Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS

v3.24.3
INVESTMENTS
 6 Months Ended
Sep. 30, 2024
Investments, Debt and Equity Securities [Abstract]  
INVESTMENTS INVESTMENTS
Fair Value
In accordance with ASC 820, the fair value of our investments is determined to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. ASC 820 also establishes the following three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date.
•Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical financial instruments in active markets;
•Level 2 — inputs to the valuation methodology include quoted prices for similar financial instruments in active or inactive markets, and inputs that are observable for the financial instrument, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists, or instances where prices vary substantially over time or among brokered market makers; and
•Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are those inputs that reflect assumptions that market participants would use when pricing the financial instrument and can include the Valuation Team’s assumptions based upon the best available information.
When a determination is made to classify our investments within Level 3 of the valuation hierarchy, such determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable, or Level 3, inputs, observable inputs (or components that are actively quoted and can be validated to external sources). The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.
As of September 30, 2024, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy. As of March 31, 2024, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy, except for our investment in Funko, which was valued using Level 2 inputs.
We transfer investments in and out of Level 1, 2 and 3 of the valuation hierarchy as of the beginning balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. There were no transfers in or out of Level 1, 2 and 3 during the three and six months ended September 30, 2024 and 2023, respectively.
As of September 30, 2024 and March 31, 2024, our investments, by security type, at fair value were categorized as follows within the ASC 820 fair value hierarchy:
Fair Value Measurements
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of September 30, 2024:
Secured first lien debt
 $ 469,480  $ —  $ —  $ 469,480 
Secured second lien debt
 111,344  —  —  111,344 
Preferred equity
 228,528  —  —  228,528 
Common equity/equivalents
 43,955  — 

—  43,955 
Total Investments as of September 30, 2024
 $ 853,307  $ —  $ —  $ 853,307 
Fair Value Measurements
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of March 31, 2024:
Secured first lien debt
 $ 474,856  $ —  $ —  $ 474,856 
Secured second lien debt
 138,703  —  —  138,703 
Preferred equity
 213,480  —  —  213,480 
Common equity/equivalents
 93,465  —  18 
(A)
 93,447 
Total Investments as of March 31, 2024
 $ 920,504  $ —  $ 18  $ 920,486 
(A)Fair value was determined based on the closing market price of shares of Funko, Inc. (our units in Funko could be converted into common shares of Funko, Inc.) at the reporting date less a discount for lack of marketability, as our investment was subject to certain restrictions.
The following table presents our investments, valued using Level 3 inputs within the ASC 820 fair value hierarchy, and carried at fair value as of September 30, 2024 and March 31, 2024, by caption on our accompanying Consolidated Statements of Assets and Liabilities, and by security type:
Total Recurring Fair Value Measurements
Reported in Consolidated Statements
of Assets and Liabilities
Valued Using Level 3 Inputs
September 30, 2024 March 31, 2024
Non-Control/Non-Affiliate Investments
Secured first lien debt $ 322,601  $ 324,348 
Secured second lien debt 92,748  93,340 
Preferred equity 167,936  162,522 
Common equity/equivalents(A)
43,955  42,005 
Total Non-Control/Non-Affiliate Investments 627,240  622,215 
Affiliate Investments
Secured first lien debt 146,309  147,603 
Secured second lien debt 18,596  45,363 
Preferred equity 60,592  50,958 
Common equity/equivalents —  51,442 
Total Affiliate Investments 225,497  295,366 
Control Investments
Secured first lien debt 570  2,905 
Secured second lien debt —  — 
Preferred equity —  — 
Common equity/equivalents —  — 
Total Control Investments 570  2,905 
Total investments at fair value using Level 3 inputs $ 853,307  $ 920,486 
(A)Excludes our investment in Funko as of March 31, 2024 with a fair value of $18 thousand, which was valued using Level 2 inputs.
In accordance with ASC 820, the following table provides quantitative information about our investments valued using Level 3 fair value measurements as of September 30, 2024 and March 31, 2024. The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to our fair value measurements. The weighted-average calculations in the table below are based on the principal balances for all debt-related calculations and on the cost basis for all equity-related calculations for the particular input.
Quantitative Information about Level 3 Fair Value Measurements
Fair Value as of Valuation
Technique/
Methodology		 Unobservable
Input		 Range / Weighted-Average as of
September 30,
2024		 March 31,
2024		 September 30,
2024		 March 31,
2024
Secured first
lien debt		 $ 469,480  $ 474,856  TEV EBITDA multiple
4.3x – 8.1x /
6.4x
4.2x – 8.8x /
6.4x
EBITDA
$1,010 – $22,396 /
$11,317
$1,091 – $23,547 / $10,509
Revenue multiple
0.2x – 0.6x /
0.4x
0.3x – 0.6x /
0.4x
Revenue
$6,336 – $95,392 /
$67,530
$31,586 – $93,916 / $77,580
Secured second
lien debt		 98,936  113,703  TEV EBITDA multiple
5.2x – 7.0x /
 6.4x
5.1x – 15.0x /
7.0x
EBITDA
$5,363 – $21,194 /
$14,203
$5,648 – $23,003 / $14,192
12,408  25,000  Yield Analysis Discount Rate
16.9% – 16.9% / 16.9%
13.8% – 13.8% / 13.8%
Preferred
equity		 228,528  213,480  TEV EBITDA multiple
4.3x – 8.1x /
6.1x
4.2x – 8.8x /
6.1x
EBITDA
$2,198 – $22,396 /
$10,053
$1,091 – $23,547 / $9,502
Revenue multiple
0.2x – 0.6x /
0.3x
0.3x – 0.6x /
0.4x
Revenue
$6,336 – $95,392 /
$50,054
$31,586 – $93,916 / $75,099
Common equity/
equivalents(A)
43,955  93,447  TEV EBITDA multiple
5.1x – 7.6x /
6.4x
5.0x – 15.0x /
6.4x
EBITDA
$1,010 – $21,194 /
$16,912
$1,154 – $63,269 / $23,615
Total $ 853,307  $ 920,486 
(A)Fair value as of March 31, 2024 excludes our investment in Funko with a fair value of $18 thousand, which was valued using Level 2 inputs.
Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in discount rates, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of our investments. Generally, an increase/(decrease) in discount rates or a (decrease)/increase in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a (decrease)/increase in the fair value of certain of our investments.
Changes in Level 3 Fair Value Measurements of Investments
The following tables provide our portfolio’s changes in fair value, broken out by security type, during the three and six months ended September 30, 2024 and 2023 for all investments for which the Adviser determines fair value using unobservable (Level 3) inputs.
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

 Secured
First Lien
Debt		 Secured
Second Lien
Debt
Preferred
Equity
 Common
Equity/
Equivalents		 Total
Three Months ended September 30, 2024:
Fair value as of June 30, 2024
 $ 463,219  $ 137,827  $ 212,591  $ 85,501  $ 899,138 
Total gain (loss):
Net realized gain (loss)(A)
—  —  —  42,284  42,284 
Net unrealized appreciation (depreciation)(B)
(13,239) (1,483) 15,937  2,701  3,916 
Reversal of previously recorded (appreciation) depreciation upon realization(B)
—  —  —  (38,028) (38,028)
New investments, repayments and settlements(C):
Issuances / originations
 19,500  —  —  —  19,500 
Settlements / repayments
 —  (25,000) —  —  (25,000)
Sales
 —  —  —  (48,503) (48,503)
Transfers
 —  —  —  —  — 
Fair value as of September 30, 2024
 $ 469,480  $ 111,344  $ 228,528  $ 43,955  $ 853,307 

Secured
First Lien
Debt		 Secured
Second Lien
Debt
Preferred
Equity
 Common
Equity/
Equivalents		 Total
Six Months Ended September 30, 2024
Fair value as of March 31, 2024 $ 474,856  $ 138,703  $ 213,480  $ 93,447  $ 920,486 
Total gain (loss):
Net realized gain (loss)(A)
—  —  —  42,284  42,284 
Net unrealized appreciation (depreciation)(B)
(22,474) (2,359) 15,048  (5,245) (15,030)
Reversal of previously recorded (appreciation) depreciation upon realization(B)
—  —  —  (38,028) (38,028)
New investments, repayments and settlements(C):
Issuances / originations
 20,098  —  —  —  20,098 
Settlements / repayments
 (3,000) (25,000) —  —  (28,000)
Sales
 —  —  —  (48,503) (48,503)
Transfers
 —  —  —  —  — 
Fair value as of September 30, 2024
 $ 469,480  $ 111,344  $ 228,528  $ 43,955  $ 853,307 
Secured
First Lien
Debt
Secured
Second Lien
Debt
Preferred
Equity
Common
Equity/
Equivalents
 Total
Three Months ended September 30, 2023:
Fair value as of June 30, 2023
 $ 452,215  $ 104,794  $ 214,258  $ 28,780  $ 800,047 
Total gain (loss):
Net realized gain (loss)(A)
—  —  —  —  — 
Net unrealized appreciation (depreciation)(B)
889  (2,047) 41,925  7,987  48,754 
Reversal of previously recorded (appreciation) depreciation upon realization(B)
—  —  —  —  — 
New investments, repayments and settlements(C):
Issuances / originations
 55,400  —  11,413  —  66,813 
Settlements / repayments
 —  —  —  —  — 
Sales
 —  —  —  —  — 
Transfers
 —  —  —  —  — 
Fair value as of September 30, 2023
 $ 508,504  $ 102,747  $ 267,596  $ 36,767  $ 915,614 
Secured
First Lien
Debt
Secured
Second Lien
Debt
Preferred
Equity
Common
Equity/
Equivalents
 Total
Six Months Ended September 30, 2023:
Fair value as of March 31, 2023
 $ 437,517  $ 75,734  $ 222,585  $ 17,680  $ 753,516 
Total gain (loss):
Net realized gain (loss)(A)
—  —  273  882  1,155 
Net unrealized appreciation (depreciation)(B)
887  2,013  30,323  14,800  48,023 
Reversal of previously recorded (appreciation) depreciation upon realization(B)
—  —  —  (93) (93)
New investments, repayments and settlements(C):
Issuances / originations
 70,100  25,000  14,688  5,000  114,788 
Settlements / repayments
 —  —  —  —  — 
Sales(D)
—  —  (273) (1,502) (1,775)
Transfers
 —  —  —  —  — 
Fair value as of September 30, 2023
 $ 508,504  $ 102,747  $ 267,596  $ 36,767  $ 915,614 
Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of Operations for the respective three and six months ended September 30, 2024 and 2023.
(B)Included in net unrealized appreciation (depreciation) of investments on our accompanying Consolidated Statements of Operations for the respective three and six months ended September 30, 2024 and 2023.
(C)Includes increases in the cost basis of investments resulting from new portfolio investments, the amortization of discounts and other non-cash disbursements to portfolio companies, as well as decreases in the cost basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs, and other cost-basis adjustments.
(D)The six months ended September 30, 2023 includes $0.3 million of proceeds from the recapitalization of Old World Christmas, Inc. ("Old World").
Investment Activity
During the six months ended September 30, 2024, the following significant transactions occurred:
•In May 2024, our remaining shares in Funko were sold representing an exit of our investment in Funko, and resulting in a return of our equity cost basis of $21 thousand and a realized gain of $2 thousand.
•In July 2024, we invested an additional $18.5 million through secured first lien debt in Nocturne Luxury Villas, Inc. ("Nocturne") to fund an add-on acquisition.

•In September 2024, we exited our investment in Nth Degree Investment Group, LLC, which resulted in success fee income of $0.1 million, a realized gain on our preferred equity of $42.3 million and the repayment of our debt investment of $25.0 million.
Investment Concentrations
As of September 30, 2024, our investment portfolio consisted of investments in 22 portfolio companies located in 18 states across 15 different industries with an aggregate fair value of $853.3 million. Our investments in Nocturne, SFEG Holdings, Inc., Old World, Brunswick Bowling Products, Inc. and Dema/Mai Holdings, Inc. represented our five largest portfolio investments at fair value and collectively comprised $402.6 million, or 47.2%, of our total investment portfolio at fair value as of September 30, 2024.
The following table summarizes our investments by security type as of September 30, 2024 and March 31, 2024:
September 30, 2024 March 31, 2024
Cost Fair Value Cost Fair Value
Secured first lien debt $ 530,522  63.1  % $ 469,480  55.0  % $ 513,425  60.1  % $ 474,856  51.6  %
Secured second lien debt 119,958  14.3  % 111,344  13.0  % 144,958  16.9  % 138,703  15.0  %
Total debt 650,480  77.4  % 580,824  68.0  % 658,383  77.0  % 613,559  66.6  %
Preferred equity 145,070  17.3  % 228,528  26.8  % 145,070  17.0  % 213,480  23.2  %
Common equity/equivalents 44,597  5.3  % 43,955  5.2  % 50,837  6.0  % 93,465  10.2  %
Total equity/equivalents 189,667  22.6  % 272,483  32.0  % 195,907  23.0  % 306,945  33.4  %
Total investments
 $ 840,147  100.0  % $ 853,307  100.0  % $ 854,290  100.0  % $ 920,504  100.0  %
Investments at fair value consisted of the following industry classifications as of September 30, 2024 and March 31, 2024:
September 30, 2024 March 31, 2024
Fair Value Percentage of
Total Investments		 Fair Value Percentage of Total Investments
Home and Office Furnishings, Housewares, and Durable Consumer Products $ 164,994  19.3  % $ 160,038  17.3  %
Diversified/Conglomerate Services 164,579  19.3  % 264,535  28.7  %
Hotels, Motels, Inns, and Gaming 98,852  11.6  % 77,366  8.4  %
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) 92,474  10.8  % 92,781  10.1  %
Buildings and Real Estate 61,749  7.2  % 60,431  6.6  %
Oil and Gas 56,379  6.6  % 51,171  5.6  %
Healthcare, Education, and Childcare 50,140  5.9  % 49,638  5.4  %
Leisure, Amusement, Motion Pictures, and Entertainment 42,381  5.0  % 39,350  4.3  %
Mining, Steel, Iron and Non-Precious Metals 33,523  3.9  % 30,537  3.3  %
Aerospace and Defense 31,821  3.7  % 29,064  3.2  %
Chemicals, Plastics, and Rubber 18,596  2.2  % 20,363  2.2  %
Printing and Publishing 13,500  1.6  % 14,238  1.5  %
Cargo Transport 12,408  1.5  % 13,500  1.5  %
Telecommunications 6,357  0.7  % 9,002  1.0  %
Other < 2.0% 5,554  0.7  % 8,490  0.9  %
Total investments $ 853,307  100.0  % $ 920,504  100.0  %
Investments at fair value were included in the following geographic regions of the U.S. as of September 30, 2024 and March 31, 2024:
September 30, 2024 March 31, 2024
Location Fair Value Percentage of
Total Investments		 Fair Value Percentage of
Total Investments
South
 $ 271,739  31.8  % $ 346,838  37.7  %
West
 223,539  26.2  % 223,871  24.3  %
Northeast
 214,844  25.2  % 207,870  22.6  %
Midwest
 143,185  16.8  % 141,925  15.4  %
Total investments $ 853,307  100.0  % $ 920,504  100.0  %
The geographic region indicates the location of the headquarters for our portfolio companies. A portfolio company may have additional business locations in other geographic regions.
Investment Principal Repayments
The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments, as of September 30, 2024:

Amount
For the remaining six months ending March 31, 2025
 $ 64,060 
For the fiscal years ending March 31:
2026 206,310 
2027 213,485 
2028 66,231 
2029 100,394 
Thereafter — 
Total contractual repayments $ 650,480 
Investments in equity securities 189,667 
Total cost basis of investments held as of September 30, 2024:
 $ 840,147 
Receivables from Portfolio Companies
Receivables from portfolio companies represent non-recurring costs that we incurred on behalf of portfolio companies. Such receivables, net of any allowance for uncollectible receivables, are included in Other assets, net on our accompanying Consolidated Statements of Assets and Liabilities. We generally maintain an allowance for uncollectible receivables from portfolio companies when the receivable balance becomes 90 days or more past due or if it is determined, based upon management’s judgment, that the portfolio company is unable to pay its obligations. We write off accounts receivable when we have exhausted collection efforts and have deemed the receivables uncollectible. As of September 30, 2024 and March 31, 2024, we had gross receivables from portfolio companies of $2.1 million and $2.2 million, respectively. As of September 30, 2024 and March 31, 2024, the allowance for uncollectible receivables was $1.6 million and $1.4 million, respectively.