Barings BDC Inc

Previous wording

On February 25, 2022, we completed our acquisition of Sierra Income Corporation, a Maryland corporation (“Sierra”), pursuant to the terms and conditions of that certain Agreement and Plan of Merger (the “Sierra Merger Agreement”), dated as of September 21, 2021, with Sierra, Mercury Acquisition Sub, Inc., a Maryland corporation and our direct wholly owned subsidiary (“Sierra Acquisition Sub”), and Barings. To effect the acquisition, Sierra Acquisition Sub merged with and into Sierra, with Sierra surviving the merger as our wholly owned subsidiary (the “First Sierra Merger”). Immediately thereafter, Sierra merged with and into us, with Barings BDC, Inc. as the surviving company (the “Second Sierra Merger” and, together with the First Sierra Merger, the “Sierra Merger”).

Current wording

On February 25, 2022, we completed our acquisition of Sierra Income Corporation, a Maryland corporation (“Sierra”), pursuant to the terms and conditions of that certain Agreement and Plan of Merger (the “Sierra Merger Agreement”), dated as of September 21, 2021, with Sierra, Mercury Acquisition Sub, Inc., a Maryland corporation and our direct wholly owned subsidiary (“Sierra Acquisition Sub”), and Barings. To effect the acquisition, Sierra Acquisition Sub merged with and into Sierra, with Sierra surviving the merger as our wholly owned subsidiary (the

Previous wording

Pursuant to the Sierra Merger Agreement, each share of Sierra common stock, par value $0.001 per share (the “Sierra Common Stock”), issued and outstanding immediately prior to the effective time of the First Sierra Merger (other than shares of Sierra Common Stock issued and outstanding immediately prior to the effective time of the First Sierra Merger that were held by a subsidiary of Sierra or held, directly or indirectly, by us or Sierra Acquisition

Current wording

Pursuant to the Sierra Merger Agreement, each share of Sierra common stock, par value $0.001 per share (the “Sierra Common Stock”), issued and outstanding immediately prior to the effective time of the First Sierra Merger (other than shares of Sierra Common Stock issued and outstanding immediately prior to the effective time of the First Sierra Merger that were held by a subsidiary of Sierra or held, directly or indirectly, by us or Sierra Acquisition Sub) was converted into the right to receive (i) an amount in cash from Barings, without interest, equal to $0.9783641, and (ii) 0.44973 shares of our common stock, plus any cash in lieu of fractional shares. As a result of the Sierra Merger, former Sierra stockholders received approximately 46.0 million shares of our common stock for their shares of Sierra Common Stock.

Previous wording

Barings focuses on investing our portfolio primarily in senior secured private debt investments in well-established middle-market businesses that operate across a wide range of industries. Barings’ existing SEC co-investment exemptive relief under the 1940 Act (the “Exemptive Relief”) permits us and Barings’ affiliated private and SEC-registered funds to co-invest in Barings-originated loans, which allows Barings to efficiently implement its senior secured private debt investment strategy for us.

Current wording

Barings focuses on investing our portfolio primarily in senior secured private debt investments in well-established middle-market businesses that operate across a wide range of industries. Barings’ Co-Investment Exemptive Relief permits us and Barings’ affiliated private and SEC-registered funds to co-invest in Barings-originated loans, which allows Barings to efficiently implement its senior secured private debt investment strategy for us.

Previous wording

We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned. Our senior secured, middle-market, private debt investments generally have terms of between five and seven years. Our senior secured, middle-market, first lien private debt investments generally bear interest between the Secured Overnight Financing Rate (“SOFR”) (or the applicable currency rate for investments in foreign currencies) plus 475 basis points and SOFR plus 675 basis points per annum. Our subordinated middle-market, private debt investments generally bear interest between SOFR (or the applicable currency rate for investments in foreign currencies) plus 700 basis points and SOFR plus 900 basis points per annum if floating rate, and between 8% and 15% if fixed rate. From time to time, certain of our investments may have a form of interest, referred to as payment-in-kind, or PIK, interest, which is not paid currently but is instead accrued and added to the loan balance and paid at the end of the term.

Current wording

We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned. Our senior secured, middle-market, private debt investments generally have terms of between five and seven years. Our senior secured, middle-market, first lien private debt investments generally bear interest between the Secured Overnight Financing Rate (“SOFR”) (or the applicable currency rate for investments in foreign currencies) plus 450 basis points and SOFR plus 650 basis points per annum. Our subordinated middle-market, private debt investments generally bear interest between SOFR (or the applicable currency rate for investments in foreign currencies) plus 700 basis points and SOFR plus 900 basis points per annum if floating rate, and between 8% and 15% if fixed rate. From time to time, certain of our investments may have a form of interest, referred to as payment-in-kind, or PIK, interest, which is not paid currently but is instead accrued and added to the loan balance and paid at the end of the term.

Previous wording

As of December 31, 2023 and December 31, 2022, the weighted average yield on the principal amount of our outstanding debt investments other than non-accrual debt investments was approximately 10.5% and 9.7%, respectively. The weighted average yield on the principal amount of all of our outstanding debt investments (including non-accrual debt investments) was approximately 10.0% and 9.1% as of December 31, 2023 and December 31, 2022, respectively.

Current wording

As of December 31, 2024 and December 31, 2023, the weighted average yield on the principal amount of our outstanding debt investments other than non-accrual debt investments was approximately 10.2% and 10.5%, respectively. The weighted average yield on the principal amount of all of our outstanding debt investments (including non-accrual debt investments) was approximately 9.8% and 10.0% as of December 31, 2024 and December 31, 2023, respectively.

Previous wording

The total fair value of our investment portfolio was $2,488.7 million as of December 31, 2023, as compared to $2,448.9 million as of December 31, 2022. As of December 31, 2023, we had investments in 336 portfolio companies with an aggregate cost of $2,535.6 million. As of December 31, 2022, we had investments in 322 portfolio companies with an aggregate cost of $2,562.4 million. As of both December 31, 2023 and 2022, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

Current wording

The total fair value of our investment portfolio was $2,449.3 million as of December 31, 2024, as compared to $2,488.7 million as of December 31, 2023. As of December 31, 2024, we had investments in 328 portfolio companies with an aggregate cost of $2,522.7 million. As of December 31, 2023, we had investments in 336 portfolio companies with an aggregate cost of $2,535.6 million. As of both December 31, 2024 and 2023, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

Previous wording

During the year ended December 31, 2022, we made 95 new investments totaling $884.8 million, purchased $442.2 million of investments as part of the Sierra Merger, made investments in existing portfolio companies totaling $258.5 million and made additional investments in existing joint venture equity portfolio companies totaling $13.8 million. We had 37 loans repaid totaling $317.6 million, received $59.7 million of portfolio company principal payments and received $68.5 million of return of capital from our joint ventures. In addition, we sold $188.0 million of loans, recognizing a net realized loss on these transactions of $11.5 million, and sold $177.4 million of investments to one of our joint ventures, realizing a loss on these transactions of $5.6 million. We received proceeds related to the sale of equity investments totaling $8.0 million, a distribution from one of our portfolio companies totaling $6.2 million and recognized a net realized gain on such sales and distributions totaling $6.9 million. Lastly, we exchanged a debt investment totaling $13.8 million in one portfolio company for equity totaling $13.9 million and realized a loss on such exchange of $0.8 million.

Current wording

During the year ended December 31, 2024, we made 45 new investments totaling $341.7 million, made investments in existing portfolio companies totaling $298.6 million and made a $3.5 million equity co-investment alongside certain affiliates in a portfolio company that specializes in providing financing to plaintiff law firms engaged in mass tort and other civil litigation. We had 47 loans repaid totaling $360.8 million and recognized a net realized loss on these transactions of $13.5 million. We also received $213.8 million of portfolio company principal payments and sales proceeds and recognized a net realized loss of $1.0 million. We received $17.1 million of return of capital from our joint ventures, equity, and royalty rights investments. In addition, we sold $27.2 million of middle-market portfolio debt investments to our joint ventures, recognizing a net realized loss on these transactions of $0.4 million. In addition, investments in four portfolio companies were restructured, which resulted in a net realized loss of $17.3 million. Lastly, we received proceeds related to the sale of equity investments totaling $38.0 million and recognized a net realized gain on such sales totaling $8.5 million.

Previous wording

Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. As of December 31, 2023, we had four portfolio companies with investments on non-accrual, the aggregate fair value of which was $37.2 million, which comprised 1.5% of the total fair value of our portfolio, and the aggregate cost of which was $62.6 million, which comprised 2.5% of the total cost of our portfolio. As of December 31, 2022, we had seven portfolio companies with investments on non-accrual, the aggregate fair value of which was $24.3 million, which comprised 1.0% of the total fair value of our portfolio, and the aggregate cost of which was $98.8 million, which comprised 3.9% of the total cost of our portfolio.

Current wording

Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. As of December 31, 2024, we hadeight portfolio companies with investments on non-accrual, the aggregate fair value of which was $8.0 million, which comprised 0.3% of the total fair value of our portfolio, and the aggregate cost of which was $41.6 million, which comprised 1.6% of the total cost of our portfolio. As of December 31, 2023, we had four portfolio companies with investments on non-accrual, the aggregate fair value of which was $37.2 million, which comprised 1.5% of the total fair value of our portfolio, and the aggregate cost of which was $62.6 million, which comprised 2.5% of the total cost of our portfolio.

Previous wording

In connection with the Sierra Merger, we purchased our debt and equity investments in Black Angus Steakhouse, LLC, or Black Angus. The Black Angus PIK term loan is on non-accrual status and as a result, under U.S. GAAP, we will not recognize interest income on our PIK term loan in Black Angus for financial reporting purposes. As of December 31, 2023, the cost of the PIK term loan in Black Angus was $9.6 million and the fair value of such investment was $4.9 million.

Current wording

In connection with the Sierra Merger, we purchased our debt and equity investments in Black Angus Steakhouse, LLC, or Black Angus. As of December 31, 2023, the Black Angus 10% PIK term loan was on non-accrual status and during the quarter ended December 31, 2024, we placed our remaining debt investments in Black Angus on non-accrual status. As a result, under U.S. GAAP, we will not recognize interest income on our debt investments in Black Angus for financial reporting purposes. As of December 31, 2024, the cost of our debt investments in Black Angus was $17.7 million and the fair value of such investments was $2.7 million.

Previous wording

The change in total investment income for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to an increase in the weighted average yield on the portfolio from higher base rates, increased dividends from portfolio companies and increased PIK interest income. The weighted average yield on the principal amount of our outstanding debt investments, other than non-accrual debt investments, was 10.5% as of December 31, 2023, as compared to 9.7% as of December 31, 2022. For the year ended December 31, 2023, PIK interest income was $18.1 million, as compared to $12.1 million for the year ended December 31, 2022. For the year ended December 31, 2023, dividend income was $36.9 million, as compared to $30.2 million for the year ended December 31, 2022.

Current wording

The change in total investment income for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to a decrease in interest income and PIK interest income, partially offset by increased dividends from portfolio companies and joint venture investments and increased fee and other income. The decrease in interest income and PIK interest income is primarily due to the amount of our outstanding debt investments decreasing from $2,187.7 million as of December 31, 2023 to $2,115.6 million as of December 31, 2024, in addition to a decrease in the weighted average yield on the principal amount of our outstanding debt investments, other than non-accrual debt investments, from 10.5% as of December 31, 2023 to 10.2% as of December 31, 2024. For the year ended December 31, 2024, dividend income was $41.1 million as compared to $36.9 million for the year ended December 31, 2023. For the year ended December 31, 2024, acceleration of unamortized OID income and unamortized loan origination fees totaled $5.3 million, as compared to $2.5 million for the year ended December 31, 2023.

Previous wording

Interest and other financing fees during both the year ended December 31, 2023 and December 31, 2022 were attributable to borrowings under our senior secured revolving credit facility with ING Capital LLC (as amended, restated and otherwise modified from time to time, the “February 2019 Credit Facility”), the August 2025 Notes, the November Notes, the February Notes and the November 2026 Notes (each as defined below under “Liquidity and Capital Resources”). The increase in interest and other financing fees for the year ended December 31, 2023 as compared to the year ended December 31, 2022, was primarily attributable to an increase in the weighted average interest rate on the February 2019 Credit Facility. The weighted average interest on the February 2019 Credit Facility was 7.1% as of December 31, 2023, as compared to 5.6% as of December 31, 2022.

Current wording

Interest and other financing fees during the year ended December 31, 2024 was attributable to borrowings under our senior secured revolving credit facility with ING Capital LLC (as amended, restated and otherwise modified from time to time, the “February 2019 Credit Facility”), the August 2025 Notes, the November Notes, the February Notes, the November 2026 Notes and the February 2029 Notes (each as defined below under “Liquidity and Capital Resources”). Interest and other financing fees during the year ended December 31, 2023 was attributable to borrowings under the February 2019 Credit Facility, the August 2025 Notes, the November Notes, the February Notes and the November 2026 Notes. The increase in interest and other financing fees for the year ended December 31, 2024 as compared to the year ended December 31, 2023, was primarily attributable to the interest and financing fees on the February 2029 Notes, which were issued in February 2024, partially offset by lower weighted average borrowings outstanding and a lower weighted average interest rate on the February 2019 Credit Facility. The weighted average interest rate on the interest rate swap related to the February 2029 Notes was 8.3% for the year ended December 31, 2024. For the years ended December 31, 2024 and 2023, the weighted average borrowings outstanding on the February 2019 Credit Facility were $422.4 million and $778.5 million, respectively. The weighted average interest on the February 2019 Credit Facility was 6.0% as of December 31, 2024, as compared to 7.1% as of December 31, 2023.

Previous wording

Under the terms of the Barings BDC Advisory Agreement, we pay Barings a base management fee (the “Base Management Fee”), quarterly in arrears on a calendar quarter basis. The Base Management Fee is calculated based on the average value of our gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters prior to the quarter for which such fees are being calculated. Base Management Fees for any partial month or quarter are appropriately pro-rated. See “Note 2. Agreements and Related Party Transactions” to our Consolidated Financial Statements for additional information regarding the terms of the Barings BDC Advisory Agreement and the fee arrangements thereunder. For the years ended December 31, 2023 and December 31, 2022, the Base Management Fee was approximately $32.6 million and $29.5 million, respectively. The increase in the Base Management Fee for the year ended December 31, 2023 versus the year ended December 31, 2022 is primarily related to the average value of gross assets used in the calculation increasing from $2,360.1 million for the year ended December 31, 2022 to $2,611.9 million for the year ended December 31, 2023. The Base Management Fee rate was 1.250% for both the years ended December 31, 2023 and 2022.

Current wording

Under the terms of the Barings BDC Advisory Agreement, we pay Barings a base management fee (the “Base Management Fee”), quarterly in arrears on a calendar quarter basis. The Base Management Fee is calculated based on the average value of our gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters prior to the quarter for which such fees are being calculated. Base Management Fees for any partial month or quarter are appropriately pro-rated. See “Note 2. Agreements and Related Party Transactions” to our Consolidated Financial Statements for additional information regarding the terms of the Barings BDC Advisory Agreement and the fee arrangements thereunder. For the years ended December 31, 2024 and December 31, 2023, the Base Management Fee was approximately $32.4 million and $32.6 million, respectively. The decrease in the Base Management Fee for the year ended December 31, 2024 versus the year ended December 31, 2023 is primarily related to the average value of gross assets used in the calculation decreasing from $2,611.9 million for the year ended December 31, 2023 to $2,592.3 million for the year ended December 31, 2024. The Base Management Fee rate was 1.250% for both the years ended December 31, 2024 and 2023.

Previous wording

Under the Barings BDC Advisory Agreement, we pay Barings an incentive fee. A portion of the incentive fee is based on our income and a portion is based on our capital gains. The income-based fee will be determined and paid quarterly in arrears based on the amount by which (x) the aggregate pre-incentive fee net investment income in respect of the current calendar quarter and the eleven preceding calendar quarters beginning with the calendar quarter that commences on or after January 1, 2021, as the case may be (or the appropriate portion thereof in the case of any of our first eleven calendar quarters that commences on or after January 1, 2021) exceeds (y) the hurdle amount as calculated for the same period. See “Note 2. Agreements and Related Party Transactions” to our Consolidated Financial Statements for additional information regarding the terms of the Barings BDC Advisory Agreement and the fee arrangements thereunder. For the year ended December 31, 2023, the amount of income- based fees incurred was $32.0 million. For the year ended December 31, 2022, the amount of income-based fees incurred was $6.6 million. The Income-Based Fee is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap in any quarter is an amount equal to (a) 20% of the Cumulative Pre-Incentive Fee Net Return during the relevant Trailing Twelve Quarters less (b) the aggregate Income-Based Fee that were paid to the Adviser in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters. See “Note 2. Agreements and Related Party Transactions” to our Consolidated Financial Statements for additional information regarding the terms of the Incentive Fee Cap. The increase in the incentive fees for the year ended December 31, 2023, as compared to the year ended December 31, 2022, relates predominately to an increase in pre-incentive fee net investment income during the year ended December 31, 2023. In addition, during the quarters ended June 30, 2022 and December 31, 2022 the incentive fee was capped at zero resulting in lower incentive fees for the year ended December 31, 2022 as compared to the year ended December 31, 2023.

Current wording

Under the Barings BDC Advisory Agreement, we pay Barings an incentive fee. A portion of the incentive fee is based on our income and a portion is based on our capital gains. The income-based fee will be determined and paid quarterly in arrears based on the amount by which (x) the aggregate pre-incentive fee net investment income in respect of the current calendar quarter and the eleven preceding calendar quarters beginning with the calendar quarter that commences on or after January 1, 2021, as the case may be (or the appropriate portion thereof in the case of any of our first eleven calendar quarters that commences on or after January 1, 2021) exceeds (y) the hurdle amount as calculated for the same period. See “Note 2. Agreements and Related Party Transactions” to our Consolidated Financial Statements for additional information regarding the terms of the Barings BDC Advisory Agreement and the fee arrangements thereunder. For the year ended December 31, 2024, the amount of income-based fees incurred was $23.8 million. For the year ended December 31, 2023, the amount of income-based fees incurred was $32.0 million. The Income-Based Fee is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap in any quarter is an amount equal to (a) 20% of the Cumulative Pre-Incentive Fee Net Return during the relevant Trailing Twelve Quarters less (b) the aggregate Income-Based Fee that were paid to the Adviser in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters. See “Note 2. Agreements and Related Party Transactions” to our Consolidated Financial Statements for additional information regarding the terms of the Incentive Fee Cap. The Incentive Fee for both the year ended December 31, 2024 and December 31, 2023 was limited due to the Incentive Fee Cap. The Incentive Fee Cap in 2024 was lower than the Incentive Fee Cap in 2023 as a result of an increase in Cumulative Pre-Incentive Fee Net Return partially offset by a greater increase in incentive fees paid in the trailing twelve quarters (or portion thereof).

Previous wording

For the years ended December 31, 2023 and 2022, the amount of administration expense incurred and invoiced by Barings for expenses was approximately $2.2 million and $3.4 million, respectively. In addition to expenses incurred under the Administration Agreement, general and administrative expenses include fees payable to the members of our board of directors (the “Board”) for their service on the Board, directors’ and officers’ insurance costs, as well as legal and accounting expenses.

Current wording

For the years ended December 31, 2024 and 2023, the amount of administration expense incurred and invoiced by Barings for expenses was approximately $2.0 million and $2.2 million, respectively. In addition to expenses incurred under the Administration Agreement, general and administrative expenses include fees payable to the members of our board of directors (the “Board”) for their service on the Board, directors’ and officers’ insurance costs, as well as legal and accounting expenses.

Previous wording

For the year ended December 31, 2022, we recognized a net realized gain totaling $12.9 million, which consisted primarily of a net gain on forward currency contracts of $25.1 million and a $6.2 million dividend from a portfolio company that was recognized as a realized gain, partially offset by net losses on our loan portfolio of $17.2 million and a loss on foreign currency transactions of $1.3 million.

Current wording

For the year ended December 31, 2024, we recognized a net realized loss totaling $38.1 million, which consisted primarily of net losses on our investment portfolio of $23.8 million, a net loss on forward currency contracts of $13.8 million and a net loss on foreign currency transactions of $0.5 million. The net loss on our investment portfolio was primarily comprised of a $17.3 million loss on the restructuring of four investments, a $16.7 million loss on the sale and exit of two investments, which were primarily reclassified from unrealized appreciation, partially offset by a $12.2 million gain on the sale of three investments during the year ended December 31, 2024.

Previous wording

For the year ended December 31, 2023, we recognized a net realized loss totaling $62.8 million, which consisted primarily of net losses on our loan portfolio of $59.5 million and a net loss on forward currency contracts of $7.4 million, partially offset by a net gain on foreign currency transactions of $4.2 million. The net loss on our investment portfolio primarily related to the $43.6 million realized loss on the exit of our debt investments in Custom Alloy Corporation, which was all reclassified from unrealized depreciation during the year ended December 31, 2023.

Current wording

consisted primarily of net losses on our investment portfolio of $59.5 million and a net loss on forward currency contracts of $7.4 million, partially offset by a net gain on foreign currency transactions of $4.2 million. The net loss on our investment portfolio primarily related to the $43.6 million realized loss on the exit of our debt investments in

Previous wording

For the year ended December 31, 2023, we recorded net unrealized appreciation totaling $62.6 million consisting of net unrealized appreciation on our current portfolio of $5.6 million, unrealized appreciation of $4.9 million on the MVC Credit Support Agreement with Barings, net unrealized appreciation on forward currency contracts of $3.9 million, unrealized appreciation reclassification adjustments of $61.0 million related to the net realized losses on the sales / repayments of certain investments and a deferred tax asset of $0.8 million, net of unrealized depreciation of $0.2 million on the Sierra Credit Support Agreement with Barings and unrealized depreciation related to foreign currency transactions of $13.4 million. The net unrealized appreciation on our current portfolio of $5.6 million was driven primarily by the impact of foreign currency exchange rates on investments of $22.1 million and broad market moves for investments of $4.4 million, partially offset by the credit or fundamental performance of investments of $20.9 million.

Current wording

For the year ended December 31, 2024, we recorded net unrealized appreciation totaling $17.2 million consisting of net unrealized appreciation on forward currency contracts of $31.1 million, net unrealized appreciation reclassification adjustments of $30.0 million related to the net realized losses on the sales / exits and restructuring of certain investments, net unrealized appreciation related to foreign currency transactions of $9.3 million, unrealized appreciation of $3.7 million on the Sierra Credit Support Agreement with Barings and unrealized appreciation of $1.9 million on the MVC Credit Support Agreement with Barings, partially offset by net unrealized depreciation on our current portfolio of $56.6 million, and deferred taxes of $2.3 million. The net unrealized depreciation on our current portfolio of $56.6 million was driven primarily by the credit or fundamental performance of investments of $36.2 million and the impact of foreign currency exchange rates on investments of $23.0 million, partially offset by broad market moves for investments of $2.6 million.

Previous wording

For the year ended December 31, 2022, we experienced a net increase in cash in the amount of $55.2 million. During that period, our operating activities provided $86.3 million in cash, consisting primarily of net cash acquired from the acquisition of Sierra of $101.9 million and proceeds from sales or repayments of portfolio investments totaling $1,041.4 million, partially offset by purchases of portfolio investments of $1,162.2 million. In addition, our financing activities used net cash of $31.1 million, consisting primarily of dividends paid in the amount of $93.7 million and share repurchases of $32.1 million, partially offset by net borrowings under the February 2019 Credit Facility of $96.6 million. At December 31, 2022, we had $139.4 million of cash and foreign currencies on hand.

Current wording

For the year ended December 31, 2024, we experienced a net increase in cash in the amount of $20.8 million. During that period, our operating activities provided $122.2 million in cash, with proceeds from sales or repayments of portfolio investments totaling $641.8 million and other cash collections from investments exceeding purchases of portfolio investments of $637.4 million. In addition, our financing activities used net cash of $101.4 million, consisting of net repayments of the February 2019 Credit Facility of $277.7 million, dividends paid in the amount of $110.1 million and share repurchases of $6.4 million, partially offset by net proceeds of $292.8 million from the issuance of the February 2029 Notes. At December 31, 2024, we had $91.3 million of cash and foreign currencies on hand.

Previous wording

For the year ended December 31, 2023, we experienced a net decrease in cash in the amount of $68.9 million. During that period, our operating activities provided $76.9 million in cash, consisting primarily of proceeds from sales or repayments of portfolio investments totaling $593.5 million, partially offset by purchases of portfolio investments of $614.6 million. In addition, our financing activities used net cash of $145.8 million, consisting of dividends paid in the amount of $109.0 million, net repayments of the February 2019 Credit Facility of

Current wording

For the year ended December 31, 2023, we experienced a net decrease in cash in the amount of $68.9 million.

Previous wording

$19.7 million and share repurchases of $14.8 million. At December 31, 2023, we had $70.5 million of cash and foreign currencies on hand.

Current wording

dividends paid in the amount of $109.0 million, net repayments of the February 2019 Credit Facility of $19.7 million and share repurchases of $14.8 million. At December 31, 2023, we had $70.5 million of cash and

Previous wording

On February 21, 2019, we entered into a senior secured credit facility with ING Capital LLC (“ING”), as administrative agent, and the lenders party thereto (as amended, restated and otherwise modified from time to time, the “February 2019 Credit Facility”). The initial commitments under the February 2019 Credit Facility total $800.0 million. Effective on November 4, 2021, we increased aggregate commitments under the February 2019 Credit Facility to $875.0 million from $800.0 million pursuant to the accordion feature under the February 2019 Credit Facility, which allows for an increase in the total commitments to an aggregate of $1.2 billion subject to certain conditions and the satisfaction of specified financial covenants (the “November 2021 Amendment”). Effective on February 25, 2022, we increased aggregate commitments under the February 2019 Credit Facility to $965.0 million from $875.0 million pursuant to the accordion feature under the February 2019 Credit Facility, and the allowance for an increase in the total commitments increased to $1.5 billion from $1.2 billion subject to certain conditions and the satisfaction of specified financial covenants (the “February 2022 Amendment”). Effective on April 1, 2022, we increased the aggregate commitments under the February 2019 Credit Facility to $1.1 billion from $965.0 million pursuant to the accordion feature under the February 2019 Credit Facility, which allows for an increase in the total commitments to an aggregate of $1.5 billion subject to certain conditions and the satisfaction of specified financial covenants (the “April 2022 Amendment”). We can borrow foreign currencies directly under the February 2019 Credit Facility. The February 2019 Credit Facility, which is structured as a revolving credit facility, is secured primarily by a material portion of our assets and guaranteed by certain of our subsidiaries. Following the termination of the August 2018 Credit Facility on June 30, 2020, Barings BDC Senior Funding I, LLC, our indirect wholly-owned Delaware limited liability company, became a subsidiary guarantor whose assets secure the February 2019 Credit Facility. Effective May 9, 2023, the revolving period of the February 2019 Credit Facility was extended to February 21, 2025, followed by a one-year repayment period, and the maturity date was extended to February 21, 2026 (the “May 2023 Amendment”).

Current wording

On February 21, 2019, we entered into a senior secured credit facility with ING Capital LLC (“ING”), as administrative agent, and the lenders party thereto (as amended, restated and otherwise modified from time to time, the “February 2019 Credit Facility”). The initial commitments under the February 2019 Credit Facility total $800.0 million. Effective on November 4, 2021, we increased aggregate commitments under the February 2019 Credit Facility to $875.0 million from $800.0 million pursuant to the accordion feature under the February 2019 Credit Facility, which allows for an increase in the total commitments to an aggregate of $1.2 billion subject to certain conditions and the satisfaction of specified financial covenants (the “November 2021 Amendment”). Effective on February 25, 2022, we increased aggregate commitments under the February 2019 Credit Facility to $965.0 million from $875.0 million pursuant to the accordion feature under the February 2019 Credit Facility, and the allowance for an increase in the total commitments increased to $1.5 billion from $1.2 billion subject to certain conditions and the satisfaction of specified financial covenants (the “February 2022 Amendment”). Effective on April 1, 2022, we increased the aggregate commitments under the February 2019 Credit Facility to $1.1 billion from $965.0 million pursuant to the accordion feature under the February 2019 Credit Facility, which allows for an increase in the total commitments to an aggregate of $1.5 billion subject to certain conditions and the satisfaction of specified financial covenants (the “April 2022 Amendment”). We can borrow foreign currencies directly under the February 2019 Credit Facility. The February 2019 Credit Facility, which is structured as a revolving credit facility, is secured primarily by a material portion of our assets and guaranteed by certain of our subsidiaries. Following the termination of the August 2018 Credit Facility on June 30, 2020, Barings BDC Senior Funding I, LLC, our indirect wholly-owned Delaware limited liability company, became a subsidiary guarantor whose assets secure the February 2019 Credit Facility. Effective May 9, 2023, the revolving period of the February 2019 Credit Facility was extended to February 21, 2025, followed by a one-year repayment period, and the maturity date was extended to February 21, 2026 (the “May 2023 Amendment”). Effective November 5, 2024 we amended the February 2019 Credit Facility to, among other things, (a) extend the revolving period from February 21, 2025 to November 5, 2028; (b) extend the stated maturity date from February 21, 2026 to November 5, 2029; (c) adjust the interest rate charged on the February 2019 Credit Facility from an applicable spread of either the term SOFR plus 2.25% (or 2.00% for so long as we maintain an investment grade credit rating) plus a credit spread adjustment of 0.10% for borrowings with an interest period of one month, 0.15% for borrowings with an interest period of…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Borrowings denominated in U.S. Dollars under the February 2019 Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the alternate base rate plus 1.25% (or 1.00% for so long as we maintain an investment grade credit rating) or (ii) the term Secured Overnight Financing Rate (“SOFR”) plus 2.25% (or 2.00% for so long as we maintain an investment grade credit rating) plus a credit spread adjustment of 0.10% for borrowings with an interest period of one month, 0.15% for borrowings with an interest period of three months or 0.25% for borrowings with an interest period of six months. Borrowings denominated in certain foreign currencies, other than Australian dollars, bear interest on a per annum basis equal to the applicable currency rate for the foreign currency as defined in the credit agreement plus 2.00% (or 2.25% if we no longer maintain an investment grade credit rating) or for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.20% (or 2.45% if we no longer maintain an investment grade credit rating). The alternate base rate is equal to the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.5%, (iii) the Overnight Bank Funding Rate plus 0.5%, (iv) one-month term SOFR plus 1.0% plus a credit spread adjustment of 0.10% and (v) 1.0%.

Current wording

Borrowings denominated in U.S. Dollars under the February 2019 Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the alternate base rate plus 0.875% or (ii) the term SOFR plus an applicable spread of 1.875% plus a credit spread adjustment of 0.10%. Borrowings denominated in certain foreign currencies, other than Australian dollars, bear interest on a per annum basis equal to the applicable currency rate for the foreign currency as defined in the credit agreement plus 1.875% or for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.0875%. The alternate base rate is equal to the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.5%, (iii) the Overnight Bank Funding Rate plus 0.5%, (iv) one-month term SOFR plus 1.0% plus a credit spread adjustment of 0.10% and (v) 1.0%.

Previous wording

In addition, we pay a commitment fee of (i) 0.5% per annum on undrawn amounts if the unused portion of the February 2019 Credit Facility is greater than two-thirds of total commitments or (ii) 0.375% per annum on undrawn amounts if the unused portion of the February 2019 Credit Facility is equal to or less than two-thirds of total commitments. In connection with entering into the February 2019 Credit Facility, we incurred financing fees of approximately $6.4 million, which will be amortized over the life of the February 2019 Credit Facility. In connection with the November 2021 Amendment, the February 2022 Amendment, the April 2022 Amendment and the May 2023 Amendment, we incurred financing fees of approximately $4.1 million, which will be amortized over the remaining life of the February 2019 Credit Facility.

Current wording

In addition, we pay a commitment fee of 0.375% per annum on undrawn amounts of the February 2019 Credit Facility. In connection with entering into the February 2019 Credit Facility, we incurred financing fees of approximately $6.4 million, which will be amortized over the life of the February 2019 Credit Facility. In connection with all amendments to the February 2019 Credit Facility, we incurred financing fees of approximately $10.7 million, which will be amortized over the remaining life of the February 2019 Credit Facility.

Previous wording

As of December 31, 2023, we were in compliance with all covenants under the February 2019 Credit Facility and we had U.S. dollar borrowings of $489.5 million outstanding under the February 2019 Credit Facility with an interest rate of 7.428% (one month SOFR of 5.328%), borrowings denominated in Swedish kronas of 12.8kr million ($1.3 million U.S. dollars) with an interest rate of 6.063% (one month STIBOR of 4.063%), borrowings denominated in British pounds sterling of £66.6 million ($84.9 million U.S. dollars) with an interest rate of 7.220% (one month SONIA of 5.220%) and borrowings denominated in Euros of €130.6 million ($144.3 million U.S. dollars) with an interest rate of 5.875% (one month EURIBOR of 3.875%). The borrowings denominated in foreign currencies were translated into U.S. dollars based on the spot rate at the relevant balance sheet date. The impact resulting from changes in foreign exchange rates on the February 2019 Credit Facility borrowings is included in “Net unrealized appreciation (depreciation) - foreign currency transactions” in our Consolidated Statements of Operations.

Current wording

As of December 31, 2024, we were in compliance with all covenants under the February 2019 Credit Facility and we had U.S. dollar borrowings of $237.0 million outstanding under the February 2019 Credit Facility with an interest rate of 6.484% (one month SOFR of 4.509%), borrowings denominated in Swedish kronor of 9.8 kr million ($0.9 million U.S. dollars) with an interest rate of 4.625% (one month STIBOR of 2.750%), borrowings denominated in British pounds sterling of £55.6 million ($69.6 million U.S. dollars) with an interest rate of 6.608% (one month SONIA of 4.700%) and borrowings denominated in Euros of €126.6 million ($131.1 million U.S. dollars) with an interest rate of 4.938% (one month EURIBOR of 3.063%). The borrowings denominated in foreign currencies were translated into U.S. dollars based on the spot rate at the relevant balance sheet date. The impact resulting from changes in foreign exchange rates on the February 2019 Credit Facility borrowings is included in “Net unrealized appreciation (depreciation) - foreign currency transactions” in our Consolidated Statements of Operations.

Previous wording

The fair values of the borrowings outstanding under the February 2019 Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of December 31, 2023, the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $719.9 million. See Note 4 to our Consolidated Financial Statements for additional information regarding the February 2019 Credit Facility.

Current wording

The fair values of the borrowings outstanding under the February 2019 Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of December 31, 2024, the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $438.6 million. See “Note 4. Borrowings” to our Consolidated Financial Statements for additional information regarding the February 2019 Credit Facility.

Previous wording

As of December 31, 2023, the fair value of the outstanding August 2025 Notes was $47.8 million. The fair value determination of the August 2025 Notes was based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

Current wording

As of December 31, 2024, the fair value of the outstanding August 2025 Notes was $49.5 million. The fair value determination of the August 2025 Notes was based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

Previous wording

As of December 31, 2023, the fair value of the outstanding Series B Notes and the Series C Notes was $59.3 million and $102.5 million, respectively. The fair value determinations of the Series B Notes and Series C

Current wording

As of December 31, 2024, the fair value of the outstanding Series B Notes and the Series C Notes was $61.6 million and $108.3 million, respectively. The fair value determinations of the Series B Notes and Series C Notes were based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

Previous wording

As of December 31, 2023, the fair value of the outstanding Series D Notes and the Series E Notes was $73.4 million and $61.2 million, respectively. The fair value determinations of the Series D Notes and Series E Notes were based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

Current wording

As of December 31, 2024, the fair value of the outstanding Series D Notes and the Series E Notes was $77.3 million and $65.4 million, respectively. The fair value determinations of the Series D Notes and Series E Notes were based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

Previous wording

On February 23, 2023, our Board authorized a 12-month share repurchase program. Under the program, we may repurchase, during the 12-month period commencing on March 1, 2023, up to $30.0 million in the aggregate of our outstanding common stock in the open market at prices below the then-current NAV per share. The timing, manner, price and amount of any share repurchases will be determined by us, at our discretion, based upon the evaluation of economic and market conditions, our stock price, applicable legal, contractual and regulatory requirements and other factors. The program is expected to be in effect until March 1, 2024, unless extended or until the aggregate repurchase amount that has been approved by our Board has been expended. The program does not require us to repurchase any specific number of shares, and we cannot assure stockholders that any shares will be repurchased under the program. The program may be suspended, extended, modified or discontinued at any time. During the year ended December 31, 2023, we repurchased a total of 1,849,096 shares of common stock in the open market under the authorized program at an average price of $7.99 per share, including brokerage commissions.

Current wording

On February 22, 2024, our Board authorized a 12-month share repurchase program (the “Share Repurchase Program”). Under the Share Repurchase Program, we may repurchase, during the 12-month period commencing on March 1, 2024, up to $30.0 million in the aggregate of our outstanding common stock in the open market at prices below the then-current NAV per share. The timing, manner, price and amount of any share repurchases will be determined by us, in our discretion, based upon the evaluation of economic and market conditions, our stock price, applicable legal, contractual and regulatory requirements and other factors. The Share Repurchase Program is expected to be in effect until March 1, 2025, unless extended or until the aggregate repurchase amount that has been approved by the Board has been expended. The Share Repurchase Program does not require us to repurchase any specific number of shares, and we cannot assure stockholders that any shares will be repurchased under the Share Repurchase Program. The Share Repurchase Program may be suspended, extended, modified or discontinued at any time. During the year ended December 31, 2024, we repurchased a total of 658,132 shares of common stock in the open market under the Share Repurchase Program at an average price of $9.79 per share, including brokerage commissions.

Previous wording

We have elected to be treated as a RIC under the Code, and intend to make the required distributions to our stockholders as specified therein. In order to maintain our tax treatment as a RIC and to obtain RIC tax benefits, we must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then we are generally required to pay income taxes only on the portion of our taxable income and gains we do not distribute (actually or constructively) and certain built-in gains. We have historically met our minimum distribution requirements and continually monitor our distribution requirements with the goal of ensuring compliance with the Code. We can offer no assurance that we will achieve results that will permit the payment of any level of cash distributions and our ability to make distributions will be limited by the asset coverage requirement and related provisions under the 1940 Act and contained in any applicable indenture or financing agreement and related supplements. In addition, in order to satisfy the annual distribution requirement applicable to RICs, we may declare a significant portion of our dividends in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash (which portion may be as low as 20% of such dividend under published guidance from the Internal Revenue Service) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, a stockholder generally would be subject to tax on 100% of the fair market value of the dividend on the date the dividend is received by the stockholder in the same manner as a cash dividend, even though most of the dividend was paid in shares of our common stock.

Current wording

We have elected to be treated as a RIC under the Code, and intend to make the required distributions to our stockholders as specified therein. In order to maintain our tax treatment as a RIC and to obtain RIC tax benefits, we must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then we are generally required to pay income taxes only on the portion of our taxable income and gains we do not distribute (actually or constructively) and certain built-in gains. We have historically met our minimum distribution requirements and continually monitor our distribution requirements with the goal of ensuring compliance with the Code. We can offer no assurance that we will achieve results that will permit the payment of any level of cash distributions and our ability to make distributions will be limited by the asset coverage requirement and related provisions under the 1940 Act and contained in any applicable indenture or financing agreement and related supplements. In addition, in order to satisfy the annual distribution requirement applicable to RICs, we may declare a significant portion of our dividends in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash (which portion may be as low as 20% of such dividend under published guidance from the IRS) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, a stockholder generally would be subject to tax on 100% of the fair market value of the dividend on the date the dividend is received by the stockholder in the same manner as a cash dividend, even though most of the dividend was paid in shares of our common stock.

Previous wording

The minimum distribution requirements applicable to RICs require us to distribute to our stockholders each year at least 90% of our investment company taxable income, or ICTI, as defined by the Code. Depending on the level of ICTI and net capital gain, if any, earned in a tax year, we may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% U.S. federal excise tax on such excess. Any such carryover ICTI must be distributed before the end of the next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

Current wording

The minimum distribution requirements applicable to RICs require us to distribute to our stockholders each year at least 90% of our investment company taxable income, or ICTI, as defined in the Code. Depending on the level of ICTI and net capital gain, if any, earned in a tax year, we may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% U.S. federal excise tax on such excess. Any such carryover ICTI must be distributed before the end of the next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

Previous wording

ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. We may be required to recognize ICTI in certain circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), we must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in ICTI other amounts that we have not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in our ICTI for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

Current wording

ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. We may be required to recognize ICTI in certain circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having OID (such as debt instruments issued with warrants), we must include in ICTI each year a portion of the OID that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in ICTI other amounts that we have not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any OID or other amounts accrued will be included in our ICTI for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

Previous wording

The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We have a valuation policy, as well as established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (at least quarterly) basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820. Our current valuation policy and processes were established by Barings and were approved by the Board.

Current wording

The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We have a valuation policy, as well as established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (at least quarterly) basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures(“ASC Topic 820”). Our current valuation policy and processes were established by Barings and were approved by the Board.

Previous wording

As of December 31, 2023, our investment portfolio, valued at fair value in accordance with the Board-approved valuation policies, represented approximately 208% of our total net assets, as compared to approximately 205% of our total net assets as of December 31, 2022.

Current wording

As of December 31, 2024, our investment portfolio, valued at fair value in accordance with the Board-approved valuation policies, represented approximately 206% of our total net assets, as compared to approximately 208% of our total net assets as of December 31, 2023.

Previous wording

As Jocassee, Thompson Rivers, Waccamaw River, Sierra JV and MVC Private Equity Fund LP (each as defined in “Note 3. Investments” in the Notes to Consolidated Financial Statements) are investment companies with no readily determinable fair values, the Adviser estimates the fair value of our investments in these entities using the NAV of each company and our ownership percentage as a practical expedient. The NAV is determined in accordance with the specialized accounting guidance for investment companies.

Current wording

As Jocassee, Thompson Rivers, Waccamaw River, Sierra JV and MVC Private Equity Fund LP (each as defined in “Note 3. Investments” in the Notes to our Consolidated Financial Statements) are investment companies with no readily determinable fair values, the Adviser estimates the fair value of our investments in these entities using the NAV of each company and our ownership percentage as a practical expedient. The NAV is determined in accordance with the specialized accounting guidance for investment companies.

Previous wording

We may have to include interest income in our ICTI, including original issue discount income, from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements to maintain our RIC tax treatment, even though we will not have received and may not ever receive any corresponding cash amount. Additionally, any loss recognized by us for U.S. federal income tax purposes on previously accrued interest income will be treated as a capital loss.

Current wording

We may have to include interest income in our ICTI, including OID income, from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements to maintain our RIC tax treatment, even though we will not have received and may not ever receive any corresponding cash amount. Additionally, any loss recognized by us for U.S. federal income tax purposes on previously accrued interest income will be treated as a capital loss.

Previous wording

Origination, facility, commitment, consent and other advance fees received in connection with the origination of a loan, or Loan Origination Fees, are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of our business, we receive certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees, covenant waiver fees and loan amendment fees, and are recorded as investment income when earned.

Current wording

Origination, facility, commitment, consent and other advance fees received in connection with the origination of a loan, or Loan Origination Fees, are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of our business, we receive certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees, covenant waiver fees and loan amendment fees, and are recorded as investment income when earned. Other income includes royalty income received in connection with revenue participation rights which is recorded on an accrual basis in accordance with revenue participation right agreements and recognized as investment income over the term of the rights.

Previous wording

In addition, we are subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our net investment income is affected by fluctuations in various interest rates, including EURIBOR, BBSY, STIBOR, CDOR, SOFR, SONIA, SARON, NIBOR and BKBM. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. We regularly measure exposure to interest rate risk and determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. As of December 31, 2023, we were not a party to any interest rate hedging arrangements.

Current wording

In addition, we are subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our net investment income is affected by fluctuations in various interest rates, including EURIBOR, BBSY, STIBOR, CORRA, SOFR, SONIA, SARON, NIBOR and BKBM. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. We regularly measure exposure to interest rate risk and determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. We currently, and may in the future, hedge against interest rate fluctuations by using hedging instruments such as additional interest rate swaps, futures, options and forward contracts. While hedging activities may mitigate our exposure to adverse fluctuations in interest rates, certain hedging transactions that we have entered into and may enter into in the future, such as interest rate swap agreements, may also limit our ability to participate in the benefits of changes in interest rates with respect to our portfolio investments.

Previous wording

As of the end of June 2023, no settings of LIBOR continue to be published on a representative basis and publication of many non-U.S. dollar LIBOR settings has been entirely discontinued. On March 15, 2022, the U.S. enacted federal legislation that is intended to minimize legal and economic uncertainty following U.S. dollar LIBOR’s cessation by replacing LIBOR references in certain U.S. law-governed contracts under certain circumstances with a SOFR-based rate identified in a Federal Reserve rule plus a statutory spread adjustment. In addition, the U.K. Financial Conduct Authority, which regulates the publisher of LIBOR (ICE Benchmark Administration), has announced that it will require the continued publication of the one-, three- and six-month tenors of U.S. dollar LIBOR on a non-representative synthetic basis until the end of September 2024, which may result in certain non-U.S. law-governed contracts and U.S. law-governed contracts not covered by the federal legislation remaining on synthetic U.S. dollar LIBOR until the end of this period.

Current wording

As of December 31, 2024, no settings of the London Interbank Offered Rate (“LIBOR”) continue to be published. On March 15, 2022, the U.S. enacted federal legislation that is intended to minimize legal and economic uncertainty following U.S. dollar LIBOR’s cessation by replacing LIBOR references in certain U.S. law-governed contracts under certain circumstances with a SOFR-based rate identified in a Federal Reserve rule plus a statutory spread adjustment.

Previous wording

Our loan agreements with our portfolio companies that referenced LIBOR included fallback language in the event that LIBOR was discontinued, became unrepresentative or in the event that the method for determining LIBOR has changed. As a result of this language or through other bi-lateral amendments, all of these loan agreements have transitioned to an alternative reference rate.

Current wording

Our loan agreements with our portfolio companies that referenced LIBOR included fallback language in the event that LIBOR was discontinued, became unrepresentative or in the event that the method for determining LIBOR has changed. As a result of this language or through other bilateral amendments, all of these loan agreements have transitioned to an alternative reference rate.