Carlyle Secured Lending Inc
For the period ended Dec 31, 2024. Filed Feb 25, 2025.
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FY2024 · Filed Feb 25, 2025
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Item 8. Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of assets and liabilities of Carlyle Secured Lending, Inc. (the “Company”), including the consolidated schedules of investments, as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations, changes in its net assets, and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of December 31, 2024 and 2023, by correspondence with the custodian, debt agents, and the underlying investees; when replies were not received from the debt agents and the underlying investees, we performed other auditing procedures.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
| Valuation of investments using significant unobservable inputs | |
| Description of the Matter | At December 31, 2024, the fair value of the Company's investments categorized in Level III of the fair value hierarchy (Level III investments) totaled $1.740 billion. As discussed in Note 3 to the consolidated financial statements (Note 3), management determined the fair value of the Company’s Level III investments by using valuation techniques such as comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses and using inputs which were significant to the valuation of these investments, such as observable market inputs, updated credit statistics, and significant unobservable inputs (significant inputs). The significant unobservable inputs used to determine fair value required significant management judgment or estimation and, as disclosed in Note 3, included discount rates, comparable multiples, recovery rates, default rates, and indicative quotes.Auditing the fair value of the Company's Level III investments was complex and judgmental due to the valuation techniques and significant unobservable inputs used by the Company to determine fair value. |
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| How We Addressed the Matter in our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's investment valuation process. This included controls over management’s assessment of the valuation techniques and significant inputs used by management to determine the fair value measurements.To test the valuation of the Company’s Level III investments, our audit procedures included, among others, evaluating the valuation techniques and significant inputs used by the Company. For each Level III investment, we gained an understanding of the valuation technique(s) and significant inputs used to value the investment and reviewed the information considered by the Company’s valuation designee, under the oversight of the Board of Directors, relating to the valuation. Our procedures also included testing, for a sample of Level III investments, significant inputs and the mathematical accuracy of the Company's valuation models.For example, we compared market spreads, market value (EBITDA) multiples of publicly traded comparable companies, available precedent sales transactions of comparable companies, default rates and recovery rates to information available from third-party market research providers. We also compared certain of the significant inputs to underlying sources like public and private credit ratings and the most recently available portfolio company financial statements and compliance certificates provided by management. To evaluate the reasonableness of the unobservable inputs, we assessed whether these inputs were developed in a manner consistent with the Company’s valuation policies and in some instances, with the assistance of our valuation specialists, we independently developed fair value estimates using portfolio company and market information and compared them to the Company's estimates. We searched for and evaluated information that corroborated or contradicted the Company's significant inputs. We also evaluated subsequent events and transactions and considered whether they corroborated or contradicted the Company's year-end valuations. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2012.
Tysons, Virginia
February 25, 2025
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.