ARES CAPITAL CORP
For the period ended Jun 30, 2024. Filed Jul 30, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Jul 30, 2024
ARCC$19.13-1.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0001287750-24-000028
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-30.
0001287750-24-000039
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 240 previous paragraphs and 248 current paragraphs.
149 unchanged; 76 reworded; 21 added; 10 removed; 5 previous and 2 current paragraphs rearranged.
Tables are not compared: 39 previous and 47 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
•political and regulatory conditions that contribute to uncertainty and market volatility including the impact of the upcoming U.S. presidential election and legislative, regulatory, trade and policy changes associated with a new administration;
Current report
(4)As of June 30, 2024 and December 31, 2023, net unrealized losses of $43 million and $13 million, respectively, have been eliminated upon consolidation and the elimination is included in “non-controlling interests in Consolidated IHAM Vehicles” in the selected balance sheet information.
Current report
For the three and six months ended June 30, 2024 and 2023
Current report
During the three months ended June 30, 2023, we also recognized net realized losses on foreign currency and other transactions of $13 million.
Current report
The net realized losses on investments during the six months ended June 30, 2024 consisted of the following:
Current report
The net realized losses on investments during the six months ended June 30, 2023 consisted of the following:
Current report
During the six months ended June 30, 2023, we also recognized net realized losses on foreign currency and other transactions of $43 million.
Current report
During the three months ended June 30, 2024, we also recognized net unrealized losses on foreign currency and other transactions of $10 million.
Current report
The changes in net unrealized appreciation and depreciation on investments during the six months ended June 30, 2024 consisted of the following:
Current report
During the six months ended June 30, 2024, we also recognized net unrealized gains on foreign currency and other transactions of $20 million.
Current report
The changes in net unrealized appreciation and depreciation on investments during the six months ended June 30, 2023 consisted of the following:
Current report
During the six months ended June 30, 2023, we also recognized net unrealized gains on foreign currency and other transactions of $26 million.
Current report
(2)Provides for a feature that allows us, under certain circumstances, to increase the size of the Revolving Credit Facility to a maximum of $6.7 billion and $7.1 billion, as of June 30, 2024 and December 31, 2023, respectively.
Current report
(4)Excludes the CLO Subordinated Notes (as defined below), which were retained by us and, as such, are eliminated in consolidation. See “Debt Securitization” below for more information.
Current report
Debt Securitization
Current report
2024-1 CLO Notes
Current report
The CLO Secured Notes are the secured obligation of ARCC CLO I and are backed by a diversified portfolio of first lien senior secured loans contributed by us to ARCC CLO I pursuant to the terms of a contribution agreement. The interest rate charged on the CLO Secured Notes is based on SOFR plus a blended weighted average spread of 1.86%. The CLO Subordinated Notes, which were retained by us, are the unsecured obligations of ARCC CLO I.
Current report
Our investment adviser serves as asset manager to ARCC CLO I under anasset management agreement and is entitled to receive certain management fees for providing these services under the agreement. Our investment adviser has waived its right to receive such fees but may rescind such waiver with respect to the CLO Secured Notes at any time.
Current report
In June 2024, we repaid in full the $900 million in aggregate principal amount outstanding of unsecured notes (the “June 2024 Notes”) upon their maturity. The June 2024 Notes bore interest at a rate of 4.200% per annum, payable semi-annually.
Current report
In connection with certain of the unsecured notes issued by us, we have entered into interest rate swap agreements to more closely align the interest rates of such liabilities with our investment portfolio, which consists primarily of floating rate loans. We designated these interest rate swaps and the associated unsecured notes as qualifying fair value hedge accounting relationships. Certain information related to our interest rate swap instruments as of June 30, 2024 is presented below (dollar amounts in millions).
Current report
See Note 5 to our consolidated financial statements for the three and six months ended June 30, 2024 for more information on our debt obligations.
Removed paragraphs (10)
Previous report
•the state of the general economy;
Previous report
During the three months ended March 31, 2023, we also recognized net realized losses on foreign currency and other transactions of $30 million.
Previous report
For the three months ended March 31, 2024, the net unrealized gains recorded on investments were largely due to the reversal of net unrealized depreciation recorded during 2023, as well as an increase in the fair value of certain of our portfolio company investments. For the three months ended March 31, 2023, the net unrealized losses recorded on investments were largely due to declining prices in the credit and equity markets as market participants expected a higher return on similar investments as a result of the higher rate environment.
Previous report
During the three months ended March 31, 2024, we also recognized net unrealized gains on foreign currency and other transactions of $30 million.
Previous report
During the three months ended March 31, 2023, we also recognized net unrealized gains on foreign currency and other transactions of $25 million.
Previous report
In connection with the January 2027 Notes, we entered into interest rate swaps for a total notional amount of $900 million that mature on January 15, 2027 to more closely align the interest rate of such liability with our investment portfolio, which consists of primarily floating rate loans. Under the interest rate swap agreements, we receive a fixed interest rate of 7.000% and pay a floating interest rate of one-month SOFR plus 2.581%. We designated these interest rate swaps and the related January 2027 Notes as a qualifying hedge accounting relationship. See Note 6 to our consolidated financial statements for the three months ended March 31, 2024 for more information on the interest rate swaps.
Previous report
In connection with the 2029 Notes, we entered into an interest rate swap agreement for a total notional amount of $1.0 billion that matures on March 1, 2029 to more closely align the interest rate of such liability with its investment portfolio, which consists of primarily floating rate loans. Under the interest rate swap agreement, we received a fixed interest rate of 5.875% and pays a floating interest rate of one-month SOFR plus 2.023%. We designated this interest rate swap and the 2029 Notes as a qualifying hedge accounting relationship. See Note 6 to our consolidated financial statements for the three months ended March 31, 2024 for more information on the interest rate swap.
Previous report
In April 2024, we amended and restated our Revolving Credit Facility. The amendment, among other things, (a) reduced the total commitment under the Revolving Credit Facility from approximately $4.8 billion to approximately $4.5 billion, (b) extended the expiration of the revolving period for lenders electing to extend their revolving commitments in an amount equal to approximately $3,005 million from April 19, 2027 to April 12, 2028, during which period we, subject to certain conditions, may make borrowings under the Revolving Credit Facility, (c) extended the stated maturity date for lenders electing to extend their revolving commitments in an amount equal to approximately $3,005 million from April 19, 2028 to April 12, 2029 and (d) extended the stated maturity date for $968 million of the lenders electing to extend their term loan commitments from April 19, 2028 to April 12, 2029. Lenders who elected not to extend their revolving commitments in an amount equal to approximately $269 million and $107 million will remain subject to a revolving period expiration of March 31, 2026 and March 31, 2025, respectively, and a stated maturity date of March 31, 2027 and March 31, 2026, respectively.
Previous report
Lenders who elected not to extend their term loan commitments in an amount equal to $70 million, $41 million and $28 million will remain subject to a maturity date of April 19, 2028, March 31, 2027 and March 31, 2026, respectively.
Previous report
The Revolving Credit Facility is composed of a revolving loan tranche equal to approximately $3,381 million and a term loan tranche equal to approximately $1,107 million. The Revolving Credit Facility includes an “accordion” feature that allows us, under certain circumstances, to increase the size of the facility by an amount up to $2,244 million.
Reworded paragraphs (76)
Previous wording
We have based the forward-looking statements included in this Quarterly Report on information available to us on the filing date of this Quarterly Report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.
Current wording
We have based the forward-looking statements included in this Quarterly Report on information available to us on the filing date of this Quarterly Report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.
Previous wording
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first lien senior secured loans (including “unitranche” loans, which are loans that combine both senior and subordinated debt, generally in a first lien position) and second lien senior secured loans. In addition to senior secured loans, we also invest in subordinated loans (sometimes referred to as mezzanine debt), which in some cases includes an equity component and preferred equity.
Current wording
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first lien senior secured loans (including “unitranche” loans, which are loans that combine both senior and subordinated debt, generally in a first lien position) and second lien senior secured loans. In addition to senior secured loans, we also invest in subordinated loans (sometimes referred to as mezzanine debt) and preferred equity.
Previous wording
Since our initial public offering (“IPO”) on October 8, 2004 through March 31, 2024, our exited investments resulted in an asset level realized gross internal rate of return to us of approximately 13% (based on original cash invested, net of syndications, of approximately $43.6 billion and total proceeds from such exited investments of approximately $55.8 billion). Internal rate of return is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. Internal rate of return is gross of expenses related to investments as these expenses are not allocable to specific investments. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the repayment of a debt investment or sale of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized.
Current wording
Since our initial public offering (“IPO”) on October 8, 2004 through June 30, 2024, our exited investments resulted in an asset level realized gross internal rate of return to us of approximately 13% (based on original cash invested, net of syndications, of approximately $45.5 billion and total proceeds from such exited investments of approximately $58.1 billion). Internal rate of return is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. Internal rate of return is gross of expenses related to investments as these expenses are not allocable to specific investments. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the repayment of a debt investment or sale of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized.
Previous wording
During the first quarter of 2024, credit markets posted positive returns, driven by sustained economic growth, a healthy level of corporate earnings and further stability in the capital markets and U.S. banking system. Against this strength, the Federal Reserve has signaled a continued willingness to maintain its restrictive monetary policies given persistent levels of inflation.
Current wording
During the second quarter of 2024, leveraged corporate credit markets posted positive returns, driven by sustained economic growth, a healthy level of corporate earnings and further stability in the capital markets and U.S. banking system. With easing inflationary measures, the Federal Reserve has signaled a willingness to soften its current restrictive monetary policies.
Previous wording
(1)New investment commitments include new agreements to fund revolving loans or delayed draw loans. See Note 7 to our consolidated financial statements for the three months ended March 31, 2024 for more information on our commitments to fund revolving loans or delayed draw loans.
Current wording
(1)New investment commitments include new agreements to fund revolving loans or delayed draw loans. See Note 7 to our consolidated financial statements for the three and six months ended June 30, 2024 for more information on our commitments to fund revolving loans or delayed draw loans.
Previous wording
(2)Includes both funded and unfunded commitments. Of these new investment commitments, we funded $2.5 billion and $636 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
(2)Includes both funded and unfunded commitments. Of these new investment commitments, we funded $2.9 billion and $1.0 billion for the three months ended June 30, 2024 and 2023, respectively.
Previous wording
(3)Includes both funded and unfunded commitments. For the three months ended March 31, 2024 and 2023, investment commitments exited included exits of unfunded commitments of $677 million and $316 million, respectively.
Current wording
(3)Includes both funded and unfunded commitments. For the three months ended June 30, 2024 and 2023, investment commitments exited included exits of unfunded commitments of $123 million and $135 million, respectively.
Previous wording
(4)For the three months ended March 31, 2024 and 2023, net fundings (repayments) of first lien secured revolving loans were $(67) million and $80 million, respectively.
Current wording
(4)For the three months ended June 30, 2024 and 2023, net fundings (repayments) of first lien secured revolving loans were $8 million and $(176) million, respectively.
Previous wording
(5)See “Senior Direct Lending Program” below and Note 4 to our consolidated financial statements for the three months ended March 31, 2024 for more information on the SDLP (as defined below).
Current wording
(5)See “Senior Direct Lending Program” below and Note 4 to our consolidated financial statements for the three and six months ended June 30, 2024 for more information on the SDLP (as defined below).
Previous wording
(6)Includes our subordinated loan and equity investments in IHAM (as defined below), as applicable. See “Ivy Hill Asset Management, L.P.” below and Note 4 to our consolidated financial statements for the three months ended March 31, 2024 for more information on IHAM.
Current wording
(6)Includes our subordinated loan and equity investments in IHAM (as defined below), as applicable. See “Ivy Hill Asset Management, L.P.” below and Note 4 to our consolidated financial statements for the three and six months ended June 30, 2024 for more information on IHAM.
Previous wording
(2)First lien senior secured loans include certain loans that we classify as “unitranche” loans. The total amortized cost and fair value of the loans that we classified as “unitranche” loans were $6.5 billion and $6.3 billion, respectively, as of March 31, 2024, and $5.8 billion and $5.7 billion, respectively, as of December 31, 2023.
Current wording
(2)First lien senior secured loans include certain loans that we classify as “unitranche” loans. The total amortized cost and fair value of the loans that we classified as “unitranche” loans were $7.3 billion and $7.2 billion, respectively, as of June 30, 2024, and $5.8 billion and $5.7 billion, respectively, as of December 31, 2023.
Previous wording
(3)The proceeds from these certificates were applied to co-investments with Varagon Capital Partners (“Varagon”) and its clients to fund first lien senior secured loans to 20 and 22 different borrowers as of March 31, 2024 and December 31, 2023, respectively.
Current wording
(3)The proceeds from these certificates were applied to co-investments with Varagon Capital Partners (“Varagon”) and its clients to fund first lien senior secured loans to 19 and 22 different borrowers as of June 30, 2024 and December 31, 2023, respectively.
Previous wording
We have commitments to fund various revolving and delayed draw senior secured and subordinated loans, including commitments to fund which are at (or substantially at) our discretion. Our commitment to fund delayed draw loans is triggered upon the satisfaction of certain pre-negotiated terms and conditions. Generally, the most significant and uncertain term requires the borrower to satisfy a specific use of proceeds covenant. The use of proceeds covenant typically requires the borrower to use the additional loans for the specific purpose of a permitted acquisition or permitted investment, for example. In addition to the use of proceeds covenant, the borrower is generally required to satisfy additional negotiated covenants (including specified leverage levels). We are also party to subscription agreements to fund equity investments. See Note 7 to our consolidated financial statements for the three months ended March 31, 2024 for more information on our unfunded commitments, including commitments to issue letters of credit, related to certain of our portfolio companies.
Current wording
We have commitments to fund various revolving and delayed draw senior secured and subordinated loans, including commitments to fund which are at (or substantially at) our discretion. Our commitment to fund delayed draw loans is triggered upon the satisfaction of certain pre-negotiated terms and conditions. Generally, the most significant and uncertain term requires the borrower to satisfy a specific use of proceeds covenant. The use of proceeds covenant typically requires the borrower to use the additional loans for the specific purpose of a permitted acquisition or permitted investment, for example. In addition to the use of proceeds covenant, the borrower is generally required to satisfy additional negotiated covenants (including specified leverage levels). We are also party to subscription agreements to fund equity investments. See Note 7 to our consolidated financial statements for the three and six months ended June 30, 2024 for more information on our unfunded commitments, including commitments to issue letters of credit, related to certain of our portfolio companies.
Previous wording
As of March 31, 2024 and December 31, 2023, loans on non-accrual status represented 1.7% of the total investments at amortized cost (or 0.7% at fair value) and 1.3% at amortized cost (or 0.6% at fair value), respectively.
Current wording
As of June 30, 2024 and December 31, 2023, loans on non-accrual status represented 1.5% of the total investments at amortized cost (or 0.7% at fair value) and 1.3% at amortized cost (or 0.6% at fair value), respectively.
Previous wording
Ivy Hill Asset Management, L.P. (“IHAM”), our wholly owned portfolio company, is an asset manager and an SEC-registered investment adviser. As of March 31, 2024, IHAM had assets under management of approximately $13.3 billion. As of March 31, 2024, IHAM managed 21 vehicles (the “IHAM Vehicles”). IHAM earns fee income from managing the IHAM Vehicles and has also invested in certain of these vehicles as part of its business strategy. The amortized cost of IHAM’s total investments as of March 31, 2024 and December 31, 2023 was $2,321 million and $2,288 million, respectively. For the three months ended March 31, 2024 and 2023, IHAM had management and incentive fee income of $14 million and $14 million, respectively, and other investment-related income of $99 million and $61 million, respectively, which included net realized gains or losses on investments and other transactions.
Current wording
Ivy Hill Asset Management, L.P. (“IHAM”), our wholly owned portfolio company, is an asset manager and an SEC-registered investment adviser. As of June 30, 2024, IHAM had assets under management of approximately $13.2 billion. As of June 30, 2024, IHAM managed 21 vehicles (the “IHAM Vehicles”). IHAM earns fee income from managing the IHAM Vehicles and has also invested in certain of these vehicles as part of its business strategy. The amortized cost of IHAM’s total investments as of June 30, 2024 and December 31, 2023 was $2,311 million and $2,288 million, respectively. For the three and six months ended June 30, 2024, IHAM had management and incentive fee income of $14 million and $28 million, respectively, and other investment-related income of $92 million and $191 million, respectively, which included net realized gains or losses on investments and other transactions. For the three and six months ended June 30, 2023, IHAM had management and incentive fee income of $13 million and $27 million, respectively, and investment-related income of $95 million and $156 million, respectively, which included net realized gains or losses on investments and other transactions.
Previous wording
The interest income and dividend income that we earned from IHAM for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
The interest income and dividend income that we earned from IHAM for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous wording
From time to time, IHAM or certain IHAM Vehicles may purchase investments from, or sell investments to, us. For any such sales or purchases by the IHAM Vehicles to or from us, the IHAM Vehicle must obtain approval from third parties unaffiliated with us or IHAM, as applicable. During the three months ended March 31, 2024 and 2023, IHAM or certain of the IHAM Vehicles purchased $35 million and $652 million, respectively, of loans from us. For the three months ended March 31, 2024 and 2023, we recognized $1 million and $10 million, respectively, of net realized losses from these sales. During the three months ended March 31, 2024, we purchased $27 million of investments from IHAM or certain IHAM Vehicles. During the three months ended March 31, 2023, we did not purchase any investments from IHAM or certain IHAM Vehicles.
Current wording
From time to time, IHAM or certain IHAM Vehicles may purchase investments from, or sell investments to, us. For any such sales or purchases by the IHAM Vehicles to or from us, the IHAM Vehicle must obtain approval from third parties unaffiliated with us or IHAM, as applicable. During the six months ended June 30, 2024 and 2023, IHAM or certain of the IHAM Vehicles purchased $35 million and $691 million, respectively, of loans from us. For the six months ended June 30, 2024 and 2023, we recognized $1 million and $11 million, respectively, of net realized losses from these sales. During the six months ended June 30, 2024 and 2023, IHAM or certain IHAM Vehicles sold $32 million and $7 million, respectively, of investments to us.
Previous wording
Pursuant to Rule 4-08(g) of Regulation S-X, selected financial information of IHAM, in conformity with U.S. generally accepted accounting principles (“GAAP”), as of and for the three months ended March 31, 2024 and 2023 are presented below.
Current wording
Pursuant to Rule 4-08(g) of Regulation S-X, selected financial information of IHAM, in conformity with U.S. generally accepted accounting principles (“GAAP”), as of and for the three and six months ended June 30, 2024 and 2023 are presented below.
Previous wording
(2)The determination of such fair value is determined in accordance with IHAM’s valuation process (separate and apart from our valuation process described elsewhere herein). The amortized cost of IHAM’s total investments as of March 31, 2024 and December 31, 2023 was $2,321 million and $2,288 million, respectively. The amortized cost of the total investments of IHAM on a consolidated basis as of March 31, 2024 and December 31, 2023 was $9,318 million and $9,619 million, respectively.
Current wording
(2)The determination of such fair value is determined in accordance with IHAM’s valuation process (separate and apart from our valuation process described elsewhere herein). The amortized cost of IHAM’s total investments as of June 30, 2024 and December 31, 2023 was $2,311 million and $2,288 million, respectively. The amortized cost of the total investments of IHAM on a consolidated basis as of June 30, 2024 and December 31, 2023 was $8,792 million and $9,619 million, respectively.
Previous wording
(4)Non-controlling interests in Consolidated IHAM Vehicles includes net unrealized depreciation in the Consolidated IHAM Vehicles of $158 million and $221 million as of March 31, 2024 and December 31, 2023, respectively.
Current wording
(5)Non-controlling interests in Consolidated IHAM Vehicles includes net unrealized depreciation in the Consolidated IHAM Vehicles of $180 million and $221 million as of June 30, 2024 and December 31, 2023, respectively.
Previous wording
We provide capital to the SDLP in the form of subordinated certificates (the “SDLP Certificates”), and Varagon and its clients provide capital to the SDLP in the form of senior notes, intermediate funding notes and the SDLP Certificates. As of March 31, 2024, we and a client of Varagon owned 87.5% and 12.5%, respectively, of the outstanding SDLP Certificates.
Current wording
We provide capital to the SDLP in the form of subordinated certificates (the “SDLP Certificates”), and Varagon and its clients provide capital to the SDLP in the form of senior notes, intermediate funding notes and the SDLP Certificates. As of June 30, 2024 and December 31, 2023, we and a client of Varagon owned 87.5% and 12.5%, respectively, of the outstanding SDLP Certificates.
Previous wording
The interest income from our investment in the SDLP Certificates and capital structuring service and other fees earned for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
The interest income from our investment in the SDLP Certificates and capital structuring service and other fees earned for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous wording
As of March 31, 2024 and December 31, 2023, the SDLP portfolio was comprised entirely of first lien senior secured loans primarily to U.S. middle-market companies and were in industries similar to the companies in our portfolio. As of March
Current wording
As of June 30, 2024 and December 31, 2023, the SDLP portfolio was comprised entirely of first lien senior secured loans primarily to U.S. middle-market companies and were in industries similar to the companies in our portfolio. As of June 30, 2024, two of the loans were on non-accrual status. As of December 31, 2023, one of the loans was on non-accrual status. Below is a summary of the SDLP’s portfolio as of June 30, 2024 and December 31, 2023:
Previous wording
(2)First lien senior secured loans include certain loans that the SDLP classifies as “unitranche” loans. As of March 31, 2024 and December 31, 2023, the total principal amount of loans in the SDLP portfolio that the SDLP classified as “unitranche” loans was $4,582 million and $4,558 million, respectively.
Current wording
(2)First lien senior secured loans include certain loans that the SDLP classifies as “unitranche” loans. As of June 30, 2024 and December 31, 2023, the total principal amount of loans in the SDLP portfolio that the SDLP classified as “unitranche” loans was $4,344 million and $4,558 million, respectively.
Previous wording
Pursuant to Rule 4-08(g) of Regulation S-X, selected financial information of the SDLP, in conformity with GAAP, as of March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and 2023 are presented below:
Current wording
Pursuant to Rule 4-08(g) of Regulation S-X, selected financial information of the SDLP, in conformity with GAAP, as of June 30, 2024 and December 31, 2023 and for the three and six months ended June 30, 2024 and 2023 are presented below:
Previous wording
(1)Represents the weighted average annual stated interest rate as of March 31, 2024. All interest rates are payable in cash, except for portions of the stated interest rates which are PIK for investments in Arrowhead Holdco Company, Emergency Communications Network, LLC and North Haven Falcon Buyer, LLC.
Current wording
(1)Represents the weighted average annual stated interest rate as of June 30, 2024. All interest rates are payable in cash, except for portions of the stated interest rates which are PIK for investments in Arrowhead Holdco Company and North Haven Falcon Buyer, LLC.
Previous wording
Operating results for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
Operating results for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous wording
Interest income from investments for the three months ended March 31, 2024 increased from the comparable period in 2023 primarily as a result of the impact of rising interest rates as well as an increase in the average size of our portfolio. The average size and weighted average yield of our portfolio at amortized cost for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
Interest income from investments for the three and six months ended June 30, 2024 increased from the comparable periods in 2023 primarily as a result of the impact of higher interest rates as well as an increase in the average size of our portfolio. The average size and weighted average yield of our portfolio at amortized cost for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous wording
Capital structuring service fees for the three months ended March 31, 2024 increased from the comparable period in 2023 primarily due to an increase in new investment commitments. The lower weighted average capital structuring service fee percentage during the three months ended March 31, 2024 was primarily due to lower fee opportunities as compared to the comparable period in 2023. The new investment commitments and weighted average capital structuring service fee percentages for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
Capital structuring service fees for the three and six months ended June 30, 2024 increased from the comparable periods in 2023 primarily due to an increase in new investment commitments. The lower weighted average capital structuring service fee percentage during the three and six months ended June 30, 2024 and 2023 was primarily due to lower fee opportunities as compared to the comparable periods in 2023. The new investment commitments and weighted average capital structuring service fee percentages for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous wording
(1)Excludes $1.6 billion and $45 million of new investment commitments sold to third party lenders during the three months ended March 31, 2024 and 2023, respectively. Excludes $240 million and $283 million of investment commitments to IHAM for the three months ended March 31, 2024 and 2023, respectively.
Current wording
(1)Excludes $34 million and $115 million of new investment commitments sold to third party lenders during the three months ended June 30, 2024 and 2023, respectively, and $1,586 million and $160 million during the six months ended June 30, 2024 and 2023, respectively. Excludes $23 million of investment commitments to IHAM for the three months ended June 30, 2024. There were no investment commitments to IHAM during the three months ended June 30, 2023. Excludes $263 million and $283 million of investment commitments to IHAM for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Dividend income for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
Dividend income for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous wording
Dividend income received from IHAM for the three months ended March 31, 2024 increased from the comparable period in 2023 primarily due to the continued increase in IHAM's earnings given the increase in its assets under management, which generally has been supported by our additional investments in IHAM. Recurring dividend income for the three months ended March 31, 2024 increased from the comparable period in 2023 primarily due to an increase in yielding preferred equity investments.
Current wording
Dividend income received from IHAM for the three and six months ended June 30, 2024 increased from the comparable periods in 2023 primarily due to the increased earnings from the IHAM Vehicles as a result of higher interest rates. Recurring dividend income for the three and six months ended June 30, 2024 increased from the comparable periods in 2023 primarily due to an increase in yielding preferred equity investments.
Previous wording
Interest and credit facility fees for the three months ended March 31, 2024 and 2023, were comprised of the following:
Current wording
Interest and credit facility fees for the three and six months ended June 30, 2024 and 2023, were comprised of the following:
Previous wording
(1)Includes the net interest expense related to the interest rate swaps for the three months ended March 31, 2024.
Current wording
(1)Includes the net interest expense related to the interest rate swaps for the three and six months ended June 30, 2024.
Previous wording
Stated interest expense for the three months ended March 31, 2024 increased from the comparable period in 2023 primarily due to the increase in the average principal amount of debt outstanding and the impact of rising interest rates on our floating debt obligations. Average debt outstanding and weighted average stated interest rate on our debt outstanding for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
Stated interest expense for the three and six months ended June 30, 2024 increased from the comparable periods in 2023 primarily due to the increase in the average principal amount of debt outstanding and the impact of higher interest rates on our floating debt obligations. Average debt outstanding and weighted average stated interest rate on our debt outstanding for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous wording
(1)The weighted average stated interest rate on our debt outstanding for the three months ended March 31, 2024 includes the impact of interest rate swaps. See Note 6 to our consolidated financial statements for the three months ended March 31, 2024, for more information on the interest rate swaps.
Current wording
(1)The weighted average stated interest rate on our debt outstanding for the three and six months ended June 30, 2024 includes the impact of interest rate swaps. See Note 6 to our consolidated financial statements for the three and six months ended June 30, 2024, for more information on the interest rate swaps.
Previous wording
Base management fee for the three months ended March 31, 2024 increased from the comparable period in 2023 primarily due to the increase in the average size of our portfolio.
Current wording
The base management fee for the three and six months ended June 30, 2024 increased from the comparable periods in 2023 primarily due to the increase in the average size of our portfolio.
Previous wording
Income based fee for the three months ended March 31, 2024 increased from the comparable period in 2023 primarily due to the pre-incentive fee net investment income, as defined in the investment advisory and management agreement, for the three months ended March 31, 2024 being higher than in the comparable period in 2023.
Current wording
The income based fee for the three and six months ended June 30, 2024 increased from the comparable periods in 2023 primarily due to the pre-incentive fee net investment income, as defined in the investment advisory and management agreement, for the three and six months ended June 30, 2024 being higher than in the comparable periods in 2023.
Previous wording
For the three months ended March 31, 2024, the capital gains incentive fee calculated in accordance with GAAP was $25 million. For the three months ended March 31, 2023, the reduction in the capital gains incentive fee calculated in accordance with GAAP was $6 million. The capital gains incentive fee accrual for the three months ended March 31, 2024 changed from the comparable period in 2023 primarily due to net gains on investments, foreign currency, other transactions and the extinguishment of debt of $124 million compared to net losses of $40 million for the three months ended March 31, 2023. The capital gains incentive fee accrued under GAAP includes an accrual related to unrealized capital appreciation, whereas the capital gains incentive fee actually payable under our investment advisory and management agreement does not. There can be no assurance that such unrealized capital appreciation will be realized in the future. The accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. As of March 31, 2024, there was $112 million of capital gains incentive fee accrued in accordance with GAAP. As of March 31, 2024, there was no capital gains incentive fee actually payable under our investment advisory and management agreement. See Note 3 to our consolidated financial statements for the three months ended March 31, 2024, for more information on the base management fee, income based fee and capital gains incentive fee.
Current wording
For the three months ended June 30, 2024, the reduction in the capital gains incentive fee calculated in accordance with GAAP was $13 million. For the six months ended June 30, 2024, the capital gains incentive fee calculated in accordance with GAAP was $12 million. For the three months ended June 30, 2023, the capital gains incentive fee calculated in accordance with GAAP was $4 million. For the six months ended June 30, 2023, the reduction in the capital gains incentive fee calculated in accordance with GAAP was $2 million. The capital gains incentive fee accrual for the six months ended June 30, 2024 changed from the comparable period in 2023 primarily due to net gains on investments, foreign currency, other transactions and the extinguishment of debt of $88 million compared to net losses of $23 million for the six months ended June 30, 2023. The capital gains incentive fee accrued under GAAP includes an accrual related to unrealized capital appreciation, whereas the capital gains incentive fee actually payable under our investment advisory and management agreement does not. There can be no assurance that such unrealized capital appreciation will be realized in the future. The accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. As of June 30, 2024, there was $100 million of capital gains incentive fee accrued in accordance with GAAP. As of June 30, 2024, there was no capital gains incentive fee actually payable under our investment advisory and management agreement. See Note 3 to our consolidated financial statements for the three and six months ended June 30, 2024, for more information on the base management fee, income based fee and capital gains incentive fee.
Previous wording
Cash payment of any income based fee and capital gains incentive fee otherwise earned by our investment adviser is deferred if during the most recent four full calendar quarter period ending on or prior to the date such payment is to be made the sum of (a) the aggregate distributions to our stockholders and (b) the change in net assets (defined as total assets less indebtedness and before taking into account any income based fee and capital gains incentive fee payable during the period) is less than 7.0% of our net assets (defined as total assets less indebtedness) at the beginning of such period. These calculations will be adjusted for any share issuances or repurchases. Any income based fee and capital gains incentive fee deferred for payment are carried over for payment in subsequent calculation periods to the extent such fees are payable under the terms of the investment advisory and management agreement. See Note 3 to our consolidated financial statements for the three months ended March 31, 2024, for more information on the related deferral terms.
Current wording
Cash payment of any income based fee and capital gains incentive fee otherwise earned by our investment adviser is deferred if during the most recent four full calendar quarter period ending on or prior to the date such payment is to be made the sum of (a) the aggregate distributions to our stockholders and (b) the change in net assets (defined as total assets less indebtedness and before taking into account any income based fee and capital gains incentive fee payable during the period) is less than 7.0% of our net assets (defined as total assets less indebtedness) at the beginning of such period. These calculations will be adjusted for any share issuances or repurchases. Any income based fee and capital gains incentive fee deferred for payment are carried over for payment in subsequent calculation periods to the extent such fees are payable under the terms of the investment advisory and management agreement. See Note 3 to our consolidated financial statements for the three and six months ended June 30, 2024, for more information on the related deferral terms.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
(1)There were no loans sold to IHAM and certain vehicles managed by IHAM during the three months ended June 30, 2024. Includes $35 million of loans sold to IHAM and certain vehicles managed by IHAM during the six months ended June 30, 2024. Includes $39 million and $691 million of loans sold to IHAM and certain vehicles managed by
Current report — wording carried from elsewhere
During the three months ended June 30, 2023, we also recognized net unrealized gains on foreign currency and other transactions of $1 million.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
31, 2024 and December 31, 2023, one of the loans was on non-accrual status. Below is a summary of the SDLP’s portfolio as of March 31, 2024 and December 31, 2023:
Previous report — wording carried elsewhere
For the three months ended March 31, 2024 and 2023
Previous report — wording carried elsewhere
(2)Provides for a feature that allows us, under certain circumstances, to increase the size of the Revolving Credit Facility (as defined below) to a maximum of $7.1 billion.
Previous report — wording carried elsewhere
March 31, 2024 and December 31, 2023 includes the impact of interest rate swaps. See Note 6 to our consolidated financial statements for the three months ended March 31, 2024 for more information on the interest rate swaps.
Previous report — wording carried elsewhere
See Note 5 to our consolidated financial statements for the three months ended March 31, 2024 for more information on our debt obligations.