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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 9/03/21 Blackstone Private Credit Fund N-2 9/02/21 3:5.6M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: N-2 Registration Statement by a Closed-End Investment HTML 3.82M
Company
2: EX-99.L Miscellaneous Exhibit HTML 14K
3: EX-99.N Miscellaneous Exhibit HTML 4K
| N-2 |
As filed with the Securities and Exchange Commission on September 2, 2021
Securities Act File No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
| Pre-Effective Amendment No. |
| |
| Post-Effective Amendment No. |
|
Blackstone Private Credit Fund
(Exact name of registrant as specified in its charter)
345 Park Avenue, 31st Floor
New York, NY
(212) 503-2100
(Address and telephone number, including area code, of principal executive offices)
Marisa J. Beeney, Esq.
Blackstone Credit BDC Advisors LLC
345 Park Avenue, 31st Floor
(Name and address of agent for service)
COPIES TO:
Rajib Chanda
Benjamin C. Wells
Simpson Thacher & Bartlett LLP
900 G Street, N.W.
Approximate Date of Commencement of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.
| ☐ | Check box if the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans. |
| ☒ | Check box if any securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933 (“Securities Act”), other than securities offered in connection with a dividend reinvestment plan. |
| ☐ | Check box if this Form is a registration statement pursuant to General Instruction A.2 or a post-effective amendment thereto. |
| ☐ | Check box if this Form is a registration statement pursuant to General Instruction B or a post-effective amendment thereto that will become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act. |
| ☐ | Check box if this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction B to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act. |
It is proposed that this filing will become effective (check appropriate box):
| ☐ | when declared effective pursuant to Section 8(c) of the Securities Act. |
| ☒ | immediately upon filing pursuant to paragraph (b) of Rule 486. |
| ☐ | on (date) pursuant to paragraph (b) of Rule 486. |
| ☐ | 60 days after filing pursuant to paragraph (a) of Rule 486. |
| ☐ | on (date) pursuant to paragraph (a) of Rule 486. |
If appropriate, check the following box:
| ☐ | This post-effective amendment designates a new effective date for a previously filed post-effective amendment registration statement. |
| ☐ | This Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is: . |
| ☐ | This Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is: . |
| ☐ | This Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is: |
Check each box that appropriately characterizes the Registrant:
| ☐ | Registered Closed-End Fund (closed-end company that is registered under the Investment Company Act of 1940 (“Investment Company Act”)). |
| ☒ | Business Development Company (closed-end company that intends or has elected to be regulated as a business development company under the Investment Company Act). |
| ☐ | Interval Fund (Registered Closed-End Fund or a Business Development Company that makes periodic repurchase offers under Rule 23c-3 under the Investment Company Act). |
| ☐ | A.2 Qualified (qualified to register securities pursuant to General Instruction A.2 of this Form). |
| ☐ | Well-Known Seasoned Issuer (as defined by Rule 405 under the Securities Act). |
| ☐ | Emerging Growth Company (as defined by Rule 12b-2 under the Securities Exchange Act of 1934 (“Exchange Act”)). |
| ☐ | If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. |
| ☒ | New Registrant (registered or regulated under the Investment Company Act for less than 12 calendar months preceding this filing). |
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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| Title of Securities Being Registered | Proposed Maximum Aggregate Offering Price(1)(2) |
Amount of Registration Fee | ||
| Common shares of beneficial interest, $0.01 par value per share |
$7,500,000,000 | $818,250.00(3) | ||
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| (1) | Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as amended, solely for the purpose of determining the registration fee. A total of $5,000,000,000 of common shares of beneficial interest, par value $0.01 per share, were previously registered. This post-effective amendment registers an additional $7,500,000,000 of common shares, resulting in a total of $12,500,000,000 in registered common shares. |
| (2) | Being registered pursuant to this Registration Statement. |
| (3) | Calculated pursuant to Rule 457(o) and paid in connection with the filing of this Registration Statement on August 26, 2021. |
Explanatory Note
Pursuant to Rule 429 under the Securities Act, the prospectus included herein is a combined prospectus which relates to (i) the Registration Statement File No. 333-248432, dated October 5, 2020, as amended, previously filed by Blackstone Private Credit Fund (the “Registrant”) on Form N-2 (the “Prior Registration Statement”) and (ii) the registration by the Registrant of additional securities as set forth herein. This Registration Statement also constitutes a Post-Effective Amendment to the Prior Registration Statement, and such Post-Effective Amendment shall become effective concurrently with the effectiveness of this Registration Statement. Pursuant to the Prior Registration Statement, a total of $5,000,000,000 common shares of beneficial interest, par value $0.01 per share, were previously registered. This Registration Statement has registered an additional $7,500,000,000 of common shares, resulting in a total of $12,500,000,000 in registered common shares.
Prospectus
Blackstone Private Credit Fund
Class S, Class D and Class I Shares
Maximum Offering of $12,500,000,000
Blackstone Private Credit Fund is a Delaware statutory trust that seeks to invest primarily in originated loans and other securities, including broadly syndicated loans, of private U.S. companies. We are externally managed by an affiliate of Blackstone Inc. (formerly, The Blackstone Group Inc.), which is the largest alternative asset manager in the world with deep investment expertise and leading investment businesses across asset classes and geographies. Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. Throughout the prospectus, we refer to Blackstone Private Credit Fund as the “Fund,” “we,” “us” or “our.”
We are a non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Our adviser, Blackstone Credit BDC Advisors LLC (the “Adviser”) is an affiliate of Blackstone Alternative Credit Advisors LP, the credit-focused business of Blackstone Inc. (“Blackstone Credit”). We intend to elect to be treated for federal income tax purposes, and intend to qualify annually thereafter, as a regulated investment company under the Internal Revenue Code of 1986, as amended.
We are offering on a continuous basis up to $12,500,000,000 of our common shares of beneficial interest (“Common Shares”). We are offering to sell any combination of three classes of Common Shares—Class S shares, Class D shares and Class I shares—with a dollar value up to the maximum offering amount. The share classes have different ongoing shareholder servicing and/or distribution fees. The purchase price per share for each class of Common Shares equals our net asset value (“NAV”) per share, as of the effective date of the monthly share purchase date. This is a “best efforts” offering, which means that Blackstone Securities Partners L.P., the intermediary manager for this offering, will use its best efforts to sell shares, but is not obligated to purchase or sell any specific amount of shares in this offering.
Investing in our Common Shares involves a high degree of risk. See “Risk Factors” beginning on page 31 of this prospectus. Also consider the following:
| • | We have limited prior operating history and there is no assurance that we will achieve our investment objectives. |
| • | This is a “blind pool” offering and thus you will not have the opportunity to evaluate our investments before we make them. |
| • | You should not expect to be able to sell your shares regardless of how we perform. |
| • | You should consider that you may not have access to the money you invest for an extended period of time. |
| • | We do not intend to list our shares on any securities exchange, and we do not expect a secondary market in our shares to develop prior to any listing. |
| • | Because you may be unable to sell your shares, you will be unable to reduce your exposure in any market downturn. |
| • | We have implemented a share repurchase program, but only a limited number of shares will be eligible for repurchase and repurchases will be subject to available liquidity and other significant restrictions. |
| • | An investment in our Common Shares is not suitable for you if you need access to the money you invest. See “Suitability Standards” and “Share Repurchase Program.” |
| • | You will bear substantial fees and expenses in connection with your investment. See “Fees and Expenses.” |
| • | We cannot guarantee that we will make distributions, and if we do, we may fund such distributions from sources other than cash flow from operations, including the sale of assets, borrowings, return of capital or offering proceeds, and although we generally expect to fund distributions from cash flow from operations, we have not established limits on the amounts we may pay from such sources. |
| • | Distributions may also be funded in significant part, directly or indirectly, from temporary waivers or expense reimbursements borne by the Adviser or its affiliates, that may be subject to reimbursement to the Adviser or its affiliates. The repayment of any amounts owed to our affiliates will reduce future distributions to which you would otherwise be entitled. |
| • | We use and continue to expect to use leverage, which will magnify the potential for loss on amounts invested in us. |
| • | We intend to invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be illiquid and difficult to value. |
Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Securities regulators have also not passed upon whether this offering can be sold in compliance with existing or future suitability or conduct standards including the ‘Regulation Best Interest’ standard to any or all purchasers.
The use of forecasts in this offering is prohibited. Any oral or written predictions about the amount or certainty of any cash benefits or tax consequences that may result from an investment in our Common Shares is prohibited. No one is authorized to make any statements about this offering different from those that appear in this prospectus.
| Price to the Public(1) |
Proceeds to Us, Before Expenses(2) |
|||||||
| Maximum Offering(3) |
$ | 12,500,000,000 | $ | 12,500,000,000 | ||||
| Class S Shares, per Share |
$ | 25.81 | $ | 4,166,666,667 | ||||
| Class D Shares, per Share |
$ | 25.81 | $ | 4,166,666,667 | ||||
| Class I Shares, per Share |
$ | 25.81 | $ | 4,166,666,667 | ||||
| (1) | Class S shares, Class D shares and Class I shares were initially offered at $25.00 per share, and are currently being offered on a monthly basis at a price per share equal to the NAV per share for such class. The table reflects the NAV per share of each class as of June 30, 2021. |
| (2) | No upfront sales load will be paid with respect to Class S shares, Class D shares or Class I shares, however, if you buy Class S shares or Class D shares through certain financial intermediaries, they may directly charge you transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to a 1.5% cap on NAV for Class D shares and 3.5% cap on NAV for Class S shares. Selling agents will not charge such fees on Class I shares. We will also pay the following shareholder servicing and/or distribution fees to the intermediary manager, subject to Financial Industry Regulatory Authority, Inc. (“FINRA”) limitations on underwriting compensation: (a) for Class S shares, a shareholder servicing and/or distribution fee equal to 0.85% per annum of the aggregate NAV as of the beginning of the first calendar day of the month for the Class S shares and (b) for Class D shares only, a shareholder servicing and/or distribution fee equal to 0.25% per annum of the aggregate NAV as of the beginning of the first calendar day of the month for the Class D shares, in each case, payable monthly. No shareholder servicing and/or distribution fees will be paid with respect to the Class I shares. The total amount that will be paid over time for other underwriting compensation depends on the average length of time for which shares remain |
| outstanding, the term over which such amount is measured and the performance of our investments. We will also pay or reimburse certain organization and offering expenses, including, subject to FINRA limitations on underwriting compensation, certain wholesaling expenses. See “Plan of Distribution” and “Use of Proceeds.” The total underwriting compensation and total organization and offering expenses will not exceed 10% and 15%, respectively, of the gross proceeds from this offering. Proceeds are calculated before deducting shareholder servicing and/or distribution fees or organization and offering expenses payable by us, which are paid over time. |
| (3) | The table assumes that all shares are sold in the primary offering, with 1/3 of the gross offering proceeds from the sale of Class S shares, 1/3 from the sale of Class D shares, and 1/3 from the sale of Class I shares. The number of shares of each class sold and the relative proportions in which the classes of shares are sold are uncertain and may differ significantly from this assumption. |
This prospectus contains important information you should know before investing in the Common Shares. Please read this prospectus before investing and keep it for future reference. We also file periodic and current reports, proxy statements and other information about us with the U.S. Securities and Exchange Commission (the “SEC”). This information is available free of charge by contacting us at 345 Park Avenue, 31st Floor, New York, NY 10154, calling us at (212) 503-2100 or visiting our corporate website located at www.bcred.com. Information on our website is not incorporated into or a part of this prospectus. The SEC also maintains a website at http://www.sec.gov that contains this information.
The date of this prospectus is September 2, 2021
Common Shares offered through this prospectus are suitable only as a long-term investment for persons of adequate financial means such that they do not have a need for liquidity in this investment. We have established financial suitability standards for initial shareholders in this offering which require that a purchaser of shares have either:
| • | a gross annual income of at least $70,000 and a net worth of at least $70,000, or |
| • | a net worth of at least $250,000. |
For purposes of determining the suitability of an investor, net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles. In the case of sales to fiduciary accounts, these minimum standards must be met by the beneficiary, the fiduciary account or the donor or grantor who directly or indirectly supplies the funds to purchase the shares if the donor or grantor is the fiduciary.
In addition, we will not sell shares to investors in the states named below unless they meet special suitability standards set forth below:
Alabama—In addition to the suitability standards set forth above, an investment in us will only be sold to Alabama residents that have a liquid net worth of at least 10 times their investment in us and our affiliates.
California—California residents may not invest more than 10% of their liquid net worth in us and must have either (a) a liquid net worth of $350,000 and annual gross income of $65,000 or (b) a liquid net worth of $500,000.
Idaho—Purchasers residing in Idaho must have either (a) a liquid net worth of $85,000 and annual gross income of $85,000 or (b) a liquid net worth of $300,000. Additionally, the total investment in us shall not exceed 10% of their liquid net worth.
Iowa—Iowa investors must (i) have either (a) an annual gross income of at least $100,000 and a net worth of at least $100,000, or (b) a net worth of at least $350,000 (net worth should be determined exclusive of home, auto and home furnishings); and (ii) limit their aggregate investment in this offering and in the securities of other non-traded business development companies (“BDCs”) to 10% of such investor’s liquid net worth (liquid net worth should be determined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities).
Kansas—It is recommended by the Office of the Securities Commissioner that Kansas investors limit their aggregate investment in our securities and other non-traded business development companies to not more than 10% of their liquid net worth. For these purposes, liquid net worth shall be defined as that portion of total net worth (total assets minus total liabilities) that is comprised of cash, cash equivalents and readily marketable securities.
Kentucky—A Kentucky investor may not invest more than 10% of its liquid net worth in us or our affiliates. “Liquid net worth” is defined as that portion of net worth that is comprised of cash, cash equivalents and readily marketable securities.
Maine—The Maine Office of Securities recommends that an investor’s aggregate investment in this offering and similar direct participation investments not exceed 10% of the investor’s liquid net worth. For this purpose, “liquid net worth” is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.
Massachusetts—In addition to the suitability standards set forth above, Massachusetts residents may not invest more than 10% of their liquid net worth in us and in other illiquid direct participation programs.
i
Missouri—In addition to the suitability standards set forth above, Missouri residents may not invest more than 10% of their liquid net worth in us.
Nebraska—Nebraska investors must have (i) either (a) an annual gross income of at least $70,000 and a net worth of at least $70,000, or (b) a net worth of at least $250,000; and (ii) Nebraska investors must limit their aggregate investment in this offering and the securities of other business development companies to 10% of such investor’s net worth. Investors who are accredited investors as defined in Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) are not subject to the foregoing investment concentration limit.
New Jersey—New Jersey investors must have either (a) a minimum liquid net worth of $100,000 and a minimum annual gross income of $85,000, or (b) a minimum liquid net worth of $350,000. For these purposes, “liquid net worth” is defined as that portion of net worth (total assets exclusive of home, home furnishings and automobiles, minus total liabilities) that consists of cash, cash equivalents and readily marketable securities. In addition, a New Jersey investor’s investment in us, our affiliates and other non-publicly-traded direct investment programs (including real estate investment trusts, business development companies, oil and gas programs, equipment leasing programs and commodity pools, but excluding unregistered, federally and state exempt private offerings) may not exceed 10% of his or her liquid net worth.
New Mexico—In addition to the general suitability standards listed above, a New Mexico investor may not invest, and we may not accept from an investor more than ten percent (10%) of that investor’s liquid net worth in shares of us, our affiliates and in other non-traded business development companies. Liquid net worth is defined as that portion of net worth which consists of cash, cash equivalents and readily marketable securities.
North Dakota—Purchasers residing in North Dakota must have a net worth of at least ten times their investment in us.
Ohio—It is unsuitable for Ohio residents to invest more than 10% of their liquid net worth in the issuer, affiliates of the issuer and in any other non-traded BDC. “Liquid net worth” is defined as that portion of net worth (total assets exclusive of primary residence, home furnishings and automobiles, minus total liabilities) comprised of cash, cash equivalents and readily marketable securities.
Oklahoma—Purchasers residing in Oklahoma may not invest more than 10% of their liquid net worth in us.
Oregon—In addition to the suitability standards set forth above, Oregon investors may not invest more than 10% of their liquid net worth in us and our affiliates. Liquid net worth is defined as net worth excluding the value of the investor’s home, home furnishings and automobile.
Puerto Rico—Purchasers residing in Puerto Rico may not invest more than 10% of their liquid net worth in us, our affiliates and other non-traded business development companies. For these purposes, “liquid net worth” is defined as that portion of net worth (total assets exclusive of primary residence, home furnishings and automobiles minus total liabilities) consisting of cash, cash equivalents and readily marketable securities.
Tennessee—Purchasers residing in Tennessee must have a liquid net worth of at least ten times their investment in us.
Texas—Each Texas investor must have: a minimum annual gross income of $85,000 and a minimum net worth of $85,000 or a minimum net worth of $330,000. The net worth shall be determined exclusive of home, home furnishings, and automobiles. In addition to the higher suitability standards set forth above, a Texas investor’s aggregate investment in the issuer, its affiliates, and other non-traded direct investment programs (including business development companies, oil and gas programs, real estate investment trusts, equipment leasing programs and commodity pools, but excluding unregistered, federally and state exempt private offerings) may not exceed 10% of his or her liquid net worth, defined as the portion of an investor’s net worth (total assets exclusive of primary residence, home furnishings and automobiles, minus total liabilities) consisting of cash, cash equivalents and readily marketable securities.
ii
Vermont—Accredited investors in Vermont, as defined in 17 C.F.R. §230.501, may invest freely in this offering. In addition to the suitability standards described above, non-accredited Vermont investors may not purchase an amount in this offering that exceeds 10% of the investor’s liquid net worth. For these purposes, “liquid net worth” is defined as an investor’s total assets (not including home, home furnishings or automobiles) minus total liabilities.
The Adviser, those selling shares on our behalf, and participating brokers and registered investment advisers recommending the purchase of shares in this offering are required to make every reasonable effort to determine that the purchase of shares in this offering is a suitable and appropriate investment for each investor based on information provided by the investor regarding the investor’s financial situation and investment objectives and must maintain records for at least six years after the information is used to determine that an investment in our shares is suitable and appropriate for each investor. In making this determination, the participating broker, registered investment adviser, authorized representative or other person selling shares will, based on a review of the information provided by the investor, consider whether the investor:
| • | meets the minimum income and net worth standards established in the investor’s state; |
| • | can reasonably benefit from an investment in our Common Shares based on the investor’s overall investment objectives and portfolio structure; |
| • | is able to bear the economic risk of the investment based on the investor’s overall financial situation, including the risk that the investor may lose its entire investment; and |
| • | has an apparent understanding of the following: |
| • | the fundamental risks of the investment; |
| • | the lack of liquidity of our shares; |
| • | the background and qualification of our Adviser; and |
| • | the tax consequences of the investment. |
In addition to investors who meet the minimum income and net worth requirements set forth above, our shares may be sold to financial institutions that qualify as “institutional investors” under the state securities laws of the state in which they reside. “Institutional investor” is generally defined to include banks, insurance companies, investment companies as defined in the 1940 Act, pension or profit sharing trusts and certain other financial institutions. A financial institution that desires to purchase shares will be required to confirm that it is an “institutional investor” under applicable state securities laws.
In addition to the suitability standards established herein, (i) a participating broker may impose additional suitability requirements and investment concentration limits to which an investor could be subject and (ii) various states may impose additional suitability standards, investment amount limits and alternative investment limitations.
Broker-dealers must comply with Regulation Best Interest, which, among other requirements, enhances the existing standard of conduct for broker-dealers and establishes a “best interest” obligation for broker-dealers and their associated persons when making recommendations of any securities transaction or investment strategy involving securities to a retail customer. The obligations of Regulation Best Interest are in addition to, and may be more restrictive than, the suitability requirements listed above. When making such a recommendation to a retail customer, a broker-dealer must, among other things, act in the best interest of the retail customer at the time a recommendation is made, without placing its interests ahead of its retail customer’s interests. A broker-dealer may satisfy the best interest standard imposed by Regulation Best Interest by meeting disclosure, care, conflict of interest and compliance obligations. Regulation Best Interest also requires registered investment advisers and registered broker-dealers to provide a brief relationship summary to retail investors. This relationship summary, referred to as Form CRS, is not a prospectus. Investors should refer to the prospectus for detailed information about this offering before deciding to purchase Common Shares. Currently, there is no administrative or case law interpreting Regulation Best Interest and the full scope of its applicability on brokers participating in our offering cannot be determined at this time.
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Please carefully read the information in this prospectus and any accompanying prospectus supplements, which we refer to collectively as the “prospectus.” You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. You should not assume that the information contained in this
prospectus is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.
We will disclose the NAV per share of each class of our Common Shares for each month when available on our website at www.bcred.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider that information to be part of this prospectus.
The words “we,” “us,” “our” and the “Fund” refer to Blackstone Private Credit Fund, together with its consolidated subsidiaries.
Unless otherwise noted, numerical information relating to Blackstone (as defined below) and Blackstone Credit is approximate as of June 30, 2021.
Citations included herein to industry sources are used only to demonstrate third-party support for certain statements made herein to which such citations relate. Information included in such industry sources that do not relate to supporting the related statements made herein are not part of this prospectus and should not be relied upon.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements about our business, including, in particular, statements about our plans, strategies and objectives. You can generally identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. These statements include our plans and objectives for future operations, including plans and objectives relating to future growth and availability of funds, and are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to these statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond our control. Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate and our actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements. In light of the significant uncertainties inherent in these forward looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved.
You should carefully review the “Risk Factors” section of this prospectus for a discussion of the risks and uncertainties that we believe are material to our business, operating results, prospects and financial condition. Except as otherwise required by federal securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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| CUSTODIAN, TRANSFER AND DISTRIBUTION PAYING AGENT AND REGISTRAR |
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| APPENDIX B: SUPPLEMENTAL PERFORMANCE INFORMATION OF THE ADVISER |
B-1 | |||
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This prospectus summary highlights certain information contained elsewhere in this prospectus. This is only a summary and it may not contain all of the information that is important to you. Before deciding to invest in this offering, you should carefully read this entire prospectus, including the “Risk Factors” section.
| Q: | What is Blackstone Private Credit Fund? |
| A: | We are a Delaware statutory trust formed on February 11, 2020. We are a non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). We are externally managed by an affiliate of Blackstone Inc. (formerly, The Blackstone Group Inc.), which is the largest alternative asset manager in the world with deep investment expertise and leading investment businesses across asset classes and geographies. Our adviser, Blackstone Credit BDC Advisers LLC (the “Adviser”) is an affiliate of Blackstone Alternative Credit Advisors LP (collectively with its affiliates in the credit-focused business of Blackstone Inc., “Blackstone Credit,” which, for the avoidance of doubt, excludes Harvest Fund Advisors LLC and Blackstone Insurance Solutions (“BIS”)). Blackstone Credit together with its non-credit-focused affiliates within Blackstone Inc. is referred to herein as “Blackstone.” |
| Q: | Who are Blackstone and Blackstone Credit? |
| A: | Blackstone is a leading global investment manager with total assets under management of approximately $684 billion. |
Blackstone’s alternative asset management businesses include investment vehicles focused on private equity, real estate, insurance, hedge fund solutions, non-investment grade credit, secondary private equity funds of funds, infrastructure and multi-asset class strategies. Blackstone also provides capital markets services.
Blackstone Credit is part of the credit platform of Blackstone. Blackstone Credit’s asset management operation has aggregate assets under management of approximately $163 billion across multiple strategies within the leveraged finance marketplace, including loans, high yield bonds, distressed and mezzanine debt and private equity, including hedge funds. Blackstone Credit has a global platform with 397 employees based in offices in New York, Houston, London and Dublin, and satellite offices in Baltimore, San Francisco, Toronto, Frankfurt, Milan, Munich and Madrid.
Our objective is to bring Blackstone Credit’s leading credit investment platform to the non-exchange traded BDC industry.
| Q: | What are your investment objectives? |
| A: | Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. |
| Q: | What is your investment strategy? |
| A: | We will seek to meet our investment objectives by: |
| • | utilizing the experience and expertise of the management team of the Adviser, along with the broader resources of Blackstone Credit and Blackstone, in sourcing, evaluating and structuring transactions, subject to Blackstone’s policies and procedures regarding the management of conflicts of interest; |
| • | employing a defensive investment approach focused on long-term credit performance and principal protection, generally investing in loans with asset coverage ratios and interest coverage ratios that the Adviser believes provide substantial credit protection, and also seeking favorable financial protections, including, where the Adviser believes necessary, one or more financial maintenance covenants; |
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| • | focusing on loans and securities of private U.S. companies, and to a lesser extent European and other non-U.S. companies. In many market environments, we believe such a focus offers an opportunity for superior risk-adjusted returns; |
| • | maintaining rigorous portfolio monitoring in an attempt to anticipate and pre-empt negative credit events within our portfolio; and |
| • | utilizing the power and scale of Blackstone and the Blackstone Credit platform to offer operational expertise to portfolio companies through the Blackstone Credit Advantage program (as defined below). |
Our investment strategy is expected to capitalize on Blackstone Credit’s scale and reputation in the market as an attractive financing partner to acquire our target investments at attractive pricing. We also expect to benefit from Blackstone’s reputation and ability to transact in scale with speed and certainty, and its long-standing and extensive relationships with private equity firms that require financing for their transactions.
| Q: | What types of investments do you intend to make? |
| A: | Under normal circumstances, we will invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in private credit investments (loans, bonds and other credit instruments that are issued in private offerings or issued by private companies). |
Once we have invested a substantial amount of proceeds from this offering, under normal circumstances we expect that the majority of our portfolio will be in privately originated and privately negotiated investments, predominantly direct lending to U.S. middle market companies through (i) first lien senior secured and unitranche loans and (ii) second lien, unsecured, subordinated or mezzanine loans and structured credit, as well as broadly syndicated loans (for which we may serve as an anchor investor), club deals (generally investments made by a small group of investment firms) and other debt and equity securities (the investments described in this sentence, collectively, “Private Credit”). To a lesser extent, we will also invest in publicly traded securities of large corporate issuers (“Opportunistic Credit”). We expect that the Opportunistic Credit investments will generally be liquid, and may be used for the purposes of maintaining liquidity for our share repurchase program and cash management, while also presenting an opportunity for attractive investment returns.
Most of our investments will be in private U.S. companies, but (subject to compliance with BDCs’ requirement to invest at least 70% of its assets in private U.S. companies), we also expect to invest to some extent in European and other non-U.S. companies, but we do not expect to invest in emerging markets. We may invest in companies of any size or capitalization. Subject to the limitations of the 1940 Act, we may invest in loans or other securities, the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds. From time to time, we may co-invest with other Blackstone Credit funds. See “Regulation—Exemptive Relief.”
The loans in which we invest will generally pay floating interest rates based on a variable base rate. The senior secured loans, unitranche loans and senior secured bonds in which we will invest generally have stated terms of five to eight years, and the mezzanine, unsecured or subordinated debt investments that we may make will generally have stated terms of up to ten years, but the expected average life of such securities is generally between three and five years. However, there is no limit on the maturity or duration of any security we may hold in our portfolio. Loans and securities purchased in the secondary market will generally have shorter remaining terms to maturity than newly issued investments. We expect most of our debt investments will be unrated. Our debt investments may also be rated by a nationally recognized statistical rating organization, and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s Investors Service, Inc. or lower than “BBB-” by Standard & Poor’s Ratings Services). We expect that our unrated debt investments will generally have credit quality consistent with below
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investment grade securities. In addition, we may invest in collateralized loan obligations (“CLOs”) and will generally have the right to receive payments only from the CLOs, and will generally not have direct rights against the underlying borrowers or entities that sponsored the CLOs.
We may, but are not required to, enter into interest rate, foreign exchange or other derivative agreements to hedge interest rate, currency, credit or other risks, but we do not generally intend to enter into any such derivative agreements for speculative purposes. Any derivative agreements entered into for speculative purposes are not expected to be material to the Fund’s business or results of operations. These hedging activities, which will be in compliance with applicable legal and regulatory requirements, may include the use of futures, options and forward contracts. We will bear the costs incurred in connection with entering into, administering and settling any such derivative contracts. There can be no assurance any hedging strategy we employ will be successful.
Our investments are subject to a number of risks. See “Investment Objectives and Strategies” and “Risk Factors.”
| Q: | What is an originated loan? |
| A: | An originated loan is a loan where we lend directly to the borrower and hold the loan generally on our own or only with other Blackstone Credit affiliates. This is distinct from a syndicated loan, which is generally originated by a bank and then syndicated, or sold, in several pieces to other investors. Originated loans are generally held until maturity or until they are refinanced by the borrower. Syndicated loans often have liquid markets and can be traded by investors. |
| Q: | What strengths does the Adviser offer? |
| A: | Blackstone Credit is one of the largest private credit investment platforms globally and a key player in the direct lending space. Blackstone Credit has experience scaling funds across its platform that invests throughout all parts of the capital structure. Blackstone Credit strives to focus on transactions where it can differentiate itself from other providers of capital, targeting large transactions and those where Blackstone Credit can bring its expertise and experience in negotiating and structuring. We believe that Blackstone Credit has the scale and platform to effectively manage a U.S. private credit investment strategy, offering investors the following potential strengths: |
| • | Ability to Provide Scale, Differentiated Capital Solutions. We believe that the breadth and scale of Blackstone Credit’s approximately $163 billion platform and affiliation with Blackstone are distinct strengths when sourcing proprietary investment opportunities and provide Blackstone Credit with a differentiated capability to invest in large, complex opportunities.1 Blackstone Credit is invested in over 2,100 corporate issuers across its portfolios globally and has focused primarily on the non-investment grade corporate credit market since its inception in 2005.2 Blackstone Credit expects that in the current environment, in which committed capital from banks remains scarce (as tracked by S&P Capital IQ LCD, U.S. banks’ share of senior secured loans has declined from 33.1% in 1995 to 7.5% as of June 30, 2021), the ability to provide flexible, well-structured capital commitments in |
| 1 | Blackstone was ranked as the third largest private debt firm in the world by Private Debt Investor in 2020 (see https://www.privatedebtinvestor.com/pdi-50-the-top-10/). Private Debt Investor ranks firms by tracking all the capital raised by firms over the past five years through closed-end funds and separately managed accounts. |
| 2 | As of June 30, 2021. Issues across portfolios include all corporate issues covered by both the Liquid Credit Strategies and Private Credit research teams across Private Credit Funds and Liquid Credit Funds, including, but not limited to, broadly syndicated assets, middle market assets, high yield bonds, investment grade assets, and mezzanine transactions. |
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| appropriate sizes will enable Blackstone Credit to command more favorable terms for its investments. Blackstone Credit seeks to generate investment opportunities through its direct origination channels and through syndicate and club deals (generally, investments made by a small group of investment firms). With respect to Blackstone Credit’s origination channel, we seek to leverage the global presence of Blackstone Credit to generate access to a substantial amount of directly originated transactions with attractive investment characteristics. We believe that the broad network of Blackstone Credit provides a significant pipeline of investment opportunities for us. With respect to syndicate and club deals, Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. Blackstone Credit also has a significant trading platform, which, we believe, allows us access to the secondary market for investment opportunities. |
| • | Established Origination Platform with Strong Credit Expertise. As of June 30, 2021, Blackstone Credit had 397 employees globally, including 196 investment professionals. Blackstone Credit’s 97-person private origination investment team (excluding Dwight Scott, global head of Blackstone Credit), together with a 13-person U.S. Direct Lending Portfolio Management team, are involved with investment activities and portfolio management activities for the Fund, respectively. Blackstone Credit’s senior managing directors have on average ~24 years of industry experience. Since inception, Blackstone Credit has originated approximately $87 billion in private credit transactions and during the period beginning June 30, 2020 and ending on June 30, 2021, Blackstone Credit originated approximately $20.0 billion in private credit transactions.3 We believe that Blackstone Credit’s strong reputation and longstanding relationships with corporate boards, management teams, leveraged buyout sponsors, financial advisors, and intermediaries position Blackstone Credit as a partner and counterparty of choice and provides us with attractive sourcing capabilities. In Blackstone Credit’s experience, these relationships help drive substantial proprietary deal flow and insight into investment opportunities. |
Blackstone Credit believes that having one team responsible for alternatives private origination allows it to leverage the strengths and experiences of investment professionals to deliver the leading financing solutions to our companies. The team has operated through multiple industry cycles, with deep credit expertise, providing them valuable experience and a long-term view of the market. The team is also focused on making investments in so called “good neighborhoods”, which are industries experiencing favorable tailwinds, such as life sciences, software & technology, and renewable energy. In addition, the team is able to leverage the expertise of other parts of Blackstone’s business that specialize in these fields.
Additionally, over the last several years, Blackstone Credit has also expanded its U.S. origination and sponsor coverage footprint with regional offices opened in select markets. Blackstone Credit has investment professionals across the U.S. and Europe and has developed a reputation for being a valued partner, with the ability to provide speed, creativity, and assurance of transaction execution. We believe that establishing this regional presence in the U.S. may help us more effectively source investment opportunities from mid-sized leveraged buyout sponsors as well as direction from companies, while potentially strengthening the Blackstone Credit brand.
| • | Value-Added Capital Provider and Partner Leveraging the Blackstone Credit Advantage Program. Blackstone Credit has established a reputation for providing creative, value-added solutions to address a company’s financing requirements and believes our ability to solve a need for a company can lead to |
| 3 | As of June 30, 2021. Includes Blackstone Credit funds that are primarily invested in privately originated investments, including Blackstone Capital Opportunities Funds, Blackstone Capital Solutions Funds, Blackstone European and U.S. Direct Lending Funds, Blackstone Energy Select Opportunities Fund, and Blackstone Credit Alpha Funds. |
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| attractive investment opportunities. In addition, Blackstone Credit has access to the significant resources of the Blackstone platform, including Blackstone Advantage, which refers to the active management of the Blackstone portfolio company network, including cross-selling efforts across all of Blackstone, and aims to ensure practice sharing, operational, and commercial synergies among portfolio companies, effective deployment of Blackstone resources, and communication of the program with businesses and partners, and Blackstone Credit Advantage, which is a global platform that provides access to a range of cost saving, revenue generating and best practice sharing opportunities. Specifically, Blackstone Credit Advantage provides (i) partnership and best practices for portfolio companies by offering invaluable access to industry and function experts both within the Blackstone organization (including the Blackstone Portfolio Operations team) and the network among portfolio companies; (ii) cross selling opportunities across Blackstone and Blackstone Credit portfolio companies; (iii) industry knowledge via leadership summits and roundtables; and (iv) quarterly reports sharing meaningful insights from CEOs on business and economic trends. Finally, one of the most important benefits of the program is Blackstone’s GPO, which is a collective purchasing platform that leverages the scale and buying power of the $5 billion of average annual spending of Blackstone’s portfolio companies with strategic partners and vendors measured over the past ten years. Blackstone and Blackstone Credit portfolio companies have generated significant cost savings through their use of the GPO, ranging from 3% to 40%, often from existing suppliers, on maintenance, repair, operations, back office, information technology, hardware, software, telecommunications, business insurance and human resources, among others. The benefits of working with Blackstone’s GPO can include improved pricing and terms, differentiated service, and ongoing service that drops straight to the bottom line. |
Note: All data as of July 27, 2021.
| (1) | Represents indirect spend (overhead items purchased by businesses) evaluated across all Blackstone portfolio companies annually. |
| (2) | Annualized identified savings from all the Blackstone Credit companies. |
| • | Flexible Investment Approach. Blackstone Credit believes that the ability to invest opportunistically throughout a capital structure is a meaningful strength when sourcing transactions and enables the Fund to seek investments that provide the best risk/return proposition in any given transaction. Blackstone Credit’s creativity and flexibility with regard to deal-structuring distinguishes it from other financing sources, including traditional mezzanine providers, whose investment mandates are typically more restrictive. Over time, Blackstone Credit has demonstrated the ability to negotiate favorable terms for its investments by providing creative structures that add value for an issuer. Blackstone Credit will |
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| continue to seek to use this flexible investment approach to focus on principal preservation, while generating attractive returns throughout different economic and market cycles. |
| • | Long-Term Investment Horizon. Our long-term investment horizon gives us great flexibility, which we believe allows us to maximize returns on our investments. Unlike most private equity and venture capital funds, as well as many private debt funds, we will not be required to return capital to our shareholders once we exit a portfolio investment. We believe that freedom from such capital return requirements, which allows us to invest using a long-term focus, provides us with an attractive opportunity to increase total returns on invested capital. |
| • | Disciplined Investment Process and Income-Oriented Investment Philosophy. Blackstone Credit employs a rigorous investment process and defensive investment approach to evaluate all potential opportunities with a focus on long-term credit performance and principal protection. We believe Blackstone Credit has generated attractive risk-adjusted returns in its investing activities throughout many economic and credit cycles by (i) maintaining its investment discipline; (ii) performing intensive credit work; (iii) carefully structuring transactions; and (iv) actively managing its portfolios. Blackstone Credit’s investment approach involves a multi-stage selection process for each investment opportunity, as well as ongoing monitoring of each investment made, with particular emphasis on early detection of deteriorating credit conditions at portfolio companies which would result in adverse portfolio developments. This strategy is designed to maximize current income and minimize the risk of capital loss while maintaining the potential for long-term capital appreciation. Additionally, Blackstone Credit’s senior investment professionals have dedicated their careers to the leveraged finance and private equity sectors and we believe that their experience in due diligence, credit analysis and ongoing management of investments is invaluable to the success of the U.S. direct lending investment strategy that we will employ. Blackstone Credit targets businesses with leading market share positions, sustainable barriers to entry, high free cash flow generation, strong asset values, liquidity to withstand market cycles, favorable underlying industry trends, strong internal controls and high-quality management teams. |
| • | Strong Investment Track Record. Blackstone Credit’s track record in private debt lending and investing in below investment grade credit dates back to the inception of Blackstone Credit. Since 2005, Blackstone Credit has provided approximately $87 billion in capital in privately-originated transactions with over 120 different sponsors,4 through various funds and accounts advised or sub-advised by Blackstone Credit. Blackstone Credit has approximately $118 billion of investor capital currently deployed.5 |
| Q: | Will Blackstone make an investment in the Fund? |
| A: | An affiliate of Blackstone has invested $25 million in our common shares of beneficial interest (“Common Shares”) through one or more private placement transactions. In addition, officers and employees of Blackstone and its affiliates have also invested $25.5 million in our Common Shares. |
| 4 | As of June 30, 2021. Includes Blackstone Credit funds that are primarily invested in privately originated investments, including Blackstone Capital Opportunities Funds, Blackstone Capital Solutions Funds, Blackstone European and U.S. Direct Lending Funds, Blackstone Energy Select Opportunities Fund, and Blackstone Credit Alpha Funds. |
| 5 | As of June 30, 2021. Investor capital currently deployed consists of fee earning assets under management of $79 billion for Liquid Credit Strategies, $34 billion for Private Credit and other liquid funds (inclusive of leverage), and $5 billion for Structured Products. |
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| Q: | What is the market opportunity? |
| A: | We believe that there are and will continue to be significant investment opportunities in the targeted asset classes discussed above. |
Attractive Opportunities in Senior Secured Loans. We believe that opportunities in senior secured loans are significant because of the strong defensive characteristics of this asset class. While there is inherent risk in investing in any securities, senior secured debt is on the top of the capital structure and thus has priority in payment among an issuer’s security holders (i.e. senior secured debt holders are due to receive payment before junior creditors and equity holders). Further, these investments are secured by the issuer’s assets, which may be collateralized in the event of a default, if necessary. Senior secured debt often has restrictive covenants for the purpose of additional principal protection and ensuring repayment before junior creditors (i.e. most types of unsecured bondholders, and other security holders) and preserving collateral to protect against credit deterioration.
Opportunity in U.S. Private Companies. In addition to investing in senior secured loans generally, we believe that the market for lending to private companies, which includes the middle market private companies within the United States, is underserved and presents a compelling investment opportunity. We believe that the following characteristics support our belief:
| • | Secular Tailwinds in the Private Market, Including Private Credit. One of the important drivers of growth in the strategy is the increasing secular tailwinds in the private markets (i.e., social or economic trends positively impacting private markets), including growing demand for private credit, which has created attractive opportunities for private capital providers like Blackstone Credit. As of June 2021, private equity funds with strategies focused on leveraged buyouts in North America had approximately $571.5 billion of “dry powder” (uncalled capital commitments), which should similarly drive demand for private capital providers like Blackstone Credit.6 This shift is partially due to traditional banks continuing to face regulatory limitations and retreating from the space, creating a vacuum that private credit helps to fill. Further, financial sponsors and companies are becoming increasingly interested in working directly with private lenders as they are seeing benefits versus accessing the public credit markets. Some of these benefits include faster execution and greater certainty, ability to partner with sophisticated lenders, more efficient process, and in some instances fewer regulatory requirements. As a result, Blackstone Credit benefits from increasing flow of larger scale deals that are offered to direct lending universe versus traditional financing markets. |
| • | Attractive Market Segment. We believe that the underserved nature of such a large segment of the market can at times create a significant opportunity for investment. In many environments, we believe that private companies are more likely to offer attractive economics in terms of transaction pricing, up-front and ongoing fees, prepayment penalties and security features in the form of stricter covenants and quality collateral than loans to public companies. In addition, as compared to larger companies, middle market companies often have simpler capital structures and carry less leverage, thus aiding the structuring and negotiation process and allowing us greater flexibility in structuring favorable transactions. We believe that these factors will result in advantageous conditions in which to pursue our investment objectives of generating current income and, to a lesser extent, long-term capital appreciation. |
| • | Limited Investment Competition. Despite the size of the overall corporate credit market, we believe that regulatory changes and other factors, some of which are discussed above, have diminished the role of traditional financial institutions and certain other capital providers in providing financing to companies. As tracked by S&P Capital IQ LCD, U.S. banks’ share of senior secured loans has declined from 33.1% in 1995 to 7.5% as of June 30, 2021. In addition, due to bank consolidation, the number of |
| 6 | Source: Preqin, June 2021. Represents dry powder (uncalled capital commitments) for private equity buyouts in North America. |
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| banks has also rapidly declined, furthering the lack of supply in financing to private companies. As of September 30, 2020, there were approximately 4,375 banks in the U.S., which was only one-third of the number of banks in 1984 (see Federal Reserve Economic Data as of December 2020). |
We also believe that lending and originating new loans to private companies generally requires a greater dedication of the lender’s time and resources compared to lending to public companies, due in part to the size of each investment and the often fragmented nature of information available from these companies. Further, we believe that many investment firms lack the breadth and scale necessary to identify investment opportunities, particularly in regards to directly originated investments in private companies, and thus attractive investment opportunities are often overlooked.
Growing Opportunities in Europe. We believe the market for European direct lending provides attractive opportunities. In recent years, we have continued to see a growing number of corporate carve-outs and divestitures driven by pressure on European public companies from activists, streamlining of operations, and sustained pressure from European competition authorities. This creates a source of deal flow that we believe Blackstone Credit is uniquely placed to execute. We further believe that the strong fundraising environment globally for private equity over the past few years will also continue to drive deal flow for European originated transactions. We anticipate that many of our opportunities to provide originated loans or other financing will be in connection with leveraged buy-outs by private equity firms. Private equity dry powder (uncalled capital commitments) currently stands at over $1 trillion, which means that these private equity firms have a large amount of capital available to conduct transactions, which we believe will create debt financing opportunities for us. Although we believe the alternative credit market in Europe is still somewhat less developed compared to its U.S. counterpart, acceptance of private capital in Europe has grown substantially in recent years. Across the U.S. and Europe, we believe Blackstone Credit has the ability to take advantage of a dislocation in capital markets as a result of volatility by providing financing solutions, including anchoring loan syndications, originating loans where traditional banks are unwilling or unable to do so, or buying investments in the secondary market, all of which we may be able to do on more attractive terms in times of market disruption than would otherwise be available. This deployment of capital via a market dislocation strategy remains firmly within Blackstone Credit’s investment philosophy—focusing on performing companies where Blackstone Credit has enhanced access and a due diligence advantage.
| Q: | Why do you intend to invest in liquid credit investments in addition to originated loans? |
| A: | We believe that our liquid credit investments will help maintain liquidity to satisfy any share repurchases we choose to make and manage cash before investing subscription proceeds into originated loans while also seeking attractive investment returns. We expect these investments to enhance our risk/return profile and serve as a source of liquidity for the Fund. |
| Q: | How will you identify investments? |
| A: | In order to source transactions, the Adviser will utilize its significant access to transaction flow, along with its trading platform. The Adviser will seek to generate investment opportunities primarily through direct origination channels, and also through syndicate and club deals. With respect to Blackstone Credit’s origination channel, the global presence of Blackstone Credit generates access to a substantial amount of directly originated transactions with what we believe to be attractive investment characteristics. With respect to syndicate and club deals, Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. We believe that Blackstone Credit’s strong reputation and longstanding relationships with its broad network will help drive substantial proprietary deal flow and provide a significant pipeline of investment opportunities for us. |
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| Q: | Will you use leverage? |
| A: | Yes. To seek to enhance our returns, we employ leverage as market conditions permit and at the discretion of the Adviser, but in no event will leverage employed exceed the limitations set forth in the 1940 Act, which currently allows us to borrow up to a 2:1 debt to equity ratio. We use leverage in the form of borrowings, including loans from certain financial institutions and unsecured debt issuances. We may also use leverage in the form of the issuance of preferred shares, but do not currently intend to do so, or by using reverse repurchase agreements or similar transactions and derivatives, including credit default swaps. In determining whether to borrow money or issue debt, we will analyze, as applicable, the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook. Any such leverage, if incurred, would be expected to increase the total capital available for investment by the Fund. See “Risk Factors.” |
| Q: | How will the Fund be allocated investment opportunities? |
| A: | Blackstone Credit, including the Adviser, provides investment management services to other BDCs, registered investment companies, investment funds, client accounts and proprietary accounts that Blackstone Credit may establish. |
Blackstone Credit will share any investment and sale opportunities with its other clients and the Fund in accordance with the Advisers Act and firm-wide allocation policies, which generally provide for sharing pro rata based on targeted acquisition size or targeted sale size. Subject to the Advisers Act and as further set forth in this prospectus, certain other clients may receive certain priority or other allocation rights with respect to certain investments, subject to various conditions set forth in such other clients’ respective governing agreements.
In addition, as a BDC regulated under the 1940 Act, the Fund is subject to certain limitations relating to co-investments and joint transactions with affiliates, which likely in certain circumstances limit the Fund’s ability to make investments or enter into other transactions alongside other clients.
The Adviser has received an exemptive order from the U.S. Securities and Exchange Commission (the “SEC”) that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. Pursuant to such order, the Fund’s board of trustees (the “Board of Trustees” and each member of the Board of Trustees, a “Trustee”) may establish objective criteria (“Board Criteria”) clearly defining co-investment opportunities in which the Fund will have the opportunity to participate with one or more listed or private Blackstone Credit-managed BDCs, including us (the “Blackstone Credit BDCs”), and other public or private Blackstone Credit funds that target similar assets. If an investment falls within the Board Criteria, Blackstone Credit must offer an opportunity for the Blackstone Credit BDCs to participate. The Blackstone Credit BDCs may determine to participate or not to participate, depending on whether Blackstone Credit determines that the investment is appropriate for the Blackstone Credit BDCs (e.g., based on investment strategy). The co-investment would generally be allocated to us, any other Blackstone Credit BDCs (including Blackstone Secured Lending Fund) and the other Blackstone Credit funds that target similar assets pro rata based on available capital in the applicable asset class. If the Adviser determines that such investment is not appropriate for us, the investment will not be allocated to us, but the Adviser will be required to report such investment and the rationale for its determination for us to not participate in the investment to the Board of Trustees at the next quarterly board meeting.
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| Q: | How is an investment in shares of your Common Shares different from listed BDCs? |
| A: | An investment in our Common Shares generally differs from an investment in listed BDCs in a number of ways, including: |
| • | Shares of listed BDCs are priced by the trading market, which is influenced generally by numerous factors, not all of which are related to the underlying value of the entity’s assets and liabilities. Our Board of Trustees, rather than the “market,” determined the initial offering price of our shares in its sole discretion after considering the initial public offering prices per share of other blind pool non-traded BDCs. The estimated value of our assets and liabilities is used to determine our net asset value (“NAV”) following January 7, 2021, the date on which the Fund broke escrow for the offering of its Common Shares (the “Escrow Break Date”). The NAV of non-traded BDCs may be subject to volatility related to the values of their underlying assets. |
| • | An investment in our shares has limited or no liquidity outside of our share repurchase program and our share repurchase program may be modified or suspended. In contrast, an investment in a listed BDC is a liquid investment, as shares can be sold on an exchange at any time the exchange is open. |
| • | Some listed BDCs are often self-managed, whereas our investment operations are managed by the Adviser, which is part of Blackstone Credit. |
| • | Listed BDCs may be reasonable alternatives to the Fund, and may be less costly and less complex with fewer and/or different risks than we have. Such listed BDCs will likely have historical performance that investors can evaluate and transactions for listed securities often involve nominal or no commissions. |
| • | Unlike the offering of a listed BDC, this offering will be registered in every state in which we are offering and selling shares. As a result, we include certain limits in our governing documents that are not typically provided for in the charter of a listed BDC. For example, our charter limits the fees we may pay to the Adviser. A listed BDC does not typically provide for these restrictions within its charter. A listed BDC is, however, subject to the governance requirements of the exchange on which its shares are traded, including requirements relating to its Board of Trustees, audit committee, independent Trustee oversight of executive compensation and the Trustee nomination process, code of conduct, shareholder meetings, related party transactions, shareholder approvals and voting rights. |
Although we expect to follow many of these same governance guidelines, there is no requirement that we do so unless it is required for other reasons. Both listed BDCs and non-traded BDCs are subject to the requirements of the 1940 Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
| Q: | For whom may an investment in your shares be appropriate? |
| A: | An investment in our shares may be appropriate for you if you: |
| • | meet the minimum suitability standards described above under “Suitability Standards;” |
| • | seek to allocate a portion of your investment portfolio to a direct investment vehicle with an income-oriented portfolio of primarily U.S. credit investments; |
| • | seek to receive current income through regular distribution payments; |
| • | wish to obtain the potential benefit of long-term capital appreciation; and |
| • | are able to hold your shares as a long-term investment and do not need liquidity from your investment quickly in the near future. |
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We cannot assure you that an investment in our shares will allow you to realize any of these objectives. An investment in our shares is only intended for investors who do not need the ability to sell their shares quickly in the future since we are not obligated to offer to repurchase any of our Common Shares in any particular quarter in our discretion. See “Share Repurchase Program.”
| Q: | Are there any risks involved in buying your shares? |
| A: | Investing in our Common Shares involves a high degree of risk. If we are unable to effectively manage the impact of these risks, we may not meet our investment objectives and, therefore, you should purchase our shares only if you can afford a complete loss of your investment. An investment in our Common Shares involves significant risks and is intended only for investors with a long-term investment horizon and who do not require immediate liquidity or guaranteed income. Some of the more significant risks relating to an investment in our Common Shares include those listed below: |
| • | We have limited prior operating history and there is no assurance that we will achieve our investment objectives. |
| • | This is a “blind pool” offering and thus you will not have the opportunity to evaluate our investments before we make them. |
| • | You should not expect to be able to sell your shares regardless of how we perform. |
| • | You should consider that you may not have access to the money you invest for an extended period of time. |
| • | We do not intend to list our shares on any securities exchange, and we do not expect a secondary market in our shares to develop prior to any listing. |
| • | Because you may be unable to sell your shares, you will be unable to reduce your exposure in any market downturn. |
| • | We have implemented a share repurchase program, but only a limited number of shares will be eligible for repurchase and repurchases will be subject to available liquidity and other significant restrictions. |
| • | An investment in our Common Shares is not suitable for you if you need access to the money you invest. See “Suitability Standards” and “Share Repurchase Program.” |
| • | You will bear substantial fees and expenses in connection with your investment. See “Fees and Expenses.” |
| • | We cannot guarantee that we will make distributions, and if we do we may fund such distributions from sources other than cash flow from operations, including the sale of assets, borrowings, return of capital or offering proceeds, and although we generally expect to fund distributions from cash flow from operations, we have not established limits on the amounts we may pay from such sources. A return of capital (1) is a return of the original amount invested, (2) does not constitute earnings or profits and (3) will have the effect of reducing the basis such that when a shareholder sells its shares the sale may be subject to taxes even if the shares are sold for less than the original purchase price. |
| • | Distributions may also be funded in significant part, directly or indirectly, from temporary waivers or expense reimbursements borne by the Adviser or its affiliates, that may be subject to reimbursement to the Adviser or its affiliates. The repayment of any amounts owed to our affiliates will reduce future distributions to which you would otherwise be entitled. |
| • | We use and expect to continue to use leverage, which will magnify the potential for loss on amounts invested in us. |
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| • | We intend to invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be illiquid and difficult to value. |
| Q: | Do you currently own any investments? |
| A: | Yes. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the financial statements included herein and our periodic reports under the Exchange Act and www.bcred.com for information on our investments. |
| Q: | What is the role of your Board of Trustees? |
| A: | We operate under the direction of our Board of Trustees, the members of which are accountable to us and our shareholders as fiduciaries. We have six Trustees, four of whom have been determined to be independent of us, the Adviser, Blackstone and its affiliates (“independent Trustees”). Our independent Trustees are responsible for, among other things, reviewing the performance of the Adviser and approving the compensation paid to the Adviser and its affiliates. The names and biographical information of our Trustees are provided under “Management of the Fund—Trustees and Executive Officers.” |
| Q: | What is the difference between the Class S, Class D and Class I Common Shares being offered? |
| A: | We are offering to the public three classes of Common Shares, Class S shares, Class D shares and Class I shares. The differences among the share classes relate to ongoing shareholder servicing and/or distribution fees. In addition, although no upfront sales loads be paid with respect to Class S shares, Class D shares or Class I shares, if you buy Class S shares or Class D shares through certain financial intermediaries, they may directly charge you transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to a 1.5% cap on NAV for Class D shares and 3.5% cap on NAV for Class S shares. Selling agents will not charge such fees on Class I shares. See “Description of Our Shares” and “Plan of Distribution” for a discussion of the differences between our Class S, Class D and Class I shares. |
Assuming a constant net asset value per share of $25.00, we expect that a one-time investment in 400 shares of each class of our shares (representing an aggregate net asset value of $10,000 for each class) would be subject to the following shareholder servicing and/or distribution fees:
| Annual Shareholder Servicing and/or Distribution Fees |
Total Over Five Years |
|||||||
| Class S |
$ | 85 | $ | 425 | ||||
| Class D |
$ | 25 | $ | 125 | ||||
| Class I |
$ | 0 | $ | 0 | ||||
Class S shares are available through brokerage and transaction-based accounts. Class D shares are generally available for purchase in this offering only (1) through fee-based programs, also known as wrap accounts, that provide access to Class D shares, (2) through participating brokers that have alternative fee arrangements with their clients to provide access to Class D shares, (3) through transaction/ brokerage platforms at participating brokers, (4) through certain registered investment advisers, (5) through bank trust departments or any other organization or person authorized to act in a fiduciary capacity for its clients or customers or (6) other categories of investors that we name in an amendment or supplement to this prospectus. Class I shares are generally available for purchase in this offering only (1) through fee-based
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programs, also known as wrap accounts, that provide access to Class I shares, (2) by endowments, foundations, pension funds and other institutional investors, (3) through participating intermediaries that have alternative fee arrangements with their clients to provide access to Class I shares, (4) through certain registered investment advisers, (5) by our executive officers and trustees and their immediate family members, as well as officers and employees of the Adviser, Blackstone, Blackstone Credit or other affiliates and their immediate family members, and joint venture partners, consultants and other service providers or (6) other categories of investors that we name in an amendment or supplement to this prospectus. In certain cases, where a holder of Class S or Class D shares exits a relationship with a participating broker for this offering and does not enter into a new relationship with a participating broker for this offering, such holder’s shares may be exchanged into an equivalent NAV amount of Class I shares. Before making your investment decision, please consult with your investment adviser regarding your account type and the classes of Common Shares you may be eligible to purchase.
If you are eligible to purchase all three classes of shares, then in most cases you should purchase Class I shares because participating brokers will not charge transaction or other fees, including upfront placement fees or brokerage commissions, on Class I shares and Class I shares have no shareholder servicing and/or distribution fees, which will reduce the NAV or distributions of the other share classes. However, Class I shares will not receive shareholder services.
| Q: | What is the per share purchase price? |
| A: | Shares are sold at the then-current NAV per share, as described below. |
| Q: | How will your NAV per share be calculated? |
| A: | Our NAV will be determined based on the value of our assets less our liabilities, including accrued fees and expenses, as of any date of determination. |
Investments for which market quotations are readily available will typically be valued at those market quotations. To validate market quotations, we will utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Securities that are not publicly traded or for which market prices are not readily available will be valued at fair value as determined in good faith pursuant to procedures adopted by, and under the oversight of, the Board of Trustees, based on, among other things, the input of the Adviser and independent third-party valuation firms engaged at the direction of the Board of Trustees to review our investments. The Board of Trustees will review and determine, or (subject to the Board of Trustee’s oversight) delegate to the Adviser to determine, the fair value of each of our investments and our NAV per share each month. See “Determination of Net Asset Value.”
| Q: | Is there any minimum investment required? |
| A: | The minimum initial investment in our Common Shares is $2,500, and the minimum subsequent investment in our shares is $500 per transaction, except that the minimum subsequent investment amount does not apply to purchases made under our distribution reinvestment plan and that the minimum investment in Class I is $1,000,000. In addition, Blackstone Securities Partners L.P. (the “Intermediary Manager”), an affiliate of the Adviser, may elect to accept smaller investments in its discretion. |
| Q: | What is a “best efforts” offering? |
| A: | This is our initial public offering of our Common Shares on a “best efforts” basis. A “best efforts” offering means the Intermediary Manager and the participating brokers are only required to use their best efforts to |
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| sell the shares. When shares are offered to the public on a “best efforts” basis, no underwriter, broker or other person has a firm commitment or obligation to purchase any of the shares. Therefore, we cannot guarantee that any minimum number of shares will be sold. |
| Q: | What is the expected term of this offering? |
| A: | We have registered $12,500,000,000 in Common Shares. It is our intent, however, to conduct a continuous offering for an extended period of time, by filing for additional offerings of our shares, subject to regulatory approval and continued compliance with the rules and regulations of the SEC and applicable state laws. |
We will endeavor to take all reasonable actions to avoid interruptions in the continuous offering of our Common Shares. There can be no assurance, however, that we will not need to suspend our continuous offering while the SEC and, where required, state securities regulators, review such filings for additional offerings of our Common Shares until such filings are declared effective, if at all.
| Q: | When may I make purchases of shares and at what price? |
| A: | Investors may purchase our Common Shares pursuant to accepted subscription orders effective as of the first day of each month (based on the NAV per share as determined as of the previous day, being the last day of the preceding month), and to be accepted, a subscription request including the full subscription amount must be received in good order at least five business days prior to the first day of the month (unless waived by the Intermediary Manager). |
Notice of each share transaction will be furnished to shareholders (or their financial representatives) as soon as practicable but not later than seven business days after the Fund’s NAV is determined and credited to the shareholder’s account, together with information relevant for personal and tax records. While a shareholder will not know our NAV applicable on the effective date of the share purchase, our NAV applicable to a purchase of shares will be available generally within 20 business days after the effective date of the share purchase; at that time, the number of shares based on that NAV and each shareholder’s purchase will be determined and shares are credited to the shareholder’s account as of the effective date of the share purchase.
See “How to Subscribe” for more details.
| Q: | When will the NAV per share be available? |
| A: | We will report our NAV per share as of the last day of each month on our website, www.bcred.com, within 20 business days of the last day of each month. Because subscriptions must be submitted at least five business days prior to the first day of each month, you will not know the NAV per share at which you will be subscribing at the time you subscribe. |
For example, if you are subscribing in October, your subscription must be submitted at least five business days prior to November 1. The purchase price for your shares will be the NAV per share determined as of October 31. The NAV per share as of October 31 will generally be available within 20 business days from October 31.
| Q: | May I withdraw my subscription request once I have made it? |
| A: | Yes. Subscribers are not committed to purchase shares at the time their subscription orders are submitted and any subscription may be canceled at any time before the time it has been accepted. You may withdraw your purchase request by notifying the transfer agent, through your financial intermediary or directly on our toll-free, automated telephone line, 844-702-1299. |
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| Q: | When will my subscription be accepted? |
| A: | Completed subscription requests will not be accepted by us any earlier than two business days before the first day of each month. |
| Q: | Will I receive distributions and how often? |
| A: | We have declared distributions each month beginning in January 2021 through the date of this prospectus and expect to continue to pay regular monthly distributions. Any distributions we make will be at the discretion of our Board of Trustees, considering factors such as our earnings, cash flow, capital needs and general financial condition and the requirements of Delaware law. As a result, our distribution rates and payment frequency may vary from time to time. |
Our Board of Trustees’ discretion as to the payment of distributions will be directed, in substantial part, by its determination to cause us to comply with the RIC requirements. To maintain our treatment as a RIC, we generally are required to make aggregate annual distributions to our shareholders of at least 90% of our net investment income. See “Description of our Shares” and “Certain U.S. Federal Income Tax Considerations.”
The per share amount of distributions on Class S, Class D and Class I shares generally differ because of different class-specific shareholder servicing and/or distribution fees that are deducted from the gross distributions for each share class. Specifically, distributions on Class S shares will be lower than Class D shares, and Class D shares will be lower than Class I shares because we are required to pay higher ongoing shareholder servicing and/or distribution fees with respect to the Class S shares (compared to Class D shares and Class I shares) and we are required to pay higher ongoing shareholder servicing and/or distribution fees with respect to Class D shares (compared to Class I shares).
There is no assurance we will pay distributions in any particular amount, if at all. We may fund any distributions from sources other than cash flow from operations, including the sale of assets, borrowings, return of capital or offering proceeds, and although we generally expect to fund distributions from cash flow from operations, we have not established limits on the amounts we may pay from such sources. The extent to which we pay distributions from sources other than cash flow from operations will depend on various factors, including the level of participation in our distribution reinvestment plan, how quickly we invest the proceeds from this and any future offering and the performance of our investments. Funding distributions from the sales of assets, borrowings or return of capital will result in us having less funds available to acquire investments. As a result, the return you realize on your investment may be reduced. Doing so may also negatively impact our ability to generate cash flows. Likewise, funding distributions from the sale of additional securities will dilute your interest in us on a percentage basis and may impact the value of your investment especially if we sell these securities at prices less than the price you paid for your shares. We believe the likelihood that we pay distributions from sources other than cash flow from operations will be higher in the early stages of the offering.
| Q: | Will the distributions I receive be taxable as ordinary income? |
| A: | Generally, distributions that you receive, including cash distributions that are reinvested pursuant to our distribution reinvestment plan, will be taxed as ordinary income to the extent they are paid from our current or accumulated earnings and profits. Dividends received will generally not be eligible to be taxed at the lower U.S. federal income tax rates applicable to individuals for “qualified dividends.” |
We may designate a portion of distributions as capital gain dividends taxable at capital gain rates to the extent we recognize net capital gains from sales of assets. In addition, a portion of your distributions may be considered return of capital for U.S. federal income tax purposes. Amounts considered a return of capital generally will not be subject to tax, but will instead reduce the tax basis of your investment. This, in effect, defers a portion of your tax until your shares are repurchased, you sell your shares or we are liquidated, at
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which time you generally will be taxed at capital gains rates. Because each investor’s tax position is different, you should consult with your tax advisor. In particular, non-U.S. investors should consult their tax advisors regarding potential withholding taxes on distributions that they receive. See “Certain U.S. Federal Income Tax Considerations.”
| Q: | May I reinvest my cash distributions in additional shares? |
| A: | Yes. We have adopted a distribution reinvestment plan whereby shareholders (other than Alabama, Arkansas, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Jersey, Ohio, Oklahoma, Oregon, Texas, Vermont and Washington investors and clients of certain participating brokers that do not permit automatic enrollment in our distribution reinvestment plan) will have their cash distributions automatically reinvested in additional Common Shares unless they elect to receive their distributions in cash. Alabama, Arkansas, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Jersey, Ohio, Oklahoma, Oregon, Texas, Vermont and Washington investors and clients of certain participating brokers that do not permit automatic enrollment in our distribution reinvestment plan will automatically receive their distributions in cash unless they elect to have their cash distributions reinvested in additional Common Shares. If you participate in our distribution reinvestment plan, the cash distributions attributable to the class of shares that you own will be automatically invested in additional Common Shares. The purchase price for shares purchased under our distribution reinvestment plan will be equal to the most recent NAV per share for such shares at the time the distribution is payable. Shareholders will not pay upfront selling commissions when purchasing shares under our distribution reinvestment plan; however, all shares, including those purchased under our distribution reinvestment plan, will be subject to ongoing shareholder servicing and/or distribution fees. Participants may terminate their participation in the distribution reinvestment plan by providing written notice to the Plan Administrator (defined below) five business days in advance of the first calendar day of the next month in order for a shareholder’s termination to be effective for such month. See “Description of Our Shares” and “Distribution Reinvestment Plan.” |
| Q: | Can I request that my shares be repurchased? |
| A: | Yes, subject to limitations. We have commenced a share repurchase program in which we intend to offer to repurchase, in each quarter, up to 5% of our Common Shares outstanding (either by number of shares or aggregate NAV) as of the close of the previous calendar quarter. Our Board of Trustees may amend or suspend the share repurchase program at any time if in its reasonable judgment it deems such action to be in our best interest and the best interest of our shareholders, such as when a repurchase offer would place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the Fund that would outweigh the benefit of the repurchase offer. As a result, share repurchases may not be available each quarter. We intend to conduct such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Exchange Act and the 1940 Act. All shares purchased by us pursuant to the terms of each tender offer will be retired and thereafter will be authorized and unissued shares. |
Under our share repurchase program, to the extent we offer to repurchase shares in any particular quarter, we expect to repurchase shares pursuant to quarterly tender offers (such date of the offer, the “Repurchase Date”) using a purchase price equal to the NAV per share as of the last calendar day of the applicable quarter, except that shares that have not been outstanding for at least one year will be repurchased at 98% of such NAV (an “Early Repurchase Deduction”). The one-year holding period is measured as of the subscription closing date immediately following the prospective repurchase date. The Early Repurchase Deduction may be waived in the case of repurchase requests arising from the death, divorce or qualified disability of the holder. The Early Repurchase Deduction will be retained by the Fund for the benefit of remaining shareholders.
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In the event the amount of shares tendered exceeds the repurchase offer amount, shares will be repurchased on a pro rata basis. All unsatisfied repurchase requests must be resubmitted in the next quarterly tender offer, or upon the recommencement of the share repurchase program, as applicable.
The majority of our assets will consist of instruments that cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. Therefore, we may not always have sufficient liquid resources to make repurchase offers. In order to provide liquidity for share repurchases, we intend to generally maintain under normal circumstances an allocation to syndicated loans and other liquid investments. We may fund repurchase requests from sources other than cash flow from operations, including the sale of assets, borrowings, return of capital or offering proceeds, and although we generally expect to fund distributions from cash flow from operations, we have not established limits on the amounts we may pay from such sources. Should making repurchase offers, in our judgment, place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the company as a whole, or should we otherwise determine that investing our liquid assets in originated loans or other illiquid investments rather than repurchasing our shares is in the best interests of the Fund as a whole, then we may choose to offer to repurchase fewer shares than described above, or none at all. See “Share Repurchase Program.”
| Q: | What is a business development company, or BDC? |
| A: | BDCs are subject to certain restrictions applicable to investment companies under the 1940 Act. As a BDC, at least 70% of our assets must be the type of “qualifying” assets listed in Section 55(a) of the 1940 Act, as described herein, which are generally privately-offered securities issued by U.S. private or thinly-traded companies. We may also invest up to 30% of our portfolio opportunistically in “non-qualifying” portfolio investments, such as investments in non-U.S. companies. See “Investment Objectives and Strategies— Regulation as a BDC.” |
| Q: | What is a regulated investment company, or RIC? |
| A: | We intend to elect to be treated for federal income tax purposes, and intend to qualify annually thereafter, as a regulated investment company (a “RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”). |
In general, a RIC is a company that:
| • | is a BDC or registered investment company that combines the capital of many investors to acquire securities; |
| • | offers the benefits of a securities portfolio under professional management; |
| • | satisfies various requirements of the Code, including an asset diversification requirement; and |
| • | is generally not subject to U.S. federal corporate income taxes on its net taxable income that it currently distributes to its shareholders, which substantially eliminates the “double taxation” (i.e., taxation at both the corporate and shareholder levels) that generally results from investments in a C corporation. |
| Q: | What is a non-exchange traded, perpetual-life BDC? |
| A: | A non-exchange traded BDC is a BDC whose shares are not listed for trading on a stock exchange or other securities market. We use the term “perpetual-life BDC” to describe an investment vehicle of indefinite duration, whose Common Shares are intended to be sold by the BDC monthly on a continuous basis at a price generally equal to the BDC’s monthly NAV per share. In our perpetual-life structure, we may offer |
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| investors an opportunity to repurchase their shares on a quarterly basis, but we are not obligated to offer to repurchase any in any particular quarter in our discretion. We believe that our perpetual nature enables us to execute a patient and opportunistic strategy and be able to invest across different market environments. This may reduce the risk of the Fund being a forced seller of assets in market downturns compared to non-perpetual funds. While we may consider a liquidity event at any time in the future, we currently do not intend to undertake a liquidity event, and we are not obligated by our charter or otherwise to effect a liquidity event at any time. |
| Q: | Will I be notified of how my investment is doing? |
| A: | Yes. We will provide you with periodic updates on the performance of your investment with us, including: |
| • | three quarterly financial reports and investor statements; |
| • | an annual report; |
| • | in the case of certain U.S. shareholders, an annual Internal Revenue Service (“IRS”) Form 1099-DIV or IRS Form 1099-B, if required, and, in the case of non-U.S. shareholders, an annual IRS Form 1042-S; |
| • | confirmation statements (after transactions affecting your balance, except reinvestment of distributions in us and certain transactions through minimum account investment or withdrawal programs); and |
| • | a quarterly statement providing material information regarding your participation in the distribution reinvestment plan and an annual statement providing tax information with respect to income earned on shares under the distribution reinvestment plan for the calendar year. |
Depending on legal requirements, we may post this information on our website, www.bcred.com, when available, or provide this information to you via U.S. mail or other courier, electronic delivery, or some combination of the foregoing. Information about us will also be available on the SEC’s website at www.sec.gov.
In addition, our monthly NAV per share is posted on our website promptly after it has become available.
| Q: | What fees do you pay to the Adviser? |
| A: | Pursuant to the advisory agreement between us and the Adviser (the “Advisory Agreement”), the Adviser is responsible for, among other things, identifying investment opportunities, monitoring our investors and determining the composition of our portfolio. We will pay the Adviser a fee for its services under the Advisory Agreement consisting of two components: a management fee and an incentive fee. |
| • | The management fee is payable monthly in arrears at an annual rate of 1.25% of the value of our net assets as of the beginning of the first calendar day of the applicable month. For the first calendar month in which the Fund has operations, net assets were measured as the beginning net assets as of the Escrow Break Date. Substantial additional fees and expenses may also be charged by the Administrator to the Fund, which is an affiliate of the Adviser. |
| • | The incentive fee consists of two components as follows: |
| • | The first part of the incentive fee is based on income, whereby we will pay the Adviser quarterly in arrears 12.5% of our Pre-Incentive Fee Net Investment Income Returns (as defined below) for each calendar quarter subject to a 5.0% annualized hurdle rate, with a catch-up. |
| • | The second part of the incentive fee is based on realized capital gains, whereby we will pay the Adviser at the end of each calendar year in arrears 12.5% of cumulative realized capital gains from inception through the end of such calendar year, computed net of all realized capital losses |
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| and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains. |
See “Advisory Agreement and Administrative Agreement.”
| Q: | Who will administer the Fund? |
| A: | Blackstone Alternative Credit Advisors LP, as our administrator (the “Administrator”), will provide, or oversee the performance of, administrative and compliance services. We will reimburse the Administrator for its costs, expenses and the Fund’s allocable portion of compensation of the Administrator’s personnel and the Administrator’s overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the administration agreement (the “Administration Agreement”). See “Advisory Agreement and Administration Agreement—Administration Agreement.” |
| Q: | What are the offering and servicing costs? |
| A: | No upfront sales load will be paid with respect to Class S shares, Class D shares or Class I shares, however, if you buy Class S shares or Class D shares through certain financial intermediaries, they may directly charge you transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to a 1.5% cap on NAV for Class D shares and 3.5% cap on NAV for Class S shares. Selling agents will not charge such fees on Class I shares. Please consult your selling agent for additional information. |
Subject to Financial Industry Regulatory Authority, Inc. (“FINRA”) limitations on underwriting compensation, we will pay the following shareholder servicing and/or distribution fees to the Intermediary Manager: (a) for Class S shares, a shareholder servicing and/or distribution fee equal to 0.85% per annum of the aggregate NAV as of the beginning of the first calendar day of the month for the Class S shares and (b) for Class D shares, a shareholder servicing and/or distribution fee equal to 0.25% per annum of the aggregate NAV as of the beginning of the first calendar day of the month for the Class D shares, in each case, payable monthly. No shareholder servicing and/or distribution fees will be paid with respect to the Class I shares. The shareholder servicing and/or distribution fees are similar to sales commissions. The distribution and servicing expenses borne by the participating brokers may be different from and substantially less than the amount of shareholder servicing and/or distribution fees charged. The shareholder servicing and/or distribution fees will be payable to the Intermediary Manager, but the Intermediary Manager anticipates that all or a portion of the shareholder servicing and/or distribution fees will be retained by, or reallowed (paid) to, participating brokers. All or a portion of the shareholder servicing and/or distribution fee may be used to pay for sub-transfer agency, sub-accounting and certain other administrative services that are not required to be paid pursuant to the shareholder servicing and/or distribution fees under FINRA rules. The Fund also may pay for these sub-transfer agency, sub-accounting and certain other administrative services outside of the shareholder servicing and/or distribution fees and its Distribution and Servicing Plan. The total amount that will be paid over time for other underwriting compensation depends on the average length of time for which shares remain outstanding, the term over which such amount is measured and the performance of our investments. We will also pay or reimburse certain organization and offering expenses, including, subject to FINRA limitations on underwriting compensation, certain wholesaling expenses. See “Plan of Distribution” and “Use of Proceeds.” The total underwriting compensation and total organization and offering expenses will not exceed 10% and 15%, respectively, of the gross proceeds from this offering.
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| Q: | What are your expected operating expenses? |
| A: | We expect to incur operating expenses in the form of our management and incentive fees, shareholder servicing and/or distribution fees, interest expense on our borrowings and other expenses, including the expenses we pay to our Administrator. See “Fees and Expenses.” |
| Q: | What are your policies related to conflicts of interests with Blackstone and its affiliates? |
| A: | The Adviser, Blackstone Credit, Blackstone and their respective affiliates (collectively, the “Firm”) will be subject to certain conflicts of interest with respect to the services the Adviser and the Administrator provide for us. These conflicts will arise primarily from the involvement of the Firm in other activities that may conflict with our activities. You should be aware that individual conflicts will not necessarily be resolved in favor of our interest. |
| • | Broad and Wide-Ranging Activities. The Firm engages in a broad spectrum of activities. In the ordinary course of its business activities, the Firm will engage in activities where the interests of certain divisions of the Firm or the interests of its clients will conflict with the interests of the shareholders in the Fund. Other present and future activities of the Firm will give rise to additional conflicts of interest. In the event that a conflict of interest arises, the Adviser will attempt to resolve such conflict in a fair and equitable manner. Subject to applicable law, including the 1940 Act, and the Board of Trustees’ oversight, the Adviser will have the power to resolve, or consent to the resolution of, conflicts of interest on behalf of the Fund. Investors should be aware that conflicts will not necessarily be resolved in favor of the Fund’s interests. In addition, the Adviser may in certain situations choose to consult with or obtain the consent of the Board of Trustees with respect to any specific conflict of interest, including with respect to the approvals required under the 1940 Act, including Section 57(f), and the Advisers Act. The Fund may enter into joint transactions or cross-trades with clients or affiliates of the Adviser to the extent permitted by the 1940 Act, the Advisers Act and any applicable co-investment order from the SEC. Subject to the limitations of the 1940 Act, the Fund may invest in loans or other securities, the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds. |
| • | Fund Co-Investment Opportunities. As a BDC regulated under the 1940 Act, the Fund is subject to certain limitations relating to co-investments and joint transactions with affiliates, which likely will in certain circumstances limit the Fund’s ability to make investments or enter into other transactions alongside the Other Clients (as defined below). There can be no assurance that such regulatory restrictions will not adversely affect the Fund’s ability to capitalize on attractive investment opportunities. However, subject to the 1940 Act and any applicable co-investment order issued by the SEC, the Fund may co-invest with Other Clients (including co-investment or other vehicles in which the Firm or its personnel invest and that co-invest with such Other Clients) in investments that are suitable for the Fund and one or more of such Other Clients. Even if the Fund and any such Other Clients and/or co-investment or other vehicles invest in the same securities, conflicts of interest may still arise. |
We have received an exemptive order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. Such order may restrict our ability to enter into follow-on investments or other transactions. Pursuant to such order, we may co-invest in a negotiated deal with certain affiliates of the Adviser or certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. We may also receive an allocation in such a deal alongside affiliates pursuant to other mechanisms to the extent permitted by the 1940 Act.
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| • | Other Affiliate Transactions and Investments in Different Levels of Capital Structure. From time to time, the Fund and the Other Clients may make investments at different levels of an issuer’s capital structure or otherwise in different classes of an issuer’s securities or loans, subject to the limitations of the 1940 Act. While less common, subject to applicable law, from time to time the Fund could hold an investment in a different layer of the capital structure than an investor or another party with which Blackstone has a material relationship, in which case Blackstone could have an incentive to cause the Fund or the portfolio company to offer more favorable terms to such parties (including, for instance, financing arrangements). Such investments may inherently give rise to conflicts of interest or perceived conflicts of interest between or among the various classes of securities or loans that may be held by such entities. To the extent the Fund holds securities or loans that are different (including with respect to their relative seniority) than those held by an Other Client, the Adviser and its affiliates may be presented with decisions when the interests of the funds are in conflict. |
Any applicable co-investment order issued by the SEC may restrict the Fund’s ability to participate in follow-on financings. Blackstone Credit may in its discretion take steps to reduce the potential for adversity between the Fund and the Other Clients, including causing the Fund and/or such Other Clients to take certain actions that, in the absence of such conflict, it would not take. Such conflicts will be more difficult if the Fund and Other Clients hold significant or controlling interests in competing or different tranches of a portfolio company’s capital structure. Equity holders and debt holders have different (and often competing) motives, incentives, liquidity goals and other interests with respect to a portfolio company. In addition, there may be circumstances where Blackstone Credit agrees to implement certain procedures to ameliorate conflicts of interest that may involve a forbearance of rights relating to the Fund or Other Clients, such as where Blackstone Credit may cause the Fund or Other Clients to decline to exercise certain control- and/or foreclosure-related rights with respect to a portfolio company.
Further, the Fund is prohibited under the 1940 Act from participating in certain transactions with certain of affiliates (including portfolio companies of Other Clients) without the prior approval of a majority of the independent members of the Board of Trustees and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of the outstanding voting securities will be an affiliate of the Fund for purposes of the 1940 Act and generally the Fund will be prohibited from buying or selling any securities from or to such affiliate, absent the prior approval of the Board of Trustees. However, the Fund may under certain circumstances purchase any such affiliate’s loans or securities in the secondary market, which could create a conflict for the Adviser between the Fund’s interests and the interests of such affiliate, in that the ability of the Adviser to recommend actions in the Fund’s best interest may be limited. The 1940 Act also prohibits certain “joint” transactions with certain affiliates, which could include investments in the same portfolio company (whether at the same or closely related times), without prior approval of the Board of Trustees and, in some cases, the SEC.
In addition, conflicts may arise in determining the amount of an investment, if any, to be allocated among potential investors and the respective terms thereof. There can be no assurance that any conflict will be resolved in favor of the Fund, and each shareholder acknowledges and agrees that in some cases, subject to applicable law, a decision by Blackstone Credit to take any particular action could have the effect of benefiting an Other Client (and, incidentally, may also have the effect of benefiting Blackstone Credit) and therefore may not have been in the best interests of, and may be adverse to, the Fund. There can be no assurance that the return on the Fund’s investment will be equivalent to or better than the returns obtained by the Other Clients participating in the transaction. The shareholders will not receive any benefit from fees paid to any affiliate of the Adviser from a portfolio company in which an Other Client also has an interest to the extent permitted by the 1940 Act.
| • | Other Blackstone and Blackstone Credit Clients; Allocation of Investment Opportunities. Certain inherent conflicts of interest arise from the fact that the Adviser, Blackstone Credit and Blackstone |
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| provide investment management, advisory and sub-advisory services to the Fund and Other Clients. Blackstone Credit will share any investment and sale opportunities with such Other Clients and the Fund in accordance with the Advisers Act, and Firm-wide allocation policies, which generally provide for sharing pro rata based on targeted acquisition size or targeted sale size. Notwithstanding the foregoing, Blackstone Credit may also consider a number of factors in making any allocation determinations, and such factors may result in a different allocation of investment and/or sale opportunities. Blackstone Credit shall not have any obligation to present any investment opportunity (or portion of any investment opportunity) to the Fund if Blackstone Credit determines in good faith that such opportunity (or portion thereof) should not be presented to the Fund for any one or a combination of the reasons specified above, or if Blackstone Credit is otherwise restricted from presenting such investment opportunity to the Fund. |
In addition, as noted above, Blackstone Credit has received an exemptive order from the SEC that permits certain existing and future funds regulated under the 1940 Act (each, a “Regulated Fund”), among other things, to co-invest with certain other persons, including certain affiliates of Blackstone Credit, and certain funds managed and controlled by Blackstone Credit and its affiliates (a “Blackstone Credit Fund”), including the Fund, subject to certain terms and conditions. For so long as any privately negotiated investment opportunity falls within the investment criteria of one or more Regulated Funds, such investment opportunity shall also be offered to such Regulated Fund(s). In the event that the aggregate targeted investment sizes of the Fund and such Regulated Fund(s) exceed the amount of such investment opportunity, allocation of such investment opportunity to each of the Fund and such Regulated Fund(s) will be reduced proportionately based on their respective “available capital” as defined in the exemptive order, which may result in allocation to the Fund in an amount less than what it would otherwise have been if such Regulated Fund(s) did not participate in such investment opportunity. The exemptive order also restricts the ability of the Fund (or any other Blackstone Credit Fund) from investing in any privately negotiated investment opportunity alongside a Regulated Fund except at the same time and on same terms. As a result, the Fund may be unable to make investments in different parts of the capital structure of the same issuer in which a Regulated Fund has invested or seeks to invest. The rules promulgated by the SEC under the 1940 Act, as well as any related guidance from the SEC and/or the terms of the exemptive order itself, are subject to change, and Blackstone Credit could undertake to amend the exemptive order (subject to SEC approval), obtain additional exemptive relief, or otherwise be subject to other requirements in respect of co-investments involving the Fund and any Regulated Funds, any of which may impact the amount of any allocation made available to Regulated Funds and thereby affect (and potentially decrease) the allocation made to the Fund.
Moreover, with respect to Blackstone Credit’s ability to allocate investment opportunities, including where such opportunities are within the common objectives and guidelines of the Fund and one or more Other Clients (which allocations are to be made on a basis that Blackstone Credit believes in good faith to be fair and reasonable), Blackstone Credit and Blackstone have established general guidelines and policies, which it may update from time to time, for determining how such allocations are to be made, which, among other things, set forth principles regarding what constitutes “debt” or “debt-like” investments, criteria for defining “control-oriented equity” or “infrastructure” investments, guidance regarding allocation for certain types of investments (e.g., distressed energy) and other matters. In addition, certain Other Clients may receive certain priority or other allocation rights with respect to certain investments, subject to various conditions set forth in such Other Clients’ respective governing agreements. In addition, we expect to offer opportunities appropriate for the Fund to subsidiaries not wholly owned by the Fund, which will result in the Fund having less exposure to such assets than it otherwise would have.
When Blackstone Credit determines not to pursue some or all of an investment opportunity for the Fund that would otherwise be within the Fund’s objectives and strategies, and Blackstone or
22
Blackstone Credit provides the opportunity or offers the opportunity to Other Clients, Blackstone or Blackstone Credit, including their personnel (including Blackstone Credit personnel), may receive compensation from the Other Clients, whether or not in respect of a particular investment, including an allocation of carried interest or referral fees, and any such compensation could be greater than amounts paid by the Fund to Blackstone Credit. As a result, Blackstone Credit (including Blackstone Credit personnel who receive such compensation) could be incentivized to allocate investment opportunities away from the Fund to or source investment opportunities for Other Clients. In addition, in some cases Blackstone or Blackstone Credit may earn greater fees when Other Clients participate alongside or instead of the Fund in an Investment.
| • | Group Procurement; Discounts. The Fund (subject to applicable law) and certain portfolio companies will enter into agreements regarding group, benefits management, purchase of title and/or other insurance policies (which may include brokerage and/or placement thereof, and will from time to time be pooled across portfolio companies and discounted due to scale, including through sharing of deductibles and other forms of shared risk retention) from a third party or an affiliate of Blackstone Credit and/or Blackstone, and other operational, administrative or management related initiatives. The Firm will allocate the cost of these various services and products purchased on a group basis among the Fund, Other Clients and their portfolio companies. Some of these arrangements result in commissions, discounts, rebates or similar payments to Blackstone Credit and/or Blackstone or their affiliates (including personnel), or Other Clients and their portfolio companies, including as a result of transactions entered into by the Fund and its portfolio companies and/or related to a portion of the savings achieved by the portfolio companies. |
The foregoing list of conflicts does not purport to be a complete enumeration or explanation of the actual and potential conflicts involved in an investment in the Fund. Prospective investors should read the Fund’s offering documents and consult with their own advisors before deciding whether to invest in the Fund. In addition, as the Fund’s investment program develops and changes over time, an investment in the Fund may be subject to additional and different actual and potential conflicts. Although the various conflicts discussed herein are generally described separately, prospective investors should consider the potential effects of the interplay of multiple conflicts.
See “Potential Conflicts of Interest” for additional information about conflicts of interest that could impact the Fund.
| Q: | Are there any ERISA considerations in connection with an investment in our shares? |
| A: | We intend to conduct our affairs so that our assets should not be deemed to constitute “plan assets” under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and certain U.S. Department of Labor regulations promulgated thereunder, as modified by Section 3(42) of ERISA (the “Plan Asset Regulations”). In this regard, if any class of the Common Shares were not considered “publicly-offered securities” within the meaning of the Plan Asset Regulations, the Fund intends to prohibit “benefit plan investors” from acquiring Common Shares that are part of a class of Common Shares which are not considered “publicly-offered securities”. As of the date of this Prospectus, we believe all classes of Common Shares that are currently outstanding are “publicly-offered securities” for purposes of the Plan Asset Regulations. |
In addition, each prospective investor that is, or is acting on behalf of any (i) “employee benefit plan” (within the meaning of Section 3(3) of ERISA) that is subject to Title I of ERISA, (ii) “plan” described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code (including, for example, an individual retirement account and a “Keogh” plan), (iii) plan, account or other arrangement that is subject to the provisions of any other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, “Similar Laws”), or (iv) entity whose underlying assets are
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considered to include the assets of any of the foregoing described in clauses (i), (ii) and (iii) (each of the foregoing described in clauses (i), (ii), (iii) and (iv) referred to as a “Plan”), must independently determine that our Common Shares are an appropriate investment for the Plan, taking into account its obligations under ERISA, the Code and applicable Similar Laws, and the facts and circumstances of each investing Plan.
Prospective investors should carefully review the matters discussed under Risk Factors—“Risks Related to an Investment in the Shares” and “Restrictions on Share Ownership” and should consult with their own advisors as to the consequences of making an investment in the Fund.
| Q: | When will I get my detailed tax information? |
| A: | In the case of certain U.S. shareholders, we expect your IRS Form 1099-DIV tax information, if required, to be mailed by January 31 of each year. |
| Q: | Who can help answer my questions? |
| A: | If you have more questions about this offering or if you would like additional copies of this prospectus, you should contact your financial adviser or our transfer agent: DST Systems, Inc., 1055 Broadway, 7th Floor, Kansas City, Missouri 64105. |
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The following table is intended to assist you in understanding the costs and expenses that an investor in Common Shares will bear, directly or indirectly. Other expenses are estimated and may vary. Actual expenses may be greater or less than shown.
| Class S Shares |
Class D Shares |
Class I Shares |
||||||||||
| Shareholder transaction expenses (fees paid directly from your investment) |
||||||||||||
| Maximum sales load(1) |
— | % | — | % | — | % | ||||||
| Maximum Early Repurchase Deduction(2) |
2.0 | % | 2.0 | % | 2.0 | % | ||||||
| Class S Shares |
Class D Shares |
Class I Shares |
||||||||||
| Annual expenses (as a percentage of net assets attributable to our Common Shares)(3) |
||||||||||||
| Base management fees(4) |
1.25 | % | 1.25 | % | 1.25 | % | ||||||
| Incentive fees(5) |
— | % | — | % | — | % | ||||||
| Shareholder servicing and/or distribution fees(6) |
0.85 | % | 0.25 | % | — | % | ||||||
| Interest payment on borrowed funds(7) |
3.21 | % | 3.21 | % | 3.21 | % | ||||||
| Other expenses(8) |
0.42 | % | 0.42 | % | 0.42 | % | ||||||
| Total annual expenses |
5.73 | % | 5.13 | % | 4.88 | % | ||||||
| (1) | No upfront sales load will be paid with respect to Class S shares, Class D shares or Class I shares, however, if you buy Class S shares or Class D shares through certain financial intermediaries, they may directly charge you transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to a 1.5% cap on NAV for Class D shares and 3.5% cap on NAV for Class S shares. Selling agents will not charge such fees on Class I shares. Please consult your selling agent for additional information. |
| (2) | Under our share repurchase program, to the extent we offer to repurchase shares in any particular quarter, we expect to repurchase shares pursuant to tender offers on or around the last business day of that quarter using a purchase price equal to the NAV per share as of the last calendar day of the applicable quarter, except that shares that have not been outstanding for at least one year will be repurchased at 98% of such NAV. The one-year holding period is measured as of the subscription closing date immediately following the prospective repurchase date. The Early Repurchase Deduction may be waived in the case of repurchase requests arising from the death, divorce or qualified disability of the holder. The Early Repurchase Deduction will be retained by the Fund for the benefit of remaining shareholders. |
| (3) | Total net assets as of June 30, 2021 employed as the denominator for expense ratio computation is $ 4,943.9 million. |
| (4) | The base management fee paid to the Adviser is calculated each month at an annual rate of 1.25% of the Fund’s net assets as of the beginning of the first business day of the month.. |
| (5) | We may have capital gains and investment income that could result in the payment of an incentive fee in the first year of investment operations. The incentive fees, if any, are divided into two parts: |
| • | The first part of the incentive fee is based on income, whereby we will pay the Adviser quarterly in arrears 12.5% of our Pre-Incentive Fee Net Investment Income Returns (as defined below) for each calendar quarter subject to a 5.0% annualized hurdle rate, with a catch-up. |
| • | The second part of the incentive fee is based on realized capital gains, whereby we will pay the Adviser at the end of each calendar year in arrears 12.5% of cumulative realized capital gains from inception through the end of such calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains. |
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As we cannot predict whether we will meet the necessary performance targets, we have assumed no incentive fee for this chart. We expect the incentive fees we pay to increase to the extent we earn greater income or generate capital gains through our investments in portfolio companies. If we achieved an annualized total return of 5% for each quarter made up entirely of net investment income, no incentive fees would be payable to the Adviser because the hurdle rate was not exceeded. If instead we achieved a total return of 5% in a calendar year made up of entirely realized capital gains net of all realized capital losses and unrealized capital depreciation, an incentive fee equal to 0.63% of our net assets would be payable. See “Advisory Agreement and Administration Agreement” for more information concerning the incentive fees.
| (6) | Subject to FINRA limitations on underwriting compensation, we will also pay the following shareholder servicing and/or distribution fees to the Intermediary Manager: (a) for Class S shares, a shareholder servicing and/or distribution fee equal to 0.85% per annum of the aggregate NAV as of the beginning of the first calendar day of the month for the Class S shares and (b) for Class D shares only, a shareholder servicing and/or distribution fee equal to 0.25% per annum of the aggregate NAV as of the beginning of the first calendar day of the month for the Class D shares, in each case, payable monthly. The shareholder servicing and/or distribution fees are similar to sales commissions. The distribution and servicing expenses borne by the participating brokers may be different from and substantially less than the amount of shareholder servicing and/or distribution fees charged. All or a portion of the shareholder servicing and/or distribution fee may be used to pay for sub-transfer agency, sub-accounting and certain other administrative services that are not required to be paid pursuant to the shareholder servicing and/or distribution fees under FINRA rules. The Fund also may pay for these sub-transfer agency, sub-accounting and certain other administrative services outside of the shareholder servicing and/or distribution fees and its Distribution and Servicing Plan. No shareholder servicing and/or distribution fees will be paid with respect to the Class I shares. The total amount that will be paid over time for other underwriting compensation depends on the average length of time for which shares remain outstanding, the term over which such amount is measured and the performance of our investments. We will cease paying the shareholder servicing and/or distribution fee on the Class S shares and Class D shares on the earlier to occur of the following: (i) a listing of Class I shares, (ii) our merger or consolidation with or into another entity, or the sale or other disposition of all or substantially all of our assets or (iii) the date following the completion of the primary portion of this offering on which, in the aggregate, underwriting compensation from all sources in connection with this offering, including the shareholder servicing and/or distribution fee and other underwriting compensation, is equal to 10% of the gross proceeds from our primary offering. In addition, consistent with the exemptive relief allowing us to offer multiple classes of shares, at the end of the month in which the Intermediary Manager in conjunction with the transfer agent determines that total transaction or other fees, including upfront placement fees or brokerage commissions, and shareholder servicing and/or distribution fees paid with respect to the shares held in a shareholder’s account would exceed, in the aggregate, 10% of the gross proceeds from the sale of such shares (or a lower limit as determined by the Intermediary Manager or the applicable selling agent), we will cease paying the shareholder servicing and/or distribution fee on the Class S shares and Class D shares in such shareholder’s account. Compensation paid with respect to the shares in a shareholder’s account will be allocated among each share such that the compensation paid with respect to each individual share will not exceed 10% of the offering price of such share. We may modify this requirement in a manner that is consistent with applicable exemptive relief. At the end of such month, the Class S shares or Class D shares in such shareholder’s account will convert into a number of Class I shares (including any fractional shares), with an equivalent aggregate NAV as such Class S or Class D shares. See “Plan of Distribution” and “Use of Proceeds.” The total underwriting compensation and total organization and offering expenses will not exceed 10% and 15%, respectively, of the gross proceeds from this offering. |
| (7) | We may borrow funds to make investments, including before we have fully invested the proceeds of this continuous offering. To the extent that we determine it is appropriate to borrow funds to make investments, the costs associated with such borrowing will be indirectly borne by shareholders. The figure in the table assumes that we borrow for investment purposes an amount equal to 125% of our weighted average net |
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| assets, and that the average annual cost of borrowings, including the amortization of cost associated with obtaining borrowings and unused commitment fees, on the amount borrowed is estimated to be 2.57%. Our ability to incur leverage depends, in large part, on the availability of financing in the market. |
| (8) | “Other expenses” include accounting, legal and auditing fees, reimbursement of expenses to our Administrator, organization and offering expenses and fees payable to our Trustees, as discussed in “Plan of Operation.” The amount presented in the table estimates the amounts we expect to pay during the initial 12-month period of the offering following the date we met our minimum offering requirement. |
We have entered into an Expense Support and Conditional Reimbursement Agreement with the Adviser. The Adviser may elect to pay certain of our expenses on our behalf, including organization and offering expenses, provided that no portion of the payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Fund. Any Expense Payment that the Adviser has committed to pay must be paid by the Adviser to us in any combination of cash or other immediately available funds no later than forty-five days after such commitment was made in writing, and/or offset against amounts due from us to the Adviser or its affiliates. If the Adviser elects to pay certain of our expenses, the Adviser will be entitled to reimbursement of such expenses from us if Available Operating Funds (as defined below) exceed the cumulative distributions accrued to the Fund’s shareholders. Because the Adviser’s obligation to pay certain of our expenses is voluntary, the table above does not reflect the impact of any expense support from the Adviser.
Example: We have provided an example of the projected dollar amount of total expenses that would be incurred over various periods with respect to a hypothetical $1,000 investment in each class of our Common Shares. In calculating the following expense amounts, we have assumed that: (1) our annual operating expenses and offering expenses remain at the levels set forth in the table above, except to reduce annual expenses upon completion of organization and offering expenses, (2) the annual return before fees and expenses is 5.0%, (3) the net return after payment of fees and expenses is distributed to shareholders and reinvested at NAV and (4) your financial intermediary does not directly charge you transaction or other fees.
Class S shares
| Return Assumption |
1 Year | 3 Years | 5 Years | 10 Years | ||||||||||||
| You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual return from net investment income: |
$ | 57 | $ | 170 | $ | 281 | $ | 552 | ||||||||
| Total expenses assuming a 5.0% annual return solely from net realized capital gains: |
$ | 63 | $ | 187 | $ | 307 | $ | 594 | ||||||||
Class D shares
| Return Assumption |
1 Year | 3 Years | 5 Years | 10 Years | ||||||||||||
| You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual return from net investment income: |
$ | 51 | $ | 153 | $ | 255 | $ | 509 | ||||||||
| Total expenses assuming a 5.0% annual return solely from net realized capital gains: |
$ | 57 | $ | 171 | $ | 282 | $ | 554 | ||||||||
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Class I shares
| Return Assumption |
1 Year | 3 Years | 5 Years | 10 Years | ||||||||||||
| You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual return from net investment income: |
$ | 49 | $ | 147 | $ | 245 | $ | 491 | ||||||||
| Total expenses assuming a 5.0% annual return solely from net realized capital gains: |
$ | 55 | $ | 164 | $ | 272 | $ | 536 | ||||||||
While the examples assume a 5.0% annual return on investment before fees and expenses, our performance will vary and may result in an annual return that is greater or less than this. These examples should not be considered a representation of your future expenses. If we achieve sufficient returns on our investments to trigger a quarterly incentive fee on income and/or if we achieve net realized capital gains in excess of 5.0%, both our returns to our shareholders and our expenses would be higher. See “Advisory Agreement and Administration Agreement” for information concerning incentive fees.
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The following table of financial highlights is intended to help a prospective investor understand the Fund’s financial performance for the periods shown. The financial data set forth in the following table as of and for the six months ended June 30, 2021 have been derived from unaudited financial data, but in the opinion of our management, reflects all adjustments (consisting only of normal recurring adjustments) that are necessary to present fairly the results for such an interim period. Interim results at and for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. You should read these financial highlights in conjunction with our consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus.
| Six Months Ended June 30, 2021 | ||||||||||||
| Class I | Class S | Class D(6) | ||||||||||
| Per Share Data: |
||||||||||||
| Net asset value, beginning of period |
$ | 25.00 | $ | 25.00 | $ | 25.59 | ||||||
| Net investment income(1) |
1.08 | 1.01 | 0.39 | |||||||||
| Net unrealized and realized gain (loss)(2) |
0.73 | 0.70 | 0.27 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net increase (decrease) in net assets resulting from operations |
1.81 | 1.71 | 0.66 | |||||||||
| Distributions from net investment income(3) |
(0.99 | ) | (0.89 | ) | (0.43 | ) | ||||||
| Distributions from net realized gains(3) |
(0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net increase (decrease) in net assets from shareholders’ distributions |
(1.00 | ) | (0.90 | ) | (0.44 | ) | ||||||
| Early repurchase deduction fees(7) |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total increase (decrease) in net assets |
0.81 | 0.81 | 0.22 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value, end of period |
$ | 25.81 | $ | 25.81 | $ | 25.81 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstanding, end of period |
145,490,140 | 43,074,698 | 3,021,288 | |||||||||
| Total return based on NAV(4) |
7.34 | % | 6.91 | % | 2.57 | % | ||||||
| Ratios: |
||||||||||||
| Ratio of net expenses to average net assets(5) |
2.69 | % | 3.68 | % | 3.33 | % | ||||||
| Ratio of net investment income to average net assets(5) |
8.77 | % | 8.15 | % | 8.96 | % | ||||||
| Portfolio turnover rate |
13.28 | % | 13.28 | % | 13.28 | % | ||||||
| Supplemental Data: |
||||||||||||
| Net assets, end of period |
$ | 3,754,393 | $ | 1,111,572 | $ | 77,969 | ||||||
| Asset coverage ratio |
202.3 | % | 202.3 | % | 202.3 | % | ||||||
| (1) | The per share data was derived by using the weighted average shares outstanding during the period. |
| (2) | For the six months ended June 30, 2021, the amount shown does not correspond with the aggregate amount for the period as it includes a $0.05, $0.04 and $0.03 impact, on Class I, Class S and Class D, respectively, from the effect of the timing of capital transactions. |
| (3) | The per share data for distributions was derived by using the actual shares outstanding at the date of the relevant transactions (refer to Note 8). |
| (4) | Total return is calculated as the change in NAV per share during the period, plus distributions per share (assuming dividends and distributions are reinvested in accordance with the Fund’s dividend reinvestment plan) divided by the beginning NAV per share. Total return does not include upfront transaction fee, if any. |
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| (5) | For the six months ended June 30, 2021, amounts are annualized except for organizational costs. For the six months ended June 30, 2021, the ratio of total operating expenses to average net assets was 4.95%, 5.94% and 6.20% on Class I, Class S and Class D respectively, on an annualized basis, excluding the effect of expense support/(recoupment) and management fee and income based incentive fee waivers by the Adviser which represented 2.26%, 2.26% and 2.87% on Class I, Class S and Class D, respectively, of average net assets. |
| (6) | Class D commenced operation on May 1, 2021. |
| (7) | The per share amount rounds to less than $0.01 per share. |
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Investing in our Common Shares involves a number of significant risks. The following information is a discussion of the material risk factors associated with an investment in our Common Shares specifically, as well as those factors generally associated with an investment in a company with investment objectives, investment policies, capital structure or traders markets similar to ours. In addition to the other information contained in this prospectus, you should consider carefully the following information before making an investment in our Common Shares. The risks below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occur our business, financial condition and results of operations could be materially and adversely affected. In such cases, the NAV of our Common Shares could decline, and you may lose all or part of your investment.
Risks Related to Our Business and Structure
We are a relatively new company and have limited operating history.
The Fund is a non-diversified, closed-end management investment company that has elected to be regulated as a BDC with limited operating history. As a result, prospective investors have a limited track record and history on which to base their investment decision. We are subject to the business risks and uncertainties associated with recently formed businesses, including the risk that we will not achieve our investment objectives and the value of a shareholder’s investment could decline substantially or become worthless. Further, the Adviser has not previously offered a non-traded business development company. While we believe that the past professional experiences of the Adviser’s investment team, including investment and financial experience of the Adviser’s senior management, will increase the likelihood that the Adviser will be able to manage the Fund successfully, there can be no assurance that this will be the case.
Our Board of Trustees may change our operating policies and strategies without prior notice or shareholder approval, the effects of which may be adverse to our results of operations and financial condition.
Our Board of Trustees has the authority to modify or waive our current operating policies, investment criteria and strategies without prior notice and without shareholder approval. We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, NAV, operating results and value of our shares. However, the effects might be adverse, which could negatively impact our ability to pay you distributions and cause you to lose all or part of your investment. Moreover, we have significant flexibility in investing the net proceeds from our continuous offering and may use the net proceeds from our continuous offering in ways with which investors may not agree or for purposes other than those contemplated in this Registration Statement.
Our Board of Trustees may amend our Declaration of Trust without prior shareholder approval.
Our Board of Trustees may, without shareholder vote, subject to certain exceptions, amend or otherwise supplement the Declaration of Trust by making an amendment, a Declaration of Trust supplemental thereto or an amended and restated Declaration of Trust, including without limitation to classify the Board of Trustees, to impose advance notice bylaw provisions for Trustee nominations or for shareholder proposals, to require super-majority approval of transactions with significant shareholders or other provisions that may be characterized as anti-takeover in nature.
Price declines in the U.S. corporate debt market may adversely affect the fair value of our portfolio, reducing our NAV through increased net unrealized depreciation.
Conditions in the U.S. corporate debt market may deteriorate, as seen during the recent financial crisis, which may cause pricing levels to similarly decline or be volatile. During the financial crisis, many institutions
31
were forced to raise cash by selling their interests in performing assets in order to satisfy margin requirements or the equivalent of margin requirements imposed by their lenders and/or, in the case of hedge funds and other investment vehicles, to satisfy widespread redemption requests. This resulted in a forced deleveraging cycle of price declines, compulsory sales, and further price declines, with falling underlying credit values, and other constraints resulting from the credit crisis generating further selling pressure. If similar events occurred in the medium- and large-sized U.S. corporate debt market, our NAV could decline through an increase in unrealized depreciation and incurrence of realized losses in connection with the sale of our investments, which could have a material adverse impact on our business, financial condition and results of operations.
Our ability to achieve our investment objectives depends on the ability of the Adviser to manage and support our investment process. If the Adviser or Blackstone Credit were to lose any members of their respective senior management teams, our ability to achieve our investment objectives could be significantly harmed.
Since we have no employees, we depend on the investment expertise, skill and network of business contacts of the broader networks of the Adviser and its affiliates. The Adviser evaluates, negotiates, structures, executes, monitors and services our investments. Our future success depends to a significant extent on the continued service and coordination of Blackstone Credit and its senior management team. The departure of any members of Blackstone Credit’s senior management team could have a material adverse effect on our ability to achieve our investment objective.
Our ability to achieve our investment objectives depends on the Adviser’s ability to identify and analyze, and to invest in, finance and monitor companies that meet our investment criteria. The Adviser’s capabilities in structuring the investment process, providing competent, attentive and efficient services to us, and facilitating access to financing on acceptable terms depend on the employment of investment professionals in an adequate number and of adequate sophistication to match the corresponding flow of transactions. To achieve our investment objective, the Adviser may need to hire, train, supervise and manage new investment professionals to participate in our investment selection and monitoring process. The Adviser may not be able to find investment professionals in a timely manner or at all. Failure to support our investment process could have a material adverse effect on our business, financial condition and results of operations.
The Advisory Agreement has been approved pursuant to Section 15 of the 1940 Act. In addition, the Advisory Agreement has termination provisions that allow the parties to terminate the agreement. The Advisory Agreement may be terminated at any time, without penalty, by us upon 60 days’ written notice or by the Adviser upon 120 days’ written notice. If the Advisory Agreement is terminated, it may adversely affect the quality of our investment opportunities. In addition, in the event the Advisory Agreement is terminated, it may be difficult for us to replace the Adviser.
Because our business model depends to a significant extent upon relationships with private equity sponsors, investment banks and commercial banks, the inability of the Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
The Adviser depends on its broader organization’s relationships with private equity sponsors, investment banks and commercial banks, and we rely to a significant extent upon these relationships to provide us with potential investment opportunities. If the Adviser or its broader organization fail to maintain their existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we may not be able to grow our investment portfolio. In addition, individuals with whom the Adviser or its broader organizations have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.
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We may face increasing competition for investment opportunities, which could delay deployment of our capital, reduce returns and result in losses.
We will compete for investments with other BDCs and investment funds (including private equity funds, mezzanine funds, performing and other credit funds, and funds that invest in CLOs, structured notes, derivatives and other types of collateralized securities and structured products), as well as traditional financial services companies such as commercial banks and other sources of funding. These other BDCs and investment funds might be reasonable investment alternatives to us and may be less costly or complex with fewer and/or different risks than we have. Moreover, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not traditionally invested, including making investments in mid-sized private U.S. companies. As a result of these new entrants, competition for investment opportunities in middle market private U.S. companies may intensify. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms or structure. If we are forced to match our competitors’ pricing, terms or structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the market for investments in middle market private U.S. companies is underserved by traditional commercial banks and other financial sources. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC.
As required by the 1940 Act, a significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined pursuant to policies adopted by, and subject to the oversight of, our Board of Trustees. There is not a public market for the securities of the privately-held companies in which we invest. Most of our investments will not be publicly-traded or actively traded on a secondary market. As a result, we value these securities quarterly at fair value as determined in good faith as required by the 1940 Act. In connection with striking a NAV as of the last day of a month that is not also the last day of a calendar quarter, the Fund will consider whether there has been a material change to such investments as to affect their fair value, but such analysis will be more limited than the quarter end process.
As part of our valuation process, we will take into account relevant factors in determining the fair value of the Fund’s investments without market quotations, many of which are loans, including and in combination, as relevant: (i) the estimated enterprise value of a portfolio company, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, (v) a comparison of the portfolio company’s securities to any similar publicly traded securities, and (vi) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. Our determinations of fair value may differ materially from the values that would have been used if a ready market for these non-traded securities existed. Due to this uncertainty, our fair value determinations may cause our NAV on a given date to materially differ from the value that we may ultimately realize upon the sale of one or more of our investments.
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There is a risk that investors in our shares may not receive distributions or that our distributions may decrease over time.
We may not achieve investment results that will allow us to make a specified or stable level of cash distributions and our distributions may decrease over time. In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions.
The amount of any distributions we may make is uncertain. Our distributions may exceed our earnings, particularly during the period before we have substantially invested the net proceeds from our public offering. Therefore, portions of the distributions that we make may represent a return of capital to you that will lower your tax basis in your shares and reduce the amount of funds we have for investment in targeted assets.
We may fund our cash distributions to shareholders from any sources of funds available to us, including borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee and expense reimbursement waivers from the Adviser or the Administrator, if any. Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described in this registration statement. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC may limit our ability to pay distributions. All distributions are and will be paid at the discretion of our Board of Trustees and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations and such other factors as our Board of Trustees may deem relevant from time to time. We cannot assure you that we will continue to pay distributions to our shareholders in the future. In the event that we encounter delays in locating suitable investment opportunities, we may pay all or a substantial portion of our distributions from borrowings or sources other than cash flow from operations in anticipation of future cash flow, which may constitute a return of your capital. A return of capital is a return of your investment, rather than a return of earnings or gains derived from our investment activities.
We have not established any limit on the amount of funds we may use from available sources, such as borrowings, if any, or proceeds from this offering, to fund distributions (which may reduce the amount of capital we ultimately invest in assets).
Any distributions made from sources other than cash flow from operations or relying on fee or expense reimbursement waivers, if any, from the Adviser of the Administrator are not based on our investment performance, and can only be sustained if we achieve positive investment performance in future periods and/or the Adviser or the Administrator continues to makes such expense reimbursements, if any. The extent to which we pay distributions from sources other than cash flow from operations will depend on various factors, including the level of participation in our dividend reinvestment plan, how quickly we invest the proceeds from this and any future offering and the performance of our investments. Shareholders should also understand that our future repayments to the Adviser will reduce the distributions that they would otherwise receive. There can be no assurance that we will achieve such performance in order to sustain these distributions, or be able to pay distributions at all. The Adviser and the Administrator have no obligation to waive fees or receipt of expense reimbursements, if any.
Although we have commenced a share repurchase program, we have discretion to not repurchase your shares or to suspend the program.
Our Board of Trustees may amend or suspend the share repurchase program at any time in its discretion. You may not be able to sell your shares on a timely basis in the event our Board of Trustees amends or suspends the share repurchase program, absent a liquidity event, and we currently do not intend to undertake a liquidity event, and we are not obligated by our charter or otherwise to effect a liquidity event at any time. We will notify you of such developments in our quarterly reports or other filings. If less than the full amount of Common Shares
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requested to be repurchased in any given repurchase offer are repurchased, funds will be allocated pro rata based on the total number of Common Shares being repurchased without regard to class. The share repurchase program has many limitations and should not be considered a guaranteed method to sell shares promptly or at a desired price.
The timing of our repurchase offers pursuant to our share repurchase program may be at a time that is disadvantageous to our shareholders.
In the event a shareholder chooses to participate in our share repurchase program, the shareholder will be required to provide us with notice of intent to participate prior to knowing what the NAV per share of the class of shares being repurchased will be on the Repurchase Date. Although a shareholder will have the ability to withdraw a repurchase request prior to the Repurchase Date, to the extent a shareholder seeks to sell shares to us as part of our periodic share repurchase program, the shareholder will be required to do so without knowledge of what the repurchase price of our shares will be on the Repurchase Date.
As a public company, we are subject to regulations not applicable to private companies, such as provisions of the Sarbanes-Oxley Act. Efforts to comply with such regulations will involve significant expenditures, and non-compliance with such regulations may adversely affect us.
As a public company, we are subject to the Sarbanes-Oxley Act, and the related rules and regulations promulgated by the SEC. Our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. As a relatively new company, developing and maintaining an effective system of internal controls may require significant expenditures, which may negatively impact our financial performance and our ability to make distributions. This process also will result in a diversion of our management’s time and attention. We cannot be certain of when our evaluation, testing and remediation actions will be completed or the impact of the same on our operations. In addition, we may be unable to ensure that the process is effective or that our internal controls over financial reporting are or will be effective in a timely manner. In the event that we are unable to develop or maintain an effective system of internal controls and maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected.
Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until there is a public market for our shares, which is not expected to occur.
Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
We, our portfolio companies and other counterparties are subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our shareholders, potentially with retroactive effect.
President Biden may support an enhanced regulatory agenda that imposes greater costs on all sectors and on financial services companies in particular. In addition, uncertainty regarding legislation and regulations affecting the financial services industry or taxation could also adversely impact our business or the business of our portfolio companies.
Additionally, any changes to or repeal of the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy to avail ourselves of new or different opportunities. Such changes could result in material differences to our strategies and plans as set forth in this
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prospectus and may result in our investment focus shifting from the areas of expertise of the Adviser to other types of investments in which the Adviser may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our financial condition and results of operations and the value of a shareholder’s investment.
The impact of financial reform legislation on us is uncertain.
In light of past market conditions in the U.S. and global financial markets, the U.S. and global economy, legislators, the presidential administration and regulators have increased their focus on the regulation of the financial services industry, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the “Dodd-Frank Act,” which instituted a wide range of reforms that have impacted financial institutions to varying degrees. Because these requirements are relatively new and evolving, the full impact such requirements will have on our business, results of operations or financial condition is unclear. While we cannot predict what effect any changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to us and our shareholders.
We may experience fluctuations in our quarterly results.
We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the loans or other debt securities we originate or acquire, the level of our expenses (including our borrowing costs), variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods.
General economic conditions could adversely affect the performance of our investments.
The global growth cycle is in a mature phase and signs of slowdown are evident in certain regions around the world, although most economists continue to expect moderate economic growth in the near term, with limited signals of an imminent recession in the U.S. as consumer and government spending remain healthy. Although the broader outlook remains constructive and progress was made on trade, including a phase one deal with China and the United States-Mexico-Canada Agreement, geopolitical instability continues to pose risk. In particular, the outbreak of the novel coronavirus and related respiratory disease (“COVID-19”) in many countries, along with more recent COVID-19 variants, has disrupted global travel and supply chains, and has adversely impacted global commercial activity and a number of industries, such as transportation, hospitality and entertainment. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19, or any future pandemics that may arise, which may have a continued adverse impact on economic and market conditions, and may lead to significant declines in corporate earnings or loan performance, and the ability of corporate borrowers to service their debt, any of which could trigger a period of global economic slowdown, and have an adverse impact on the performance and financial results of the Fund, and the value and the liquidity of the shares.
We may be impacted by general European economic conditions.
The success of our investment activities could be affected by general economic and market conditions in Europe and in the rest of the world, as well as by changes in applicable laws and regulations (including laws relating to taxation of our investments), trade barriers, currency exchange controls, rate of inflation, currency depreciation, asset re-investment, resource self-sufficiency and national and international political and socioeconomic circumstances in respect of the European and other non-U.S. countries in which we may invest. These factors will affect the level and volatility of securities prices and the liquidity of the Fund’s investments, which could impair our profitability or result in losses. General fluctuations in the market prices of securities and interest rates may affect our investment opportunities and the value of our investments. We may maintain
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substantial trading positions that can be adversely affected by the level of volatility in the financial markets; the larger the positions, the greater the potential for loss. Declines in the performance of national economies or the credit markets in certain jurisdictions have had a negative impact on general economic and market conditions globally, and as a result, could have a material adverse effect on our business, financial condition and results of operations.
The Adviser’s financial condition may be adversely affected by a significant general economic downturn and it may be subject to legal, regulatory, reputational and other unforeseen risks that could have a material adverse effect on the Adviser’s businesses and operations (including those of the Fund). A recession, slowdown and/or sustained downturn in the global economy (or any particular segment thereof) could have a pronounced impact on the Fund and could adversely affect the Fund’s profitability, impede the ability of the Fund’s portfolio companies to perform under or refinance their existing obligations and impair the Fund’s ability to effectively deploy its capital or realize its investments on favorable terms.
In addition, economic problems in a single country are increasingly affecting other markets and economies. A continuation of this trend could adversely affect global economic conditions and world markets and, in turn, could adversely affect the Fund’s performance.
Any of the foregoing events could result in substantial or total losses to the Fund in respect of certain investments, which losses will likely be exacerbated by the presence of leverage in a portfolio company’s capital structure.
It may be difficult to bring suit or foreclosure in non-U.S. countries.
Because the effectiveness of the judicial systems in the countries in which the Fund may invest varies, the Fund (or any portfolio company) may have difficulty in foreclosing or successfully pursuing claims in the courts of such countries, as compared to the United States or other countries. Further, to the extent the Fund or a portfolio company may obtain a judgment but is required to seek its enforcement in the courts of one of these countries in which the Fund invests, there can be no assurance that such courts will enforce such judgment. The laws of other countries often lack the sophistication and consistency found in the United States with respect to foreclosure, bankruptcy, corporate reorganization or creditors’ rights.
MiFID II obligations could have an adverse effect on the ability of Blackstone Credit and its MiFID-authorized EEA affiliates to obtain and research in connection with the provision of an investment service.
The Recast European Union Directive on Markets in Financial Instruments (“MiFID II”) came into effect on January 3, 2018, and imposes regulatory obligations in respect of providing financial services in the European Economic Area (“EEA”) by EEA banks and EEA investment firms providing regulated services (each an “Investment Firm”). The Adviser is a non-EEA investment company and is, therefore, not subject to MiFID II but can be indirectly affected. The regulatory obligations imposed by MiFID II may impact, and constrain the implementation of, the investment strategy of the Fund. MiFID II restricts Investment Firms’ ability to obtain research in connection with the provision of an investment service. For example, Investment Firms providing portfolio management or independent investment advice may purchase investment research only at their own expense or out of specifically dedicated research payment accounts agreed upon with their clients. Research will also have to be unbundled and paid separately from the trading commission. EEA broker-dealers will unbundle research costs and invoice them to Investment Firms separated from dealing commissions.
Therefore, in light of the above, MiFID II could have an adverse effect on the ability of Blackstone Credit and its MiFID-authorized EEA affiliates to obtain and to provide research. The new requirements regarding the unbundling of research costs under MiFID II are not consistent with market practice in the United States and the regulatory framework concerning the use of commissions to acquire research developed by the SEC, although the SEC has issued temporary no-action letters to facilitate compliance by firms with the research requirements
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under MiFID II in a manner that is consistent with the U.S. federal securities laws. Blackstone Credit’s access to third-party research may nonetheless be significantly limited. Some EEA jurisdictions extend certain MiFID II obligations also to other market participants (e.g., Alternative Investment Fund Managers) under national law. There is very little guidance, and limited market practice, that has developed in preparation for MiFID II. As such, the precise impact of MiFID II on Blackstone Credit and the Fund cannot be fully predicted at this stage.
Any unrealized losses we experience on our portfolio may be an indication of future realized losses, which could reduce our income available for distribution.
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as determined in good faith by our Board of Trustees. Decreases in the market value or fair value of our investments relative to amortized cost will be recorded as unrealized depreciation. Any unrealized losses in our portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods. In addition, decreases in the market value or fair value of our investments will reduce our NAV.
Terrorist attacks, acts of war or natural disasters may adversely affect our operations.
Terrorist acts, acts of war or natural disasters may disrupt our operations, as well as the operations of the businesses in which we invest. Such acts have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability. Future terrorist activities, military or security operations, or natural disasters could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results and financial condition. Losses from terrorist attacks and natural disasters are generally uninsurable.
Force Majeure events may adversely affect our operations.
The Fund may be affected by force majeure events (e.g., acts of God, fire, flood, earthquakes, outbreaks of an infectious disease, pandemic or any other serious public health concern, war, terrorism, nationalization of industry and labor strikes). Force majeure events could adversely affect the ability of the Fund or a counterparty to perform its obligations. The liability and cost arising out of a failure to perform obligations as a result of a force majeure event could be considerable and could be borne by the Fund. Certain force majeure events, such as war or an outbreak of an infectious disease, could have a broader negative impact on the global or local economy, thereby affecting the Fund. Additionally, a major governmental intervention into industry, including the nationalization of an industry or the assertion of control, could result in a loss to the Fund if an investment is affected, and any compensation provided by the relevant government may not be adequate.
The current outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the U.S. and global economy and may in the future have a material adverse impact on our financial condition and results of operations.
During the first quarter of 2020, there was a global outbreak of COVID-19, which has spread to over 100 countries, including the United States, and has spread to every state in the United States. On March 11, 2020 the World Health Organization designated COVID-19 as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19. The global impact of the outbreak has been rapidly evolving, and as cases of COVID-19 have continued to be identified in additional countries, many countries have reacted by instituting quarantines, restrictions on travel, closing financial markets and/or restricting trading, and limiting hours of operations of non-essential businesses. Such actions are creating disruption in global supply chains, and adversely impacting a number of industries, including industries in which our portfolio companies operate. The outbreak could have a continued adverse impact on economic and market conditions and, at times, has triggered a period of global economic slowdown.
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The outbreak of COVID-19 and related effects has had, and may in the future have, material adverse impact on our NAV, financial condition, liquidity, results of operations, and the businesses of our portfolio companies, among other factors. Negative impacts to our business as a result of the COVID-19 pandemic could exacerbate other risks described in this prospectus, including:
| • | weakening financial conditions of or the bankruptcy or insolvency of portfolio companies, which may result in the inability of such portfolio companies to meet debt obligations, delays in collecting accounts receivable, defaults, or forgiveness or deferral of interest payments from such portfolio companies; |
| • | significant volatility in the markets for syndicated loans, which could cause rapid and large fluctuations in the values of such investments and adverse effects on the liquidity of any such investments; |
| • | deteriorations in credit and financing market conditions, which may adversely impact our ability to access financing for our investments on favorable terms or at all; |
| • | operational impacts on our Adviser, Administrator and our other third-party advisors, service providers, vendors and counterparties, including independent valuation firms, our lenders and other providers of financing, brokers and other counterparties that we purchase and sell assets to and from, derivative counterparties, and legal and diligence professionals that we rely on for acquiring our investments; |
| • | limitations on our ability to ensure business continuity in the event our, or our third-party advisors’ and service providers’ continuity of operations plan is not effective or improperly implemented or deployed during a disruption; |
| • | the availability of key personnel of the Adviser, Administrator and our other service providers as they face changed circumstances and potential illness during the pandemic; |
| • | difficulty in valuing our assets in light of significant changes in the financial markets, including difficulty in forecasting discount rates and making market comparisons, and circumstances affecting the Adviser’s, Administrator’s and our service providers’ personnel during the pandemic; |
| • | limitations on our ability to raise capital in this offering; |
| • | significant changes to the valuations of pending investments; and |
| • | limitations on our ability to make distributions to our shareholders due to material adverse impacts on our cash flows from operations or liquidity. |
The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the novel coronavirus on economic and market conditions, and, as a result, present material uncertainty and risk with respect to us and the performance of our investments. The full extent of the impact and effects of COVID-19 will depend on future developments, including, among other factors, the duration and spread of the outbreak, along with related travel advisories, quarantines and restrictions, the recovery time of the disrupted supply chains and industries, the impact of labor market interruptions, the impact of government interventions, the distribution of effective vaccines, mutations and variants of COVID-19 and uncertainty with respect to the duration of the global economic slowdown. COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, financial condition, results of operations and ability to pay distributions.
The outbreak of the epidemics/pandemics could adversely affect the performance of our investments.
Certain countries have been susceptible to epidemics/pandemics, most recently COVID-19, which has been designated as a pandemic by world health authorities. The outbreak of such epidemics/pandemics, together with any resulting restrictions on travel or quarantines imposed, has had and will continue to have a negative impact on the economy and business activity globally (including in the countries in which the Fund invests), and thereby
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is expected to adversely affect the performance of the Fund’s investments. Furthermore, the rapid development of epidemics/pandemics could preclude prediction as to their ultimate adverse impact on economic and market conditions, and, as a result, presents material uncertainty and risk with respect to the Fund and the performance of its investments.
We may face a breach of our cyber security, which could result in adverse consequences to our operations and exposure of confidential information.
Cyber security incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. Blackstone, Blackstone Credit and their affiliates and portfolio companies’ and service providers’ information and technology systems may be vulnerable to damage or interruption from cyber security breaches, computer viruses or other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and other security breaches, or usage errors by their respective professionals or service providers. If unauthorized parties gain access to such information and technology systems, they may be able to steal, publish, delete or modify private and sensitive information, including non-public personal information related to shareholders (and their beneficial owners) and material non-public information. Although Blackstone has implemented, and portfolio companies and service providers may implement, various measures to manage risks relating to these types of events, such systems could prove to be inadequate and, if compromised, could become inoperable for extended periods of time, cease to function properly or fail to adequately secure private information. Blackstone and Blackstone Credit do not control the cyber security plans and systems put in place by third-party service providers, and such third-party service providers may have limited indemnification obligations to Blackstone, Blackstone Credit, their affiliates, the Fund, the shareholders and/or a portfolio company, each of which could be negatively impacted as a result. Breaches such as those involving covertly introduced malware, impersonation of authorized users and industrial or other espionage may not be identified even with sophisticated prevention and detection systems, potentially resulting in further harm and preventing them from being addressed appropriately. The failure of these systems and/or of disaster recovery plans for any reason could cause significant interruptions in Blackstone’s, Blackstone Credit’s, their affiliates’, the Fund’s and/or a portfolio company’s operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to shareholders (and their beneficial owners), material non-public information and the intellectual property and trade secrets and other sensitive information of Blackstone, Blackstone Credit and/or portfolio companies. Blackstone, Blackstone Credit, the Fund and/or a portfolio company could be required to make a significant investment to remedy the effects of any such failures, harm to their reputations, legal claims that they and their respective affiliates may be subjected to, regulatory action or enforcement arising out of applicable privacy and other laws, adverse publicity, and other events that may affect their business and financial performance.
We may not be able to obtain all required state licenses.
We may be required to obtain various state licenses in order to, among other things, originate commercial loans. Applying for and obtaining required licenses can be costly and take several months. There is no assurance that we will obtain all of the licenses that we need on a timely basis. Furthermore, we will be subject to various information and other requirements in order to obtain and maintain these licenses, and there is no assurance that we will satisfy those requirements. Our failure to obtain or maintain licenses might restrict investment options and have other adverse consequences.
The United Kingdom’s exit from the European Union may create significant risks and uncertainty for global markets and the Fund’s investments.
The United Kingdom (the “UK”) formally left the European Union (the “EU”) on January 31, 2020 (commonly known as “Brexit”), followed by an implementation period, during which EU law continued to apply in the UK and the UK maintained its EU single market access rights and EU customs union membership. The implementation period expired on December 31, 2020. Consequently, the UK has become a third country vis-à-vis the EU, without access to
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the single market or membership of the EU customs union. During the implementation period, on December 30, 2020, the UK and the EU signed a trade and cooperation agreement (the “TCA”) to govern their ongoing relationship. The TCA was officially ratified by the UK Parliament on December 30, 2020, and was ratified by the EU Parliament and Council on April 27, 2021. It is anticipated that further details of the relationship between the UK and the EU will continue to be negotiated even after formal ratification of the TCA.
Over time, UK regulated firms and other UK businesses may be adversely affected by the terms of the TCA (assuming it is formally ratified by the EU), as compared with the position prior to the expiration of the implementation period on December 31, 2020. For example, the TCA introduces new customs checks, as well as new restrictions on the provision of cross-border services and on the free movement of employees. These changes have the potential to materially impair the profitability of a business, and to require it to adapt or even relocate.
Although it is probable that any adverse effects flowing from the UK’s withdrawal from the EU will principally affect the UK (and those having an economic interest in, or connected to, the UK), given the size and global significance of the UK’s economy, the impact of the withdrawal is unpredictable and likely to be an ongoing source of instability, produce significant currency fluctuations, and/or have other adverse effects on international markets, international trade agreements and/or other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise). The withdrawal of the UK from the EU could therefore adversely affect us. In addition, although it seems less likely following the expiration of the transition period than at the time of the UK’s referendum, the withdrawal of the UK from the EU could have a further destabilizing effect if any other member states were to consider withdrawing from the EU, presenting similar and/or additional potential risks and consequences to our business and financial results.
Compliance with the SEC’s Regulation Best Interest may negatively impact our ability to raise capital in this offering, which would harm our ability to achieve our investment objectives.
Commencing June 30, 2020, broker-dealers must comply with Regulation Best Interest, which, among other requirements, enhances the existing standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when recommending to a retail customer any securities transaction or investment strategy involving securities to a retail customer. The impact of Regulation Best Interest on broker-dealers participating in our offering cannot be determined at this time, but it may negatively impact whether broker-dealers and their associated persons recommend this offering to retail customers. Regulation Best Interest imposes a duty of care for broker-dealers to evaluate reasonable alternatives in the best interests of their clients. Reasonable alternatives to the Fund exist and may have lower expenses and/or lower investment risk than the Fund. Under Regulation Best Interest, broker-dealers participating in the offering must consider such alternatives in the best interests of their clients. If Regulation Best Interest reduces our ability to raise capital in this offering, it would harm our ability to create a diversified portfolio of investments and achieve our investment objectives and would result in our fixed operating costs representing a larger percentage of our gross income.
Risks Related to Our Investments
Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment.
Our investments may be risky and, subject to compliance with our 80% test, there is no limit on the amount of any such investments in which we may invest.
Subordinated Debt. Our subordinated debt investments will generally rank junior in priority of payment to senior debt and will generally be unsecured. This may result in a heightened level of risk and volatility or a loss of principal, which could lead to the loss of the entire investment. These investments may involve additional
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risks that could adversely affect our investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our shareholders to non-cash income. Because we will not receive any principal repayments prior to the maturity of some of our subordinated debt investments, such investments will be of greater risk than amortizing loans.
Equity Investments. We may make select equity investments. In addition, in connection with our debt investments, we on occasion may receive equity interests such as warrants or options as additional consideration. The equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
Preferred Securities. Investments in preferred securities involve certain risks. Certain preferred securities contain provisions that allow an issuer under certain conditions to skip or defer distributions. If the Fund owns a preferred security that is deferring its distribution, the Fund may be required to include the amount of the deferred distribution in its taxable income for tax purposes although it does not currently receive such amount in cash. In order to receive the special treatment accorded to RICs and their shareholders under the Code and to avoid U.S. federal income and/or excise taxes at the Fund level, the Fund may be required to distribute this income to shareholders in the tax year in which the income is recognized (without a corresponding receipt of cash). Therefore, the Fund may be required to pay out as an income distribution in any such tax year an amount greater than the total amount of cash income the Fund actually received, and to sell portfolio securities, including at potentially disadvantageous times or prices, to obtain cash needed for these income distributions. Preferred securities often are subject to legal provisions that allow for redemption in the event of certain tax or legal changes or at the issuer’s call. In the event of redemption, the Fund may not be able to reinvest the proceeds at comparable rates of return. Preferred securities are subordinated to bonds and other debt securities in an issuer’s capital structure in terms of priority for corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt securities. Preferred securities may trade less frequently and in a more limited volume and may be subject to more abrupt or erratic price movements than many other securities, such as common stocks, corporate debt securities and U.S. government securities.
Non-U.S. Securities. We may invest in non-U.S. securities, which may include securities denominated in U.S. dollars or in non-U.S. currencies, to the extent permitted by the 1940 Act. Because evidence of ownership of such securities usually is held outside the United States, we would be subject to additional risks if we invested in non-U.S. securities, which include possible adverse political and economic developments, seizure or nationalization of foreign deposits and adoption of governmental restrictions, which might adversely affect or restrict the payment of principal and interest on the non-U.S. securities to shareholders located outside the country of the issuer, whether from currency blockage or otherwise. Because non-U.S. securities may be purchased with and payable in foreign currencies, the value of these assets as measured in U.S. dollars may be affected unfavorably by changes in currency rates and exchange control regulations.
Loans Risk. The loans that the Fund may invest in include Loans that are first lien, second lien, third lien or that are unsecured. In addition, the Loans the Fund will invest in will usually be rated below investment grade or may also be unrated. Loans are subject to a number of risks described elsewhere in this prospectus, including credit risk, liquidity risk, below investment grade instruments risk and management risk.
Although certain Loans in which the Fund may invest will be secured by collateral, there can be no assurance that such collateral could be readily liquidated or that the liquidation of such collateral would satisfy the borrower’s obligation in the event of non-payment of scheduled interest or principal. In the event of the bankruptcy or insolvency of a borrower, the Fund could experience delays or limitations with respect to its ability to realize the benefits of the collateral securing a Loan. In the event of a decline in the value of the already pledged collateral, if the terms of a Loan do not require the borrower to pledge additional collateral, the Fund will be exposed to the risk that the value of the collateral will not at all times equal or exceed the amount of the borrower’s obligations under the Loans. To the extent that a Loan is collateralized by stock in the borrower or its
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subsidiaries, such stock may lose some or all of its value in the event of the bankruptcy or insolvency of the borrower. Those Loans that are under-collateralized involve a greater risk of loss.
Further, there is a risk that any collateral pledged by portfolio companies in which the Fund has taken a security interest may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. To the extent the Fund’s debt investment is collateralized by the securities of a portfolio company’s subsidiaries, such securities may lose some or all of their value in the event of the bankruptcy or insolvency of the portfolio company. Also, in some circumstances, the Fund’s security interest may be contractually or structurally subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the debt. Secured debt that is under-collateralized involves a greater risk of loss. In addition, second lien debt is granted a second priority security interest in collateral, which means that any realization of collateral will generally be applied to pay senior secured debt in full before second lien debt is paid. Consequently, the fact that debt is secured does not guarantee that the Fund will receive principal and interest payments according to the debt’s terms, or at all, or that the Fund will be able to collect on the debt should it be forced to enforce remedies.
Loans are not registered with the SEC, or any state securities commission, and are not listed on any national securities exchange. There is less readily available or reliable information about most Loans than is the case for many other types of securities, including securities issued in transactions registered under the Securities Act or registered under the Exchange Act. No active trading market may exist for some Loans, and some loans may be subject to restrictions on resale. A secondary market may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods, which may impair the ability to realize full value and thus cause a material decline in the Fund’s NAV. In addition, the Fund may not be able to readily dispose of its Loans at prices that approximate those at which the Fund could sell such loans if they were more widely-traded and, as a result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. During periods of limited supply and liquidity of Loans, the Fund’s yield may be lower.
Some Loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate the Loans to presently existing or future indebtedness of the borrower or take other action detrimental to lenders, including the Fund. Such court action could under certain circumstances include invalidation of Loans.
If legislation of state or federal regulations impose additional requirements or restrictions on the ability of financial institutions to make loans, the availability of Loans for investment by the Fund may be adversely affected. In addition, such requirements or restrictions could reduce or eliminate sources of financing for certain borrowers. This would increase the risk of default.
If legislation or federal or state regulations require financial institutions to increase their capital requirements this may cause financial institutions to dispose of Loans that are considered highly levered transactions. Such sales could result in prices that, in the opinion of the Adviser, do not represent fair value. If the Fund attempts to sell a Loan at a time when a financial institution is engaging in such a sale, the price the Fund could get for the Loan may be adversely affected.
The Fund may acquire Loans through assignments or participations. The Fund will typically acquire Loans through assignment. The purchaser of an assignment typically succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement with respect to the debt obligation; however, the purchaser’s rights can be more restricted than those of the assigning institution, and the Fund may not be able to unilaterally enforce all rights and remedies under the loan and with regard to any associated collateral.
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A participation typically results in a contractual relationship only with the institution selling the participation interest, not with the borrower. Sellers of participations typically include banks, broker-dealers, other financial institutions and lending institutions. Certain participation agreements also include the option to convert the participation to a full assignment under agreed upon circumstances. The Adviser has adopted best execution procedures and guidelines to mitigate credit and counterparty risk in the atypical situation when the Fund must acquire a Loan through a participation.
In purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement against the borrower, and the Fund may not directly benefit from the collateral supporting the debt obligation in which it has purchased the participation. As a result, the Fund will be exposed to the credit risk of both the borrower and the institution selling the participation. Further, in purchasing participations in lending syndicates, the Fund will not be able to conduct the due diligence on the borrower or the quality of the Loan with respect to which it is buying a participation that the Fund would otherwise conduct if it were investing directly in the Loan, which may result in the Fund being exposed to greater credit or fraud risk with respect to the borrower or the Loan than the Fund expected when initially purchasing the participation.
The Fund also may originate Loans or acquire Loans by participating in the initial issuance of the Loan as part of a syndicate of banks and financial institutions, or receive its interest in a Loan directly from the borrower.
The Adviser has established a counterparty and liquidity sub-committee that regularly reviews each broker-dealer counterparty for, among other things, its quality and the quality of its execution. The established procedures and guidelines require trades to be placed for execution only with broker counterparties approved by the counterparty and liquidity sub-committee of the Adviser. The factors considered by the sub-committee when selecting and approving brokers and dealers include, but are not limited to: (i) quality, accuracy, and timeliness of execution, (ii) review of the reputation, financial strength and stability of the financial institution, (iii) willingness and ability of the counterparty to commit capital, (iv) ongoing reliability and (v) access to underwritten offerings and secondary markets.
LIBOR Risk. Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect our credit arrangements and our CLO transactions.
On July 27, 2017, the Financial Conduct Authority (“FCA”) announced that it would phase out the London Interbank Offered Rate (“LIBOR”) as a benchmark by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. The administrator of LIBOR has announced it will consult on its intention to cease the publication of the one week and two month LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. The U.S. Federal Reserve System (“FRS”), Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation have issued guidance encouraging market participants to adopt alternatives to LIBOR in new contracts as soon as practicable and no later than December 31, 2021, and the FCA has indicated that market participants should not rely on LIBOR being available after 2021. As an alternative to LIBOR, for example, the FRS, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S.-dollar LIBOR with the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements, backed by Treasury securities. Abandonment of or modifications to LIBOR could have adverse impacts on newly issued financial instruments and our existing financial instruments which reference LIBOR. While some instruments may contemplate a scenario where LIBOR is no longer available by providing for an alternative rate setting methodology, not all instruments may have such provisions and there is significant uncertainty regarding the effectiveness of any such alternative methodologies. Abandonment of or modifications to LIBOR could lead to significant short-term and long-term uncertainty and market instability. If LIBOR ceases to exist, we and our portfolio companies may need to amend or restructure our existing LIBOR-based debt instruments and any related hedging arrangements that extend beyond December 31, 2021, or June 30, 2023, depending on the applicable LIBOR tenor and pending the outcome of the LIBOR administrator’s
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consultation. Such amendments and restructurings may be difficult, costly and time consuming. In addition, from time to time we invest in floating rate loans and investment securities whose interest rates are indexed to LIBOR. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR, or any changes announced with respect to such reforms, may result in a sudden or prolonged increase or decrease in the reported LIBOR rates and the value of LIBOR-based loans and securities, including those of other issuers we or our funds currently own or may in the future own. It remains uncertain how such changes would be implemented and the effects such changes would have on us, issuers of instruments in which we invest and financial markets generally.
The expected discontinuation of LIBOR could have a significant impact on our business. There could be significant operational challenges for the transition away from LIBOR including, but not limited to, amending loan agreements with borrowers on investments that may have not been modified with fallback language and adding effective fallback language to new agreements in the event that LIBOR is discontinued before maturity. Beyond these challenges, we anticipate there may be additional risks to our current processes and information systems that will need to be identified and evaluated by us. Due to the uncertainty of the replacement for LIBOR, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined. In addition, the cessation of LIBOR could:
| • | Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any LIBOR-linked securities, loans and derivatives that may be included in our assets and liabilities; |
| • | Require extensive changes to documentation that governs or references LIBOR or LIBOR-based products, including, for example, pursuant to time-consuming renegotiations of documentation to modify the terms of investments; |
| • | Result in inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with one or more alternative reference rates; |
| • | Result in disputes, litigation or other actions with portfolio companies, or other counterparties, regarding the interpretation and enforceability of provisions in our LIBOR-based investments, such as fallback language or other related provisions, including, in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between LIBOR and the various alternative reference rates; |
| • | Require the transition and/or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on one or more alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and |
| • | Cause us to incur additional costs in relation to any of the above factors. |
There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could have a material adverse effect on our business, result of operations, financial condition, and unit price. In addition, the transition to a successor rate could potentially cause (i) increased volatility or illiquidity in markets for instruments that currently rely on LIBOR, (ii) a reduction in the value of certain instruments held by the Fund, or (iii) reduced effectiveness of related Fund transactions, such as hedging. It remains uncertain how such changes would be implemented and the effects such changes would have on the Fund, issuers of instruments in which the Fund invests and financial markets generally.
Junior, Unsecured Securities. Our strategy may entail acquiring securities that are junior or unsecured instruments. While this approach can facilitate obtaining control and then adding value through active management, it also means that certain of the Fund’s investments may be unsecured. If a portfolio company becomes financially distressed or insolvent and does not successfully reorganize, we will have no assurance
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(compared to those distressed securities investors that acquire only fully collateralized positions) that we will recover any of the principal that we have invested. Similarly, investments in “last out” pieces of unitranche loans will be similar to second lien loans in that such investments will be junior in priority to the “first out” piece of the same unitranche loan with respect to payment of principal, interest and other amounts. Consequently, the fact that debt is secured does not guarantee that we will receive principal and interest payments according to the debt’s terms, or at all, or that we will be able to collect on the debt should it be forced to enforce its remedies.
While such junior or unsecured investments may benefit from the same or similar financial and other covenants as those enjoyed by the indebtedness ranking more senior to such investments and may benefit from cross-default provisions and security over the issuer’s assets, some or all of such terms may not be part of particular Investments. Moreover, our ability to influence an issuer’s affairs, especially during periods of financial distress or following insolvency, is likely to be substantially less than that of senior creditors. For example, under typical subordination terms, senior creditors are able to block the acceleration of the junior debt or the exercise by junior debt holders of other rights they may have as creditors. Accordingly, we may not be able to take steps to protect investments in a timely manner or at all, and there can be no assurance that our rate of return objectives or any particular investment will be achieved. In addition, the debt securities in which we will invest may not be protected by financial covenants or limitations upon additional indebtedness, may have limited liquidity and are not expected to be rated by a credit rating agency.
Early repayments of our investments may have a material adverse effect on our investment objectives. In addition, depending on fluctuations of the equity markets and other factors, warrants and other equity investments may become worthless.
There can be no assurance that attempts to provide downside protection through contractual or structural terms with respect to our investments will achieve their desired effect and potential investors should regard an investment in us as being speculative and having a high degree of risk. Furthermore, we have limited flexibility to negotiate terms when purchasing newly issued investments in connection with a syndication of mezzanine or certain other junior or subordinated investments or in the secondary market.
Below Investment Grade Risk. In addition, we intend to invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be difficult to value and illiquid. The major risks of below investment grade securities include:
| • | Below investment grade securities may be issued by less creditworthy issuers. Issuers of below investment grade securities may have a larger amount of outstanding debt relative to their assets than issuers of investment grade securities. In the event of an issuer’s bankruptcy, claims of other creditors may have priority over the claims of holders of below investment grade securities, leaving few or no assets available to repay holders of below investment grade securities. |
| • | Prices of below investment grade securities are subject to extreme price fluctuations. Adverse changes in an issuer’s industry and general economic conditions may have a greater impact on the prices of below investment grade securities than on other higher-rated fixed-income securities. |
| • | Issuers of below investment grade securities may be unable to meet their interest or principal payment obligations because of an economic downturn, specific issuer developments or the unavailability of additional financing. |
| • | Below investment grade securities frequently have redemption features that permit an issuer to repurchase the security from us before it matures. If the issuer redeems below investment grade securities, we may have to invest the proceeds in securities with lower yields and may lose income. |
| • | Below investment grade securities may be less liquid than higher-rated fixed-income securities, even under normal economic conditions. There are fewer dealers in the below investment grade securities |
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| market, and there may be significant differences in the prices quoted by the dealers. Judgment may play a greater role in valuing these securities and we may be unable to sell these securities at an advantageous time or price. |
| • | We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting issuer. |
The credit rating of a high-yield security does not necessarily address its market value risk. Ratings and market value may change from time to time, positively or negatively, to reflect new developments regarding the issuer.
Mezzanine Loans. Our mezzanine debt securities generally will have ratings or implied or imputed ratings below investment grade. They will be obligations of corporations, partnerships or other entities that are generally unsecured, typically are subordinated to other obligations of the obligor and generally have greater credit and liquidity risk than is typically associated with investment grade corporate obligations. Accordingly, the risks associated with mezzanine debt securities include a greater possibility that adverse changes in the financial condition of the obligor or in general economic conditions (including a sustained period of rising interest rates or an economic downturn) may adversely affect the obligor’s ability to pay principal and interest on its debt. Many obligors on mezzanine debt securities are highly leveraged, and specific developments affecting such obligors, including reduced cash flow from operations or the inability to refinance debt at maturity, may also adversely affect such obligors’ ability to meet debt service obligations. Mezzanine debt securities are often issued in connection with leveraged acquisitions or recapitalizations, in which the issuers incur a substantially higher amount of indebtedness than the level at which they had previously operated. Default rates for mezzanine debt securities have historically been higher than has been the case for investment grade securities.
CLO Risk. Our investments in CLOs may be riskier than a direct investment in the debt or other securities of the underlying companies. When investing in CLOs, we may invest in any level of a CLO’s subordination chain, including subordinated (lower-rated) tranches and residual interests (the lowest tranche). CLOs are typically highly levered and therefore, the junior debt and equity tranches that we may invest in are subject to a higher risk of total loss and deferral or nonpayment of interest than the more senior tranches to which they are subordinated. In addition, we will generally have the right to receive payments only from the CLOs, and will generally not have direct rights against the underlying borrowers or entities that sponsored the CLOs. Furthermore, the investments we make in CLOs are at times thinly traded or have only a limited trading market. As a result, investments in such CLOs may be characterized as illiquid securities.
Risk Retention Vehicles. The Fund may invest in CLO debt and equity tranches and warehouse investments directly or indirectly through an investment in U.S. and/or European vehicles (“Risk Retention Vehicles”) established for the purpose of satisfying U.S. and/or E.U. regulations that require eligible risk retainers to purchase and retain specified amounts of the credit risk associated with certain CLOs, which vehicles themselves are invested in CLO securities, warehouse investments and/or senior secured obligations. Risk Retention Vehicles will be structured to satisfy the retention requirements by purchasing and retaining the percentage of CLO notes prescribed under the applicable retention requirements (the “Retention Notes”) and will include Risk Retention Vehicles with respect to CLOs managed by other collateral managers, but will not include Risk Retention Vehicles with respect to CLOs for which the Adviser or its affiliates acts as collateral manager.
Indirect investments in CLO equity securities (and in some instances more senior CLO securities) and warehouse investments through entities that have been established to satisfy the U.S. retention requirements and/or the European retention requirements may allow for better economics for the Fund (including through fee rebate arrangements) by creating stronger negotiating positions with CLO managers and underwriting banks who are incentivized to issue CLOs and who require the participation of a Risk Retention Vehicle to enable the CLO securities to be issued. However, Retention Notes differ from other securities of the same ranking since the retention requirements prescribe that such Retention Notes must be held by the relevant risk retainer for a
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specified period. In the case of European Risk Retention Vehicles, the prescribed holding period is the lifetime of the CLO, and in the case of U.S. Risk Retention Vehicles it is the longer of (x) the period until the CLO has paid down its securities to 33% of their original principal amount, (y) the period until the CLO has sold down its assets to 33% of their original principal amount and (z) two years after the closing of the CLO. In addition, Retention Notes are subject to other restrictions not imposed on other securities of the same ranking; for example, Retention Notes may not be subject to credit risk mitigation, and breach of the retention requirements may result in the imposition of regulatory sanctions or, in the case of the European retention requirements, in claims being brought against the retaining party.
“Covenant-lite” Obligations. We may invest in, or obtain exposure to, obligations that may be “covenant-lite,” which means such obligations lack certain financial maintenance covenants. While these loans may still contain other collateral protections, a covenant-lite loan may carry more risk than a covenant-heavy loan made by the same borrower, as it does not require the borrower to provide affirmation that certain specific financial tests have been satisfied on a routine basis as is required under a covenant-heavy loan agreement. Should a loan we hold begin to deteriorate in quality, our ability to negotiate with the borrower may be delayed under a covenant-lite loan compared to a loan with full maintenance covenants. This may in turn delay our ability to seek to recover its investment.
Consumer Loans. We may invest in, or obtain exposure to, consumer lending, which involves risk elements in addition to normal credit risk. Consumer loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In underwriting consumer loans, a thorough analysis of the borrower’s financial ability to repay the loan as agreed is typically performed. The ability to repay shall be determined by, among others, the borrower’s employment history, current financial conditions, and credit background. While these loans typically have higher yields than many other loans, such loans involve risk elements in addition to normal credit risk. Consumer loans may entail greater credit risk than other loans particularly in the case of unsecured consumer loans or consumer loans secured by rapidly depreciable assets, such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. During periods of deteriorating economic conditions, such as recessions or periods of rising unemployment, delinquencies and losses generally increase, sometimes dramatically, with respect to consumer loans. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, and/or state consumer protection laws may limit the amount which can be recovered on such loans.
Bridge Financings. From time to time, we may lend to portfolio companies on a short-term, unsecured basis or otherwise invest on an interim basis in portfolio companies in anticipation of a future issuance of equity or long-term debt securities or other refinancing or syndication. Such bridge loans would typically be convertible into a more permanent, long-term security; however, for reasons not always in the Fund’s control, such long-term securities issuance or other refinancing or syndication may not occur and such bridge loans and interim investments may remain outstanding. In such event, the interest rate on such loans or the terms of such interim investments may not adequately reflect the risk associated with the position taken by the Fund.
Restructurings. Investments in companies operating in workout or bankruptcy modes present additional legal risks, including fraudulent conveyance, voidable preference and equitable subordination risks. The level of analytical sophistication, both financial and legal, necessary for successful investment in companies experiencing significant business and financial difficulties is unusually high. There is no assurance that we will correctly evaluate the value of the assets collateralizing our loans or the prospects for a successful reorganization or similar action.
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Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any proceeds. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
If one of our portfolio companies were to file for bankruptcy, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might re-characterize our debt investment and subordinate all or a portion of our claim to that of other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower.
We generally will not control our portfolio companies.
We do not expect to control most of our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements with such portfolio companies may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of the company’s common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.
We will be exposed to risks associated with changes in interest rates.
We are subject to financial market risks, including changes in interest rates. General interest rate fluctuations may have a substantial negative impact on our investments and investment opportunities and, accordingly, have a material adverse effect on our investment objectives and our rate of return on invested capital. In addition, an increase in interest rates would make it more expensive to use debt for our financing needs.
Interest rates have recently been at or near historic lows. In the event of a rising interest rate environment, payments under floating rate debt instruments generally would rise and there may be a significant number of issuers of such floating rate debt instruments that would be unable or unwilling to pay such increased interest costs and may otherwise be unable to repay their loans. Investments in floating rate debt instruments may also decline in value in response to rising interest rates if the interest rates of such investments do not rise as much, or as quickly, as market interest rates in general. Similarly, during periods of rising interest rates, fixed-rate debt instruments may decline in value because the fixed rates of interest paid thereunder may be below market interest rates.
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Second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
Certain debt investments that we make to portfolio companies may be secured on a second priority basis by the same collateral securing first priority debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company remaining assets, if any.
We may also make unsecured debt investments in portfolio companies, meaning that such investments will not benefit from any interest in collateral of such companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured debt agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before we are so entitled. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy its unsecured debt obligations after payment in full of all secured debt obligations. If such proceeds were not sufficient to repay the outstanding secured debt obligations, then its unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.
The rights we may have with respect to the collateral securing the debt investments we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.
Economic recessions or downturns or restrictions on trade could impair our portfolio companies and adversely affect our operating results.
Many of our portfolio companies may be susceptible to economic recessions or downturns and may be unable to repay our debt investments during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our senior secured debt. A prolonged recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income and NAV. Certain of our portfolio companies may also be impacted by tariffs or other matters affecting international trade. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and adversely affect our operating results.
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A covenant breach or other default by our portfolio companies may adversely affect our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. In addition, lenders in certain cases can be subject to lender liability claims for actions taken by them when they become too involved in the borrower’s business or exercise control over a borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken if we render significant managerial assistance to the borrower. Furthermore, if one of our portfolio companies were to file for bankruptcy protection, a bankruptcy court might re-characterize our debt holding and subordinate all or a portion of our claim to claims of other creditors, even though we may have structured our investment as senior secured debt. The likelihood of such a re-characterization would depend on the facts and circumstances, including the extent to which we provided managerial assistance to that portfolio company.
Our portfolio companies may be highly leveraged.
Some of our portfolio companies may be highly leveraged, which may have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair these companies’ ability to finance their future operations and capital needs. As a result, these companies’ flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.
A portion of our portfolio may be invested in the life sciences industry.
Investments in the life sciences industry involve a high degree of risk that can result in substantial losses. For example, investing in these assets involves substantial risks, including, but not limited to, the following: the obsolescence of products; erosion of sales due to generic or biosimilar competition; change in government policies and governmental investigations; potential litigation alleging negligence, products liability torts, breaches of warranty, intellectual property infringement and other legal theories; extensive and evolving government regulation; disappointing results from preclinical testing in new indications; indications of safety concerns; insufficient clinical trial data in certain jurisdictions to support the safety or efficacy of the product candidate; difficulty in obtaining all necessary regulatory approvals in each additional proposed jurisdiction; inability to manufacture sufficient quantities of the product for development or commercialization in a timely or cost-effective manner; substantial commercial risk; and the fact that, even after regulatory approval has been obtained, the product and its manufacturer are subject to continual regulatory review, and any discovery of previously unknown problems with the product or the manufacturer may result in restrictions or recalls. Many of these companies may operate as a loss, or with substantial variations in operating results for a period of time after product approval. In addition, many of the companies will need substantial additional capital to support additional research and development activities and may face intense competition in the life sciences industry from biopharmaceutical companies with greater financial resources, more extensive research and development capabilities and a larger number of qualified managerial and technical personnel.
Biopharmaceutical product sales may also be lower than expected due to pricing pressures, insufficient demand, product competition, failure of clinical trials, lack of market acceptance, obsolescence, loss of patent protection, the impact of the COVID-19 global pandemic or other factors and development-stage product candidates may fail to reach the market. Unexpected side effects, safety or efficacy concerns can arise with respect to a product, leading to product recalls, withdrawals or declining sales.
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Investing in large private U.S. borrowers may limit the Fund’s ability to achieve high growth rates during times of economic expansion.
Investing in originated assets made to large private U.S. borrowers may result in the Fund underperforming other segments of the market, particularly during times of economic expansion, because large private U.S. borrowers may be less responsive to competitive challenges and opportunities in the financial markets. As a result, the Fund’s value may not rise at the same rate, if at all, as other funds that invest in smaller market capitalization companies that are more capable of responding to economic and industrial changes.
Investing in private companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results.
These risks include the risk that:
| • | these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing on any guarantees we may have obtained in connection with our investment; |
| • | these companies frequently have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tends to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns; |
| • | these companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; |
| • | these companies generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, Trustees and members of the Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and |
| • | these companies may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity. |
We may not realize gains from our equity investments.
Certain investments that we may make could include warrants or other equity securities. In addition, we may make direct equity investments in portfolio companies. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We intend to seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.
An investment strategy focused primarily on privately-held companies presents certain challenges, including, but not limited to, the lack of available information about these companies.
We intend to invest primarily in privately-held companies. Investments in private companies pose significantly greater risks than investments in public companies. First, private companies have reduced access to
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the capital markets, resulting in diminished capital resources and the ability to withstand financial distress. Second, the depth and breadth of experience of management in private companies tends to be less than that at public companies, which makes such companies more likely to depend on the management talents and efforts of a smaller group of persons and/or persons with less depth and breadth of experience. Therefore, the decisions made by such management teams and/or the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our investments and, in turn, on us. Third, the investments themselves tend to be less liquid. As such, we may have difficulty exiting an investment promptly or at a desired price prior to maturity or outside of a normal amortization schedule. As a result, the relative lack of liquidity and the potential diminished capital resources of our target portfolio companies may affect our investment returns. Fourth, limited public information generally exists about private companies. Fifth, these companies may not have third-party debt ratings or audited financial statements. We must therefore rely on the ability of the Adviser to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. The Adviser would typically assess an investment in a portfolio company based on the Adviser’s estimate of the portfolio company’s earnings and enterprise value, among other things, and these estimates may be based on limited information and may otherwise be inaccurate, causing the Adviser to make different investment decisions than it may have made with more complete information. These private companies and their financial information will not be subject to the Sarbanes-Oxley Act and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments.
Our investments in securities or assets of publicly-traded companies are subject to the risks inherent in investing in public securities.
We may invest a portion of our portfolio in publicly-traded assets. For example, it is not expected that we will be able to negotiate additional financial covenants or other contractual rights, which we might otherwise be able to obtain in making privately negotiated investments. In addition, by investing in publicly-traded securities or assets, we will be subject to U.S. federal and state securities laws, as well as non-U.S. securities laws, that may, among other things, restrict or prohibit our ability to make or sell an investment. Moreover, we may not have the same access to information in connection with investments in public securities, either when investigating a potential investment or after making an investment, as compared to privately negotiated investments. Furthermore, we may be limited in its ability to make investments and to sell existing investments in public securities because the Firm may be deemed to have material, non-public information regarding the issuers of those securities or as a result of other internal policies. The inability to sell public securities in these circumstances could materially adversely affect our investment results. In addition, an investment may be sold by us to a public company where the consideration received is a combination of cash and stock of the public company, which may, depending on the securities laws of the relevant jurisdiction, be subject to lock-up periods.
A lack of liquidity in certain of our investments may adversely affect our business.
We intend to invest in certain companies whose securities are not publicly-traded or actively traded on the secondary market, and whose securities are subject to legal and other restrictions on resale or will otherwise be less liquid than publicly-traded securities. The illiquidity of certain of our investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. The reduced liquidity of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.
Our investments may include original issue discount and payment-in-kind instruments.
To the extent that we invest in original issue discount or payment-in-kind (“PIK”) instruments and the accretion of original issue discount or PIK interest income constitutes a portion of our income, we will be
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exposed to risks associated with the requirement to include such non-cash income in taxable and accounting income prior to receipt of cash, including the following:
| • | the higher interest rates on PIK instruments reflect the payment deferral and increased credit risk associated with these instruments, and PIK instruments generally represent a significantly higher credit risk than coupon loans; |
| • | original issue discount and PIK instruments may have unreliable valuations because the accruals require judgments about collectability of the deferred payments and the value of any associated collateral; |
| • | an election to defer PIK interest payments by adding them to the principal on such instruments increases our future investment income which increases our net assets and, as such, increases the Adviser’s future base management fees which, thus, increases the Adviser’s future income incentive fees at a compounding rate; |
| • | market prices of PIK instruments and other zero coupon instruments are affected to a greater extent by interest rate changes, and may be more volatile than instruments that pay interest periodically in cash. While PIK instruments are usually less volatile than zero coupon debt instruments, PIK instruments are generally more volatile than cash pay securities; |
| • | the deferral of PIK interest on an instrument increases the loan-to-value ratio, which is a measure of the riskiness of a loan, with respect to such instrument; |
| • | even if the conditions for income accrual under accounting principles generally accepted in the United States (“GAAP”) are satisfied, a borrower could still default when actual payment is due upon the maturity of such loan; |
| • | the required recognition of original issue discount or PIK interest for U.S. federal income tax purposes may have a negative impact on liquidity, as it represents a non-cash component of our investment company taxable income that may require cash distributions to shareholders in order to maintain our ability to be subject to tax as a RIC; and |
| • | original issue discount may create a risk of non-refundable cash payments to the Adviser based on non-cash accruals that may never be realized. |
We may use a wide range of investment techniques that could expose us to a diverse range of risks.
The Adviser may employ investment techniques or invest in instruments that it believes will help achieve our investment objectives, whether or not such investment techniques or instruments are specifically described herein, so long as such investments are consistent with our investment strategies and objectives and subject to applicable law. Such investment techniques or instruments may not be thoroughly tested in the market before being employed and may have operational or theoretical shortcomings which could result in unsuccessful investments and, ultimately, losses to us. In addition, any such investment technique or instrument may be more speculative than other investment techniques or instruments specifically described herein and may involve material and unanticipated risks. There can be no assurance that the Adviser will be successful in implementing any such investment technique. Furthermore, the diversification and type of investments may differ substantially from our prior investments.
We may enter into a TRS agreement that exposes us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
A total return swap (“TRS”) is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the assets underlying the TRS, which may include a specified security, basket of securities or securities indices during a specified period, in return for periodic payments based on a fixed or variable interest rate. A TRS effectively adds leverage to a portfolio by providing investment
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exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Because of the unique structure of a TRS, a TRS often offers lower financing costs than are offered through more traditional borrowing arrangements.
A TRS is subject to market risk, liquidity risk and risk of imperfect correlation between the value of the TRS and the loans underlying the TRS. In addition, we may incur certain costs in connection with the TRS that could in the aggregate be significant. A TRS is also subject to the risk that a counterparty will default on its payment obligations thereunder or that we will not be able to meet our obligations to the counterparty.
We may enter into repurchase agreements or reverse repurchase agreements.
Subject to our investment objectives and policies, we may invest in repurchase agreements as a buyer for investment purposes. Repurchase agreements typically involve the acquisition by the Fund of debt securities from a selling financial institution such as a bank, savings and loan association or broker-dealer. The agreement provides that the Fund will sell the securities back to the institution at a fixed time in the future for the purchase price plus premium (which often reflects the interests). The Fund does not bear the risk of a decline in the value of the underlying security unless the seller defaults under its repurchase obligation. In the event of the bankruptcy or other default of a seller of a repurchase agreement, the Fund could experience both delays in liquidating the underlying securities and losses, including (1) possible decline in the value of the underlying security during the period in which the Fund seeks to enforce its rights thereto; (2) possible lack of access to income on the underlying security during this period; and (3) expenses of enforcing its rights. In addition, as described above, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Fund generally will seek to liquidate such collateral. However, the exercise of the Fund’s right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Fund could suffer a loss.
Subject to our investment objectives and policies, we invest in repurchase agreements as a seller, also knowns as a “reverse repurchase agreement.” The Fund’s use of reverse repurchase agreements involves many of the same risks involved in the Fund’s use of leverage, as the proceeds from reverse repurchase agreements generally will be invested in additional securities. There is a risk that the market value of the securities acquired in the reverse repurchase agreement may decline below the price of the securities that the Fund has sold but remains obligated to repurchase. If the buyer of securities under a reverse repurchase agreement were to file for bankruptcy or experiences insolvency, the Fund may be adversely affected. Also, in entering into reverse repurchase agreements, the Fund would bear the risk of loss to the extent that the proceeds of the reverse repurchase agreement are less than the value of the underlying securities. In addition, due to the interest costs associated with reverse repurchase agreements transactions, the Fund’s NAV will decline, and, in some cases, the Fund may be worse off than if it had not used such instruments.
We may enter into securities lending agreements.
We may from time to time make secured loans of our marginable securities to brokers, dealers and other financial institutions if our asset coverage, as defined in the 1940 Act, would at least equal 150% immediately after each such loan. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. However, such loans will be made only to brokers and other financial institutions that are believed by the Adviser to be of high credit standing. Securities loans are made to broker-dealers pursuant to agreements requiring that loans be continuously secured by collateral consisting of U.S. government securities, cash or cash equivalents (e.g., negotiable certificates of deposit, bankers’ acceptances or letters of credit) maintained on a daily mark-to-market basis in an amount at least equal at all times to the market value of the securities lent. If the Fund enters into a securities lending arrangement, the Adviser, as part of its responsibilities under the Advisory
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Agreement, will invest the Fund’s cash collateral in accordance with the Fund’s investment objectives and strategies. The Fund will pay the borrower of the securities a fee based on the amount of the cash collateral posted in connection with the securities lending program. The borrower will pay to the Fund, as the lender, an amount equal to any dividends or interest received on the securities lent.
The Fund may invest the cash collateral received only in accordance with its investment objectives, subject to the Fund’s agreement with the borrower of the securities. In the case of cash collateral, the Fund expects to pay a rebate to the borrower. The reinvestment of cash collateral will result in a form of effective leverage for the Fund.
Although voting rights or rights to consent with respect to the loaned securities pass to the borrower, the Fund, as the lender, will retain the right to call the loans and obtain the return of the securities loaned at any time on reasonable notice, and it will do so in order that the securities may be voted by the Fund if the holders of such securities are asked to vote upon or consent to matters materially affecting the investment. The Fund may also call such loans in order to sell the securities involved. When engaged in securities lending, the Fund’s performance will continue to reflect changes in the value of the securities loaned and will also reflect the receipt of interest through investment of cash collateral by the Fund in permissible investments.
We may from time to time enter into credit default swaps or other derivative transactions which expose us to certain risks, including credit risk, market risk, liquidity risk and other risks similar to those associated with the use of leverage.
We may from time to time enter into credit default swaps or other derivative transactions that seek to modify or replace the investment performance of a particular reference security or other asset. These transactions are typically individually negotiated, non-standardized agreements between two parties to exchange payments, with payments generally calculated by reference to a notional amount or quantity. Swap contracts and similar derivative contracts are not traded on exchanges; rather, banks and dealers act as principals in these markets. These investments may present risks in excess of those resulting from the referenced security or other asset. Because these transactions are not an acquisition of the referenced security or other asset itself, the investor has no right directly to enforce compliance with the terms of the referenced security or other asset and has no voting or other consensual rights of ownership with respect to the referenced security or other asset. In the event of insolvency of a counterparty, we will be treated as a general creditor of the counterparty and will have no claim of title with respect to the referenced security or other asset.
A credit default swap is a contract in which one party buys or sells protection against a credit event with respect to an issuer, such as an issuer’s failure to make timely payments of interest or principal on its debt obligations, bankruptcy or restructuring during a specified period. Generally, if we sell credit protection using a credit default swap, we will receive fixed payments from the swap counterparty and if a credit event occurs with respect to the applicable issuer, we will pay the swap counterparty par for the issuer’s defaulted debt securities and the swap counterparty will deliver the defaulted debt securities to us. Generally, if we buy credit protection using a credit default swap, we will make fixed payments to the counterparty and if a credit event occurs with respect to the applicable issuer, we will deliver the issuer’s defaulted securities underlying the swap to the swap counterparty and the counterparty will pay us par for the defaulted securities. Alternatively, a credit default swap may be cash settled and the buyer of protection would receive the difference between the par value and the market value of the issuer’s defaulted debt securities from the seller of protection.
Credit default swaps are subject to the credit risk of the underlying issuer. If we are selling credit protection, there is a risk that we will not properly assess the risk of the underlying issuer, a credit event will occur and we will have to pay the counterparty. If we are buying credit protection, there is a risk that we will not properly assess the risk of the underlying issuer, no credit event will occur and we will receive no benefit for the premium paid.
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A derivative transaction is also subject to the risk that a counterparty will default on its payment obligations thereunder or that we will not be able to meet our obligations to the counterparty. In some cases, we may post collateral to secure our obligations to the counterparty, and we may be required to post additional collateral upon the occurrence of certain events such as a decrease in the value of the reference security or other asset. In some cases, the counterparty may not collateralize any of its obligations to us. Derivative investments effectively add leverage to a portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. In addition to the risks described above, such arrangements are subject to risks similar to those associated with the use of leverage.
Certain categories of credit default swaps are subject to mandatory clearing, and more categories may be subject to mandatory clearing in the future. The counterparty risk for cleared derivatives is generally lower than for uncleared over-the-counter derivative transactions because generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing house for performance of financial obligations. However, there can be no assurance that a clearing house, or its members, will satisfy the clearing house’s obligations (including, but not limited to, financial obligations and legal obligations to segregate margins collected by the clearing house) to the Fund. Counterparty risk with respect to certain exchange-traded and over-the-counter derivatives may be further complicated by recently enacted U.S. financial reform legislation. See “Risk Factors—Risks Related to Debt Financing.”
We may acquire various financial instruments for purposes of “hedging” or reducing our risks, which may be costly and ineffective and could reduce our cash available for distribution to our shareholders.
We may seek to hedge against interest rate and currency exchange rate fluctuations and credit risk by using financial instruments such as futures, options, swaps and forward contracts, subject to the requirements of the 1940 Act. These financial instruments may be purchased on exchanges or may be individually negotiated and traded in over-the-counter markets. Use of such financial instruments for hedging purposes may present significant risks, including the risk of loss of the amounts invested. Defaults by the other party to a hedging transaction can result in losses in the hedging transaction. Hedging activities also involve the risk of an imperfect correlation between the hedging instrument and the asset being hedged, which could result in losses both on the hedging transaction and on the instrument being hedged. Use of hedging activities may not prevent significant losses and could increase our losses. Further, hedging transactions may reduce cash available to pay distributions to our shareholders.
Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments, net of prepayment fees, could negatively impact our return on equity.
Technological innovations and industry disruptions may negatively impact us.
Current trends in the market generally have been toward disrupting a traditional approach to an industry with technological innovation, and multiple young companies have been successful where this trend toward disruption in markets and market practices has been critical to their success. In this period of rapid technological and commercial innovation, new businesses and approaches may be created that will compete with the Fund and/
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or its investments or alter the market practices the Fund’s strategy has been designed to function within and depend on for investment returns. Any of these new approaches could damage the Fund’s investments, significantly disrupt the market in which it operates and subject it to increased competition, which could materially and adversely affect its business, financial condition and results of investments.
We may invest through various joint ventures.
From time to time, the Fund may hold a portion of its investments through partnerships, joint ventures, securitization vehicles or other entities with third-party investors (collectively, “joint ventures”). Joint venture investments involve various risks, including the risk that the Fund will not be able to implement investment decisions or exit strategies because of limitations on the Fund’s control under applicable agreements with joint venture partners, the risk that a joint venture partner may become bankrupt or may at any time have economic or business interests or goals that are inconsistent with those of the Fund, the risk that a joint venture partner may be in a position to take action contrary to the Fund’s objectives, the risk of liability based upon the actions of a joint venture partner and the risk of disputes or litigation with such partner and the inability to enforce fully all rights (or the incurrence of additional risk in connection with enforcement of rights) one partner may have against the other, including in connection with foreclosure on partner loans, because of risks arising under state law. In addition, the Fund may, in certain cases, be liable for actions of its joint venture partners. The joint venture’s in which we participate may sometimes be allocated investment opportunities that might have otherwise gone entirely to the Fund, which may reduce our return on equity. Additionally, our joint venture investments may be held on an unconsolidated basis and at times may be highly leveraged. Such leverage would not count toward the investment limits imposed on us by the 1940 Act.
Syndication of Co-Investments.
From time to time, the Fund may make an investment with the expectation of offering a portion of its interests therein as a co-investment opportunity to third-party investors. There can be no assurance that the Fund will be successful in syndicating any such co-investment, in whole or in part, that the closing of such co-investment will be consummated in a timely manner, that any syndication will take place on terms and conditions that will be preferable for the Fund or that expenses incurred by the Fund with respect to any such syndication will not be substantial. In the event that the Fund is not successful in syndicating any such co-investment, in whole or in part, the Fund may consequently hold a greater concentration and have more exposure in the related investment than initially was intended, which could make the Fund more susceptible to fluctuations in value resulting from adverse economic and/or business conditions with respect thereto. Moreover, an investment by the Fund that is not syndicated to co-investors as originally anticipated could significantly reduce the Fund’s overall investment returns.
Risks Related to the Adviser and Its Affiliates; Conflicts of Interest
The Adviser and its affiliates, including our officers and some of our Trustees, face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our shareholders.
The Adviser and its affiliates receive substantial fees from us in return for their services, and these fees could influence the advice provided to us. We pay to the Adviser an incentive fee that is based on the performance of our portfolio and an annual base management fee that is based on the value of our net assets as of the beginning of the first business day of the month. Because the incentive fee is based on the performance of our portfolio, the Adviser may be incentivized to make investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee is determined may also encourage the Adviser to use leverage to increase the return on our investments. Our compensation arrangements could therefore result in our making riskier or more speculative investments than would otherwise be the case. This could result in higher investment losses, particularly during cyclical economic downturns. See “Certain Relationships and Related Party Transactions.”
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We may be obligated to pay the Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.
Our Advisory Agreement entitles the Adviser to receive Pre-Incentive Fee Net Investment Income Returns regardless of any capital losses. In such case, we may be required to pay the Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.
In addition, any Pre-Incentive Fee Net Investment Income Returns may be computed and paid on income that may include interest that has been accrued but not yet received. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. The Adviser is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received.
The Fund has applied for exemptive relief from the SEC to permit the Fund to pay the Adviser all or a portion of its fees in shares of Common Shares in lieu of cash, which may not be granted.
The Fund has applied for exemptive relief from the SEC that, if granted, will permit the Fund to pay the Adviser all or a portion of its management fees and incentive fees in shares of Common Shares in lieu of paying the Adviser an equivalent amount of such fees in cash. There is no assurance that the relief will be granted. Until the relief is granted, the Adviser may use all or a portion of the cash it receives for management and incentive fees to purchase shares of Common Shares, which may dilute third party interests in the Fund.
There may be conflicts of interest related to obligations that the Adviser’s senior management and Investment Team have to Other Clients.
The members of the senior management and Investment Team of the Adviser serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by the same personnel. In serving in these multiple capacities, they may have obligations to Other Clients or investors in those entities, the fulfillment of which may not be in our best interests or in the best interest of our shareholders. Our investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. In particular, we will rely on the Adviser to manage our day-to-day activities and to implement our investment strategy. The Adviser and certain of its affiliates are presently, and plan in the future to continue to be, involved with activities that are unrelated to us. As a result of these activities, the Adviser, its officers and employees and certain of its affiliates will have conflicts of interest in allocating their time between us and other activities in which they are or may become involved, including the management of its affiliated equipment funds. The Adviser and its officers and employees will devote only as much of its or their time to our business as the Adviser and its officers and employees, in their judgment, determine is reasonably required, which may be substantially less than their full time.
We rely, in part, on the Adviser to assist with identifying investment opportunities and making investment recommendations to the Adviser. The Adviser and its affiliates are not restricted from forming additional investment funds, entering into other investment advisory relationships or engaging in other business activities. These activities could be viewed as creating a conflict of interest in that the time and effort of the members of the Adviser, its affiliates and their officers and employees will not be devoted exclusively to our business, but will be allocated between us and such other business activities of the Adviser and its affiliates in a manner that the Adviser deems necessary and appropriate. See “Certain Relationships and Related Party Transactions.”
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The time and resources that individuals employed by the Adviser devote to us may be diverted and we may face additional competition due to the fact that individuals employed by the Adviser are not prohibited from raising money for or managing other entities that make the same types of investments that we target.
The Adviser and individuals employed by the Adviser are generally not prohibited from raising capital for and managing other investment entities that make the same types of investments as those we target. As a result, the time and resources that these individuals may devote to us may be diverted. In addition, we may compete with any such investment entity for the same investors and investment opportunities. We may participate in certain transactions originated by the Adviser or its affiliates under our exemptive relief from the SEC that allows us to engage in co-investment transactions with the Adviser and its affiliates, subject to certain terms and conditions. However, while the terms of the exemptive relief require that the Adviser will be given the opportunity to cause us to participate in certain transactions originated by affiliates of the Adviser, the Adviser may determine that we not participate in those transactions and for certain other transactions (as set forth in guidelines approved by the Board of Trustees) the Adviser may not have the opportunity to cause us to participate. Affiliates of the Adviser, whose primary business includes the origination of investments or investing in non-originated assets, engage in investment advisory business with accounts that compete with us. See “Certain Relationships and Related Party Transactions.”
Our shares may be purchased by the Adviser or its affiliates.
Affiliates of the Adviser have purchased and the Adviser and its affiliates in the future expect to purchase our shares. The Adviser and its affiliates will not acquire any shares with the intention to resell or re-distribute such shares. The purchase of shares by the Adviser and its affiliates could create certain risks, including, but not limited to, the following:
| • | the Adviser and its affiliates may have an interest in disposing of our assets at an earlier date so as to recover their investment in our shares; and |
| • | substantial purchases of shares by the Adviser and its affiliates may limit the Adviser’s ability to fulfill any financial obligations that it may have to us or incurred on our behalf. |
The Adviser relies on key personnel, the loss of any of whom could impair its ability to successfully manage us.
Our future success depends, to a significant extent, on the continued services of the officers and employees of the Adviser or its affiliates. The loss of services of one or more members of the Adviser’s management team, including members of Blackstone Credit’s investment committee (the “Investment Committee”), could adversely affect our financial condition, business and results of operations. The Adviser does not have an employment agreement with any of these key personnel and we cannot guarantee that all, or any particular one, will remain affiliated with us and/or the Adviser. Further, we do not intend to separately maintain key person life insurance on any of these individuals.
The compensation we pay to the Adviser will be determined without independent assessment on our behalf, and these terms may be less advantageous to us than if such terms had been the subject of arm’s-length negotiations.
The Advisory Agreement will not be entered into on an arm’s-length basis with an unaffiliated third party. As a result, the form and amount of compensation we pay the Adviser may be less favorable to us than they might have been had an investment advisory agreement been entered into through arm’s-length transactions with an unaffiliated third party.
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The Intermediary Manager’s influence on this offer gives it the ability to increase the fees payable to the Adviser.
The Adviser is paid a base management fee calculated as a percentage of our net assets and unrelated to net income or any other performance base or measure. The Intermediary Manager, an affiliate of the Adviser will be incentivized to raise more proceeds in this offering to increase our net assets, even if it would be difficult for us to efficiently deploy additional capital, which in turn would increase the base management fee payable to the Adviser.
There may be trademark risk, as we do not own the Blackstone name.
We do not own the Blackstone name, but we are permitted to use it as part of our corporate name pursuant to the Advisory Agreement. Use of the name by other parties or the termination of the Advisory Agreement may harm our business.
Risks Related to Business Development Companies
The requirement that we invest a sufficient portion of our assets in Qualifying Assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in Qualifying Assets could result in our failure to maintain our status as a BDC.
Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in section 55(a) of the 1940 Act described as “qualifying” assets, (“Qualifying Assets”) unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are Qualifying Assets. Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not Qualifying Assets. Conversely, if we fail to invest a sufficient portion of our assets in Qualifying Assets, we could lose our status as a BDC, which would have a material adverse effect on our business, financial condition and results of operations. Similarly, these rules could prevent us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us to dispose of investments at an inopportune time to comply with the 1940 Act. If we were forced to sell non-qualifying investments in the portfolio for compliance purposes, the proceeds from such sale could be significantly less than the current value of such investments.
Failure to maintain our status as a BDC would reduce our operating flexibility.
If we do not remain a BDC, we might be regulated as a registered closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility.
Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.
As a result of the annual distribution requirement to qualify as a RIC, we may need to periodically access the capital markets to raise cash to fund new investments. We may issue “senior securities,” as defined under the 1940 Act, including borrowing money from banks or other financial institutions only in amounts such that our asset coverage meets the threshold set forth in the 1940 Act immediately after each such issuance. The 1940 Act currently requires an asset coverage of at least 150% (i.e., the amount of debt may not exceed two-thirds of the value of our assets). Our ability to issue different types of securities is also limited. Compliance with these requirements may unfavorably limit our investment opportunities and reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend. As a BDC, therefore, we intend to continuously issue equity at a rate more frequent than our privately-owned competitors, which may lead to greater shareholder dilution.
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We expect to borrow for investment purposes. If the value of our assets declines, we may be unable to satisfy the asset coverage test, which would prohibit us from paying distributions and could prevent us from qualifying as a RIC. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales may be disadvantageous.
Under the 1940 Act, we generally are prohibited from issuing or selling our shares at a price per share, after deducting selling commissions, that is below our NAV per share, which may be a disadvantage as compared with other public companies. We may, however, sell our shares, or warrants, options or rights to acquire our shares, at a price below the current NAV of our shares if our Board of Trustees, including our independent Trustees, determine that such sale is in our best interests and the best interests of our shareholders, and our shareholders, as well as those shareholders that are not affiliated with us, approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Trustees, closely approximates the fair value of such securities.
Our ability to enter into transactions with our affiliates is restricted.
We are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates (including portfolio companies of Other Clients) without the prior approval of a majority of the independent members of our Board of Trustees and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act and generally we will be prohibited from buying or selling any securities from or to such affiliate, absent the prior approval of our Board of Trustees. However, we may under certain circumstances purchase any such affiliate’s loans or securities in the secondary market, which could create a conflict for the Adviser between our interests and the interests of such affiliate, in that the ability of the Adviser to recommend actions in our best interest may be limited. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company (whether at the same or closely related times), without prior approval of our Board of Trustees and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions (including certain co-investments) with such persons, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers, Trustees, investment advisers, sub-advisers or their affiliates. As a result of these restrictions, we may be prohibited from buying or selling any security from or to any fund or any portfolio company of a fund managed by the Adviser, or entering into joint arrangements such as certain co-investments with these companies or funds without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.
We have obtained exemptive relief from the SEC that allows us to engage in co-investment transactions with the Adviser and its affiliates, subject to certain terms and conditions. However, while the terms of the exemptive relief require that the Adviser will be given the opportunity to cause us to participate in certain transactions originated by affiliates of the Adviser, the Adviser may determine that we not participate in those transactions and for certain other transactions (as set forth in guidelines approved by the Board of Trustees) the Adviser may not have the opportunity to cause us to participate.
We are uncertain of our sources for funding our future capital needs; if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.
The net proceeds from the sale of shares will be used for our investment opportunities, operating expenses and for payment of various fees and expenses such as base management fees, incentive fees and other expenses. Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require debt or equity financing to operate. Accordingly, in the event that we develop a need for additional capital in the
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future for investments or for any other reason, these sources of funding may not be available to us. Consequently, if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected. As a result, we would be less able to create and maintain a broad portfolio of investments and achieve our investment objective, which may negatively impact our results of operations and reduce our ability to make distributions to our shareholders.
We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.
We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Under the 1940 Act, a “diversified” investment company is required to invest at least 75% of the value of its total assets in cash and cash items, government securities, securities of other investment companies and other securities limited in respect of any one issuer to an amount not greater than 5% of the value of the total assets of such company and no more than 10% of the outstanding voting securities of such issuer. As a non-diversified investment company, we are not subject to this requirement. To the extent that we assume large positions in the securities of a small number of issuers, or within a particular industry, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company or to a general downturn in the economy. However, we will be subject to the diversification requirements applicable to RICs under Subchapter M of the Code.
Risks Related to Debt Financing
When we use leverage, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us. Leverage may also adversely affect the return on our assets, reduce cash available for distribution to our shareholders and result in losses.
The use of borrowings, also known as leverage, increases the volatility of investments by magnifying the potential for loss on invested equity capital. Furthermore, the Fund may add leverage to its portfolio through the issuance of preferred shares. Currently, the Fund has no intention to issue preferred shares. The use of leverage involves increased risk, including increased variability of the Fund’s net income, distributions and NAV in relation to market changes. If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not used leverage. Such a decline could negatively affect our ability to make distributions to our shareholders. In addition, our shareholders bear the burden of any increase in our expenses as a result of our use of leverage, including interest expenses and any increase in the management or incentive fees payable to the Adviser. The Fund’s leverage strategy may not work as planned or achieve its goal.
We use and expect to continue to use leverage to finance our investments. The amount of leverage that we employ will depend on the Adviser’s and our Board of Trustees’ assessment of market and other factors at the time of any proposed borrowing. There can be no assurance that leveraged financing will be available to us on favorable terms or at all. However, to the extent that we use leverage to finance our assets, our financing costs will reduce cash available for distributions to shareholders. Moreover, we may not be able to meet our financing obligations and, to the extent that we cannot, we risk the loss of some or all of our assets to liquidation or sale to satisfy the obligations. In such an event, we may be forced to sell assets at significantly depressed prices due to market conditions or otherwise, which may result in losses.
As a BDC, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred shares that we may issue in the future, of at least 150%. If this ratio were to fall below 150%, we could not incur additional debt and could be required to
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sell a portion of our investments to repay some debt when it is disadvantageous to do so. This could have a material adverse effect on our operations and investment activities. Moreover, our ability to make distributions to you may be significantly restricted or we may not be able to make any such distributions whatsoever. The amount of leverage that we will employ will be subject to oversight by our Board of Trustees, a majority of whom are independent Trustees with no material interests in such transactions.
The Fund may also into reverse repurchase. Transactions under such agreements constitute leverage. When the Fund enters into a reverse repurchase agreement, any fluctuations in the market value of either the securities transferred to another party or the securities in which the proceeds may be invested would affect the market value of the Fund’s assets. As a result, the use of such leverage transactions may increase fluctuations in the market value of the Fund’s assets compared to what would occur without the use of such transactions. Because reverse repurchase agreements may be considered to be the practical equivalent of borrowing funds, they constitute a form of leverage. If the Fund reinvests the proceeds of a reverse repurchase agreement at a rate lower than the cost of the agreement, transacting under such agreement will lower the Fund’s yield.
Although leverage has the potential to enhance overall returns that exceed the Fund’s cost of funds, they will further diminish returns (or increase losses on capital) to the extent overall returns are less than the Fund’s cost of funds. In addition, borrowings and reverse repurchases agreements or similar arrangements in which the Fund may engage may be secured by the shareholders’ investments as well as by the Fund’s assets and the documentation relating to such transactions may provide that during the continuance of a default under such arrangement, the interests of the holders of Common Shares may be subordinated to the interests of the Fund’s lenders or debtholders.
Our credit facilities and unsecured notes impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a regulated investment company. A failure to renew our facilities or to add new or replacement debt facilities or issue additional debt securities or other evidences of indebtedness could have a material adverse effect on our business, financial condition or results of operations.
The following table illustrates the effect of leverage on the total returns of Common Shares created by our use of borrowings at the weighted average stated interest rate of 2.35% as of June 30, 2021, together with (a) our total value of net assets as of June 30, 2021; (b) our approximately $4.8 billion in aggregate principal amount of indebtedness outstanding as of June 30, 2021 and (c) hypothetical annual returns on our portfolio of minus 10% to plus 10%. Actual expenses associated with borrowings or preferred shares, if issued, may vary frequently and may be significantly higher or lower than the rate used for the table below.
| Assumed Return on Portfolio (Net of Expenses)(1) |
-10.00 | % | -5.00 | % | — | % | 5.00 | % | 10.00 | % | ||||||||||
| Corresponding Return to Common Shareholders(2) |
-25.08 | % | -13.64 | % | -2.20 | % | 9.25 | % | 20.69 | % |
| (1) | The assumed portfolio return is required by SEC regulations and is not a prediction of, and does not represent, our projected or actual performance. Actual returns may be greater or less than those appearing in the table. Pursuant to SEC regulations, this table is calculated as of June 30, 2021. As a result, it has not been updated to take into account any changes in assets or leverage since June 30, 2021. |
| (2) | In order to compute the “Corresponding Return to Common Shareholders,” the “Assumed Return on Portfolio” is multiplied by the total value of our assets at June 30, 2021 to obtain an assumed return to us. From this amount, the interest expense (calculated by multiplying the weighted average stated interest rate of 2.35% by the approximately $4.8 billion of principal debt outstanding) is subtracted to determine the return available to shareholders. The return available to shareholders is then divided by the total value of our net assets as of the end of the period ($4.9 billion) to determine the “Corresponding Return to Common Shareholders.” In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our June 30, 2021 total assets of at least 1.00%. |
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We may default under our credit facilities.
In the event we default under a credit facility or other borrowings, our business could be adversely affected as we may be forced to sell a portion of our investments quickly and prematurely at what may be disadvantageous prices to us in order to meet our outstanding payment obligations and/or support working capital requirements under such borrowing facility, any of which would have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, following any such default, the agent for the lenders under such borrowing facility could assume control of the disposition of any or all of our assets, including the selection of such assets to be disposed and the timing of such disposition, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our credit ratings may not reflect all risks of an investment in our debt securities.
Our credit ratings are an assessment by third parties of our ability to pay our obligations. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of our debt securities. Our credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed above on the market value of or trading market for the publicly issued debt securities.
The Notes present other risks to common shareholders, including the possibility that such notes could discourage an acquisition of us by a third party.
Certain provisions of the 2024 Notes, 2021-1 Notes and any other notes issued by us (collectively, the “Notes”) could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of the Notes may have the right, at their option, to require us to repurchase all of their notes or any portion of the principal amount of such Notes. These provisions could discourage an acquisition of us by a third party.
Failure to refinance our existing Notes could have a material adverse effect on our results of operations and financial position.
The Notes issued by us will mature at various dates in the future. If we are unable to refinance the Notes or find a new source of borrowing on acceptable terms, we will be required to pay down the amounts outstanding at maturity through one or more of the following: (1) borrowing additional funds under our then current credit facility, (2) issuance of additional common shares or (3) possible liquidation of some or all of our loans and other assets, any of which could have a material adverse effect on our results of operations and financial position.
Provisions in a credit facility may limit our investment discretion.
A credit facility may be backed by all or a portion of our loans and securities on which the lenders will have a security interest. We may pledge up to 100% of our assets and may grant a security interest in all of our assets under the terms of any debt instrument we enter into with lenders. We expect that any security interests we grant will be set forth in a pledge and security agreement and evidenced by the filing of financing statements by the agent for the lenders. In addition, we expect that the custodian for our securities serving as collateral for such loan would include in its electronic systems notices indicating the existence of such security interests and, following notice of occurrence of an event of default, if any, and during its continuance, will only accept transfer instructions with respect to any such securities from the lender or its designee. If we were to default under the terms of any debt instrument, the agent for the applicable lenders would be able to assume control of the timing of disposition of any or all of our assets securing such debt, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, any security interests and/or negative covenants required by a credit facility may limit our ability to create liens on assets to secure additional debt and may make it difficult for us to restructure or
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refinance indebtedness at or prior to maturity or obtain additional debt or equity financing. In addition, if our borrowing base under a credit facility were to decrease, we may be required to secure additional assets in an amount sufficient to cure any borrowing base deficiency. In the event that all of our assets are secured at the time of such a borrowing base deficiency, we could be required to repay advances under a credit facility or make deposits to a collection account, either of which could have a material adverse impact on our ability to fund future investments and to make distributions.
In addition, we may be subject to limitations as to how borrowed funds may be used, which may include restrictions on geographic and industry concentrations, loan size, payment frequency and status, average life, collateral interests and investment ratings, as well as regulatory restrictions on leverage which may affect the amount of funding that may be obtained. There may also be certain requirements relating to portfolio performance, including required minimum portfolio yield and limitations on delinquencies and charge-offs, a violation of which could limit further advances and, in some cases, result in an event of default. An event of default under a credit facility could result in an accelerated maturity date for all amounts outstanding thereunder, which could have a material adverse effect on our business and financial condition. This could reduce our liquidity and cash flow and impair our ability to grow our business.
Segregation and asset coverage requirements may limit our investment discretion.
Certain portfolio management techniques, such as engaging in reverse repurchase agreements or firm commitments may be considered senior securities unless appropriate steps are taken to segregate the Fund’s assets or otherwise cover its obligations. When employing these techniques, the Fund may segregate liquid assets, enter into offsetting transactions or own positions covering its obligations. To the extent the Fund covers its commitment under such a portfolio management technique, such instrument will not be considered a senior security for the purposes of the 1940 Act. The Fund may cover such transactions using other methods currently or in the future permitted under the 1940 Act, the rules and regulations thereunder, or orders issued by the SEC thereunder. For these purposes, interpretations and guidance provided by the SEC staff may be taken into account when deemed appropriate by the Fund. These segregation and coverage requirements could result in the Fund maintaining securities positions that it would otherwise liquidate, segregating assets at a time when it might be disadvantageous to do so or otherwise restricting portfolio management. Such segregation and cover requirements will not limit or offset losses on related positions. In connection with the adoption of Rule 18f-4 of the 1940 Act, the SEC eliminated the asset segregation framework arising from prior SEC guidance for covering positions in derivatives and certain financial instruments. Among other things, Rule 18f-4 limits a fund’s derivatives exposure through a value-at-risk test and requires the adoption and implementation of a derivatives risk management program for certain derivatives users. Subject to certain conditions, limited derivatives users (as defined in Rule 18f-4), such as the Fund, however, would not be subject to the full requirements of Rule 18f-4. The Fund will comply with the requirements of the new rule on or before the SEC’s compliance date in 2022.
Changes in interest rates may affect our cost of capital and net investment income.
Since we intend to use debt to finance a portion of our investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates when we have debt outstanding, our cost of funds will increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. Also, we have limited experience in entering into hedging transactions, and we will initially have to purchase or develop such expertise.
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A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase in the amount of incentive fees payable to the Adviser with respect to pre-incentive fee net investment income.
We have formed, and may form, one or more other CLOs, which may subject us to certain structured financing risks.
To finance investments, we have securitized certain of our secured loans or other investments, including through the formation of one or more CLOs, while retaining all or most of the exposure to the performance of these investments, and may form one or more other CLOs in the future. This process involves contributing a pool of assets to a special purpose entity, and selling debt interests in such entity on a non-recourse or limited-recourse basis to purchasers. It is possible that an interest in any such CLO held by us may be considered a “non-qualifying” portfolio investment for purposes of the 1940 Act.
In creating a CLO, we depend in part on distributions from the CLO’s assets out of its earnings and cash flows to enable us to make distributions to shareholders. The ability of a CLO to make distributions will be subject to various limitations, including the terms and covenants of the debt it issues. Also, a CLO may take actions that delay distributions in order to preserve ratings and to keep the cost of present and future financings lower or the CLO may be obligated to retain cash or other assets to satisfy over-collateralization requirements commonly provided for holders of the CLO’s debt, which could impact our ability to receive distributions from the CLO. If we do not receive cash flow from any such CLO that is necessary to satisfy the annual distribution requirement for maintaining RIC status, and we are unable to obtain cash from other sources necessary to satisfy this requirement, we may not maintain our qualification as a RIC, which would have a material adverse effect on an investment in the shares.
In addition, a decline in the credit quality of loans in a CLO due to poor operating results of the relevant borrower, declines in the value of loan collateral or increases in defaults, among other things, may force a CLO to sell certain assets at a loss, reducing their earnings and, in turn, cash potentially available for distribution to us for distribution to shareholders. To the extent that any losses are incurred by the CLO in respect of any collateral, such losses will be borne first by us as owner of equity interests in the CLO.
The manager for a CLO that we create may be the Fund, the Adviser or an affiliate, and such manager may be entitled to receive compensation for structuring and/or management services. To the extent the Adviser or an affiliate other than the Fund serves as manager and the Fund is obligated to compensate the Adviser or the affiliate for such services, we, the Adviser or the affiliate will implement offsetting arrangements to assure that we, and indirectly, our shareholders, pay no additional management fees to the Adviser or the affiliate in connection therewith. To the extent we serve as manager, we will waive any right to receive fees for such services from the Fund (and indirectly its shareholders) or any affiliate.
Federal Income Tax Risks
We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy RIC distribution requirements.
To obtain and maintain RIC tax treatment under Subchapter M of the Code, we must, among other things, meet annual distribution, income source and quarterly asset diversification requirements. If we do not qualify for or maintain RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.
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We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as zero coupon securities, debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income 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 income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we may elect to amortize market discount and include such amounts in our taxable income in the current year, instead of upon disposition, as an election not to do so would limit our ability to deduct interest expenses for tax purposes.
Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our shareholders in order to satisfy the annual distribution requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the annual distribution requirement necessary to qualify for and maintain RIC tax treatment under Subchapter M of the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may not qualify for or maintain RIC tax treatment and thus we may become subject to corporate-level income tax.
Some of our investments may be subject to corporate-level income tax.
We may invest in certain debt and equity investments through taxable subsidiaries and the taxable income of these taxable subsidiaries will be subject to federal and state corporate income taxes. We may invest in certain foreign debt and equity investments which could be subject to foreign taxes (such as income tax, withholding and value added taxes).
Our portfolio investments may present special tax issues.
The Fund expects to invest in debt securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Investments in these types of instruments may present special tax issues for the Fund. U.S. federal income tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt obligations in a bankruptcy or workout context are taxable. These and other issues will be addressed by the Fund, to the extent necessary, to preserve its status as a RIC and to distribute sufficient income to not become subject to U.S. federal income tax.
Legislative or regulatory tax changes could adversely affect investors.
At any time, the federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be amended. Any of those new laws, regulations or interpretations may take effect retroactively and could adversely affect the taxation of us or our shareholders. Therefore, changes in tax laws, regulations or administrative interpretations or any amendments thereto could diminish the value of an investment in our shares or the value or the resale potential of our investments.
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Risks Related to an Investment in the Shares
We face risks associated with the deployment of our capital.
In light of the nature of our continuous offering as well as ongoing and periodic private offerings in relation to our investment strategy and the need to be able to deploy potentially large amounts of capital quickly to capitalize on potential investment opportunities, if we have difficulty identifying investments on attractive terms, there could be a delay between the time we receive net proceeds from the sale of shares of our Common Shares in this offering or any private offering and the time we invest the net proceeds. Our proportion of privately-negotiated investments may be lower than expected. We may also from time to time hold cash pending deployment into investments or have less than our targeted leverage, which cash or shortfall in target leverage may at times be significant, particularly at times when we are receiving high amounts of offering proceeds and/or times when there are few attractive investment opportunities. Such cash may be held in an account for the benefit of our shareholders that may be invested in money market accounts or other similar temporary investments, each of which are subject to the management fees.
In the event we are unable to find suitable investments such cash may be maintained for longer periods which would be dilutive to overall investment returns. This could cause a substantial delay in the time it takes for your investment to realize its full potential return and could adversely affect our ability to pay regular distributions of cash flow from operations to you. It is not anticipated that the temporary investment of such cash into money market accounts or other similar temporary investments pending deployment into investments will generate significant interest, and investors should understand that such low interest payments on the temporarily invested cash may adversely affect overall returns. In the event we fail to timely invest the net proceeds of sales of our Common Shares or do not deploy sufficient capital to meet our targeted leverage, our results of operations and financial condition may be adversely affected.
We may have difficulty sourcing investment opportunities.
We cannot assure investors that we will be able to locate a sufficient number of suitable investment opportunities to allow us to deploy all investments successfully. In addition, privately-negotiated investments in loans and illiquid securities of private companies require substantial due diligence and structuring, and we cannot assure investors that we will achieve our anticipated investment pace. As a result, investors will be unable to evaluate any future portfolio company investments prior to purchasing our shares. Additionally, our Adviser will select our investments subsequent to this offering, and our shareholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our shares. To the extent we are unable to deploy all investments, our investment income and, in turn, our results of operations, will likely be materially adversely affected.
We may have difficulty paying distributions and the tax character of any distributions is uncertain.
We generally intend to distribute substantially all of our available earnings annually by paying distributions on a monthly basis, as determined by the Board of Trustees in its discretion. We cannot assure investors that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this Registration Statement. Due to the asset coverage test applicable to us under the 1940 Act as a BDC, we may be limited in our ability to make distributions. In addition, if we enter into a credit facility or any other borrowing facility, for so long as such facility is outstanding, we anticipate that we may be required by its terms to use all payments of interest and principal that we receive from our current investments as well as any proceeds received from the sale of our current investments to repay amounts outstanding thereunder, which could adversely affect our ability to make distributions.
Furthermore, the tax treatment and characterization of our distributions may vary significantly from time to time due to the nature of our investments. The ultimate tax characterization of our distributions made during a
69
taxable year may not finally be determined until after the end of that taxable year. We may make distributions during a taxable year that exceed our investment company taxable income and net capital gains for that taxable year. In such a situation, the amount by which our total distributions exceed investment company taxable income and net capital gains generally would be treated as a return of capital up to the amount of a shareholder’s tax basis in the shares, with any amounts exceeding such tax basis treated as a gain from the sale or exchange of such shares. A return of capital generally is a return of a shareholder’s investment rather than a return of earnings or gains derived from our investment activities. Moreover, we may pay all or a substantial portion of our distributions from borrowings or sources other than cash flow from operations in anticipation of future cash flow, which could constitute a return of shareholders’ capital and will lower such shareholders’ tax basis in our shares, which may result in increased tax liability to shareholders when they sell such shares.
An investment in our shares will have limited liquidity.
Our shares constitute illiquid investments for which there is not, and will likely not be, a secondary market at any time prior to a public offering and listing of our shares on a national securities exchange. There can be no guarantee that we will conduct a public offering and list our shares on a national securities exchange. Investment in the Fund is suitable only for sophisticated investors and requires the financial ability and willingness to accept the high risks and lack of liquidity inherent in an investment in the Fund. Except in limited circumstances for legal or regulatory purposes, shareholders are not entitled to redeem their shares. Shareholders must be prepared to bear the economic risk of an investment in our shares for an extended period of time.
Certain investors will be subject to 1934 Act filing requirements.
Because our Common Shares will be registered under the 1934 Act, ownership information for any person who beneficially owns 5% or more of our Common Shares will have to be disclosed in a Schedule 13G or other filings with the SEC. Beneficial ownership for these purposes is determined in accordance with the rules of the SEC, and includes having voting or investment power over the securities. In some circumstances, our shareholders who choose to reinvest their dividends may see their percentage stake in the Fund increased to more than 5%, thus triggering this filing requirement. Each shareholder is responsible for determining their filing obligations and preparing the filings. In addition, our shareholders who hold more than 10% of a class of our shares may be subject to Section 16(b) of the 1934 Act, which recaptures for the benefit of the Fund profits from the purchase and sale of registered stock (and securities convertible or exchangeable into such registered stock) within a six-month period.
Special considerations for certain benefit plan investors.
We intend to conduct our affairs so that our assets should not be deemed to constitute “plan assets” under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and certain U.S. Department of Labor regulations promulgated thereunder, as modified by Section 3(42) of ERISA (the “Plan Asset Regulations”). In this regard, if any class of the Common Shares were not considered “publicly-offered securities” within the meaning of the Plan Asset Regulations, the Fund intends to prohibit “benefit plan investors” from acquiring Common Shares that are part of a class of Common Shares which are not considered “publicly-offered securities”. As of the date of this Prospectus, we believe all classes of Common Shares that are currently outstanding are “publicly-offered securities” for purposes of the Plan Asset Regulations.
If, notwithstanding our intent, the assets of the Fund were deemed to be “plan assets” of any shareholder that is a “benefit plan investor” under the Plan Asset Regulations, this would result, among other things, in (i) the application of the prudence and other fiduciary responsibility standards of ERISA to investments made by the Fund, and (ii) the possibility that certain transactions in which the Fund might seek to engage could constitute “prohibited transactions” under ERISA and the Code. If a prohibited transaction occurs for which no exemption is available, the Adviser and/or any other fiduciary that has engaged in the prohibited transaction could be required to (i) restore to the “benefit plan investor” any profit realized on the transaction and (ii) reimburse the
70
Covered Plan for any losses suffered by the “benefit plan investor” as a result of the investment. In addition, each disqualified person (within the meaning of Section 4975 of the Code) involved could be subject to an excise tax equal to 15% of the amount involved in the prohibited transaction for each year the transaction continues and, unless the transaction is corrected within statutorily required periods, to an additional tax of 100%. The Fiduciary of a “benefit plan investor” who decides to invest in the Fund could, under certain circumstances, be liable for prohibited transactions or other violations as a result of their investment in the Fund or as co-fiduciaries for actions taken by or on behalf of the Fund or the Adviser. With respect to a “benefit plan investor” that is an individual retirement account (an “IRA”) that invests in the Fund, the occurrence of a prohibited transaction involving the individual who established the IRA, or his or her beneficiaries, would cause the IRA to lose its tax-exempt status.
For any class of Common Shares deemed not to be “publicly traded securities” within the meaning of the Plan Asset Regulations, we have the power to (a) exclude any shareholder or potential shareholder from purchasing such class of Common Shares; (b) prohibit any redemption of such class of Common Shares; and (c) redeem some or all Common Shares held by any holder if, and to the extent that, our Board of Trustees determines that there is a substantial likelihood that such holder’s purchase, ownership or redemption of Common Shares would result in our assets to be characterized as “plan assets,” for purposes of the fiduciary responsibility or prohibited transaction provisions of ERISA or Section 4975 of the Code, and all Common Shares of the Fund shall be subject to such terms and conditions.
Prospective investors should carefully review the matters discussed under “Restrictions on Share Ownership” and should consult with their own advisors as to the consequences of making an investment in the Fund.
No shareholder approval is required for certain mergers.
The Independent Trustees of our Board may undertake to approve mergers between us and certain other funds or vehicles. Subject to the requirements of the 1940 Act, such mergers will not require shareholder approval so you will not be given an opportunity to vote on these matters unless such mergers are reasonably anticipated to result in a material dilution of the NAV per share of the Fund. These mergers may involve funds managed by affiliates of Blackstone Credit. The Independent Trustees may also convert the form and/or jurisdiction of organization, including to take advantage of laws that are more favorable to maintaining board control in the face of dissident shareholders.
Shareholders may experience dilution.
All distributions declared in cash payable to shareholders that are participants in our distribution reinvestment plan will generally be automatically reinvested in our Common Shares. As a result, shareholders that do not participate in our distribution reinvestment plan may experience dilution over time.
Holders of our Common Shares will not have preemptive rights to any shares we issue in the future. Our charter allows us to issue an unlimited number of Common Shares. After you purchase Common Shares in this offering, our Board of Trustees may elect, without shareholder approval, to: (1) sell additional shares in this or future public offerings; (2) issue Common Shares or interests in any of our subsidiaries in private offerings; (3) issue Common Shares upon the exercise of the options we may grant to our independent directors or future employees; or (4) subject to applicable law, issue Common Shares in payment of an outstanding obligation to pay fees for services rendered to us. To the extent we issue additional Common Shares after your purchase in this offering, your percentage ownership interest in us will be diluted. Because of these and other reasons, our shareholders may experience substantial dilution in their percentage ownership of our shares or their interests in the underlying assets held by our subsidiaries.
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Investing in our shares involves a high degree of risk.
The investments we make in accordance with our investment objectives may result in a higher amount of risk than alternative investment options and volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive and, therefore, an investment in our shares may not be suitable for someone with lower risk tolerance.
The NAV of our shares may fluctuate significantly.
The NAV and liquidity, if any, of the market for our shares may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:
| • | changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs; |
| • | loss of RIC or BDC status; |
| • | changes in earnings or variations in operating results; |
| • | changes in the value of our portfolio of investments; |
| • | changes in accounting guidelines governing valuation of our investments; |
| • | any shortfall in revenue or net income or any increase in losses from levels expected by investors; |
| • | departure of either of our adviser or certain of its respective key personnel; |
| • | general economic trends and other external factors; and |
| • | loss of a major funding source. |
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We intend to use the net proceeds from this offering to (1) make investments in accordance with our investment strategy and policies, (2) reduce borrowings and repay indebtedness incurred under various financing agreements we may enter into and (3) fund repurchases under our share repurchase program. Generally, our policy will be to pay distributions and operating expenses from cash flow from operations, however, we are not restricted from funding these items from proceeds from this offering or other sources and may choose to do so, particularly in the earlier part of this offering. For additional information on our debt obligations, see “Note 6. Borrowings” of our unaudited financial statements for the quarter ended June 30, 2021 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources—Borrowings.”
We will seek to invest the net proceeds received in this offering as promptly as practicable after receipt thereof, and in any event generally within 60 days of each subscription closing. However, depending on market conditions and other factors, including the availability of investments that meet our investment objectives, we may be unable to invest such proceeds within the time period we anticipate. Pending such investment, we may have a greater allocation to syndicated loans or other liquid investments than we otherwise would or we may make investments in cash or cash equivalents (such as U.S. government securities or certain high quality debt instruments).
We estimate that we will incur approximately $2.3 million of offering expenses (excluding the shareholder servicing and/or distribution fee) in connection with this offering, or approximately 0.02% of the gross proceeds, assuming maximum gross proceeds of $12,500,000,000. Any reimbursements will not exceed actual expenses incurred by the Adviser and its affiliates.
The following tables sets forth our estimate of how we intend to use the gross proceeds from this offering. Information is provided assuming that the Fund sells the maximum number of shares registered in this offering, or 484,308,408 shares. The amount of net proceeds may be more or less than the amount depicted in the table below depending on the public offering price of our shares and the actual number of shares we sell in this offering. The table below assumes that shares are sold at the current offering price of $25.81 per share. Such amount is subject to increase or decrease based upon our NAV per share.
The following tables present information about the net proceeds raised in this offering for each class, assuming that we sell the maximum primary offering amount of $12,500,000,000. The tables assume that 1/3 of our gross offering proceeds are from the sale of Class S shares, 1/3 of our gross offering proceeds are from the sale of Class D shares and 1/3 of our gross offering proceeds are from the sale of Class I shares. The number of shares of each class sold and the relative proportions in which the classes of shares are sold are uncertain and may differ significantly from what is shown in the tables below. Because amounts in the following tables are estimates, they may not accurately reflect the actual receipt or use of the gross proceeds from this offering. Amounts expressed as a percentage of net proceeds or gross proceeds may be higher or lower due to rounding.
The following table presents information regarding the use of proceeds raised in this offering with respect to
Class S shares.
| Maximum Offering of $4,166,666,667 in Class S Shares |
||||||||
| Gross Proceeds(1) |
$ | 4,166,666,667 | 100 | % | ||||
| Upfront Sales Load(2) |
$ | — | — | % | ||||
| Organization and Offering Expenses(3) |
$ | 755,579 | 0.02 | % | ||||
|
|
|
|
|
|||||
| Net Proceeds Available for Investment |
$ | 4,165,911,088 | 99.98 | % | ||||
|
|
|
|
|
|||||
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The following table presents information regarding the use of proceeds raised in this offering with respect to Class D shares.
| Maximum Offering of $4,166,666,667 in Class D Shares |
||||||||
| Gross Proceeds(1) |
$ | 4,166,666,667 | 100 | % | ||||
| Upfront Sales Load(2) |
$ | — | — | % | ||||
| Organization and Offering Expenses(3) |
$ | 755,579 | 0.02 | % | ||||
|
|
|
|
|
|||||
| Net Proceeds Available for Investment |
$ | 4,165,911,088 | 99.98 | % | ||||
|
|
|
|
|
|||||
The following table presents information regarding the use of proceeds raised in this offering with respect to Class I shares.
| Maximum Offering of $4,166,666,667 in Class I Shares |
||||||||
| Gross Proceeds(1) |
$ | 4,166,666,667 | 100 | % | ||||
| Upfront Sales Load(2) |
$ | — | — | % | ||||
| Organization and Offering Expenses(3) |
$ | 755,579 | 0.02 | % | ||||
|
|
|
|
|
|||||
| Net Proceeds Available for Investment |
$ | 4,165,911,088 | 99.98 | % | ||||
|
|
|
|
|
|||||
| (1) | We intend to conduct a continuous offering of an unlimited number of Common Shares over an unlimited time period by filing a new registration statement prior to the end of the three-year period described in Rule 415 under the Securities Act; however, in certain states this offering is subject to annual extensions. |
| (2) | No upfront sales load will be paid with respect to Class S shares, Class D shares or Class I shares, however, if you buy Class S shares or Class D shares through certain financial intermediaries, they may directly charge you transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to a 1.5% cap on NAV for Class D shares and 3.5% cap on NAV for Class S shares. Selling agents will not charge such fees on Class I shares. We will pay the following shareholder servicing and/or distribution fees to the Intermediary Manager, subject to FINRA limitations on underwriting compensation: (a) for Class S shares only, a shareholder servicing and/or distribution fee equal to 0.85% per annum of the aggregate NAV for the Class S shares and (b) for Class D shares only, a shareholder servicing and/or distribution fee equal to 0.25% per annum of the aggregate NAV for the Class D shares, in each case, payable monthly. The shareholder servicing and/or distribution fees are similar to sales commissions. The distribution and servicing expenses borne by the participating brokers may be different from and substantially less than the amount of shareholder servicing and/or distribution fees charged. All or a portion of the shareholder servicing and/or distribution fee may be used to pay for sub-transfer agency, sub-accounting and certain other administrative services that are not required to be paid pursuant to the shareholder servicing and/or distribution fees under FINRA rules. The Fund also may pay for these sub-transfer agency, sub-accounting and certain other administrative services outside of the shareholder servicing and/or distribution fees and its Distribution and Servicing Plan. The total amount that will be paid over time for shareholder servicing and/or distribution fees depends on the average length of time for which shares remain outstanding, the term over which such amount is measured and the performance of our investments, and is not expected to be paid from sources other than cash flow from operating activities. We will cease paying the shareholder servicing and/or distribution fee on the Class S shares and Class D shares on the earlier to occur of the following: (i) a listing of Class I shares, (ii) our merger or consolidation with or into another entity, or the sale or other disposition of all or substantially all of our assets or (iii) the date following the completion of the primary portion of this offering on which, in the aggregate, underwriting compensation from all sources in connection with this offering, including the shareholder servicing and/or distribution fee and other underwriting compensation, is equal to 10% of the gross proceeds from our primary offering. In addition, |
74
| consistent with the exemptive relief allowing us to offer multiple classes of shares, at the end of the month in which the Intermediary Manager in conjunction with the transfer agent determines that total transaction or other fees, including upfront placement fees or brokerage commissions, and shareholder servicing and/or distribution fees paid with respect to the shares held in a shareholder’s account would exceed, in the aggregate, 10% of the gross proceeds from the sale of such shares (or a lower limit as determined by the Intermediary Manager or the applicable selling agent), we will cease paying the shareholder servicing and/or distribution fee on the Class S shares and Class D shares in such shareholder’s account. Compensation paid with respect to the shares in a shareholder’s account will be allocated among each share such that the compensation paid with respect to each individual share will not exceed 10% of the offering price of such share. We may modify this requirement in a manner that is consistent with applicable exemptive relief. At the end of such month, the Class S shares or Class D shares in such shareholder’s account will convert into a number of Class I shares (including any fractional shares), with an equivalent aggregate NAV as such Class S or Class D shares. |
| (3) | The organization and offering expense numbers shown above represent our estimates of expenses to be incurred by us in connection with this offering and include estimated wholesaling expenses reimbursable by us. See “Plan of Distribution” for examples of the types of organization and offering expenses we may incur. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in this section should be read in conjunction with “Financial Highlights” and our financial statements and related notes appearing elsewhere or incorporated in this prospectus. This discussion contains forward-looking statements, which relate to future events our future performance or financial condition and involves numerous risks and uncertainties, including, but not limited to, those set forth in “Risk Factors” and elsewhere in this prospectus. Actual results could differ materially from those implied or expressed in any forward-looking statements. The six months ended June 30, 2021 represents the period from January 7, 2021 (commencement of operations) to June 30, 2021.
Overview and Investment Framework
We are a newly organized, externally managed, non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. Formed as a Delaware statutory trust on February 11, 2020, we are externally managed by the Adviser, which is responsible for sourcing potential investments, conducting due diligence on prospective investments, analyzing investment opportunities, structuring investments and monitoring our portfolio on an ongoing basis. Our Adviser is registered as investment adviser with the SEC. We also intend to elect to be treated, and intend to qualify annually thereafter, as a RIC under the Code.
Under our Investment Advisory Agreement, we have agreed to pay the Adviser an annual management fee as well as an incentive fee based on our investment performance. Also, under the Administration Agreement, we have agreed to reimburse the Administrator for the allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including but not limited to our allocable portion of the costs of compensation and related expenses of our chief compliance officer, chief financial officer and their respective staffs.
Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. Under normal circumstances, we will invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in private credit investments (loans, bonds and other credit instruments that are issued in private offerings or issued by private companies). If we change our 80% test, we will provide shareholders with at least 60 days’ notice of such change. Once we have invested a substantial amount of proceeds from the offering, under normal circumstances we expect that the majority of our portfolio will be in privately originated and privately negotiated investments, predominantly direct lending to U.S. middle market companies through (i) first lien senior secured and unitranche loans and (ii) second lien, unsecured, subordinated or mezzanine loans and structured credit, as well as broadly syndicated loans (for which we may serve as an anchor investor), club deals (generally investments made by a small group of investment firms) and other debt and equity securities (the investments described in this sentence, collectively, “Private Credit”). To a lesser extent, we will also invest in publicly traded securities of large corporate issuers (“Opportunistic Credit”). We expect that the Opportunistic Credit investments will generally be liquid, and may be used for the purposes of maintaining liquidity for our share repurchase program and cash management, while also presenting an opportunity for attractive investment returns.
Most of our investments will be in private U.S. companies, but (subject to compliance with BDCs’ requirement to invest at least 70% of its assets in private U.S. companies), we also expect to invest to some extent in European and other non-U.S. companies, but do not expect to invest in emerging markets. Subject to the limitations of the 1940 Act, we may invest in loans or other securities, the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds. From time to time, we may co-invest with other Blackstone Credit funds.
76
Key Components of Our Results of Operations
Investments
We focus primarily on loans and securities, including syndicated loans, of private U.S. companies, specifically small and middle market companies. Our level of investment activity (both the number of investments and the size of each investment) can and will vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment, trading prices of loans and other securities and the competitive environment for the types of investments we make.
Revenues
We generate revenues in the form of interest income on debt investments, capital gains, and dividend income from our equity investments in our portfolio companies. Our senior and subordinated debt investments are expected to bear interest at a fixed or floating rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid PIK interest generally will become due at the maturity date. In addition, we generate revenue from various fees in the ordinary course of business such as in the form of structuring, consent, waiver, amendment, syndication and other miscellaneous fees as well as fees for managerial assistance rendered by us.
Expenses
Except as specifically provided below, all investment professionals and staff of the Adviser, when and to the extent engaged in providing investment advisory services to us, and the base compensation, bonus and benefits, and the routine overhead expenses, of such personnel allocable to such services, will be provided and paid for by the Adviser. We bear all other costs and expenses of our operations, administration and transactions, including, but not limited to (a) investment advisory fees, including management fees and incentive fees, to the Adviser, pursuant to the Investment Advisory Agreement; (b) our allocable portion of compensation, overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) our chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, operations and other non-investment professionals at the Administrator that performs duties for us; and (iii) any internal audit group personnel of Blackstone or any of its affiliates; and (c) all other expenses of our operations, administrations and transactions.
With respect to costs incurred in connection with our organization and offering and all other costs incurred prior to the time we broke escrow for the offering, the Adviser has agreed to advance all such costs on our behalf. Unless the Adviser elects to cover such expenses pursuant to the Expense Support and Conditional Reimbursement Agreement we entered into with the Adviser, we are obligated to reimburse the Adviser for such advanced expenses. See “Expense Support and Conditional Reimbursement Agreement.” Any reimbursements that may be made by us in the future will not exceed actual expenses incurred by the Adviser and its affiliates.
From time to time, the Adviser, the Administrator or their affiliates may pay third-party providers of goods or services. We will reimburse the Adviser, the Administrator or such affiliates thereof for any such amounts paid on our behalf. From time to time, the Adviser or the Administrator may defer or waive fees and/or rights to be reimbursed for expenses. In this regard, the Administrator has waived the right to be reimbursed for rent and related occupancy costs. However, the Administrator may seek reimbursement for such costs in future periods. All of the foregoing expenses will ultimately be borne by our shareholders.
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Expense Support and Conditional Reimbursement Agreement
We have entered into an Expense Support Agreement with the Adviser. For additional information see “Note 3. Fees, Expenses, Agreements and Related Party Transactions” of our unaudited financial statements for the quarter ended June 30, 2021.
Portfolio and Investment Activity
For the three months ended June 30, 2021, we acquired $7,240.6 million aggregate principal amount of investments (including $861.7 million of unfunded commitments), $6,503.1 million of which was first lien debt, $673.9 million of which was second lien debt, $12.7 million of which was unsecured debt, and $50.9 million of which was equity.
Our investment activity is presented below (information presented herein is at amortized cost unless otherwise indicated) (dollar amounts in thousands):
| As of and for the three months ended June 30, 2021 |
||||
| Investments: |
||||
| Total investments, beginning of period |
$ | 5,417,954 | ||
| New investments purchased |
6,321,122 | |||
| Net accretion of discount on investments |
4,450 | |||
| Net realized gain (loss) on investments |
360 | |||
| Investments sold or repaid |
(496,309 | ) | ||
|
|
|
|||
| Total investments, end of period |
$ | 11,247,577 | ||
|
|
|
|||
| Amount of investments funded at principal: |
||||
| First lien debt investments |
$ | 5,641,443 | ||
| Second lien debt investments |
673,895 | |||
| Unsecured debt |
12,695 | |||
| Equity investments |
50,912 | |||
|
|
|
|||
| Total |
$ | 6,378,945 | ||
|
|
|
|||
| Proceeds from investments sold or repaid: |
||||
| First lien debt investments |
$ | (470,828 | ) | |
| Second lien debt investments |
(4,473 | ) | ||
| Unsecured debt |
(21,008 | ) | ||
| Equity investments |
— | |||
|
|
|
|||
| Total |
$ | (496,309 | ) | |
|
|
|
|||
| Number of portfolio companies |
347 | |||
| Weighted average yield on debt and income producing investments, at cost(1)(2) |
6.23 | % | ||
| Weighted average yield on debt and income producing investments, at fair value(1)(2) |
6.19 | % | ||
| Percentage of debt investments bearing a floating rate, at fair value |
98.4 | % | ||
| Percentage of debt investments bearing a fixed rate, at fair value |
1.6 | % | ||
| (1) | Computed as (a) the annual stated interest rate or yield plus the annual accretion of discounts or less the annual amortization of premiums, as applicable, on accruing debt included in such securities, divided by (b) total debt investments (at fair value or cost, as applicable) included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above. |
| (2) | As of June 30, 2021, the weighted average total portfolio yield at cost was 6.20%. The weighted average total portfolio yield at fair value was 6.16%. |
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Our investments consisted of the following (dollar amounts in thousands):
| June 30, 2021 | ||||||||||||
| Cost | Fair Value | % of Total Investments at Fair Value |
||||||||||
| First lien debt |
$ | 10,095,919 | $ | 10,147,833 | 89.69 | % | ||||||
| Second lien debt |
1,049,026 | 1,065,350 | 9.41 | |||||||||
| Unsecured debt |
45,757 | 45,757 | 0.40 | |||||||||
| Equity investments |
56,875 | 56,877 | 0.50 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 11,247,577 | $ | 11,315,817 | 100.00 | % | ||||||
|
|
|
|
|
|
|
|||||||
As of June 30, 2021, no loans in the portfolio were on non-accrual status.
Results of Operations
On January 7, 2021, we commenced operations and accepted $814.0 million of subscriptions.
The following table represents the operating results (dollar amounts in thousands):
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Total investment income |
$ | 123,124 | $ | 157,513 | ||||
| Net expenses |
31,517 | 39,726 | ||||||
|
|
|
|
|
|||||
| Net investment income |
91,607 | 117,787 | ||||||
| Net unrealized appreciation (depreciation) |
50,411 | 68,531 | ||||||
| Net realized gain (loss) |
1,725 | 6,018 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets resulting from operations |
$ | 143,743 | $ | 192,336 | ||||
|
|
|
|
|
|||||
Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including acquisitions, the level of new investment commitments, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. As a result, comparisons may not be meaningful.
Investment Income
Investment income, was as follows (dollar amounts in thousands):
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Interest income |
$ | 114,433 | $ | 148,636 | ||||
| Payment-in-kind interest income |
578 | 700 | ||||||
| Fee income |
8,113 | 8,177 | ||||||
|
|
|
|
|
|||||
| Total investment income |
$ | 123,124 | $ | 157,513 | ||||
|
|
|
|
|
|||||
For the three and six months ended June 30, 2021, total investment income was $123.1 million and $157.5 million, respectively, driven by our deployment of capital and the increased balance of our investments. The size of our investment portfolio at fair value was $11,315.8 million at June 30, 2021 and our weighted average yield on debt and income producing investments, at fair value was 6.19%.
79
As the impact of COVID-19 persists and there remain uncertainties related to new variants and the acceptance of vaccines, it could cause operational and/or liquidity issues at our portfolio companies which could restrict their ability to make cash interest payments. Additionally, we may experience full or partial losses on our investments which may ultimately reduce our investment income in future periods.
Expenses
Expenses were as follows (dollar amounts in thousands):
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Interest expense |
$ | 17,345 | $ | 20,785 | ||||
| Management fees |
12,620 | 17,000 | ||||||
| Income based incentive fee |
10,916 | 13,761 | ||||||
| Capital gains incentive fee |
6,517 | 9,319 | ||||||
| Distribution and shareholder servicing fees |
||||||||
| Class S |
1,798 | 2,156 | ||||||
| Class D |
23 | 23 | ||||||
| Professional fees |
1,009 | 1,587 | ||||||
| Board of Trustees’ fees |
140 | 279 | ||||||
| Administrative service expenses |
324 | 619 | ||||||
| Organization costs |
— | 1,090 | ||||||
| Amortization of continuous offering costs |
838 | 1,609 | ||||||
| Other general & administrative |
1,324 | 2,259 | ||||||
|
|
|
|
|
|||||
| Total expenses |
52,854 | 70,487 | ||||||
| Expense support |
— | (2,199 | ) | |||||
| Recoupment of expense support |
2,199 | 2,199 | ||||||
| Management fees waived |
(12,620 | ) | (17,000 | ) | ||||
| Incentive fees waived |
(10,916 | ) | (13,761 | ) | ||||
|
|
|
|
|
|||||
| Net expenses |
$ | 31,517 | $ | 39,726 | ||||
|
|
|
|
|
|||||
Interest Expense
Total interest expense (including unused fees, amortization of deferred financing costs and accretion of net discounts on unsecured debt) of $17.3 million for the three months ended June 30, 2021 was driven by $2,814.1 million of average borrowings (at an average effective interest rate of 2.21%) under our credit facilities, 2024 Notes and our 2021-1 Debt related to borrowing for investments.
Total interest expense (including unused fees, amortization of deferred financing costs and accretion of net discounts on unsecured debt) of $20.8 million for the six months ended June 30, 2021 was driven by $1,777.0 million of average borrowings (at an average effective interest rate of 2.16%) under our existing and new credit facilities and our newly issued 2024 Notes and our 2021-1 Debt related to borrowing for investments.
Management Fees
For the three and six months ended June 30, 2021, management fees were $12.6 million and $17.0 million, respectively. Management fees are payable monthly in arrears at an annual rate of 1.25% of the value of our net assets as of the beginning of the first calendar day of the applicable month. The Adviser has waived management fees through July 7, 2021.
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Income Based Incentive Fees
For the three and six months ended June 30, 2021, income based incentive fees were $10.9 million and $13.8 million , respectively. The Adviser has waived income based incentive fees through July 7, 2021.
Capital Gains Incentive Fees
For the three and six months ended June 30, 2021, we accrued capital gains incentive fees of $6.5 million and $9.3 million, respectively. For the three and six months ended June 30, 2021, the accrued incentive fees were attributable to net realized and unrealized gains of $52.1 million and $74.5 million, respectively. The accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less in the prior period. If such cumulative amount is negative, then there is no accrual.
Other Expenses
Organization costs and offering costs include expenses incurred in our initial formation and our continuous offering. Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of us. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers, their respective staff and other non-investment professionals that perform duties for us. Other general and administrative expenses include insurance, filing, research, our sub-administrator, subscriptions and other costs.
Total other expenses were $5.5 million for the three months ended June 30, 2021, primarily comprised of $0.8 million of offering costs, $1.0 million of professional fees (including legal, audit and tax), $1.3 million of general and administrative expenses (including fees paid to our sub-administrator and transfer agent), and $1.8 million of distribution and shareholder servicing fees paid by Class S and Class D investors.
Total other expenses were $9.6 million for the six months ended June 30, 2021, primarily comprised of $2.7 million of organization and offering costs, $1.6 million of professional fees (including legal, audit and tax), $2.3 million of general and administrative expenses (including fees paid to our sub-administrator and transfer agent), and $2.2 million of distribution and shareholder servicing fees paid by Class S and Class D investors.
Income Taxes, Including Excise Taxes
We intend to elect to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, we must, among other things, distribute to our shareholders in each taxable year generally at least 90% of the sum of our investment company taxable income, as defined by the Code (without regard to the deduction for dividends paid), and net tax-exempt income for that taxable year. To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our shareholders, which generally relieve us from corporate-level U.S. federal income taxes.
Depending on the level of taxable income earned in a tax year, we may carry forward taxable income (including net capital gains, if any) in excess of current year dividend distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, we will accrue excise tax on estimated excess taxable income.
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For the three and six months ended June 30, 2021, we incurred no U.S. federal excise tax.
Net Unrealized Gain (Loss)
Net unrealized gain (loss) was comprised of the following (dollar amounts in thousands):
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Net unrealized gain (loss) on investments |
$ | 52,321 | $ | 68,531 | ||||
| Net unrealized gain (loss) on forward purchase obligation |
(1,910 | ) | — | |||||
|
|
|
|
|
|||||
| Net unrealized gain (loss) |
$ | 50,411 | $ | 68,531 | ||||
|
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|
|
|
|||||
For the three and six months ended June 30, 2021, the fair value of our debt investments increased due to continued spread tightening in the credit markets driven primarily by a strong recovery in economic activity in the period. Additionally, the fair value of our debt investments as a percentage of principal increased by 0.3% as compared to prior quarter.
Net Realized Gain (Loss)
The realized gains and losses on fully exited and partially exited investments comprised of the following (dollar amounts in thousands):
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Net realized gain (loss) on investments |
$ | 360 | $ | 777 | ||||
| Net realized gain (loss) on forward purchase obligation |
2,248 | 3,709 | ||||||
| Net realized gain (loss) on derivative |
— | 2,334 | ||||||
| Net realized gain (loss) on translation of assets and liabilities in foreign currencies |
(883 | ) | (802 | ) | ||||
|
|
|
|
|
|||||
| Net realized gain (loss) |
$ | 1,725 | $ | 6,018 | ||||
|
|
|
|
|
|||||
For the three and six months ended June 30, 2021, we generated realized gains on investments of $1.7 million and $6.0 million, respectively, which was primarily comprised of the net realized gain on forward purchase obligation and, for the six months ended June 30, 2021, the net realized gain on derivative recorded upon the settlement of the purchase of the Syndicated Warehouse.
As the impact of COVID-19 persists, it may cause us to experience full or partial losses on our investments upon the exit or restructuring of our investments.
Financial Condition, Liquidity and Capital Resources
We generate cash primarily from the net proceeds of our continuous offering of common shares, proceeds from net borrowings on our credit facilities and unsecured debt issuances, income earned and repayments on principal on our debt investments. The primary uses of our cash and cash equivalents are for (i) originating and purchasing debt investments, (ii) funding the costs of our operations (including fees paid to our Adviser and expense reimbursements paid to our Administrator), (iii) debt service, repayment and other financing costs of our borrowings, (iv) funding repurchases under our share repurchase program and (v) cash distributions to the holders of our shares.
As of June 30, 2021, we had nine asset based leverage facilities, one revolving credit facility, one unsecured note issuance and one debt securitization outstanding. We have and will continue to, from time to time, enter into
82
additional credit facilities, increase the size of our existing credit facilities or issue additional debt securities, including debt securitizations and unsecured debt. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred stock, if immediately after the borrowing or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock, is at least 150%. As of June 30, 2021, we had an aggregate amount of $4,833.1 million of debt securities outstanding and our asset coverage ratio was 202.3%. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage.
Cash and cash equivalents as of June 30, 2021, taken together with our $2,630.9 million of available capacity under our credit facilities (subject to borrowing base availability), proceeds from new or amended financing arrangements and the continuous offering of our common shares is expected to be sufficient for our investing activities and to conduct our operations in the near term. This determination is based in part on our expectations for the timing of funding investment purchases and the timing and amount of future proceeds from sales of our common shares and the use of existing and future financing arrangements. As of June 30, 2021, we had significant amounts payable and commitments for new investments, which we planned to fund using proceeds from offering our common shares (including the $1,136.6 million of proceeds from July 1, 2021 subscriptions, which we had significant visibility for as of June 30, 2021) and available borrowing capacity under our credit facilities. Additionally, we held $5,459.2 million of Level 2 debt investments as of June 30, 2021, which could provide additional liquidity if necessary.
Although we were able to close on several new revolving credit facilities and issue debt securities during the six months ended June 30, 2021, and the financial markets have recovered from 2020 levels, another disruption in the financial markets like that caused by the COVID-19 outbreak or any other negative economic development could restrict our access to financing in the future. We may not be able to find new financing for future investments or liquidity needs and, even if we are able to obtain such financing, such financing may not be on as favorable terms as we could have obtained prior to the outbreak of the pandemic. These factors may limit our ability to make new investments and adversely impact our results of operations.
As of June 30, 2021, we had $495.6 million in cash and cash equivalents. During the six months ended June 30, 2021, cash used in operating activities was $8,639.8 million, primarily as a result of funding portfolio investments of $10,637.6 million, the acquisition of Twin Peaks for $697.4 million (net of cash assumed), partially offset by proceeds from sale of investments of $723.4 million and an increase in payables for investments purchases of $2,169.4 million. Cash provided by financing activities was $9,135.3 million during the period, primarily as a result of new share issuances related $4,843.4 million of subscriptions and net borrowings of $4,358.7 million.
Equity
The following table summarizes transactions in common shares of beneficial interest during the three months ended June 30, 2021 (dollars in thousands except share amounts):
| Shares | Amount | |||||||
| CLASS I |
||||||||
| Subscriptions |
72,765,283 | $ | 1,863,782 | |||||
| Share transfers between classes |
106,389 | 2,745 | ||||||
| Distributions reinvested |
768,399 | 19,715 | ||||||
| Share repurchases |
(48,738 | ) | (1,233 | ) | ||||
| Early repurchase deduction |
— | 19 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
73,591,333 | $ | 1,885,003 | |||||
|
|
|
|
|
|||||
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| Shares | Amount | |||||||
| CLASS S |
||||||||
| Subscriptions |
31,758,213 | $ | 813,582 | |||||
| Distributions reinvested |
185,595 | 4,766 | ||||||
| Share repurchases |
— | — | ||||||
| Early repurchase deduction |
— | 6 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
31,943,808 | $ | 818,354 | |||||
|
|
|
|
|
|||||
| CLASS D |
||||||||
| Subscriptions |
3,125,266 | $ | 80,347 | |||||
| Share transfers between classes |
(106,389 | ) | (2,745 | ) | ||||
| Distributions reinvested |
2,411 | 62 | ||||||
| Share repurchases |
— | — | ||||||
| Early repurchase deduction |
— | — | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
3,021,288 | $ | 77,664 | |||||
|
|
|
|
|
|||||
| Total net increase (decrease) |
108,556,429 | $ | 2,781,021 | |||||
|
|
|
|
|
|||||
The following table summarizes transactions in common shares of beneficial interest during the six months ended June 30, 2021 (dollars in thousands except share amounts):
| Shares | Amount | |||||||
| CLASS I |
||||||||
| Subscriptions |
144,470,591 | $ | 3,669,228 | |||||
| Share transfers between classes |
106,389 | 2,745 | ||||||
| Distributions reinvested |
959,838 | 24,563 | ||||||
| Share repurchases |
(48,738 | ) | (1,233 | ) | ||||
| Early repurchase deduction |
— | 19 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
145,488,080 | $ | 3,695,297 | |||||
|
|
|
|
|
|||||
| CLASS S |
||||||||
| Subscriptions |
42,866,403 | $ | 1,093,871 | |||||
| Distributions reinvested |
208,295 | 5,341 | ||||||
| Share repurchases |
— | — | ||||||
| Early repurchase deduction fees |
— | 6 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
43,074,698 | $ | 1,099,218 | |||||
|
|
|
|
|
|||||
| CLASS D |
||||||||
| Subscriptions |
3,125,266 | $ | 80,347 | |||||
| Transfers |
(106,389 | ) | (2,745 | ) | ||||
| Distributions reinvested |
2,411 | 62 | ||||||
| Share repurchases |
— | — | ||||||
| Early repurchase deduction fees |
— | — | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
3,021,288 | $ | 77,664 | |||||
|
|
|
|
|
|||||
| Total net increase (decrease) |
191,584,066 | $ | 4,872,179 | |||||
|
|
|
|
|
|||||
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Distributions and Dividend Reinvestment
The following table summarizes our distributions declared and payable for the six months ended June 30, 2021 (dollar amounts in thousands, except per share amounts):
| Class I | ||||||||||||||||
| Declaration Date |
Record Date | Payment Date | Distribution Per Share |
Distribution Amount |
||||||||||||
| January 31, 2021 | February 24, 2021 | $ | 0.1151 | $ | 3,431 | |||||||||||
| February 28, 2021 | March 29, 2021 | 0.1427 | 7,206 | |||||||||||||
| March 31, 2021 | April 28, 2021 | 0.1458 | 10,483 | |||||||||||||
| April 30, 2021 | May 26, 2021 | 0.1510 | 15,074 | |||||||||||||
| May 31, 2021 | June 28, 2021 | 0.1563 | 19,336 | |||||||||||||
| June 30, 2021 | July 28, 2021 | 0.1667 | 24,261 | |||||||||||||
| June 30, 2021 | July 28, 2021 | 0.1233 | 17,944 | (1) | ||||||||||||
|
|
|
|
|
|||||||||||||
| $ | 1.0009 | $ | 97,735 | |||||||||||||
|
|
|
|
|
|||||||||||||
| Class S | ||||||||||||||||
| Declaration Date |
Record Date | Payment Date | Distribution Per Share |
Distribution Amount |
||||||||||||
| January 31, 2021 | February 24, 2021 | $ | 0.1008 | $ | 277 | |||||||||||
| February 28, 2021 | March 29, 2021 | 0.1250 | 827 | |||||||||||||
| March 31, 2021 | April 28, 2021 | 0.1281 | 1,426 | |||||||||||||
| April 30, 2021 | May 26, 2021 | 0.1329 | 2,994 | |||||||||||||
| May 31, 2021 | June 28, 2021 | 0.1382 | 4,607 | |||||||||||||
| June 30, 2021 | July 28, 2021 | 0.1484 | 6,391 | |||||||||||||
| June 30, 2021 | July 28, 2021 | 0.1233 | 5,311 | (1) | ||||||||||||
|
|
|
|
|
|||||||||||||
| $ | 0.8967 | $ | 21,833 | |||||||||||||
|
|
|
|
|
|||||||||||||
| Class D | ||||||||||||||||
| Declaration Date |
Record Date | Payment Date | Distribution Per Share |
Distribution Amount |
||||||||||||
| May 31, 2021 | June 28, 2021 | 0.1510 | 205 | |||||||||||||
| June 30, 2021 | July 28, 2021 | 0.1613 | 487 | |||||||||||||
| June 30, 2021 | July 28, 2021 | 0.1233 | 373 | (1) | ||||||||||||
|
|
|
|
|
|||||||||||||
| $ | 0.4356 | $ | 1,065 | |||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | Represents a special distribution. |
With respect to distributions, we have adopted an “opt out” dividend reinvestment plan for shareholders. As a result, in the event of a declared cash distribution or other distribution, each shareholder that has not “opted out” of the dividend reinvestment plan will have their dividends or distributions automatically reinvested in additional shares rather than receiving cash distributions. Shareholders who receive distributions in the form of shares will be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions.
85
Sources of distributions, other than net investment income and realized gains on a U.S. GAAP basis, include required adjustments to U.S. GAAP net investment income in the current period to determine taxable income available for distributions. The following tables reflect the sources of cash distributions on a U.S. GAAP basis that we declared on our shares of common stock during the six months ended June 30, 2021:
| Class I | Class S | Class D | ||||||||||||||||||||||
| Source of Distribution |
Per Share | Amount | Per Share | Amount | Per Share | Amount | ||||||||||||||||||
| Net investment income |
$ | 0.9871 | $ | 95,729 | $ | 0.8829 | $ | 21,239 | $ | 0.4218 | $ | 1,023 | ||||||||||||
| Net realized gains |
0.0138 | 2,006 | 0.0138 | 594 | 0.0138 | 42 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 1.0009 | $ | 97,735 | $ | 0.8967 | $ | 21,833 | $ | 0.4356 | $ | 1,065 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Share Repurchase Program
At the discretion of the Board, we have commenced a share repurchase program in which we may repurchase, in each quarter, up to 5% of the NAV of our common shares outstanding (either by number of shares or aggregate NAV) as of the close of the previous calendar quarter. The Board may amend or suspend the share repurchase program at any time if in its reasonable judgment it deems such action to be in the best interest of shareholders, such as when a repurchase offer would place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on us that would outweigh the benefit of the repurchase offer. As a result, share repurchases may not be available each quarter. We intend to conduct such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Securities Exchange Act of 1934, as amended, and the 1940 Act. All shares purchased pursuant to the terms of each tender offer will be retired and thereafter will be authorized and unissued shares.
Under the share repurchase plan, to the extent we offer to repurchase shares in any particular quarter, it is expected to repurchase shares pursuant to tender offers using a purchase price equal to the NAV per share as of the last calendar day of the applicable quarter, except that shares that have not been outstanding for at least one year will be repurchased at 98% of such NAV (an “Early Repurchase Deduction”). The one-year holding period is measured as of the subscription closing date immediately following the prospective repurchase date. The Early Repurchase Deduction may be waived in the case of repurchase requests arising from the death, divorce or qualified disability of the holder. The Early Repurchase Deduction will be retained by us for the benefit of remaining shareholders across all share classes.
During the three and six months ended June 30, 2021, approximately 48,738 shares were repurchased (total value of $1.3 million based on June 30, 2021 NAV of $25.81).
The following table further summarizes the share repurchases completed during the six months ended June 30, 2021:
| Repurchase deadline request |
Percentage of Outstanding Shares the Fund Offered to Repurchase |
Repurchase Pricing Date |
Amount Repurchased (all classes) |
Number of Shares Repurchased (all classes) |
Percentage of Outstanding Shares Repurchased(1) |
|||||||||||||||
| 5.00 | % | June 30, 2021 | $ | 1,233 | 48,738 | 0.06 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Percentage is based on total shares as of the close of the previous calendar quarter. All repurchases requests were satisfied in full. |
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Borrowings
Our outstanding debt obligations were as follows (dollar amounts in thousands):
| June 30, 2021 | ||||||||||||||||||||
| Aggregate Principal Committed |
Outstanding Principal |
Carrying Value |
Unused Portion(1) |
Amount Available(2) |
||||||||||||||||
| Bard Peak Funding Facility(3) |
$ | 600,000 | $ | 599,425 | $ | 599,425 | $ | 575 | $ | 575 | ||||||||||
| Castle Peak Funding Facility(4) |
800,000 | 796,391 | 796,391 | 3,609 | 3,131 | |||||||||||||||
| Maroon Peak Funding Facility |
1,000,000 | 97,350 | 97,350 | 902,650 | 604,111 | |||||||||||||||
| Summit Peak Funding Facility(5) |
1,000,000 | 370,289 | 370,289 | 629,711 | 561,777 | |||||||||||||||
| Denali Peak Funding Facility |
200,000 | 200,000 | 200,000 | — | — | |||||||||||||||
| Siris Peak Funding Facility |
165,919 | 165,919 | 165,919 | — | — | |||||||||||||||
| Bushnell Peak Funding Facility |
425,000 | 125,000 | 125,000 | 300,000 | 42,068 | |||||||||||||||
| Granite Peak Funding Facility |
250,000 | 15,000 | 15,000 | 235,000 | 83,759 | |||||||||||||||
| Middle Peak Funding Facility |
500,000 | — | — | 500,000 | 37,050 | |||||||||||||||
| Revolving Credit Facility(6) |
1,425,000 | 1,365,684 | 1,365,684 | 59,316 | 59,316 | |||||||||||||||
| 2024 Notes(7) |
435,000 | 435,000 | 431,539 | — | — | |||||||||||||||
| 2021-1 Debt(8) |
663,000 | 663,000 | 661,866 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 7,463,919 | $ | 4,833,058 | $ | 4,828,463 | $ | 2,630,861 | $ | 1,391,787 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | The unused portion is the amount upon which commitment fees, if any, are based. |
| (2) | The amount available reflects any limitations related to each respective credit facility’s borrowing base. |
| (3) | Under the Bard Peak Funding Facility, the Fund may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Fund had borrowings denominated in Euros (EUR) of 19.5 million. |
| (4) | Under the Castle Peak Funding Facility, the Fund may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Fund had borrowings denominated in Canadian Dollars (CAD) and British Pounds (GBP) of 60.0 million and 42.4 million, respectively. |
| (5) | Under the Summit Peak Funding Facility, the Fund may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Fund had borrowings denominated in Canadian Dollars (CAD) of 60.0 million.. |
| (6) | Under the Revolving Credit Facility, the Fund may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Fund had borrowings denominated in Canadian Dollars (CAD) and British Pounds (GBP) of 11.3 million and 19.6 million, respectively. |
| (7) | The carrying value of the Fund’s 2024 Notes is presented net of unamortized debt issuance costs of $3.5 million as of June 30, 2021. |
| (8) | The carrying value of the Fund’s 2021-1 Debt is presented net of unamortized debt issuance costs of $1.1 million as of June 30, 2021. |
For additional information on our debt obligations see “Note 6. Borrowings” of our unaudited financial statements for the quarter ended June 30, 2021.
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Contractual Obligations
Our contractual obligations consisted of the following as of June 30, 2021 (dollar amounts in thousands):
| Payments Due by Period | ||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
| Bard Peak Funding Facility |
$ | 599,425 | $ | — | $ | — | $ | 599,425 | $ | — | ||||||||||
| Castle Peak Funding Facility |
796,391 | — | — | 796,391 | — | |||||||||||||||
| Maroon Peak Funding Facility |
97,350 | — | 97,350 | — | — | |||||||||||||||
| Summit Peak Funding Facility |
370,289 | — | — | 370,289 | — | |||||||||||||||
| Denali Peak Funding Facility |
200,000 | — | 200,000 | — | — | |||||||||||||||
| Siris Peak Funding Facility |
165,919 | — | 165,919 | — | — | |||||||||||||||
| Bushnell Peak Funding Facility |
125,000 | — | 125,000 | — | — | |||||||||||||||
| Granite Peak Funding Facility |
15,000 | — | — | 15,000 | — | |||||||||||||||
| Middle Peak Funding Facility |
— | — | — | — | — | |||||||||||||||
| Revolving Credit Facility |
1,365,684 | — | — | 1,365,684 | — | |||||||||||||||
| 2024 Notes |
435,000 | — | 435,000 | — | — | |||||||||||||||
| 2021-1 Debt |
663,000 | — | — | — | 663,000 | |||||||||||||||
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| Total Contractual Obligations |
$ | 4,833,058 | $ | — | $ | 1,023,269 | $ | 3,146,789 | $ | 663,000 | ||||||||||
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Off-Balance Sheet Arrangements
Portfolio Company Commitments
Our investment portfolio contains and is expected to continue to contain debt investments which are in the form of lines of credit or delayed draw commitments, which require us to provide funding when requested by portfolio companies in accordance with underlying loan agreements. As of June 30, 2021, we had unfunded delayed draw term loans and revolvers with an aggregate principal amount of $1,364.2 million.
Warehousing Transactions
We entered into two warehousing transactions whereby we agreed, subject to certain conditions, to purchase certain assets from parties unaffiliated with the Adviser. Such warehousing transactions were designed to assist us in deploying capital upon receipt of subscriptions. One of these warehousing transactions, the Facility Agreement, relates primarily to originated or anchor investments in middle market loans. The other warehouse, the Syndicated Warehouse Facility, related primarily to broadly syndicated loans (the “Warehousing Transactions”). Prior to the time that we broke escrow, we also entered into trades with two Counterparties that gave us the right to purchase certain investments from these Counterparties upon meeting certain contingencies. For additional information see “Note 7. Commitment and Contingencies” in our unaudited financial statements for the quarter ended June 30, 2021.
Other Commitments and Contingencies
From time to time, we may become a party to certain legal proceedings incidental to the normal course of its business. At June 30, 2021, management is not aware of any pending or threatened litigation.
Twin Peaks Acquisition
Pursuant to a Securities Purchase Agreement, dated March 5, 2021 (the “Purchase Agreement”), by and among us, Twin Peaks Parent LLC, a Delaware limited liability company not affiliated with the Fund (the “Seller”), BCRED Twin Peaks LLC (“Twin Peaks”), Teacher Retirement System of Texas, an investor in Seller, and the Adviser, we acquired Twin Peaks which includes a portfolio of assets from Seller consisting of
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loans to 41 borrowers (including delayed draw term loans), five equity investments, cash and other assets (collectively, the “Assets”) for an aggregate purchase price of $721.0 million. For additional information see “Note 10. Twin Peaks Acquisition.” in our unaudited financial statements for the quarter ended June 30, 2021.
Related-Party Transactions
We entered into a number of business relationships with affiliated or related parties, including the following:
| • | the Investment Advisory Agreement; |
| • | the Administration Agreement; |
| • | Intermediary Manager Agreement; |
| • | Expense Support and Conditional Reimbursement Agreement; and |
| • | Twin Peaks Acquisition |
In addition to the aforementioned agreements, we, our Adviser and certain of our Adviser’s affiliates have been granted exemptive relief by the SEC to co-invest with other funds managed by our Adviser or its affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. See “Note 3. Agreements and Related Party Transactions” in our unaudited financial statements for the quarter ended June 30, 2021.
Performance
| Inception Date | YTD Return(1) | |||||||
| Class I |
January 7, 2021 | 7.34 | % | |||||
| Class S (no upfront placement fee) |
January 7, 2021 | 6.91 | % | |||||
| Class S (with upfront placement fee) |
January 7, 2021 | 3.15 | % | |||||
| Class D (no upfront placement fee) |
May 1, 2021 | 2.57 | % | |||||
| Class D (with upfront placement fee) |
May 1, 2021 | 1.03 | % | |||||
| (1) | YTD return is from January 7, 2021 for Class I and S and May 1, 2021 for Class D. Performance is through June 30, 2021 and assumes distributions are reinvested pursuant to the Fund’s dividend reinvestment plan. Amounts are not annualized. |
Recent Developments
COVID-19 Update
There is an ongoing global outbreak of COVID-19, which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States. The global impact of the outbreak has been rapidly evolving, and as cases of COVID-19, including new variants, have continued to be identified in additional countries, many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading, and limiting operations of non-essential businesses. Such actions have created disruption in global supply chains, and adversely impacted many industries. The outbreak has had a continued adverse impact on economic and market conditions and has triggered a period of global economic slowdown.
Although vaccines have been widely distributed in the U.S., certain U.S. states are planning on reopening and we believe the economy is beginning to rebound in certain respects, the uncertainty surrounding the COVID-19 pandemic, including uncertainty regarding new variants of COVID-19 and acceptance of vaccines
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and other factors have and may continue to contribute to significant volatility in the global markets. COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, financial condition, results of operations and ability to pay distributions.
Critical Accounting Policies
The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ.
Investments and Fair Value Measurements
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.
Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. The Fund utilizes mid-market pricing (i.e., mid-point of average bid and ask prices) to value these investments. These market quotations are obtained from independent pricing services, if available; otherwise from at least two principal market makers or primary market dealers.
Where prices or inputs are not available or, in the judgment of the Board, not reliable, valuation techniques based on the facts and circumstances of the particular investment will be utilized. Securities that are not publicly traded or for which market prices are not readily available are valued at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, the Audit Committee and independent valuation firms engaged on the recommendation of the Adviser and at the direction of the Board. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.
With respect to the quarterly valuation of investments, the Fund’s Board undertake a multi-step valuation process each quarter in connection with determining the fair value of our investments for which reliable market quotations are not readily available as of the last calendar day of each quarter, which includes, among other procedures, the following:
| • | The valuation process begins with each investment being preliminarily valued by the Adviser’s valuation team in conjunction with the Adviser’s investment professionals responsible for each portfolio investment; |
| • | In addition, independent valuation firms engaged by the Board prepare quarter-end valuations of such investments except de minimis investments, as determined by the Adviser. The independent valuation firms provide a final range of values on such investments to the Board and the Adviser. The independent valuation firms also provide analyses to support their valuation methodology and calculations; |
| • | The Adviser’s Valuation Committee reviews each valuation recommendation to confirm they have been calculated in accordance with the valuation policy and compares such valuations to the independent valuation firms’ valuation ranges to ensure the Adviser’s valuations are reasonable; |
| • | The Adviser’s Valuation Committee makes valuation recommendations to the Audit Committee; |
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| • | The Audit Committee reviews the valuation recommendations made by the Adviser’s Valuation Committee, including the independent valuation firms’ valuations, and once approved, recommends them for approval by the Board; and |
| • | The Board reviews the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Audit Committee, the Adviser’s Valuation Committee and, where applicable, the independent valuation firms and other external service providers. |
When the Fund determines its NAV as of the last day of a month that is not also the last day of a calendar quarter, the Fund intends to update the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, pursuant to authority delegated by the Board, the Adviser’s valuation team will generally value such assets at the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Adviser determines such a change has occurred with respect to one or more investments, the Adviser will determine whether to update the value for each relevant investment using a range of values from an independent valuation firm, where applicable, in accordance with the Fund’s valuation policy, pursuant to authority delegated by the Board. Additionally, the Adviser may otherwise determine to update the most recent quarter end valuation of an investment without reliable market quotations that the Adviser considers to be material to the Fund using a range of values from an independent valuation firm.
As part of the valuation process, the Board will take into account relevant factors in determining the fair value of our investments for which reliable market quotations are not readily available, many of which are loans, including and in combination, as relevant, of: (i) the estimated enterprise value of a portfolio company, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, (v) a comparison of the portfolio company’s securities to any similar publicly traded securities, and (vi) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Board or its delegates will consider whether the pricing indicated by the external event corroborates its valuation.
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date.
The fair value hierarchy under ASC 820 prioritizes the inputs to valuation methodology used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities. The three levels of the fair value hierarchy are as follows:
| • | Level 1: Inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including equities and derivatives, listed in active markets. |
| • | Level 2: Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities and certain over-the-counter derivatives where the fair value is based on observable inputs. |
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| • | Level 3: Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include debt and equity investments in privately held entities, collateralized loan obligations and certain over-the-counter derivatives where the fair value is based on unobservable inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurs.
The Fund’s accounting policy on the fair value of our investments is critical because the determination of fair value involves subjective judgments and estimates. Accordingly, the notes to the Fund’s consolidated financial statements express the uncertainty with respect to the possible effect of these valuations, and any change in these valuations, on the consolidated financial statements. See “Note 5. Fair Value Measurements” in our unaudited financial statements for the quarter ended June 30, 2021 for more information on the fair value of the Fund’s investments.
Interest and Dividend Income Recognition
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortizations of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including loan origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period.
Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.
Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
Income Taxes
The Fund elected to be treated as a BDC under the 1940 Act. The Fund also intends to elect to be treated as a RIC under the Code. So long as the Fund maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by BCRED would represent obligations of the Fund’s investors and would not be reflected in the consolidated financial statements of the Fund.
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The Fund evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
To qualify for and maintain qualification as a RIC, the Fund must, among other things, meet certain source-of-income and quarterly asset diversification requirements. In addition, to qualify for RIC tax treatment, the Fund must distribute to its shareholders, for each taxable year, at least 90% of the sum of (i) its “investment company taxable income” for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income.
In addition, based on the excise tax distribution requirements, the Fund is subject to a 4% nondeductible federal excise tax on undistributed income unless the Fund distributes in a timely manner in each taxable year an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Fund that is subject to corporate income tax is considered to have been distributed.
Legal Proceedings
We are not currently subject to any material legal proceedings, nor, to our knowledge, are any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, we do not expect that any such future proceedings will have a material effect upon our financial condition or results of operations.
Quantitative and Qualitative Disclosures About Market Risk.
Uncertainty with respect to the economic effects of the COVID-19 outbreak has introduced significant volatility in the financial markets, and the effect of the volatility could materially impact our market risks, including those listed below. We are subject to financial market risks, including valuation risk and interest rate risk.
Valuation Risk
We have invested, and plan to continue to invest, primarily in illiquid debt and equity securities of private companies. Most of our investments will not have a readily available market price, and we value these investments at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, our Audit Committee and independent third-party valuation firms engaged at the direction of the Board, and in accordance with our valuation policy. There is no single standard for determining fair value. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize amounts that are different from the amounts presented and such differences could be material.
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Interest Rate Risk
Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. We intend to fund portions of our investments with borrowings, and at such time, our net investment income will be affected by the difference between the rate at which we invest and the rate at which we borrow. Accordingly, we cannot assure shareholders that a significant change in market interest rates will not have a material adverse effect on our net investment income.
As of March 31, 2021, 98.2% of our debt investments at fair value were at floating rates. Based on our Consolidated Statements of Assets and Liabilities as of March 31, 2021, the following table shows the annualized impact on net income of hypothetical base rate changes in interest rates (considering base rate floors and ceilings for floating rate instruments assuming no changes in our investment and borrowing structure) (dollar amounts in thousands):
| Interest Income |
Interest Expense |
Net Income |
||||||||||
| Up 300 basis points |
$ | 135,961 | $ | (57,686 | ) | $ | 78,275 | |||||
| Up 200 basis points |
81,265 | (38,457 | ) | 42,808 | ||||||||
| Up 100 basis points |
26,793 | (19,229 | ) | 7,564 | ||||||||
| Down 100 basis points |
(3,134 | ) | 3,735 | 601 | ||||||||
| Down 200 basis points |
(3,134 | ) | 3,735 | 601 | ||||||||
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INVESTMENT OBJECTIVES AND STRATEGIES
We were formed on February 11, 2020, as a Delaware statutory trust. We were organized to invest primarily in originated loans and other securities, including syndicated loans, of private U.S. companies.
We have elected to be regulated as a BDC under the 1940 Act. We also intend to elect to be treated as soon as reasonably practical, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. As a BDC and a RIC, we will be required to comply with certain regulatory requirements.
Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We will seek to meet our investment objectives by:
| • | utilizing the experience and expertise of the management team of the Adviser, along with the broader resources of Blackstone Credit and Blackstone, in sourcing, evaluating and structuring transactions, subject to Blackstone’s policies and procedures regarding the management of conflicts of interest; |
| • | employing a defensive investment approach focused on long-term credit performance and principal protection, generally investing in loans with asset coverage ratios and interest coverage ratios that the Adviser believes provide substantial credit protection, and also seeking favorable financial protections, including, where the Adviser believes necessary, one or more financial maintenance covenants; |
| • | focusing on loans and securities of private U.S. companies, and to a lesser extent European and other non-U.S. companies. In many market environments, we believe such a focus offers an opportunity for superior risk-adjusted returns; |
| • | maintaining rigorous portfolio monitoring in an attempt to anticipate and pre-empt negative credit events within our portfolio; and |
| • | utilizing the power and scale of Blackstone and the Blackstone Credit platform to offer operational expertise to portfolio companies through the Blackstone Credit Advantage program. |
Our investment strategy is expected to capitalize on Blackstone Credit’s scale and reputation in the market as an attractive financing partner to acquire our target investments at attractive pricing. We also expect to benefit from Blackstone’s reputation and ability to transact in scale with speed and certainty, and its long-standing and extensive relationships with private equity firms that require financing for their transactions.
Under normal circumstances, we will invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in private credit investments (loans, bonds and other credit instruments that are issued in private offerings or issued by private companies).
Once we have invested a substantial amount of proceeds from this offering, under normal circumstances we expect that the majority of our portfolio will be in Private Credit. To a lesser extent, we will also invest in Opportunistic Credit. We expect that the Opportunistic Credit investments will generally be liquid, and may be used for the purposes of maintaining liquidity for our share repurchase program and cash management, while also presenting an opportunity for attractive investment returns.
Most of our investments will be in private U.S. companies, but (subject to compliance with BDCs’ requirement to invest at least 70% of its assets in private U.S. companies), we also expect to invest to some extent in European and other non-U.S. companies, but we do not expect to invest in emerging markets. We may invest in companies of any size or capitalization. Subject to the limitations of the 1940 Act, we may invest in loans or other securities, the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds. From time to time, we may co-invest with other Blackstone Credit funds. See “Regulation—Exemptive Relief.”
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As a BDC, at least 70% of our assets must be the type of “qualifying” assets listed in Section 55(a) of the 1940 Act, as described herein, which are generally privately-offered securities issued by U.S. private or thinly-traded companies. We may also invest up to 30% of our portfolio opportunistically in “non-qualifying” portfolio investments, such as investments in non-U.S. companies.
The loans in which we invest will generally pay floating interest rates based on a variable base rate. The senior secured loans, unitranche loans and senior secured bonds in which we will invest generally have stated terms of five to eight years, and the mezzanine, unsecured or subordinated debt investments that we may make will generally have stated terms of up to ten years, but the expected average life of such securities is generally between three and five years. However, there is no limit on the maturity or duration of any security we may hold in our portfolio. Loans and securities purchased in the secondary market will generally have shorter remaining terms to maturity than newly issued investments. We expect most of our debt investments will be unrated. Our debt investments may also be rated by a nationally recognized statistical rating organization, and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s Investors Service, Inc. or lower than “BBB-” by Standard & Poor’s Ratings Services). We expect that our unrated debt investments will generally have credit quality consistent with below investment grade securities. In addition, we may invest in CLOs and will generally have the right to receive payments only from the CLOs, and will generally not have direct rights against the underlying borrowers or entities that sponsored the CLOs.
We may, but are not required to, enter into interest rate, foreign exchange or other derivative agreements to hedge interest rate, currency, credit or other risks, but we do not generally intend to enter into any such derivative agreements for speculative purposes. Any derivative agreements entered into for speculative purposes are not expected to be material to the Fund’s business or results of operations. These hedging activities, which will be in compliance with applicable legal and regulatory requirements, may include the use of futures, options and forward contracts. We will bear the costs incurred in connection with entering into, administering and settling any such derivative contracts. There can be no assurance any hedging strategy we employ will be successful.
To seek to enhance our returns, we intend to employ leverage as market conditions permit and at the discretion of the Adviser, but in no event will leverage employed exceed the limitations set forth in the 1940 Act; which currently allows us to borrow up to a 2:1 debt to equity ratio. We intend to use leverage in the form of borrowings, including loans from certain financial institutions and may also issue debt securities. We may also use leverage in the form of the issuance of preferred shares, but do not currently intend to do so. In determining whether to borrow money, we will analyze the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook. Any such leverage, if incurred, would be expected to increase the total capital available for investment by the Fund. See “Risk Factors—Risk Related to Debt Financing.”
We have declared distributions each month beginning in January 2021 through the date of this prospectus and expect to continue to pay regular monthly distributions. Any distributions we make will be at the discretion of our Board of Trustees, considering factors such as our earnings, cash flow, capital needs and general financial condition and the requirements of Delaware law. As a result, our distribution rates and payment frequency may vary from time to time.
Our investments are subject to a number of risks. See “Risk Factors.”
The Adviser and the Administrator
The Fund’s investment activities will be managed by Blackstone Credit BDC Advisors LLC, an investment adviser registered with the SEC under the Advisers Act. Our Adviser will be responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis.
Blackstone Alternative Credit Advisors LP, as our Administrator, will provide, or oversee the performance of, administrative and compliance services, including, but not limited to, maintaining financial records,
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overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of our other service providers), preparing reports to shareholders and reports filed with the SEC, preparing materials and coordinating meetings of our Board of Trustees, managing the payment of expenses and the performance of administrative and professional services rendered by others and providing office space, equipment and office services.
The Adviser is an affiliate of Blackstone Credit and is led by substantially the same investment personnel as Blackstone Credit. As such, our Adviser has access to the broader resources of Blackstone Credit and Blackstone, subject to Blackstone’s policies and procedures regarding the management of conflicts of interest.
Blackstone is a leading global investment manager with total assets under management of $684 billion. Blackstone’s alternative asset management businesses include investment vehicles focused on private equity, real estate, insurance, hedge fund solutions, non-investment grade credit, secondary private equity funds of funds, infrastructure and multi-asset class strategies. Blackstone also provides capital markets services. Blackstone Credit is part of the credit platform of Blackstone. Blackstone Credit’s asset management operation has aggregate assets under management of approximately $163 billion across multiple strategies within the leveraged finance marketplace, including loans, high yield bonds, distressed and mezzanine debt and private equity, including hedge funds. Blackstone Credit has a global platform with 397 employees based in offices in New York, Houston, London and Dublin, and satellite offices in Baltimore, San Francisco, Toronto, Frankfurt, Milan, Munich and Madrid. Blackstone’s balance sheet is available here .
Our objective is to bring Blackstone Credit’s leading credit investment platform to the non-exchange traded BDC industry.
Blackstone Investment
An affiliate of Blackstone has invested approximately $25 million in our Common Shares through one or more private placement transactions. In addition, officers and employees of Blackstone and its affiliates have also invested $25.5 million in our Common Shares.
Market Opportunity
We believe that there are and will continue to be significant investment opportunities in the targeted asset classes discussed above.
Attractive Opportunities in Senior Secured Loans
We believe that opportunities in senior secured loans are significant because of the strong defensive characteristics of this asset class. While there is inherent risk in investing in any securities, senior secured debt is on the top of the capital structure and thus has priority in payment among an issuer’s security holders (i.e. senior secured debt holders are due to receive payment before junior creditors and equity holders). Further, these investments are secured by the issuer’s assets, which may be collateralized in the event of a default, if necessary. Senior secured debt often has restrictive covenants for the purpose of additional principal protection and ensuring repayment before junior creditors (i.e. most types of unsecured bondholders, and other security holders) and preserving collateral to protect against credit deterioration.
Opportunity in U.S. Private Companies
In addition to investing in senior secured loans generally, we believe that the market for lending to private companies, which includes the middle market private companies within the United States, is underserved and presents a compelling investment opportunity. We believe that the following characteristics support our belief:
Secular Tailwinds in the Private Market, Including Private Credit. One of the important drivers of growth in the strategy is the increasing secular tailwinds in the private markets (i.e., social or economic trends positively
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impacting private markets), including growing demand for private credit, which has created attractive opportunities for private capital providers like Blackstone Credit. As of June 2021, private equity funds with strategies focused on leveraged buyouts in North America had approximately $571.5 billion of “dry powder” (uncalled capital commitments), which should similarly drive demand for private capital providers like Blackstone Credit.1 This shift is partially due to traditional banks continuing to face regulatory limitations and retreating from the space, creating a vacuum that private credit helps to fill. Further, financial sponsors and companies are becoming increasingly interested in working directly with private lenders as they are seeing benefits versus accessing the public credit markets. Some of these benefits include faster execution and greater certainty, ability to partner with sophisticated lenders, more efficient process, and in some instances fewer regulatory requirements. As a result, Blackstone Credit benefits from increasing flow of larger scale deals that are offered to direct lending universe versus traditional financing markets.
Attractive Market Segment. We believe that the underserved nature of such a large segment of the market can at times create a significant opportunity for investment. In many environments, we believe that private companies are more likely to offer attractive economics in terms of transaction pricing, up-front and ongoing fees, prepayment penalties and security features in the form of stricter covenants and quality collateral than loans to public companies. In addition, as compared to larger companies, middle market companies often have simpler capital structures and carry less leverage, thus aiding the structuring and negotiation process and allowing us greater flexibility in structuring favorable transactions. We believe that these factors will result in advantageous conditions in which to pursue our investment objectives of generating current income and, to a lesser extent, long-term capital appreciation.
Limited Investment Competition. Despite the size of the overall corporate credit market, we believe that regulatory changes and other factors, some of which are discussed above, have diminished the role of traditional financial institutions and certain other capital providers in providing financing to companies. As tracked by S&P Capital IQ LCD, U.S. banks’ share of senior secured loans has declined from 33.1% in 1995 to 7.5% as of June 30, 2021. In addition, due to bank consolidation, the number of banks has also rapidly declined, furthering the lack of supply in financing to private companies. As of September 30, 2020, there were approximately 4,375 banks in the U.S., which was only one-third of the number of banks in 1984 (see Federal Reserve Economic Data as of December 2020).
We also believe that lending and originating new loans to private companies generally requires a greater dedication of the lender’s time and resources compared to lending to public companies, due in part to the size of each investment and the often fragmented nature of information available from these companies. Further, we believe that many investment firms lack the breadth and scale necessary to identify investment opportunities, particularly in regards to directly originated investments in private companies, and thus attractive investment opportunities are often overlooked.
Growing Opportunities in Europe. We believe the market for European direct lending provides attractive opportunities. In recent years, we have continued to see a growing number of corporate carve-outs and divestitures driven by pressure on European public companies from activists, streamlining of operations, and sustained pressure from European competition authorities. This creates a source of deal flow that we believe Blackstone Credit is uniquely placed to execute. We further believe that the strong fundraising environment globally for private equity over the past few years will also continue to drive deal flow for European originated transactions. We anticipate that many of our opportunities to provide originated loans or other financing will be in connection with leveraged buy-outs by private equity firms. Private equity dry powder (uncalled capital commitments) currently stands at over $1 trillion, which means that these private equity firms have a large amount of capital available to conduct transactions, which we believe will create debt financing opportunities for us. Although we believe the alternative credit market in Europe is still somewhat less developed compared to its U.S. counterpart, acceptance of private capital in Europe has grown substantially in recent years. Across the U.S. and Europe, we believe Blackstone Credit has the ability to take advantage of a dislocation in capital markets as a
| 1 | Source: Preqin, June 2021. Represents dry powder (uncalled capital commitments) for private equity buyouts in North America. |
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result of volatility by providing financing solutions, including anchoring loan syndications, originating loans
where traditional banks are unwilling or unable to do so, or buying investments in the secondary market, all of which we may be able to do on more attractive terms in times of market disruption than would otherwise be available. This deployment of capital via a market dislocation strategy remains firmly within Blackstone Credit’s investment philosophy—focusing on performing companies where Blackstone Credit has enhanced access and a due diligence advantage.
Blackstone Credit Strengths
Blackstone Credit is one of the largest private credit investment platforms globally and a key player in the direct lending space. Blackstone Credit has experience scaling funds across its platform that invest throughout all parts of the capital structure. Blackstone Credit strives to focus on transactions where it can differentiate itself from other providers of capital, targeting large transactions and those where Blackstone Credit can bring its expertise and experience in negotiating and structuring. We believe that Blackstone Credit has the scale and platform to effectively manage a U.S. private credit investment strategy, offering investors the following potential strengths:
Ability to Provide Scale, Differentiated Capital Solutions. We believe that the breadth and scale of Blackstone Credit’s approximately $163 billion platform and affiliation with Blackstone are distinct strengths when sourcing proprietary investment opportunities and provide Blackstone Credit with a differentiated capability to invest in large, complex opportunities.2 Blackstone Credit is invested in over 2,100 corporate issuers across its portfolios globally and has focused primarily on the non-investment grade corporate credit market since its inception in 2005.3 Blackstone Credit expects that in the current environment, in which committed capital from banks remains scarce (as tracked by S&P Capital IQ LCD, U.S. banks’ share of senior secured loans has declined from 33.1% in 1995 to 7.5% as of June 30, 2021), the ability to provide flexible, well-structured capital commitments in appropriate sizes will enable Blackstone Credit to command more favorable terms for its investments.
Blackstone Credit seeks to generate investment opportunities through its direct origination channels and through syndicate and club deals (generally, investments made by a small group of investment firms). With respect to Blackstone Credit’s origination channel, we seek to leverage the global presence of Blackstone Credit to generate access to a substantial amount of directly originated transactions with attractive investment characteristics. We believe that the broad network of Blackstone Credit provides a significant pipeline of investment opportunities for us. With respect to syndicate and club deals, Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. Blackstone Credit also has a significant trading platform, which, we believe, allows us access to the secondary market for investment opportunities.
Established Origination Platform with Strong Credit Expertise. As of June 30, 2021, Blackstone Credit had 397 employees globally, including 196 investment professionals. Blackstone Credit’s 97-person private origination investment team (excluding Dwight Scott, global head of Blackstone Credit), together with a 13-person U.S. Direct Lending Portfolio Management team, are involved with investment activities and portfolio management activities for the Fund, respectively. Blackstone Credit’s senior managing directors have on average ~24 years of industry experience. Since inception, Blackstone Credit has originated approximately $87 billion in
| 2 | Blackstone was ranked as the third largest private debt firm in the world by Private Debt Investor in 2020 (see https://www.privatedebtinvestor.com/pdi-50-the-top-10/). Private Debt Investor ranks firms by tracking all the capital raised by firms over the past five years through closed-end funds and separately managed accounts. |
| 3 | As of June 30, 2021. Issues across portfolios include all corporate issues covered by both the Liquid Credit Strategies and Private Credit research teams across Private Credit Funds and Liquid Credit Funds, including, but not limited to, broadly syndicated assets, middle market assets, high yield bonds, investment grade assets, and mezzanine transactions. |
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private credit transactions and during the period beginning June 30, 2020 and ending on June 30, 2021, Blackstone Credit originated approximately $20.0 billion in private credit transactions.4 We believe that Blackstone Credit’s strong reputation and longstanding relationships with corporate boards, management teams, leveraged buyout sponsors, financial advisors, and intermediaries position Blackstone Credit as a partner and counterparty of choice and provides us with attractive sourcing capabilities. In Blackstone Credit’s experience, these relationships help drive substantial proprietary deal flow and insight into investment opportunities.
Blackstone Credit believes that having one team responsible for alternatives private origination allows it to leverage the strengths and experiences of investment professionals to deliver the leading financing solutions to our companies. The team has operated through multiple industry cycles, with deep credit expertise, providing them valuable experience and a long-term view of the market. The team is also focused on making investments in so called “good neighborhoods”, which are industries experiencing favorable tailwinds, such as life sciences, software& technology, and renewable energy. In addition, the team is able to leverage the expertise of other parts of Blackstone’s business that specialize in these fields.
Additionally, over the last several years, Blackstone Credit has also expanded its U.S. origination and sponsor coverage footprint with regional offices opened in select markets. Blackstone Credit has investment professionals across the U.S. and Europe and has developed a reputation for being a valued partner, with the ability to provide speed, creativity, and assurance of transaction execution. We believe that establishing this regional presence in the U.S. may help us more effectively source investment opportunities from mid-sized leveraged buyout sponsors as well as direction from companies, while potentially strengthening the Blackstone Credit brand.
Value-Added Capital Provider and Partner Leveraging the Blackstone Credit Advantage Program. Blackstone Credit has established a reputation for providing creative, value-added solutions to address a company’s financing requirements and believes our ability to solve a need for a company can lead to attractive investment opportunities. In addition, Blackstone Credit has access to the significant resources of the Blackstone platform, including Blackstone Advantage, which refers to the active management of the Blackstone portfolio company network, including cross-selling efforts across all of Blackstone, and aims to ensure practice sharing, operational, and commercial synergies among portfolio companies, effective deployment of Blackstone resources, and communication of the program with businesses and partners, and Blackstone Credit Advantage, which is a global platform that provides access to a range of cost saving, revenue generating and best practice sharing opportunities. Specifically, Blackstone Credit Advantage provides (i) partnership and best practices for portfolio companies by offering invaluable access to industry and function experts both within the Blackstone organization (including the Blackstone Portfolio Operations team) and the network among portfolio companies; (ii) cross selling opportunities across Blackstone and Blackstone Credit portfolio companies; (iii) industry knowledge via leadership summits and roundtables; and (iv) quarterly reports sharing meaningful insights from CEOs on business and economic trends. Finally, one of the most important benefits of the program is Blackstone’s GPO, which is a collective purchasing platform that leverages the scale and buying power of the $5 billion of average annual spending of Blackstone’s portfolio companies with strategic partners and vendors measured over the past ten years. Blackstone and Blackstone Credit portfolio companies have generated significant cost savings through their use of the GPO, ranging from 3% to 40%, often from existing suppliers, on maintenance, repair, operations, back office, information technology, hardware, software, telecommunications, business insurance and human resources, among others. The benefits of working with Blackstone’s GPO can include improved pricing and terms, differentiated service, and ongoing service that drops straight to the bottom line. As of June 30, 2021, Blackstone Advantage has grown revenue by over $100 million for Blackstone portfolio companies and Blackstone Credit Advantage has reduced annual costs by $167 million. Over 70% of Blackstone Credit portfolio companies have used Blackstone Credit Advantage, which also has a team of 63 internal Blackstone resources available to such portfolio companies.
| 4 | As of June 30, 2021. Includes Blackstone Credit funds that are primarily invested in privately originated investments, including Blackstone Capital Opportunities Funds, Blackstone Capital Solutions Funds, Blackstone European and U.S. Direct Lending Funds, Blackstone Energy Select Opportunities Fund, and Blackstone Credit Alpha Funds. |
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Flexible Investment Approach. Blackstone Credit believes that the ability to invest opportunistically throughout a capital structure is a meaningful strength when sourcing transactions and enables the Fund to seek investments that provide the best risk/return proposition in any given transaction. Blackstone Credit’s creativity and flexibility with regard to deal-structuring distinguishes it from other financing sources, including traditional mezzanine providers, whose investment mandates are typically more restrictive. Over time, Blackstone Credit has demonstrated the ability to negotiate favorable terms for its investments by providing creative structures that add value for an issuer. Blackstone Credit will continue to seek to use this flexible investment approach to focus on principal preservation, while generating attractive returns throughout different economic and market cycles.
Long-Term Investment Horizon. Our long-term investment horizon gives us great flexibility, which we believe allows us to maximize returns on our investments. Unlike most private equity and venture capital funds, as well as many private debt funds, we will not be required to return capital to our shareholders once we exit a portfolio investment. We believe that freedom from such capital return requirements, which allows us to invest using a long-term focus, provides us with an attractive opportunity to increase total returns on invested capital.
Disciplined Investment Process and Income-Oriented Investment Philosophy. Blackstone Credit employs a rigorous investment process and defensive investment approach to evaluate all potential opportunities with a focus on long-term credit performance and principal protection. We believe Blackstone Credit has generated attractive risk-adjusted returns in its investing activities throughout many economic and credit cycles by (i) maintaining its investment discipline; (ii) performing intensive credit work; (iii) carefully structuring transactions; and (iv) actively managing its portfolios. Blackstone Credit’s investment approach involves a multi-stage selection process for each investment opportunity, as well as ongoing monitoring of each investment made, with particular emphasis on early detection of deteriorating credit conditions at portfolio companies which would result in adverse portfolio developments. This strategy is designed to maximize current income and minimize the risk of capital loss while maintaining the potential for long-term capital appreciation. Additionally, Blackstone Credit’s senior investment professionals have dedicated their careers to the leveraged finance and private equity sectors and we believe that their experience in due diligence, credit analysis and ongoing management of investments is invaluable to the success of the U.S. direct lending investment strategy that we will employ. Blackstone Credit targets businesses with leading market share positions, sustainable barriers to entry, high free cash flow generation, strong asset values, liquidity to withstand market cycles, favorable underlying industry trends, strong internal controls and high-quality management teams.
Strong Investment Track Record. Blackstone Credit’s track record in private debt lending and investing in below investment grade credit dates back to the inception of Blackstone Credit. Since 2005, Blackstone Credit has provided approximately $87 billion in capital in privately-originated transactions with over 120 different sponsors,5 through various funds and accounts advised or sub-advised by Blackstone Credit. Blackstone Credit has approximately $118 billion of investor capital currently deployed.6
| 5 | As of June 30, 2021. Includes Blackstone Credit funds that are primarily invested in privately originated investments, including Blackstone Capital Opportunities Funds, Blackstone Capital Solutions Funds, Blackstone European and U.S. Direct Lending Funds, Blackstone Energy Select Opportunities Fund, and Blackstone Credit Alpha Funds. |
| 6 | As of June 30, 2021. Investor capital currently deployed consists of fee earning assets under management of $79 billion for Liquid Credit Strategies, $34 billion for Private Credit and other liquid funds (inclusive of leverage), and $5 billion for Structured Products. |
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The Board of Trustees
Overall responsibility for the Fund’s oversight rests with the Board of Trustees. We have entered into the Advisory Agreement with the Adviser, pursuant to which the Adviser will manage the Fund on a day-to-day basis. The Board of Trustees is responsible for overseeing the Adviser and other service providers in our operations in accordance with the provisions of the 1940 Act, the Fund’s bylaws and applicable provisions of state and other laws. The Adviser will keep the Board of Trustees well informed as to the Adviser’s activities on our behalf and our investment operations and provide the Board of Trustees information with additional information as the Board of Trustees may, from time to time, request. The Board of Trustees is currently composed of six members, four of whom are Trustees who are not “interested persons” of the Fund or the Adviser as defined in the 1940 Act.
Investment Selection
When identifying prospective investment opportunities, the Adviser currently intends to rely on fundamental credit analysis in order to minimize the loss of the Fund’s capital. The Adviser expects to invest in companies possessing the following attributes, which it believes will help achieve our investment objective:
Leading, Defensible Market Positions. The Adviser intends to invest in companies that it believes have developed strong positions within their respective markets and exhibit the potential to maintain sufficient cash flows and profitability to service their obligations in a range of economic environments. The Adviser will seek companies that it believes possess advantages in scale, scope, customer loyalty, product pricing or product quality versus their competitors, thereby minimizing business risk and protecting profitability.
Proven Management Teams. The Adviser intends to focus on investments in which the target company has an experienced and high-quality management team with an established track record of success. The Adviser will typically require companies to have in place proper incentives to align management’s goals with the Fund’s goals.
Private Equity Sponsorship. Often the Adviser will seek to participate in transactions sponsored by what it believes to be high-quality private equity firms. The Adviser believes that a private equity sponsor’s willingness to invest significant sums of equity capital into a company is an implicit endorsement of the quality of the investment. Further, private equity sponsors of companies with significant investments at risk generally have the ability and a strong incentive to contribute additional capital in difficult economic times should operational issues arise, which could provide additional protections for our investments.
Diversification. The Adviser will seek to invest broadly among companies and industries, thereby potentially reducing the risk of a downturn in any one company or industry having a disproportionate impact on the value of the Fund’s portfolio.
Viable Exit Strategy. In addition to payments of principal and interest, we expect the primary methods for the strategy to realize returns on our investments include refinancings, sales of portfolio companies, and in some cases initial public offerings and secondary offerings. While many debt instruments in which we will invest have stated maturities of five to eight years, virtually all are redeemed or sold prior to maturity. These instruments often have call protection that requires an issuer to pay a premium if it redeems in the early years of an investment. The Investment Team regularly reviews investments and related market conditions in order to determine if an opportunity exists to realize returns on a particular investment. We believe the ability to utilize the entire resources of Blackstone Credit, including the public market traders and research analysts, allows the Adviser to gain access to current market information where the opportunity may exist to sell positions into the market at attractive prices.
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Investment Process Overview
Our investment activities are managed by our Adviser. The Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis.
The investment professionals employed by Blackstone Credit have spent their careers developing the resources necessary to invest in private companies. Our transaction process is highlighted below.
Sourcing and Origination
In order to source transactions, the Adviser utilizes its significant access to transaction flow, along with its trading platform. The Adviser seeks to generate investment opportunities primarily through direct origination channels, and also through syndicate and club deals. With respect to Blackstone Credit’s origination channel, the global presence of Blackstone Credit generates access to a substantial amount of directly originated transactions with what we believe to be attractive investment characteristics. With respect to syndicate and club deals, Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. We believe that Blackstone Credit’s strong reputation and longstanding relationships with its broad network will help drive substantial proprietary deal flow and provide a significant pipeline of investment opportunities for us.
Evaluation
Initial Review. The Investment Team examines information furnished by the target company and external sources, including banks, advisors and rating agencies, if applicable, to determine whether the investment meets our basic investment criteria within the context of proper allocation of our portfolio among various issuers and industries, and offers an acceptable probability of attractive returns with identifiable downside risk. In the case of directly originated transactions, Blackstone Credit conducts detailed due diligence investigations. For the majority of securities available on the secondary market, a comprehensive analysis is conducted and continuously maintained by a dedicated Blackstone Credit research analyst, the results of which are available for the transaction team to review.
Credit Analysis/Due Diligence. Before undertaking an investment, the Investment Team conducts a thorough and rigorous due diligence review of the opportunity to ensure the company fits our investment strategy for originated investments, which may include:
| • | a full operational analysis to identify the key risks and opportunities of the target’s business, including a detailed review of historical and projected financial results; |
| • | a detailed analysis of industry and customer dynamics, competitive position, regulatory, tax, legal and environmental, social and governance matters; |
| • | on-site visits and customer and supplier reference calls, if deemed necessary; |
| • | background checks to further evaluate management and other key personnel; |
| • | a review by legal and accounting professionals, environmental or other industry consultants, if necessary; |
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| • | financial sponsor due diligence, including portfolio company and lender reference checks, if necessary; and |
| • | a review of management’s experience and track record. |
Third parties are often involved in the Adviser’s due diligence process, whether they are hired by the Adviser or by the lead sponsor in a transaction. Utilizing consultants to help evaluate a business and test an investment thesis is typically very beneficial. When possible, the Adviser seeks to structure transactions in such a way that our target companies are required to bear the costs of due diligence, including those costs related to any outside consulting work we may require.
The foregoing initial assessment is then followed by extensive credit analysis, including asset valuation, financial analysis, cash flow analysis and scenario analysis, legal and accounting review, and comparable credit and equity analyses. A thorough assessment of structure and leverage of a transaction and how the particular investment fits into the overall investment strategy of the portfolio is conducted. Blackstone Credit’s typical diligence process for an originated investment opportunity spans two to six months, from the initial screen through final approval and funding. Depending on the deal, each investment team typically consists of three to four investment professionals, consisting of a portfolio manager, managing director, principal or vice president and associate and / or analyst.
Blackstone Credit’s due diligence emphasizes the following key criteria to facilitate decisions by the Investment Committee (described below) on an investment:
| • | Valuation: What is the intrinsic value of the business? How has the business historically generated returns on capital? Will these returns continue in the future? What growth opportunities does the business have, if any? And, most importantly, is the investment being purchased at a deep discount to long-term intrinsic value? |
| • | Return Hurdles: Is the investment expected to generate a rate of return that meets the Fund’s objectives? |
| • | Risk of Principal Loss & Risk/Reward: What is the expected recovery in a severe downside case? Does the expected upside appropriately compensate for risk of loss? |
| • | Company Analysis: Does the business have a reason to exist? Does it provide needed products and services? Does it have strong business characteristics such as high relative market share and a defensible niche? |
| • | Industry Analysis: What is the expected time and depth of cyclical downturn? Is the distress related to cyclical or secular issues? Is there a favorable industry structure with respect to customers, suppliers and regulation? |
| • | Due Diligence: Do we have sufficient information to make an informed investment decision? |
| • | Catalyst: What steps are required to complete a reorganization, eliminate financial distress, gain control and implement improved business strategies? |
| • | Exit Plan: Do we expect refinancings, a sale of the company, or other exit opportunities? |
Investment Committee Process. The Investment Committee review process is multi-step and iterative, and occurs in parallel with the diligence and structuring of investments. The initial investment screening process involves an Investment Committee heads-up (the “Heads-Up”) review presentation by the portfolio manager and members of the investment team. The Heads-Up review involves the production of a short memo with a focus on the following diligence items: an early diligence review of the underlying business fundamentals; expected return potential; expected investment size; assessment of key risks; and an appropriate initial diligence plan. At this point in the decision-making process, the Investment Committee will decide whether or not the Investment Team should proceed with deeper diligence on the investment opportunity.
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Once in-depth diligence has begun, the investment team presents updates at the weekly Investment Committee meetings. The senior team reviews all activity for the prior week, with a focus on detailed updates of ongoing situations and in-depth review of all new investment opportunities. The type of diligence materials reviewed at these meetings for each company may include, but are not limited to:
| • | Detailed historical financial performance |
| • | Financial models with detailed revenue drivers |
| • | This includes the construction of a base case, a downside case and specifically tailored cases. This process includes probability-weighted analysis and a range of outcomes analysis. |
| • | Quarterly liquidity analyses |
| • | Industry analysis incorporating internal and external work from research analysts and industry consultants |
| • | Competitive position and market share analysis |
| • | Customer analysis, including revenue, profitability and concentration risk |
| • | Pricing and volume analyses |
| • | Detailed fixed vs. variable cost analysis, and line item analysis of cost of goods sold as well as selling, general and administrative expenses |
| • | Public and private credit and equity comparable analysis |
| • | Accounting quality of earnings analysis |
| • | Legal due diligence |
The ultimate results and findings of the investment analysis are compiled in comprehensive investment memoranda that are used as the basis to support the investment thesis and are utilized by the Investment Committee (or the applicable delegates or sub-committees as described below) for final investment review and approval. Each investment requires the consent of the Investment Committee, which may emphasize the following key criteria (among others) in making a decision:
| • | Company Analysis: Does the company meet the investment criteria defined by the “Blackstone Credit Scorecard”?: |
| • | Leading market share position |
| • | Sustainable barriers to entry that drive pricing power |
| • | High-quality management team |
| • | Stable financials: strong free cash flow generation, high earnings before interest and tax margins |
| • | Conservative capital structure with underlying equity value |
| • | Liquidity to withstand market cycles |
| • | Industry Analysis: Is there a favorable industry structure with respect to customers, suppliers and regulation? |
| • | Due Diligence: Have we fully diligenced each of the investment criteria specified by the Blackstone Credit Scorecard? Have we completely vetted each of the risk factors identified throughout the diligence and Investment Committee process? |
| • | Valuation: What is the intrinsic value of the business? How has the business historically generated returns on capital? Will these returns continue in the future? What growth opportunities does the business have, if any? Is there substantial equity value to support the capital structure? |
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| • | Risk of Principal Loss & Risk/Reward: What is the expected recovery in a severe downside case? Does the expected upside appropriately compensate for risk of loss? |
| • | Return Hurdles: Is the investment expected to generate a rate of return that meets the Fund’s objectives? |
| • | Exit Plan: Do we expect refinancings, a sale of the company, or other exit opportunities? |
The Investment Committee utilizes a consensus-driven approach and currently consists of the following senior investment professionals: Dwight Scott, Brad Marshall, Steve Kuppenheimer, Rob Zable, Michael Zawadzki, Dan Smith, Rob Horn, Rob Petrini, Louis Salvatore and Paulo Eapen. Others who participate in the Investment Committee process include the members of the Investment Team responsible for sourcing, analyzing and conducting due diligence on the investment and other senior members of Blackstone Credit. For certain investments, generally smaller investments where the Fund is participating alongside other lenders in a “club” deal, providing an anchor order or purchasing broadly syndicated loans, the Investment Committee has delegated the authority to make an investment decision to a sub-committee of the full Investment Committee. For broadly syndicated loan investments made by the Fund alongside funds within Blackstone Credit’s Liquid Credit Strategies, the portfolio managers of the Fund may conduct a joint investment committee with the Liquid Credit Strategies business that follows the investment committee process for the Liquid Credit Strategies business in lieu of the Investment Committee process described above. There are no representatives from other business groups of Blackstone involved in the Fund’s Investment Committee process.
Monitoring
Portfolio Monitoring. Active management of our investments is performed by the team responsible for making the initial investment. The Adviser believes that actively managing an investment allows the Investment Team to identify problems early and work with companies to develop constructive solutions when necessary. The Adviser will monitor our portfolio with a focus toward anticipating negative credit events. In seeking to maintain portfolio company performance and help to ensure a successful exit, the Adviser will work closely with, as applicable, the lead equity sponsor, loan syndicator, portfolio company management, consultants, advisers and other security holders to discuss financial position, compliance with covenants, financial requirements and execution of the company’s business plan. In addition, depending on the size, nature and performance of the transaction, we may occupy a seat or serve as an observer on a portfolio company’s board of directors or similar governing body.
Typically, Blackstone Credit will receive financial reports detailing operating performance, sales volumes, margins, cash flows, financial position and other key operating metrics on a quarterly basis from portfolio companies. Blackstone Credit will use this data, combined with due diligence gained through contact with the company’s customers, suppliers, competitors, market research and other methods, to conduct an ongoing, rigorous assessment of the company’s operating performance and prospects.
Watch List. Typically for its portfolio companies, Blackstone Credit establishes at closing a number of reporting and management tools. These tools include regular reporting on portfolio composition and reporting, calls with CEOs and detailed reports and calls with senior management on a regular basis, and quarterly in-person board meetings and board presentations. All reports and presentations are designed with Blackstone Credit input based on its past experience with private investments. These tools allow Blackstone Credit to identify problems quickly and work to fix them before they impair an investment. In addition, Blackstone Credit maintains a “watch list” for each business under-performing its expectations. Blackstone Credit seeks to approach each situation with the view that working closely with senior management and the shareholders of the company on strategies to remedy problems will ultimately maximize value realization. When, in order to maximize our recovery, Blackstone Credit is forced to take positions inconsistent with the company’s shareholders, Blackstone Credit expects to act quickly to enforce its rights.
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Blackstone Credit strives to position itself to be able to identify and manage the process surrounding a troubled portfolio company. When companies under-perform, Blackstone Credit generally increases its involvement in the business and works closely with senior management to develop plans to help get performance on track. Blackstone Credit will request more information and will enhance our information quality so that we are aware of any developments. Blackstone Credit’s Investment Committee process is designed to identify red flags of a potential opportunity early and to leverage the collective knowledge of its prior experiences. Blackstone Credit believes that vetting all investments through its Investment Committee, which has deep expertise across industries, differentiates Blackstone Credit and can help it avoid mistakes. Additionally, Blackstone Credit may provide guidance on key management hires or supplement the portfolio company’s board with relevant industry people that Blackstone Credit has worked with previously to engage more deeply in the operations of a portfolio company. Additionally, the GPO team can be leveraged to help reduce costs and augment key leadership positions.
Default/Workout. An important element of Blackstone Credit’s strategy for originated investments is to attempt to structure investments in a manner such that Blackstone Credit will control negotiations should an issuer violate covenants or need to restructure its balance sheet. Blackstone Credit believes that this is typically achieved by ensuring that an investment is at or above the “fulcrum” security, if a restructuring were to occur. A fulcrum security is the security in a company’s capital structure that, if the company were to be liquidated, would be partially repaid. Generally, securities more senior than the fulcrum security would typically be fully repaid in such a liquidation and securities more junior than the fulcrum security would typically receive no recovery in a liquidation. If an investment should default, Blackstone Credit believes it has ample resources necessary to take a company through a restructuring, as many of its investment professionals have restructuring backgrounds.
The Blackstone Credit deal team, along with other creditors and outside counsel, will be responsible for monitoring any defaulting portfolio companies and driving the restructuring processes thereafter. The same Investment Team members who originate an investment remain actively involved, from sourcing through diligence, execution and ongoing management all the way to exit. In the case that an investment requires a heavy workout that results in a board seat and more operational involvement, Blackstone Credit may dedicate or add a senior investment professional to solely focus on the workout situation. This individual will get involved and run the full workout process to allow the other deal team members to focus on new origination and other portfolio companies. Any investment undergoing a workout will also be discussed with portfolio management and the Investment Committee on a regular basis.
Valuation Process. Each quarter, we will value investments in our portfolio, and such values will be disclosed each quarter in reports filed with the SEC. Investments for which market quotations are readily available are recorded at such market quotations. With respect to investments for which market quotations are not readily available, a valuation committee appointed by the Board of Trustees will assist the Board of Trustees in determining the fair value of such investments in good faith, based on procedures adopted by and subject to the supervision of the Board of Trustees.
Managerial Assistance. As a BDC, we must offer, and provide upon request, significant managerial assistance to certain of our portfolio companies except where the Fund purchases securities of an issuer in conjunction with one or more other persons acting together, one of the other persons in the group makes available such managerial assistance. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance, including through the Blackstone Credit Advantage program. The Adviser and the Administrator will provide such managerial assistance on our behalf to portfolio companies that request this assistance. To the extent fees are paid for these services, we, rather than the Adviser, will retain any fees paid for such assistance.
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Exit
In addition to payments of principal and interest, we expect the primary methods for the strategy to realize returns on its investments include refinancings, sales of portfolio companies, and in some cases initial public offerings and secondary offerings. While many debt securities in which we will invest have stated maturities of five to eight years, based on Blackstone Credit’s past experience, we believe most of these securities will be redeemed or sold prior to maturity. These securities often have call protection that requires an issuer to pay a premium if it redeems in the early years of an investment. However, there is no assurance that our investments will achieve realization events as a result of refinancings, sales of portfolio companies or public offerings and these realization events will become more unlikely when conditions in the loan and capital markets have deteriorated.
The Investment Team regularly reviews investments and related market conditions in order to determine if an opportunity exists to realize returns on a particular investment. We believe the Adviser’s ability to utilize the entire resources of Blackstone Credit, including the public market traders and research analysts, allows the Adviser to gain access to current market information where the opportunity may exist to sell positions into the market at attractive price.
Allocation of Investment Opportunities
General
Blackstone Credit, including the Adviser, provides investment management services to other BDCs, registered investment companies, investment funds, client accounts and proprietary accounts that Blackstone Credit may establish.
Blackstone Credit will share any investment and sale opportunities with its other clients and the Fund in accordance with the Advisers Act and firm-wide allocation policies, which generally provide for sharing pro rata based on targeted acquisition size or targeted sale size. Subject to the Advisers Act and as further set forth in this prospectus, certain other clients may receive certain priority or other allocation rights with respect to certain investments, subject to various conditions set forth in such other clients’ respective governing agreements. In addition, we expect to offer opportunities appropriate for the Fund to subsidiaries not wholly owned by the Fund, which will result in the Fund having less exposure to such assets than it otherwise would have.
In addition, as a BDC regulated under the 1940 Act, the Fund is subject to certain limitations relating to co-investments and joint transactions with affiliates, which likely in certain circumstances limit the Fund’s ability to make investments or enter into other transactions alongside other clients.
Co-Investment Relief
We have in the past co-invested, and in the future may co-invest, with certain affiliates of the Adviser. We have received an exemptive order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. Pursuant to such order, the Fund’s Board of Trustees may establish Board Criteria clearly defining co-investment opportunities in which the Fund will have the opportunity to participate with one or more listed or private Blackstone Credit BDCs, and other public or private Blackstone Credit funds that target similar assets. If an investment falls within the Board Criteria, Blackstone Credit must offer an opportunity for the Blackstone Credit BDCs to participate. The Blackstone Credit BDCs may determine to participate or not to participate, depending on whether Blackstone Credit determines that the investment is appropriate for the Blackstone Credit BDCs (e.g., based on investment strategy). The co-investment would generally be allocated to us, any other Blackstone Credit BDCs (including Blackstone Secured Lending Fund) and the other Blackstone Credit funds that target similar assets pro rata based on available capital in the applicable asset class. If the Adviser determines that such investment is not appropriate
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for us, the investment will not be allocated to us, but the Adviser will be required to report such investment and the rationale for its determination for us to not participate in the investment to the Board of Trustees at the next quarterly board meeting.
Competition
We will compete for investments with other BDCs and investment funds (including private equity funds, mezzanine funds, performing and other credit funds, and funds that invest in CLOs, structured notes, derivatives and other types of collateralized securities and structured products), as well as traditional financial services companies such as commercial banks and other sources of funding. These other BDCs and investment funds might be reasonable investment alternatives to us and may be less costly or complex with fewer and/or different risks than we have. Moreover, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not traditionally invested, including making investments in mid-sized private U.S. companies. As a result of these new entrants, competition for investment opportunities in private U.S. companies may intensify. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms or structure. If we are forced to match our competitors’ pricing, terms or structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the market for investments in middle market private U.S. companies is underserved by traditional commercial banks and other financial sources. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC.
Non-Exchange Traded, Perpetual-Life BDC
The Fund is non-exchange traded, meaning its shares are not listed for trading on a stock exchange or other securities market and a perpetual-life BDC, meaning it is an investment vehicle of indefinite duration, whose common shares are intended to be sold by the BDC monthly on a continuous basis at a price generally equal to the BDC’s monthly NAV per share. In our perpetual-life structure, we may offer investors an opportunity to repurchase their shares on a quarterly basis, but we are not obligated to offer to repurchase any in any particular quarter in our discretion. We believe that our perpetual nature enables us to execute a patient and opportunistic strategy and be able to invest across different market environments. This may reduce the risk of the Fund being a forced seller of assets in market downturns compared to non-perpetual funds. While we may consider a liquidity event at any time in the future, we currently do not intend to undertake a liquidity event, and we are not obligated by our charter or otherwise to effect a liquidity event at any time.
Employees
We do not currently have any employees and do not expect to have any employees. Services necessary for our business are provided by individuals who are employees of the Adviser or its affiliates pursuant to the terms of the Advisory Agreement and the Administrator or its affiliates pursuant to the Administration Agreement. Each of our executive officers described under “Management of the Fund” is employed by the Adviser or its affiliates. Our day-to-day investment operations will be managed by the Adviser. The services necessary for the sourcing and administration of our investment portfolio will be provided by investment professionals employed by the Adviser or its affiliates. The Investment Team will focus on origination, non-originated investments and transaction development and the ongoing monitoring of our investments. In addition, we will reimburse the Administrator for its costs, expenses and allocable portion of overhead, including compensation paid by the
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Administrator (or its affiliates) to the Fund’s chief compliance officer and chief financial officer and their respective staffs as well as other administrative personnel (based on the percentage of time such individuals devote, on an estimated basis, to the business and affairs of the Fund).
Regulation as a BDC
The following discussion is a general summary of the material prohibitions and descriptions governing BDCs generally. It does not purport to be a complete description of all of the laws and regulations affecting BDCs.
Qualifying Assets. Under the 1940 Act, a BDC may not acquire any asset other than Qualifying Assets, unless, at the time the acquisition is made, Qualifying Assets represent at least 70% of the company’s total assets. The principal categories of Qualifying Assets relevant to our business are any of the following:
(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an Eligible Portfolio Company (as defined below), or from any person who is, or has been during the preceding 13 months, an affiliated person of an Eligible Portfolio Company, or from any other person, subject to such rules as may be prescribed by the SEC. An “Eligible Portfolio Company” is defined in the 1940 Act as any issuer which:
(a) is organized under the laws of, and has its principal place of business in, the United States;
(b) is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and
(c) satisfies any of the following:
(i) does not have any class of securities that is traded on a national securities exchange;
(ii) has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million;
(iii) is controlled by a BDC or a group of companies, including a BDC and the BDC has an affiliated person who is a director of the Eligible Portfolio Company; or
(iv) is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million.
(2) Securities of any Eligible Portfolio Company controlled by the Fund.
(3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
(4) Securities of an Eligible Portfolio Company purchased from any person in a private transaction if there is no ready market for such securities and the Fund already owns 60% of the outstanding equity of the Eligible Portfolio Company.
(5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.
(6) Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
In addition, a BDC must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.
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Significant Managerial Assistance. A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described above. However, in order to count portfolio securities as Qualifying Assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group makes available such managerial assistance. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company through monitoring of portfolio company operations, selective participation in board and management meetings, consulting with and advising a portfolio company’s officers or other organizational or financial guidance.
Temporary Investments. Pending investment in other types of Qualifying Assets, as described above, our investments can consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which are referred to herein, collectively, as temporary investments, so that 70% of our assets would be Qualifying Assets.
Warrants. Under the 1940 Act, a BDC is subject to restrictions on the issuance, terms and amount of warrants, options or rights to purchase shares that it may have outstanding at any time. In particular, the amount of shares that would result from the conversion or exercise of all outstanding warrants, options or rights to purchase shares cannot exceed 25% of the BDC’s total outstanding shares.
Leverage and Senior Securities; Coverage Ratio. We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of shares senior to our Common Shares if our asset coverage, as defined in the 1940 Act, would at least equal 150% immediately after each such issuance. On August 24, 2020, our sole shareholder approved the adoption of this 150% threshold pursuant to Section 61(a)(2) of the 1940 Act and such election became effective the following day. In addition, while any senior securities remain outstanding, we will be required to make provisions to prohibit any dividend distribution to our shareholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the dividend distribution or repurchase. We will also be permitted to borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes, which borrowings would not be considered senior securities.
We intend to establish one or more credit facilities and/or subscription facilities or enter into other financing arrangements to facilitate investments and the timely payment of our expenses. It is anticipated that any such credit facilities will bear interest at floating rates at to be determined spreads over LIBOR. We cannot assure shareholders that we will be able to enter into a credit facility. Shareholders will indirectly bear the costs associated with any borrowings under a credit facility or otherwise. In connection with a credit facility or other borrowings, lenders may require us to pledge assets, commitments and/or drawdowns (and the ability to enforce the payment thereof) and may ask to comply with positive or negative covenants that could have an effect on our operations. In addition, from time to time, our losses on leveraged investments may result in the liquidation of other investments held by us and may result in additional drawdowns to repay such amounts.
We may enter into a TRS agreement. A TRS is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the assets underlying the TRS, which may include a specified security, basket of securities or securities indices during a specified period, in return for periodic payments based on a fixed or variable interest rate. A TRS effectively adds leverage to a portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Because of the unique structure of a TRS, a TRS often offers lower financing costs than are offered through more traditional borrowing arrangements. The Fund would typically have to post collateral to cover this potential obligation. To the extent the Fund segregates liquid assets with a value equal (on a daily mark-to-market basis) to its obligations under TRS transactions, enters into offsetting
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transactions or otherwise covers such TRS transactions in accordance with applicable SEC guidance, the leverage incurred through TRS will not be considered a borrowing for purposes of the Fund’s overall leverage limitation.
We may also create leverage by securitizing our assets (including in CLOs) and retaining the equity portion of the securitized vehicle. See “Risk Factors—Risks Related to Debt Financing—We may form one or more CLOs, which may subject us to certain structured financing risks.” We may also from time to time make secured loans of our marginable securities to brokers, dealers and other financial institutions.
Code of Ethics. We and the Adviser have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code are permitted to invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. You may read and copy this code of ethics at the SEC’s Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090. You may also obtain copies of the codes of ethics, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549.
Affiliated Transactions. We may be prohibited under the 1940 Act from conducting certain transactions with our affiliates without the prior approval of our Trustees who are not interested persons and, in some cases, the prior approval of the SEC. We have received an exemptive order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions.
Other. We will be periodically examined by the SEC for compliance with the 1940 Act, and be subject to the periodic reporting and related requirements of the 1934 Act.
We are also required to provide and maintain a bond issued by a reputable fidelity insurance company to protect against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any Trustee or officer against any liability to our shareholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
We are also required to designate a chief compliance officer and to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws and to review these policies and procedures annually for their adequacy and the effectiveness of their implementation.
We are not permitted to change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (i) 67% or more of such company’s shares present at a meeting if more than 50% of the outstanding shares of such company are present or represented by proxy, or (ii) more than 50% of the outstanding shares of such company.
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Information about our senior securities is shown in the following table as of June 30, 2021. This information about our senior securities should be read in conjunction with our unaudited financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus.
| Class and Period |
Total Amount Outstanding Exclusive of Treasury Securities (1) ($ in millions) |
Asset Coverage per Unit(2) |
Involuntary Liquidating Preference per Unit(3) |
Average Market Value per Unit(4) |
||||||||||||
| Bard Peak Funding Facility |
||||||||||||||||
| June 30, 2021 (unaudited) |
599.4 | 2,023.0 | — | N/A | ||||||||||||
| Castle Peak Funding Facility |
|
|||||||||||||||
| June 30, 2021 (unaudited) |
796.4 | 2,023.0 | — | N/A | ||||||||||||
| Maroon Peak Funding Facility |
|
|||||||||||||||
| June 30, 2021 (unaudited) |
97.4 | 2,023.0 | — | N/A | ||||||||||||
| Summit Peak Funding Facility |
|
|||||||||||||||
| June 30, 2021 (unaudited) |
370.3 | 2,023.0 | — | N/A | ||||||||||||
| Denali Peak Funding Facility |
|
|||||||||||||||
| June 30, 2021 (unaudited) |
200.0 | 2,023.0 | — | N/A | ||||||||||||
| Siris Peak Funding Facility |
||||||||||||||||
| June 30, 2021 (unaudited) |
165.9 | 2,023.0 | — | N/A | ||||||||||||
| Bushnell Peak Funding Facility |
||||||||||||||||
| June 30, 2021 (unaudited) |
125.0 | 2,023.0 | — | N/A | ||||||||||||
| Granite Peak Funding Facility |
|
|||||||||||||||
| June 30, 2021 (unaudited) |
15.0 | 2,023.0 | — | N/A | ||||||||||||
| Revolving Credit Facility |
|
|||||||||||||||
| June 30, 2021 (unaudited) |
1,365.7 | 2,023.0 | — | N/A | ||||||||||||
| 2024 Notes (2.56% Notes) |
|
|||||||||||||||
| June 30, 2021 (unaudited) |
435.0 | 2,023.0 | — | N/A | ||||||||||||
| 2021-1 Debt |
|
|||||||||||||||
| June 30, 2021 (unaudited) |
663.0 | 2,023.0 | — | N/A | ||||||||||||
| Middle Peak Funding Facility |
||||||||||||||||
| June 30, 2021 (unaudited) |
— | — | — | N/A | ||||||||||||
| (1) | Total amount of each class of senior securities outstanding at the end of the period presented. |
| (2) | Asset coverage per unit is the ratio of the carrying value of our total assets, less all liabilities excluding indebtedness represented by senior securities in this table, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness and is calculated on a consolidated basis. |
| (3) | The amount to which such class of senior security would be entitled upon our involuntary liquidation in preference to any security junior to it. The “—” in this column indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities. |
| (4) | Not applicable because the senior securities are not registered for public trading. |
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The following table sets forth certain information as of June 30, 2021 for each portfolio company in which the Fund had an investment. Percentages shown for class of securities held by the Fund represent percentage of the class owned and do not necessarily represent voting ownership or economic ownership. The Fund offers to make available significant managerial assistance to its portfolio companies.
The Board approved the valuation of the Fund’s investment portfolio, as of June 30, 2021, at fair value as determined in good faith using a consistently applied valuation process in accordance with the Fund’s documented valuation policy that has been reviewed and approved by the Board, who also approve in good faith the valuation of such securities as of the end of each quarter. For more information relating to the Fund’s investments, see the Fund’s financial statements included in this prospectus.
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| 2U, Inc.(4)(6)(11) | Software | |
First Lien Debt |
|
L + 5.75 | % | 6.50 | % | 11/30/2024 | 54,000 | 53,055 | 53,055 | 1.07 | % | ||||||||||||||||||||||||
| 7800 HARKINS RD, LANHAM MD 20706 United States | ||||||||||||||||||||||||||||||||||||||
| Abaco Energy Technologies, LLC(4)(14) | Energy Equipment & Services | |
First Lien Debt |
|
L + 7.00 | % | 8.50 | % | 10/4/2024 | 10,832 | 10,092 | 10,155 | 0.21 | % | ||||||||||||||||||||||||
| 1999 Bryan Street, Suite 900, Dallas TX 75201 United States | ||||||||||||||||||||||||||||||||||||||
| Access CIG, LLC(8) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.75 | % | 3.84 | % | 2/27/2025 | 19,061 | 19,031 | 18,971 | 0.38 | % | ||||||||||||||||||||||||
| 6818 A Patterson Pass Road, Livermore CA 94550 United States | ||||||||||||||||||||||||||||||||||||||
| Acrisure, LLC(8) | Insurance | |
First Lien Debt |
|
L + 3.50 | % | 3.60 | % | 2/15/2027 | 1,995 | 1,979 | 1,976 | 0.04 | % | ||||||||||||||||||||||||
| 100 Ottawa Avenue SW, Grand Rapids, MI 49503 United States | ||||||||||||||||||||||||||||||||||||||
| ADCS Clinics Intermediate Holdings, LLC(4)(7)(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 5/7/2027 | 37,082 | 36,173 | 36,149 | 0.73 | % | ||||||||||||||||||||||||
| 151 Southhall Lane Suite 300 Maitland FL 32751 United States | ||||||||||||||||||||||||||||||||||||||
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| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| ADMI Corp.(10) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.75 | % | 4.25 | % | 12/23/2027 | 15,625 | 15,547 | 15,625 | 0.32 | % | ||||||||||||||||||||||||
| 299 Park Avenue 34th Floor New York NY 10171 United States | ||||||||||||||||||||||||||||||||||||||
| Advisor Group Holdings, Inc.(8) | Capital Markets | |
First Lien Debt |
|
L + 4.50 | % | 4.60 | % | 7/31/2026 | 24,454 | 24,518 | 24,537 | 0.50 | % | ||||||||||||||||||||||||
| 20 East Thomas Road, Phoenix AZ 85012 United States | ||||||||||||||||||||||||||||||||||||||
| Aegion Corporation(11) | Construction & Engineering | |
First Lien Debt |
|
L + 4.75 | % | 5.50 | % | 5/17/2028 | 23,939 | 23,868 | 24,238 | 0.49 | % | ||||||||||||||||||||||||
| 787 7th Avenue 49th Floor New York NY 10019 United States | ||||||||||||||||||||||||||||||||||||||
| AGI-CFI Holdings, Inc.(4)(5)(7)(11) | Air Freight & Logistics | |
First Lien Debt |
|
L + 5.50 | % | 6.25 | % | 6/11/2027 | 188,818 | 185,179 | 185,146 | 3.74 | % | ||||||||||||||||||||||||
| 9130 S Dadeland Blvd Ste 1801, Miami, FL, 33156-7858 United States | ||||||||||||||||||||||||||||||||||||||
| Ahead DB Holdings, LLC(5)(11) | IT Services | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 10/18/2027 | 6,087 | 6,119 | 6,106 | 0.12 | % | ||||||||||||||||||||||||
| 401 N Michigan Ave., Suite 3400, Chicago IL 60611 United States | ||||||||||||||||||||||||||||||||||||||
| AI Aqua Merger Sub, Inc.(4)(6)(7)(12) | Household Durables | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 12/13/2023 | 16,393 | 16,403 | 16,426 | 0.33 | % | ||||||||||||||||||||||||
| 9399 West Higgins Road, Rosemont, IL 60018 United States | ||||||||||||||||||||||||||||||||||||||
| AI Aqua Merger Sub, Inc.(6)(12) | Household Durables | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 12/13/2023 | 12,477 | 12,469 | 12,503 | 0.25 | % | ||||||||||||||||||||||||
| 9399 West Higgins Road, Rosemont, IL 60018 United States | ||||||||||||||||||||||||||||||||||||||
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| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| AI Aqua Merger Sub, Inc.(6)(7)(10) | Household Durables | |
First Lien Debt |
|
L + 4.00 | % | 4.50 | % | 6/16/2028 | 16,580 | 16,537 | 16,629 | 0.34 | % | ||||||||||||||||||||||||
| 9399 West Higgins Road, Rosemont, IL 60018 United States | ||||||||||||||||||||||||||||||||||||||
| AIT Worldwide Logistics Holdings, Inc.(11) | Transportation Infrastructure | |
First Lien Debt |
|
L + 4.75 | % | 5.50 | % | 3/31/2028 | 46,968 | 46,157 | 47,027 | 0.95 | % | ||||||||||||||||||||||||
| 399 Park Avenue 30th Floor New York NY 10022 United States | ||||||||||||||||||||||||||||||||||||||
| Albany Molecular Research, Inc.(12) | Life Sciences Tools & Services | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 8/30/2024 | 27,904 | 28,001 | 27,979 | 0.57 | % | ||||||||||||||||||||||||
| 26 Corporate Circle, Albany NY 12203 United States | ||||||||||||||||||||||||||||||||||||||
| Albireo Energy, LLC(4)(5)(7)(12) | Electronic Equipment, Instruments & Components | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 12/23/2026 | 34,801 | 34,103 | 34,508 | 0.70 | % | ||||||||||||||||||||||||
| 3 Ethel Road, Suite 300, Edison, NJ 08817 | ||||||||||||||||||||||||||||||||||||||
| ALKU, LLC(4)(11) | Professional Services | |
First Lien Debt |
|
L + 5.25 | % | 6.00 | % | 3/1/2028 | 165,066 | 163,476 | 164,241 | 3.32 | % | ||||||||||||||||||||||||
| 200 Brickstone Square, Suite 503, Andover, MA 01810 | ||||||||||||||||||||||||||||||||||||||
| Alliant Holdings Intermediate, LLC(10) | Insurance | |
First Lien Debt |
|
L + 3.75 | % | 4.25 | % | 10/8/2027 | 14,039 | 14,009 | 14,081 | 0.28 | % | ||||||||||||||||||||||||
| 1301 Dove Street, Suite 200, Newport Beach, CA 92660 United States | ||||||||||||||||||||||||||||||||||||||
| Alliant Holdings Intermediate, LLC(8) | Insurance | |
First Lien Debt |
|
L + 3.25 | % | 3.35 | % | 5/9/2025 | 10,043 | 10,028 | 9,948 | 0.20 | % | ||||||||||||||||||||||||
| 1301 Dove Street, Suite 200, Newport Beach, CA 92660 United States | ||||||||||||||||||||||||||||||||||||||
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| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Allied Universal Holdco, LLC(10) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.75 | % | 4.25 | % | 5/12/2028 | 23,564 | 23,598 | 23,659 | 0.48 | % | ||||||||||||||||||||||||
| 1551 North Tustin Avenue Suite 650 Santa Ana CA 92705 United States | ||||||||||||||||||||||||||||||||||||||
| Alterra Mountain Company(11) | Household Durables | |
First Lien Debt |
|
L + 3.50 | % | 4.25 | % | 8/1/2026 | 4,987 | 5,003 | 5,006 | 0.10 | % | ||||||||||||||||||||||||
| 3501 Wazee Street, Denver CO 80216 United States | ||||||||||||||||||||||||||||||||||||||
| Altice Financing S.A.(6)(8) | Media | |
First Lien Debt |
|
L + 2.75 | % | 2.90 | % | 1/31/2026 | 1,990 | 1,963 | 1,959 | 0.04 | % | ||||||||||||||||||||||||
| 5, rue Eugène Ruppert L - 2453 Luxembourg LU | ||||||||||||||||||||||||||||||||||||||
| American Airlines, Inc.(6)(11) | Airlines | |
First Lien Debt |
|
L + 4.75 | % | 5.50 | % | 3/11/2028 | 7,314 | 7,243 | 7,634 | 0.15 | % | ||||||||||||||||||||||||
| 4333 Amon Carter Blvd, Fort Worth TX 76155 United States | ||||||||||||||||||||||||||||||||||||||
| American Rock Salt Company, LLC(11) | Airlines | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 6/4/2028 | 21,000 | 20,979 | 21,079 | 0.43 | % | ||||||||||||||||||||||||
| 5520 Route 63 PO Box 190 Mount Morris NY 14510 United States | ||||||||||||||||||||||||||||||||||||||
| American Rock Salt Company, LLC(4)(5)(11) | Airlines | |
Second Lien Debt |
|
L + 7.25 | % | 8.00 | % | 6/4/2029 | 17,000 | 16,830 | 17,000 | 0.34 | % | ||||||||||||||||||||||||
| 5520 Route 63 PO Box 190 Mount Morris NY 14510 United States | ||||||||||||||||||||||||||||||||||||||
| AMGH Holding Corp.(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.25 | % | 5.25 | % | 3/14/2025 | 4,987 | 4,994 | 5,007 | 0.10 | % | ||||||||||||||||||||||||
| 209 Highway 121 Bypass Suite 21 Lewisville, TX 75067 United States | ||||||||||||||||||||||||||||||||||||||
117
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| ANI Pharmaceuticals, Inc.(6)(11) | Pharmaceuticals | |
First Lien Debt |
|
L + 6.00 | % | 6.75 | % | 4/27/2028 | 54,930 | 53,831 | 54,243 | 1.10 | % | ||||||||||||||||||||||||
| 210 Main Street West, Baudette MN 56623 United States | ||||||||||||||||||||||||||||||||||||||
| Apex Tool Group, LLC(13) | Machinery | |
First Lien Debt |
|
L + 5.25 | % | 6.50 | % | 8/1/2024 | 71,088 | 71,196 | 71,478 | 1.45 | % | ||||||||||||||||||||||||
| 910 Ridgebrook Road Suite 200 Sparks MD 21152 United States | ||||||||||||||||||||||||||||||||||||||
| Apttus Corp.(13) | Software | |
First Lien Debt |
|
L + 5.25 | % | 6.50 | % | 4/27/2028 | 8,488 | 8,479 | 8,549 | 0.17 | % | ||||||||||||||||||||||||
| 150 North Riverside Plaza Suite 2800 Chicago IL 60606 United States | ||||||||||||||||||||||||||||||||||||||
| APX Group, Inc.(6)(8) | Diversified Consumer Services | |
First Lien Debt |
|
L + 5.00 | % | 5.09 | % | 12/31/2025 | 9,945 | 9,996 | 9,988 | 0.20 | % | ||||||||||||||||||||||||
| 4931 North 300 West, Provo, UT 84604 | ||||||||||||||||||||||||||||||||||||||
| AqGen Ascensus, Inc.(12) | Professional Services | |
First Lien Debt |
|
L + 4.00 | % | 5.00 | % | 12/13/2026 | 16,922 | 17,014 | 16,975 | 0.34 | % | ||||||||||||||||||||||||
| 200 Dryden Rd, Dresher, PA 19025 United States | ||||||||||||||||||||||||||||||||||||||
| Aqgen Island Holdings, Inc.(10) | Professional Services | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 5/20/2028 | 27,837 | 27,728 | 27,824 | 0.56 | % | ||||||||||||||||||||||||
| 535 Madsion Avenue, 24TH Floor New York, NY 10022 | ||||||||||||||||||||||||||||||||||||||
| Aqgen Island Holdings, Inc.(5)(10) | Professional Services | |
Second Lien Debt |
|
L + 6.50 | % | 7.00 | % | 5/4/2029 | 28,238 | 27,956 | 28,097 | 0.57 | % | ||||||||||||||||||||||||
| 535 Madsion Avenue, 24TH Floor New York, NY 10022 | ||||||||||||||||||||||||||||||||||||||
| Arches Buyer, Inc.(12) | Professional Services | |
First Lien Debt |
|
L + 4.00 | % | 5.00 | % | 12/6/2027 | 1,995 | 1,991 | 1,993 | 0.04 | % | ||||||||||||||||||||||||
| 1300 West Traverse Parkway, Lehi, UT 84043 United States | ||||||||||||||||||||||||||||||||||||||
118
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Arterra Wines Canada, Inc.(6)(11) | Beverages | |
First Lien Debt |
|
L + 3.50 | % | 4.25 | % | 11/24/2027 | 4,982 | 5,011 | 5,000 | 0.10 | % | ||||||||||||||||||||||||
| 441 Courtneypark Dr E, Mississauga ON L5T 2V3 Canada | ||||||||||||||||||||||||||||||||||||||
| Ascend Learning, LLC(10) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.75 | % | 4.25 | % | 7/12/2024 | 6,982 | 6,986 | 6,985 | 0.14 | % | ||||||||||||||||||||||||
| 233 Wilshire Blvd Suite 800 Santa Monica CA 90401 United States | ||||||||||||||||||||||||||||||||||||||
| Ascend Performance Materials Operations, LLC(12) | Professional Services | |
First Lien Debt |
|
L + 4.00 | % | 5.00 | % | 8/27/2026 | 4,987 | 5,064 | 5,067 | 0.10 | % | ||||||||||||||||||||||||
| 400 Park Avenue Suite 820 New York NY 10022 United States | ||||||||||||||||||||||||||||||||||||||
| ASP Endeavor Acquisition, LLC(4)(10) | Construction & Engineering | |
First Lien Debt |
|
L + 6.50 | % | 7.00 | % | 5/3/2027 | 36,000 | 35,299 | 35,280 | 0.71 | % | ||||||||||||||||||||||||
| 515 Houston St Ste 500, Fort Worth, TX 76102 United States | ||||||||||||||||||||||||||||||||||||||
| AssuredPartners, Inc.(8) | Insurance | |
First Lien Debt |
|
L + 3.50 | % | 3.60 | % | 2/12/2027 | 15,031 | 15,101 | 15,045 | 0.30 | % | ||||||||||||||||||||||||
| 200 Colonial Center Parkway Suite 140 Lake Mary FL 32746 United States | ||||||||||||||||||||||||||||||||||||||
| At Home Group, Inc.(4)(10) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.25 | % | 4.75 | % | 7/30/2028 | 3,125 | 3,102 | 3,125 | 0.06 | % | ||||||||||||||||||||||||
| 415 Mission Street Suite 5700 San Francisco CA 94105 United States | ||||||||||||||||||||||||||||||||||||||
| athenahealth, Inc.(8) | Health Care Technology | |
First Lien Debt |
|
L + 4.25 | % | 4.41 | % | 2/11/2026 | 19,285 | 19,409 | 19,363 | 0.39 | % | ||||||||||||||||||||||||
| Arsenal Street, Watertown, MA 02472 United States | ||||||||||||||||||||||||||||||||||||||
119
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Atlas CC Acquisition Corp.(4)(5)(11) | Transportation Infrastructure | |
Second Lien Debt |
|
L + 7.63 | % | 8.38 | % | 5/25/2029 | 44,520 | 43,861 | 43,852 | 0.89 | % | ||||||||||||||||||||||||
| 9465 Wilshire Blvd, Suit 300 Beverly Hills, California 90212 United States | ||||||||||||||||||||||||||||||||||||||
| Atlas CC Acquisition Corp.(5)(11) | Transportation Infrastructure | |
First Lien Debt |
|
L + 4.25 | % | 5.00 | % | 4/28/2028 | 47,807 | 46,267 | 48,016 | 0.97 | % | ||||||||||||||||||||||||
| 9465 Wilshire Blvd, Suit 300 Beverly Hills, California 90212 United States | ||||||||||||||||||||||||||||||||||||||
| Auris Luxembourg III S.à r.l, LLC(6)(8) | Health Care Equipment & Supplies | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 2/27/2026 | 17,064 | 16,818 | 16,907 | 0.34 | % | ||||||||||||||||||||||||
| 23 Rue Aldringen, Luxembourg, L - 1118 Luxembourg | ||||||||||||||||||||||||||||||||||||||
| Baldwin Risk Partners, LLC(6)(10) | Insurance | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 10/14/2027 | 8,714 | 8,704 | 8,720 | 0.18 | % | ||||||||||||||||||||||||
| 4211 W BOY SCOUT BLVD SUITE 800 TAMPA FL 33607 United States | ||||||||||||||||||||||||||||||||||||||
| Barbri Holdings, Inc.(4)(7)(11) | Diversified Financial Services | |
First Lien Debt |
|
L + 5.75 | % | 6.50 | % | 4/30/2028 | 93,000 | 91,185 | 91,140 | 1.84 | % | ||||||||||||||||||||||||
| 12222 Merit Drive, Suite 1340, Dallas, TX 75251 United States | ||||||||||||||||||||||||||||||||||||||
| Bazaarvoice, Inc.(4)(7)(8) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 5.75 | % | 5.83 | % | 5/7/2028 | 372,166 | 372,166 | 372,166 | 7.53 | % | ||||||||||||||||||||||||
| 338 Pier Avenue, Hermosa Beach CA 90254 United States | ||||||||||||||||||||||||||||||||||||||
| Belfor Holdings, Inc.(8) | Software | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 4/6/2026 | 4,987 | 5,006 | 4,994 | 0.10 | % | ||||||||||||||||||||||||
| 185 Oakland Avenue Suite 300 Birmingham MI 48009 United States | ||||||||||||||||||||||||||||||||||||||
120
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Berlin Packaging, LLC(10) | Containers & Packaging | |
First Lien Debt |
|
L + 3.25 | % | 3.75 | % | 3/5/2028 | 11,970 | 11,930 | 11,936 | 0.24 | % | ||||||||||||||||||||||||
| 525 West Monroe Street, Chicago IL 60661 United States | ||||||||||||||||||||||||||||||||||||||
| Berlin Packaging, LLC(8) | Containers & Packaging | |
First Lien Debt |
|
L + 3.00 | % | 3.15 | % | 11/7/2025 | 12,530 | 12,495 | 12,443 | 0.25 | % | ||||||||||||||||||||||||
| 525 West Monroe Street, Chicago IL 60661 United States | ||||||||||||||||||||||||||||||||||||||
| Blount International, Inc.(12) | Machinery | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 4/12/2023 | 18,160 | 18,233 | 18,239 | 0.37 | % | ||||||||||||||||||||||||
| 4909 Southeast International Way Portland OR 97222 United States | ||||||||||||||||||||||||||||||||||||||
| BMC Acquisition, Inc.(12) | Professional Services | |
First Lien Debt |
|
L + 5.25 | % | 6.25 | % | 12/28/2024 | 5,084 | 5,072 | 5,082 | 0.10 | % | ||||||||||||||||||||||||
| 300 West 6th Street,, Suite 2300, Austin, TX 78701 United States | ||||||||||||||||||||||||||||||||||||||
| Boxer Parent Company, Inc.(8) | Software | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 10/2/2025 | 12,066 | 12,066 | 12,012 | 0.24 | % | ||||||||||||||||||||||||
| John Hancock Tower 200 Clarendon Street Boston MA 02116 United States | ||||||||||||||||||||||||||||||||||||||
| BPPH2 Limited(4)(6)(8) | Professional Services | |
First Lien Debt |
|
L + 6.75 | % | 6.75 | % | 3/2/2028 | 25,500 | 34,329 | 35,201 | 0.71 | % | ||||||||||||||||||||||||
| One Wood Street, London, EC2V 7WS | ||||||||||||||||||||||||||||||||||||||
| Brand Industrial Services, Inc.(12) | Construction & Engineering | |
First Lien Debt |
|
L + 4.25 | % | 5.25 | % | 6/21/2024 | 20,635 | 20,529 | 20,328 | 0.41 | % | ||||||||||||||||||||||||
| 1325 Cobb International Drive, Kennesaw GA 30152 United States | ||||||||||||||||||||||||||||||||||||||
121
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Brave Parent Holdings, Inc.(8) | Software | |
First Lien Debt |
|
L + 4.00 | % | 4.10 | % | 4/18/2025 | 5,638 | 5,631 | 5,638 | 0.11 | % | ||||||||||||||||||||||||
| 600 Montgomery Street 20th Floor San Francisco CA 94111 United States | ||||||||||||||||||||||||||||||||||||||
| BroadStreet Partners, Inc.(8) | Insurance | |
First Lien Debt |
|
L + 3.25 | % | 3.35 | % | 1/27/2027 | 11,932 | 11,906 | 11,847 | 0.24 | % | ||||||||||||||||||||||||
| 580 North Fourth Street Suite 450 Columbus OH 43215 United States | ||||||||||||||||||||||||||||||||||||||
| Bungie, Inc.(4)(12) | Interactive Media & Services | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 8/28/2024 | 2,500 | 2,500 | 2,500 | 0.05 | % | ||||||||||||||||||||||||
| 550 106th Ave NE, Ste 207 Bellevue, WA 98004 United States | ||||||||||||||||||||||||||||||||||||||
| Bution Holdco 2, Inc.(4)(12) | Distributors | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 10/17/2025 | 8,197 | 8,044 | 8,033 | 0.16 | % | ||||||||||||||||||||||||
| 907 S. Detroit Ave Tulsa, OK 74120 United States | ||||||||||||||||||||||||||||||||||||||
| Cambium Learning Group, Inc.(11) | Diversified Consumer Services | |
First Lien Debt |
|
L + 4.50 | % | 5.25 | % | 12/18/2025 | 19,630 | 19,694 | 19,765 | 0.40 | % | ||||||||||||||||||||||||
| 17855 North Dallas Parkway Suite 400 Dallas TX 75287 United States | ||||||||||||||||||||||||||||||||||||||
| Cambrex Corp.(11) | Life Sciences Tools & Services | |
First Lien Debt |
|
L + 3.50 | % | 4.25 | % | 12/4/2026 | 20,170 | 20,263 | 20,246 | 0.41 | % | ||||||||||||||||||||||||
| One Meadowlands Plaza, East Rutherford NJ 07073 United States | ||||||||||||||||||||||||||||||||||||||
| Camelot US Acquisition, LLC(5)(6)(12) | Professional Services | |
First Lien Debt |
|
L + 3.00 | % | 4.00 | % | 10/30/2026 | 4,975 | 4,994 | 4,985 | 0.10 | % | ||||||||||||||||||||||||
| 1500 Spring Garden Streeet, Philadelphia PA 19130 United States | ||||||||||||||||||||||||||||||||||||||
122
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Canadian Hospital Specialties Ltd.(4)(6)(7)(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.50 | % | 5.50 | % | 4/14/2028 | 40,680 | 31,707 | 32,159 | 0.65 | % | ||||||||||||||||||||||||
| 676 North Michigan Avenue Suite 3300 Chicago IL 60611 United States | ||||||||||||||||||||||||||||||||||||||
| Canadian Hospital Specialties Ltd.(4)(6)(8) | Health Care Providers & Services | |
Second Lien Debt |
|
0.0875 | 8.75 | % | 4/15/2029 | 15,800 | 12,370 | 12,495 | 0.25 | % | |||||||||||||||||||||||||
| 676 North Michigan Avenue Suite 3300 Chicago IL 60611 United States | ||||||||||||||||||||||||||||||||||||||
| Capstone Logistics, LLC(7)(12) | Transportation Infrastructure | |
First Lien Debt |
|
L + 4.75 | % | 5.75 | % | 11/12/2027 | 21,731 | 21,806 | 21,836 | 0.44 | % | ||||||||||||||||||||||||
| 30 Technology Parkway South, Suite 200, Peachtree Corner, GA 30092 | ||||||||||||||||||||||||||||||||||||||
| Cast & Crew Payroll, LLC(8) | Professional Services | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 2/9/2026 | 15,924 | 15,795 | 15,859 | 0.32 | % | ||||||||||||||||||||||||
| 2300 Empire Avenue 5th Floor Burbank CA 91504 United States | ||||||||||||||||||||||||||||||||||||||
| CCC Information Services, Inc.(12) | Insurance | |
First Lien Debt |
|
L + 3.00 | % | 4.00 | % | 11/18/2024 | 6,474 | 6,476 | 6,481 | 0.13 | % | ||||||||||||||||||||||||
| 222 Merchandise Mart Plaza, Suite 900, Chicago, IL 60654 United States | ||||||||||||||||||||||||||||||||||||||
| CCI Buyer, Inc.(11) | Wireless Telecommunication Services |
|
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 12/17/2027 | 28,976 | 29,122 | 29,057 | 0.59 | % | ||||||||||||||||||||||||
| 300 N. LaSalle St, Suite 5600, Chicago 60602 United States | ||||||||||||||||||||||||||||||||||||||
123
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| CD&R Artemis Bidco, Inc.(5)(6)(7)(9) | Health Care Providers & Services | |
First Lien Debt |
|
L + 6.50 | % | 6.75 | % | 5/12/2027 | 1,299 | 1,199 | 1,283 | 0.03 | % | ||||||||||||||||||||||||
| 26 Southampton Buildings 8th Floor, Holborn Gate London, WC2A 1AN United Kingdom | ||||||||||||||||||||||||||||||||||||||
| CEC Entertainment, Inc.(5)(8) | Hotels, Restaurants & Leisure | |
First Lien Debt |
|
0.0675 | 6.75 | % | 5/1/2026 | 94,317 | 94,294 | 96,911 | 1.96 | % | |||||||||||||||||||||||||
| 1707 Market Place Blvd Suite 200 Irving TX 75063 United States | ||||||||||||||||||||||||||||||||||||||
| Celestial Saturn Parent, Inc.(4)(10) | Software | |
Second Lien Debt |
|
L + 6.50 | % | 7.00 | % | 4/13/2029 | 118,488 | 117,311 | 119,525 | 2.42 | % | ||||||||||||||||||||||||
| 40 Pacifica #900, Irvine, CA 92618 United States | ||||||||||||||||||||||||||||||||||||||
| Cengage Learning, Inc.(12) | Interactive Media & Services | |
First Lien Debt |
|
L + 4.75 | % | 5.75 | % | 6/29/2026 | 28,112 | 27,831 | 27,901 | 0.56 | % | ||||||||||||||||||||||||
| 20 Channel Center Street, Boston MA 02210 United States | ||||||||||||||||||||||||||||||||||||||
| Charter NEX US, Inc.(11) | Containers & Packaging | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 12/1/2027 | 21,508 | 21,585 | 21,586 | 0.44 | % | ||||||||||||||||||||||||
| 1264 East High Street, Milton WI 53563 United States | ||||||||||||||||||||||||||||||||||||||
| CHG Healthcare Services, Inc.(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.00 | % | 4.00 | % | 6/7/2023 | 23,468 | 23,491 | 23,473 | 0.47 | % | ||||||||||||||||||||||||
| 6440 South Millrock Drive Suite 175 Salt Lake City UT 84121 United States | ||||||||||||||||||||||||||||||||||||||
| Clarios Global LP(6)(8) | Auto Components | |
First Lien Debt |
|
L + 3.25 | % | 3.35 | % | 4/30/2026 | 7,317 | 7,308 | 7,264 | 0.15 | % | ||||||||||||||||||||||||
| Florist Tower 5757 North Green Bay Avenue Milwaukee WI 53201 United States | ||||||||||||||||||||||||||||||||||||||
124
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| ConvergeOne Holdings, Inc.(8) | Electronic Equipment, Instruments & Components | |
First Lien Debt |
|
L + 5.00 | % | 5.10 | % | 1/4/2026 | 34,213 | 33,229 | 33,909 | 0.69 | % | ||||||||||||||||||||||||
| 0900 Nesbitt Avenue South Bloomington MN 55437 United States | ||||||||||||||||||||||||||||||||||||||
| COP Home Services TopCo IV, Inc.(4)(12) | Construction & Engineering | |
Second Lien Debt |
|
L + 8.75 | % | 9.75 | % | 12/31/2028 | 34,895 | 34,230 | 34,895 | 0.71 | % | ||||||||||||||||||||||||
| 3150 E Birch St., Brea, CA 92821 | ||||||||||||||||||||||||||||||||||||||
| COP Home Services TopCo IV, Inc.(4)(7)(12) | Construction & Engineering | |
First Lien Debt |
|
L + 5.00 | % | 6.00 | % | 12/31/2027 | 103,094 | 99,559 | 101,704 | 2.06 | % | ||||||||||||||||||||||||
| 3150 E Birch St., Brea, CA 92821 | ||||||||||||||||||||||||||||||||||||||
| Core & Main LP(12) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 2.75 | % | 3.75 | % | 8/1/2024 | 7,565 | 7,581 | 7,572 | 0.15 | % | ||||||||||||||||||||||||
| 1830 Craig Park Court, Saint Louis MO 63146 United States | ||||||||||||||||||||||||||||||||||||||
| CoreLogic, Inc.(10) | Software | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 6/2/2028 | 20,000 | 19,912 | 19,973 | 0.40 | % | ||||||||||||||||||||||||
| 40 Pacifica #900, Irvine, CA 92618 United States | ||||||||||||||||||||||||||||||||||||||
| Corfin Holdings, Inc.(4)(12) | Aerospace & Defense | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 2/5/2026 | 6,652 | 6,619 | 6,636 | 0.13 | % | ||||||||||||||||||||||||
| 1050 Perimeter Road, Manchester, NH 03103 United States | ||||||||||||||||||||||||||||||||||||||
| Cornerstone Building Brands, Inc.(6)(10) | Building Products | |
First Lien Debt |
|
L + 3.25 | % | 3.75 | % | 4/12/2028 | 5,970 | 5,937 | 5,978 | 0.12 | % | ||||||||||||||||||||||||
| 5020 Weston Parkway, Cary NC 27513 United States | ||||||||||||||||||||||||||||||||||||||
| Covenant Surgical Partners, Inc.(8) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.00 | % | 4.08 | % | 7/1/2026 | 2,988 | 2,938 | 2,969 | 0.06 | % | ||||||||||||||||||||||||
| 401 Commerce Street Suite 600 Nashville TN 37219 United States | ||||||||||||||||||||||||||||||||||||||
125
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| CP Atlas Buyer, Inc.(10) | Building Products | |
First Lien Debt |
|
L + 3.75 | % | 4.25 | % | 11/23/2027 | 27,822 | 27,847 | 27,792 | 0.56 | % | ||||||||||||||||||||||||
| 1521 North Cooper, Suite 500, Arlington US-TX US 76011 | ||||||||||||||||||||||||||||||||||||||
| CPI Holdco, LLC(8) | Health Care Equipment & Supplies | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 11/4/2026 | 15,170 | 15,221 | 15,204 | 0.31 | % | ||||||||||||||||||||||||
| 625 East Bunker Ct Vernon Hills , IL 60061 United States | ||||||||||||||||||||||||||||||||||||||
| CPI International, Inc.(12) | Electronic Equipment, Instruments & Components | |
First Lien Debt |
|
L + 3.50 | % | 4.50 | % | 7/26/2024 | 17,800 | 17,790 | 17,804 | 0.36 | % | ||||||||||||||||||||||||
| 580 Skylane Blvd, Santa Rosa CA 95403 United States | ||||||||||||||||||||||||||||||||||||||
| Cross Country Healthcare, Inc.(4)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 5.75 | % | 6.50 | % | 6/8/2027 | 55,250 | 54,153 | 54,145 | 1.10 | % | ||||||||||||||||||||||||
| 5201 Congress Avenue Suite 100B Boca Raton FL 33487 United States | ||||||||||||||||||||||||||||||||||||||
| Cumming Group, Inc.(4)(7)(12) | Real Estate Management & Development | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 5/26/2027 | 113,208 | 110,778 | 110,736 | 2.24 | % | ||||||||||||||||||||||||
| 485 Lexington Avenue, New York NY 10017 United States | ||||||||||||||||||||||||||||||||||||||
| CustomInk, LLC(4)(12) | Specialty Retail | |
First Lien Debt |
|
L + 6.21 | % | 7.21 | % | 5/3/2026 | 30,000 | 29,367 | 29,400 | 0.59 | % | ||||||||||||||||||||||||
| 2910 District Avenue Fairfax VA 22031 United States | ||||||||||||||||||||||||||||||||||||||
| Dana Kepner Company, LLC(4)(7)(12) | Distributors | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 12/29/2026 | 14,925 | 14,650 | 14,850 | 0.30 | % | ||||||||||||||||||||||||
| 700 Alcott St. Denver, CO 80204 | ||||||||||||||||||||||||||||||||||||||
| DCA Investment Holdings, LLC(4)(7)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 6.25 | % | 7.00 | % | 3/12/2027 | 33,136 | 32,595 | 32,567 | 0.66 | % | ||||||||||||||||||||||||
| 6240 Lake Osprey Drive, Sarasota, FL 34240 | ||||||||||||||||||||||||||||||||||||||
126
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Dcert Buyer, Inc.(8) | IT Services | |
First Lien Debt |
|
L + 4.00 | % | 4.10 | % | 10/16/2026 | 13,311 | 13,332 | 13,345 | 0.27 | % | ||||||||||||||||||||||||
| 2801 N Thanksgiving Way #500, Lehi 84043 United States | ||||||||||||||||||||||||||||||||||||||
| Dcert Buyer, Inc.(8) | IT Services | |
Second Lien Debt |
|
L + 7.00 | % | 7.10 | % | 2/16/2029 | 39,277 | 39,319 | 39,736 | 0.80 | % | ||||||||||||||||||||||||
| 2801 N Thanksgiving Way #500, Lehi 84043 United States | ||||||||||||||||||||||||||||||||||||||
| Deerfield Dakota Holding, LLC(12) | Professional Services | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 4/9/2027 | 22,109 | 22,197 | 22,244 | 0.45 | % | ||||||||||||||||||||||||
| 55 East 52nd Street 31st Floorm Park Avenue Plaza, New York, NY 10055 United States | ||||||||||||||||||||||||||||||||||||||
| Deerfield Dakota Holding, LLC(4)(11) | Professional Services | |
Second Lien Debt |
|
L + 6.75 | % | 7.50 | % | 4/7/2028 | 30,000 | 29,854 | 30,825 | 0.62 | % | ||||||||||||||||||||||||
| 55 East 52nd Street 31st Floorm Park Avenue Plaza, New York, NY 10055 United States | ||||||||||||||||||||||||||||||||||||||
| Deliver Buyer, Inc.(4)(12) | Technology Hardware, Storage & Peripherals | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 5/1/2024 | 19,900 | 19,989 | 20,012 | 0.40 | % | ||||||||||||||||||||||||
| 3955 East Blue Lick Road, Louisville, KY 40229 United States | ||||||||||||||||||||||||||||||||||||||
| Delta Topco, Inc.(11) | Software | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 12/1/2027 | 22,500 | 22,595 | 22,580 | 0.46 | % | ||||||||||||||||||||||||
| 3111 Coronado Drive in Santa Clara, CA 95054 United States | ||||||||||||||||||||||||||||||||||||||
127
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| DG Investment Intermediate Holdings 2, Inc.(11) | Commercial Services & Supplies | |
Second Lien Debt |
|
L + 6.75 | % | 7.50 | % | 3/18/2029 | 29,464 | 29,321 | 29,520 | 0.60 | % | ||||||||||||||||||||||||
| One Commerce Drive Schaumburg, Illinois 60173 United States | ||||||||||||||||||||||||||||||||||||||
| DG Investment Intermediate Holdings 2, Inc.(7)(11) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 3/17/2028 | 28,502 | 28,556 | 28,663 | 0.58 | % | ||||||||||||||||||||||||
| One Commerce Drive Schaumburg, Illinois 60173 United States | ||||||||||||||||||||||||||||||||||||||
| Digital Media Solutions, LLC(5)(6)(11) | Media | |
First Lien Debt |
|
L + 5.00 | % | 5.75 | % | 5/24/2026 | 40,000 | 39,016 | 39,817 | 0.81 | % | ||||||||||||||||||||||||
| 4800 140th Avenue North Suite 101 Clearwater FL 33762 United States | ||||||||||||||||||||||||||||||||||||||
| Diligent Corporation(4)(12) | Software | |
First Lien Debt |
|
L + 5.75 | % | 6.75 | % | 8/4/2025 | 89,775 | 88,591 | 88,653 | 1.79 | % | ||||||||||||||||||||||||
| 111 West 33rd St., 16th Floor, New York, NY 10120 | ||||||||||||||||||||||||||||||||||||||
| DiversiTech Holdings, Inc.(12) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 12/3/2024 | 15,864 | 15,910 | 15,899 | 0.32 | % | ||||||||||||||||||||||||
| 3039 Premiere Parkway Suite 600 Duluth GA 30097 United States | ||||||||||||||||||||||||||||||||||||||
| Divisions Holding Corp.(11) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 4.75 | % | 5.50 | % | 5/29/2028 | 24,096 | 23,857 | 24,111 | 0.49 | % | ||||||||||||||||||||||||
| 1 Riverfront Place Suite 500 Newport, KY 41071 United States | ||||||||||||||||||||||||||||||||||||||
128
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Dominion Colour Corporation(4)(6)(7)(12) | Chemicals | |
First Lien Debt |
|
|
L + 8.25 |
% (incl. 2.00% PIK) |
9.25 | % | 4/6/2024 | 39,248 | 37,342 | 37,776 | 0.76 | % | |||||||||||||||||||||||
| 1 Concorde Gate, Suite 608, Toronto, Ontario, Canada | ||||||||||||||||||||||||||||||||||||||
| Donuts, Inc.(4)(12) | Internet & Direct Marketing Retail | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 12/29/2026 | 114,413 | 112,271 | 113,841 | 2.30 | % | ||||||||||||||||||||||||
| 10500 NE 8th Street Suite 750, Bellevue, WA 98004 | ||||||||||||||||||||||||||||||||||||||
| Drive Chassis Holdco, LLC(5)(8) | Transportation Infrastructure | |
Second Lien Debt |
|
L + 7.00 | % | 7.19 | % | 4/10/2026 | 96,086 | 96,156 | 97,808 | 1.98 | % | ||||||||||||||||||||||||
| 9 West 57th Street, New York, NY 10019 United States | ||||||||||||||||||||||||||||||||||||||
| Dynasty Acquisition Co, Inc.(6)(8) | Aerospace & Defense | |
First Lien Debt |
|
L + 3.50 | % | 3.65 | % | 4/6/2026 | 4,987 | 4,856 | 4,866 | 0.10 | % | ||||||||||||||||||||||||
| 1001 Pennsylvania Avenue North Suite 220 South Washington DC 20004-2505 United States | ||||||||||||||||||||||||||||||||||||||
| EAB Global, Inc.(10) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 6/28/2028 | 9,174 | 9,128 | 9,174 | 0.19 | % | ||||||||||||||||||||||||
| 2008 Saint Johns Ave, Washington DC 20037 United States | ||||||||||||||||||||||||||||||||||||||
| Eagle Midstream Canada Finance, Inc.(4)(6)(14) | Oil, Gas & Consumable Fuels | |
First Lien Debt |
|
L + 6.25 | % | 7.75 | % | 11/26/2024 | 36,013 | 35,520 | 35,923 | 0.73 | % | ||||||||||||||||||||||||
| 222 3rd Avenue S.W. Suite 900 Calgary, Alberta T2P 0B4 Canada | ||||||||||||||||||||||||||||||||||||||
| ECI Macola Max Holding, LLC(6)(11) | Software | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 11/9/2027 | 24,917 | 24,998 | 25,005 | 0.51 | % | ||||||||||||||||||||||||
| 5455 Rings Road Suite 100 Dublin OH 43017 United States | ||||||||||||||||||||||||||||||||||||||
129
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| ECP Gopher Holdings L.P.(12) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 3/6/2025 | 3,979 | 3,997 | 3,565 | 0.07 | % | ||||||||||||||||||||||||
| 2900 Lone Oak Parkway, Ste 140A, Eagan, MN 55121 | ||||||||||||||||||||||||||||||||||||||
| Edifecs, Inc.(4)(12) | Health Care Technology | |
First Lien Debt |
|
L + 7.00 | % | 8.00 | % | 9/21/2026 | 29,809 | 29,669 | 30,107 | 0.61 | % | ||||||||||||||||||||||||
| 756 114TH AVE SE BELLEVUE WA 98004 United States | ||||||||||||||||||||||||||||||||||||||
| EG America, LLC(6)(10) | Specialty Retail | |
First Lien Debt |
|
L + 4.25 | % | 4.75 | % | 3/10/2026 | 15,043 | 14,961 | 15,074 | 0.30 | % | ||||||||||||||||||||||||
| 65 Flanders Rd, Westborough, MA 01581 United States | ||||||||||||||||||||||||||||||||||||||
| EIS Buyer, LLC(4)(14) | Distributors | |
First Lien Debt |
|
L + 6.25 | % | 7.75 | % | 9/30/2025 | 13,265 | 12,898 | 12,933 | 0.26 | % | ||||||||||||||||||||||||
| 2018 Powers Ferry Road, Suite 400 Atlanta, Georgia 30339 United States | ||||||||||||||||||||||||||||||||||||||
| Emerald US, Inc.(6)(8) | Professional Services | |
First Lien Debt |
|
L + 3.50 | % | 3.65 | % | 7/10/2026 | 5,074 | 5,070 | 5,077 | 0.10 | % | ||||||||||||||||||||||||
| 31910 Del Obispo Street Suite 200 San Juan Capistrano, CA 92675 United States | ||||||||||||||||||||||||||||||||||||||
| Empire Today, LLC(11) | Building Products | |
First Lien Debt |
|
L + 5.00 | % | 5.75 | % | 3/8/2028 | 100,000 | 98,307 | 100,313 | 2.03 | % | ||||||||||||||||||||||||
| 333 Northwest Avenue, Northlake IL 60164 United States | ||||||||||||||||||||||||||||||||||||||
| Endurance International Group Holdings, Inc.(11) | IT Services | |
First Lien Debt |
|
L + 3.50 | % | 4.25 | % | 2/10/2028 | 29,694 | 29,539 | 29,607 | 0.60 | % | ||||||||||||||||||||||||
| 10 Corporate Drive Suite 300 Burlington MA 01803 United States | ||||||||||||||||||||||||||||||||||||||
130
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Endurance International Group Holdings, Inc.(5)(8) | IT Services | |
Unsecured Debt |
|
0.06 | 6.00 | % | 2/15/2029 | 25,000 | 24,603 | 24,785 | 0.50 | % | |||||||||||||||||||||||||
| 10 Corporate Drive Suite 300 Burlington MA 01803 United States | ||||||||||||||||||||||||||||||||||||||
| EnergySolutions, LLC(12) | Energy Equipment & Services | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 5/9/2025 | 16,637 | 16,622 | 16,567 | 0.34 | % | ||||||||||||||||||||||||
| 299 South Main Street Suite 1700 Salt Lake City UT 84111 United States | ||||||||||||||||||||||||||||||||||||||
| Ensono Holdings, LLC(11) | IT Services | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 5/19/2028 | 34,286 | 34,237 | 34,411 | 0.70 | % | ||||||||||||||||||||||||
| 3333 Finley Road, Downers Grove IL 60515 United States | ||||||||||||||||||||||||||||||||||||||
| Enviva Holdings LP(4)(12) | Independent Power and Renewable Electricity Producers | |
First Lien Debt |
|
L + 5.50 | % | 6.50 | % | 2/11/2026 | 24,554 | 24,325 | 24,830 | 0.50 | % | ||||||||||||||||||||||||
| 7200 Wisconsin Avenue Suite 1000 Bethesda MD 20814 United States | ||||||||||||||||||||||||||||||||||||||
| Epicor Software Corp.(11) | Software | |
First Lien Debt |
|
L + 3.25 | % | 4.00 | % | 7/30/2027 | 11,960 | 12,016 | 11,961 | 0.24 | % | ||||||||||||||||||||||||
| 804 Las Cimas Parkway Austin TX 78746 United States | ||||||||||||||||||||||||||||||||||||||
| Episerver, Inc.(4)(5)(7)(12) | Software | |
First Lien Debt |
|
L + 5.50 | % | 6.50 | % | 4/9/2026 | 18,183 | 17,857 | 17,852 | 0.36 | % | ||||||||||||||||||||||||
| 542A Amherst Street Route 101A Nashua, NH 03063 United States | ||||||||||||||||||||||||||||||||||||||
| Epoch Acquisition, Inc.(4)(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 6.75 | % | 7.75 | % | 10/4/2024 | 29,573 | 29,573 | 29,573 | 0.60 | % | ||||||||||||||||||||||||
| 4600 Lena Drive Mechanicsburg, PA 17055 United States | ||||||||||||||||||||||||||||||||||||||
131
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| eResearch Technology, Inc.(12) |
Commercial Services & Supplies | |
First Lien Debt |
|
L + 4.50 | % | 5.50 | % | 2/4/2027 | 28,246 | 28,373 | 28,409 | 0.57 | % | ||||||||||||||||||||||||
| 1818 Market Street Suite 1000 Philadelphia PA 19103 United States | ||||||||||||||||||||||||||||||||||||||
| ExamWorks Group, Inc.(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 7/27/2023 | 18,685 | 18,728 | 18,724 | 0.38 | % | ||||||||||||||||||||||||
| 3280 Peachtree Road North East, Suite 2625 Atlanta GA 30305 United States | ||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp.(12) | Industrial Conglomerates | |
First Lien Debt |
|
L + 3.50 | % | 4.50 | % | 12/2/2024 | 22,907 | 22,932 | 22,942 | 0.46 | % | ||||||||||||||||||||||||
| 200 West Street, Waltham MA 02451 United States | ||||||||||||||||||||||||||||||||||||||
| FCG Acquisitions, Inc.(7)(10) | Industrial Conglomerates | |
First Lien Debt |
|
L + 3.75 | % | 4.25 | % | 3/16/2028 | 26,097 | 26,112 | 26,161 | 0.53 | % | ||||||||||||||||||||||||
| 800 Concar Drive, Suite 100, San Mateo, CA 94402 United States | ||||||||||||||||||||||||||||||||||||||
| Fencing Supply Group Acquisition, LLC(4)(7)(12) | Building Products | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 2/26/2027 | 57,653 | 56,418 | 56,938 | 1.15 | % | ||||||||||||||||||||||||
| 211 Perimeter Center Pkwy NE #250 Dunwoody, GA 30346 | ||||||||||||||||||||||||||||||||||||||
| Flex Acquisition Co., Inc.(10) | Containers & Packaging | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 2/23/2028 | 16,226 | 16,193 | 16,175 | 0.33 | % | ||||||||||||||||||||||||
| 101 E Carolina Ave, Hartsville, SC 29550 | ||||||||||||||||||||||||||||||||||||||
| Flex Acquisition Co., Inc.(8) | Containers & Packaging | |
First Lien Debt |
|
L + 3.25 | % | 3.45 | % | 6/29/2025 | 9,519 | 9,504 | 9,439 | 0.19 | % | ||||||||||||||||||||||||
| 101 E Carolina Ave, Hartsville, SC 29550 | ||||||||||||||||||||||||||||||||||||||
| Flexera Software, LLC(11) | Software | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 1/26/2028 | 12,466 | 12,521 | 12,508 | 0.25 | % | ||||||||||||||||||||||||
| 300 Park Blvd Suite 500 Itasca IL 60143 United States | ||||||||||||||||||||||||||||||||||||||
132
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Formula One Management Limited(6)(12) | Software | |
First Lien Debt |
|
L + 2.50 | % | 3.50 | % | 2/1/2024 | 5,000 | 4,995 | 4,986 | 0.10 | % | ||||||||||||||||||||||||
| 12300 Liberty Blvd, Englewood CO 80112 United States | ||||||||||||||||||||||||||||||||||||||
| Forterra Finance, LLC(6)(12) | Construction Materials | |
First Lien Debt |
|
L + 3.00 | % | 4.00 | % | 10/25/2023 | 1,866 | 1,874 | 1,869 | 0.04 | % | ||||||||||||||||||||||||
| 511 East John Carpenter Freeway, 6th Floor, Irving, TX 75062 | ||||||||||||||||||||||||||||||||||||||
| Foundation Building Materials, Inc.(10) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 3.25 | % | 3.75 | % | 2/3/2028 | 7,159 | 7,136 | 7,119 | 0.14 | % | ||||||||||||||||||||||||
| 2520 Red Hill Avenue, Santa Ana, CA 92705 | ||||||||||||||||||||||||||||||||||||||
| Frontline Road Safety, LLC(4)(7)(11) | Transportation Infrastructure | |
First Lien Debt |
|
L + 5.75 | % | 6.50 | % | 5/3/2027 | 124,635 | 122,210 | 122,142 | 2.47 | % | ||||||||||||||||||||||||
| 2714 Sherman Street, Grand Prairie, TX 75051 United States | ||||||||||||||||||||||||||||||||||||||
| Garda World Security Corp.(5)(6)(8) | Commercial Services & Supplies | |
Unsecured Debt |
|
0.06 | 6.00 | % | 6/1/2029 | 2,674 | 2,674 | 2,657 | 0.05 | % | |||||||||||||||||||||||||
| 1390 Barre Street, Montreal QC H3C 1N4 Canada | ||||||||||||||||||||||||||||||||||||||
| Garda World Security Corp.(6)(8) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 4.25 | % | 4.35 | % | 10/30/2026 | 22,500 | 22,581 | 22,636 | 0.46 | % | ||||||||||||||||||||||||
| 1390 Barre Street, Montreal QC H3C 1N4 Canada | ||||||||||||||||||||||||||||||||||||||
| GC EOS Buyer, Inc.(8) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.50 | % | 4.60 | % | 8/1/2025 | 1,663 | 1,655 | 1,663 | 0.03 | % | ||||||||||||||||||||||||
| 29627 Renaissance Blvd., Howell Township, NJ 07727 United States | ||||||||||||||||||||||||||||||||||||||
133
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Genuine Financial Holdings, LLC(8) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 7/11/2025 | 10,048 | 9,907 | 9,886 | 0.20 | % | ||||||||||||||||||||||||
| 3349 Michelson Drive Suite 150 Irvine, CA 92612 United States | ||||||||||||||||||||||||||||||||||||||
| GI Consilio Parent, LLC(7)(10) | Software | |
First Lien Debt |
|
L + 4.00 | % | 4.50 | % | 4/30/2028 | 125,000 | 120,868 | 125,010 | 2.53 | % | ||||||||||||||||||||||||
| 188 The Embarcadero, San Francisco, CA United States 94016 | ||||||||||||||||||||||||||||||||||||||
| Gigamon Inc.(11) | Software | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 12/27/2024 | 25,681 | 25,735 | 25,777 | 0.52 | % | ||||||||||||||||||||||||
| 3300 Olcott Street, Santa Clara CA 95054 United States | ||||||||||||||||||||||||||||||||||||||
| Global Medical Response, Inc.(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.75 | % | 5.75 | % | 10/2/2025 | 21,750 | 21,840 | 21,872 | 0.44 | % | ||||||||||||||||||||||||
| 6363 S Fiddlers Green Circle 14th floor Greenwood Village CO 80111 United States | ||||||||||||||||||||||||||||||||||||||
| GlobalLogic Holdings, Inc.(11) | IT Services | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 9/14/2027 | 19,926 | 19,997 | 19,985 | 0.40 | % | ||||||||||||||||||||||||
| 1741 Technology Drive Suite 400 San Jose CA 95110 United States | ||||||||||||||||||||||||||||||||||||||
| Gordian Medical, Inc.(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 6.25 | % | 7.00 | % | 3/29/2027 | 70,000 | 67,641 | 69,650 | 1.41 | % | ||||||||||||||||||||||||
| 17595 Cartwright Road, Irvine CA 92614 United States | ||||||||||||||||||||||||||||||||||||||
| Grab Technology, LLC(6)(12) | Road & Rail | |
First Lien Debt |
|
L + 4.50 | % | 5.50 | % | 1/29/2026 | 29,839 | 29,410 | 30,361 | 0.61 | % | ||||||||||||||||||||||||
| 780 Barnes Blvd SW, Tumwater, WA 98512 United States | ||||||||||||||||||||||||||||||||||||||
134
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Graham Packaging Co, Inc.(11) | Containers & Packaging | |
First Lien Debt |
|
L + 3.00 | % | 3.75 | % | 8/4/2027 | 4,988 | 4,997 | 4,989 | 0.10 | % | ||||||||||||||||||||||||
| 148 Quay Street Floor 9, Auckland Central Auckland, 1010 New Zealand | ||||||||||||||||||||||||||||||||||||||
| GraphPAD Software, LLC(4)(7)(12) | Software | |
First Lien Debt |
|
L + 5.50 | % | 6.50 | % | 4/27/2027 | 17,500 | 17,204 | 17,195 | 0.35 | % | ||||||||||||||||||||||||
| 2365 Northside Dr #560, San Diego, CA 92108 United States | ||||||||||||||||||||||||||||||||||||||
| Greeneden U.S. Holdings II, LLC(11) | Software | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 12/1/2027 | 39,963 | 40,128 | 40,105 | 0.81 | % | ||||||||||||||||||||||||
| 2001 Junipero Serra Blvd, Daly City CA 94014 United States | ||||||||||||||||||||||||||||||||||||||
| Guidehouse LLP(8) | Professional Services | |
First Lien Debt |
|
L + 4.00 | % | 4.10 | % | 5/1/2025 | 21,466 | 21,518 | 21,543 | 0.44 | % | ||||||||||||||||||||||||
| 1730 Pennsylvania Ave NW. Washington, District of Columbia 20006 US | ||||||||||||||||||||||||||||||||||||||
| Heartland Dental, LLC(8) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.00 | % | 4.07 | % | 4/30/2025 | 20,145 | 20,053 | 20,138 | 0.41 | % | ||||||||||||||||||||||||
| 9 West 57th Street Suite 4200 New York NY 10019 United States | ||||||||||||||||||||||||||||||||||||||
| High Street Buyer, Inc.(4)(7)(11) | Insurance | |
First Lien Debt |
|
L + 6.00 | % | 6.75 | % | 4/14/2028 | 31,304 | 30,361 | 30,069 | 0.61 | % | ||||||||||||||||||||||||
| 600 Unicorn Park Drive, Suite 208, Woburn, MA 01801 United States | ||||||||||||||||||||||||||||||||||||||
| HNC Holdings, Inc.(12) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 4.00 | % | 5.00 | % | 10/5/2023 | 3,990 | 4,007 | 4,007 | 0.08 | % | ||||||||||||||||||||||||
| 405 East Edgerton Street, Dunn NC 28334 United States | ||||||||||||||||||||||||||||||||||||||
135
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Howden Group Holdings Limited(6)(11) | Insurance | |
First Lien Debt |
|
L + 3.25 | % | 4.00 | % | 11/12/2027 | 12,650 | 12,678 | 12,658 | 0.26 | % | ||||||||||||||||||||||||
| 1 Creechurch Place, London, EC3A 5AF United Kingdom | ||||||||||||||||||||||||||||||||||||||
| HS Purchaser, LLC(4)(7)(11) | Software | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 11/19/2026 | 17,842 | 17,887 | 17,899 | 0.36 | % | ||||||||||||||||||||||||
| 6455 City West Parkway Eden Prairie, MN United States | ||||||||||||||||||||||||||||||||||||||
| HS Purchaser, LLC(5)(11) | Software | |
Second Lien Debt |
|
L + 6.75 | % | 7.50 | % | 11/19/2027 | 51,000 | 51,150 | 51,526 | 1.04 | % | ||||||||||||||||||||||||
| 6455 City West Parkway Eden Prairie, MN United States | ||||||||||||||||||||||||||||||||||||||
| HUB International Limited(8) | Insurance | |
First Lien Debt |
|
L + 2.75 | % | 2.93 | % | 4/25/2025 | 9,255 | 9,247 | 9,197 | 0.19 | % | ||||||||||||||||||||||||
| 55 East Jackson Blvd 14th Floor Chicago IL 60604 United States | ||||||||||||||||||||||||||||||||||||||
| Huntsworth Limited(6)(8) | Health Care Providers & Services | |
First Lien Debt |
|
|
L + 6.00 (incl. |
% |
6.19 | % | 5/11/2027 | 8,958 | 8,269 | 9,002 | 0.18 | % | |||||||||||||||||||||||
| 26 Southampton Buildings 8th Floor, Holborn Gate London, WC2A 1AN United Kingdom | ||||||||||||||||||||||||||||||||||||||
| Hyland Software, Inc.(11) | Software | |
First Lien Debt |
|
L + 3.50 | % | 4.25 | % | 7/1/2024 | 23,435 | 23,491 | 23,505 | 0.48 | % | ||||||||||||||||||||||||
| 28500 Clemens Road, Westlake OH 44145 United States | ||||||||||||||||||||||||||||||||||||||
| IBC Capital US, LLC(6)(8) | Containers & Packaging | |
First Lien Debt |
|
L + 3.75 | % | 3.87 | % | 9/11/2023 | 18,609 | 18,564 | 18,479 | 0.37 | % | ||||||||||||||||||||||||
| 3 Changi South Street 1, Santa United Building, #03-01 Singapore 486795 | ||||||||||||||||||||||||||||||||||||||
136
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Idera, Inc.(5)(11) | Software | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 2/4/2028 | 30,418 | 30,330 | 30,478 | 0.62 | % | ||||||||||||||||||||||||
| Brookhollow Ctr III, 2950 Nort Loop Freeway W, Suite 700 Houston TX 77092 United States | ||||||||||||||||||||||||||||||||||||||
| Idera, Inc.(5)(11) | Software | |
Second Lien Debt |
|
L + 6.75 | % | 7.50 | % | 2/4/2029 | 35,430 | 35,268 | 35,430 | 0.72 | % | ||||||||||||||||||||||||
| Brookhollow Ctr III, 2950 Nort Loop Freeway W, Suite 700 Houston TX 77092 United States | ||||||||||||||||||||||||||||||||||||||
| IEA Energy Services, LLC(8) | Construction & Engineering | |
First Lien Debt |
|
L + 6.75 | % | 6.90 | % | 9/25/2024 | 6,955 | 6,975 | 6,917 | 0.14 | % | ||||||||||||||||||||||||
| 6325 Digital Way Suite 460 Indianapolis IN 46278 United States | ||||||||||||||||||||||||||||||||||||||
| IG Investments Holdings, LLC(12) | Professional Services | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 5/23/2025 | 22,404 | 22,413 | 22,482 | 0.45 | % | ||||||||||||||||||||||||
| 4170 Ashford Dunwood Road, Northeast, Ste 250 Atlanta GA 30319 United States | ||||||||||||||||||||||||||||||||||||||
| Illuminate Merger Sub Corp.(4)(10) | Building Products | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 6/30/2028 | 7,184 | 7,148 | 7,173 | 0.15 | % | ||||||||||||||||||||||||
| 198 Van Buren Street, Suite 200. Herndon, Virginia 20170 United States | ||||||||||||||||||||||||||||||||||||||
| Imperva, Inc.(12) | Software | |
First Lien Debt |
|
L + 4.00 | % | 5.00 | % | 1/12/2026 | 19,416 | 19,513 | 19,509 | 0.39 | % | ||||||||||||||||||||||||
| 3400 Bridge Parkway Suite 200 Redwood City CA 94065 United States | ||||||||||||||||||||||||||||||||||||||
| Imprivata, Inc.(10) | Software | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 12/1/2027 | 14,525 | 14,565 | 14,570 | 0.29 | % | ||||||||||||||||||||||||
| 10 Maguire Road, Building 1 Suite 125 Lexington MA 02421 United States | ||||||||||||||||||||||||||||||||||||||
137
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Infinite Bidco, LLC(10) | Electronic Equipment, Instruments & Components | |
First Lien Debt |
|
L + 3.75 | % | 4.25 | % | 2/24/2028 | 21,940 | 21,924 | 21,968 | 0.44 | % | ||||||||||||||||||||||||
| 17792 Fitch, Irvine, CA 92614 United States | ||||||||||||||||||||||||||||||||||||||
| Infinite Bidco, LLC(5)(10) | Electronic Equipment, Instruments & Components | |
Second Lien Debt |
|
L + 7.00 | % | 7.50 | % | 2/24/2029 | 20,833 | 20,733 | 21,042 | 0.43 | % | ||||||||||||||||||||||||
| 17792 Fitch, Irvine, CA 92614 United States | ||||||||||||||||||||||||||||||||||||||
| Informatica, LLC(8) | Software | |
First Lien Debt |
|
L + 3.25 | % | 3.35 | % | 2/25/2027 | 3,722 | 3,729 | 3,706 | 0.07 | % | ||||||||||||||||||||||||
| 2100 Seaport Blvd, Redwood City CA 94063 United States | ||||||||||||||||||||||||||||||||||||||
| Ingram Micro, Inc.(10) | Electronic Equipment, Instruments & Components | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 3/31/2028 | 8,500 | 8,453 | 8,525 | 0.17 | % | ||||||||||||||||||||||||
| 360 North Crescent Drive, Beverly Hills CA 90210 United States | ||||||||||||||||||||||||||||||||||||||
| Inmar, Inc.(12) | Professional Services | |
First Lien Debt |
|
L + 4.00 | % | 5.00 | % | 5/1/2024 | 4,987 | 4,990 | 4,990 | 0.10 | % | ||||||||||||||||||||||||
| 8150 Industrial Blvd, Breinigsville, PA 18031 United States | ||||||||||||||||||||||||||||||||||||||
| Instant Brands Holdings, Inc.(4)(11) |
Household Durables | |
First Lien Debt |
|
L + 5.00 | % | 5.75 | % | 4/12/2028 | 85,000 | 83,766 | 84,894 | 1.72 | % | ||||||||||||||||||||||||
| 499 Park Avenue 21st Floor New York NY 10022 United States | ||||||||||||||||||||||||||||||||||||||
| Integrity Marketing Acquisition, LLC(4)(7)(12) | Insurance | |
First Lien Debt |
|
L + 5.75 | % | 6.75 | % | 8/27/2025 | 16,642 | 16,095 | 16,043 | 0.32 | % | ||||||||||||||||||||||||
| 2300 Highland Village Suite 300 Highland Village, TX 75077 United States | ||||||||||||||||||||||||||||||||||||||
138
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| ION Trading Finance Ltd.(6)(8) | Software | |
First Lien Debt |
|
L + 4.75 | % | 4.92 | % | 3/26/2028 | 17,795 | 17,787 | 17,895 | 0.36 | % | ||||||||||||||||||||||||
| Simmonscourt Road Minerva House, 4th Floor Dublin 4, D04H9P8 Ireland | ||||||||||||||||||||||||||||||||||||||
| IRB Holding Corp.(12) | Hotels, Restaurants & Leisure | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 12/15/2027 | 39,880 | 39,963 | 39,927 | 0.81 | % | ||||||||||||||||||||||||
| Three Glenlake Parkway Northeast Atlanta GA 30328 United States | ||||||||||||||||||||||||||||||||||||||
| Ivanti Software, Inc.(11) | Software | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 12/1/2027 | 4,014 | 4,004 | 4,002 | 0.08 | % | ||||||||||||||||||||||||
| 10377 South Jordan Gateway Suite 110 South Jordan UT 84095 United States | ||||||||||||||||||||||||||||||||||||||
| Ivanti Software, Inc.(12) | Software | |
First Lien Debt |
|
L + 4.75 | % | 5.75 | % | 12/1/2027 | 25,099 | 25,204 | 25,174 | 0.51 | % | ||||||||||||||||||||||||
| 10377 South Jordan Gateway Suite 110 South Jordan UT 84095 United States | ||||||||||||||||||||||||||||||||||||||
| Jacuzzi Brands, LLC(4)(12) | Building Products | |
First Lien Debt |
|
L + 6.50 | % | 7.50 | % | 2/25/2025 | 52,938 | 52,330 | 52,938 | 1.07 | % | ||||||||||||||||||||||||
| 3925 City Center Drive Suite 200 Chino Hills CA 91709 United States | ||||||||||||||||||||||||||||||||||||||
| Jayhawk Buyer, LLC(4)(12) | Health Care Providers & Services | |
Second Lien Debt |
|
L + 8.75 | % | 9.75 | % | 10/15/2027 | 29,372 | 28,793 | 28,784 | 0.58 | % | ||||||||||||||||||||||||
| 8717 West 110th Street, Suite 300 Overland Park, KS 66210 | ||||||||||||||||||||||||||||||||||||||
| Jayhawk Buyer, LLC(4)(7)(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 5.00 | % | 6.00 | % | 10/15/2026 | 165,298 | 162,104 | 163,223 | 3.30 | % | ||||||||||||||||||||||||
| 8717 West 110th Street, Suite 300 Overland Park, KS 66210 | ||||||||||||||||||||||||||||||||||||||
139
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Jazz Pharmaceuticals, Inc.(6)(10) | Pharmaceuticals | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 4/21/2028 | 12,442 | 12,379 | 12,495 | 0.25 | % | ||||||||||||||||||||||||
| 1 Burlington Road 4th Floor, Connaught House Dublin, 4 Ireland | ||||||||||||||||||||||||||||||||||||||
| Jones Deslauriers Insurance Management, Inc.(4)(6)(7)(10) | Insurance | |
Second Lien Debt |
|
L + 7.50 | % | 8.00 | % | 3/26/2029 | 20,859 | 16,201 | 16,993 | 0.34 | % | ||||||||||||||||||||||||
| 2375 Skymark Avenue, Mississauga, Ontario L4W 4Y6 | ||||||||||||||||||||||||||||||||||||||
| Jones Deslauriers Insurance Management, Inc.(4)(6)(7)(11) | Insurance | |
First Lien Debt |
|
L + 4.25 | % | 5.00 | % | 3/28/2028 | 55,944 | 43,777 | 45,308 | 0.92 | % | ||||||||||||||||||||||||
| 2375 Skymark Avenue, Mississauga, Ontario L4W 4Y6 | ||||||||||||||||||||||||||||||||||||||
| JSS Holdings, Inc.(4)(12) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 12/17/2027 | 46,739 | 46,080 | 46,505 | 0.94 | % | ||||||||||||||||||||||||
| 180 North Stetson, 29th Floor, Chicago, IL 60601 United States | ||||||||||||||||||||||||||||||||||||||
| Kodiak BP, LLC(11) | Building Products | |
First Lien Debt |
|
L + 3.25 | % | 4.00 | % | 2/25/2028 | 14,416 | 14,394 | 14,416 | 0.29 | % | ||||||||||||||||||||||||
| 1745 Shea Center Drive Suite 130 Highlands Ranch CO 80129 United States | ||||||||||||||||||||||||||||||||||||||
| KUEHG Corp.(12) | Diversified Consumer Services | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 2/21/2025 | 19,941 | 19,660 | 19,674 | 0.40 | % | ||||||||||||||||||||||||
| 650 North East Holladay Street, Portland OR 97232 United States | ||||||||||||||||||||||||||||||||||||||
140
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Lanai Holding III, Inc.(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.75 | % | 7.00 | % | 8/29/2022 | 26,288 | 26,198 | 26,241 | 0.53 | % | ||||||||||||||||||||||||
| 28100 Torch Pwky, Warrenville, IL 60555 United States | ||||||||||||||||||||||||||||||||||||||
| Latham Pool Products, Inc.(8) | Building Products | |
First Lien Debt |
|
L + 6.00 | % | 6.10 | % | 6/18/2025 | 80,709 | 80,172 | 81,087 | 1.64 | % | ||||||||||||||||||||||||
| 787 Watervliet Shaker Road Latham NY 2110 United States | ||||||||||||||||||||||||||||||||||||||
| LBM Acquisition, LLC(7)(11) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 12/17/2027 | 41,162 | 41,009 | 40,923 | 0.83 | % | ||||||||||||||||||||||||
| 1000 Corporate Grove Drive, Buffalo Grove IL 60089 United States | ||||||||||||||||||||||||||||||||||||||
| LD Lower Holdings, Inc.(4)(7)(12) | Software | |
First Lien Debt |
|
L + 6.50 | % | 7.50 | % | 2/8/2026 | 119,575 | 116,861 | 118,380 | 2.39 | % | ||||||||||||||||||||||||
| 8201 Greensboro Drive, Suite 717 Mclean, VA 22102-3810 United States | ||||||||||||||||||||||||||||||||||||||
| Learning Care Group(12) | Diversified Consumer Services | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 3/13/2025 | 19,941 | 19,615 | 19,644 | 0.40 | % | ||||||||||||||||||||||||
| 21333 Haggerty Rd., Suite 300, Novi, MI 48375 United States | ||||||||||||||||||||||||||||||||||||||
| Legalzoom.com, Inc.(8) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 4.50 | % | 4.60 | % | 11/21/2024 | 5,967 | 5,990 | 5,969 | 0.12 | % | ||||||||||||||||||||||||
| 101 North Brand Blvd 11th Floor Glendale CA 91203 United States | ||||||||||||||||||||||||||||||||||||||
| Lew’s Intermediate Holdings, LLC(4)(11) | Leisure Products | |
First Lien Debt |
|
L + 5.00 | % | 5.75 | % | 1/26/2028 | 26,334 | 26,082 | 26,466 | 0.54 | % | ||||||||||||||||||||||||
| 209 Stoneridge Dr, Columbia, South Carolina 29210 | ||||||||||||||||||||||||||||||||||||||
141
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| LifePoint Health, Inc.(8) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 11/16/2025 | 10,000 | 10,020 | 9,989 | 0.20 | % | ||||||||||||||||||||||||
| 330 Seven Springs Way, Brentwood TN 37027 United States | ||||||||||||||||||||||||||||||||||||||
| Lindstrom, LLC(4)(12) | Building Products | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 4/7/2025 | 28,075 | 27,817 | 28,075 | 0.57 | % | ||||||||||||||||||||||||
| 2950 100th Court Northeast Blaine MN 55449 United States | ||||||||||||||||||||||||||||||||||||||
| Liquid Tech Solutions Holdings, LLC(4)(11) | Transportation Infrastructure | |
First Lien Debt |
|
L + 4.75 | % | 5.50 | % | 3/19/2028 | 15,500 | 15,425 | 15,500 | 0.31 | % | ||||||||||||||||||||||||
| 79 Madison Ave #439, New York, NY 10016 United States | ||||||||||||||||||||||||||||||||||||||
| Livingston International, Inc.(4)(6)(12) | Air Freight & Logistics | |
First Lien Debt |
|
L + 5.75 | % | 6.75 | % | 4/30/2026 | 22,542 | 22,520 | 22,571 | 0.46 | % | ||||||||||||||||||||||||
| The West Mall Suite 400 Toronto ON M9C 5K7 Canada | ||||||||||||||||||||||||||||||||||||||
| Loar Group, Inc.(4)(12) | Aerospace & Defense | |
First Lien Debt |
|
L + 7.25 | % | 8.25 | % | 10/2/2023 | 29,573 | 29,573 | 29,573 | 0.60 | % | ||||||||||||||||||||||||
| 450 Lexington Avenue, New York, NY 10017 United States | ||||||||||||||||||||||||||||||||||||||
| Loire US HoldCo 2, Inc.(6)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 4/21/2027 | 4,861 | 4,837 | 4,855 | 0.10 | % | ||||||||||||||||||||||||
| Warwick Court, Paternoster Square, London GB | ||||||||||||||||||||||||||||||||||||||
| LSF11 Skyscraper Holdco S.à r.l, LLC(4)(5)(6)(11) | Chemicals | |
First Lien Debt |
|
L + 3.50 | % | 4.25 | % | 9/29/2027 | 19,950 | 19,851 | 20,025 | 0.41 | % | ||||||||||||||||||||||||
| 33 rue du Puits Romain, Bertrange, L-8070 Luxembourg | ||||||||||||||||||||||||||||||||||||||
142
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| LTI Holdings, Inc.(8) | Electronic Equipment, Instruments & Components | |
First Lien Debt |
|
L + 3.50 | % | 3.60 | % | 9/6/2025 | 2,992 | 2,956 | 2,957 | 0.06 | % | ||||||||||||||||||||||||
| 600 South McClure Road, Modesto CA 95357 United States | ||||||||||||||||||||||||||||||||||||||
| Lytx, Inc.(4)(7)(12) | Technology Hardware, Storage & Peripherals | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 2/28/2026 | 37,475 | 37,658 | 37,599 | 0.76 | % | ||||||||||||||||||||||||
| 9785 Towne Centre Drive San Diego CA 92121 United States | ||||||||||||||||||||||||||||||||||||||
| MA FinanceCom, LLC(6)(12) | Software | |
First Lien Debt |
|
L + 4.25 | % | 5.25 | % | 6/5/2025 | 5,000 | 5,069 | 5,074 | 0.10 | % | ||||||||||||||||||||||||
| 22-30 Old Bath Road The Lawn, Berkshire Newbury, RG14 1QN United Kingdom | ||||||||||||||||||||||||||||||||||||||
| Mad Engine Global, LLC(4)(12) | Textiles, Apparel & Luxury Goods | |
First Lien Debt |
|
L + 7.00 | % | 8.00 | % | 6/30/2027 | 40,000 | 39,000 | 39,000 | 0.79 | % | ||||||||||||||||||||||||
| 6740 Cobra Way, San Diego, CA, 92121 United States | ||||||||||||||||||||||||||||||||||||||
| Madison IAQ, LLC(10) | Electrical Equipment | |
First Lien Debt |
|
L + 3.25 | % | 3.75 | % | 6/16/2028 | 7,019 | 6,984 | 7,022 | 0.14 | % | ||||||||||||||||||||||||
| 500 W Madison St #3890, Chicago IL United States | ||||||||||||||||||||||||||||||||||||||
| MAG DS Corp.(12) | Aerospace & Defense | |
First Lien Debt |
|
L + 5.50 | % | 6.50 | % | 4/1/2027 | 11,298 | 11,105 | 11,086 | 0.22 | % | ||||||||||||||||||||||||
| 3580 Groupe Drive Suite 200 Woodbridge VA 22192 United States | ||||||||||||||||||||||||||||||||||||||
| MAR Bidco Sarl(4)(6)(10) | Containers & Packaging | |
First Lien Debt |
|
L + 4.25 | % | 4.75 | % | 4/20/2028 | 3,947 | 3,928 | 3,972 | 0.08 | % | ||||||||||||||||||||||||
| 320 Stewart Rd, Wilkes-Barre, PA 18706 United States | ||||||||||||||||||||||||||||||||||||||
143
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Maravai Intermediate Holdings, LLC(6)(12) | Life Sciences Tools & Services | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 10/19/2027 | 1,989 | 2,012 | 2,000 | 0.04 | % | ||||||||||||||||||||||||
| 10770 Wateridge Circle Suite 200. San Diego, CA 92121 United States | ||||||||||||||||||||||||||||||||||||||
| Masergy Holdings, Inc.(12) | Diversified Telecommunication Services | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 12/7/2026 | 20,008 | 19,968 | 20,033 | 0.41 | % | ||||||||||||||||||||||||
| 2740 North Dallas Parkway Suite 100 Plano, TX 75093 United States | ||||||||||||||||||||||||||||||||||||||
| Maverick Acquisition, Inc.(11) | Software | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 4/28/2028 | 17,000 | 16,916 | 17,036 | 0.34 | % | ||||||||||||||||||||||||
| 3063 Philmont Ave B, Huntingdon Valley, PA 19006 United States | ||||||||||||||||||||||||||||||||||||||
| Maverick Acquisition, Inc.(4)(5)(11) | Software | |
Second Lien Debt |
|
L + 6.75 | % | 7.50 | % | 4/28/2029 | 17,000 | 16,916 | 17,170 | 0.35 | % | ||||||||||||||||||||||||
| 3063 Philmont Ave B, Huntingdon Valley, PA 19006 United States | ||||||||||||||||||||||||||||||||||||||
| Maverick Acquisition, Inc.(4)(7)(12) | Software | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 6/1/2027 | 39,000 | 38,071 | 38,058 | 0.77 | % | ||||||||||||||||||||||||
| 3063 Philmont Ave B, Huntingdon Valley, PA 19006 United States | ||||||||||||||||||||||||||||||||||||||
| Mavis Tire Express Services TopCo LP(5)(8) | Auto Components | |
Unsecured Debt |
|
0.065 | 6.50 | % | 5/15/2029 | 7,000 | 7,000 | 6,903 | 0.14 | % | |||||||||||||||||||||||||
| 358 Saw Mill River Road, New York NY 10546 United States | ||||||||||||||||||||||||||||||||||||||
144
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| MaxGen Energy Services Corporation(4)(12) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 4.75 | % | 5.75 | % | 6/2/2027 | 60,000 | 58,520 | 58,800 | 1.19 | % | ||||||||||||||||||||||||
| 1690 Scenic Ave, Costa Mesa, CA 92626 United States | ||||||||||||||||||||||||||||||||||||||
| McCarthy & Stone PLC(4)(5)(6)(8) | Real Estate Management & Development | |
First Lien Debt |
|
0.07 | 7.00 | % | 12/16/2025 | 20,000 | 27,989 | 27,471 | 0.56 | % | |||||||||||||||||||||||||
| 2711 North Haskell Avenue Suite 1700 Dallas TX 75204 United States | ||||||||||||||||||||||||||||||||||||||
| MeridianLink, Inc.(12) | Software | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 5/30/2025 | 25,010 | 24,986 | 25,022 | 0.51 | % | ||||||||||||||||||||||||
| 3560 Hyland Avenue Suite 200 Costa Mesa CA 92626 United States | ||||||||||||||||||||||||||||||||||||||
| Metis Buyer, Inc.(5)(7)(11) | Auto Components | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 5/4/2028 | 50,000 | 48,459 | 50,188 | 1.02 | % | ||||||||||||||||||||||||
| 358 Saw Mill River Rd, Millwood, NY 10546 United States | ||||||||||||||||||||||||||||||||||||||
| MH Sub I, LLC(12) | Interactive Media & Services | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 9/13/2024 | 23,818 | 23,912 | 23,900 | 0.48 | % | ||||||||||||||||||||||||
| 909 North Pacific Coast Highway, 11th Floor El Segundo CA 90245 United States | ||||||||||||||||||||||||||||||||||||||
| MH Sub I, LLC(5)(8) | Interactive Media & Services | |
Second Lien Debt |
|
L + 6.25 | % | 6.35 | % | 2/12/2029 | 15,113 | 15,077 | 15,373 | 0.31 | % | ||||||||||||||||||||||||
| 909 North Pacific Coast Highway, 11th Floor El Segundo CA 90245 United States | ||||||||||||||||||||||||||||||||||||||
| Mi Windows and Doors, LLC(11) | Building Products | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 12/18/2027 | 24,411 | 24,534 | 24,480 | 0.50 | % | ||||||||||||||||||||||||
| 650 West Market Street, Gratz, PA 17030 United States | ||||||||||||||||||||||||||||||||||||||
145
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Mic Glen, LLC(11) | Software | |
First Lien Debt |
|
L + 6.75 | % | 7.25 | % | 6/23/2028 | 4,011 | 3,991 | 4,011 | 0.08 | % | ||||||||||||||||||||||||
| 88 S State St, Hackensack, NJ 07601 United States | ||||||||||||||||||||||||||||||||||||||
| Mic Glen, LLC(5)(11) | Software | |
Second Lien Debt |
|
L + 6.75 | % | 7.25 | % | 6/22/2029 | 17,000 | 16,915 | 17,151 | 0.35 | % | ||||||||||||||||||||||||
| 88 S State St, Hackensack, NJ 07601 United States | ||||||||||||||||||||||||||||||||||||||
| Midwest Physician Administrative Services, LLC(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.25 | % | 4.00 | % | 3/5/2028 | 2,993 | 2,978 | 2,989 | 0.06 | % | ||||||||||||||||||||||||
| 1100 West 31st Street Suite 300 Downers Grove IL 60515 United States | ||||||||||||||||||||||||||||||||||||||
| Minotaur Acquisition, Inc.(8) | Professional Services | |
First Lien Debt |
|
L + 4.75 | % | 4.85 | % | 3/27/2026 | 53,082 | 53,005 | 53,137 | 1.07 | % | ||||||||||||||||||||||||
| 2001 Spring Road, Suite 700 Oak Brook, Illinois 60523 United States | ||||||||||||||||||||||||||||||||||||||
| Mitchell International, Inc.(10) | Diversified Financial Services | |
First Lien Debt |
|
L + 4.25 | % | 4.75 | % | 11/29/2024 | 12,952 | 13,025 | 13,031 | 0.26 | % | ||||||||||||||||||||||||
| 6220 Greenwich Drive, San Diego CA 92122 United States | ||||||||||||||||||||||||||||||||||||||
| Mitchell International, Inc.(8) | Diversified Financial Services | |
First Lien Debt |
|
L + 3.25 | % | 3.35 | % | 11/29/2024 | 11,234 | 11,179 | 11,147 | 0.23 | % | ||||||||||||||||||||||||
| 6220 Greenwich Drive, San Diego CA 92122 United States | ||||||||||||||||||||||||||||||||||||||
| Mobileum, Inc.(4)(7)(12) | Software | |
First Lien Debt |
|
L + 4.75 | % | 5.75 | % | 6/1/2028 | 48,623 | 48,006 | 45,810 | 0.93 | % | ||||||||||||||||||||||||
| 101 Huntington Avenue, Boston MA 02199 United States | ||||||||||||||||||||||||||||||||||||||
146
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Mode Purchaser, Inc.(4)(12) | Air Freight & Logistics | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 12/9/2026 | 34,563 | 33,502 | 33,698 | 0.68 | % | ||||||||||||||||||||||||
| 17330 Preston Rd., Suite 200 C Dallas, TX 75252 United States | ||||||||||||||||||||||||||||||||||||||
| Monroe Capital Holdings, LLC(4)(7)(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 9/8/2026 | 21,632 | 21,382 | 22,281 | 0.45 | % | ||||||||||||||||||||||||
| 311 South Wacker Drive 64th Floor Chicago IL 60606 United States | ||||||||||||||||||||||||||||||||||||||
| Motion Finco, LLC(6)(8) | Pharmaceuticals | |
First Lien Debt |
|
L + 3.25 | % | 3.40 | % | 11/12/2026 | 4,988 | 4,839 | 4,841 | 0.10 | % | ||||||||||||||||||||||||
| 234 West 42nd Street New York, NY 10036 United States | ||||||||||||||||||||||||||||||||||||||
| MPH Acquisition Holdings(6)(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 2.75 | % | 3.75 | % | 6/7/2023 | 17,600 | 17,613 | 17,571 | 0.36 | % | ||||||||||||||||||||||||
| 115, 5th Avenue, New York NY 10003 United States | ||||||||||||||||||||||||||||||||||||||
| MRI Software, LLC(4)(7)(12) | Software | |
First Lien Debt |
|
L + 5.50 | % | 6.50 | % | 2/10/2026 | 11,903 | 11,817 | 11,927 | 0.24 | % | ||||||||||||||||||||||||
| 28925 Fountain Parkway Solon OH 44139 United States | ||||||||||||||||||||||||||||||||||||||
| NAB Holdings, LLC(12) | IT Services | |
First Lien Debt |
|
L + 3.00 | % | 4.00 | % | 7/1/2024 | 9,956 | 9,950 | 9,981 | 0.20 | % | ||||||||||||||||||||||||
| 250 Stephenson Highway, Troy MI 48083 United States | ||||||||||||||||||||||||||||||||||||||
| National Intergovernmental Purchasing Alliance Co.(8) | Professional Services | |
First Lien Debt |
|
L + 3.50 | % | 3.65 | % | 5/23/2025 | 15,362 | 15,292 | 15,272 | 0.31 | % | ||||||||||||||||||||||||
| 840 Crescent Centre Drive Suite 600 Franklin TN 37067 United States | ||||||||||||||||||||||||||||||||||||||
| National Mentor Holdings, Inc.(7)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 2/18/2028 | 21,986 | 21,968 | 22,051 | 0.45 | % | ||||||||||||||||||||||||
| 313 Congress Street 5th Floor Boston MA 02210 United States | ||||||||||||||||||||||||||||||||||||||
147
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| NAVEX TopCo, Inc.(8) | Software | |
First Lien Debt |
|
L + 3.25 | % | 3.36 | % | 9/5/2025 | 7,561 | 7,548 | 7,511 | 0.15 | % | ||||||||||||||||||||||||
| 401 Congress Ave, Suite 3100, Austin TX 78701 United States | ||||||||||||||||||||||||||||||||||||||
| Navico, Inc.(5)(6)(12) | Marine | |
First Lien Debt |
|
L + 4.25 | % | 5.25 | % | 3/31/2023 | 1,924 | 1,862 | 1,924 | 0.04 | % | ||||||||||||||||||||||||
| 10410 Waltham St, Jamaica, NY 11435 United States | ||||||||||||||||||||||||||||||||||||||
| NDC Acquisition Corp.(4)(7)(12) | Distributors | |
First Lien Debt |
|
L + 5.75 | % | 6.75 | % | 3/9/2027 | 23,600 | 22,920 | 22,888 | 0.46 | % | ||||||||||||||||||||||||
| 402 BNA Drive, Suite 500, Nashville, TN 37217 | ||||||||||||||||||||||||||||||||||||||
| Netsmart Technologies, Inc.(11) | Health Care Technology | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 10/1/2027 | 24,938 | 25,050 | 25,036 | 0.51 | % | ||||||||||||||||||||||||
| 11100 Nall Avenue, Overland Park KS 66211 United States | ||||||||||||||||||||||||||||||||||||||
| New Arclin US Holding Corp.(5)(6)(12) | Building Products | |
First Lien Debt |
|
L + 4.00 | % | 5.00 | % | 2/28/2026 | 1,794 | 1,786 | 1,806 | 0.04 | % | ||||||||||||||||||||||||
| 1000 Holcomb Woods Parkway Suite 342 Roswell GA 30076 United States | ||||||||||||||||||||||||||||||||||||||
| NFP Corp.(8) | Insurance | |
First Lien Debt |
|
L + 3.25 | % | 3.35 | % | 2/15/2027 | 13,424 | 13,401 | 13,253 | 0.27 | % | ||||||||||||||||||||||||
| 340 Madison Avenue 20th Floor New York NY 10173 United States | ||||||||||||||||||||||||||||||||||||||
| NIC Acquisition Corp.(11) | Chemicals | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 12/29/2027 | 13,906 | 13,891 | 13,899 | 0.28 | % | ||||||||||||||||||||||||
| 150 Dascomb Road Andover, MA 01810 | ||||||||||||||||||||||||||||||||||||||
| NIC Acquisition Corp.(11) | Chemicals | |
Second Lien Debt |
|
L + 7.75 | % | 8.50 | % | 12/29/2028 | 31,500 | 31,051 | 31,736 | 0.64 | % | ||||||||||||||||||||||||
| 150 Dascomb Road Andover, MA 01810 | ||||||||||||||||||||||||||||||||||||||
148
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| NMC Crimson Holdings, Inc.(4)(7)(11) | Health Care Technology | |
First Lien Debt |
|
L + 6.00 | % | 6.75 | % | 3/1/2028 | 71,173 | 68,692 | 69,101 | 1.40 | % | ||||||||||||||||||||||||
| 1050 Winter Street, Suite 2700 Waltham, MA 02451 | ||||||||||||||||||||||||||||||||||||||
| Numericable US, LLC(6)(8) | Diversified Telecommunication Services | |
First Lien Debt |
|
L + 3.69 | % | 3.87 | % | 1/31/2026 | 5,077 | 5,083 | 5,045 | 0.10 | % | ||||||||||||||||||||||||
| 5, rue Eugène Ruppert L - 2453 Luxembourg LU | ||||||||||||||||||||||||||||||||||||||
| Numericable US, LLC(6)(8) | Diversified Telecommunication Services | |
First Lien Debt |
|
L + 4.00 | % | 4.15 | % | 8/14/2026 | 23,951 | 23,976 | 23,950 | 0.48 | % | ||||||||||||||||||||||||
| 5, rue Eugène Ruppert L - 2453 Luxembourg LU | ||||||||||||||||||||||||||||||||||||||
| Odyssey Holding Company, LLC(4)(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 5.75 | % | 6.75 | % | 11/16/2025 | 46,316 | 46,316 | 46,316 | 0.94 | % | ||||||||||||||||||||||||
| 100 Winners Circle Suite 440 Brentwood, TN 37027 United States | ||||||||||||||||||||||||||||||||||||||
| Omni Intermediate Holdings, LLC - Revolving Term Loan(4)(5)(7)(12) | Air Freight & Logistics | |
First Lien Debt |
|
L + 5.00 | % | 6.00 | % | 12/30/2025 | 2,507 | 2,489 | 2,507 | 0.05 | % | ||||||||||||||||||||||||
| 3100 Olympus Blvd, Suite 420, Dallas, TX 75019 | ||||||||||||||||||||||||||||||||||||||
| Omni Intermediate Holdings, LLC(4)(7)(12) | Air Freight & Logistics | |
First Lien Debt |
|
L + 5.00 | % | 6.00 | % | 12/30/2026 | 143,091 | 139,960 | 142,795 | 2.89 | % | ||||||||||||||||||||||||
| 3100 Olympus Blvd, Suite 420, Dallas, TX 75019 | ||||||||||||||||||||||||||||||||||||||
| Onex TSG Intermediate Corp.(6)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.75 | % | 5.50 | % | 2/28/2028 | 15,333 | 15,102 | 15,465 | 0.31 | % | ||||||||||||||||||||||||
| 200 Corporate Boulevard, Lafayette LA 70508 United States | ||||||||||||||||||||||||||||||||||||||
149
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Oxea Corporation(6)(8) | Chemicals | |
First Lien Debt |
|
L + 3.50 | % | 3.63 | % | 10/14/2024 | 4,986 | 4,980 | 4,974 | 0.10 | % | ||||||||||||||||||||||||
| 78 Lafayette St. Carteret, 07008 NJ United States | ||||||||||||||||||||||||||||||||||||||
| Padagis, LLC(4)(6)(10) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.75 | % | 5.25 | % | 6/30/2028 | 5,707 | 5,649 | 5,707 | 0.12 | % | ||||||||||||||||||||||||
| 1251 Lincoln Rd Allegan, MI 49010 United States | ||||||||||||||||||||||||||||||||||||||
| Park Place Technologies, LLC(12) | IT Services | |
First Lien Debt |
|
L + 5.00 | % | 6.00 | % | 11/10/2027 | 41,895 | 40,894 | 42,094 | 0.85 | % | ||||||||||||||||||||||||
| 5910 Landerbrook Drive, Mayfield Heights, OH 44124 | ||||||||||||||||||||||||||||||||||||||
| Park River Holdings, Inc.(11) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 3.25 | % | 4.00 | % | 12/28/2027 | 27,171 | 27,138 | 27,069 | 0.55 | % | ||||||||||||||||||||||||
| 1 E. 4TH Street Suite 1400, Cincinnati, OH, 45202 United States | ||||||||||||||||||||||||||||||||||||||
| Pathway Vet Alliance, LLC(8) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 3/31/2027 | 7,429 | 7,419 | 7,421 | 0.15 | % | ||||||||||||||||||||||||
| 4225 Guadalupe Street Austin, TX 78751 United States | ||||||||||||||||||||||||||||||||||||||
| Paula’s Choice Holdings, Inc.(4)(12) | Personal Products | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 11/17/2025 | 19,750 | 19,255 | 19,750 | 0.40 | % | ||||||||||||||||||||||||
| 705 5th Ave S, Ste 200 Seattle, WA 98104 | ||||||||||||||||||||||||||||||||||||||
| Paya Holdings III, LLC(4)(5)(6)(7)(11) | Software | |
First Lien Debt |
|
L + 3.25 | % | 4.00 | % | 6/16/2028 | 9,500 | 9,324 | 9,456 | 0.19 | % | ||||||||||||||||||||||||
| 303 Perimeter Center N Suite 600. Atlanta, Georgia 30346 United States | ||||||||||||||||||||||||||||||||||||||
150
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| PaySimple, Inc.(4)(8) | Software | |
First Lien Debt |
|
L + 5.50 | % | 5.61 | % | 8/23/2025 | 47,340 | 47,346 | 47,103 | 0.95 | % | ||||||||||||||||||||||||
| 515 Wynkoop Street Suite 250 Denver CO 80202 United States | ||||||||||||||||||||||||||||||||||||||
| Peak Utility Services Group, Inc.(7)(12) | Construction & Engineering | |
First Lien Debt |
|
L + 5.00 | % | 6.00 | % | 2/26/2028 | 23,800 | 23,537 | 23,645 | 0.48 | % | ||||||||||||||||||||||||
| 310 Interlocken Parkway Suite 220 Broomfield CO 80021 United States | ||||||||||||||||||||||||||||||||||||||
| Peraton Corp.(11) | Aerospace & Defense | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 2/1/2028 | 65,078 | 64,809 | 65,380 | 1.32 | % | ||||||||||||||||||||||||
| 12975 Worldgate Drive, Herndon VA 20170 United States | ||||||||||||||||||||||||||||||||||||||
| Peraton Corp.(4)(11) | Aerospace & Defense | |
Second Lien Debt |
|
L + 7.75 | % | 8.50 | % | 2/26/2029 | 75,000 | 73,891 | 76,875 | 1.55 | % | ||||||||||||||||||||||||
| 12975 Worldgate Drive, Herndon VA 20170 United States | ||||||||||||||||||||||||||||||||||||||
| Perforce Software, Inc.(8) | Software | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 7/1/2026 | 11,740 | 11,733 | 11,665 | 0.24 | % | ||||||||||||||||||||||||
| 2320 Blanding Avenue, Alameda CA 94501 United States | ||||||||||||||||||||||||||||||||||||||
| Petco Health & Wellness Co, Inc.(11) | Specialty Retail | |
First Lien Debt |
|
L + 3.25 | % | 4.00 | % | 2/24/2028 | 14,931 | 14,902 | 14,918 | 0.30 | % | ||||||||||||||||||||||||
| 10850 Via Frontera, San Diego CA 92127 United States | ||||||||||||||||||||||||||||||||||||||
| PetSmart, Inc.(5)(11) | Specialty Retail | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 2/11/2028 | 3,295 | 3,264 | 3,301 | 0.07 | % | ||||||||||||||||||||||||
| 19601 N 27th Ave, Phoenix, AZ, 85027-4010 United States | ||||||||||||||||||||||||||||||||||||||
| PetVet Care Centers, LLC(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.50 | % | 4.25 | % | 2/14/2025 | 33,213 | 33,311 | 33,353 | 0.67 | % | ||||||||||||||||||||||||
| 1 Gorham Island, Westport CT 06880 United States | ||||||||||||||||||||||||||||||||||||||
151
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Phoenix Guarantor, Inc.(8) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.25 | % | 3.34 | % | 3/5/2026 | 4,915 | 4,920 | 4,882 | 0.10 | % | ||||||||||||||||||||||||
| 805 N. Whittington Parkway, Louisville, Kentucky 40222 United States | ||||||||||||||||||||||||||||||||||||||
| Phoenix Guarantor, Inc.(8) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.50 | % | 3.57 | % | 3/5/2026 | 8,127 | 8,127 | 8,089 | 0.16 | % | ||||||||||||||||||||||||
| 805 N. Whittington Parkway, Louisville, Kentucky 40222 United States | ||||||||||||||||||||||||||||||||||||||
| Phoenix Services Merger Sub, LLC(12) | Machinery | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 3/1/2025 | 5,969 | 5,945 | 5,968 | 0.12 | % | ||||||||||||||||||||||||
| 805 North Whittington Parkway Louisville, KY 40222 United States | ||||||||||||||||||||||||||||||||||||||
| Plantronics, Inc.(5)(6)(8) | Communications Equipment | |
Unsecured Debt |
|
0.0475 | 4.75 | % | 3/1/2029 | 11,480 | 11,480 | 11,411 | 0.23 | % | |||||||||||||||||||||||||
| 345 Encinal Street Santa Cruz, California 95060 | ||||||||||||||||||||||||||||||||||||||
| Pluto Acquisition I, Inc.(8) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.00 | % | 4.14 | % | 6/22/2026 | 400 | 400 | 400 | 0.01 | % | ||||||||||||||||||||||||
| 251 Little Falls Drive, Wilmington, DE 19807 United States | ||||||||||||||||||||||||||||||||||||||
| Polymer Additives, Inc.(8) | Chemicals | |
First Lien Debt |
|
L + 6.00 | % | 6.18 | % | 7/31/2025 | 30,577 | 28,158 | 29,308 | 0.59 | % | ||||||||||||||||||||||||
| 5929 Lakeside Blvd Indianapolis IN 46278 United States | ||||||||||||||||||||||||||||||||||||||
| Porcelain Acquisition Corp.(4)(7)(12) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 4/30/2027 | 71,693 | 68,679 | 68,724 | 1.39 | % | ||||||||||||||||||||||||
| 20 Sanker Road, Dickson, TN 37055 United States | ||||||||||||||||||||||||||||||||||||||
152
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Pre-Paid Legal Services, Inc.(8) | Diversified Consumer Services | |
First Lien Debt |
|
L + 3.25 | % | 3.35 | % | 5/1/2025 | 8,800 | 8,820 | 8,749 | 0.18 | % | ||||||||||||||||||||||||
| 1 Pre-Paid Way, Ada OK 74820 United States | ||||||||||||||||||||||||||||||||||||||
| Pro Mach Group, Inc.(8) | Machinery | |
First Lien Debt |
|
L + 2.75 | % | 2.85 | % | 3/7/2025 | 6,268 | 6,237 | 6,189 | 0.13 | % | ||||||||||||||||||||||||
| 50 East Rivercenter Blvd Suite 1800 Covington KY 41011 United States | ||||||||||||||||||||||||||||||||||||||
| ProAmpac PG Borrower, LLC(11) | Containers & Packaging | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 11/3/2025 | 27,845 | 27,915 | 27,870 | 0.56 | % | ||||||||||||||||||||||||
| 12025 Tricon Road, Cincinnati, OH 45246 United States | ||||||||||||||||||||||||||||||||||||||
| Progress Residential PM Holdings, LLC(4)(7)(11) | Real Estate Management & Development | |
First Lien Debt |
|
L + 6.25 | % | 7.00 | % | 2/16/2028 | 55,898 | 54,575 | 55,200 | 1.12 | % | ||||||||||||||||||||||||
| 7500 N Dobson Rd., Suite 300 Scottsdale, AZ 85256 | ||||||||||||||||||||||||||||||||||||||
| Project Alpha Intermediate Holding, Inc.(8) | Software | |
First Lien Debt |
|
L + 4.00 | % | 4.11 | % | 4/26/2024 | 23,901 | 23,981 | 23,965 | 0.48 | % | ||||||||||||||||||||||||
| 211 South Gulph Road, Suite 500, King of Prussia, PA 19406 United States | ||||||||||||||||||||||||||||||||||||||
| Project Boost Purchaser, LLC(10) | Interactive Media & Services | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 6/1/2026 | 8,511 | 8,489 | 8,511 | 0.17 | % | ||||||||||||||||||||||||
| 11660 Alpharetta Highway Suite 210 Roswell, GA 30076 United States | ||||||||||||||||||||||||||||||||||||||
| Project Boost Purchaser, LLC(8) | Interactive Media & Services | |
First Lien Debt |
|
L + 3.50 | % | 3.60 | % | 6/1/2026 | 3,625 | 3,625 | 3,608 | 0.07 | % | ||||||||||||||||||||||||
| 11660 Alpharetta Highway Suite 210 Roswell, GA 30076 United States | ||||||||||||||||||||||||||||||||||||||
153
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Project Leopard Holdings, Inc.(12) | Software | |
First Lien Debt |
|
L + 4.75 | % | 5.75 | % | 7/7/2024 | 25,917 | 25,979 | 26,046 | 0.53 | % | ||||||||||||||||||||||||
| 300 North La Salle Street, Suite 4350, Chicago, IL 60654 United States | ||||||||||||||||||||||||||||||||||||||
| Project Ruby Ultimate Parent Corp.(11) | Health Care Technology | |
First Lien Debt |
|
L + 3.25 | % | 4.00 | % | 3/3/2028 | 8,590 | 8,547 | 8,575 | 0.17 | % | ||||||||||||||||||||||||
| 11711 West 79th Street Lenexa, Kansas 62214 | ||||||||||||||||||||||||||||||||||||||
| Proofpoint, Inc.(5)(10) | Software | |
Second Lien Debt |
|
L + 6.25 | % | 6.75 | % | 6/8/2029 | 95,000 | 94,525 | 96,306 | 1.95 | % | ||||||||||||||||||||||||
| 892 Ross Drive, Sunnyvale CA 94089 United States | ||||||||||||||||||||||||||||||||||||||
| PSKW Intermediate, LLC(4)(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 3/9/2026 | 22,219 | 22,219 | 22,219 | 0.45 | % | ||||||||||||||||||||||||
| The Crossings at Jefferson Park, 200 Jefferson Park, Whippany, NJ 07981 United States | ||||||||||||||||||||||||||||||||||||||
| Qualus Power Services Corp.(4)(7)(12) | Electric Utilities | |
First Lien Debt |
|
L + 5.50 | % | 6.50 | % | 3/26/2027 | 42,643 | 41,439 | 41,383 | 0.84 | % | ||||||||||||||||||||||||
| 4040 Rev Drive Cincinatti, OH 45232 | ||||||||||||||||||||||||||||||||||||||
| Quantum Bidco, Ltd.(6)(8) | Food Products | |
First Lien Debt |
|
L + 6.00 | % | 6.11 | % | 2/5/2028 | 18,500 | 24,398 | 24,996 | 0.51 | % | ||||||||||||||||||||||||
| 12 St James’s Square, St. James’s, London SW1Y 4LB | ||||||||||||||||||||||||||||||||||||||
| Quest Software US Holdings, Inc.(5)(6)(8) | Software | |
Second Lien Debt |
|
L + 8.25 | % | 8.44 | % | 5/18/2026 | 11,098 | 11,104 | 11,101 | 0.22 | % | ||||||||||||||||||||||||
| 4 Polaris Way, Aliso Viejo CA 92656 United States | ||||||||||||||||||||||||||||||||||||||
154
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Quest Software US Holdings, Inc.(6)(8) | Software | |
First Lien Debt |
|
L + 4.25 | % | 4.44 | % | 5/16/2025 | 19,049 | 19,074 | 19,066 | 0.39 | % | ||||||||||||||||||||||||
| 4 Polaris Way, Aliso Viejo CA 92656 United States | ||||||||||||||||||||||||||||||||||||||
| R1 Holdings, LLC(4)(7)(12) | Air Freight & Logistics | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 1/2/2026 | 36,718 | 36,718 | 36,718 | 0.74 | % | ||||||||||||||||||||||||
| One Kellaway Drive Randolph, MA 02368 United States | ||||||||||||||||||||||||||||||||||||||
| Radiate Holdco, LLC(11) | Media | |
First Lien Debt |
|
L + 3.50 | % | 4.25 | % | 9/25/2026 | 34,895 | 35,017 | 34,971 | 0.71 | % | ||||||||||||||||||||||||
| 650 College Road East, Suite 3100, Princeton, NJ 08540 United States | ||||||||||||||||||||||||||||||||||||||
| Radnet, Inc.(6)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.00 | % | 3.75 | % | 4/22/2028 | 4,924 | 4,900 | 4,930 | 0.10 | % | ||||||||||||||||||||||||
| 3830 Park Ave, Edison, NJ 08820 United States | ||||||||||||||||||||||||||||||||||||||
| RealPage, Inc.(10) | Software | |
First Lien Debt |
|
L + 3.25 | % | 3.75 | % | 4/24/2028 | 8,933 | 8,920 | 8,916 | 0.18 | % | ||||||||||||||||||||||||
| 4000 International Parkway, Carrollton TX 75007 United States | ||||||||||||||||||||||||||||||||||||||
| Recess Holdings, Inc.(12) | Leisure Products | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 9/30/2024 | 19,922 | 19,897 | 19,858 | 0.40 | % | ||||||||||||||||||||||||
| 544 Chestnut Street Chattanooga, TN 37402 United States | ||||||||||||||||||||||||||||||||||||||
| Recorded Books, Inc.(8) | Entertainment | |
First Lien Debt |
|
L + 4.00 | % | 4.08 | % | 8/29/2025 | 12,615 | 12,636 | 12,642 | 0.26 | % | ||||||||||||||||||||||||
| 270 Skipjack Road, Prince Frederick MD 20678 United States | ||||||||||||||||||||||||||||||||||||||
| Red River Technology, LLC(4)(7)(12) | IT Services | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 5/26/2027 | 151,200 | 148,597 | 148,554 | 3.00 | % | ||||||||||||||||||||||||
| 875 3rd Avenue, New York NY 10022 United States | ||||||||||||||||||||||||||||||||||||||
155
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Relativity ODA, LLC(4)(7)(12) | Software | |
First Lien Debt |
|
|
L + 7.50 |
% PIK |
8.50 | % | 5/12/2027 | 42,275 | 41,130 | 41,095 | 0.83 | % | |||||||||||||||||||||||
| 231 South LaSalle Street, 8th Floor, Chicago, IL 60604 United States | ||||||||||||||||||||||||||||||||||||||
| Resonetics, LLC(11) | Health Care Equipment & Supplies | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 4/28/2028 | 12,507 | 12,470 | 12,544 | 0.25 | % | ||||||||||||||||||||||||
| 800 Boylston Street Suite 3325 Boston MA 02199 United States | ||||||||||||||||||||||||||||||||||||||
| Revspring, Inc.(8) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 4.00 | % | 4.15 | % | 10/11/2025 | 13,439 | 13,310 | 13,418 | 0.27 | % | ||||||||||||||||||||||||
| 38705 Seven Mile Road Suite 450 Livonia MI 48152 United States | ||||||||||||||||||||||||||||||||||||||
| Roadsafe Holdings, Inc.(4)(7)(12) | Transportation Infrastructure | |
First Lien Debt |
|
L + 5.75 | % | 6.75 | % | 10/19/2027 | 63,295 | 61,656 | 61,604 | 1.25 | % | ||||||||||||||||||||||||
| 3331 Street Rd #430, Bensalem, PA 19020 United States | ||||||||||||||||||||||||||||||||||||||
| Rocket Software, Inc.(8) | Software | |
First Lien Debt |
|
L + 4.25 | % | 4.35 | % | 11/28/2025 | 23,249 | 23,068 | 22,865 | 0.46 | % | ||||||||||||||||||||||||
| 77 4th Avenue, Waltham MA 02451 United States | ||||||||||||||||||||||||||||||||||||||
| S&S Holdings, LLC(10) | Textiles, Apparel & Luxury Goods | |
First Lien Debt |
|
L + 5.00 | % | 5.50 | % | 3/4/2028 | 29,925 | 29,057 | 29,775 | 0.60 | % | ||||||||||||||||||||||||
| 26748 Alsace Dr, Calabasas, CA, 91302-3450 United States | ||||||||||||||||||||||||||||||||||||||
| S2P Acquisition Borrower, Inc.(6)(8) | Software | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 8/14/2026 | 2,980 | 2,990 | 2,986 | 0.06 | % | ||||||||||||||||||||||||
| 3020 Carrington Mill Blvd Suite 100, Morrisville, NC 27560 United States | ||||||||||||||||||||||||||||||||||||||
156
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Sciens Building Solutions, LLC(4)(7)(12) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 5.75 | % | 6.75 | % | 5/21/2027 | 45,338 | 44,431 | 44,274 | 0.90 | % | ||||||||||||||||||||||||
| 500 Griswold Suite 2700 Detroit MI 48226 United States | ||||||||||||||||||||||||||||||||||||||
| Scientific Games International, Inc.(6)(8) | Hotels, Restaurants & Leisure | |
First Lien Debt |
|
L + 2.75 | % | 2.85 | % | 8/14/2024 | 3,768 | 3,731 | 3,745 | 0.08 | % | ||||||||||||||||||||||||
| 6601 Bermuda Road, Las Vegas NV 89119 United States | ||||||||||||||||||||||||||||||||||||||
| SCIH Salt Holdings, Inc.(11) | Metals & Mining | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 3/16/2027 | 36,396 | 36,306 | 36,514 | 0.74 | % | ||||||||||||||||||||||||
| 10955 LOWELL AVE STE 500 OVERLAND PARK KS 66210 United States | ||||||||||||||||||||||||||||||||||||||
| Sedgwick Claims Management Services, Inc.(5)(6)(12) | Diversified Financial Services | |
First Lien Debt |
|
L + 4.25 | % | 5.25 | % | 9/3/2026 | 2,475 | 2,501 | 2,485 | 0.05 | % | ||||||||||||||||||||||||
| 8125 Sedgwick Way, Memphis TN 38125 United States | ||||||||||||||||||||||||||||||||||||||
| Sedgwick Claims Management Services, Inc.(6)(8) | Diversified Financial Services | |
First Lien Debt |
|
L + 3.25 | % | 3.35 | % | 12/31/2025 | 12,727 | 12,688 | 12,606 | 0.25 | % | ||||||||||||||||||||||||
| 8125 Sedgwick Way, Memphis TN 38125 United States | ||||||||||||||||||||||||||||||||||||||
| SEKO Global Logistics Network, LLC(4)(7)(12) | Air Freight & Logistics | |
First Lien Debt |
|
L + 5.00 | % | 6.00 | % | 12/30/2026 | 96,514 | 95,219 | 96,133 | 1.94 | % | ||||||||||||||||||||||||
| 1100 N. Arlington Heights Rd., Itasca, IL 60143 | ||||||||||||||||||||||||||||||||||||||
| SelectQuote, Inc.(4)(7)(11) | Diversified Financial Services | |
First Lien Debt |
|
L + 5.00 | % | 5.75 | % | 11/5/2024 | 140,779 | 139,858 | 140,779 | 2.85 | % | ||||||||||||||||||||||||
| 6800 West 115th Street Suite 2511 Overland Park KS 66211 United States | ||||||||||||||||||||||||||||||||||||||
157
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| SG Acquisition, Inc.(4)(10) | Insurance | |
First Lien Debt |
|
L + 5.00 | % | 5.50 | % | 1/27/2027 | 108,204 | 107,549 | 106,581 | 2.16 | % | ||||||||||||||||||||||||
| 2635 Century Parkway Northeast Suite 900 Atlanta GA 30345 United States | ||||||||||||||||||||||||||||||||||||||
| Shoals Holdings, LLC(4)(12) | Electrical Equipment | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 11/25/2026 | 11,435 | 11,172 | 11,492 | 0.23 | % | ||||||||||||||||||||||||
| 1400 Shoals Way Portland, TN 37148 | ||||||||||||||||||||||||||||||||||||||
| Shutterfly, LLC(12) | Internet & Direct Marketing Retail | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 9/25/2026 | 5,000 | 5,018 | 5,019 | 0.10 | % | ||||||||||||||||||||||||
| 2800 Bridge Parkway Redwood City CA 94065 United States | ||||||||||||||||||||||||||||||||||||||
| Shutterfly, LLC(12) | Internet & Direct Marketing Retail | |
First Lien Debt |
|
L + 6.50 | % | 7.50 | % | 9/25/2026 | 49,645 | 49,920 | 49,851 | 1.01 | % | ||||||||||||||||||||||||
| 2800 Bridge Parkway Redwood City CA 94065 United States | ||||||||||||||||||||||||||||||||||||||
| Shutterfly, LLC(5)(8) | Internet & Direct Marketing Retail | |
First Lien Debt |
|
0.085 | 8.50 | % | 10/1/2026 | 13,217 | 14,114 | 14,532 | 0.29 | % | |||||||||||||||||||||||||
| 2800 Bridge Parkway Redwood City CA 94065 United States | ||||||||||||||||||||||||||||||||||||||
| SMB Shipping Logistics, LLC(12) | Air Freight & Logistics | |
First Lien Debt |
|
L + 4.00 | % | 5.00 | % | 2/2/2024 | 13,249 | 13,217 | 13,245 | 0.27 | % | ||||||||||||||||||||||||
| 2323 Victory Ave., Suite 1600, Dallas, TX 75219 United States | ||||||||||||||||||||||||||||||||||||||
| Snacking Investments US, LLC (6)(12) | Food Products | |
First Lien Debt |
|
L + 4.00 | % | 5.00 | % | 12/18/2026 | 5,000 | 5,030 | 5,028 | 0.10 | % | ||||||||||||||||||||||||
| 2 Henry St, North City, Dublin 1, D01 C3Y9, Ireland | ||||||||||||||||||||||||||||||||||||||
| Snoopy Bidco, Inc.(4)(7)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 6.00 | % | 6.75 | % | 6/1/2028 | 186,150 | 179,166 | 179,083 | 3.62 | % | ||||||||||||||||||||||||
| 8039 Beach Blvd, Buena Park, CA United States | ||||||||||||||||||||||||||||||||||||||
158
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Sophia LP(8) | Software | |
First Lien Debt |
|
L + 3.75 | % | 3.90 | % | 10/7/2027 | 19,937 | 20,001 | 19,979 | 0.40 | % | ||||||||||||||||||||||||
| 680 East Swedesford Road, Wayne PA 19087 United States | ||||||||||||||||||||||||||||||||||||||
| SpecialtyCare, Inc.(4)(5)(7)(12) | Software | |
First Lien Debt |
|
L + 5.75 | % | 6.75 | % | 6/18/2028 | 69,276 | 66,919 | 66,913 | 1.35 | % | ||||||||||||||||||||||||
| 111 Radio Circle, Mount Kisco NY 10549 United States | ||||||||||||||||||||||||||||||||||||||
| Spin Holdco Inc.(11) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 3/1/2028 | 25,549 | 25,433 | 25,621 | 0.52 | % | ||||||||||||||||||||||||
| 303 Sunnyside Blvd Suite 70 Plainview NY 11803 United States | ||||||||||||||||||||||||||||||||||||||
| Spireon, Inc.(4)(12) | Transportation Infrastructure | |
First Lien Debt |
|
L + 6.50 | % | 7.50 | % | 10/4/2024 | 42,838 | 42,838 | 42,838 | 0.87 | % | ||||||||||||||||||||||||
| 6802 Aston Street Irvine CA 92606 United States | ||||||||||||||||||||||||||||||||||||||
| Spitfire Parent, Inc.(4)(12) | Software | |
First Lien Debt |
|
L + 5.50 | % | 6.50 | % | 3/11/2027 | 19,500 | 23,117 | 22,663 | 0.46 | % | ||||||||||||||||||||||||
| 10161 Park Run Drive, Suite 150, Las Vegas, Nevada | ||||||||||||||||||||||||||||||||||||||
| Spitfire Parent, Inc.(4)(7)(12) | Software | |
First Lien Debt |
|
L + 5.50 | % | 6.50 | % | 3/11/2027 | 66,000 | 64,538 | 64,459 | 1.30 | % | ||||||||||||||||||||||||
| 10161 Park Run Drive, Suite 150, Las Vegas, Nevada | ||||||||||||||||||||||||||||||||||||||
| SRS Distribution, Inc.(10) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 3.75 | % | 4.25 | % | 6/4/2028 | 38,229 | 38,122 | 38,253 | 0.77 | % | ||||||||||||||||||||||||
| 5900 South Lake Forest Drive 5900 South Lake Forest Drive Mckinney TX 75070 United States | ||||||||||||||||||||||||||||||||||||||
| Storable, Inc.(10) | Software | |
First Lien Debt |
|
L + 3.25 | % | 3.75 | % | 2/26/2028 | 1,370 | 1,367 | 1,366 | 0.03 | % | ||||||||||||||||||||||||
| 11000 North Mopac Expressway Suite 300 Austin TX 78759 United States | ||||||||||||||||||||||||||||||||||||||
159
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Sunshine Luxembourg VII S.à r.l, LLC(6)(11) | Health Care Equipment & Supplies | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 10/2/2026 | 18,820 | 18,876 | 18,913 | 0.38 | % | ||||||||||||||||||||||||
| 26A Blvd Royal, Luxembourg, L-2449 Luxembourg | ||||||||||||||||||||||||||||||||||||||
| Surf Holdings, LLC(6)(8) | Software | |
First Lien Debt |
|
L + 3.50 | % | 3.63 | % | 3/5/2027 | 7,771 | 7,775 | 7,730 | 0.16 | % | ||||||||||||||||||||||||
| 18595 Vineyard Point Lane, Cornelius, NC 28031 United States | ||||||||||||||||||||||||||||||||||||||
| Surgery Centers Holdings, Inc.(6)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 8/31/2026 | 24,881 | 24,855 | 25,016 | 0.51 | % | ||||||||||||||||||||||||
| 310, 7 Springs Way Suite 500 Brentwood TN 37027 United States | ||||||||||||||||||||||||||||||||||||||
| SurveyMonkey, Inc.(6)(8) | Interactive Media & Services | |
First Lien Debt |
|
L + 3.75 | % | 3.85 | % | 10/10/2025 | 6,865 | 6,858 | 6,839 | 0.14 | % | ||||||||||||||||||||||||
| 1 Curiosity Way, San Mateo CA 94403 United States | ||||||||||||||||||||||||||||||||||||||
| Symphony Technology Group(11) | Building Products | |
First Lien Debt |
|
L + 5.00 | % | 5.75 | % | 5/3/2028 | 63,345 | 62,711 | 63,400 | 1.28 | % | ||||||||||||||||||||||||
| 428 UNIVERSITY AVE, PALO ALTO CA 94301 United States | ||||||||||||||||||||||||||||||||||||||
| Symphony Technology Group(4)(11) | Building Products | |
Second Lien Debt |
|
L + 8.25 | % | 9.00 | % | 5/3/2029 | 41,667 | 41,042 | 41,354 | 0.84 | % | ||||||||||||||||||||||||
| 428 UNIVERSITY AVE, PALO ALTO CA 94301 United States | ||||||||||||||||||||||||||||||||||||||
| Tacala Investment Corp.(11) | Hotels, Restaurants & Leisure | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 2/5/2027 | 35,657 | 35,748 | 35,727 | 0.72 | % | ||||||||||||||||||||||||
| 3750 Corporate Woods Drive Vestavia Hills, AL 35242 United States | ||||||||||||||||||||||||||||||||||||||
160
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Tailwind Colony Holding Corporation (4)(7)(12) | Distributors | |
First Lien Debt |
|
L + 7.50 | % | 8.50 | % | 11/13/2024 | 56,800 | 55,245 | 55,664 | 1.13 | % | ||||||||||||||||||||||||
| 269 South Lambert Road Orange, CT 06512 United States | ||||||||||||||||||||||||||||||||||||||
| TecoStar Holdings, Inc.(12) | Health Care Equipment & Supplies | |
First Lien Debt |
|
L + 3.50 | % | 4.50 | % | 5/1/2024 | 20,909 | 20,819 | 20,756 | 0.42 | % | ||||||||||||||||||||||||
| 4 Embarcadero Center Suite 1900 San Francisco CA 94111 United States | ||||||||||||||||||||||||||||||||||||||
| Tegra118 Wealth Solutions, Inc.(8) | Software | |
First Lien Debt |
|
L + 4.00 | % | 4.16 | % | 2/18/2027 | 3,980 | 4,007 | 3,992 | 0.08 | % | ||||||||||||||||||||||||
| 255 Fiserv Drive, Brookfield WI 53045 United States | ||||||||||||||||||||||||||||||||||||||
| Terrier Media Buyer, Inc.(8) | Media | |
First Lien Debt |
|
L + 3.50 | % | 3.60 | % | 12/17/2026 | 7,967 | 7,966 | 7,936 | 0.16 | % | ||||||||||||||||||||||||
| 223 Perimeter Center Parkway NE, Atlanta, Georgia 30346 United States | ||||||||||||||||||||||||||||||||||||||
| Tetra Technologies, Inc.(4)(6)(12) | Energy Equipment & Services | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 9/10/2025 | 25,750 | 24,495 | 25,364 | 0.51 | % | ||||||||||||||||||||||||
| 24955 Interstate 45 North The Woodlands TX 77380 United States | ||||||||||||||||||||||||||||||||||||||
| The Action Environmental Group, Inc.(4)(13) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 6.00 | % | 7.25 | % | 1/16/2026 | 16,345 | 15,735 | 15,691 | 0.32 | % | ||||||||||||||||||||||||
| 451 Frelinghuysen Avenue Newark NJ 07114 United States | ||||||||||||||||||||||||||||||||||||||
| The Cook & Boardman Group, LLC(12) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 5.75 | % | 6.75 | % | 10/17/2025 | 46,600 | 44,982 | 45,552 | 0.92 | % | ||||||||||||||||||||||||
| 3064 Salem Industrial Drive Winston Salem NC 27127 United States | ||||||||||||||||||||||||||||||||||||||
161
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| The Edelman Financial Engines Center, LLC(11) | Capital Markets | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 3/15/2028 | 24,980 | 24,884 | 25,039 | 0.51 | % | ||||||||||||||||||||||||
| 600 Travis, Suite 5800, Houston, Texas 77002 United States | ||||||||||||||||||||||||||||||||||||||
| The GI Alliance Management, LLC(4)(7)(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 11/4/2024 | 110,163 | 107,322 | 107,504 | 2.17 | % | ||||||||||||||||||||||||
| 8267 Elmbrook Drive, Ste. 200 Dallas, TX 75247 United States | ||||||||||||||||||||||||||||||||||||||
| The Hillman Group(8) | Trading Companies & Distributors | |
First Lien Debt |
|
L + 4.00 | % | 4.10 | % | 5/31/2025 | 8,544 | 8,557 | 8,542 | 0.17 | % | ||||||||||||||||||||||||
| 10590 Hamilton Avenue, Cincinnati OH 45231 United States | ||||||||||||||||||||||||||||||||||||||
| The Kenan Advantage Group, Inc.(11) | Air Freight & Logistics | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 3/12/2026 | 17,391 | 17,392 | 17,460 | 0.35 | % | ||||||||||||||||||||||||
| 4895 Dressler Road, Canton OH 44718 United States | ||||||||||||||||||||||||||||||||||||||
| The Ultimate Software Group, Inc.(11) | Software | |
First Lien Debt |
|
L + 3.25 | % | 4.00 | % | 5/4/2026 | 10,945 | 10,976 | 10,972 | 0.22 | % | ||||||||||||||||||||||||
| 2000 Ultimate Way, Weston FL 33326 United States | ||||||||||||||||||||||||||||||||||||||
| The Wolf Organization, LLC(4)(12) | Building Products | |
First Lien Debt |
|
L + 6.50 | % | 7.50 | % | 9/3/2026 | 5,350 | 5,400 | 5,564 | 0.11 | % | ||||||||||||||||||||||||
| 20 West Market Street York PA 7405 United States | ||||||||||||||||||||||||||||||||||||||
| Therapy Brands Holdings, LLC(4)(5)(7)(11) | Health Care Technology | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 5/12/2028 | 6,373 | 6,341 | 6,373 | 0.13 | % | ||||||||||||||||||||||||
| 9 West 57th Street Suite 4200 New York NY 10019 United States | ||||||||||||||||||||||||||||||||||||||
162
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Therapy Brands Holdings, LLC(4)(5)(7)(11) | Health Care Technology | |
Second Lien Debt |
|
L + 6.75 | % | 7.50 | % | 5/18/2029 | 3,519 | 3,484 | 3,519 | 0.07 | % | ||||||||||||||||||||||||
| 9 West 57th Street Suite 4200 New York NY 10019 United States | ||||||||||||||||||||||||||||||||||||||
| ThoughtWorks, Inc.(10) | IT Services | |
First Lien Debt |
|
L + 3.25 | % | 3.75 | % | 3/23/2028 | 9,352 | 9,329 | 9,366 | 0.19 | % | ||||||||||||||||||||||||
| 200 East Randolph Street 25th Floor Chicago IL 60601 United States | ||||||||||||||||||||||||||||||||||||||
| TierPoint, LLC(11) | IT Services | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 5/6/2026 | 29,870 | 29,749 | 29,902 | 0.60 | % | ||||||||||||||||||||||||
| 23403 East Mission Avenue, Liberty Lake WA 99019 United States | ||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Acquisition, LLC(4)(12) | Construction & Engineering | |
First Lien Debt |
|
L + 5.00 | % | 6.00 | % | 2/3/2023 | 14,757 | 14,728 | 14,812 | 0.30 | % | ||||||||||||||||||||||||
| 7601 Imperial Drive, P.O. Box 20368, Waco, Texas 76712 | ||||||||||||||||||||||||||||||||||||||
| Titan Acquisition, Ltd.(6)(8) | Machinery | |
First Lien Debt |
|
L + 3.00 | % | 3.17 | % | 3/28/2025 | 13,030 | 12,908 | 12,831 | 0.26 | % | ||||||||||||||||||||||||
| 500 Queen Street South, Bolton, Ontario, Canada L7E 5S5 | ||||||||||||||||||||||||||||||||||||||
| TRC Companies, Inc.(12) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.50 | % | 4.50 | % | 6/21/2024 | 13,000 | 13,023 | 12,992 | 0.26 | % | ||||||||||||||||||||||||
| 21 Griffin Road North, Windsor CT 06095 United States | ||||||||||||||||||||||||||||||||||||||
| TricorBraun Holdings, Inc.(7)(10) | Containers & Packaging | |
First Lien Debt |
|
L + 3.25 | % | 3.75 | % | 3/3/2028 | 11,422 | 11,373 | 11,339 | 0.23 | % | ||||||||||||||||||||||||
| 6 CityPlace Drive Suite 1000 Saint Louis MO 63141 United States | ||||||||||||||||||||||||||||||||||||||
163
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Trident TPI Holdings, Inc. (12) | Containers & Packaging | |
First Lien Debt |
|
L + 3.00 | % | 4.00 | % | 10/17/2024 | 19,948 | 19,948 | 19,907 | 0.40 | % | ||||||||||||||||||||||||
| 460 Swedesford Rd Wayne, PA 19087 United States | ||||||||||||||||||||||||||||||||||||||
| Trinity Air Consultants Holdings Corp.(4)(7)(11) | Professional Services | |
First Lien Debt |
|
L + 5.25 | % | 6.00 | % | 6/29/2027 | 138,870 | 135,400 | 135,412 | 2.74 | % | ||||||||||||||||||||||||
| 330 7th Ave, New York, NY 10001 United States | ||||||||||||||||||||||||||||||||||||||
| Triple Lift, Inc.(4)(7)(11) | Software | |
First Lien Debt |
|
L + 5.75 | % | 6.50 | % | 5/6/2028 | 91,000 | 88,940 | 88,894 | 1.80 | % | ||||||||||||||||||||||||
| 400 Lafayette St 5th floor, New York, NY 10003 United States | ||||||||||||||||||||||||||||||||||||||
| Triton Water Holdings, Inc.(10) | Beverages | |
First Lien Debt |
|
L + 3.50 | % | 4.00 | % | 3/18/2028 | 26,765 | 26,726 | 26,768 | 0.54 | % | ||||||||||||||||||||||||
| 900 Long Ridge Road, Building 2, Stamford, CT 06902-1138 | ||||||||||||||||||||||||||||||||||||||
| TruGreen Limited Partnership (11) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 11/2/2027 | 5,985 | 6,022 | 6,020 | 0.12 | % | ||||||||||||||||||||||||
| 860 Ridge Lake Blvd, Memphis TN 38120 United States | ||||||||||||||||||||||||||||||||||||||
| TSL Engineered Products, LLC(4)(6)(11) | Industrial Conglomerates | |
First Lien Debt |
|
L + 4.75 | % | 5.50 | % | 1/8/2028 | 24,439 | 24,206 | 24,378 | 0.49 | % | ||||||||||||||||||||||||
| 800 3rd Ave, New York, NY 10022 United States | ||||||||||||||||||||||||||||||||||||||
| TTF Holdings, LLC(4)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.25 | % | 5.00 | % | 3/24/2028 | 7,025 | 6,974 | 7,034 | 0.14 | % | ||||||||||||||||||||||||
| 2222 West Grand River Ave, Suite A, Okemos, MI 48864 United States | ||||||||||||||||||||||||||||||||||||||
| Tutor Perini Corp.(6)(12) | Construction & Engineering | |
First Lien Debt |
|
L + 4.75 | % | 5.75 | % | 8/13/2027 | 2,978 | 3,010 | 3,017 | 0.06 | % | ||||||||||||||||||||||||
| 15901 Olden Street, Sylmar CA 91342 United States | ||||||||||||||||||||||||||||||||||||||
164
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| U.S. Anesthesia Partners, Inc.(12) | Health Care Providers & Services | |
First Lien Debt |
|
L + 3.00 | % | 4.00 | % | 6/23/2024 | 16,210 | 16,121 | 16,120 | 0.33 | % | ||||||||||||||||||||||||
| 12222 MERIT DR STE 700 DALLAS TX 75251 United States | ||||||||||||||||||||||||||||||||||||||
| Unified Door & Hardware Group, LLC(4)(12) | Distributors | |
First Lien Debt |
|
L + 6.25 | % | 7.25 | % | 6/30/2025 | 6,753 | 6,753 | 6,753 | 0.14 | % | ||||||||||||||||||||||||
| 1650 Suckle Highway Pennsauken, NJ 08110 United States | ||||||||||||||||||||||||||||||||||||||
| Unified Women’s Healthcare, LLC(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 4.25 | % | 5.00 | % | 12/16/2027 | 18,365 | 18,374 | 18,412 | 0.37 | % | ||||||||||||||||||||||||
| 1501 Yamato Road Suite 200 West Boca Raton FL 33431 United States | ||||||||||||||||||||||||||||||||||||||
| United Airlines, Inc.(6)(11) | Airlines | |
First Lien Debt |
|
L + 3.75 | % | 4.50 | % | 4/21/2028 | 16,715 | 16,724 | 16,957 | 0.34 | % | ||||||||||||||||||||||||
| 233 South Wacker Drive, Chicago IL 60606 United States | ||||||||||||||||||||||||||||||||||||||
| University Support Services, LLC(10) | Software | |
First Lien Debt |
|
L + 3.25 | % | 3.75 | % | 6/29/2028 | 16,862 | 16,778 | 16,803 | 0.34 | % | ||||||||||||||||||||||||
| 3500 Sunrise Hwy, Great River, NY 11739 United States | ||||||||||||||||||||||||||||||||||||||
| Univision Communications, Inc.(12) | Media | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 3/15/2026 | 22,824 | 22,817 | 22,902 | 0.46 | % | ||||||||||||||||||||||||
| 5999 Center Drive, Los Angeles CA 90045 United States | ||||||||||||||||||||||||||||||||||||||
| UPC Financing Partnership(6)(8) | Media | |
First Lien Debt |
|
L + 3.00 | % | 3.07 | % | 1/31/2029 | 2,681 | 2,655 | 2,667 | 0.05 | % | ||||||||||||||||||||||||
| 4643 South Ulster Street Suite 1300 Denver CO 80237 United States | ||||||||||||||||||||||||||||||||||||||
165
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| US Acute Care Solutions(5)(8) | Health Care Providers & Services | |
First Lien Debt |
|
0.0638 | 6.38 | % | 3/1/2026 | 7,071 | 7,071 | 7,331 | 0.15 | % | |||||||||||||||||||||||||
| 4535 Dressler Road Northwest Canton OH 44718 United States | ||||||||||||||||||||||||||||||||||||||
| USIC Holdings, Inc.(11) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.50 | % | 4.25 | % | 5/12/2028 | 25,000 | 24,875 | 24,984 | 0.51 | % | ||||||||||||||||||||||||
| 9045 North River Road Suite 300 Indianapolis IN 46240 United States | ||||||||||||||||||||||||||||||||||||||
| USIC Holdings, Inc.(4)(5)(11) | Commercial Services & Supplies | |
Second Lien Debt |
|
L + 6.50 | % | 7.25 | % | 5/7/2029 | 10,000 | 9,900 | 10,200 | 0.21 | % | ||||||||||||||||||||||||
| 9045 North River Road Suite 300 Indianapolis IN 46240 United States | ||||||||||||||||||||||||||||||||||||||
| USS Ultimate Holdings, Inc.(12) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 3.75 | % | 4.75 | % | 8/25/2024 | 12,933 | 12,975 | 12,984 | 0.26 | % | ||||||||||||||||||||||||
| 118 Flanders Rd, Westborough, MA 01581 | ||||||||||||||||||||||||||||||||||||||
| Veregy Consolidated, Inc.(12) | Commercial Services & Supplies | |
First Lien Debt |
|
L + 6.00 | % | 7.00 | % | 11/2/2027 | 20,688 | 20,740 | 20,843 | 0.42 | % | ||||||||||||||||||||||||
| 23325 N. 23rd Ave, Suite 120 Phoenix, AZ 85027 | ||||||||||||||||||||||||||||||||||||||
| Veritas US, Inc.(6)(12) | Software | |
First Lien Debt |
|
L + 5.00 | % | 6.00 | % | 9/1/2025 | 20,630 | 20,816 | 20,790 | 0.42 | % | ||||||||||||||||||||||||
| 2625 Augustine Drive, Santa Clara CA 95054 United States | ||||||||||||||||||||||||||||||||||||||
| Verscend Holding Corp.(8) | Health Care Technology | |
First Lien Debt |
|
L + 4.00 | % | 4.10 | % | 8/27/2025 | 25,553 | 25,635 | 25,654 | 0.52 | % | ||||||||||||||||||||||||
| 201 Jones Road 4th Floor Waltham MA 02451 United States | ||||||||||||||||||||||||||||||||||||||
| Vertical US Newco, Inc.(6)(8) | Industrial Conglomerates | |
First Lien Debt |
|
L + 4.25 | % | 4.48 | % | 7/30/2027 | 17,689 | 17,791 | 17,735 | 0.36 | % | ||||||||||||||||||||||||
| 451 Park Avenue South 7th Floor New York, NY 10016 United States | ||||||||||||||||||||||||||||||||||||||
166
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Virgin Pulse, Inc.(11) | Software | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 4/6/2028 | 42,553 | 42,141 | 42,686 | 0.86 | % | ||||||||||||||||||||||||
| 75 Fountain Street, Providence RI 02902 United States | ||||||||||||||||||||||||||||||||||||||
| Virgin Pulse, Inc.(5)(11) | Software | |
Second Lien Debt |
|
L + 7.25 | % | 8.00 | % | 3/30/2029 | 26,000 | 25,793 | 26,065 | 0.53 | % | ||||||||||||||||||||||||
| 75 Fountain Street, Providence RI 02902 United States | ||||||||||||||||||||||||||||||||||||||
| Virtusa Corp.(11) | IT Services | |
First Lien Debt |
|
L + 4.25 | % | 5.00 | % | 2/11/2028 | 17,459 | 17,558 | 17,558 | 0.36 | % | ||||||||||||||||||||||||
| 132 Turnpike Road Suite 300 Southborough MA 01772 United States | ||||||||||||||||||||||||||||||||||||||
| Vision Solutions, Inc.(11) | Software | |
First Lien Debt |
|
L + 4.25 | % | 5.00 | % | 3/4/2028 | 41,256 | 41,054 | 41,274 | 0.83 | % | ||||||||||||||||||||||||
| 15300 Barranca Parkway Suite 100 Irvine CA 92618 United States | ||||||||||||||||||||||||||||||||||||||
| Vision Solutions, Inc.(5)(11) | Software | |
Second Lien Debt |
|
L + 7.25 | % | 8.00 | % | 3/4/2029 | 110,950 | 109,976 | 110,973 | 2.24 | % | ||||||||||||||||||||||||
| 15300 Barranca Parkway Suite 100 Irvine CA 92618 United States | ||||||||||||||||||||||||||||||||||||||
| Waystar Technologies, Inc.(8) | Health Care Technology | |
First Lien Debt |
|
L + 4.00 | % | 4.10 | % | 10/22/2026 | 22,917 | 23,002 | 22,988 | 0.46 | % | ||||||||||||||||||||||||
| 2055 Sugarloaf Circle Suite 600 Duluth GA 30097 United States | ||||||||||||||||||||||||||||||||||||||
| Weld North Education, LLC(11) | Diversified Consumer Services | |
First Lien Debt |
|
L + 4.00 | % | 4.75 | % | 12/21/2027 | 24,419 | 24,460 | 24,480 | 0.50 | % | ||||||||||||||||||||||||
| 3 Columbus Circle Suite 2405 New York NY 10019 United States | ||||||||||||||||||||||||||||||||||||||
| WHCG Purchaser III, Inc.(4)(7)(11) | Health Care Providers & Services | |
First Lien Debt |
|
L + 5.75 | % | 6.50 | % | 6/22/2028 | 84,259 | 81,926 | 81,918 | 1.66 | % | ||||||||||||||||||||||||
| 251 Little Falls Drive, Wilmington, DE 19808 United States | ||||||||||||||||||||||||||||||||||||||
167
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||||
| Wheel Pros, Inc.(11) | Auto Components | |
First Lien Debt |
|
L + 4.50 | % | 5.25 | % | 4/23/2028 | 23,931 | 23,939 | 24,027 | 0.49 | % | ||||||||||||||||||||||||
| 6101 Knott Avenue, Buena Park CA 90620 United States | ||||||||||||||||||||||||||||||||||||||
| White Cap Buyer, LLC(10) | Construction Materials | |
First Lien Debt |
|
L + 4.00 | % | 4.50 | % | 10/19/2027 | 23,947 | 24,041 | 24,019 | 0.49 | % | ||||||||||||||||||||||||
| 6250 Brook Hollow Parkway, Norcross, Georgia 30071 | ||||||||||||||||||||||||||||||||||||||
| WideOpenWest Finance, LLC(6)(12) | Media | |
First Lien Debt |
|
L + 3.25 | % | 4.25 | % | 8/18/2023 | 10,438 | 10,461 | 10,440 | 0.21 | % | ||||||||||||||||||||||||
| 7887 East Belleview Avenue Suite 1000 Englewood CO 80111 United States | ||||||||||||||||||||||||||||||||||||||
| Windows Acquisition Holdings, Inc.(4)(12) | Building Products | |
First Lien Debt |
|
L + 6.50 | % | 7.50 | % | 12/29/2026 | 62,681 | 61,524 | 62,367 | 1.26 | % | ||||||||||||||||||||||||
| 235 Sunshine Road Royal, AR 71968 | ||||||||||||||||||||||||||||||||||||||
| Wireless Vision, LLC(4)(7)(12) | Internet & Direct Marketing Retail | |
First Lien Debt |
|
L + 5.50 | % | 6.50 | % | 12/30/2025 | 22,841 | 22,841 | 22,841 | 0.46 | % | ||||||||||||||||||||||||
| 40700 Woodward Avenue Suite 250 Bloomfield Hills MI 48304 United States | ||||||||||||||||||||||||||||||||||||||
| Corfin Holdco, Inc. - Common Stock(4) | Aerospace & Defense | Equity | 0.1 | % | 52,143 | 125 | 125 | 0.00 | % | |||||||||||||||||||||||||||||
| 1050 Perimeter Road, Manchester, NH 03103 United States | ||||||||||||||||||||||||||||||||||||||
| Loar Acquisition 13, LLC - Common Units(4) | Aerospace & Defense | Equity | 0.7 | % | 2,890,586 | 4,336 | 4,336 | 0.09 | % | |||||||||||||||||||||||||||||
| 450 Lexington Avenue, New York, NY 10017 | ||||||||||||||||||||||||||||||||||||||
| AGI Group Holdings LP - A2 Common Units(4) | Air Freight & Logistics | Equity | 55.8 | % | 1,674 | 1,674 | 1,674 | 0.03 | % | |||||||||||||||||||||||||||||
| 9130 S Dadeland Blvd Ste 1801, Miami, FL, 33156-7858 United States | ||||||||||||||||||||||||||||||||||||||
| Mode Holdings, L.P. - Class A-2 Common Units(4) | Air Freight & Logistics | Equity | 1.8 | % | 1,076,923 | 1,077 | 1,077 | 0.02 | % | |||||||||||||||||||||||||||||
| 17330 Preston Rd., Suite 200 C Dallas, TX 75252 United States | ||||||||||||||||||||||||||||||||||||||
168
| Name and |
Industry |
Type of Investment |
Reference Rate and Spread |
Interest Rate(2) |
Maturity Date |
% of Class Held at 6/30/2021 |
Par Amount/ Units |
Cost(3) | Fair Value |
Percentage of Net Assets |
||||||||||||||||||||||||||
| Jayhawk Holdings, LP - A-1 Common Units(4) | Health Care Providers & Services | Equity | 0.4 | % | 12,472 | 2,220 | 2,220 | 0.04 | % | |||||||||||||||||||||||||||
| 8717 West 110th Street, Suite 300 Overland Park, KS 66210 | ||||||||||||||||||||||||||||||||||||
| Jayhawk Holdings, LP - A-2 Common Units(4) | Health Care Providers & Services | Equity | 0.4 | % | 6,716 | 1,195 | 1,195 | 0.02 | % | |||||||||||||||||||||||||||
| 8717 West 110th Street, Suite 300 Overland Park, KS 66210 | ||||||||||||||||||||||||||||||||||||
| OHCP V TC COI, LP. - LP Interest(4) | Professional Services | Equity | 65.0 | % | 6,500,000 | 6,500 | 6,500 | 0.13 | % | |||||||||||||||||||||||||||
| 330 7th Ave, New York, NY 10001 United States | ||||||||||||||||||||||||||||||||||||
| Atlas Intermediate Holding LLC - Preferred Interest(4) | Transportation Infrastructure | Equity | 13.5 | % | 34,238,400 | 33,725 | 33,725 | 0.68 | % | |||||||||||||||||||||||||||
| 9465 Wilshire Blvd, Suit 300 Beverly Hills, California 90212 United States |
||||||||||||||||||||||||||||||||||||
| Frontline Road Safety Investments, LLC - Class A Common Units(4) | Transportation Infrastructure | Equity | 4.6 | % | 39,999 | 4,200 | 4,200 | 0.08 | % | |||||||||||||||||||||||||||
| 2714 Sherman Street, Grand Prairie, TX 75051 United States |
||||||||||||||||||||||||||||||||||||
| GSO DL Co-Invest EIS LP (EIS Acquisition Holdings, LP) - Class A Common Units(4)(15) | Distributors | Equity | 20.1 | % | 401 | 401 | 0.01 | % | ||||||||||||||||||||||||||||
| 2018 Powers Ferry Road, Suite 400 Atlanta, Georgia 30339 United States | ||||||||||||||||||||||||||||||||||||
| GSO DL Co-Invest CI LP (CustomInk, LLC) - Series A Preferred Units(4)(15) | Specialty Retail | Equity | 31.3 | % | 1,421 | 1,424 | 0.03 | % | ||||||||||||||||||||||||||||
| 2910 District Avenue Fairfax VA 22031 United States |
||||||||||||||||||||||||||||||||||||
| (1) | Unless otherwise indicated, issuers of debt and equity investments held by the Fund (which such term “Fund” shall include the Fund’s consolidated subsidiaries for purposes of this Consolidated Schedule of Investments) are denominated in dollars. All debt investments are |
169
| income producing unless otherwise indicated. All equity investments are non-income producing unless otherwise noted. Certain portfolio Fund investments are subject to contractual restrictions on sales. The total par amount is presented for debt investments and the number of shares or units owned is presented for equity investments. Each of the Fund’s investments is pledged as collateral, under one or more of its credit facilities unless otherwise indicated. |
| (2) | Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate (“F”) or the U.S. Prime Rate (“P”)), which generally resets periodically. For each loan, the Fund has indicated the reference rate used and provided the spread and the interest rate in effect as of June 30, 2021. As of June 30, 2021, the reference rates for our variable rate loans were the 30-day L at 0.10%, the 90-day L at 0.15% and the 180-day L at 0.16% and P at 3.25%. Variable rate loans typically include an interest reference rate floor feature, which is generally 0.75% or 1.00%. |
| (3) | The cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). |
| (4) | These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Board of Trustees, pursuant to the Fund’s valuation policy. |
| (5) | These debt investments are not pledged as collateral under any of the Fund’s credit facilities. For other debt investments that are pledged to the Fund’s credit facilities, a single investment may be divided into parts that are individually pledged as collateral to separate credit facilities. |
| (6) | The investment is not a qualifying asset under Section 55(a) of the 1940 Act. The Fund may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Fund’s total assets. As of June 30, 2021, non-qualifying assets represented 12.1% of total assets as calculated in accordance with regulatory requirements. |
| (7) | Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. Negative cost and fair value results from unamortized fees, which are capitalized to the investment cost. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Fund’s unfunded commitments (all commitments are first lien, unless otherwise noted): |
|
Investments—non-controlled/ |
Commitment Type | Commitment Expiration Date |
Unfunded Commitment |
Fair Value |
||||||||||||
| First and Second Lien Debt |
||||||||||||||||
| ADCS Clinics Intermediate Holdings, LLC |
Delayed Draw Term Loan | 5/7/2023 | 11,267 | (113 | ) | |||||||||||
| ADCS Clinics Intermediate Holdings, LLC |
Revolver | 5/7/2027 | 3,902 | (78 | ) | |||||||||||
| AGI-CFI Holdings, Inc. |
Delayed Draw Term Loan | 6/11/2023 | 42,157 | — | ||||||||||||
| AGI-CFI Holdings, Inc. |
Revolver | 6/11/2027 | 18,144 | — | ||||||||||||
| AI Aqua Merger Sub, Inc. |
Delayed Draw Term Loan | 12/13/2023 | 2,003 | — | ||||||||||||
| Albireo Energy, LLC |
Delayed Draw Term Loan | 6/23/2022 | 11,898 | — | ||||||||||||
| Atlas CC Acquisition Corp. |
Revolver | 5/26/2026 | 18,518 | — | ||||||||||||
| Atlas CC Acquisition Corp. |
Letter of Credit | 5/26/2026 | 14,403 | — | ||||||||||||
| Barbri , Inc. |
Delayed Draw Term Loan | 4/28/2023 | 28,251 | — | ||||||||||||
| Bazaarvoice, Inc. |
Delayed Draw Term Loan | 11/7/2022 | 57,432 | — | ||||||||||||
| Bazaarvoice, Inc. |
Revolver | 5/7/2026 | 42,994 | — | ||||||||||||
| Canadian Hospital Specialties Ltd. |
Delayed Draw Term Loan | 4/14/2023 | 8,795 | (151 | ) | |||||||||||
| Canadian Hospital Specialties Ltd. |
Revolver | 4/14/2027 | 4,313 | — | ||||||||||||
| Capstone Logistics, LLC |
Delayed Draw Term Loan | 11/12/2027 | 2,189 | — | ||||||||||||
| CD&R Artemis Bidco, Inc. |
Delayed Draw Term Loan | 6/9/2022 | 9,740 | — | ||||||||||||
| COP Home Services TopCo IV, Inc. |
Delayed Draw Term Loan | 12/31/2022 | 9,500 | (245 | ) | |||||||||||
| COP Home Services TopCo IV, Inc. |
Revolver | 12/31/2025 | 10,538 | — | ||||||||||||
| Cumming Group, Inc. |
Delayed Draw Term Loan | 5/26/2027 | 25,112 | (208 | ) | |||||||||||
| Cumming Group, Inc. |
Revolver | 5/26/2027 | 10,387 | — | ||||||||||||
| Dana Kepner Company, LLC |
Delayed Draw Term Loan | 12/29/2021 | 6,250 | — | ||||||||||||
| DCA Investment Holdings, LLC |
Delayed Draw Term Loan | 3/12/2023 | 9,586 | (72 | ) | |||||||||||
170
|
Investments—non-controlled/ |
Commitment Type | Commitment Expiration Date |
Unfunded Commitment |
Fair Value |
||||||||||
| DG Investment Intermediate Holdings 2, Inc. |
Delayed Draw Term Loan | 3/5/2028 | 1,236 | — | ||||||||||
| Dominion Colour Corporation |
Delayed Draw Term Loan | 5/6/2027 | 7,649 | — | ||||||||||
| Episerver, Inc. |
Revolver | 4/9/2026 | 3,833 | (57 | ) | |||||||||
| FCG Acquisitions, Inc. |
Delayed Draw Term Loan | 3/31/2028 | 1,161 | — | ||||||||||
| Fencing Supply Group Acquisition, LLC |
Delayed Draw Term Loan | 2/24/2023 | 13,776 | (138 | ) | |||||||||
| Frontline Road Safety, LLC—A |
Delayed Draw Term Loan | 5/3/2027 | 17,754 | — | ||||||||||
| Frontline Road Safety, LLC—B |
Delayed Draw Term Loan | 5/3/2022 | 39,526 | — | ||||||||||
| GI Consilio Parent, LLC |
Revolver | 5/14/2026 | 6,300 | (49 | ) | |||||||||
| GraphPAD Software, LLC |
Revolver | 4/27/2027 | 2,832 | (42 | ) | |||||||||
| High Street Buyer, Inc. |
Delayed Draw Term Loan | 4/16/2028 | 26,259 | (523 | ) | |||||||||
| High Street Buyer, Inc. |
Revolver | 4/16/2027 | 4,186 | (84 | ) | |||||||||
| HS Purchaser, LLC |
Delayed Draw Term Loan | 11/19/2027 | 5,000 | — | ||||||||||
| Integrity Marketing Acquisition, LLC |
Delayed Draw Term Loan | 8/27/2025 | 23,316 | — | ||||||||||
| Jayhawk Buyer, LLC |
Delayed Draw Term Loan | 10/15/2021 | 667 | — | ||||||||||
| Jones Deslauriers Insurance Management, Inc. |
Delayed Draw Term Loan | 3/28/2022 | 12,385 | — | ||||||||||
| Jones Deslauriers Insurance Management, Inc. (2nd Lien) |
Delayed Draw Term Loan | 3/28/2022 | 1,943 | — | ||||||||||
| LBM Acquisition, LLC |
Delayed Draw Term Loan | 12/17/2027 | 1,437 | — | ||||||||||
| LD Lower Holdings, Inc. |
Delayed Draw Term Loan | 2/8/2023 | 19,979 | — | ||||||||||
| Lytx, Inc. |
Delayed Draw Term Loan | 2/28/2022 | 9,108 | — | ||||||||||
| Maverick Acquisition, Inc. |
Delayed Draw Term Loan | 6/1/2023 | 16,185 | (162 | ) | |||||||||
| Metis Buyer, Inc. |
Revolver | 5/4/2026 | 9,000 | (34 | ) | |||||||||
| Mobileum, Inc. |
Delayed Draw Term Loan | 8/12/2024 | 26,377 | — | ||||||||||
| Monroe Capital Holdings, LLC |
Delayed Draw Term Loan | 6/8/2022 | 8,839 | — | ||||||||||
| MRI Software, LLC |
Delayed Draw Term Loan | 1/31/2022 | 8,600 | — | ||||||||||
| MRI Software, LLC |
Delayed Draw Term Loan | 1/31/2022 | 276 | (3 | ) | |||||||||
| MRI Software, LLC |
Delayed Draw Term Loan | 1/31/2022 | 864 | — | ||||||||||
| MRI Software, LLC |
Revolver | 2/10/2026 | 673 | — | ||||||||||
| National Mentor Holdings, Inc. |
Delayed Draw Term Loan | 2/18/2028 | 989 | — | ||||||||||
| NDC Acquisition Corp. |
Revolver | 3/9/2027 | 2,269 | — | ||||||||||
| NMC Crimson Holdings, Inc. |
Delayed Draw Term Loan | 3/1/2023 | 31,400 | (471 | ) | |||||||||
| Omni Intermediate Holdings, LLC |
Delayed Draw Term Loan | 12/30/2021 | 37,050 | (296 | ) | |||||||||
| Omni Intermediate Holdings, LLC |
Revolver | 12/30/2025 | 8,049 | — | ||||||||||
| Paya Holdings III, LLC |
Revolver | 6/16/2028 | 3,375 | (32 | ) | |||||||||
| Peak Utility Services Group, Inc. |
Delayed Draw Term Loan | 3/2/2028 | 7,200 | — | ||||||||||
| Porcelain Acquistion Corp. |
Delayed Draw Term Loan | 4/30/2022 | 33,940 | (997 | ) | |||||||||
| Progress Residential PM Holdings, LLC |
Delayed Draw Term Loan | 2/16/2022 | 16,623 | — | ||||||||||
| Qualus Power Services Corp. |
Delayed Draw Term Loan | 3/26/2023 | 15,545 | (194 | ) | |||||||||
| R1 Holdings, LLC |
Delayed Draw Term Loan | 4/19/2022 | 7,898 | — | ||||||||||
| Red River Technology, LLC |
Delayed Draw Term Loan | 5/26/2023 | 47,832 | — | ||||||||||
| Relativity ODA, LLC |
Revolver | 5/12/2027 | 4,937 | (123 | ) | |||||||||
| Roadsafe Holdings, Inc. |
Delayed Draw Term Loan | 10/19/2021 | 42,476 | (425 | ) | |||||||||
| Sciens Building Solutions, LLC |
Delayed Draw Term Loan | 5/21/2027 | 36,563 | (457 | ) | |||||||||
| Sciens Building Solutions, LLC |
Revolver | 5/21/2027 | 3,150 | (39 | ) | |||||||||
171
|
Investments—non-controlled/ |
Commitment Type | Commitment Expiration Date |
Unfunded Commitment |
Fair Value |
||||||||||||
| SEKO Global Logistics Network, LLC |
Delayed Draw Term Loan | 12/30/2022 | 15,200 | (210 | ) | |||||||||||
| SEKO Global Logistics Network, LLC |
Revolver | 12/30/2026 | 3,739 | — | ||||||||||||
| SelectQuote, Inc. |
Delayed Draw Term Loan | 11/5/2024 | 78,250 | — | ||||||||||||
| Snoopy Bidco, Inc. |
Delayed Draw Term Loan | 6/1/2023 | 98,850 | — | ||||||||||||
| SpecialtyCare, Inc. |
Delayed Draw Term Loan | 9/18/2021 | 7,139 | (107 | ) | |||||||||||
| SpecialtyCare, Inc. |
Revolver | 6/18/2026 | 5,935 | (178 | ) | |||||||||||
| Spitfire Parent, Inc. |
Delayed Draw Term Loan | 9/4/2022 | 22,132 | (221 | ) | |||||||||||
| Tailwind Colony Holding Corporation |
Delayed Draw Term Loan | 2/10/2022 | 18,493 | — | ||||||||||||
| The GI Alliance Management, LLC |
Delayed Draw Term Loan | 10/26/2022 | 67,122 | — | ||||||||||||
| Therapy Brands Holdings, LLC |
Delayed Draw Term Loan | 5/18/2028 | 3,109 | — | ||||||||||||
| TricorBraun Holdings, Inc. |
Delayed Draw Term Loan | 3/3/2028 | 2,465 | — | ||||||||||||
| Trinity Air Consultants Holdings Corp. |
Delayed Draw Term Loan | 6/29/2023 | 44,729 | — | ||||||||||||
| Trinity Air Consultants Holdings Corp. |
Revolver | 6/29/2027 | 11,629 | — | ||||||||||||
| Triple Lift, Inc. |
Revolver | 5/6/2028 | 14,295 | (286 | ) | |||||||||||
| WHCG Purchaser III, Inc. |
Delayed Draw Term Loan | 6/22/2023 | 40,653 | (250 | ) | |||||||||||
| WHCG Purchaser III, Inc. |
Revolver | 6/22/2026 | 12,486 | (407 | ) | |||||||||||
| Wireless Vision, LLC |
Delayed Draw Term Loan | 12/30/2025 | 2,100 | — | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total Unfunded Commitments |
1,364,162 | (6,652 | ) | |||||||||||||
|
|
|
|
|
|||||||||||||
| (8) | There are no interest rate floors on these investments. |
| (9) | The interest rate floor on these investments as of June 30, 2021 was 0.25%. |
| (10) | The interest rate floor on these investments as of June 30, 2021 was 0.50%. |
| (11) | The interest rate floor on these investments as of June 30, 2021 was 0.75%. |
| (12) | The interest rate floor on these investments as of June 30, 2021 was 1.00%. |
| (13) | The interest rate floor on these investments as of June 30, 2021 was 1.25%. |
| (14) | The interest rate floor on these investments as of June 30, 2021 was 1.50%. |
| (15) | Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”), the Fund is deemed to “control” a portfolio company if the Fund owns more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. Under the 1940 Act, the Fund is deemed an “affiliated person” of a portfolio company if the Fund owns 5% or more of the portfolio company’s outstanding voting securities. As of June 30, 2021, the Fund’s controlled/affiliated and non-controlled/affiliated investments were as follows: |
| Fair value as of December 31, 2020 |
Gross Additions |
Gross Reductions |
Change in Unrealized Gains (Losses) |
Fair value as of June 30, 2021 |
Dividend and Interest Income |
|||||||||||||||||||
| Non-Controlled/Affiliated Investments |
||||||||||||||||||||||||
| GSO DL Co-Invest EIS LP |
$ | — | $ | 401 | $ | — | $ | — | $ | 401 | $ | — | ||||||||||||
| Controlled/Affiliated Investments |
||||||||||||||||||||||||
| GSO DL Co-Invest CI LP |
— | 1,421 | — | 3 | 1,424 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | — | $ | 1,822 | $ | — | $ | 3 | $ | 1,825 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
172
Board of Trustees
Our business and affairs are managed under the direction of our Board of Trustees. The responsibilities of the Board of Trustees include, among other things, the oversight of our investment activities, the quarterly valuation of our assets, oversight of our financing arrangements and corporate governance activities. Our Board of Trustees consists of six members, four of whom are not “interested persons” of the Fund or of the Adviser as defined in Section 2(a)(19) of the 1940 Act and are “independent,” as determined by our Board of Trustees. We refer to these individuals as our independent Trustees. Our Board of Trustees elects our executive officers, who serve at the discretion of the Board of Trustees.
Trustees
Information regarding the Board of Trustees is as follows:
| Name |
Year of Birth |
Position |
Length of Tim Served |
Principal Occupation During
Past |
Number of Portfolio Companies in Fund Complex Overseen by Director(1) |
Other Directorships Held by Director | ||||||||||||
| Independent Trustees |
||||||||||||||||||
| 1949 | Trustee | |
Since 2020 |
|
Vice Chairman (2006-2012) and Partner (1982-2012) of Deloitte & Touche LLP. | 2 | Director, Groupon Inc. (2012-present); Director, Apex Tool Group, LLC (2014-present); Director, Redfin Corporation (2016-present); Director, Sims Metal Management (2013-2018); and Director, New Page Corporation (2013-2015). | |||||||||||
| 1961 | Trustee | |
Since 2020 |
|
Partner and Investment Committee member of Sound Shore Management, Inc. (2004-Present) | 2 | Partner, Sound Shore Management, Inc. (2004-Present). | |||||||||||
| 1963 | Trustee | |
Since 2020 |
|
Independent finance professional and Chief Executive Officer of SmartFinance LLC (a Fintech startup) (2013-2017). | 2 | Director, KKR Financial (2006-2014). | |||||||||||
| 1957 | Trustee | |
Since 2020 |
|
Chief Investment Officer of the New York State Common Retirement Fund (2012-2018). | 2 | Director, The Williams Companies (2018-present); Director, Fidelity Equity and High Income Funds (2018–present); Treliant, LLC (international multi-industry consulting firm) (2019-present). | |||||||||||
173
| Name |
Year of Birth |
Position |
Length of Tim Served |
Principal Occupation During
Past |
Number of Portfolio Companies in Fund Complex Overseen by Director(1) |
Other Directorships Held by Director | ||||||||||
| Interested Trustees |
||||||||||||||||
| 1972 | Trustee, Chairperson, and Chief Executive Officer |
|
Since 2020 |
|
Mr. Marshall is a Senior Managing Director of Blackstone. He is a senior portfolio manager in Blackstone Credit’s Performing Credit Group and oversees Blackstone Credit’s Direct Lending effort. Mr. Marshall is a member of Blackstone Credit’s Performing Credit Investment Committee. | 2 | None. | |||||||||
| 1963 | Trustee | |
Since 2020 |
|
Mr. Smith is a Senior Managing Director of Blackstone Credit and is Head of GSO / Blackstone Debt Funds Management LLC. | 6 | None. | |||||||||
| (1) | The “Fund Complex” consists of the Fund, the Blackstone Credit Closed-End Funds (BXSL, BSL, BGX, BGB and BGFLX), as well as the Blackstone Real Estate Income Funds (Blackstone Real Estate Income Fund, Blackstone Real Estate Income Fund II and Blackstone Real Estate Income Master Fund), the Blackstone Alternative Alpha Funds (Blackstone Alternative Alpha Fund, Blackstone Alternative Alpha Fund II and Blackstone Alternative Alpha Master Fund) and Blackstone Alternative Multi-Strategy Fund. |
The address for each trustee is c/o Blackstone Private Credit Fund, 345 Park Avenue, 31st Floor, New York, NY 10154. While we do not intend to list our shares on any securities exchange, if any class of our shares is listed on a national securities exchange, our Board of Trustees will be divided into three classes of trustees serving staggered terms of three years each.
174
Executive Officers Who are Not Trustees
Information regarding our executive officers who are not Trustees is as follows:
| Name |
Year of Birth |
Position |
Length of |
Principal Occupation During Past 5 Years |
Number of | |||||
| 1970 | Chief Financial Officer | Since 2020 | Mr. Kuppenheimer is a Senior Managing Director of Blackstone. He is part of Blackstone Credit’s Performing Credit Group focused on portfolio management, structuring and capital markets. Mr. Kuppenheimer is a member of Blackstone Credit’s Performing Credit Investment Committee. | 2 | ||||||
| 1982 | Chief Accounting Officer and Treasurer | Since 2020 | Mr. Busch is a Senior Vice President of Blackstone Inc. Before joining Blackstone Credit, Mr. Busch worked previously at Fifth Street Asset Management from 2012 to 2018, where he was Senior Vice President of Finance and served as Controller of the firm’s two publicly traded business development companies and publicly traded alternative asset manager. | 6 | ||||||
| Marisa J. Beeney |
1970 | Chief Compliance Officer, Chief Legal Officer and Secretary | Since 2020 | Ms. Beeney is a Senior Managing Director of Blackstone Inc. and General Counsel of Blackstone Credit. |
6 | |||||
| Katherine Rubenstein |
1978 | Chief Operating Officer | Since 2021 | Ms. Rubenstein is a Managing Director of Blackstone Credit. Before joining Blackstone, Ms. Rubenstein originated senior secured loans and equipment finance opportunities in the industrial, consumer, and retail sectors for GE Capital. | 2 | |||||
The address for each executive officer is c/o Blackstone Private Credit Fund, 345 Park Avenue, 31st Floor, New York, NY 10154.
Biographical Information
The following is information concerning the business experience of our Board of Trustees and executive officers. Our Trustees have been divided into two groups—interested Trustees and independent Trustees. Interested Trustees are “interested persons” as defined in the 1940 Act.
Interested Trustees
Brad Marshall (Portfolio Manager), Trustee, Chief Executive Officer of the Fund, Senior Managing Director of Blackstone and Co-head of Performing Credit. Mr. Marshall is Co-head of Blackstone Credit’s Performing
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Credit Platform and a Senior Managing Director of Blackstone. Mr. Marshall also serves on the board of trustees of Blackstone Secured Lending Fund (“BXSL”). Mr. Marshall focuses on Blackstone Credit’s Direct Lending effort and is a member of the performing credit investment committee. Before joining Blackstone Credit in 2005, at its inception, Mr. Marshall worked in various roles at RBC, including fixed income research and business development within RBC’s private equity funds effort. Prior to RBC, Mr. Marshall helped develop a private equity funds business for TAL Global, a Canadian asset management division of CIBC, and prior to that, he co-founded a microchip verification software company where he served as chief financial officer. Mr. Marshall received an MBA from McGill University in Montreal and a BA (Honors) in Economics from Queen’s University in Kingston, Canada.
Daniel H. Smith, Jr., Trustee, Senior Managing Director of Blackstone and Head of Liquid Credit Strategies. Mr. Smith is a Trustee of the Company, a Senior Managing Director of The Blackstone Group Inc. and is Head of Liquid Credit Strategies unit, which includes various commingled credit funds, permanent capital vehicles, CLOs, closed-end funds and leveraged and unleveraged separately managed accounts (“SMAs”). Mr. Smith is also the Chief Executive Officer, Trustee and Chairman of Blackstone Senior Floating Rate Term Fund (“BSL”), Blackstone Long-Short Credit Income Fund (“BGX”), Blackstone Strategic Credit Fund (“BGB”), Blackstone Floating Rate Enhanced Income Fund (“BGFLX”). Mr. Smith also serves on the board of trustees of BXSL. Mr. Smith joined Blackstone Credit from the Royal Bank of Canada in July 2005 where he was a Managing Partner and Co-Head of RBC Capital Market’s Alternative Investments Unit. Mr. Smith joined RBC in 2001 from Indosuez Capital, a division of Crédit Agricole Indosuez, where he was a Co-Head and Managing Director overseeing the firm’s debt investments business and merchant banking activities. Prior to Indosuez Capital, Mr. Smith was a Principal at Frye-Louis Capital Management in Chicago. He began his career in investment management in 1987 at Van Kampen American Capital (f/k/a Van Kampen Merritt), a mutual fund company in Chicago where he held a variety of positions including Co-Head of the firm’s high-yield investment group and head of the firm’s equity fund complex. Mr. Smith received a B.S. in Petroleum Engineering from the University of Southern California and a Masters in Management from the J.L. Kellogg Graduate School of Management at Northwestern University.
Independent Trustees
Robert Bass. Mr. Bass has served on the board of Groupon, Inc. since June 2012. He served as a Vice Chairman of Deloitte & Touche LLP from 2006 through June 2012, and was a Partner in Deloitte from 1982 through June 2012, where he specialized in e-commerce, mergers and acquisitions, SEC filings and related issues. At Deloitte, Mr. Bass was responsible for all services provided to Forstmann Little and its portfolio companies and was the advisory partner for Blackstone, DIRECTV, 24 Hour Fitness, McKesson, IMG and CSC. In addition, he has been an advisory partner for RR Donnelley, Automatic Data Processing, Community Health Systems, and Avis Budget. Mr. Bass has served on the board of directors of Sims Metal Management (ASX: SGM.AX) and as a member of the risk and audit committee from September 2013 to December 31, 2018, including as Chairman of the risk and audit committee from November 2014, the board of directors and as a member of the audit committee of Apex Tool Group, LLC since December 2014, including as Chairman of the audit committee since April 2015, the board of directors and as Chairman of the audit committee of New Page Corporation from January 2013 (emergence from chapter XI) to January 2015 (sale of the company), and the board of directors and as Chairman of the audit committee of Redfin Corporation (NASDAQ: RDFN) since October 2016. Mr. Bass is a certified public accountant licensed in New York and Connecticut. He is a member of the American Institute of Certified Public Accountants and the Connecticut State Society of Certified Public Accountants. Mr. Bass brings to the Board a wealth of experience and knowledge of public company financial reporting and accounting, including with respect to companies in the e-commerce sector, and his experience at the highest levels of a Big Four accounting firm is an invaluable resource to the Board in its oversight of the Fund’s SEC filings, all of which make him well qualified to serve on our Board. Mr. Bass also serves on the board of trustees of BXSL.
James F. Clark. Mr. Clark has served as a Partner with Sound Shore Management, Inc. (“Sound Shore”), which he joined in 2004. At Sound Shore, Mr. Clark is a generalist on the investment team, responsible for the firm’s
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investments in energy, industrials, materials and utility stocks. His tenure also includes heading Sound Shore’s Environmental, Social, and Governance (ESG) Committee, and having served on its Investment Committee and operating committee. Previously, Mr. Clark worked at Credit Suisse First Boston (CSFB) from 1984 to 2004, most recently as a Managing Director, 1996-2004. At CSFB, Mr. Clark served as Head of US Equity Research, 2000-2004, and as the firm’s International and Domestic Oil Analyst, 1989-2000. Mr. Clark was selected to 14 Institutional Investor magazine’s All America Research teams, 1993-1999. Mr. Clark was named a Wall Street Journal All-Star Analyst, 1994-1999, and also named to that newspaper’s All-Star Analyst Hall of Fame, 1998-1999. Mr. Clark has an MBA from Harvard University and a BA from Williams College, cum laude and with highest honors. Mr. Clark also has served as a winter study adjunct faculty member at Williams College, 2020-2021. Mr. Clark also serves on the board of trustees of BXSL.
Tracy Collins. Ms. Collins is an independent finance professional and most recently served as CEO to SmartFinance LLC (2013-2017), a Fintech startup purchased by MidFirst Bank in December of 2017. During her career in financial services, Ms. Collins worked as a Senior Managing Director (Partner) and Head of Asset-Backed Securities Research at Bear Stearns & Co., Inc. for six years and prior to that as a Managing Director (Partner) and Head of Asset-Backed Securities and Structured Products at Credit Suisse (formerly known as Credit Suisse First Boston) for nine years. During her tenure as a structured product specialist, Ms. Collins was consistently recognized as a “First Team All American Research Analyst.” Ms. Collins served as an independent director for KKR Financial from August 2006 to May 2014. She graduated from the University of Texas at Austin in the Plan II Honors Program. Ms. Collins has held numerous management positions and her broad experiences in the financial services sector provide her with skills and valuable insight in handling complex financial transactions and issues, all of which make her well qualified to serve on our Board. Ms. Collins’ spouse is the founder, managing partner and co-CIO of Good Hill Partners LP (“Good Hill”). Good Hill is a registered investment adviser that manages various types of collective investment vehicles and investment accounts. Affiliates of the Adviser (but not the Adviser) have invested on behalf of their clients in Good Hill-managed vehicles or accounts since 2010, and the amount of such investment is material to Good Hill. Ms. Collins also serves on the board of trustees of BXSL.
Vicki L. Fuller. Ms. Fuller has served as a Director of The Williams Companies, Inc. since 2018. Ms. Fuller joined the board of The Williams Companies, Inc. after retirement from the New York State Common Retirement Fund (“NYSCRF”) where she served as Chief Investment Officer beginning in August 2012. NYSCRF is the third largest public pension fund in the nation and holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. Prior to joining NYSCRF, Ms. Fuller spent 27 years in leadership positions at AllianceBernstein Holding L.P., which has approximately $500 billion in assets under management. She joined the company in 1993 from the Equitable Capital Management Corporation, which was acquired by Alliance Capital Management LP (in 2000, the company became AllianceBernstein LP after the company acquired Sanford C. Bernstein). In December 2019, Ms. Fuller was appointed to the board of directors of Treliant, LLC, an international multi-industry consulting firm specializing in regulatory requirements. In 2018, Ms. Fuller was appointed to the Board of Trustees for Fidelity Equity and High Income Funds. Ms. Fuller, who was inducted into the National Association of Securities Professionals Wall Street Hall of Fame, was named to Chief Investment Officer Magazine’s “Power 100” and received the Urban Technology Center’s Corporate Leadership Award. She has also been named one of the most powerful African Americans on Wall Street by Black Enterprise. Ms. Fuller’s skills, experience, and attributes include executive leadership, public policy and government, securities and capital markets, financial and accounting, and diversity, all of which make her well qualified to serve on our Board. Ms. Fuller also serves on the board of trustees of BXSL.
Executive Officers Who are not Trustees
Steve Kuppenheimer (Portfolio Manager), Chief Financial Officer. Mr. Kuppenheimer is a Portfolio Manager and Chief Financial Officer of the Fund and Senior Managing Director with Blackstone Credit. He is a member of Blackstone Credit’s Performing Credit Group focused on portfolio management and capital markets.
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Mr. Kuppenheimer is a member of the performing credit investment committee. Before joining Blackstone Credit, then known as GSO Capital Partners, in 2015 Mr. Kuppenheimer was a Senior Managing Director at Stifel Financial where he served as Head of Principal Investing and Head of Debt Capital Markets from 2010 to 2015. Prior to Stifel, Mr. Kuppenheimer was founder and CEO of FSI Capital, an alternative asset management company focused on U.S. credit products. Previously, Mr. Kuppenheimer was head of CLOs and structured funds for Merrill Lynch. Mr. Kuppenheimer received a J.D., with Distinction, from Emory University School of Law and a B.A. from Colgate University with Honors in Philosophy. Mr. Kuppenheimer serves on the board of trustees for the George Jackson Academy.
Robert Busch, Chief Accounting Officer and Treasurer. Mr. Busch is the Chief Accounting Officer and Treasurer of the Fund and a Senior Vice President with Blackstone Credit. Mr. Busch is the Chief Financial Officer and Treasurer of BSL, BGX, BGB and BGFLX and the Treasurer and Chief Accounting Officer of BXSL. Mr. Busch joined Blackstone Credit in 2018. Mr. Busch worked previously at Fifth Street Asset Management from 2012 to 2018, where he was Senior Vice President Finance and served as Controller of the firm’s two publicly traded business development companies and publicly traded alternative asset manager. Prior to that, Mr. Busch was an Audit Manager at Deloitte & Touche LLP serving clients in various industries including alternative asset management and real estate. Mr. Busch is a Certified Public Accountant in the state of New York and received a Bachelor’s Degree in Business Administration with a concentration in Accounting from Boston University’s Questrom School of Business where he graduated cum laude.
Marisa J. Beeney, Chief Compliance Officer, Chief Legal Officer and Secretary. Ms. Beeney has been with Blackstone Credit since 2007 and is a Senior Managing Director and General Counsel of Blackstone Credit. As General Counsel, Ms. Beeney works on a variety of legal matters within Blackstone Credit and oversees all legal and compliance issues Ms. Beeney is the Chief Compliance Officer, Chief Legal Officer and Secretary of BSL, BGX, BGB, BGFLX and BXSL. Before joining Blackstone Credit, Ms. Beeney was an attorney at DLA Piper within the finance group. Prior to that, she worked at Latham & Watkins primarily on project finance and development transactions, as well as leveraged finance transactions, restructurings and certain structured credit products. Ms. Beeney holds a B.S. in Engineering from Cornell University, and a J.D., magna cum laude, from Boston University.
Katherine Rubenstein, Chief Operating Officer. Ms. Rubenstein is a Managing Director in Blackstone Credit and the Chief Operating Officer of the Fund and BXSL. Since Blackstone in 2015, Ms. Rubenstein created and led the GSO Advantage platform (now Blackstone Credit Advantage), which brings Blackstone’s broad set of capabilities to drive operational efficiencies and growth for Blackstone Credit’s portfolio companies. She subsequently created and led the Blackstone Advantage program, focusing on building networks and expanding access to resources for portfolio companies across Blackstone business units. Ms. Rubenstein is on the Blackstone Charitable Foundation Leadership Council and on the Board of Let’s Get Ready, a non-profit organization that provides low-income and first generation to college students support to gain admission to and graduate from college. Before joining Blackstone, Ms. Rubenstein originated senior secured loans and equipment finance opportunities in the industrial, consumer, and retail sectors for GE Capital and prior to that worked in brand management at World Kitchen. Ms. Rubenstein received an MBA from The Johnson Graduate School of Management at Cornell University, where she was a Roy H. Park Leadership Fellow, and an A.B. from Dartmouth College.
Communications with Trustees
Shareholders and other interested parties may contact any member (or all members) of the Board of Trustees by mail. To communicate with the Board of Trustees, any individual Trustees or any group or committee of Trustees, correspondence should be addressed to the Board of Trustees or any such individual Trustees or group or committee of Trustees by either name or title. All such correspondence should be sent c/o Blackstone Private Credit Fund, 345 Park Avenue, 31st Floor, New York, NY 10154, Attention: Chief Compliance Officer.
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Committees of the Board of Trustees
Our Board of Trustees currently has two committees: an audit committee and a nominating and governance committee. We do not have a compensation committee because our executive officers do not receive any direct compensation from us. Under the Declaration of Trust, the Fund is not required to hold annual meetings.
Audit Committee. The audit committee operates pursuant to a charter approved by our Board of Trustees. The charter sets forth the responsibilities of the audit committee. The primary function of the audit committee is to serve as an independent and objective party to assist the Board of Trustees in selecting, engaging and discharging our independent accountants, reviewing the plans, scope and results of the audit engagement with our independent accountants, approving professional services provided by our independent accountants (including compensation therefore), reviewing the independence of our independent accountants and reviewing the adequacy of our internal controls over financial reporting. The audit committee is presently composed of four persons, including Robert Bass, Jim Clark, Tracy Collins and Vicki L. Fuller, all of whom are considered independent for purposes of the 1940 Act. Robert Bass serves as the chair of the Audit Committee. Our Board of Trustees has determined that Robert Bass qualifies as an “audit committee financial expert” as defined in Item 407 of Regulation S-K under the Exchange Act. Each of the members of the audit committee meet the independence requirements of Rule 10A-3 of the Exchange Act and, in addition, is not an “interested person” of the Fund or of the Adviser as defined in Section 2(a)(19) of the 1940 Act. During the year ended December 31, 2020, the Audit Committee met four times.
A copy of the charter of the Audit Committee is available in print to any shareholder who requests it, and it will also be available on the Fund’s website at www.bcred.com.
Nominating and Governance Committee. The nominating and governance committee operates pursuant to a charter approved by our Board of Trustees. The charter sets forth the responsibilities of the nominating and governance committee, including making nominations for the appointment or election of independent Trustees. The nominating and governance committee consists of four persons, including Robert Bass, Jim Clark, Tracy Collins and Vicki L. Fuller, all of whom are considered independent for purposes of the 1940 Act. Tracy Collins serves as the chair of the Nominating and Governance Committee.
The Nominating and Governance Committee will consider nominees to the Board of Trustees recommended by a shareholder, if such shareholder complies with the advance notice provisions of our bylaws. Our bylaws provide that a shareholder who wishes to nominate a person for election as a Trustee at a meeting of shareholders must deliver written notice to our Corporate Secretary. This notice must contain, as to each nominee, all of the information relating to such person as would be required to be disclosed in a proxy statement meeting the requirements of Regulation 14A under the Exchange Act, and certain other information set forth in the bylaws. In order to be eligible to be a nominee for election as a Trustee by a shareholder, such potential nominee must deliver to our Corporate Secretary a written questionnaire providing the requested information about the background and qualifications of such person and a written representation and agreement that such person is not and will not become a party to any voting agreements, any agreement or understanding with any person with respect to any compensation or indemnification in connection with service on the Board, and would be in compliance with all of our publicly disclosed corporate governance, conflict of interest, confidentiality and share ownership and trading policies and guidelines. During the year ended December 31, 2020, the Nominating and Governance Committee met two times.
A copy of charter of the Nominating and Governance Committee is available in print to any shareholder who requests it, and it will also be available on the Fund’s website at www.bcred.com.
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Credit Facility Committee
Although not a committee of the Board, the Fund has established a credit committee that, among other things, implements or oversees certain aspects of the Fund’s credit facility engagements (the “Credit Committee”). The Credit Committee consists of one or more persons, typically employees of the Adviser, who have been authorized by the Board to make determinations on a day-to-day basis with respect to the Fund’s credit facility operations in accordance with Board approved procedures.
Compensation of Trustees
Our Trustees who do not also serve in an executive officer capacity for us or the Adviser are entitled to receive annual cash retainer fees, fees for participating in the in-person board and committee meetings and annual fees for serving as a committee chairperson, determined based on our net assets as of the end of each fiscal quarter. These Trustees are Robert Bass, Jim Clark, Tracy Collins and Vicki L. Fuller. Amounts payable under the arrangement are determined and paid quarterly in arrears as follows:
| Annual Committee Chair Cash Retainer |
||||||||||||||||
| Annual Cash Retainer |
Board Meeting Fee |
Audit | Nominating and Governance |
Committee Meeting Fee |
||||||||||||
| $50,000 (NAV up to $1 billion) |
$ | 2,500 | $ | 7,500 | None | $ | 1,000 | |||||||||
| $75,000 (NAV $1 billion to $2 billion) |
$ | 2,500 | $ | 7,500 | None | $ | 1,000 | |||||||||
| $100,000 (NAV greater than $2 billion) |
$ | 2,500 | $ | 7,500 | None | $ | 1,000 | |||||||||
We also reimburse each of the Trustees for all reasonable and authorized business expenses in accordance with our policies as in effect from time to time, including reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and each committee meeting not held concurrently with a board meeting.
We will not pay compensation to our Trustees who also serve in an executive officer capacity for us or the Adviser.
Staffing
We do not currently have any employees and do not expect to have any employees. Services necessary for our business are provided by individuals who are employees of the Adviser, pursuant to the terms of the Advisory Agreement and the Administration Agreement. Our day-to-day investment operations are managed by our Adviser. In addition, we reimburse the Administrator for our allocable portion of expenses incurred by it in performing its obligations under the Administration Agreement, including our allocable portion of the cost of our officers and their respective staffs.
Compensation of Executive Officers
None of our officers will receive direct compensation from us. The compensation of our chief financial officer and chief compliance officer will be paid by our Administrator, subject to reimbursement by us of an allocable portion of such compensation for services rendered by them to us. To the extent that our Administrator outsources any of its functions, we will pay the fees associated with such functions on a direct basis without profit to our Administrator.
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Board Leadership Structure
Our business and affairs are managed under the direction of our Board of Trustees. Among other things, our Board of Trustees sets broad policies for us and approves the appointment of our investment adviser, administrator and officers. The role of our Board of Trustees, and of any individual Trustee, is one of oversight and not of management of our day-to-day affairs.
Under our bylaws, our Board of Trustees may designate one of our Trustees as chair to preside over meetings of our Board of Trustees and meetings of shareholders, and to perform such other duties as may be assigned to him or her by our Board of Trustees. The Board of Trustees has appointed Brad Marshall to serve in the role of chairperson of the Board of Trustees. The chairperson’s role is to preside at all meetings of the Board of Trustees and to act as a liaison with the Adviser, counsel and other Trustees generally between meetings. The chairperson serves as a key point person for dealings between management and the Trustees. The chairperson also may perform such other functions as may be delegated by the Board of Trustees from time to time. The Board of Trustees reviews matters related to its leadership structure annually. The Board of Trustees has determined that its leadership structure is appropriate because it allows the Board of Trustees to exercise informed and independent judgment over the matters under its purview and it allocates areas of responsibility among committees of Trustees and the full board in a manner that enhances effective oversight.
Our Board of Trustees believes that its leadership structure is the optimal structure for us at this time. Our Board of Trustees, which will review its leadership structure periodically as part of its annual self-assessment process, further believes that its structure is presently appropriate to enable it to exercise its oversight of us.
Board Role in Risk Oversight
Our Board of Trustees performs its risk oversight function primarily through (i) its standing committees, which report to the entire Board of Trustees and are comprised solely of independent Trustees, and (ii) active monitoring of our chief compliance officer and our compliance policies and procedures. Oversight of other risks is delegated to the committees.
Oversight of our investment activities extends to oversight of the risk management processes employed by the Adviser as part of its day-to-day management of our investment activities. The Board of Trustees anticipates reviewing risk management processes at both regular and special board meetings throughout the year, consulting with appropriate representatives of the Adviser as necessary and periodically requesting the production of risk management reports or presentations. The goal of the Board of Trustee’s risk oversight function is to ensure that the risks associated with our investment activities are accurately identified, thoroughly investigated and responsibly addressed. Investors should note, however, that the Board of Trustees’ oversight function cannot eliminate all risks or ensure that particular events do not adversely affect the value of investments.
We believe that the role of our Board of Trustees in risk oversight is effective and appropriate given the extensive regulation to which we are already subject as a BDC. As a BDC, we are required to comply with certain regulatory requirements that control the levels of risk in our business and operations. For example, we are limited in our ability to enter into transactions with our affiliates, including investing in any portfolio company in which one of our affiliates currently has an investment.
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Blackstone Credit BDC Advisors LLC will serve as our investment adviser. The Adviser is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our Board of Trustees, the Adviser will manage the day-to-day operations of, and provide investment advisory and management services to, us.
Investment Personnel
Our senior staff of investment personnel currently consists of the members of the Investment Committee. The Investment Committee is currently comprised of Dwight Scott, Brad Marshall, Steve Kuppenheimer, Rob Zable, Michael Zawadzki, Rob Horn, Rob Petrini, Louis Salvatore, Dan Smith and Paulo Eapen. The portfolio managers primarily responsible for the day-to-day management of the Fund are Brad Marshall, Steve Kuppenheimer, Rob Zable and Michael Zawadzki.
The Adviser is currently staffed with 397 employees, including the investment personnel noted above. In addition, the Adviser may retain additional investment personnel in the future based upon its needs.
The table below shows the dollar range of Common Shares owned by the portfolio managers as of December 31, 2020:
| Name of Portfolio Manager |
Dollar Range of Equity Securities in BCRED(1) | |
| None | ||
| None | ||
| Rob Zable |
None | |
| Michael Zawadzki |
None |
| (1) | Dollar ranges are as follows: None, $1 – $10,000, $10,001 – $50,000, $50,001 – $100,000, $100,001 – $500,000, $500,001 – $1,000,000, or over $1,000,000. |
Other Accounts Managed by Portfolio Managers
The portfolio managers primarily responsible for the day-to-day management of the Fund also manage other registered investment companies, other pooled investment vehicles and other accounts, as indicated below. The following table identifies, as of December 31, 2020: (i) the number of other registered investment companies, other pooled investment vehicles and other accounts managed by each portfolio manager; (ii) the total assets of such companies, vehicles and accounts; and (iii) the number and total assets of such companies, vehicles and accounts that are subject to an advisory fee based on performance.
| Type of Account |
Number of Accounts |
Assets of Accounts |
Number of Accounts Subject to a performance Fee |
Assets Subject to a performance Fee |
||||||||||||
| Registered investment companies |
— | — | — | — | ||||||||||||
| Other pooled investment vehicles(1) |
2 | $ | 8.954 billion | 2 | $ | 8.954 billion | ||||||||||
| Other accounts |
5 | $ | 4.663 billion | 5 | $ | 4.663 billion | ||||||||||
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| Type of Account |
Number of Accounts |
Assets of Accounts |
Number of Accounts Subject to a performance Fee |
Assets Subject to a performance Fee |
||||||||||||
| Registered investment companies |
— | — | — | — | ||||||||||||
| Other pooled investment vehicles(1) |
1 | $ | 7.553 billion | 1 | $ | 7.553 billion | ||||||||||
| Other accounts |
3 | $ | 0.606 billion | 3 | $ | 0.606 billion | ||||||||||
Rob Zable
| Type of Account |
Number of Accounts |
Assets of Accounts |
Number of Accounts Subject to a performance Fee |
Assets Subject to a performance Fee |
||||||||||||
| Registered investment companies |
4 | $ | 2.053 billion | — | — | |||||||||||
| Other pooled investment vehicles(1) |
40 | $ | 22.213 billion | 40 | $ | 22.213 billion | ||||||||||
| Other accounts |
1 | $ | 0.251 billion | — | — | |||||||||||
Michael Zawadzki
| Type of Account |
Number of Accounts |
Assets of Accounts |
Number of Accounts Subject to a performance Fee |
Assets Subject to a performance Fee |
||||||||||||
| Registered investment companies |
— | — | — | — | ||||||||||||
| Other pooled investment vehicles(1) |
2 | $ | 6.145 billion | 2 | $ | 6.145 billion | ||||||||||
| Other accounts |
9 | $ | 2.737 billion | 7 | $ | 2.595 billion | ||||||||||
| (1) | Includes management investment companies that have elected to be regulated as business development companies under the 1940 Act. |
The Adviser
Investment Committee
Investment opportunities and follow-on investments in existing portfolio companies will generally require the unanimous approval of the Investment Committee. The Investment Committee will meet regularly to consider our investments, direct our strategic initiatives and supervise the actions taken by the Adviser on our behalf. In addition, the Investment Committee reviews and determines whether to make prospective investments identified by the Adviser and monitors the performance of our investment portfolio. The day-to-day management of investments approved by the Investment Committees will be overseen by investment personnel.
All of the Investment Committee members have ownership and financial interests in, and may receive compensation and/or profit distributions from, the Adviser. None of the Investment Committee members receive any direct compensation from us. See “Control Persons and Principal Shareholders” for additional information about equity interests held by certain of these individuals.
Members of the Investment Committee Who Are Not Our Trustees or Executive Officers
Dwight Scott, Global Head of Blackstone Credit, Senior Managing Director. Mr. Scott is the Global Head of Blackstone Credit and Senior Managing Director of Blackstone. Prior to his current role, Mr. Scott managed the
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energy investing activity at Blackstone Credit, where he remains active. Before joining Blackstone Credit in 2005, at its inception, Mr. Scott was an Executive Vice President and Chief Financial Officer of El Paso Corporation. Prior to joining El Paso, Mr. Scott served as a Managing Director in the energy investment banking practice of Donaldson, Lufkin & Jenrette. Mr. Scott is currently a Director of GEP Haynesville. He is a member of the Wall Street for McCombs Board. Mr. Scott graduated from the University of North Carolina and the University of Texas’ McCombs School of Business.
Louis Salvatore, Senior Managing Director, Co-head of Performing Credit. Mr. Salvatore is Co-head of Blackstone Credit’s Performing Credit platform and a Senior Managing Director of Blackstone. Mr. Salvatore is a Joint Portfolio Manager for Blackstone Credit’s Capital Opportunities Funds and sits on the investment committee for Blackstone Credit’s performing credit funds. He also sits on the Blackstone Insurance Solutions and Blackstone Total Alternatives Solution investment committees. Before joining Blackstone Credit in 2005, at its inception, Mr. Salvatore was a Principal of DLJ Investment Partners, the mezzanine fund of CSFB’s Alternative Capital Division. Mr. Salvatore joined CSFB in 2000 when it acquired DLJ, where he was a member of the Merchant Banking Group. He had been a member of DLJ’s Leveraged Finance Group, specializing in corporate restructurings. Prior to that, he worked for Kidder Peabody. Mr. Salvatore is on the board of directors (either as a member or observer) of Acrisure LLC, Community Development Capital Group IV and Loar Group. Mr. Salvatore received a BA in Economics from Cornell University and an MBA from the Wharton School of the University of Pennsylvania.
Robert Petrini, Senior Managing Director, Co-head of Performing Credit. Mr. Petrini is Co-head of Blackstone Credit’s Performing Credit platform and a Senior Managing Director of Blackstone. Mr. Petrini is a Joint Portfolio Manager for Blackstone Credit’s Capital Opportunities Funds and sits on the investment committees for Blackstone Credit’s performing credit funds, distressed funds and energy funds. Before joining Blackstone Credit in 2005, at its inception, Mr. Petrini was a Principal of DLJ Investment Partners, the mezzanine fund of CSFB’s Alternative Capital Division. Prior to that, Mr. Petrini was a member of DLJ’s Leveraged Finance Group specializing in financial sponsor transactions since 1997. Mr. Petrini graduated magna cum laude with a B.S. in Economics from the Wharton School of the University of Pennsylvania, where he was a Joseph Wharton and Benjamin Franklin Scholar.
Michael Zawadzki (Portfolio Manager), Senior Managing Director, Co-head of Energy. Mr. Zawadzki is Co-head of Blackstone Credit’s Energy platform and a Senior Managing Director of Blackstone. Mr. Zawadzki sits on the investment committees for Blackstone Credit’s energy funds, performing credit funds and distressed funds. Before joining Blackstone Credit in 2006, Mr. Zawadzki was with Citigroup Private Equity, where he completed numerous private equity and subordinated debt investments. Previously, Mr. Zawadzki worked in the investment banking division of Salomon Smith Barney. Mr. Zawadzki serves on the board of directors (as a director or observer) of 3Bear Energy, Community Development Capital Group IV, Elevation Midstream, LLC, Sequel Energy Group, Sequel Energy Group II, Targa Badlands, Twin Eagle Resources Management and WPX Energy Mineral Partners, LP. Mr. Zawadzki graduated magna cum laude with a B.S. in Economics from the Wharton School of the University of Pennsylvania.
Robert Horn, Senior Managing Director, Co-head of Energy. Mr. Horn is Co-head of Blackstone Credit’s Energy platform and a Senior Managing Director of Blackstone. Mr. Horn sits on the investment committees for Blackstone Credit’s energy funds, performing credit funds and distressed funds. Before joining Blackstone Credit in 2005, Mr. Horn worked in Credit Suisse’s Global Energy Group, where he advised on high yield financings and merger and acquisition assignments for companies in the power and utilities sector. Mr. Horn serves on the board of directors of various companies involved in the upstream, midstream and oilfield service sectors, including Altus Power America, Inc., Compass Well Services, Delaware Basin Investment Group, GEP Haynesville, GulfTex Energy III, GulfTex Energy IV, Legacy Reserves, M5 Midstream, M6 Midstream, MR Italia, River Bend Oil and Gas, Sanchez UnSub, and Sierra Resources Partners. Mr. Horn graduated with academic honors from McGill University.
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Paulo Eapen, Senior Managing Director, Head of Europe. Mr. Eapen is Head of Blackstone Credit’s European business and a Senior Managing Director of Blackstone. Mr. Eapen sits on the investment committees for Blackstone Credit’s performing credit funds and distressed funds. Mr. Eapen is focused on the origination and management of private credit and equity investments, spanning acquisitions and corporate refinancings. These investments include a wide variety of industries and geographies, primarily headquartered in Europe. Before joining Blackstone Credit in 2007, Mr. Eapen was with Citigroup Private Equity and previously worked in M&A investment banking with Salomon Smith Barney. Mr. Eapen is on the boards (as a director or observer) of Accord BidCo, iAero Group, Cobham Mission Systems and Cobham Aviation Services UK, Curium Pharma and Morson Group. Additionally, Mr. Eapen is on the board of directors for the Ubuntu Education Fund, a charitable organization. Mr. Eapen has a B.A. in Economics and Political Science from the University of Pennsylvania and is an Infantry Officer in the Singapore Armed Forces.
Robert Zable (Portfolio Manager), Senior Managing Director. Mr. Zable is a Senior Managing Director and Senior Portfolio Manager for Blackstone Credit’s U.S. CLOs, closed-end funds, and high yield separately managed accounts. He is also a member of Blackstone Credit’s LCS Management Committee and sits on LCS’s U.S. Syndicated Credit Investment Committee, Global Structured Credit Investment Committee, Global Dynamic Credit Asset Allocation Committee, and CLO Origination Committee. Prior to joining Blackstone Credit in 2007, Mr. Zable was a Vice President at FriedbergMilstein LLC, where he was responsible for credit opportunity investments and junior capital origination and execution. Mr. Zable began his career at JP Morgan Securities Inc., where he focused on leveraged finance in New York and London. Mr. Zable received a B.S. from Cornell University and an M.B.A in Finance from The Wharton School at the University of Pennsylvania.
Other Members of the Portfolio Management Team
Brad Colman, Managing Director. Mr. Colman focuses on originating, analyzing, executing and monitoring credit investments across a diverse range of industries primarily for the Direct Lending business. Mr. Colman’s responsibilities also include acting as the Portfolio Manager for the GSO Diamond Portfolio Fund, which focuses on senior and stretch senior loans to issuers in the U.S. Before joining Blackstone in 2012, Mr. Colman worked as a Director in the Strategic Investments group at PartnerRe, a Senior Associate in the sponsor finance team at American Capital, and an Analyst in Merrill Lynch’s investment banking group. Mr. Colman graduated magna cum laude from New York University’s Leonard N. Stern School of Business with a BS in Finance, Accounting, and Operations.
Bradley Boggess, Managing Director. Mr. Boggess is a Managing Director with Blackstone Credit and is involved with portfolio management and monitoring. Since joining Blackstone in 2018, Mr. Boggess has been focused on the Blackstone Credit Advantage program, which looks to bring Blackstone’s broad set of capabilities to bear for Blackstone Credit’s portfolio companies. Prior to joining Blackstone, Mr. Boggess was Managing Director and Chief Administrative Officer of Hudson Advisors, the asset management affiliate of Lone Star Funds since 2011. He also previously led the asset management team for private equity investments at Hudson. Mr. Boggess served as Chairman of the Board of Continental Building Products (NYSE:CBPX) and on the Board of Del Frisco’s Restaurant Group (NASDAQ:DFRG) and Forterra, PLC (LSE:FORT). Prior to Hudson he had various roles as a management consultant and restructuring advisor at AlixPartners, Ariba, and Accenture. Mr. Boggess was an Armor Officer in the United States Army and received a BS in Management from Tulane University.
Joseph McKnight, Managing Director. Mr. McKnight is a Managing Director with Blackstone Credit and is focused on portfolio management and monitoring in the U.S. Direct Lending business. Mr. McKnight previously focused on mezzanine lending and private equity investments as part of Blackstone Credit’s energy platform. Before joining Blackstone Credit in 2014, Mr. McKnight served as a Vice President at Goldman Sachs, where he focused on private equity and proprietary direct investments in power generation and renewable energy within the firm’s J. Aron commodity division. He previously worked as an Associate in the Natural Resources private equity vertical at Apollo Management. Mr. McKnight received a BA in History from the University of
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Pennsylvania and a BS in Economics from The Wharton School of the University of Pennsylvania, where he graduated with academic honors.
Will Sirignano, Managing Director. Mr. Sirignano has been with Blackstone Credit since 2012 and is involved in sourcing and managing public corporate credit investments across various products for Blackstone Credit. Additionally, Mr. Sirignano focuses on the firm’s capital markets efforts. Before joining Blackstone Credit, Mr. Sirignano worked at Karsch Capital Management as a Senior Research Analyst in the fund’s high-yield and distressed credit group from 2010 to 2012. Prior to that, Mr. Sirignano was a Credit Research Analyst for Satellite Asset Management. Mr. Sirignano began his career at Lehman Brothers in their Leveraged Finance Division. Mr. Sirignano received a BA in Economics and Legal Studies from Williams College.
Teddy Desloge, Principal. Mr. Desloge focuses on origination, research and execution of opportunistic and liquid credit investments across a diverse range of industries, primarily supporting various vehicles within Blackstone Credit’s Direct Lending strategy. Additionally, Mr. Desloge is a member of the investment management team for BXSL and the Fund. Before joining Blackstone Credit in 2015, Mr. Desloge was an Associate at Gefinor Capital where he focused on research and execution of private credit investments. He started his career in the Leveraged Finance Group at Jefferies. Mr. Desloge graduated with a major in Economics from Hobart & William Smith Colleges.
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ADVISORY AGREEMENT AND ADMINISTRATION AGREEMENT
Blackstone Credit BDC Advisors LLC is located at 345 Park Avenue, 31st Floor, New York, NY 10154. The Adviser is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our Board of Trustees and in accordance with the 1940 Act, the Adviser manages our day-to-day operations and provides investment advisory services to us.
Advisory Agreement
The Adviser will provide management services to us pursuant to the Advisory Agreement. Under the terms of the Advisory Agreement, the Adviser is responsible for the following:
| • | determining the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes in accordance with our investment objective, policies and restrictions; |
| • | identifying investment opportunities and making investment decisions for us, including negotiating the terms of investments in, and dispositions of, portfolio securities and other instruments on our behalf; |
| • | monitoring our investments; |
| • | performing due diligence on prospective portfolio companies; |
| • | exercising voting rights in respect of portfolio securities and other investments for us; |
| • | serving on, and exercising observer rights for, boards of directors and similar committees of our portfolio companies; |
| • | negotiating, obtaining and managing financing facilities and other forms of leverage; and |
| • | providing us with such other investment advisory and related services as we may, from time to time, reasonably require for the investment of capital. |
The Adviser’s services under the Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities, and it intends to do so, so long as its services to us are not impaired.
Compensation of Adviser
We will pay the Adviser a fee for its services under the Advisory Agreement consisting of two components: a management fee and an incentive fee. The cost of both the management fee and the incentive fee will ultimately be borne by the shareholders.
Management Fee
The management fee is payable monthly in arrears at an annual rate of 1.25% of the value of our net assets as of the beginning of the first calendar day of the applicable month. For purposes of the Advisory Agreement, net assets means our total assets less liabilities determined on a consolidated basis in accordance with GAAP. For the first calendar month in which we have operations, net assets were measured as the beginning net assets as of the Escrow Break Date. Substantial additional fees and expenses may also be charged by the Administrator to the Fund, which is an affiliate of the Adviser.
Incentive Fee
The incentive fee consists of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on a percentage of our income and a portion is based on a percentage of our capital gains, each as described below.
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Incentive Fee Based on Income
The portion based on our income is based on Pre-Incentive Fee Net Investment Income Returns. “Pre-Incentive Fee Net Investment Income Returns” means, as the context requires, either the dollar value of, or percentage rate of return on the value of our net assets at the end of the immediate preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses accrued for the quarter (including the management fee, expenses payable under the Administration Agreement entered into between us and the Administrator, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred shares, but excluding the incentive fee and any shareholder servicing and/or distribution fees).
Pre-Incentive Fee Net Investment Income Returns include, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income Returns do not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The impact of expense support payments and recoupments are also excluded from Pre-Incentive Fee Net Investment Income Returns.
Pre-Incentive Fee Net Investment Income Returns, expressed as a rate of return on the value of our net assets at the end of the immediate preceding quarter, is compared to a “hurdle rate” of return of 1.25% per quarter (5.0% annualized).
We will pay the Adviser an incentive fee quarterly in arrears with respect to our Pre-Incentive Fee Net Investment Income Returns in each calendar quarter as follows:
| • | No incentive fee based on Pre-Incentive Fee Net Investment Income Returns in any calendar quarter in which our Pre-Incentive Fee Net Investment Income Returns do not exceed the hurdle rate of 1.25% per quarter (5.0% annualized); |
| • | 100% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns with respect to that portion of such Pre-Incentive Fee Net Investment Income Returns, if any, that exceeds the hurdle rate but is less than a rate of return of 1.43% (5.72% annualized). We refer to this portion of our Pre-Incentive Fee Net Investment Income Returns (which exceeds the hurdle rate but is less than 1.43%) as the “catch-up.” The “catch-up” is meant to provide the Adviser with approximately 12.5% of our Pre-Incentive Fee Net Investment Income Returns as if a hurdle rate did not apply if this net investment income exceeds 1.43% in any calendar quarter; and |
| • | 12.5% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.43% (5.72% annualized). This reflects that once the hurdle rate is reached and the catch-up is achieved, 12.5% of all Pre-Incentive Fee Net Investment Income Returns thereafter are allocated to the Adviser. |
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Percentage of Pre-Incentive Fee Net Investment Income
Allocated to Quarterly Incentive Fee
These calculations are pro-rated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. You should be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of incentive fees payable to the Adviser with respect to Pre-Incentive Fee Net Investment Income Returns. Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a calendar quarter in which we incur an overall loss taking into account capital account losses. For example, if we receive Pre-Incentive Fee Net Investment Income Returns in excess of the quarterly hurdle rate, we will pay the applicable incentive fee even if we have incurred a loss in that calendar quarter due to realized and unrealized capital losses.
Incentive Fee Based on Capital Gains
The second component of the incentive fee, the capital gains incentive fee, is payable at the end of each calendar year in arrears. The amount payable equals:
| • | 12.5% of cumulative realized capital gains from inception through the end of such calendar, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains as calculated in accordance with GAAP. |
Each year, the fee paid for the capital gains incentive fee is net of the aggregate amount of any previously paid capital gains incentive fee for all prior periods. We will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if we were to sell the relevant investment and realize a capital gain. In no event will the capital gains incentive fee payable pursuant to the Advisory Agreement be in excess of the amount permitted by the Advisers Act, including Section 205 thereof.
The fees that are payable under the Advisory Agreement for any partial period will be appropriately prorated.
Administration Agreement
Under the terms of the Administration Agreement, the Administrator provides, or oversees the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of our other service providers), preparing reports to shareholders and reports filed with the SEC and other regulators, preparing materials and coordinating meetings of our Board of Trustees, managing the payment of expenses, the payment and receipt of funds for investments and the performance of administrative and professional services rendered by others and providing office space, equipment and office services. We will reimburse the Administrator for the costs and expenses incurred by the Administrator in performing its obligations under the Administration Agreement. Such reimbursement will include the Fund’s allocable portion of compensation, overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) the Fund’s chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, operations and other non-investment professionals at the Administrator that perform duties for the Fund; and (iii) any internal audit group personnel of Blackstone or any of its affiliates, subject to the limitations described in Advisory and Administration Agreements. In addition, pursuant to the terms of the Administration Agreement, the Administrator may delegate its obligations under the Administration Agreement to an affiliate or
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to a third party and we will reimburse the Administrator for any services performed for us by such affiliate or third party. The Administrator intends to hire a sub-administrator to assist in the provision of administrative services. The sub-administrator will receive compensation from the Administrator for its sub-administrative services under a sub-administration agreement.
The amount of the reimbursement payable to the Administrator will be the lesser of (1) the Administrator’s actual costs incurred in providing such services and (2) the amount that we estimate we would be required to pay alternative service providers for comparable services in the same geographic location. The Administrator will be required to allocate the cost of such services to us based on factors such as assets, revenues, time allocations and/or other reasonable metrics. We will not reimburse the Administrator for any services for which it receives a separate fee, or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of the Administrator.
Certain Terms of the Advisory Agreement and Administration Agreement
Each of the Advisory Agreement and the Administration Agreement has been approved by the Board of Trustees. Unless earlier terminated as described below, each of the Advisory Agreement and the Administration Agreement will remain in effect for a period of two years from the date it first becomes effective and will remain in effect from year-to-year thereafter if approved annually by a majority of the Board of Trustees or by the holders of a majority of our outstanding voting securities and, in each case, a majority of the independent Trustees. We may terminate the Advisory Agreement or the Administration Agreement, without payment of any penalty, upon 60 days’ written notice. The decision to terminate either agreement may be made by a majority of the Board of Trustees or the shareholders holding a majority of our outstanding voting securities, which means the lesser of (1) 67% or more of the voting securities present at a meeting if more than 50% of the outstanding voting securities are present or represented by proxy, or (2) more than 50% of the outstanding voting securities. In addition, without payment of any penalty, the Adviser may terminate the Advisory Agreement upon 120 days’ written notice and the Administrator may terminate the Administration Agreement upon 60 days’ written notice. The Advisory Agreement will automatically terminate within the meaning of the 1940 Act and related SEC guidance and interpretations in the event of its assignment.
The Adviser and the Administrator shall not be liable for any error of judgment or mistake of law or for any act or omission or any loss suffered by the Fund in connection with the matters to which the Advisory Agreement and Administration Agreement, respectively, relate, provided that the Adviser and the Administrator shall not be protected against any liability to the Fund or its shareholders to which the Adviser or Administrator would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of the reckless disregard of its duties and obligations (“disabling conduct”). Each of the Advisory Agreement and the Administration Agreement provide that, absent disabling conduct, each of our Adviser and our Administrator, as applicable, and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it (collectively, the “Indemnified Parties”) will be entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of our Adviser’s services under the Advisory Agreement and our Administrator’s services under the Administration Agreement or otherwise as adviser or administrator for us. The Adviser and the Administrator shall not be liable under their respective agreements with us or otherwise for any loss due to the mistake, action, inaction, negligence, dishonesty, fraud or bad faith of any broker or other agent; provided, that such broker or other agent shall have been selected, engaged or retained and monitored by the Adviser or the Administrator in good faith, unless such action or inaction was made by reason of disabling conduct, or in the case of a criminal action or proceeding, where the Adviser or Administrator had reasonable cause to believe its conduct was unlawful. In addition, we will not provide for indemnification of an Indemnified Party for any liability or loss suffered by such Indemnified Party, nor will we provide that an Indemnified Party be held harmless for any loss or liability suffered by us, unless: (1) we have determined, in good faith, that the course of conduct that caused the loss or liability was in our best interest; (2) the Indemnified Party was acting on our behalf or performing services for us;
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(3) such liability or loss was not the result of negligence or misconduct, in the case that the Indemnified Party is the Adviser or Administrator, as applicable, an affiliate of the Adviser or Administrator or one of our officers; and (4) the indemnification or agreement to hold harmless is recoverable only out of our net assets and not from our shareholders.
The Fund has applied for exemptive relief from the SEC that, if granted, will permit the Fund to pay the Adviser all or a portion of its management and incentive fees in Common Shares in lieu of paying the Adviser an equivalent amount of such fees in cash. However, there is no assurance that the relief will be granted. Until the relief is granted, the Adviser may use all or a portion of the cash it receives for management and incentive fees to purchase shares of Common Shares.
Payment of Our Expenses Under the Investment Advisory and Administration Agreements
Except as specifically provided below, all investment professionals and staff of the Adviser, when and to the extent engaged in providing investment advisory services to us, and the base compensation, bonus and benefits, and the routine overhead expenses, of such personnel allocable to such services, will be provided and paid for by the Adviser. We will bear all other costs and expenses of our operations, administration and transactions, including, but not limited to:
1. investment advisory fees, including management fees and incentive fees, to the Adviser, pursuant to the Advisory Agreement;
2. the Fund’s allocable portion of compensation, overhead and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) the Fund’s chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, operations and other non-investment professionals at the Administrator that perform duties for the Fund; and (iii) any internal audit group personnel of Blackstone or any of its affiliates, subject to the limitations described in “Advisory and Administration Agreement—Administration Agreement”; and
3. all other expenses of the Fund’s operations and transactions, including, without limitation, those relating to:
(i) organization and offering expenses associated with this offering (including legal, accounting, printing, mailing, subscription processing and filing fees and expenses and other offering expenses, including costs associated with technology integration between the Fund’s systems and those of participating intermediaries, reasonable bona fide due diligence expenses of participating intermediaries supported by detailed and itemized invoices, costs in connection with preparing sales materials and other marketing expenses, design and website expenses, fees and expenses of the Fund’s escrow agent and transfer agent, fees to attend retail seminars sponsored by participating intermediaries and costs, expenses and reimbursements for travel, meals, accommodations, entertainment and other similar expenses related to meetings or events with prospective investors, intermediaries, registered investment advisors or financial or other advisors, but excluding the shareholder servicing fee);
(ii) all taxes, fees, costs, and expenses, retainers and/or other payments of accountants, legal counsel, advisors (including tax advisors), administrators, auditors (including with respect to any additional auditing required under The Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and any applicable legislation implemented by an EEA Member state in connection with such Directive (the “AIFMD”), investment bankers, administrative agents, paying agents, depositaries, custodians, trustees, sub-custodians, consultants (including individuals consulted through expert network consulting firms), engineers, senior advisors, industry experts, operating partners, deal sourcers (including personnel dedicated to but not employed by Blackstone Credit or Blackstone), and
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other professionals (including, for the avoidance of doubt, the costs and charges allocable with respect to the provision of internal legal, tax, accounting, technology or other services and professionals related thereto (including secondees and temporary personnel or consultants that may be engaged on short- or long-term arrangements) as deemed appropriate by the Administrator, with the oversight of the Board of Trustees, where such internal personnel perform services that would be paid by the Fund if outside service providers provided the same services); fees, costs, and expenses herein include (x) costs, expenses and fees for hours spent by its in-house attorneys and tax advisors that provide transactional legal advice and/or services to the Fund or its portfolio companies on matters related to potential or actual investments and transactions and the ongoing operations of the Fund and (y) expenses and fees to provide administrative and accounting services to the Fund or its portfolio companies, and expenses, charges and/or related costs incurred directly by the Fund or affiliates in connection such services (including overhead related thereto), in each case, (I) that are specifically charged or specifically allocated or attributed by the Administrator, with the oversight of the Board of Trustees, to the Fund or its portfolio companies and (II) provided that any such amounts shall not be greater than what would be paid to an unaffiliated third party for substantially similar advice and/or services);
(iii) the cost of calculating the Fund’s net asset value, including the cost of any third-party valuation services;
(iv) the cost of effecting any sales and repurchases of the Common Shares and other securities;
(v) fees and expenses payable under any intermediary manager and selected intermediary agreements, if any;
(vi) interest and fees and expenses arising out of all borrowings, guarantees and other financings or derivative transactions (including interest, fees and related legal expenses) made or entered into by the Fund, including, but not limited to, the arranging thereof and related legal expenses;
(vii) all fees, costs and expenses of any loan servicers and other service providers and of any custodians, lenders, investment banks and other financing sources;
(viii) costs incurred in connection with the formation or maintenance of entities or vehicles to hold the Fund’s assets for tax or other purposes;
(ix) costs of derivatives and hedging;
(x) expenses, including travel, entertainment, lodging and meal expenses, incurred by the Adviser, or members of its investment team, or payable to third parties, in evaluating, developing, negotiating, structuring and performing due diligence on prospective portfolio companies, including such expenses related to potential investments that were not consummated, and, if necessary, enforcing the Fund’s rights;
(xi) expenses (including the allocable portions of compensation and out-of-pocket expenses such as travel expenses) or an appropriate portion thereof of employees of the Adviser to the extent such expenses relate to attendance at meetings of the Board of Trustees or any committees thereof;
(xii) all fees, costs and expenses, if any, incurred by or on behalf of the Fund in developing, negotiating and structuring prospective or potential investments that are not ultimately made, including, without limitation any legal, tax, administrative, accounting, travel, meals, accommodations and entertainment, advisory, consulting and printing expenses, reverse termination fees and any liquidated damages, commitment fees that become payable in connection with any proposed investment that is not ultimately made, forfeited deposits or similar payments;
(xiii) the allocated costs incurred by the Adviser and the Administrator in providing managerial assistance to those portfolio companies that request it;
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(xiv) all brokerage costs, hedging costs, prime brokerage fees, custodial expenses, agent bank and other bank service fees; private placement fees, commissions, appraisal fees, commitment fees and underwriting costs; costs and expenses of any lenders, investment banks and other financing sources, and other investment costs, fees and expenses actually incurred in connection with evaluating, making, holding, settling, clearing, monitoring or disposing of actual investments (including, without limitation, travel, meals, accommodations and entertainment expenses and any expenses related to attending trade association and/or industry meetings, conferences or similar meetings, any costs or expenses relating to currency conversion in the case of investments denominated in a currency other than U.S. dollars) and expenses arising out of trade settlements (including any delayed compensation expenses);
(xv) investment costs, including all fees, costs and expenses incurred in sourcing, evaluating, developing, negotiating, structuring, trading (including trading errors), settling, monitoring and holding prospective or actual investments or investment strategies including, without limitation, any financing, legal, filing, auditing, tax, accounting, compliance, loan administration, travel, meals, accommodations and entertainment, advisory, consulting, engineering, data-related and other professional fees, costs and expenses in connection therewith (to the extent the Adviser is not reimbursed by a prospective or actual issuer of the applicable investment or other third parties or capitalized as part of the acquisition price of the transaction) and any fees, costs and expenses related to the organization or maintenance of any vehicle through which the Fund directly or indirectly participates in the acquisition, holding and/or disposition of investments or which otherwise facilitate the Fund’s investment activities, including without limitation any travel and accommodations expenses related to such vehicle and the salary and benefits of any personnel (including personnel of Adviser or its affiliates) reasonably necessary and/or advisable for the maintenance and operation of such vehicle, or other overhead expenses (including any fees, costs and expenses associated with the leasing of office space (which may be made with one or more affiliates of Blackstone as lessor in connection therewith));
(xvi) transfer agent, dividend agent and custodial fees;
(xvii) fees and expenses associated with marketing efforts;
(xviii) federal and state registration fees, franchise fees, any stock exchange listing fees and fees payable to rating agencies;
(xix) independent trustees’ fees and expenses including reasonable travel, entertainment, lodging and meal expenses, and any legal counsel or other advisors retained by, or at the discretion or for the benefit of, the independent trustees;
(xx) costs of preparing financial statements and maintaining books and records, costs of Sarbanes-Oxley Act of 2002 compliance and attestation and costs of preparing and filing reports or other documents with the SEC, Financial Industry Regulatory Authority, U.S. Commodity Futures Trading Commission (“CFTC”) and other regulatory bodies and other reporting and compliance costs, including registration and exchange listing and the costs associated with reporting and compliance obligations under the 1940 Act and any other applicable federal and state securities laws, and the compensation of professionals responsible for the foregoing;
(xxi) all fees, costs and expenses associated with the preparation and issuance of the Fund’s periodic reports and related statements (e.g., financial statements and tax returns) and other internal and third-party printing (including a flat service fee), publishing (including time spent performing such printing and publishing services) and reporting-related expenses (including other notices and communications) in respect of the Fund and its activities (including internal expenses, charges and/or related costs incurred, charged or specifically attributed or allocated by the Fund or the Adviser or its affiliates in connection with such provision of services thereby);
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(xxii) the costs of any reports, proxy statements or other notices to shareholders (including printing and mailing costs) and the costs of any shareholder or Trustee meetings;
(xxiii) proxy voting expenses;
(xxiv) costs associated with an exchange listing;
(xxv) costs of registration rights granted to certain investors;
(xxvi) any taxes and/or tax-related interest, fees or other governmental charges (including any penalties incurred where the Adviser lacks sufficient information from third parties to file a timely and complete tax return) levied against the Fund and all expenses incurred in connection with any tax audit, investigation, litigation, settlement or review of the Fund and the amount of any judgments, fines, remediation or settlements paid in connection therewith;
(xxvii) all fees, costs and expenses of any litigation, arbitration or audit involving the Fund any vehicle or its portfolio companies and the amount of any judgments, assessments fines, remediations or settlements paid in connection therewith, Trustees and officers, liability or other insurance (including costs of title insurance) and indemnification (including advancement of any fees, costs or expenses to persons entitled to indemnification) or extraordinary expense or liability relating to the affairs of the Fund;
(xxviii) all fees, costs and expenses associated with the Fund’s information, obtaining and maintaining technology (including the costs of any professional service providers), hardware/software, data-related communication, market data and research (including news and quotation equipment and services and including costs allocated by the Adviser’s or its affiliates’ internal and third-party research group (which are generally based on time spent, assets under management, usage rates, proportionate holdings or a combination thereof or other reasonable methods determined by the Administrator) and expenses and fees (including compensation costs) charged or specifically attributed or allocated by Adviser and/or its affiliates for data-related services provided to the Fund and/or its portfolio companies (including in connection with prospective investments), each including expenses, charges, fees and/or related costs of an internal nature; provided, that any such expenses, charges or related costs shall not be greater than what would be paid to an unaffiliated third party for substantially similar services) reporting costs (which includes notices and other communications and internally allocated charges), and dues and expenses incurred in connection with membership in industry or trade organizations;
(xxix) the costs of specialty and custom software for monitoring risk, compliance and the overall portfolio, including any development costs incurred prior to the filing of the Fund’s election to be treated as a business development company;
(xxx) costs associated with individual or group shareholders;
(xxxi) fidelity bond, trustees and officers errors and omissions liability insurance and other insurance premiums;
(xxxii) direct costs and expenses of administration, including printing, mailing, long distance telephone, copying and secretarial and other staff;
(xxxiii) all fees, costs and expenses of winding up and liquidating the Fund’s assets;
(xxxiv) extraordinary expenses (such as litigation or indemnification);
(xxxv) all fees, costs and expenses related to compliance-related matters (such as developing and implementing specific policies and procedures in order to comply with certain regulatory requirements) and regulatory filings; notices or disclosures related to the Fund’s activities (including, without limitation, expenses relating to the preparation and filing of filings required under the Securities Act, TIC Form SLT filings, Internal Revenue Service filings under FATCA
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and FBAR reporting requirements applicable to the Fund or reports to be filed with the CFTC, reports, disclosures, filings and notifications prepared in connection with the laws and/or regulations of jurisdictions in which the Fund engages in activities, including any notices, reports and/or filings required under the AIFMD, European Securities and Markets Authority and any related regulations, and other regulatory filings, notices or disclosures of the Adviser relating to the Fund and its affiliates relating to the Fund, and their activities) and/or other regulatory filings, notices or disclosures of the Adviser and its affiliates relating to the Fund including those pursuant to applicable disclosure laws and expenses relating to FOIA requests, but excluding, for the avoidance of doubt, any expenses incurred for general compliance and regulatory matters that are not related to the Fund and its activities;
(xxxvi) costs and expenses (including travel) in connection with the diligence and oversight of the Fund’s service providers;
(xxxvii) costs and expenses, including travel, meals, accommodations, entertainment and other similar expenses, incurred by the Adviser or its affiliates for meetings with existing investors and any intermediaries, registered investment advisors, financial and other advisors representing such existing investors; and
(xxxviii) all other expenses incurred by the Administrator in connection with administering the Fund’s business.
From time to time, the Adviser, the Administrator or their affiliates may pay third-party providers of goods or services. We will reimburse the Adviser, the Administrator or such affiliates thereof for any such amounts paid on our behalf. From time to time, the Adviser or the Administrator may defer or waive fees and/or rights to be reimbursed for expenses. All of the foregoing expenses will ultimately be borne by our shareholders.
Costs and expenses of the Administrator and the Adviser that are eligible for reimbursement by the Fund will be reasonably allocated to the Fund on the basis of time spent, assets under management, usage rates, proportionate holdings, a combination thereof or other reasonable methods determined by the Administrator.
Expense Support and Conditional Reimbursement Agreement
We have entered into an Expense Support and Conditional Reimbursement Agreement (the “Expense Support Agreement”) with the Adviser. The Adviser may elect to pay certain of our expenses on our behalf (each, an “Expense Payment”), provided that no portion of the payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Fund. Any Expense Payment that the Adviser has committed to pay must be paid by the Adviser to us in any combination of cash or other immediately available funds no later than forty-five days after such commitment was made in writing, and/or offset against amounts due from us to the Adviser or its affiliates.
Following any calendar month in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to the Fund’s shareholders based on distributions declared with respect to record dates occurring in such calendar month (the amount of such excess being hereinafter referred to as “Excess Operating Funds”), we shall pay such Excess Operating Funds, or a portion thereof, to the Adviser until such time as all Expense Payments made by the Adviser to the Fund within three years prior to the last business day of such calendar month have been reimbursed. Any payments required to be made by the Fund shall be referred to herein as a “Reimbursement Payment.” Available Operating Funds means the sum of (i) our net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) our net capital gains (including the excess of net long-term capital gains over net short-term capital losses) and (iii) dividends and other distributions paid to us on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).
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The Fund’s obligation to make a Reimbursement Payment shall automatically become a liability of the Fund on the last business day of the applicable calendar month, except to the extent the Adviser has waived its right to receive such payment for the applicable month.
Board Approval of the Advisory Agreement
Our Board, including our independent Trustees, approved the Advisory Agreement at a meeting held on August 21, 2020. In reaching a decision to approve the Advisory Agreement, the Board reviewed a significant amount of information and considered, among other things:
| • | the nature, quality and extent of the advisory and other services to be provided to the Fund by the Adviser; |
| • | the proposed investment advisory fee rates to be paid by the Fund to the Adviser; |
| • | the fee structures of comparable externally managed business development companies that engage in similar investing activities; |
| • | our projected operating expenses and expense ratio compared to business development companies with similar investment objectives; |
| • | information about the services to be performed and the personnel who would be performing such services under the Advisory Agreement; and |
| • | the organizational capability and financial condition of the Adviser and its affiliates. |
Based on the information reviewed and the discussion thereof, the Board, including a majority of the non-interested trustees, concluded that the investment advisory fee rates are reasonable in relation to the services to be provided and approved the Advisory Agreement as being in the best interests of our shareholders.
Prohibited Activities
Our activities are subject to compliance with the 1940 Act. In addition, our Declaration of Trust prohibits the following activities among us, the Adviser and its affiliates:
| • | We may not purchase or lease assets in which the Adviser or its affiliates has an interest unless (i) we disclose the terms of the transaction to our shareholders, the terms are reasonable to us and the price does not exceed the lesser of cost or fair market value, as determined by an independent expert or (ii) such purchase or lease of assets is consistent with the 1940 Act or an exemptive order under the 1940 Act issued to us by the SEC; |
| • | We may not invest in general partnerships or joint ventures with affiliates and non-affiliates unless certain conditions are met; |
| • | The Adviser and its affiliates may not acquire assets from us unless (i) approved by our shareholders entitled to cast a majority of the votes entitled to be cast on the matter or (ii) such acquisition is consistent with the 1940 Act or an exemptive order under the 1940 Act issued to us by the SEC; |
| • | We may not lease assets to the Adviser or its affiliates unless we disclose the terms of the transaction to our shareholders and such terms are fair and reasonable to us; |
| • | We may not make any loans, credit facilities, credit agreements or otherwise to the Adviser or its affiliates except for the advancement of funds as permitted by our Declaration of Trust or unless otherwise permitted by the 1940 Act or applicable guidance or exemptive relief of the SEC; |
| • | We may not acquire assets in exchange for our Common Shares; |
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| • | We may not pay a commission or fee, either directly or indirectly to the Adviser or its affiliates, except as otherwise permitted by our Declaration of Trust, in connection with the reinvestment of cash flows from operations and available reserves or of the proceeds of the resale, exchange or refinancing of our assets; |
| • | The Adviser may not charge duplicate fees to us; and |
| • | The Adviser may not provide financing to us with a term in excess of 12 months. |
In addition, in the Advisory Agreement, the Adviser agrees that its activities will at all times be in compliance in all material respects with all applicable federal and state securities laws governing its operations and investments.
Compliance with the Omnibus Guidelines Published by NASAA
Rebates, Kickbacks and Reciprocal Arrangements
Our Declaration of Trust prohibits our Adviser from: (i) receiving or accepting any rebate, give-ups or similar arrangement that is prohibited under applicable federal or state securities laws, (ii) participating in any reciprocal business arrangement that would circumvent provisions of applicable federal or state securities laws governing conflicts of interest or investment restrictions or (iii) entering into any agreement, arrangement or understanding that would circumvent the restrictions against dealing with affiliates or promoters under applicable federal or state securities laws. In addition, our Adviser may not directly or indirectly pay or award any fees or commissions or other compensation to any person or entity engaged to sell our shares or give investment advice to a potential shareholder; provided, however, that our Adviser may pay a registered broker or other properly licensed agent sales commissions or other compensation (including cash compensation and non-cash compensation (as such terms are defined under FINRA Rule 2310)) for selling or distributing our Common Shares, including out of the Adviser’s own assets, including those amounts paid to the Adviser under the Advisory Agreement.
Commingling
The Adviser may not permit our funds to be commingled with the funds of any other entity.
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POTENTIAL CONFLICTS OF INTEREST
The Firm will be subject to certain conflicts of interest with respect to the services the Adviser and the Administrator provide to us. These conflicts will arise primarily from the Firm, in other activities that may conflict with our activities. You should be aware that individual conflicts will not necessarily be resolved in favor of your interest. The foregoing list of conflicts does not purport to be a complete enumeration or explanation of the actual and potential conflicts involved in an investment in the Fund.
For purposes of this discussion and ease of reference, the following terms shall have the meanings as set forth below:
“Other Blackstone Credit Clients” means, collectively, the investment funds, client accounts (including managed accounts) and proprietary accounts and/or other similar arrangements (including such arrangements in which the Fund or one or more Other Blackstone Credit Clients own interests) that Blackstone Credit may establish, advise or sub-advise from time to time and to which Blackstone Credit provides investment management or sub-advisory services (other than the Fund and any such funds and accounts in which the Fund has an interest), in each case including any alternative investment vehicles and additional capital vehicles relating thereto and any vehicles established by Blackstone Credit to exercise its side-by-side or other general partner investment rights as set forth in their respective governing documents; provided, that for the avoidance of doubt, “Other Blackstone Credit Clients” shall not include Blackstone Credit in its role as principal of any account, including any accounts for which Blackstone Credit or an affiliate thereof acts as an advisor.
“Blackstone Clients” means, collectively, the investment funds, client accounts (including managed accounts) and proprietary accounts and/or other similar arrangements (including such arrangements in which the Fund or one or more Blackstone Clients own interests) that Blackstone may establish, advise or sub-advise from time to time and to which Blackstone provides investment management or sub-advisory services (other than the Fund, any such funds and accounts in which the Fund has an interest and Other Blackstone Credit Clients), in each case including any alternative investment vehicles and additional capital vehicles relating thereto and any vehicles established by Blackstone to exercise its side-by-side or other general partner investment rights as set forth in their respective governing documents; provided that, for the avoidance of doubt, “Blackstone Clients” shall not include Blackstone in its role as principal of any account, including any accounts for which Blackstone or an affiliate thereof acts as an advisor.
“Other Clients” means, collectively, Other Blackstone Credit Clients and Blackstone Clients.
Performance Based Compensation and Management Fees. The existence of the incentive fees payable to Blackstone Credit may create a greater incentive for Blackstone Credit to make more speculative investments on behalf of the Fund, or to time the purchase or sale of investments in a manner motivated by the personal interests of Blackstone Credit and/or Blackstone personnel. However, the fact that the hurdle rate for the incentive fee based on income is calculated on an aggregate basis each quarter and that realized and unrealized losses are netted against realized gains for the incentive fee based on capital gains should reduce the incentives for the Adviser to make more speculative investments or otherwise time the purchase or sale of investments.
In addition, the manner in which the Adviser’s entitlement to incentive fees is determined may result in a conflict between its interests and the interests of shareholders with respect to the sequence and timing of disposals of investments, as the Adviser may want to dispose of lower yielding investments in favor of higher yielding ones. With respect to the Adviser’s entitlement to incentive fees on capital gains, the Adviser may be incentivized to realize capital gains prior to a year end if such gains, net of realized and unrealized losses, would result in an incentive fee on capital gains.
The Firm’s Policies and Procedures. Because the Firm has many different asset management and advisory businesses, it is subject to a number of actual and potential conflicts of interest, greater regulatory oversight and
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more legal and contractual restrictions than that to which it would be subject if it had just one line of business. Certain policies and procedures implemented by the Firm to mitigate potential conflicts of interest and address certain regulatory requirements and contractual restrictions, such as the Firm’s information wall policy, will from time to time reduce the synergies and collaboration across the Firm’s various businesses that the Fund expects to draw on for purposes of identifying, pursuing and managing attractive investment opportunities. For example, the Firm will come into possession of material non-public information with respect to companies, including companies in which the Fund has investments or is considering making investments. The information, which could be of benefit to the Fund, is likely to be restricted to those other businesses and otherwise be unavailable to the Fund. It is also possible that the Fund could be restricted from trading despite the fact that the Fund did not receive such information. The inability to buy or sell securities in such circumstances could materially adversely affect the investment results of the Fund, including but not limited to a material loss with respect to an individual investment or differing results than those obtained by Other Clients with respect to the same investment. Additionally, the Firm may restrict or otherwise limit the Fund and/or its portfolio companies from entering into agreements with, or related to, companies that either are advisory clients of the Firm or in which any fund of the Firm has invested or has considered making an investment. The Firm will from time to time restrict or otherwise limit the ability of the Fund and/or its portfolio companies to make investments in or otherwise engage in businesses or activities competitive with companies of other advisory clients of the Firm, either as a result of contractual restrictions or otherwise. Furthermore, there will be circumstances in which affiliates of the Firm (including Other Clients) may refrain from taking certain confidential information in order to avoid trading restrictions. Finally, the Firm has and will enter into one or more strategic relationships in certain regions or with respect to certain types of investments that, although possibly intended to provide greater opportunities for the Fund, may require the Fund to share such opportunities or otherwise limit the amount of an opportunity the Fund can otherwise take. There can be no assurance that additional restrictions will not be imposed that would further limit the ability of the Firm to share information internally.
Blackstone Credit Advantage. Blackstone Credit Advantage is a global platform that is part of Blackstone’s Portfolio Operations group (the “Portfolio Operations Group”) and seeks to provide access to a range of cost-saving, revenue-generating and best-practice sharing opportunities for Blackstone Credit portfolio companies. The Portfolio Operations Group is organized into seven functional areas, across geographic regions and industry verticals:
Procurement: Blackstone’s Group Purchasing program harnesses spending from portfolio companies across more than 75 categories, including IT hardware and software, office supplies, shipping, energy and telecommunications.
Healthcare Cost Containment: Blackstone’s Equity Healthcare team partners with portfolio companies to optimize the strategy and value of healthcare spending by reducing cost and improving the quality of healthcare services received by employees and their dependents. Equity Healthcare is one of the largest private sector purchasers of healthcare services in the United States and has helped drive cumulative healthcare cost savings to portfolio companies and strengthened portfolio companies’ ability to attract and retain talent.
Lean Process: The lean process team seeks to drive transformational improvements focused on material and information flows by reducing waste and non-value add activities across manufacturing functions. It develops prescriptive solutions for portfolio companies and aligns with senior leadership to support tailored strategies and guide management teams in executing and sustaining improved workflow processes.
Leadership and Talent: The Portfolio Operations Group employs the following strategies to optimize leadership and organizational performance: (i) delivering fit-for-purpose resources to portfolio companies, which include non-executive chairpersons, board members, advisors, and operating specialists, (ii) strengthening company teams and organizational practices through assisting with restructuring, integrations and growth actions, and (iii) convening conferences for portfolio company executives to share best practices and improve alignment to the Firm.
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Sustainability: By improving the operation and maintenance of mechanical systems, the Portfolio Operations Group seeks to reduce energy spend while improving productivity, safety, and environmental performance.
Technology / BPO: Blackstone’s Technology / BPO team helps the portfolio management teams recruit/upgrade their information technology leadership teams; import contemporary operating systems and application software to address their respective business priorities; leverage portfolio investments in technology companies to promote and serve the overall portfolio interests; and evaluate and negotiate preferred partnerships with digital/technology suppliers, advisors, and consultants from around the world.
Data Science: The Firm has invested in a team of data scientists and engineers to help the portfolio companies realize operational efficiencies and drive new revenue through data and analytics. This team focuses on (i) building predictive models to enhance decision making; (ii) leveraging big data within operations; (iii) data visualization to democratize access to information; and (iv) data monetization.
Members of Blackstone’s Portfolio Operations Group (including Blackstone Credit Advantage), who are Blackstone employees, are permitted to provide services to the Fund’s obligors, including without limitation those related to the functional areas described above and other similar management consulting, operational and financial matters and are permitted to participate in the Firm co-investment rights. Any payments made or fees paid (which fees or payments may also in certain instances be structured as a reimbursement of internal compensation costs for time spent) by such obligors to Blackstone for services rendered to such obligors will generally be consistent with what would be paid in an arm’s-length transaction for similar overall services, as determined by the Adviser in good faith, and such payments or fees received by Blackstone will not reduce the management fee payable by the Fund. As a result, Blackstone may be incentivized to cause members of the Portfolio Operations Group to spend more time on the Fund’s obligors as compared to portfolio companies of Other Clients that do reduce the management fee offset. There can be no assurance that members of the Portfolio Operations Group will be able to provide their services to portfolio companies and/or that any individuals within the Portfolio Operations Group will remain employed by Blackstone. The level of involvement and role of Blackstone’s Portfolio Operations Group within each part of Blackstone with respect to any of the Fund’s obligors may vary, including having no involvement or role at all. In addition, the Portfolio Operations Group will provide services to the Fund’s obligors as described in more detail in “—Firm Affiliated Service Providers”, including facilitation of arrangements for obligors relating to group procurement (such as the group purchasing organization) and other operational, administrative or management related matters from third parties or Firm affiliates, and other similar operational initiatives. These services may result in commissions or similar payments, including related to a portion of the savings achieved by the obligors, and in each case payments made to the Firm in connection therewith will not offset the management fee. See also “—Group Procurement; Discounts” and “—Firm Affiliated Service Providers” for further information regarding such programs.
Broad and Wide-Ranging Activities. The Firm engages in a broad spectrum of activities. In the ordinary course of its business activities, the Firm will engage in activities where the interests of certain divisions of the Firm or the interests of its clients will conflict with the interests of the shareholders in the Fund. Other present and future activities of the Firm will give rise to additional conflicts of interest. In the event that a conflict of interest arises, the Adviser will attempt to resolve such conflict in a fair and equitable manner. Subject to applicable law, including the 1940 Act, and the Board of Trustees’ oversight, the Adviser will have the power to resolve, or consent to the resolution of, conflicts of interest on behalf of the Fund. Investors should be aware that conflicts will not necessarily be resolved in favor of the Fund’s interests. In addition, the Adviser may in certain situations choose to consult with or obtain the consent of the Board of Trustees with respect to any specific conflict of interest, including with respect to the approvals required under the 1940 Act, including Section 57(f), and the Advisers Act. The Fund may enter into joint transactions or cross-trades with clients or affiliates of the Adviser to the extent permitted by the 1940 Act, the Advisers Act and any applicable co-investment order from the SEC. Subject to the limitations of the 1940 Act, the Fund may invest in loans or other securities, the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds.
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Allocation of Personnel. The Adviser and its members, officers and employees will devote as much of their time to the activities of the Fund as they deem necessary to conduct its business affairs in an appropriate manner. By the terms of the Advisory Agreement, the Firm is not restricted from forming additional investment funds, from entering into other investment advisory relationships or from engaging in other business activities, even though such activities may be in competition with the Fund and/or may involve substantial time and resources of the Adviser. Firm personnel, including members of the investment committee, will work on other projects, serve on other committees and source potential investments for and otherwise assist the investment programs of Other Clients and their portfolio companies, including other investment programs to be developed in the future. These activities could be viewed as creating a conflict of interest in that the time and effort of the members of the Adviser and its officers and employees will not be devoted exclusively to the business of the Fund, but will be allocated between the business of the Fund and the management of the monies of such other advisees of the Adviser. Time spent on these other initiatives diverts attention from the activities of the Fund, which could negatively impact the Fund shareholders. Furthermore, Blackstone Credit and Blackstone Credit personnel derive financial benefit from these other activities, including fees and performance-based compensation. Firm personnel outside of Blackstone Credit may share in the fees and performance-based compensation from the Fund; similarly, Blackstone Credit personnel may share in the fees and performance-based compensation generated by Other Clients. These and other factors create conflicts of interest in the allocation of time by Firm personnel. Blackstone Credit’s determination of the amount of time necessary to conduct the Fund’s activities will be conclusive, and shareholders rely on Blackstone Credit’s judgment in this regard.
Outside Activities of Principals and Other Personnel and their Related Parties. Certain of the principals and employees of the Adviser may be subject to a variety of conflicts of interest relating to their responsibilities to the Fund. Other clients and their respective portfolio companies, and their outside business activities as members of investment or advisory committees or boards of directors of or advisors to investment funds, corporations, foundations or other organizations. Such positions create a conflict if such other entities have interests that are adverse to those of the Fund, including if such other entities compete with the Fund for investment opportunities or other resources. The other managed accounts and/or investment funds in which such individuals may become involved may have investment objectives that overlap with the Fund. Furthermore, certain principals and employees of the Adviser may have a greater financial interest in the performance of such other funds or accounts than the performance of the Fund. Such involvement may create conflicts of interest in making investments on behalf of the Fund and such other funds and accounts. Although such principals and employees will seek to limit any such conflicts in a manner that is in accordance with their fiduciary duties to the Fund, there can be no assurance they will be resolved favorably for the Fund. Also, Blackstone personnel, Firm employees, including employees of the Adviser, are generally permitted to invest in alternative investment funds, private equity funds, real estate funds, hedge funds or other investment vehicles, including potential competitors of the Fund. Shareholders will not receive any benefit from any such investments, and the financial incentives of such Firm employees in such other investments could be greater than their financial incentives in relation to the Fund.
Additionally, certain employees and other professionals of the Firm have family members or relatives employed by such advisers and service providers (or their affiliates) or otherwise actively involved in industries and sectors in which the Fund invests, or have business, financial, personal or other relationships with companies in such industries and sectors (including the advisors and service providers described above) or other industries, which gives rise to potential or actual conflicts of interest. For example, such family members or relatives might be employees, officers, directors or owners of companies or assets that are actual or potential investments of the Fund or other counterparties of the Fund and its portfolio companies and/or assets. Moreover, in certain instances, the Fund or its portfolio companies may issue loans to or acquire securities from, or otherwise transact with, companies that are owned by such family members or relatives or in respect of which such family members or relatives have other involvement. These relationships may influence Blackstone, the Adviser and/or Blackstone Credit in deciding whether to select or recommend such service providers to perform services for the Fund or portfolio companies (the cost of which will generally be borne directly or indirectly by the Fund or such portfolio companies, as applicable). Notwithstanding the foregoing, investment transactions relating to the Fund
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that require the use of a service provider will generally be allocated to service providers on the basis of best execution, the evaluation of which includes, among other considerations, such service provider’s provision of certain investment-related services and research that the Adviser believes to be of benefit to the Fund. To the extent that the Firm determines appropriate, conflict mitigation strategies may be put in place with respect to a particular circumstance, such as internal information barriers or recusal, disclosure or other steps determined appropriate by the Firm. The shareholders rely on the Firm to manage these conflicts in its sole discretion.
Secondments and Internships. Certain personnel of the Firm and its affiliates, including consultants, will, in certain circumstances, be seconded to one or more portfolio companies, vendors, service providers and vendors or shareholders or other investors of the Fund and Other Clients to provide services, including the sourcing of investments for the Fund or other parties. The salaries, benefits, overhead and other similar expenses for such personnel during the secondment could be borne by the Firm and its affiliates or the organization for which the personnel are working or both. In addition, personnel of portfolio companies, vendors and service providers (including law firms and accounting firms) and shareholders or other investors of the Fund and Other Clients will, in certain circumstances, be seconded to, serve internships at or otherwise provide consulting services to, the Firm, the Fund, Other Clients and portfolio companies of the Fund and Other Clients. While often the Fund, Other Clients and their portfolio companies are the beneficiaries of these types of arrangements, the Firm is from time to time a beneficiary of these arrangements as well, including in circumstances where the vendor or service provider also provides services to the Fund, Other Clients, their portfolio companies or the Firm in the ordinary course. The Firm, the Fund, Other Clients or their portfolio companies could receive benefits from these arrangements at no cost, or alternatively could pay all or a portion of the fees, compensation or other expenses in respect of these arrangements. The management fee will not be reduced as a result of these arrangements or any fees, expense reimbursements or other costs related thereto and the Fund may not receive any benefit as a result of these arrangements. The personnel described above may provide services in respect of multiple matters, including in respect of matters related to the Firm, the Fund, Other Clients, portfolio companies, each of their respective affiliates and related parties, and the Firm will endeavor in good faith to allocate the costs of these arrangements, if any, to the Firm, the Fund, Other Clients, portfolio companies and other parties based on time spent by the personnel or another methodology the Firm deems appropriate in a particular circumstance.
Other Benefits. Blackstone Credit and its personnel will receive certain intangible and/or other benefits, rebates and/or discounts and/or perquisites arising or resulting from their activities on behalf of the Fund, which will not reduce the management fee or incentive fees or otherwise be shared with the Fund, investors and/or portfolio companies. For example, airline travel or hotel stays incurred as Fund expenses, as set forth in the Advisory Agreement and Administration Agreement (“Fund Expenses”), may result in “miles” or “points” or credit in loyalty/status programs, and such benefits and/or amounts will, whether or not de minimis or difficult to value, inure exclusively to Blackstone Credit and/or such personnel (and not the Fund and/or portfolio companies) even though the cost of the underlying service is borne by the Fund and/or portfolio companies. Blackstone Credit, its personnel, and other related persons also receive discounts on products and services provided by portfolio companies and/or customers or suppliers of such portfolio companies. Such other benefits or fees may give rise to conflicts of interest in connection with the Fund’s investment activities, and while the Adviser and Blackstone Credit will seek to resolve any such conflicts in a fair and equitable manner, there is no assurance that any such conflicts will be resolved in favor of the Fund. (See also “—Portfolio Company Service Providers and Vendors” and “—Portfolio Company Relationships Generally” below).
Advisors, Consultants and Operating Partners. Blackstone Credit may engage and retain strategic advisers, consultants, senior advisors, executive advisors, industry experts, operating partners, deal sourcers and/or other similar professionals (which may include former Blackstone and/or Blackstone Credit employees as well as current and former employees of portfolio companies of Blackstone and/or Blackstone Credit) as well as consultants, and other similar professionals who are not employees or affiliates of Blackstone Credit (collectively, “Consultants”), including through joint ventures, investment platforms, other entities or similar arrangements, and who will, from time to time, receive payments from, or allocations of a profits interest with
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respect to, portfolio companies (as well as from Blackstone Credit or the Fund). In particular, in some cases, Consultants, including those with a “Senior Advisor” title, have been and will be engaged with the responsibility to source and recommend transactions to Blackstone Credit or to undertake a build-up strategy to acquire and develop assets and businesses in a particular sector or involving a particularly strategy, potentially on a full-time and/or exclusive basis and notwithstanding any overlap with the responsibilities of Blackstone Credit under the Advisory Agreement, the compensation to such consultants may be borne fully by the Fund, Other Clients and/or portfolio companies (with no reduction to management fee payable by the Fund) and not Blackstone Credit. In such circumstances, such payments from, or allocations of a profits interest with respect to, portfolio companies and/or the Fund may, subject to applicable law, be treated as Fund Expenses and will not, even if they have the effect of reducing any retainers or minimum amounts otherwise payable by Blackstone Credit, be deemed paid to or received by Blackstone Credit, and such amounts will not reduce the management fees or incentive fees payable.
To the extent permitted by applicable law and/or any applicable SEC-granted exemptive or no-action relief, these Consultants often have the right or may be offered the ability to (i) co-invest alongside the Fund, including in the specific investments in which they are involved (and for which they may be entitled to receive performance-related incentive fees, which will reduce the Fund’s returns), (ii) otherwise participate in equity plans for management of any such portfolio company or (iii) invest directly in the Fund or in a vehicle controlled by the Fund subject to reduced or waived management fees and/or incentive fees, including after the termination of their engagement by or other status with the Firm. Such co-investment and/or participation generally will result in the Fund being allocated a smaller share of the applicable investment will not be considered as part of the Firm’s side-by-side co-investment rights. Such co-investment and/or participation may vary by transaction and such participation may, depending on its structure, reduce the Fund’s returns. Additionally, and notwithstanding the foregoing, these Consultants, as well as other Blackstone Clients, may be (or have the preferred right to be) investors in Blackstone Credit’s portfolio companies (which, in some cases, may involve agreements to pay performance fees or allocate profits interests to such persons in connection with the Fund’s investment therein, which will reduce the Fund’s returns) and/or Other Clients. Such Consultants, as well as other Blackstone Clients, may also, subject to applicable law, have rights to co-invest with the Fund on a side-by-side basis, which rights are generally offered on a no-fee/no-carried interest basis and generally result in the Fund being allocated a smaller share of an investment than would otherwise be the case in the absence of such side-by-side participation.
The time, dedication and scope of work of, and the nature of the relationship with each of the Consultants vary considerably. In certain cases, they may provide the Adviser and/or Blackstone Credit with industry-specific insights and feedback on investment themes, assist in transaction due diligence or make introductions to and provide reference checks on management teams. In other cases, they take on more extensive roles (and may be exclusive service providers to Blackstone Credit) and serve as executives or directors on the boards of portfolio companies or contribute to the identification and origination of new investment opportunities. The Fund may rely on these Consultants to recommend Blackstone Credit as a preferred investment partner, identify investments, source opportunities, and otherwise carry out its investment program, but there is no assurance that these advisers will continue to be involved with the Fund for any length of time. In certain instances, Blackstone Credit has formal arrangements with these Consultants (which may or may not be terminable upon notice by any party), and in other cases the relationships are more informal. They are either compensated (including pursuant to retainers and expense reimbursement, and, in any event, pursuant to negotiated arrangements that will not be confirmed as being comparable to the market rates for such services) by Blackstone Credit, the Fund, and/or portfolio companies or otherwise uncompensated unless and until an engagement with a portfolio company develops. In certain cases, they have certain attributes of Blackstone Credit “employees” (e.g., they may have dedicated offices at Blackstone Credit, receive administrative support from Blackstone Credit personnel, participate in general meetings and events for Blackstone Credit personnel, work on Blackstone Credit matters as their primary or sole business activity, service Blackstone Credit exclusively, have Blackstone Credit-related e-mail addresses and/or business cards and participate in certain benefit arrangements typically reserved for Blackstone Credit employees, etc.) even though they are not considered Blackstone Credit employees, affiliates or personnel for
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purposes of the Advisory Agreement between the Fund and Blackstone Credit. Some Consultants work only for the Fund and its portfolio companies, while others may have other clients. The determination of whether a particular party is a Consultant will be made by Blackstone Credit, in its sole discretion. Over time, certain existing and former employees of Blackstone (including senior personnel) may transition to a Consultant role, which shifts the burden of compensating such persons from Blackstone to the Fund, Other Clients and/or their portfolio companies, and any compensation received by such persons will not reduce any management fees. Consultants could have conflicts of interest between their work for the Fund and its portfolio companies, on the one hand, and themselves or other clients, on the other hand, and Blackstone Credit is limited in its ability to monitor and mitigate these conflicts. Blackstone Credit expects, where applicable, to allocate the costs of such Consultants to the Fund and/or applicable portfolio companies, and to the extent any such costs are allocated to the Fund, they would be treated as Fund Expenses. Payments or allocations to Consultants will not be reduced by the management fee, and can be expected to increase the overall costs and expenses borne indirectly by investors in the Fund. There can be no assurance that any of the Consultants, to the extent engaged, will continue to serve in such roles and/or continue their arrangements with Blackstone Credit, the Fund and/or any portfolio companies for the duration of the relevant investments or throughout the term of the Fund.
As an example of the foregoing, in certain investments through platform arrangements, the Fund will from time to time enter into an arrangement with one or more individuals (who may be former personnel of the Firm or current or former personnel of portfolio companies of the Fund or Other Clients, may have experience or capability in sourcing or managing investments, and may form a management team) to undertake a build-up strategy to acquire and develop assets and businesses in a particular sector or involving a particular strategy. The services provided by such individuals or relevant portfolio company, as the case may be, could include the following with respect to investments: origination or sourcing, due diligence, evaluation, negotiation, servicing, development, management (including turnaround) and disposition. The individuals or relevant portfolio company could be compensated with a salary and equity incentive plan, including a portion of profits derived from the Fund or a portfolio company or asset of the Fund, or other long- term incentive plans. Compensation could also be based on assets under management, a waterfall similar to a carried interest, respectively, or other similar metric. The Fund could initially bear the cost of overhead (including rent, utilities, benefits, salary or retainers for the individuals or their affiliated entities) and the sourcing, diligence and analysis of investments, as well as the compensation for the individuals and entity undertaking the build-up strategy. Such expenses could be borne directly by the Fund as Fund Expenses (or Broken Deal Expense (as defined below), if applicable) or indirectly through expenditures by a portfolio company. None of the fees, costs or expenses described above will reduce the management fee.
In addition, the Adviser may engage third parties as Consultants (or in another similar capacity) in order to advise it with respect to existing investments, specific investment opportunities, and economic and industry trends. Such Consultants may receive reimbursement of reasonable related expenses by portfolio companies or the Fund and may have the opportunity to invest in a portion of the equity and/or debt available to the Fund for investment that would otherwise be taken by the Adviser and its affiliates. If such Consultants generate investment opportunities on the Fund’s behalf, such Consultants may receive special additional fees or allocations comparable to those received by a third party in an arm’s length transaction and such additional fees or allocations would be borne fully by the Fund and/or portfolio companies (with no reduction to management fees) and not Blackstone Credit.
Multiple Firm Business Lines. The Firm has multiple business lines, including the Blackstone Capital Markets, which, subject to applicable law, Blackstone, Blackstone Credit, the Fund, Other Clients, portfolio companies of the Fund and Other Clients and third parties may engage for debt and equity financings and to provide other investment banking, brokerage, investment advisory or other services. As a result of these activities, the Firm is subject to a number of actual and potential conflicts of interest, greater regulatory oversight and more legal and contractual restrictions than if it had one line of business. For example, the Firm may come into possession of information that limits the Fund’s ability to engage in potential transactions. Similarly, other Firm businesses and their personnel may be prohibited by law or contract from sharing information with
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Blackstone Credit that would be relevant to monitoring the Fund’s investments and other activities. Additionally, Blackstone, Blackstone Credit or Other Clients can be expected to enter into covenants that restrict or otherwise limit the ability of the Fund or its portfolio companies and their affiliates to make investments in, or otherwise engage in, certain businesses or activities. For example, Other Clients could have granted exclusivity to a joint venture partner that limits the Fund and Other Clients from owning assets within a certain distance of any of the joint venture’s assets, or Blackstone, Blackstone Credit or an Other Client could have entered into a non-compete in connection with a sale or other transaction. These types of restrictions may negatively impact the ability of the Fund to implement its investment program. (See also “—Other Blackstone and Blackstone Credit Clients; Allocation of Investment Opportunities”). Finally, Blackstone and Blackstone Credit personnel who are members of the investment team or investment committee may be excluded from participating in certain investment decisions due to conflicts involving other Firm businesses or for other reasons, in which case the Fund will not benefit from their experience. The shareholders will not receive a benefit from any fees earned by the Firm or their personnel from these other businesses.
Blackstone is under no obligation to decline any engagements or investments in order to make an investment opportunity available to the Fund. The Firm has long-term relationships with a significant number of corporations and their senior management. In determining whether to invest in a particular transaction on behalf of the Fund, the Adviser will consider those relationships and may decline to participate in a transaction as a result of one or more of such relationships (e.g., investments in a competitor of a client or other person with whom Blackstone has a relationship). The Fund may be forced to sell or hold existing investments as a result of investment banking relationships or other relationships that the Firm may have or transactions or investments the Firm may make or have made. (See “—Other Blackstone and Blackstone Credit Clients; Allocation of Investment Opportunities” and “—Portfolio Company Relationships Generally.”) Subject to the 1940 Act and any applicable co-investment order issued by the SEC, the Fund may also co-invest with clients of the Firm in particular investment opportunities, and the relationship with such clients could influence the decisions made by the Adviser with respect to such investments. There can be no assurance that all potentially suitable investment opportunities that come to the attention of the Firm will be made available to the Fund.
Finally, Blackstone and other Blackstone Clients could acquire shares in the Fund in the secondary market. Blackstone and other Blackstone Clients would generally have greater information than counterparties in such transactions, and the existence of such business could produce conflicts, including in the valuation of the Fund’s Investments.
Minority Investments in Asset Management Firms. Blackstone and other Blackstone Clients, including Blackstone Strategic Capital Holdings (“BSCH”) and its related parties, regularly make minority investments in alternative asset management firms that are not affiliated with Blackstone, the Fund, other Blackstone Clients and their respective portfolio companies, and which may from time to time engage in similar investment transactions, including with respect to purchase and sale of investments, with these asset management firms and their sponsored funds and portfolio companies. Typically, the Blackstone related party with an interest in the asset management firm would be entitled to receive a share of carried interest/performance based incentive compensation and net fee income or revenue share generated by the various products, vehicles, funds and accounts managed by that third party asset management firm that are included in the transaction or activities of the third party asset management firm, or a subset of such activities such as transactions with a Blackstone related party. In addition, while such minority investments are generally structured so that Blackstone does not “control” such third party asset management firms, Blackstone may nonetheless be afforded certain governance rights in relation to such investments (typically in the nature of “protective” rights, negative control rights or anti-dilution arrangements, as well as certain reporting and consultation rights) that afford Blackstone the ability to influence the firm. Although Blackstone and other Blackstone Clients, including BSCH, do not intend to control such third party asset management firms, there can be no assurance that all third parties will similarly conclude that such investments are non-control investments or that, due to the provisions of the governing documents of such third party asset management firms or the interpretation of applicable law or regulations, investments by Blackstone and other Blackstone Clients, including BSCH, will not be deemed to have control
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elements for certain contractual, regulatory or other purposes. While such third party asset managers may not be affiliated with the Fund within the meaning of the 1940 Act, Blackstone may, under certain circumstances, be in a position to influence the management and operations of such asset managers and the existence of its economic/ revenue sharing interest therein may give rise to conflicts of interest. Participation rights in a third party asset management firm (or other similar business), negotiated governance arrangements and/or the interpretation of applicable law or regulations could expose the investments of the Fund to claims by third parties in connection with such investments (as indirect owners of such asset management firms or similar businesses) that may have an adverse financial or reputational impact on the performance of the Fund. The Fund, its affiliates and their respective portfolio companies may from time to time engage in transactions with, and buy and sell investments from, any such third party asset managers and their sponsored funds and transactions and other commercial arrangements between such third party asset managers and the Fund and its portfolio companies are not subject to approval by the Board of Trustees. There can be no assurance that the terms of these transactions between parties related to Blackstone, on the one hand, and the Fund and its portfolio companies, on the other hand, will be at arm’s length or that Blackstone will not receive a benefit from such transactions, which can be expected to incentivize Blackstone to cause these transactions to occur. By executing a subscription agreement with respect to the Fund, each shareholder acknowledges these conflicts related to investments in and arrangements with other asset management firms, acknowledges that these conflicts will not necessarily be resolved in favor of the Fund, agrees that shareholders will not be entitled to receive notice or disclosure of the terms or occurrence of either the investments in alternative asset management firms or transactions therewith, otherwise understands that shareholders will not receive any benefit from such transactions, consents to all such transactions and arrangements to the fullest extent permitted by law, and waives any claim against the Firm and releases the Firm from any liability arising from the existence of any such conflict of interest.
Data. The Firm receives or obtains various kinds of data and information from the Fund, Other Clients and their portfolio companies, including data and information relating to business operations, trends, budgets, customers and other metrics, some of which is sometimes referred to as “big data.” The Firm can be expected to be better able to anticipate macroeconomic and other trends, and otherwise develop investment themes, as a result of its access to (and rights regarding) this data and information from the Fund, Other Clients and their portfolio companies. The Firm has entered and will continue to enter into information sharing and use arrangements with the Fund, Other Clients and their portfolio companies, related parties and service providers, which may give the Firm access to (and rights regarding) data that it would not otherwise obtain in the ordinary course. Although the Firm believes that these activities improve the Firm’s investment management activities on behalf of the Fund and Other Clients, information obtained from the Fund and its portfolio companies also provides material benefits to Blackstone, Blackstone Credit or Other Clients without compensation or other benefit accruing to the Fund or shareholders. For example, information from a portfolio company in which the Fund holds an interest can be expected to enable the Firm to better understand a particular industry and execute trading and investment strategies in reliance on that understanding for Blackstone, Blackstone Credit and Other Clients that do not own an interest in the portfolio company, without compensation or benefit to the Fund or its portfolio companies.
Furthermore, except for contractual obligations to third parties to maintain confidentiality of certain information, and regulatory limitations on the use of material nonpublic information, the Firm is generally free to use data and information from the Fund’s activities to assist in the pursuit of the Firm’s various other activities, including to trade for the benefit of the Firm and/or an Other Client. Any confidentiality obligations in the operative documents do not limit the Firm’s ability to do so. For example, the Firm’s ability to trade in securities of an issuer relating to a specific industry may, subject to applicable law, be enhanced by information of a portfolio company in the same or related industry. Such trading can be expected to provide a material benefit to the Firm without compensation or other benefit to the Fund or shareholders.
The sharing and use of “big data” and other information presents potential conflicts of interest and the shareholders acknowledge and agree that any benefits received by the Firm or its personnel (including fees, costs and expenses) will not reduce the management fees or incentive fees payable to the Adviser or otherwise be
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shared with the Fund or shareholders. As a result, the Adviser has an incentive to pursue investments that have data and information that can be utilized in a manner that benefits the Firm or Other Clients.
Data Management Services. Blackstone or an affiliate of Blackstone formed in the future may provide Data Management Services (as defined below) to portfolio companies and may also provide such services directly to the Fund and Other Clients (collectively, “Data Holders”). Such services may include assistance with obtaining, analyzing, curating, processing, packaging, organizing, mapping, holding, transforming, enhancing, marketing and selling such data (among other related data management and consulting services) for monetization through licensing or sale arrangements with third parties and, subject to applicable law and the limitations in the Advisory Agreement and any other applicable contractual limitations, with the Fund, Other Clients, portfolio companies and other Blackstone affiliates and associated entities (including funds in which Blackstone and Other Clients make investments, and portfolio companies thereof) (the “Data Management Services”). If Blackstone enters into data services arrangements with portfolio companies and receives compensation from such portfolio companies for such data services, the Fund will indirectly bear its share of such compensation based on its pro rata ownership of such portfolio companies. Where Blackstone believes appropriate, data from one Data Holder may be pooled with data from other Data Holders. Any revenues arising from such pooled data sets would be allocated between applicable Data Holders on a fair and reasonable basis as determined by Blackstone Credit in its sole discretion, with Blackstone Credit able to make corrective allocations should it determine subsequently that such corrections were necessary or advisable. Blackstone is expected to receive compensation for such Data Management Services, which may include a percentage of the revenues generated through any licensing or sale arrangements with respect to the relevant data, and which compensation may also include fees, royalties and cost and expense reimbursement (including start-up costs and allocable overhead associated with personnel working on relevant matters (including salaries, benefits and other similar expenses)), provided that any compensation amounts will not exceed market rates for such services as determined by Blackstone Credit to be appropriate under the circumstances. Additionally, Blackstone may determine to share the products from such Data Management Services within Blackstone or its affiliates (including Other Clients or their portfolio companies) at no charge and, in such cases, the Data Holders would not receive any financial or other benefit from having provided such data to Blackstone. The potential receipt of such compensation by Blackstone could create incentives for the Firm to cause the Fund to invest in portfolio companies with a significant amount of data that it might not otherwise have invested in or on terms less favorable than it otherwise would have sought to obtain.
Blackstone and Blackstone Credit Strategic Relationships. Blackstone and Blackstone Credit have entered, and it can be expected that Blackstone and Blackstone Credit in the future will enter, into strategic relationships with investors (and/or one or more of their affiliates) that involve an overall relationship with Blackstone or Blackstone Credit that could incorporate one or more strategies in addition to the Fund’s strategy (“Strategic Relationships”), with terms and conditions applicable solely to such investor and its investment in multiple Blackstone or Blackstone Credit strategies that would not apply to any other investor’s investment in the Fund. A Strategic Relationship often involves an investor agreeing to make a capital commitment to or investment in (as applicable) multiple Blackstone or Blackstone Credit funds, one of which may include the Fund. Shareholders will not receive a copy of any agreement memorializing such a Strategic Relationship program (even if in the form of a side letter) and will be unable to elect in the “most-favored- nations” election process any rights or benefits afforded through a Strategic Relationship. Specific examples of such additional rights and benefits include, among others, specialized reporting, discounts on and/or reimbursement of management fees or carried interest, secondment of personnel from the investor to Blackstone or Blackstone Credit (or vice versa), rights to participate in the investment review and evaluation process, as well as priority rights or targeted amounts for co-investments alongside Blackstone Credit or Blackstone funds (including, without limitation, preferential or favorable allocation of co-investment and preferential terms and conditions related to co-investment or other participation in Blackstone or Blackstone Credit funds (including in respect of any carried interest and/ or management fees to be charged with respect thereto, as well as any additional discounts or rebates with respect thereto or other penalties that may result if certain target co-investment allocations or other conditions under such arrangements are not achieved)). The co-investment that is part of a Strategic Relationship may include co-investment in investments made by the Fund. Blackstone, including its personnel (including Blackstone
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Credit personnel), may receive compensation from Strategic Relationships and be incentivized to allocate investment opportunities away from the Fund to or source investment opportunities for Strategic Relationships. Strategic Relationships may therefore result in fewer co-investment opportunities (or reduced or no allocations) being made available to shareholders, subject to the 1940 Act.
Portfolio Operations Group. Members of Blackstone’s Portfolio Operations group (the “Portfolio Operations”), who are Blackstone employees, are permitted to provide services to the Fund’s portfolio companies, and any payments made by such portfolio companies to Blackstone for reimbursement of the internal compensation costs for time spent on such portfolio companies will not reduce the management fee payable by the Fund. As a result, Blackstone may be incentivized to cause members of the Portfolio Operations group to spend more time on the Fund’s portfolio companies as compared to portfolio companies of Other Clients that do reduce the management fee offset. There can be no assurance that members of the Portfolio Operations group will be able to provide their services to portfolio companies and/or that any individuals within the Portfolio Operations group will remain employed by Blackstone through the term of the Fund.
Buying and Selling Investments or Assets from Certain Related Parties. The Fund and its portfolio companies may purchase investments or assets from or sell investments or assets to shareholders, other portfolio companies of the Fund, portfolio companies of Other Clients or their respective related parties. Purchases and sales of investments or assets between the Fund or its portfolio companies, on the one hand, and shareholders, other portfolio companies of the Fund, portfolio companies of Other Clients or their respective related parties, on the other hand, are not, unless required by applicable law, subject to the approval of the Board of Trustees or any shareholder. These transactions involve conflicts of interest, as the Firm may receive fees and other benefits, directly or indirectly, from or otherwise have interests in both parties to the transaction, including different financial incentives Blackstone may have with respect to the parties to the transaction. For example, there can be no assurance that any investment or asset sold by the Fund to a shareholder, other portfolio companies of the Fund, portfolio company of Other Clients or any of their respective related parties will not be valued or allocated a sale price that is lower than might otherwise have been the case if such asset were sold to a third party rather than to a shareholder, portfolio company of Other Clients or any of their respective related parties. The Firm will not be required to solicit third party bids or obtain a third party valuation prior to causing the Fund or any of its portfolio companies to purchase or sell any asset or investment from or to a shareholder, other portfolio companies of the Fund, portfolio company of Other Clients or any of their respective related parties as provided above.
Blackstone’s Relationship with Pátria. On October 1, 2010, Blackstone purchased a 40% equity interest in Pátria Investments Limited and Pátria Investimentos Ltda. (collectively, “Pátria”). Pátria is a leading alternative asset manager in Latin America. Pátria’s alternative asset management businesses include the management of private equity funds, real estate funds, infrastructure funds and hedge funds (e.g., a multi-strategy fund and a long/short equity fund). On January 26, 2021, Pátria completed its initial public offering (“IPO”), pursuant to which Blackstone sold a portion of its interest and no longer has representatives or the right to designate representatives on Pátria’s board of directors. As a result of Pátria’s pre-IPO reorganization transactions (which included Blackstone’s sale of 10% of Pátria’s pre-IPO shares to Pátria’s controlling shareholder) and the consummation of the IPO, Blackstone is deemed to no longer have significant influence over Pátria due to its decreased ownership and lack of board representation.
Other Firm Businesses, Activities and Relationships. As part of its regular business, Blackstone provides a broad range of investment banking, advisory and other services. In addition, from time to time, the Firm will provide services in the future beyond those currently provided. Shareholders will not receive any benefit from any fees relating to such services.
In the regular course of its capital markets, investment banking, real estate advisory and other businesses, Blackstone represents potential purchasers, sellers and other involved parties, including corporations, financial buyers, management, shareholders and institutions, with respect to transactions that could give rise to other transactions that are suitable for the Fund. In such a case, a Blackstone advisory client would typically require
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Blackstone to act exclusively on its behalf. Such advisory client requests may preclude all Blackstone-affiliated clients, including the Fund, from participating in related transactions that would otherwise be suitable. Blackstone will be under no obligation to decline any such engagements in order to make an investment opportunity available to the Fund. In connection with its capital markets, investment banking, advisory, real estate and other businesses, Blackstone comes into possession of information that limits its ability to engage in potential transactions. The Fund’s activities are expected to be constrained as a result of the inability of Blackstone personnel to use such information. For example, employees of Blackstone from time to time are prohibited by law or contract from sharing information with members of the Fund’s investment team. Additionally, there are expected to be circumstances in which one or more individuals associated with Blackstone affiliates (including clients) will be precluded from providing services related to the Fund’s activities because of certain confidential information available to those individuals or to other parts of Blackstone (e.g., trading may be restricted). Where Blackstone affiliates are engaged to find buyers or financing sources for potential sellers of assets, the seller may permit the Fund to act as a participant in such transactions (as a buyer or financing partner), which would raise certain conflicts of interest inherent in such a situation (including as to the negotiation of the purchase price).
The Fund may invest in securities of the same issuers as Other Clients, other investment vehicles, accounts and clients of the Firm and the Adviser. To the extent that the Fund holds interests that are different (or more senior or junior) than those held by such Other Clients, Blackstone Credit may be presented with decisions involving circumstances where the interests of such Other Clients are in conflict with those of the Fund. Furthermore, it is possible the Fund’s interest may be subordinated or otherwise adversely affected by virtue of such Other Clients’ involvement and actions relating to its investment.
In addition, the 1940 Act may limit the Fund’s ability to undertake certain transactions with its affiliates that are registered under the 1940 Act or regulated as BDCs under the 1940 Act. As a result of these restrictions, the Fund may be prohibited from executing “joint” transactions with such affiliates, which could include investments in the same portfolio company (whether at the same or different times). These limitations may limit the scope of investment opportunities that would otherwise be available to the Fund.
Blackstone Credit has received an exemptive order that permits certain funds, among other things, to co-invest with certain other persons, including certain affiliates of Blackstone Credit, and certain funds managed and controlled by Blackstone Credit and its affiliates subject to certain terms and conditions. In addition, other present and future activities of the Firm and its affiliates (including Blackstone Credit and the Adviser) will from time to time give rise to additional conflicts of interest relating to the Firm and its investment activities. In the event that any such conflict of interest arises, the Adviser will attempt to resolve such conflicts in a fair and equitable manner. Investors should be aware that, subject to applicable law, conflicts will not necessarily be resolved in favor of the Fund’s interests.
Transactions with Clients of Blackstone Insurance Solutions. BIS is a business unit of Blackstone that is comprised of two affiliated registered investment advisers. BIS provides investment advisory services to insurers (including insurance companies that are owned, directly or indirectly, by Blackstone or Other Clients, in whole or in part). Actual or potential conflicts of interest may arise with respect to the relationship of the Fund and its portfolio companies with the funds, vehicles or accounts BIS advises or sub-advises, including accounts where an insurer participates in investments directly and there is no separate vehicle controlled by Blackstone (collectively, “BIS Clients”). BIS Clients have invested and are expected to continue investing in Other Clients and the Fund. BIS Clients may have investment objectives that overlap with those of the Fund or its portfolio companies, and such BIS Clients may invest, as permitted by applicable law and the Fund’s co-investment exemptive relief, alongside the Fund or such portfolio companies in certain investments, which will reduce the investment opportunities otherwise available to the Fund or such portfolio companies. BIS Clients will also participate in transactions related to the Fund and/or its portfolio companies (e.g., as originators, co-originators, counterparties or otherwise). Other transactions in which BIS Clients will participate include, without limitation, investments in debt or other securities issued by portfolio companies or other forms of financing to portfolio
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companies (including special purpose vehicles established by the Fund or such portfolio companies). When investing alongside the Fund or its portfolio companies or in other transactions related to the Fund or its portfolio companies, BIS Clients may or may not invest or divest at the same time or on the same terms as the Fund or the applicable portfolio companies. BIS Clients may also from time to time acquire investments and portfolio companies directly or indirectly from the Fund, as permitted by applicable law and the Fund’s co-investment exemptive relief. In circumstances where Blackstone Credit determines in good faith that the conflict of interest is mitigated in whole or in part through various measures that Blackstone, Blackstone Credit or the Adviser implements, the Adviser may determine to proceed with the applicable transaction (subject to oversight by the Board of Trustees and the applicable law to which the Fund is subject). In order to seek to mitigate any potential conflicts of interest with respect to such transactions (or other transactions involving BIS Clients), Blackstone may, in its discretion, involve independent members of the board of a portfolio company or a third party stakeholder in the transaction to negotiate price and terms on behalf of the BIS Clients or otherwise cause the BIS Clients to “follow the vote” thereof, and/or cause an independent client representative or other third party to approve the investment or otherwise represent the interests of one or more of the parties to the transaction. In addition, Blackstone or the Adviser may limit the percentage interest of the BIS Clients participating in such transaction, or obtain appropriate price quotes or other benchmarks, or, alternatively, a third-party price opinion or other document to support the reasonableness of the price and terms of the transaction. BIS will also from time to time require the applicable BIS Clients participating in a transaction to consent thereto (including in circumstances where the Adviser does not seek the consent of the Board of Trustees). There can be no assurance that any such measures or other measures that may be implemented by Blackstone will be effective at mitigating any actual or potential conflicts of interest.
Allocation of Portfolios. The Firm may have an opportunity to acquire a portfolio or pool of assets, securities and instruments that it determines should be divided and allocated among the Fund and Other Clients. Such allocations generally would be based on the Firm’s assessment of the expected returns and risk profile of each of the assets. For example, some of the assets in a pool may have a return profile appropriate for us, while others may have a return profile not appropriate for the Fund but appropriate for Other Clients. Also, a pool may contain both debt and equity instruments that the Firm determines should be allocated to different funds. In all of these situations, the combined purchase price paid to a seller would be allocated among the multiple assets, securities and instruments in the pool and therefore, subject to applicable law and the conditions of the Fund’s co-investment relief, among the Fund and Other Clients acquiring any of the assets, securities and instruments. Similarly, there will likely be circumstances in which the Fund and Other Clients will sell assets in a single or related transactions to a buyer. In some cases a counterparty will require an allocation of value in the purchase or sale contract, though the Firm could determine such allocation of value is not accurate and should not be relied upon. The Firm will generally rely upon internal analysis to determine the ultimate allocation of value, though it could also obtain third party valuation reports. Regardless of the methodology for allocating value, the Firm will have conflicting duties to the Fund and Other Clients when they buy or sell assets together in a portfolio, including as a result of different financial incentives the Firm has with respect to different vehicles, most clearly when the fees and compensation, including performance-based compensation, earned from the different vehicles differ. There can be no assurance that an investment will not be valued or allocated a purchase price that is higher or lower than it might otherwise have been allocated if such investment were acquired or sold independently rather than as a component of a portfolio shared with Other Clients.
Other Affiliate Transactions and Investments in Different Levels of Capital Structure. From time to time, the Fund and the Other Clients may make investments at different levels of an issuer’s capital structure or otherwise in different classes of an issuer’s securities or loans, subject to the limitations of the 1940 Act. While less common, subject to applicable law, from time to time the Fund could hold an investment in a different layer of the capital structure than an investor or another party with which Blackstone has a material relationship, in which case Blackstone could have an incentive to cause the Fund or the portfolio company to offer more favorable terms to such parties (including, for instance, financing arrangements). Such investments may inherently give rise to conflicts of interest or perceived conflicts of interest between or among the various classes of securities or loans that may be held by such entities. To the extent the Fund holds securities or loans that are
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different (including with respect to their relative seniority) than those held by an Other Client, the Adviser and its affiliates may be presented with decisions when the interests of the funds are in conflict. For example, conflicts could arise where the Fund lends funds to a portfolio company while an Other Client invests in equity securities of such portfolio company. In this circumstance, for example, if such portfolio company were to go into bankruptcy, become insolvent or otherwise be unable to meet its payment obligations or comply with its debt covenants, conflicts of interest could arise between the holders of different types of securities or loans as to what actions the portfolio company should take. In addition, purchases or sales of securities or loans for the account of the Fund (particularly marketable securities) will be bunched or aggregated with orders for Other Clients, including other funds. It is frequently not possible to receive the same price or execution on the entire volume of securities sold, and the various prices may be averaged, which may be disadvantageous to the Fund. Further conflicts could arise after the Fund and Other Clients have made their respective initial investments. For example, if additional financing is necessary as a result of financial or other difficulties, it may not be in the best interests of the Fund to provide such additional financing. If the Other Clients were to lose their respective investments as a result of such difficulties, the ability of the Adviser to recommend actions in the best interests of the Fund might be impaired. Any applicable co-investment order issued by the SEC may restrict the Fund’s ability to participate in follow-on financings. Blackstone Credit may in its discretion take steps to reduce the potential for adversity between the Fund and the Other Clients, including causing the Fund and/or such Other Clients to take certain actions that, in the absence of such conflict, it would not take. Such conflicts will be more difficult if the Fund and Other Clients hold significant or controlling interests in competing or different tranches of a portfolio company’s capital structure. Equity holders and debt holders have different (and often competing) motives, incentives, liquidity goals and other interests with respect to a portfolio company. In addition, there may be circumstances where Blackstone Credit agrees to implement certain procedures to ameliorate conflicts of interest that may involve a forbearance of rights relating to the Fund or Other Clients, such as where Blackstone Credit may cause the Fund or Other Clients to decline to exercise certain control-and/or foreclosure-related rights with respect to a portfolio company.
Further, the Fund is prohibited under the 1940 Act from participating in certain transactions with certain of affiliates (including portfolio companies of Other Clients) without the prior approval of a majority of the independent members of the Board of Trustees and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of the outstanding voting securities will be an affiliate of the Fund for purposes of the 1940 Act and generally the Fund will be prohibited from buying or selling any securities from or to such affiliate, absent the prior approval of the Board of Trustees. However, the Fund may under certain circumstances purchase any such affiliate’s loans or securities in the secondary market, which could create a conflict for the Adviser between the Fund’s interests and the interests of such affiliate, in that the ability of the Adviser to recommend actions in the Fund’s best interest may be limited. The 1940 Act also prohibits certain “joint” transactions with certain affiliates, which could include investments in the same portfolio company (whether at the same or closely related times), without prior approval of the Board of Trustees and, in some cases, the SEC.
In addition, conflicts may arise in determining the amount of an investment, if any, to be allocated among potential investors and the respective terms thereof. There can be no assurance that any conflict will be resolved in favor of the Fund, and each shareholder acknowledges and agrees that in some cases, subject to applicable law, a decision by Blackstone Credit to take any particular action could have the effect of benefiting an Other Client (and, incidentally, may also have the effect of benefiting Blackstone Credit) and therefore may not have been in the best interests of, and may be adverse to, the Fund. There can be no assurance that the return on the Fund’s investment will be equivalent to or better than the returns obtained by the Other Clients participating in the transaction. The shareholders will not receive any benefit from fees paid to any affiliate of the Adviser from a portfolio company in which an Other Client also has an interest to the extent permitted by the 1940 Act.
Related Financing Counterparties. The Fund may invest in companies or other entities in which Other Clients make an investment in a different part of the capital structure (and vice versa) subject to the requirements of the 1940 Act and the Fund’s co-investment order. The Adviser requests in the ordinary course proposals from lenders and other sources to provide financing to the Fund and its portfolio companies. Blackstone Credit takes
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into account various facts and circumstances it deems relevant in selecting financing sources, including whether a potential lender has expressed an interest in evaluating debt financing opportunities, whether a potential lender has a history of participating in debt financing opportunities generally and with the Firm in particular, the size of the potential lender’s loan amount, the timing of the relevant cash requirement, the availability of other sources of financing, the creditworthiness of the lender, whether the potential lender has demonstrated a long-term or continuing commitment to the success of Blackstone, Blackstone Credit and their funds, and such other factors that Blackstone and Blackstone Credit deem relevant under the circumstances. The cost of debt alone is not determinative.
Although the Fund will generally be providing first lien financing to its portfolio companies, it is possible that shareholders, Other Clients, their portfolio companies, co-investors and other parties with material relationships with the Firm, such as shareholders of and lenders to the Firm and lenders to Other Clients and their portfolio companies (as well as Blackstone itself), could provide additional first lien financing to portfolio companies of the Fund, subject to the requirements of the 1940 Act. The Firm could have incentives to cause the Fund and its portfolio companies to accept less favorable financing terms from a shareholder, Other Clients, their portfolio companies, Blackstone, and other parties with material relationships with the Firm than it would from a third party. If the Fund or a portfolio company occupies a more senior position in the capital structure than a shareholder, Other Client, their portfolio companies and other parties with material relationships with Blackstone, Blackstone could have an incentive to cause the Fund or portfolio company to offer more favorable financing terms to such parties. In the case of a related party financing between the Fund or its portfolio companies, on the one hand, and Blackstone or Other Clients’ portfolio companies, on the other hand, to the extent permitted by the 1940 Act, the Adviser could, but is not obligated to, rely on a third party agent to confirm the terms offered by the counterparty are consistent with market terms, or the Adviser could instead rely on its own internal analysis, which the Adviser believes is often superior to third party analysis given the Firm’s scale in the market. If however any of the Firm, the Fund, an Other Client or any of their portfolio companies delegates to a third party, such as another member of a financing syndicate or a joint venture partner, the negotiation of the terms of the financing, the transaction will be assumed to be conducted on an arms-length basis, even though the participation of the Firm related vehicle impacts the market terms. For example, in the case of a loan extended to the Fund or a portfolio company by a financing syndicate in which an Other Client has agreed to participate on terms negotiated by a third party participant in the syndicate, it may have been necessary to offer better terms to the financing provider to fully subscribe the syndicate if the Other Client had not participated. It is also possible that the frequent participation of Other Clients in such syndicates could dampen interest among other potential financing providers, thereby lowering demand to participate in the syndicate and increasing the financing costs to the Fund. The Adviser does not believe either of these effects is significant, but no assurance can be given to shareholders that these effects will not be significant in any circumstance. Unless required by applicable law, the Adviser will not seek any consent or approvals from shareholders or the Board of Trustees in the case of any of these conflicts.
The Firm could cause actions adverse to the Fund to be taken for the benefit of Other Clients that have made an investment more senior in the capital structure of a portfolio company than the Fund (e.g., provide financing to a portfolio company, the equity of which is owned by the Fund) and, vice versa, actions may be taken for the benefit of the Fund and its portfolio companies that are adverse to Other Clients. The Firm could seek to implement procedures to mitigate conflicts of interest in these situations such as (i) a forbearance of rights, including some or all non-economic rights, by the Fund or relevant Other Client (or their respective portfolio companies, as the case may be) by, for example, agreeing to follow the vote of a third party in the same tranche of the capital structure, or otherwise deciding to recuse itself with respect to decisions on defaults, foreclosures, workouts, restructurings and other similar matters, (ii) causing the Fund or relevant Other Client (or their respective portfolio companies, as the case may be) to hold only a non-controlling interest in any such portfolio company, (iii) retaining a third party loan servicer, administrative agent or other agent to make decisions on behalf of the Fund or relevant Other Client (or their respective portfolio companies, as the case may be), or (iv) create groups of personnel within the Firm separated by information barriers (which may be temporary and limited purpose in nature), each of which would advise one of the clients that has a conflicting position with
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other clients. As an example, to the extent an Other Client holds an interest in a loan or security that is different (including with respect to relative seniority) than those held by the Fund or its portfolio companies, the Firm may decline to exercise, or delegate to a third party, certain control, foreclosure and other similar governance rights of the Other Client. In these cases, the Firm would generally act on behalf of one of its clients, though the other client would generally retain certain control rights, such as the right to consent to certain actions taken by the trustee or administrative or other agent of the investment, including a release, waiver, forgiveness or reduction of any claim for principal or interest; extension of maturity date or due date of any payment of any principal or interest; release or substitution of any material collateral; release, waiver, termination or modification of any material provision of any guaranty or indemnity; subordination of any lien; and release, waiver or permission with respect to any covenants.
In connection with negotiating loans and bank financings in respect of Blackstone Credit-sponsored transactions, Blackstone Credit will generally obtain the right to participate (for its own account or an Other Client) in a portion of the financings with respect to such Blackstone Credit-sponsored transactions on the same terms negotiated by third parties with the Firm or other terms the Adviser determines to be consistent with the market. Although the Firm could rely on third parties to verify market terms, the Firm may nonetheless have influence on such third parties. No assurance can be given that negotiating with a third party, or verification of market terms by a third party, will ensure that the Fund and its portfolio companies receive market terms.
In addition, it is anticipated that in a bankruptcy proceeding the Fund’s interests will likely be subordinated or otherwise adverse to the interests of Other Clients with ownership positions that are more senior to those of the Fund. For example, an Other Client that has provided debt financing to an investment of the Fund may take actions for its benefit, particularly if the Fund’s Investment is in financial distress, which adversely impact the value of the Fund’s subordinated interests.
Although Other Clients can be expected to provide financing to the Fund and its portfolio companies subject to the requirements of the 1940 Act, there can be no assurance that any Other Client will indeed provide any such financing with respect to any particular Investment. Participation by Other Clients in some but not all financings of the Fund and its portfolio companies may adversely impact the ability of the Fund and its portfolio companies to obtain financing from third parties when Other Clients do not participate, as it may serve as a negative signal to market participants.
Any financing provided by a shareholder or an affiliate to the Fund or a portfolio company is not an investment in the Fund.
The respective investment programs of the Fund and the Other Clients may or may not be substantially similar. Blackstone Credit and/or Blackstone may give advice to, and recommend securities for, Other Clients that may differ from advice given to, or securities recommended or bought for, the Fund, even though their investment objectives may be the same as or similar to those of the Fund. While Blackstone Credit will seek to manage potential conflicts of interest in a fair and equitable manner, the portfolio strategies employed by Blackstone Credit and Blackstone in managing their respective Other Clients are likely to conflict from time to time with the transactions and strategies employed by the Adviser in managing the Fund and may affect the prices and availability of the securities and instruments in which the Fund invests. Conversely, participation in specific investment opportunities may be appropriate, at times, for both the Fund and Other Clients. In any event, it is the policy of Blackstone Credit to allocate investment opportunities and sale opportunities on a basis deemed by Blackstone Credit, in its sole discretion, to be fair and equitable over time.
Conflicting Fiduciary Duties to Debt Funds. Other Clients include funds and accounts that make investments in senior secured loans, distressed debt, subordinated debt, high-yield securities, commercial mortgage-backed securities and other debt instruments. As discussed above, it is expected that these Other Clients or investors therein will be offered the opportunity, subject to applicable law, to provide financing with respect to investments made by the Fund and its portfolio companies. The Firm owes a fiduciary duty to these
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Other Clients as well as to the Fund and will encounter conflicts in the exercise of these duties. For example, if an Other Client purchases high-yield securities or other debt instruments of a portfolio company of the Fund, or otherwise occupies a senior (or other different) position in the capital structure of an investment relative to the Fund, the Firm will encounter conflicts in providing advice to the Fund and to these Other Clients with regard to appropriate terms of such high-yield securities or other instruments, the enforcement of covenants, the terms of recapitalizations and the resolution of workouts or bankruptcies, among other matters. More commonly, the Fund could hold an investment that is senior in the capital structure, such as a debt instrument, to an Other Client. Although measures described above in “Related Financing Counterparties” above can mitigate these conflicts, they cannot completely eliminate them.
Similarly, certain Other Clients may invest in securities of publicly traded companies that are actual or potential investments of the Fund or its portfolio companies. The trading activities of those vehicles may differ from or be inconsistent with activities that are undertaken for the account of the Fund or its portfolio companies in any such securities or related securities. In addition, the Fund may not pursue an investment in a portfolio company otherwise within the investment mandate of the Fund as a result of such trading activities by Other Clients.
Other Blackstone and Blackstone Credit Clients; Allocation of Investment Opportunities. Certain inherent conflicts of interest arise from the fact that the Adviser, Blackstone Credit and Blackstone provide investment management, advisory and sub-advisory services to the Fund and Other Clients.
Allocation Methodology Considerations
Blackstone Credit will share any investment and sale opportunities with such Other Clients and the Fund in accordance with the Advisers Act, and Firm-wide allocation policies, which generally provide for sharing pro rata based on targeted acquisition size or targeted sale size.
Notwithstanding the foregoing, Blackstone Credit may also consider the following factors in making any allocation determinations, and such factors may result in a different allocation of investment and/or sale opportunities: (i) the risk-return and target return profile of the proposed investment relative to the Fund’s and the Other Clients’ current risk profiles; (ii) the Fund’s and/or the Other Clients’ investment guidelines, restrictions, terms and objectives, including whether such objectives are considered solely in light of the specific investment under consideration or in the context of the respective portfolios’ overall holdings; (iii) the need to re-size risk in the Fund’s or the Other Clients’ portfolios (including the potential for the proposed investment to create an industry, sector or issuer imbalance in the Fund’s and Other Clients’ portfolios, as applicable) and taking into account any existing non-pro rata investment positions in the portfolio of the Fund and Other Clients; (iv) liquidity considerations of the Fund and the Other Clients, including during a ramp-up or wind-down of one or more of the Fund or such Other Clients, proximity to the end of the Fund’s or Other Clients’ specified term or investment period, any redemption/withdrawal requests, anticipated future contributions and available cash; (v) legal, tax, accounting, political, national security and other consequences; (vi) regulatory or contractual restrictions or consequences (including, without limitation, requirements under the 1940 Act and any related rules, orders, guidance or other authority applicable to the Fund or Other Blackstone Credit Clients; (vii) avoiding a de minimis or odd lot allocation; (viii) availability and degree of leverage and any requirements or other terms of any existing leverage facilities; (ix) the Fund’s or Other Clients’ investment focus on a classification attributable to an investment or issuer of an investment, including, without limitation, investment strategy, geography, industry or business sector; (x) the nature and extent of involvement in the transaction on the part of the respective teams of investment professionals dedicated to the Fund or such Other Clients; (xi) the management of any actual or potential conflict of interest; (xii) with respect to investments that are made available to Blackstone Credit by counterparties pursuant to negotiated trading platforms (e.g., ISDA contracts), the absence of such relationships which may not be available to the Fund and all Other Clients; (xiii) available capital of the Fund and the Other Clients, (xiv) primary and permitted investment strategies and objectives of the Fund and the Other Clients, including, without limitation, with respect to Other Clients that expect to invest in or alongside other funds or across asset classes based on expected return (such as certain managed accounts with
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similar investment strategies and objectives), (xv) sourcing of the investment, (xvi) the specific nature (including size, type, amount, liquidity, holding period, anticipated maturity and minimum investment criteria) of the investment, (xvii) expected investment return, (xviii) expected cash characteristics (such as cash-on-cash yield, distribution rates or volatility of cash flows), (xix) capital expenditure required as part of the investment, (xx) portfolio diversification concerns (including, but not limited to, whether a particular fund already has its desired exposure to the investment, sector, industry, geographic region or markets in question), (xxi) relation to existing investments in a fund, if applicable (e.g., “follow on” to existing investment, joint venture or other partner to existing investment, or same security as existing investment), and (xxii) any other considerations deemed relevant by Blackstone Credit in good faith.
Blackstone Credit shall not have any obligation to present any investment opportunity (or portion of any investment opportunity) to the Fund if Blackstone Credit determines in good faith that such opportunity (or portion thereof) should not be presented to the Fund for any one or a combination of the reasons specified above, or if Blackstone Credit is otherwise restricted from presenting such investment opportunity to the Fund.
In addition, Blackstone Credit has received an exemptive order from the SEC that permits certain existing and future funds regulated under the 1940 Act (each, a “Regulated Fund”), among other things, to co-invest with certain other persons, including certain affiliates of Blackstone Credit, and certain funds managed and controlled by Blackstone Credit and its affiliates, including the Fund, subject to certain terms and conditions. For so long as any privately negotiated investment opportunity falls within the investment criteria of one or more Regulated Funds, such investment opportunity shall also be offered to such Regulated Fund(s). In the event that the aggregate targeted investment sizes of the Fund and such Regulated Fund(s) exceed the amount of such investment opportunity, allocation of such investment opportunity to each of the Fund and such Regulated Fund(s) will be reduced proportionately based on their respective “available capital” as defined in the exemptive order, which may result in allocation to the Fund in an amount less than what it would otherwise have been if such Regulated Fund(s) did not participate in such investment opportunity. The exemptive order also restricts the ability of the Fund (or any other Blackstone Credit Fund) from investing in any privately negotiated investment opportunity alongside a Regulated Fund except at the same time and on same terms. As a result, the Fund may be unable to make investments in different parts of the capital structure of the same issuer in which a Regulated Fund has invested or seeks to invest. The rules promulgated by the SEC under the 1940 Act, as well as any related guidance from the SEC and/or the terms of the exemptive order itself, are subject to change, and Blackstone Credit could undertake to amend the exemptive order (subject to SEC approval), obtain additional exemptive relief, or otherwise be subject to other requirements in respect of co-investments involving the Fund and any Regulated Funds, any of which may impact the amount of any allocation made available to Regulated Funds and thereby affect (and potentially decrease) the allocation made to the Fund.
Moreover, with respect to Blackstone Credit’s ability to allocate investment opportunities, including where such opportunities are within the common objectives and guidelines of the Fund and one or more Other Clients (which allocations are to be made on a basis that Blackstone Credit believes in good faith to be fair and reasonable), Blackstone Credit and Blackstone have established general guidelines and policies, which it may update from time to time, for determining how such allocations are to be made, which, among other things, set forth principles regarding what constitutes “debt” or “debt-like” investments, criteria for defining “control-oriented equity” or “infrastructure” investments, guidance regarding allocation for certain types of investments (e.g., distressed energy) and other matters. In addition, certain Other Clients may receive certain priority or other allocation rights with respect to certain investments, subject to various conditions set forth in such Other Clients’ respective governing agreements. The application of those guidelines and conditions may result in the Fund or Other Clients not participating (and/or not participating to the same extent) in certain investment opportunities in which they would have otherwise participated had the related allocations been determined without regard to such guidelines and conditions and based only on the circumstances of those particular investments. Additionally, investment opportunities sourced by Blackstone Credit will be allocated in accordance with Blackstone’s and Blackstone Credit’s allocation policies, which may provide that investment opportunities will be allocated in whole or in part to other business units of the Firm on a basis that Blackstone and Blackstone Credit believe in good faith to be fair and reasonable, based on various factors, including the involvement of the respective teams
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from Blackstone Credit and such other business units. It should also be noted that investment opportunities sourced by business units of the Firm other than Blackstone Credit will be allocated in accordance with such business units’ allocation policies, which will result in such investment opportunities being allocated, in whole or in part, away from Blackstone Credit, the Fund and Other Blackstone Credit Clients. In addition, the Fund expects to offer opportunities appropriate for the Fund to subsidiaries not wholly owned by the Fund, which will result in the Fund having less exposure to such assets than it otherwise would have.
When Blackstone Credit determines not to pursue some or all of an investment opportunity for the Fund that would otherwise be within the Fund’s objectives and strategies, and Blackstone or Blackstone Credit provides the opportunity or offers the opportunity to Other Clients, Blackstone or Blackstone Credit, including their personnel (including Blackstone Credit personnel), may receive compensation from the Other Clients, whether or not in respect of a particular investment, including an allocation of carried interest or referral fees, and any such compensation could be greater than amounts paid by the Fund to Blackstone Credit. As a result, Blackstone Credit (including Blackstone Credit personnel who receive such compensation) could be incentivized to allocate investment opportunities away from the Fund to or source investment opportunities for Other Clients. In addition, in some cases Blackstone or Blackstone Credit may earn greater fees when Other Clients participate alongside or instead of the Fund in an investment.
Blackstone Credit makes good faith determinations for allocation decisions based on expectations that may prove inaccurate. Information unavailable to Blackstone Credit, or circumstances not foreseen by Blackstone Credit at the time of allocation, may cause an investment opportunity to yield a different return than expected. Conversely, an investment that Blackstone Credit expects to be consistent with the Fund’s objectives may fail to achieve them.
The Adviser may, but will be under no obligation to, provide co-investment opportunities relating to investments made by the Fund to Fund shareholders, Other Clients, and investors of such Other Clients, subject to the Fund’s exemptive relief and the 1940 Act. Such co-investment opportunities may be offered to such parties in the Adviser’s subject to the Fund’s exemptive relief. From time to time, Blackstone Credit may form one or more funds or accounts to co-invest in transactions with the Fund (or transactions alongside any of the Fund and one or more Other Clients). Furthermore, for the avoidance of doubt, to the extent that the Fund has received its target amount in respect of an investment opportunity, any remaining portion of such investment opportunity initially allocated to the Fund may be allocated to Other Clients or to co-investors in Blackstone Credit’s discretion pursuant to the Fund’s exemptive relief.
Orders may be combined for the Fund and all other participating Other Clients, and if any order is not filled at the same price, they may be allocated on an average price basis. Similarly, if an order on behalf of more than one account cannot be fully executed under prevailing market conditions, securities may be allocated among the different accounts on a basis that Blackstone Credit or its affiliates consider equitable.
Additionally, it can be expected that the Firm will, from time to time, enter into arrangements or strategic relationships with third parties, including other asset managers, financial firms or other businesses or companies, that, among other things, provide for referral, sourcing or sharing of investment opportunities. Blackstone or Blackstone Credit may pay management fees and performance-based compensation in connection with such arrangements. Blackstone or Blackstone Credit may also provide for or receive reimbursement of certain expenses incurred or received in connection with these arrangements, including diligence expenses and general overhead, administrative, deal sourcing and related corporate expenses. The amount of these rebates may relate to allocations of co-investment opportunities and increase if certain co-investment allocations are not made. While it is possible that the Fund will, along with the Firm itself, benefit from the existence of those arrangements and/or relationships, it is also possible that investment opportunities that would otherwise be presented to or made by the Fund would instead be referred (in whole or in part) to such third party, or, as indicated above, to other third parties, either as a contractual obligation or otherwise, resulting in fewer opportunities (or reduced allocations) being made available to the Fund and/or shareholders. This means that co-investment opportunities that are sourced by the Fund may be allocated to investors that are not shareholders.
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For example, a firm with which the Firm has entered into a strategic relationship may be afforded with “first-call” rights on a particular category of investment opportunities, although there is not expected to be substantial overlap in the investment strategies and/or objectives between the Fund and any such firm. (See “—Blackstone’s Relationship with Pátria”).
Certain Investments Inside the Fund’s Mandate that are not Pursued by the Fund. Under certain circumstances, Blackstone or Blackstone Credit may determine not to pursue some or all of an investment opportunity within the Fund’s mandate, including without limitation, as a result of business, reputational or other reasons applicable to the Fund, Other Clients, their respective portfolio companies or Blackstone. In addition, Blackstone Credit may determine that the Fund should not pursue some or all of an investment opportunity, including, by way of example and without limitation, because the Fund has already invested sufficient capital in the investment, sector, industry, geographic region or markets in question, as determined by Blackstone Credit in its good faith discretion, or the investment is not appropriate for the Fund for other reasons as determined by Blackstone Credit in its good faith reasonable sole discretion. In any such case Blackstone or Blackstone Credit could, thereafter, offer such opportunity to other parties, including Other Clients or portfolio companies or limited partners or shareholders of the Fund or Other Clients, joint venture partners, related parties or third parties. Any such Other Clients may be advised by a different Blackstone or Blackstone Credit business group with a different investment committee, which could determine an investment opportunity to be more attractive than Blackstone Credit believes to be the case. In any event, there can be no assurance that Blackstone Credit’s assessment will prove correct or that the performance of any investments actually pursued by the Fund will be comparable to any investment opportunities that are not pursued by the Fund. Blackstone and Blackstone Credit, including their personnel, may receive compensation from any such party that makes the investment, including an allocation of carried interest or referral fees, and any such compensation could be greater than amounts paid by the Fund to Blackstone Credit. In some cases, Blackstone or Blackstone Credit earns greater fees when Other Clients participate alongside or instead of the Fund in an Investment.
Cross Transactions. Situations may arise where certain assets held by the Fund may be transferred to Other Clients and vice versa. Such transactions will be conducted in accordance with, and subject to, the Adviser’s contractual obligations to the Fund and applicable law, including the 1940 Act.
Co-Investment. The Fund will co-invest with its shareholders, limited partners and/or shareholders of the Other Clients, the Firm’s affiliates and other parties with whom Blackstone Credit has a material relationship. The allocation of co-investment opportunities is entirely and solely in the discretion of Blackstone Credit, subject to applicable law. In addition to participation by Consultants in specific transactions or investment opportunities, Consultants and/or other Firm employees may be permitted to participate in the Firm’s side-by-side co-investment rights. Such rights generally do not provide for a management fee or carried interest payable by participants therein and generally result in the Fund being allocated a smaller share of an investment than would otherwise be the case in the absence of such side-by-side. Furthermore, Other Clients will be permitted (or have a preferred right) to participate in the Firm’s side-by-side co-investment rights.
In certain circumstances, Blackstone Credit will determine that a co-investment opportunity should be offered to one or more third parties (such investors, “Co-Investors”) and will maintain sole discretion with respect to which Co-Investors are offered any such opportunity. It is expected that many investors who may have expressed an interest in co-investment opportunities will not be allocated any co-investment opportunities or may receive a smaller amount of co-investment opportunities than the amount requested. Furthermore, co-investment offered by Blackstone Credit will be on such terms and conditions (including with respect to management fees, performance-based compensation and related arrangements and/or other fees applicable to co-investors) as Blackstone Credit determine to be appropriate in its sole discretion on a case-by-case basis, which may differ amongst co-investors with respect to the same co-investment. In addition, the performance of Other Clients co-investing with the Fund is not considered for purposes of calculating the carried interest payable by the Fund to the Adviser. Furthermore, the Fund and co-investors will often have different investment objectives and limitations, such as return objectives and maximum hold period. Blackstone Credit, as a result, will have
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conflicting incentives in making decisions with respect to such opportunities. Even if the Fund and any such parties invest in the same securities on similar terms, conflicts of interest will still arise as a result of differing investment profiles of the investors, among other items.
| • | General Co-Investment Considerations: There are expected to be circumstances where an amount that would otherwise have been invested by the Fund is instead allocated to co-investors (who may or may not be shareholders of the Fund or limited partners of Other Clients) or supplemental capital vehicles, and there is no guarantee that any shareholders will be offered any particular co-investment opportunity. Each co-investment opportunity (should any exist) is likely to be different, and allocation of each such opportunity will depend on the facts and circumstances specific to that unique situation (e.g., timing, industry, size, geography, asset class, projected holding period, exit strategy and counterparty). Different situations will require that the various facts and circumstances of each opportunity be weighted differently, as Blackstone Credit deems relevant to such opportunity. Such factors are likely to include, among others, whether a co-investor adds strategic value, industry expertise or other similar synergies; whether a potential co-investor has expressed an interest in evaluating co-investment opportunities; whether a potential co-investor has an overall strategic relationship with the Firm; whether a potential co-investor has demonstrated a long-term and/or continuing commitment to the potential success of Blackstone, Blackstone Credit, the Fund, Other Clients or other co-investments (including whether a potential co-investor will help establish, recognize, strengthen and/or cultivate relationships that may provide indirectly longer-term benefits to the Fund or Other Clients and their respective underlying portfolio companies, or whether the potential co-investor has significant capital under management by the Firm or intends to increase such amount); the ability of a potential co-investor to commit to a co-investment opportunity within the required timeframe of the particular transaction; Blackstone Credit’s assessment of a potential co-investor’s ability to invest an amount of capital that fits the needs of the investment (taking into account the amount of capital needed as well as the maximum number of investors that can realistically participate in the transaction); whether the co-investor is considered “strategic” to the investment because it is able to offer the Fund certain benefits, including but not limited to, the ability to help consummate the investment, the ability to aid in operating or monitoring the portfolio company or the possession of certain expertise; the transparency, speed and predictability of the potential co-investor’s investment process; whether the Firm has previously expressed a general intention to seek to offer co-investment opportunities to such potential co-investor; whether a potential co-investor has the financial and operational resources and other relevant wherewithal to evaluate and participate in a co-investment opportunity; the familiarity the Firm has with the personnel and professionals of the investor in working together in investment contexts (which may include such potential co-investor’s history of investment in other Firm co-investment opportunities); the extent to which a potential co-investor has committed to an Other Client; the size of such potential co-investor’s interest to be held in the underlying portfolio company as a result of the Fund’s investment (which is likely to be based on the size of the potential co-investor’s capital commitment or investment in the Fund); the extent to which a potential co-investor has been provided a greater amount of co-investment opportunities relative to others; the ability of a potential co-investor to invest in potential add-on acquisitions for the portfolio company or participate in defensive investments; the likelihood that the potential co-investor would require governance rights that would complicate or jeopardize the transaction (or, alternatively, whether the investor would be willing to defer to the Firm and assume a more passive role in governing the portfolio company); any interests a potential co-investor may have in any competitors of the underlying portfolio company; the tax profile of the potential co-investor and the tax characteristics of the investment (including whether the potential co-investor would require particular structuring implementation or covenants that would not otherwise be required but for its participation or whether such co-investor’s participation is beneficial to the overall structuring of the investment); whether a potential co-investor’s participation in the transaction would subject the Fund and/or the portfolio company to additional regulatory requirements, review and/or scrutiny, including any necessary governmental approvals required to consummate the investment; the potential co-investor’s interaction with the potential management team of the portfolio company; whether the potential co-investor has any existing positions in the portfolio company (whether in the same security in which the Fund is investing or otherwise); whether there is any evidence to |
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| suggest that there is a heightened risk with respect to the potential co-investor maintaining confidentiality; whether the potential co-investor has demonstrated a long-term and/or continuing commitment to the potential success of the Fund, other affiliated funds and/or other co-investments, including the size of such commitment; whether the potential co-investor has any known investment policies and restrictions, guideline limitations or investment objectives that are relevant to the transaction, including the need for distributions; whether the expected holding period and risk-return profile of the investment is consistent with the stated goals of the investor; and such other factors as the Adviser deems relevant and believes to be appropriate under the circumstances. Furthermore, in connection with any such co-investment by third-party co-investors, the Adviser may establish one or more investment vehicles managed or advised by the Firm to facilitate such co-investors’ investment alongside the Fund. The factors listed in the foregoing sentence are neither presented in order of importance nor weighted, except that Blackstone Credit has historically primarily relied upon the following two factors in making the determination to offer co-investment opportunities to co-investors: (i) whether the potential co-investor has demonstrated a long-term and/or continuing commitment to the potential success of the Fund (including whether a potential co-investor will help establish, recognize, strengthen and/or cultivate relationships that may provide indirectly longer-term benefits to the Fund or Other Clients and their respective underlying portfolio companies), other affiliated funds, and/or other co-investments, including the size of any such commitment and fee revenue or profits generated for the benefit of Blackstone Credit or Blackstone as a result thereof and (ii) the ability of a potential co-investor to process a co-investment decision within the required timeline of the particular transaction. Except as otherwise described herein, co-investors generally will not share Broken Deal Expenses with the Fund and Other Clients, with the result that the Fund and such Other Clients will bear all such Broken Deal Expenses, and such expenses may be significant. However, the Adviser does not intend to offer any such co-investment opportunities to shareholders in their capacity as shareholders. Blackstone Credit may (but is not required to) establish co-investment vehicles (including dedicated or “standing” co-investment vehicles) for one or more investors (including third party investors and investors in the Fund) in order to co-invest alongside the Fund in one or more future investments. The existence of these vehicles could reduce the opportunity for other shareholders to receive allocations of co-investment. In addition, the allocation of investments to Other Clients, including as described under “Other Blackstone and Blackstone Credit Clients; Allocation of Investment Opportunities” herein, may result in fewer co-investment opportunities (or reduced allocations) being made available to shareholders. |
| • | Additional Potential Conflicts of Interest with respect to Co-Investment; Strategic Relationships Involving Co-Investment: In addition, the Adviser and/or its affiliates will in certain circumstances be incentivized to offer certain potential co-investors (including, by way of example, as a part of an overall strategic relationship with the Firm) opportunities to co-invest because the extent to which any such co-investor participates in (or is offered) co-investment opportunities may impact the amount of performance-based compensation and/or management fees or other fees paid by the co-investor. The amount of carried interest or expenses charged and/or management fees paid by the Fund may be less than or exceed such amounts charged or paid by co-investment vehicles pursuant to the terms of such vehicles’ partnership agreements and/or other agreements with co-investors, and such variation in the amount of fees and expenses may create an economic incentive for Blackstone Credit to allocate a greater or lesser percentage of an investment opportunity to the Fund or such co-investment vehicles or co-investors, as the case may be. In addition, other terms of existing and future co-investment vehicles may differ materially, and in some instances may be more favorable to Blackstone Credit, than the terms of the Fund, and such different terms may create an incentive for Blackstone Credit to allocate a greater or lesser percentage of an investment opportunity to the Fund or such co-investment vehicles, as the case may be. Such incentives will from time to time give rise to conflicts of interest, and there can be no assurance that such conflicts of interest will be resolved in favor of the Fund. Accordingly, any investment opportunities that would have otherwise been offered or allocated, in whole or in part, to the Fund may be reduced and made available to co-investment vehicles. Co-investments may be offered by the Adviser on such terms and conditions as the Adviser determines in its discretion on a case-by-case basis. |
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Fund Co-Investment Opportunities. As a BDC regulated under the 1940 Act, the Fund is subject to certain limitations relating to co-investments and joint transactions with affiliates, which likely will in certain circumstances limit the Fund’s ability to make investments or enter into other transactions alongside the Other Clients. There can be no assurance that such regulatory restrictions will not adversely affect the Fund’s ability to capitalize on attractive investment opportunities. However, subject to the 1940 Act and any applicable co-investment order issued by the SEC, the Fund may co-invest with Other Clients (including co-investment or other vehicles in which the Firm or its personnel invest and that co-invest with such Other Clients) in investments that are suitable for the Fund and one or more of such Other Clients. Even if the Fund and any such Other Clients and/or co-investment or other vehicles invest in the same securities, conflicts of interest may still arise.
We have received an exemptive order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. Such order may restrict our ability to enter into follow-on investments or other transactions. Pursuant to such order, we may co-invest in a negotiated deal with certain affiliates of the Adviser or certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. We may also receive an allocation in such a deal alongside affiliates pursuant to other mechanisms to the extent permitted by the 1940 Act.
Investments in Portfolio Companies Alongside Other Clients. From time to time, the Fund will co-invest with Other Clients (including co-investment or other vehicles in which the Firm or its personnel invest and that co-invest with such Other Clients) in investments that are suitable for both the Fund and such Other Clients, as permitted by applicable law and/or any applicable SEC-granted order. Even if the Fund and any such Other Clients invest in the same securities or loans, conflicts of interest may still arise. For example, it is possible that as a result of legal, tax, regulatory, accounting, political, national security or other considerations, the terms of such investment (and divestment thereof) (including with respect to price and timing) for the Fund and such other funds and vehicles may not be the same. Additionally, the Fund and such Other Clients and/or vehicles will generally have different investment periods and/or investment objectives (including return profiles) and Blackstone Credit, as a result, may have conflicting goals with respect to the price and timing of disposition opportunities. As such, subject to applicable law and any applicable order issued by the SEC, the Fund and/or such Other Clients may dispose of any such shared investment at different times and on different terms.
Firm Involvement in Financing of Third Party Dispositions by the Fund. The Fund may from time to time dispose of all or a portion of an investment by way of accepting a third-party purchaser’s bid where the Firm or one or more Other Clients is providing financing as part of such bid or acquisition of the investment or underlying assets thereof. This generally would include the circumstance where the Firm or one or more Other Clients is making commitments to provide financing at or prior to the time such third-party purchaser commits to purchase such investments or assets from the Fund. Such involvement of the Firm or one or more Other Clients as such a provider of debt financing in connection with the potential acquisition of portfolio investments by third parties from the Fund may give rise to potential or actual conflicts of interest.
Blackstone Europe. Blackstone, Blackstone Credit and Other Clients may incorporate or otherwise organize, and one or more of its affiliates have incorporated or otherwise organized, one or more Luxembourg-based or Ireland-based entities (and in the future may organize other non-U.S. entities) that are the master holding companies or other structures through which the Fund and Other Blackstone Credit Clients may principally invest into European investments (any such structure, “Blackstone Europe”) and that may be utilized by Blackstone Credit. Blackstone Europe is expected to provide one or more of the following key service functions to the Fund and/or to the European-domiciled entities that are part of the investments of Other Blackstone Credit Clients and may also be owned, directly or indirectly, by Other Clients or their affiliates. The key service functions expected to be provided by Blackstone Europe and its employees are: (i) domiciliation, (ii) account management, (iii) administration, (iv) accounting, (v) tax, regulatory and organizational compliance, (vi) transaction support services, and (vii) local office space, though other services may also be provided. If approved by the Board of Trustees, Blackstone Europe is expected to receive fees for such services at no greater
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than market rates deemed competitive by the Firm. The Firm will endeavor to allocate fees and expenses associated with Blackstone Europe fairly and equitably, which allocation is expected to involve certain subjective assumptions based on actual data pertaining to the services provided. The Adviser believes that this method will result in a fair and equitable allocation of expenses. Any such expenses attributable directly or indirectly to the Fund, including, without limitation, the Fund’s allocable portion of overhead expenses (including, for example, the salary and compensation of personnel of Blackstone Europe) and costs associated with the leasing of office space, will be treated as a Fund Expense and will not reduce the management fee or otherwise be shared with the Fund or the shareholders.
Self-Administration of the Fund. Blackstone Credit and its affiliates expect to provide certain fund administration services to the Fund rather than engage or rely on a third party administrator to perform such services. The costs for providing these services are not included in the management fee under the Advisory Agreement and will be paid separately by the Fund. Blackstone Credit also reserves the right to charge the Fund a reduced rate for these services, or to reduce or waive such charges entirely, subject to the 1940 Act. Blackstone Credit’s ability to determine the reimbursement obligation from the Fund creates a conflict of interest. Blackstone Credit addresses this conflict by reviewing its fund administration fee to ensure that it is comparable and fair with regard to equivalent services performed by a non-affiliated third party at a rate negotiated on an arm’s length basis. The Board of Trustees periodically reviews the reimbursement obligation.
Outsourcing. Subject to the oversight and, in certain circumstances, approval by the Board of the Fund, Blackstone may outsource to third parties many of the services performed for the Fund and/or its portfolio entities, including services (such as administrative, legal, accounting, tax or other related services) that can be or historically have been performed in-house by Blackstone and its personnel. For certain third-party service providers, the fees, costs and expenses of such service providers will be borne by the Fund, and in other circumstances, the fees, costs and expenses of such service providers will be borne by Blackstone. Certain third-party service providers and/or their employees will dedicate substantially all of their business time to the Fund, Other Clients and/or their respective portfolio entities, while others will have other clients. In certain cases, third-party service providers and/or their employees may spend a significant amount of time at Blackstone offices, have dedicated office space at Blackstone, receive administrative support from Blackstone personnel or participate in meetings and events for Blackstone personnel, even though they are not Blackstone employees or affiliates. This creates a conflict of interest because Blackstone will have an incentive to outsource services to third parties due to a number of factors, including because retaining third parties will reduce Blackstone’s internal overhead and compensation costs for employees who would otherwise perform such services in-house.
The involvement of third-party service providers may present a number of risks due to Blackstone’s reduced control over the functions that are outsourced. There can be no assurances that Blackstone will be able to identify, prevent or mitigate the risks of engaging third-party service providers. The Fund may suffer adverse consequences from actions, errors or failures to act by such third parties, and will have obligations, including indemnity obligations, and limited recourse against them. Outsourcing may not occur uniformly for all Blackstone managed vehicles and accounts and, accordingly, certain costs may be incurred by (or allocated to) the Fund through the use of third-party service providers that are not incurred by (or allocated to) Other Clients.
Material, Non-Public Information. Blackstone Credit will come into possession of confidential information with respect to an issuer. Blackstone Credit may be restricted from buying, originating or selling securities, loans of, or derivatives with respect to, the issuer on behalf of the Fund until such time as the information becomes public or is no longer deemed material such that it would preclude the Fund from participating in an investment. Disclosure of such information to the Adviser’s personnel responsible for the affairs of the Fund will be on a need-to-know basis only, and the Fund may not be free to act for the Fund upon any such information. Therefore, the Fund may not have access to confidential information in the possession of Blackstone Credit that might be relevant to an investment decision to be made for the Fund. In addition, Blackstone Credit, in an effort to avoid buying or selling restrictions on behalf of the Fund or Other Blackstone Credit Clients, may choose to forego an opportunity to receive (or elect not to receive) information that other market participants or counterparties,
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including those with the same positions in the issuer as the Fund, are eligible to receive or have received, even if possession of such information would otherwise be advantageous to the Fund.
In addition, affiliates of Blackstone Credit within Blackstone may come into possession of confidential information with respect to an issuer. Blackstone Credit may be restricted from buying, originating or selling securities, loans of, or derivatives with respect to, the issuer on behalf of the Fund if the Firm deemed such restriction appropriate. Disclosure of such information to the Adviser’s personnel responsible for the affairs of the Fund will be on a need-to-know basis only, and the Fund may not be free to act upon any such information. Therefore, the Fund may not have access to confidential information in the possession of the Firm that might be relevant to an investment decision to be made by the Fund. Accordingly, the Fund may not be able to initiate a transaction that it otherwise might have initiated and may not be able to sell an investment that it otherwise might have sold.
Break-up and other Similar Fees. Break-up or topping fees with respect to the Fund’s investments can be paid to Blackstone Credit. Alternatively, the Fund could receive the break-up or topping fees directly. Break-up or topping fees paid to Blackstone Credit or the Fund in connection with a transaction could be allocated, or not, to Other Clients or co-investment vehicles that invest (or are expected to invest) alongside the Fund, as determined by Blackstone Credit to be appropriate in the circumstances. Generally, Blackstone Credit would not allocate break-up or topping fees with respect to a potential investment to the Fund, an Other Client or co-investment vehicle unless such person would also share in Broken Deal Expenses related to the potential Investment. With respect to fees received by Blackstone Credit relating to the Fund’s investments or from unconsummated transactions, shareholders will not receive the benefit of any fees relating to the Fund’s investments (including, without limitation, as described above). In the case of fees for services as a director of a portfolio company, the management fee will not be reduced to the extent any Firm personnel continues to serve as a director after the Fund has exited (or is in the process of exiting) the applicable portfolio company and/or following the termination of such employee’s employment with the Firm. For the avoidance of doubt, although the financial advisory and restructuring business of Blackstone has been spun out, to the extent any investment banking fees, consulting (including management consulting) fees, syndication fees, capital markets syndication and advisory fees (including underwriting fees), origination fees, servicing fees, healthcare consulting / brokerage fees, fees relating to group purchasing, financial advisory fees and similar fees for arranging acquisitions and other major financial restructurings, loan servicing and/or other types of insurance fees, operations fees, financing fees, fees for asset services, title insurance fees, and other similar fees and annual retainers (whether in cash or in kind) are received by Blackstone, such fees will not be required to be shared with the Fund or the shareholders and will not reduce the management fee payable by the Fund.
Broken Deal Expenses. Any expenses that may be incurred by the Fund for actual investments as described herein may also be incurred by the Fund with respect to broken deals (i.e., investments that are not consummated) (“Broken Deal Expenses”). Blackstone Credit is not required to and in most circumstances will not seek reimbursement of Broken Deal Expenses (i.e., expenses incurred in pursuit of an investment that is not consummated) from third parties, including counterparties to the potential transaction or potential co-investors. Examples of such Broken Deal Expenses include, but are not limited to, reverse termination fees, extraordinary expenses such as litigation costs and judgments, travel and entertainment expenses incurred, costs of negotiating co-investment documentation, and legal, accounting, tax and other due diligence and pursuit costs and expenses. Any such Broken Deal Expenses could, in the sole discretion of Blackstone Credit, be allocated solely to the Fund and not to Other Clients or co-investment vehicles that could have made the investment, even when the Other Client or co-investment vehicle commonly invests alongside the Fund in its investments or the Firm or Other Clients in their investments. In such cases, the Fund’s shares of expenses would increase. In the event Broken Deal Expenses are allocated to an Other Client or a co-investment vehicle, Blackstone Credit may advance such fees and expenses without charging interest until paid by the Other Client or co-investment vehicle, as applicable.
Other Firm Business Activities. The Firm, Other Clients, their portfolio companies, and personnel and related parties of the foregoing will receive fees and compensation, including performance-based and other
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incentive fees, for products and services provided to the Fund and its portfolio companies, such as fees for asset and property management; investment management, underwriting, syndication or refinancing of a loan or investment; loan servicing; special servicing; administrative services; advisory services on purchase or sale of an asset or company; investment banking and capital markets services; placement agent services; fund administration; internal legal and tax planning services; information technology products and services; insurance procurement; brokerage; solutions and risk management services; data extraction and management products and services; and other products and services. Such parties will also provide products and services for fees to the Firm, Other Clients and their portfolio companies, and their personnel and related parties, as well as third parties. Through its Innovations group, Blackstone incubates businesses that can be expected to provide goods and services to the Fund (subject to the requirements of the 1940 Act and applicable guidance) and Other Clients and their portfolio companies, as well as other Firm-related parties and third parties. By contracting for a product or service from a business related to the Firm, the Fund and its portfolio companies would provide not only current income to the business and its stakeholders, but could also create significant enterprise value in them, which would not be shared with the Fund or shareholders and could benefit the Firm directly and indirectly. Also, the Firm, Other Clients and their portfolio companies, and their personnel and related parties may receive compensation or other benefits, such as through additional ownership interests or otherwise, directly related to the consumption of products and services by the Fund and its portfolio companies. The Fund and its portfolio companies will incur expense in negotiating for any such fees and services, which will be treated as Fund Expenses. In addition, the Firm may receive fees associated with capital invested by co-investors relating to investments in which the Fund participates or otherwise, in connection with a joint venture in which the Fund participates (subject to the 1940 Act) or otherwise with respect to assets or other interests retained by a seller or other commercial counterparty with respect to which the Firm performs services. Finally, the Firm and its personnel and related parties may also receive compensation in connection with referrals and related activities of such business incubated by the Blackstone Innovations group.
The Fund will, as determined by Blackstone Credit and as permitted by the governing fund documents, bear the cost of fund administration, in house legal, tax planning and other related services provided by Firm personnel and related parties to the Fund and its portfolio companies, including the allocation of their compensation and related overhead otherwise payable by the Firm, or pay for their services at market rates, as discussed above in “Self-Administration of the Fund.” Such allocations or charges can be based on any of the following methodologies: (i) requiring personnel to periodically record or allocate their historical time spent with respect to the Fund or the Firm approximating the proportion of certain personnel’s time spent with respect to the Fund, and in each case allocating their compensation and allocable overhead based on time spent, or charging their time spent at market rates, (ii) the assessment of an overall dollar amount (based on a fixed fee or percentage of assets under management) that the Firm believes represents a fair recoupment of expenses and a market rate for such services or (iii) any other similar methodology determined by the Firm to be appropriate under the circumstances. Certain Firm personnel will provide services to few, or only one, of the Fund and Other Clients, in which case the Firm could rely upon rough approximations of time spent by the employee for purposes of allocating the salary and overhead of the person if the market rate for services is clearly higher than allocable salary and overhead. However, any methodology (including the choice thereof) involves inherent conflicts and may result in incurrence of greater expenses by the Fund and its portfolio companies than would be the case if such services were provided by third parties.
Blackstone Credit, Other Clients and their portfolio companies, and their affiliates, personnel and related parties could continue to receive fees, including performance-based or incentive fees, for the services described in the preceding paragraphs with respect to investments sold by the Fund or a portfolio company to a third party buyer after the sale is consummated. Such post-disposition involvement will give rise to potential or actual conflicts of interest, particularly in the sale process. Moreover, Blackstone Credit, Other Clients and their portfolio companies, and their affiliates, personnel and related parties may acquire a stake in the relevant asset as part of the overall service relationship, at the time of the sale or thereafter.
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Blackstone Credit does not have any obligation to ensure that fees for products and services contracted by the Fund or its portfolio companies are at market rates unless the counterparty is considered an affiliate of the Firm and given the breadth of the Firm’s investments and activities Blackstone Credit may not be aware of every commercial arrangement between the Fund and its portfolio companies, on the one hand, and the Firm, Other Clients and their portfolio companies, and personnel and related parties of the foregoing, on the other hand.
Except as set forth above, the Fund and shareholders will not receive the benefit (e.g., through a reduction to the management fee or otherwise) of any fees or other compensation or benefit received by Blackstone Credit, its affiliates or their personnel and related parties. (See also “—Service Providers, Vendors and Other Counterparties Generally” and “—Other Firm Business Activities.”)
Securities and Lending Activities. Blackstone, its affiliates and their related parties and personnel will from time to time participate in underwriting or lending syndicates with respect to current or potential portfolio companies, or may otherwise act as arrangers of financing, including with respect to the public offering and/or private placement of debt or equity securities issued by, or loan proceeds borrowed by the Fund and its portfolio companies, or otherwise in arranging financing (including loans) for such portfolio companies or advise on such transactions. Such underwritings or engagements may be on a firm commitment basis or may be on an uncommitted “best efforts” basis, and the underwriting or financing parties are under no duty to provide any commitment unless specifically set forth in the relevant contract. Blackstone may also provide placement or other similar services to purchasers or sellers of securities, including loans or instruments issued by portfolio companies. There may also be circumstances in which the Fund commits to purchase any portion of such issuance from the portfolio company that a Blackstone broker-dealer intends to syndicate to third parties. As a result thereof, subject to the limitations of the 1940 Act, Blackstone may receive commissions or other compensation, thereby creating a potential conflict of interest. This could include, by way of example, fees and/ or commissions for equity syndications to co-investment vehicles. In certain cases, subject to the limitations of the 1940 Act, a Blackstone broker-dealer will from time to time act as the managing underwriter or a member of the underwriting syndicate or broker for the Fund or its portfolio companies, or as dealer, broker or advisor to a counterparty to the Fund or a portfolio company and purchase securities from or sell securities to the Fund, Other Clients or portfolio companies of the Fund or Other Clients or advise on such transactions. Blackstone will also from time to time, on behalf of the Fund or other parties to a transaction involving the Fund or its portfolio companies, effect transactions, including transactions in the secondary markets that result in commissions or other compensation paid to Blackstone by the Fund or its portfolio companies or the counterparty to the transaction, thereby creating a potential conflict of interest. This could include, by way of example, fees and/or commissions for equity syndications to co-investment vehicles. Subject to applicable law, Blackstone will from time to time receive underwriting fees, discounts, placement commissions, loan modification or restructuring fees, servicing fees, capital markets advisory fees, lending arrangement fees, asset/property management fees, insurance (including title insurance) fees and consulting fees, monitoring fees, commitment fees, syndication fees, origination fees, organizational fees, operational fees, loan servicing fees, and financing and divestment fees (or, in each case, rebates in lieu of any such fees, whether in the form of purchase price discounts or otherwise, even in cases where Blackstone, an Other Client or its portfolio companies are purchasing debt) or other compensation with respect to the foregoing activities, which are not required to be shared with the Fund. In addition, the management fee with respect to a shareholder generally will not be reduced by such amounts. Therefore, Blackstone will from time to time have a potential conflict of interest regarding the Fund and the other parties to those transactions to the extent it receives commissions, discounts or other compensation from such other parties. The Board of Trustees, in its sole discretion, will approve any transactions, subject to the limitations of the 1940 Act, in which a Blackstone broker-dealer acts as an underwriter, as broker for the Fund, or as dealer, broker or advisor, on the other side of a transaction with the Fund only where the Board of Trustees believes in good faith that such transactions are appropriate for the Fund and, by executing a subscription agreement for shares in the Fund, a shareholder consents to all such transactions, along with the other transactions involving conflicts of interest described herein, to the fullest extent permitted by law.
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When Blackstone serves as underwriter with respect to securities of the Fund or its portfolio companies, the Fund and such portfolio companies could from time to time be subject to a “lock-up” period following the offering under applicable regulations during which time the Fund or portfolio company would be unable to sell any securities subject to the “lock-up.” This may prejudice the ability of the Fund and its portfolio companies to dispose of such securities at an opportune time. In addition, Blackstone Capital Markets may serve as underwriter in connection with the sale of securities by the Fund or its portfolio companies. Conflicts may arise because such engagement would result in Blackstone Capital Markets receiving selling commissions or other compensation in connection with such sale. (See also “—Portfolio Company Relationships Generally” below).
Blackstone and Blackstone Credit employees are generally permitted to invest in alternative investment funds, real estate funds, hedge funds or other investment vehicles, including potential competitors of the Fund. The Fund will not receive any benefit from any such investments.
PJT. On October 1, 2015, Blackstone spun off its financial and strategic advisory services, restructuring and reorganization advisory services, and its Park Hill fund placement businesses and combined these businesses with PJT Partners Inc. (“PJT”), an independent financial advisory firm founded by Paul J. Taubman. While the combined business operates independently from Blackstone and is not an affiliate thereof, it is expected that there will be substantial overlapping ownership between Blackstone and PJT for a considerable period of time going forward. Therefore, conflicts of interest will arise in connection with transactions between or involving the Fund and its portfolio companies, on the one hand, and PJT, on the other. The pre-existing relationship between Blackstone and its former personnel involved in financial and strategic advisory services at PJT, the overlapping ownership and co-investment and other continuing arrangements between PJT and Blackstone may influence Blackstone Credit to select or recommend PJT to perform services for the Fund or its portfolio companies, the cost of which will generally be borne directly or indirectly by the Fund. Given that PJT is no longer an affiliate of Blackstone, Blackstone Credit and its affiliates will be free to cause the Fund and portfolio companies to transact with PJT generally without restriction under the applicable governing documents, notwithstanding the relationship between Blackstone and PJT.
Portfolio Company Relationships Generally. The Fund’s portfolio companies are expected to be counterparties to or participants in agreements, transactions or other arrangements with portfolio companies of Other Clients for the provision of goods and services, purchase and sale of assets and other matters. Although the Firm may determine that such agreements, transactions or other arrangements are consistent with the requirements of such Other Clients’ offering and/or governing agreements, such agreements, transactions or other arrangements may not have otherwise been entered into but for the affiliation with Blackstone Credit and/or Blackstone. These agreements, transactions or other agreements involve fees, commissions, servicing payments and/or discounts to Blackstone Credit, any Blackstone affiliate (including personnel) or a portfolio company, none of which reduce the management fee payable by the Fund. This may give rise to actual or potential conflicts of interest for the Adviser, the Fund and/or their respective affiliates, as such agreements, transactions and arrangements may be more favorable for one portfolio company than another, thus benefiting the Fund or Other Clients at the expense of the other. For example, the Firm may cause, or offer the opportunity to, portfolio companies to enter into agreements regarding group procurement (such as the group purchasing organization), benefits management, purchase of title and/or other insurance policies (which may be pooled across portfolio companies and discounted due to scale) and other operational, administrative or management related matters from a third party or a Firm affiliate, and other similar operational initiatives that may result in commissions or similar payments, including related to a portion of the savings achieved by the portfolio company. Such agreements, transactions or other arrangements may be entered into without the consent or direct involvement of the Fund and/or such Other Client or the consent of the Board of Trustees and/or the shareholders of the Fund or such Other Client (including, without limitation, in the case of minority and/or non-controlling investments by the Fund in such portfolio companies or the sale of assets from one portfolio company to another) and/or such Other Client. In any such case, the Fund may not be involved in the negotiation process, and there can be no assurance that the terms of any such agreement, transaction or other arrangement will be as favorable to the Fund as otherwise would be the case if the counterparty were not related to the Firm.
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In addition, it is possible that certain portfolio companies of Other Clients or companies in which Other Clients have an interest will compete with the Fund for one or more investment opportunities and/or engage in activities that may have adverse consequences on the Fund and/or its portfolio companies. As an example of the latter, the laws and regulations of certain jurisdictions (e.g., bankruptcy, environmental, consumer protection and/ or labor laws) may not recognize the segregation of assets and liabilities as between separate entities and may permit recourse against the assets of not just the entity that has incurred the liabilities, but also the other entities that are under common control with, or part of the same economic group as, such entity. In such circumstances, the assets of the Fund and/or its portfolio companies may be used to satisfy the obligations or liabilities of one or more Other Clients, their portfolio companies and/or affiliates.
Certain portfolio companies may have established or invested in, or may in the future establish or invest in, vehicles that are managed exclusively by the portfolio company (and not the Fund or the Firm or any of its affiliates) and that invest in asset classes or industry sectors (such as cyber security) that fall within the Fund’s investment strategy. Such vehicles, which may not be considered affiliates of the Firm and would not be subject to the Firm’s policies and procedures, may compete with the Fund for investment opportunities. Portfolio companies and affiliates of the Firm may also establish other investment products, vehicles and platforms focusing on specific asset classes or industry sectors (such as reinsurance) that may compete with the Fund for investment opportunities (it being understood that such arrangements may give rise to conflicts of interest that may not necessarily be resolved in favor of the Fund). Portfolio companies and affiliates of the Firm may also establish other investment products, vehicles and platforms focusing on specific asset classes or industry sectors (such as reinsurance) that may compete with the Fund for investment opportunities (it being understood that such arrangements may give rise to conflicts of interest that may not necessarily be resolved in favor of the Fund). In addition, the Fund may hold non-controlling interests in certain portfolio companies and, as a result, such portfolio companies could engage in activities outside of the Fund’s control that may have adverse consequences on the Fund and/or its other portfolio companies.
In addition, the Firm has also entered into an investment management arrangement whereby it provides investment management services to Fidelity & Guaranty Life Insurance Company (a portfolio company of certain Other Clients), which will involve investments across a variety of asset classes (including investments that may otherwise be appropriate for the Fund), and in the future the Firm may enter into similar arrangements with other portfolio companies. Such arrangements may reduce the allocations of investments to the Fund, and the Firm may be incentivized to allocate investments away from the Fund to the counterparties to such investment management arrangements or other vehicles/accounts to the extent the economic arrangements related thereto are more favorable to the Firm relative to the terms of the Fund.
Further, portfolio companies with respect to which the Fund may elect members of the Board of Trustees may, as a result, subject the Fund and/or such directors to fiduciary obligations to make decisions that they believe to be in the best interests of any such portfolio company. Although in most cases the interests of the Fund and any such portfolio company will be aligned, this may not always be the case. This can be expected to create conflicts of interest between the relevant director’s obligations to any such portfolio company and its stakeholders, on the one hand, and the interests of the Fund, on the other hand. Although Blackstone Credit will generally seek to minimize the impact of any such conflicts, there can be no assurance they will be resolved favorably for the Fund. For instance, such positions could impair the ability of the Fund to sell the securities of an issuer in the event a director receives material non-public information by virtue of his or her role, which would have an adverse effect on the Fund. Furthermore, an employee of Blackstone serving as a director to a portfolio company owes a fiduciary duty to the portfolio company, on the one hand, and the Fund, on the other hand, and such employee may be in a position where they must make a decision that is either not in the best interest of the Fund, or is not in the best interest of the portfolio company. Blackstone personnel serving as directors may make decisions for a portfolio company that negatively impact returns received by the Fund as an investor in the portfolio company. In addition, to the extent an employee serves as a director on the board of more than one portfolio company, such employees’ fiduciaries duties among the two portfolio companies can be expected to create a conflict of interest. Certain decisions made by a director may subject the Adviser, its affiliates or the Fund to claims they would not otherwise be subject to as an
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investor, including claims of breach of duty of loyalty, securities claims and other director-related claims. In general, the Fund will indemnify the Adviser and Blackstone Credit personnel from such claims.
Portfolio Company Service Providers and Vendors. Subject to applicable law, the Fund, Other Clients, portfolio companies of each of the foregoing and Blackstone Credit can be expected to engage portfolio companies of the Fund and Other Clients to provide some or all of the following services: (a) corporate support services (including, without limitation, accounts payable, accounting/audit (including valuation support services), account management, insurance, procurement, placement, brokerage, consulting, cash management, corporate secretarial services, domiciliation, data management, directorship services, finance/budget, human resources, information technology/systems support, internal compliance/KYC, judicial processes, legal, operational coordination (i.e., coordination with JV partners, property managers), risk management, reporting, tax, tax analysis and compliance (e.g., CIT and VAT compliance), transfer pricing and internal risk control, treasury and valuation services); (b) loan services (including, without limitation, monitoring, restructuring and work-out of performing, sub-performing and nonperforming loans, administrative services, and cash management); (c) management services (i.e., management by a portfolio company, Blackstone affiliate or third party (e.g., a third-party manager) of operational services); (d) operational services (i.e., general management of day to day operations); (e) risk management (tax and treasury); (f) insurance procurement, placement, brokerage and consulting services; and (g) other services. Similarly, Blackstone Credit, Other Clients and their portfolio companies can be expected to engage portfolio companies of the Fund to provide some or all of these services. Some of the services performed by portfolio company service providers could also be performed by Blackstone Credit from time to time and vice versa. Fees paid by the Fund or its portfolio companies to the other portfolio company service providers do not reduce the management fee payable by the Fund and are not otherwise shared with the Fund.
Portfolio companies of the Fund and Other Clients that can be expected to provide services to the Fund and its portfolio companies include, without limitation, the following, and may include additional portfolio companies that may be formed or acquired in the future:
BTIG. BTIG, LLC (“BTIG”) is a global financial services firm in which certain Blackstone entities own a strategic minority investment. BTIG provides institutional trading, investment banking, research and related brokerage services and may provide goods and services for the Fund or its portfolio companies.
Optiv. Optiv Security, Inc. is a portfolio company held by certain Blackstone private equity funds that provides a full slate of information security services and solutions and may provide goods and services for the Fund and its portfolio companies.
PSAV. PSAV, Inc. is a portfolio company held by certain Blackstone private equity funds that provides outsourced audiovisual services and event production and may provide goods and services for the Fund and its portfolio companies.
Refinitiv. On October 1, 2018, a consortium led by Blackstone announced that private equity funds managed by Blackstone had completed an acquisition of Thomson Reuters’ Financial & Risk business (“Refinitiv”). On January 29, 2021, Refinitiv was sold to London Stock Exchange Group (“LSEG”), with Blackstone private equity funds receiving a minority stake in LSEG. Refinitiv operates a pricing service that provides valuation services and may provide goods and services for the Fund and its portfolio companies.
Kryalos. Blackstone through one or more Other Clients has made a minority investment in Kryalos Investments S.r.l. (“Kryalos”), an operating partner in certain real estate investments made by Other Clients. Kryalos may perform services for the Fund and its portfolio companies.
Valkyrie. Valkyrie BTO Aviation LLC (“Valkyrie”) is a Blackstone affiliate that provides asset management and loan servicing solutions for investments in the aviation space, including for investments by the Fund, Other Clients and their portfolio companies, affiliates and related parties. The asset management services provided by Valkyrie with respect to such investments can be expected to include, without limitation, origination or sourcing of investment opportunities, diligence, negotiation, analysis, servicing,
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development, management and disposition and other related services (e.g., marketing, financial, administrative, legal and risk management). In exchange for such services, Valkyrie earns fees, including through incentive-based compensation payable to their management team, which would have otherwise been paid to third parties. As a result of the foregoing and Blackstone’s ownership of Valkyrie, Blackstone may be incentivized to participate in and pursue more aviation-related transactions due to the prospect of Valkyrie earning such fees. Engaging Valkyrie to perform services will reduce Blackstone’s internal overhead and compensation costs for employees who would otherwise perform such services. As a result, while Blackstone believes that Valkyrie will provide services at or better than those provided by third parties, there is an inherent conflict of interest that would incentivize Blackstone to pursue aviation-related transactions and engage Valkyrie to perform such services.
The Fund and its portfolio companies will compensate one or more of these service providers and vendors owned by the Fund or Other Clients, including through incentive based compensation payable to their management teams and other related parties. The incentive based compensation paid with respect to a portfolio company or asset of the Fund or Other Clients will vary from the incentive based compensation paid with respect to other portfolio companies and assets of the Fund and Other Clients; as a result the management team or other related parties can be expected to have greater incentives with respect to certain assets and portfolio companies relative to others, and the performance of certain assets and portfolio companies may provide incentives to retain management that also service other assets and portfolio companies. Some of these service providers and vendors owned or controlled by the Fund or Other Clients will charge the Fund and its portfolio companies for goods and services at rates generally consistent with those available in the market for similar goods and services. The discussion regarding the determination of market rates under “Firm Affiliated Service Providers” herein applies equally in respect of the fees and expenses of the portfolio company service providers, if charged at rates generally consistent with those available in the market. Other service providers and vendors owned and/or controlled by the Fund or Other Clients pass through expenses on a cost reimbursement, no-profit or break-even basis, in which case the service provider allocates costs and expenses directly associated with work performed for the benefit of the Fund and its portfolio companies to them, along with any related tax costs and an allocation of the service provider’s overhead, including any of the following: salaries, wages, benefits and travel expenses; marketing and advertising fees and expenses; legal, accounting and other professional fees and disbursements; office space and equipment; insurance premiums; technology expenditures, including hardware and software costs; costs to engage recruitment firms to hire employees; diligence expenses; one-time costs, including costs related to building-out and winding-down a portfolio company; taxes; and other operating and capital expenditures. Any of the foregoing costs, although allocated in a particular period, will, in certain circumstances, relate to activities occurring outside the period, and therefore the Fund could pay more than its pro rata portion of fees for services. The allocation of overhead among the entities and assets to which services are provided can be expected to be based on any of a number of different methodologies, including, without limitation, “cost” basis as described above, “time-allocation” basis, “per unit” basis, “per square footage” basis or “fixed percentage” basis. There can be no assurance that a different manner of allocation would result in the Fund and its portfolio companies bearing less or more costs and expenses. Blackstone Credit will not always perform or obtain benchmarking analysis or third-party verification of expenses with respect to services provided on a cost reimbursement, no profit or break even basis. There can be no assurances that amounts charged by portfolio company service providers that are not controlled by the Fund or Other Clients will be consistent with market rates or that any benchmarking, verification or other analysis will be performed with respect to such charges. If benchmarking is performed, the related expenses will be borne by the Fund, Other Clients and their respective portfolio companies and will not reduce the management fee. A portfolio company service provider will, in certain circumstances, subcontract certain of its responsibilities to other portfolio companies. In such circumstances, the relevant subcontractor could invoice the portfolio company for fees (or in the case of a cost reimbursement arrangement, for allocable costs and expenses) in respect of the services provided by the subcontractor. The portfolio company, if charging on a cost reimbursement, no-profit or break-even basis, would in turn allocate those costs and expenses as it allocates other fees and expenses as described above. Similarly, Other Clients, their portfolio companies and Blackstone Credit can be expected to engage portfolio companies of the Fund to provide services, and these portfolio companies will generally charge for services in the same manner
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described above, but the Fund and its portfolio companies generally will not be reimbursed for any costs (such as start-up costs) relating to such portfolio companies incurred prior to such engagement. Some of the services performed by these service providers could also be performed by Blackstone Credit from time to time and vice versa. Fees paid by the Fund or its portfolio companies to these service providers do not the management fee payable to the Adviser.
Where compensation paid to an affiliated service provider from the Fund or its portfolio company is based on market rates, such compensation will not be based on the cost incurred by the applicable service provider and therefore will likely result in a profit to such service provider. In the event the service provider is an affiliate of Blackstone Credit, Blackstone Credit experiences a conflict of interest in determining the terms of any such engagement. There can be no assurance that an unaffiliated third party would not charge a lesser rate.
Service Providers, Vendors and Other Counterparties Generally. Certain third party advisors and other service providers and vendors to the Fund and its portfolio companies (including accountants, administrators, lenders, bankers, brokers, attorneys, consultants, title agents and investment or commercial banking firms) are owned by the Firm, the Fund or Other Clients or provide goods or services to, or have other business, personal, financial or other relationships with, the Firm, the Other Clients and their respective portfolio companies and affiliates and personnel. Such advisors and service providers referred to above may be investors in the Fund, affiliates of the Adviser, sources of financing and investment opportunities or co-investors or commercial counterparties or entities in which the Firm and/or Other Clients have an investment, and payments by the Fund and/or such entities may indirectly benefit the Firm, the Other Clients and their respective portfolio companies or any affiliates or personnel. Also, advisors, lenders, investors, commercial counterparties, vendors and service providers (including any of their affiliates or personnel) to the Fund and its portfolio companies could have other commercial or personal relationships with the Firm, Other Clients and their respective portfolio companies, or any affiliates, personnel or family members of personnel of the foregoing. Although the Firm selects service providers and vendors it believes are most appropriate in the circumstances based on its knowledge of such service providers and vendors (which knowledge is generally greater in the case of service providers and vendors that have other relationships to the Firm), the relationship of service providers and vendors to the Firm as described above will influence the Firm in deciding whether to select, recommend or form such an advisor or service provider to perform services for the Fund, subject to applicable law, or a portfolio company, the cost of which will generally be borne directly or indirectly by the Fund and can be expected to incentivize the Firm to engage such service provider over a third party, utilize the services of such service providers and vendors more frequently than would be the case absent the conflict, or to pay such service providers and vendors higher fees or commissions, resulting in higher fees and expenses being borne by the Fund, than would be the case absent the conflict. The incentive could be created by current income and/or the generation of enterprise value in a service provider or vendor; the Firm can be expected to also have an incentive to invest in or create service providers and vendors to realize on these opportunities.
The Firm has a practice of not entering into any arrangements with advisors, vendors or service providers that provide lower rates or discounts to the Firm itself compared to those it enters into on behalf of the Fund and its portfolio companies for the same services. However, legal fees for unconsummated transactions are often charged at a discount rate, such that if the Fund and its portfolio companies consummate a higher percentage of transactions with a particular law firm than the Firm, the Fund, Other Clients and their portfolio companies, the shareholders could indirectly pay a higher net effective rate for the services of that law firm than the Firm, the Fund or Other Clients or their portfolio companies. Also, advisors, vendors and service providers often charge different rates or have different arrangements for different types of services. For example, advisors, vendors and service providers often charge fees based on the complexity of the matter as well as the expertise and time required to handle it. Therefore, to the extent the types of services used by the Fund and its portfolio companies are different from those used by the Firm, Other Clients and their portfolio companies, and their affiliates and personnel, the Fund and its portfolio companies can be expected to pay different amounts or rates than those paid by such other persons. Similarly, the Firm, the Fund, the Other Clients and their portfolio companies and affiliates can be expected to enter into agreements or other arrangements with vendors and other similar
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counterparties (whether such counterparties are affiliated or unaffiliated with the Firm) from time to time whereby such counterparty will, in certain circumstances, charge lower rates (or no fee) or provide discounts or rebates for such counterparty’s products or services depending on the volume of transactions in the aggregate or other factors.
Subject to applicable law, the Fund, Other Clients and their portfolio companies are expected to enter into joint ventures with third parties to which the service providers and vendors described above will provide services. In some of these cases, the third party joint venture partner may negotiate to not pay its pro rata share of fees, costs and expenses to be allocated as described above, in which case the Fund, Other Clients and their portfolio companies that also use the services of the portfolio company service provider will, directly or indirectly, pay the difference, or the portfolio company service provider will bear a loss equal to the difference.
The Firm may, from time to time, encourage service providers to funds and investments to use, generally at market rates and/or on arm’s length terms (and/or on the basis of best execution, if applicable), the Firm-affiliated service providers in connection with the business of the Fund, portfolio companies, and unaffiliated entities. This practice creates a conflict of interest because it provides an indirect benefit to the Firm in the form of added business for the Firm-affiliated service providers without any reduction to the Fund’s management fee.
Certain portfolio companies that provide services to the Fund, Other Clients and/or portfolio companies or assets of the Fund and/or Other Clients may be transferred between and among the Fund and/or Other Clients (where the Fund may be a seller or a buyer in any such transfer) for minimal or no consideration (based on a third-party valuation confirming the same). Such transfers may give rise to actual or potential conflicts of interest for Blackstone Credit.
Firm Affiliated Service Providers. Certain of the Fund’s, the Firm’s and/or portfolio companies’ advisers and other service providers, or their affiliates (including accountants, administrators, lenders, bankers, brokers, attorneys, consultants, and investment or commercial banking firms) also provide goods or services to, or have business, personal, financial or other relationships with, the Firm, its affiliates and portfolio companies. Such advisers and service providers (or their affiliates) may be investors in the Fund, affiliates of the Firm, sources of investment opportunities, co-investors, commercial counterparties and/or portfolio companies in which the Firm and/or the Fund has an investment. Accordingly, payments by the Fund and/or such entities may indirectly benefit the Fund and/or its affiliates, including the Firm and Other Clients. No fees charged by these service providers and vendors will reduce the management fees payable to the Adviser. Furthermore, the Firm, the Other Clients and their portfolio companies and their affiliates and related parties will use the services of these Firm affiliates, including at different rates. Although the Firm believes the services provided by its affiliates are equal or better than those of third parties, the Firm directly benefits from the engagement of these affiliates, and there is therefore an inherent conflict of interest such as those described above.
Because the Firm has many different businesses, including the Blackstone Capital Markets Group, which Blackstone investment teams and portfolio companies may engage to provide underwriting and capital market advisory services, it is subject to a number of actual and potential conflicts of interest, greater regulatory oversight and more legal and contractual restrictions than that to which it would be subject if it had just one line of business. To the extent Blackstone determines appropriate, conflict mitigation strategies may be put in place with respect to a particular circumstance, such as internal information barriers or recusal, disclosure or other steps determined appropriate by the Adviser. Service providers affiliated with the Firm, which are generally expected to receive competitive market rate fees (as determined by the Adviser or its affiliates) with respect to certain Investments, include:
| • | BPM. Blackstone Property Management is a Blackstone affiliate that may provide property management, leasing oversight, corporate services (including accounting and reporting), development and construction management, and transaction support services to any of the Fund’s investment properties primarily located in the United Kingdom and continental Europe. |
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| • | Equity Healthcare. Equity Healthcare LLC (“Equity Healthcare”) is a Blackstone affiliate that negotiates with providers of standard administrative services for health benefit plans and other related services for cost discounts, quality of service monitoring, data services and clinical consulting. Because of the combined purchasing power of its client participants, which include unaffiliated third parties, Equity Healthcare is able to negotiate pricing terms that are believed to be more favorable than those that the portfolio companies could obtain on an individual basis. The fees received by Equity Healthcare in connection with services provided to investments will not reduce the management fee payable by the Fund. |
| • | LNLS. Blackstone wholly owns a leading national title agency, Lexington National Land Services (“LNLS”), a title agent company. LNLS may act as an agent for one or more underwriters in issuing title policies and/or providing support services in connection with investments by the Fund, Other Clients and third parties. LNLS focuses on transactions in rate-regulated U.S. states where the cost of title insurance is non-negotiable. LNLS will not perform services in nonregulated U.S. states for the Fund and Other Clients unless (i) in the context of a portfolio transaction that includes assets in rate-regulated U.S. states, (ii) as part of a syndicate of title insurance companies where the rate is negotiated by other insurers or their agents, (iii) when a third party is paying all or a material portion of the premium or (iv) when providing only support services to the underwriter and not negotiating the title policy or issuing it to the insured. LNLS earns fees, which would have otherwise been paid to third parties, by providing title agency services and facilitating the placement of title insurance with underwriters. Blackstone receives distributions from LNLS in connection with investments by the Fund based on its equity interest in LNLS. In each case, there will be no related reduction in management fees. As a result, while Blackstone believes that venture will provide services at or better than those provided by third parties (even in jurisdictions where insurance rates are regulated), there is an inherent conflict of interest that would incentivize Blackstone to engage LNLS over a third party. |
| • | Refinitiv. See “—Portfolio Company Service Providers and Vendors.” |
Certain Blackstone-affiliated service providers and their respective personnel will receive a management promote, an incentive fee and other performance-based compensation in respect of investments, sales or other transaction volume. Furthermore, Blackstone-affiliated service providers may charge costs and expenses based on allocable overhead associated with personnel working on relevant matters (including salaries, benefits and other similar expenses).
In connection with such relationships, Blackstone Credit and, if required by applicable law, the Board of Trustees, will make determinations of competitive market rates based on its consideration of a number of factors, which are generally expected to include Blackstone Credit’s experience with non-affiliated service providers, benchmarking data and other methodologies determined by Blackstone Credit to be appropriate under the circumstances (i.e., rates that fall within a range that Blackstone Credit has determined is reflective of rates in the applicable market and certain similar markets, though not necessarily equal to or lower than the median rate of comparable firms). In respect of benchmarking, while Blackstone Credit often obtains benchmarking data regarding the rates charged or quoted by third parties for services similar to those provided by Blackstone Credit affiliates in the applicable market or certain similar markets, relevant comparisons may not be available for a number of reasons, including, without limitation, as a result of a lack of a substantial market of providers or users of such services or the confidential or bespoke nature of such services (e.g., different assets may receive different services). In addition, benchmarking data is based on general market and broad industry overviews, rather than determined on an asset by asset basis. As a result, benchmarking data does not take into account specific characteristics of individual assets then invested in by the Fund (such as location or size), or the particular characteristics of services provided. For these reasons, such market comparisons may not result in precise market terms for comparable services. Expenses to obtain benchmarking data will be borne by the Fund, Other Clients and their respective portfolio companies and will not reduce the management fee. Finally, in certain circumstances Blackstone Credit may determine that third party benchmarking is unnecessary, either because the price for a particular good or service is mandated by law (e.g., title insurance in rate regulated states) or because
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Blackstone Credit has access to adequate market data to make the determination without reference to third party benchmarking. For example, certain portfolio companies may enter into an employer health program arrangement or similar arrangements with Equity Healthcare, a Blackstone affiliate that negotiates with providers of standard administrative services and insurance carriers for health benefit plans and other related services for cost discounts, quality of service monitoring, data services and clinical consulting. Because of the combined purchasing power of its client participants, Equity Healthcare is able to negotiate pricing terms from providers that are believed to be more favorable than the companies could obtain for themselves on an individual basis. The payments made to Blackstone in connection with Equity Healthcare, group purchasing, insurance and benefits management will not reduce the management fee payable to the Adviser.
Portfolio company service providers described in this section are generally owned by one or more Blackstone funds. In certain instances a similar company could be owned by Blackstone directly. Blackstone could cause a transfer of ownership of one of these service providers from an Other Client to the Fund. The transfer of a portfolio company service provider between the Fund and an Other Client (where the Fund may be a seller or a buyer in any such transfer) will generally be consummated for minimal or no consideration. The Adviser may, but is not required to, obtain a third-party valuation confirming the same, and if it does, the Adviser may rely on such valuation.
Advisers and service providers, or their affiliates, often charge different rates, including below-market or no fee, or have different arrangements for different types of services. With respect to service providers, for example, the fee for a given type of work may vary depending on the complexity of the matter as well as the expertise required and demands placed on the service provider. Therefore, to the extent the types of services used by the Fund and/or portfolio companies differ from those used by the Firm and its affiliates (including personnel), Blackstone Credit and/or Blackstone or their respective affiliates (including personnel) may pay different amounts or rates than those paid by the Fund and/or portfolio companies. However, Blackstone Credit and its affiliates have a longstanding practice of not entering into any arrangements with advisers or service providers that could provide for lower rates or discounts than those available to the Fund, Other Clients and/or portfolio companies for the same services. Furthermore, advisers and service providers may provide services exclusively to the Firm and its affiliates, including the Fund, Other Clients and their portfolio companies, although such advisers and service providers would not be considered employees of Blackstone or Blackstone Credit. Similarly, Blackstone, Blackstone Credit, each of their respective affiliates, the Fund, the Other Clients and/or their portfolio companies, may enter into agreements or other arrangements with vendors and other similar counterparties (whether such counterparties are affiliated or unaffiliated with the Firm) from time to time whereby such counterparty may charge lower rates (or no fee) and/ or provide discounts or rebates for such counterparty’s products and/or services depending on certain factors, including volume of transactions entered into with such counterparty by the Firm, its affiliates, the Fund, the Other Clients and their portfolio companies in the aggregate.
In addition, investment banks or other financial institutions, as well as Blackstone employees, may also be investors in the Fund. These institutions and employees are a potential source of information and ideas that could benefit the Fund. Blackstone has procedures in place reasonably designed to prevent the inappropriate use of such information by the Fund.
Transactions with Portfolio Companies. The Firm and portfolio companies of the Fund and Other Clients provide products and services to or otherwise contract with the Fund and its portfolio companies, among others. In the alternative, the Firm may form a joint venture with such a company to implement such referral arrangement. For example, such arrangements may include the establishment of a joint venture or other business arrangement between the Firm, on the one hand, and a portfolio company of the Fund, portfolio company of an Other Client or third party, on the other hand, pursuant to which the joint venture or business provides services (including, without limitation, corporate support services, loan management services, management services, operational services, risk management services, data management services, consulting services, brokerage services, insurance procurement, placement, brokerage and consulting services, and other services) to portfolio
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companies of the Fund (and portfolio companies of Other Clients) that are referred to the joint venture or business by the Firm. The Firm, the Fund and Other Clients and their respective portfolio companies and personnel and related parties of the foregoing may make referrals or introductions to portfolio companies of the Fund or Other Clients in an effort, in part, to increase the customer base of such companies or businesses (and therefore the value of the investment held by the Fund or Other Client, which would also benefit the Firm financially through its participation in such joint venture or business) or because such referrals or introductions may result in financial benefits, such as additional equity ownership and/or milestones benefitting the referring or introducing party that are tied or related to participation by the portfolio companies of the Fund and/or of Other Clients, accruing to the party making the introduction. The Fund and the shareholders will not share in any fees, economics, equity or other benefits accruing to the Firm, Other Clients and their portfolio companies as a result of the introduction of the Fund and its portfolio companies. Moreover, payments made to the Firm in connection with such arrangements will not reduce the management fee payable to the Adviser. There may, however, be instances in which the applicable arrangements provide that the Fund or its portfolio companies share in some or all of any resulting financial incentives (including, in some cases, equity ownership) based on structures and allocation methodologies determined in the sole discretion of the Firm. Conversely, where the Fund or one of its portfolio companies is the referring or introducing party, rather than receiving all of the financial incentives (including, in some cases, additional equity ownership) for similar types of referrals and/or introductions, such financial incentives (including, in some cases, equity ownership) may be similarly shared with the participating Other Clients or their respective portfolio companies.
The Firm may also enter into commercial relationships with third party companies, including those in which the Fund considered making an investment (but ultimately chose not to pursue). For example, the Firm may enter into an introducer engagement with such company, pursuant to which the Firm introduces the company to unaffiliated third parties (which may include current and former portfolio companies and portfolio companies of Other Clients and/or their respective employees) in exchange for a fee from, or equity interest in, such company. Even though the Firm may benefit financially from this commercial relationship, the Firm will be under no obligation to reimburse the Fund for Broken Deal Expenses incurred in connection with its consideration of the prospective investment and such arrangements will not be subject to the management fee payable to the Adviser and otherwise described herein.
Additionally, the Firm or an affiliate thereof will from time to time hold equity or other investments in companies or businesses that provide services to or otherwise contract with portfolio companies. Blackstone and Blackstone Credit have in the past entered (and can be expected in the future to enter) into relationships with companies in the information technology, corporate services and related industries whereby Blackstone acquires an equity or similar interest in such company. In connection with such relationships, Blackstone and/or Blackstone Credit may also make referrals and/or introductions to portfolio companies (which may result in financial incentives (including additional equity ownership) and/or milestones benefitting Blackstone and/or Blackstone Credit that are tied or related to participation by portfolio companies). Such joint venture or business could use data obtained from portfolio companies of the Fund and/or portfolio companies of Other Clients. (See “—Data.”) These arrangements may be entered into without the consent or direct involvement of the Fund. The Fund and the shareholders will not share in any fees or economics accruing to Blackstone and/or Blackstone Credit as a result of these relationships and/or participation by portfolio companies.
With respect to transactions or agreements with portfolio companies (including, for the avoidance of doubt, long-term incentive plans), at times if officers unrelated to the Firm have not yet been appointed to represent a portfolio company, the Firm may negotiate and execute agreements between the Firm and/or the Fund on the one hand, and the portfolio company or its affiliates, on the other hand, without arm’s length representation of the portfolio company, which could entail a conflict of interest in relation to efforts to enter into terms that are arm’s length. Among the measures the Firm may use to mitigate such conflicts are to involve outside counsel to review and advise on such agreements and provide insights into commercially reasonable terms, or establish separate groups with information barriers within the Firm to advise on each side of the negotiation.
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Related Party Leasing. Subject to applicable law, the Fund and its portfolio companies may lease property to or from Blackstone, Other Clients and their portfolio companies and affiliates and other related parties. The leases are generally expected to be at market rates. Blackstone may confirm market rates by reference to other leases it is aware of in the market, which Blackstone expects to be generally indicative of market given the scale of Blackstone’s real estate business. Blackstone will nonetheless have conflicts of interest in making these determinations. There can be no assurance that the Fund and its portfolio companies will lease to or from any such related parties on terms as favorable to the Fund and its portfolio companies as would apply if the counterparties were unrelated.
Cross-Guarantees and Cross-Collateralization. While Blackstone Credit generally seeks to use reasonable efforts to avoid cross-guarantees and other similar arrangements, a counterparty, lender or other participant in any transaction to be pursued by the Fund (other than alternative investment vehicles) and/or the Other Clients may require or prefer facing only one fund entity or group of entities, which may result in any of the Fund, such Other Clients, the portfolio companies, such Other Clients’ portfolio companies and/or other vehicles being jointly and severally liable for such applicable obligation (subject to any limitations set forth in the applicable partnership agreements or other governing documents thereof), which in each case may result in the Fund, such Other Clients, such portfolio companies, and/or vehicles entering into a back-to-back or other similar reimbursement agreement, subject to applicable law. In such situation, better financing terms may be available through a cross-collateralized arrangement, but it is not expected that any of the Fund or such Other Clients or vehicles would be compensated (or provide compensation to the other) for being primarily liable vis-à-vis such third party counterparty. Also, it is expected that cross-collateralization will generally occur at portfolio companies rather than the Fund for obligations that are not recourse to the Fund except in limited circumstances such as “bad boy” events. Any cross-collateralization arrangements with Other Clients could result in the Fund losing its interests in otherwise performing investments due to poorly performing or non-performing investments of Other Clients in the collateral pool.
Similarly, a lender could require that it face only one portfolio company of the Fund and Other Clients, even though multiple portfolio companies of the Fund and Other Clients benefit from the lending, which will typically result in (i) the portfolio company facing the lender being solely liable with respect to the entire obligation, and therefore being required to contribute amounts in respect of the shortfall attributable to other portfolio companies, and (ii) portfolio companies of the Fund and Other Clients being jointly and severally liable for the full amount of the obligation, liable on a cross-collateralized basis or liable for an equity cushion (which cushion amount may vary depending upon the type of financing or refinancing (e.g., cushions for refinancings may be smaller)). The portfolio companies of the Fund and Other Clients benefiting from a financing may enter into a back-to-back or other similar reimbursement agreements to ensure no portfolio company bears more than its pro rata portion of the debt and related obligations. It is not expected that the portfolio companies would be compensated (or provide compensation to other portfolio companies) for being primarily liable, or jointly liable, for other portfolio companies pro rata share of any financing.
Joint Venture Partners. The Fund will from time to time enter into one or more joint venture arrangements with third party joint venture partners. Investments made with joint venture partners will often involve performance-based compensation and other fees payable to such joint venture partners, as determined by the Adviser in its sole discretion. The joint venture partners could provide services similar to those provided by the Adviser to the Fund. Yet, no compensation or fees paid to the joint venture partners would reduce the management fees payable by the Fund. Additional conflicts would arise if a joint venture partner is related to the Firm in any way, such as a limited partner investor in, lender to, a shareholder of, or a service provider to the Firm, the Fund, Other Clients, or their respective portfolio companies, or any affiliate, personnel, officer or agent of any of the foregoing.
Group Procurement; Discounts. The Fund (subject to applicable law) and certain portfolio companies will enter into agreements regarding group procurement (such as CoreTrust, an independent group purchasing organization), benefits management, purchase of title and/or other insurance policies (which may include
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brokerage and/or placement thereof, and will from time to time be pooled across portfolio companies and discounted due to scale, including through sharing of deductibles and other forms of shared risk retention) from a third party or an affiliate of Blackstone Credit and/or Blackstone, and other operational, administrative or management related initiatives. The Firm will allocate the cost of these various services and products purchased on a group basis among the Fund, Other Clients and their portfolio companies. Some of these arrangements result in commissions, discounts, rebates or similar payments to Blackstone Credit and/or Blackstone or their affiliates (including personnel), or Other Clients and their portfolio companies, including as a result of transactions entered into by the Fund and its portfolio companies and/or related to a portion of the savings achieved by the portfolio companies. Such commissions or payment will not reduce the management fee. The Firm may also receive consulting or other fees from the parties to these group procurement arrangements. To the extent that a portfolio company of an Other Client is providing such a service, such portfolio company and such Other Client will benefit. Further, the benefits received by a particular portfolio company providing the service may be greater than those received by the Fund and its portfolio companies receiving the service. Conflicts exist in the allocation of the costs and benefits of these arrangements, and shareholders rely on the Adviser to handle them in its sole discretion.
Diverse Shareholder Group. The Fund’s shareholders are expected to be based in a wide variety of jurisdictions and take a wide variety of forms. The shareholders may have conflicting investment, tax and other interests with respect to their investments in the Fund and with respect to the interests of investors in other investment vehicles managed or advised by the Adviser and Blackstone Credit that may participate in the same investments as the Fund. The conflicting interests of individual shareholders with respect to other shareholders and relative to investors in other investment vehicles would generally relate to or arise from, among other things, the nature of investments made by the Fund and such other partnerships, the structuring or the acquisition of investments and the timing of disposition of investments. As a consequence, conflicts of interest may arise in connection with the decisions made by the Adviser or Blackstone Credit, including with respect to the nature or structuring of investments that may be more beneficial for one investor than for another investor, especially with respect to investors’ individual tax situations. In addition, the Fund may make investments that may have a negative impact on related investments made by the shareholders in separate transactions. In selecting and structuring investments appropriate for the Fund, the Adviser or Blackstone Credit will consider the investment and tax objectives of the Fund and the shareholders (and those of investors in other investment vehicles managed or advised by the Adviser or Blackstone Credit) as a whole, not the investment, tax or other objectives of any shareholder individually.
In addition, certain shareholders also may be investors in Other Clients, including supplemental capital vehicles and co-investment vehicles that may invest alongside the Fund in one or more investments, consistent with applicable law and/or any applicable SEC-granted order. Shareholders also may include affiliates of the Firm, such as Other Clients, affiliates of portfolio companies of the Fund or Other Clients, charities, foundations or other entities or programs associated with Firm personnel and/or current or former Firm employees, the Firm’s senior advisors and/or operating partners and any affiliates, funds or persons may also invest in the Fund through the vehicles established in connection with the Firm’s side-by-side co-investment rights, subject to applicable law, in each case, without being subject to management fees, and shareholders will not be afforded the benefits of such arrangements. Some of the foregoing Firm related parties are sponsors of feeder vehicles that could invest in the Fund as shareholders. The Firm related sponsors of feeder vehicles generally charge their investors additional fees, including performance based fees, which could provide the Firm current income and increase the value of its ownership position in them. The Firm will therefore have incentives to refer potential investors to these feeder vehicles. All of these Firm related shareholders will have equivalent rights to vote and withhold consents as nonrelated shareholders. Nonetheless, the Firm may have the ability to influence, directly or indirectly, these Firm related shareholders.
It is also possible that the Fund or its portfolio companies will be a counterparty (such counterparties dealt with on an arm’s-length basis) or participant in agreements, transactions or other arrangements with a shareholder or an affiliate of a shareholder. Such transactions may include agreements to pay performance fees to
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operating partners, a management team and other related persons in connection with the Fund’s investment therein, which will reduce the Fund’s returns. Such shareholders described in the previous sentences may therefore have different information about the Firm and the Fund than shareholders not similarly positioned. In addition, conflicts of interest may arise in dealing with any such shareholders, and the Adviser and its affiliates may not be motivated to act solely in accordance with its interests relating to the Fund. Similar information disparity may occur as a result of shareholders monitoring their investments in vehicles such as the Fund differently. For example, certain shareholders may periodically request from the Adviser information regarding the Fund, its investments and/or portfolio companies that is not otherwise set forth in (or has yet to be set forth) in the reporting and other information required to be delivered to all shareholders. In such circumstances, the Adviser may provide such information to such shareholders, subject to applicable law and regulations. Unless required by applicable law, the Adviser will not be obligated to affirmatively provide such information to all shareholders (although the Adviser will generally provide the same information upon request and treat shareholders equally in that regard). As a result, certain shareholders may have more information about the Fund than other shareholders, and, unless required by applicable law, the Adviser will have no duty to ensure all shareholders seek, obtain or process the same information regarding the Fund, its investments and/or portfolio companies. Therefore, certain shareholders may be able to take actions on the basis of such information which, in the absence of such information, other shareholders do not take. Furthermore, at certain times the Firm may be restricted from disclosing to the shareholders material non-public information regarding any assets in which the Fund invests, particularly those investments in which an Other Client or portfolio company that is publicly registered co-invests with the Fund. In addition, investment banks or other financial institutions, as well as Firm personnel, may also be shareholders. These institutions and personnel are a potential source of information and ideas that could benefit the Fund, and may receive information about the Fund and its portfolio companies in their capacity as a service provider or vendor to the Fund and its portfolio companies.
Possible Future Activities. The Firm and its affiliates may expand the range of services that it provides over time. Except as provided herein, the Firm and its affiliates will not be restricted in the scope of its business or in the performance of any such services (whether now offered or undertaken in the future) even if such activities could give rise to conflicts of interest, and whether or not such conflicts are described herein. The Firm and its affiliates have, and will continue to develop, relationships with a significant number of companies, financial sponsors and their senior managers, including relationships with clients who may hold or may have held investments similar to those intended to be made by the Fund. These clients may themselves represent appropriate investment opportunities for the Fund or may compete with the Fund for investment opportunities.
Restrictions Arising under the Securities Laws. The Firm’s activities and the activities of Other Clients (including the holding of securities positions or having one of its employees on the board of directors of a portfolio company) could result in securities law restrictions on transactions in securities held by the Fund, affect the prices of such securities or the ability of such entities to purchase, retain or dispose of such investments, or otherwise create conflicts of interest, any of which could have an adverse impact on the performance of the Fund and thus the return to the shareholders.
The 1940 Act may limit the Fund’s ability to undertake certain transactions with or alongside its affiliates that are registered under the 1940 Act. As a result of these restrictions, the Fund may be prohibited from executing “joint” transactions with the Fund’s 1940 Act registered affiliates, which could include investments in the same portfolio company (whether at the same or different times) or buying investments from, or selling them to, Other Clients. These limitations may limit the scope of investment opportunities that would otherwise be available to the Fund.
We have received an exemptive order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions.
Shareholders’ Outside Activities. A shareholder shall be entitled to and may have business interests and engage in activities in addition to those relating to the Fund, including business interests and activities in direct
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competition with the Fund and its portfolio companies, and may engage in transactions with, and provide services to, the Fund or its portfolio companies (which may include providing leverage or other financing to the Fund or its portfolio companies as determined by the Adviser in its sole discretion). None of the Fund, any shareholder or any other person shall have any rights by virtue of the Fund’s operative documents in any business ventures of any shareholder. The shareholder, and in certain cases the Adviser, will have conflicting loyalties in these situations.
Insurance. The Adviser will cause the Fund to purchase, and/or bear premiums, fees, costs and expenses (including any expenses or fees of insurance brokers) for insurance to insure the Fund and the Board of Trustees against liability in connection with the activities of the Fund. This includes a portion of any premiums, fees, costs and expenses for one or more “umbrella,” group or other insurance policies maintained by the Firm that cover the Fund and one or more of the Other Clients, the Adviser, Blackstone Credit and/or Blackstone (including their respective directors, officers, employees, agents, representatives, independent client representative (if any) and other indemnified parties). The Adviser will make judgments about the allocation of premiums, fees, costs and expenses for such “umbrella,” group or other insurance policies among the Fund, one or more Other Clients, the Adviser, Blackstone Credit and/or Blackstone on a fair and reasonable basis, subject to approval by the Board of Trustees.
Additional Potential Conflicts of Interest. The officers, directors, members, managers, employees and personnel of the Adviser may trade in securities for their own accounts, subject to restrictions and reporting requirements as may be required by law or the Firm’s policies, or otherwise determined from time to time by the Adviser. In addition, certain Other Clients may be subject to the 1940 Act or other regulations that, due to the role of the Firm, could restrict the ability of the Fund to buy investments from, to sell investments to or to invest in the same securities as, such Other Clients. Such regulations may have the effect of limiting the investment opportunities available to the Fund. In addition, as a consequence of Blackstone’s status as a public company, the officers, directors, members, managers and personnel of the Adviser may take into account certain considerations and other factors in connection with the management of the business and affairs of the Fund and its affiliates that would not necessarily be taken into account if Blackstone were not a public company. The directors of Blackstone have fiduciary duties to shareholders of the public company that may conflict with their duties to the Fund. Finally, although the Firm believes its positive reputation in the marketplace provides benefit to the Fund and Other Clients, the Adviser could decline to undertake investment activity or transact with a counterparty on behalf of the Fund for reputational reasons, and this decision could result in the Fund foregoing a profit or suffering a loss.
The foregoing list of conflicts does not purport to be a complete enumeration or explanation of the actual and potential conflicts involved in an investment in the Fund. Prospective investors should read this Registration Statement and consult with their own advisors before deciding whether to invest in the Fund. In addition, as the Fund’s investment program develops and changes over time, an investment in the Fund may be subject to additional and different actual and potential conflicts. Although the various conflicts discussed herein are generally described separately, prospective investors should consider the potential effects of the interplay of multiple conflicts.
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CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of July 31, 2021, information with respect to the beneficial ownership of our Common Shares by:
| • | each person known to us to be expected to beneficially own more than 5% of the outstanding Common Shares; |
| • | each of our Trustees and each executive officers; and |
| • | all of our Trustees and executive officers as a group. |
Percentage of beneficial ownership is based on 236,634,239 shares outstanding as of July 31, 2021.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. There are no Common Shares subject to options that are currently exercisable or exercisable within 60 days of the offering.
| Shares Beneficially Owned |
||||||||
| Name and Address | Number | Percentage | ||||||
| Interested Trustees |
||||||||
| 62,384 | * | |||||||
| 20,795 | * | |||||||
| Independent Trustees(1) |
||||||||
| 4,159 | * | |||||||
| 14,556 | * | |||||||
| — | * | |||||||
| — | * | |||||||
| Executive Officers |
||||||||
| who are not Trustees(1) |
||||||||
| 20,795 | * | |||||||
| — | * | |||||||
| Marisa J. Beeney |
986 | * | ||||||
| Other |
||||||||
| Blackstone BDC Holdings LLC(2) |
1,000,000 | * | ||||||
| All officers and Trustees as a group (9 persons) |
1,123,674 | * | ||||||
| * | Less than 1%. |
| (1) | The address for all of the Fund’s officers and Trustees is c/o Blackstone Credit BDC Advisers LLC, 345 Park Avenue, 31st Floor, New York, NY 10154. |
| (2) | The address for Blackstone BDC Holdings LLC (f/k/a Blackstone BGSL Holdings LLC) is c/o BDC Holdings LLC, 345 Park Avenue, 31st Floor, New York, NY 10154. |
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The following table sets forth the dollar range of our equity securities as of December 31, 2020.
| Name and Address | Dollar Range of Equity Securities in BCRED(1)(2)(3) |
Aggregate Dollar Range of Equity Securities in the Fund Complex(1)(3)(4) |
||||||
| Interested Trustees |
||||||||
| Over $100,000 | Over $100,000 | |||||||
| Over $100,000 | Over $100,000 | |||||||
| Independent Trustees(1) |
||||||||
| Over $100,000 | Over $100,000 | |||||||
| Over $ | 100,000 | Over $ | 100,000 | |||||
| None | None | |||||||
| None | None | |||||||
| (1) | Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Exchange Act. |
| (2) | The dollar range of equities securities expected to be beneficially owned by our Trustees is based on the initial public offering price of $25.00 per share. |
| (3) | The dollar range of equity securities beneficially owned are: none, $1 - $10,000, $10,001 - $50,000, $50,001 - $100,000 or over $100,000. |
| (4) | The “Fund Complex” consists of the Fund, Blackstone Secured Lending Fund, the Blackstone Credit Closed-End Funds (BSL, BGX, BGB and BGFLX), as well as the Blackstone Real Estate Income Funds (Blackstone Real Estate Income Fund, Blackstone Real Estate Income Fund II and Blackstone Real Estate Income Master Fund), the Blackstone Alternative Alpha Funds (Blackstone Alternative Alpha Fund, Blackstone Alternative Alpha Fund II and Blackstone Alternative Alpha Master Fund) and Blackstone Alternative Multi-Strategy Fund. |
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We have declared distributions each month beginning in January 2021 through the date of this prospectus and expect to continue to pay regular monthly distributions. Any distributions we make will be at the discretion of our Board of Trustees, considering factors such as our earnings, cash flow, capital needs and general financial condition and the requirements of Delaware law. As a result, our distribution rates and payment frequency may vary from time to time.
Our Board of Trustees’ discretion as to the payment of distributions will be directed, in substantial part, by its determination to cause us to comply with the RIC requirements. To maintain our treatment as a RIC, we generally are required to make aggregate annual distributions to our shareholders of at least 90% of our net investment income. See “Description of our Shares” and “Certain U.S. Federal Income Tax Considerations.”
The per share amount of distributions on Class S, Class D and Class I shares generally differ because of different class-specific shareholder servicing and/or distribution fees that are deducted from the gross distributions for each share class. Specifically, distributions on Class S shares will be lower than Class D shares, and Class D shares will be lower than Class I shares because we are required to pay higher ongoing shareholder servicing and/or distribution fees with respect to the Class S shares (compared to Class D shares and Class I shares) and we are required to pay higher ongoing shareholder servicing and/or distribution fees with respect to Class D shares (compared to Class I shares).
There is no assurance we will pay distributions in any particular amount, if at all. We may fund any distributions from sources other than cash flow from operations, including the sale of assets, borrowings, return of capital or offering proceeds, and although we generally expect to fund distributions from cash flow from operations, we have not established limits on the amounts we may pay from such sources. The extent to which we pay distributions from sources other than cash flow from operations will depend on various factors, including the level of participation in our distribution reinvestment plan, how quickly we invest the proceeds from this and any future offering and the performance of our investments. Funding distributions from the sales of assets, borrowings or return of capital will result in us having less funds available to acquire investments. As a result, the return you realize on your investment may be reduced. Doing so may also negatively impact our ability to generate cash flows. Likewise, funding distributions from the sale of additional securities will dilute your interest in us on a percentage basis and may impact the value of your investment especially if we sell these securities at prices less than the price you paid for your shares. We believe the likelihood that we pay distributions from sources other than cash flow from operations will be higher in the early stages of the offering.
From time to time, we may also pay special interim distributions in the form of cash or Common Shares at the discretion of our Board of Trustees.
We have not established limits on the amount of funds we may use from any available sources to make distributions. There can be no assurance that we will achieve the performance necessary to sustain our distributions or that we will be able to pay distributions at a specific rate or at all. The Adviser and its affiliates have no obligation to waive advisory fees or otherwise reimburse expenses in future periods. See “Advisory Agreement and Administration Agreement.”
Consistent with the Code, shareholders will be notified of the source of our distributions. Our distributions may exceed our earnings and profits, especially during the period before we have substantially invested the proceeds from this offering. As a result, a portion of the distributions we make may represent a return of capital for tax purposes. The tax basis of shares must be reduced by the amount of any return of capital distributions, which will result in an increase in the amount of any taxable gain (or a reduction in any deductible loss) on the sale of shares.
For a period of time following commencement of this offering, which time period may be significant, we expect substantial portions of our distributions may be funded indirectly through the reimbursement of certain
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expenses by the Adviser and its affiliates, including through the waiver of certain investment advisory fees by the Adviser, that are subject to conditional reimbursement by us within three years. Any such distributions funded through expense reimbursements or waivers of advisory fees are not based on our investment performance, and can only be sustained if we achieve positive investment performance in future periods and/or the Adviser or its affiliates continues to advance such expenses or waive such fees. Our future reimbursement of amounts advanced or waived by the Adviser and its affiliates will reduce the distributions that you would otherwise receive in the future. Other than as set forth in this prospectus, the Adviser and its affiliates have no obligation to advance expenses or waive advisory fees.
We intend to elect to be treated, and intend to qualify annually thereafter, as a RIC under the Code. To obtain and maintain RIC tax treatment, we must distribute at least 90% of our investment company taxable income (net ordinary taxable income and net short-term capital gains in excess of net long-term capital losses), if any, to our shareholders. A RIC may satisfy the 90% distribution requirement by actually distributing dividends (other than capital gain dividends) during the taxable year. In addition, a RIC may, in certain cases, satisfy the 90% distribution requirement by distributing dividends relating to a taxable year after the close of such taxable year under the “spillback dividend” provisions of Subchapter M. If a RIC makes a spillback dividend, the amounts will be included in a shareholder’s gross income for the year in which the spillback dividend is paid.
We currently intend to distribute net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions. However, we may decide in the future to retain such capital gains for investment and elect to treat such gains as deemed distributions to you. If this happens, you will be treated for U.S. federal income tax purposes as if you had received an actual distribution of the capital gains that we retain and reinvested the net after tax proceeds in us. In this situation, you would be eligible to claim a tax credit (or, in certain circumstances, a tax refund) equal to your allocable share of the tax we paid on the capital gains deemed distributed to you. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions. See “Certain U.S. Federal Income Tax Considerations.”
When issuing senior securities, we may be prohibited from making distributions if doing so causes us to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
We have adopted a distribution reinvestment plan pursuant to which you may elect to have the full amount of your cash distributions reinvested in additional Common Shares. See “Distribution Reinvestment Plan.”
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The following description is based on relevant portions of Delaware law and on our Declaration of Trust and bylaws. This summary is not necessarily complete, and we refer you to Delaware law, our Declaration of Trust and our bylaws for a more detailed description of the provisions summarized below.
General
The terms of the Declaration of Trust authorize an unlimited number of Common Shares of any class, par value $0.01 per share, of which 158,401,778 shares were outstanding as of May 31, 2021, and an unlimited number of shares of preferred shares, par value $0.01 per share. The Declaration of Trust provides that the Board of Trustees may classify or reclassify any unissued Common Shares into one or more classes or series of Common Shares or preferred shares by setting or changing the preferences, conversion or other rights, voting powers, restrictions, or limitations as to dividends, qualifications, or terms or conditions of redemption of the shares. There is currently no market for our Common Shares, and we can offer no assurances that a market for our shares will develop in the future. We do not intend for the shares offered under this prospectus to be listed on any national securities exchange. There are no outstanding options or warrants to purchase our shares. No shares have been authorized for issuance under any equity compensation plans. Under the terms of our Declaration of Trust, shareholders shall be entitled to the same limited liability extended to shareholders of private Delaware for profit corporations formed under the Delaware General Corporation Law, 8 Del. C. § 100, et. seq. Our Declaration of Trust provides that no shareholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to us by reason of being a shareholder, nor shall any shareholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any person in connection with the Fund’s assets or the affairs of the Fund by reason of being a shareholder.
None of our shares are subject to further calls or to assessments, sinking fund provisions, obligations of the Fund or potential liabilities associated with ownership of the security (not including investment risks). In addition, except as may be provided by the Board of Trustees in setting the terms of any class or series of Common Shares, no shareholder shall be entitled to exercise appraisal rights in connection with any transaction.
Outstanding Securities
| Title of Class |
Amount Authorized |
Amount Held by Fund for its Account |
Amount Outstanding as of July 31, 2021 |
|||||||||
| Class S |
Unlimited | — | 179,611,905 | |||||||||
| Class D |
Unlimited | — | 52,581,499 | |||||||||
| Class I |
Unlimited | — | 4,440,865 | |||||||||
Common Shares
Under the terms of our Declaration of Trust, all Common Shares will have equal rights as to voting and, when they are issued, will be duly authorized, validly issued, fully paid and nonassessable. Dividends and distributions may be paid to the holders of our Common Shares if, as and when authorized by our Board of Trustees and declared by us out of funds legally available therefore. Except as may be provided by our Board of Trustees in setting the terms of classified or reclassified shares, our Common Shares will have no preemptive, exchange, conversion, appraisal or redemption rights and will be freely transferable, except where their transfer is restricted by federal and state securities laws or by contract and except that, in order to avoid the possibility that our assets could be treated as “plan assets,” we may require any person proposing to acquire Common Shares to furnish such information as may be necessary to determine whether such person is a benefit plan investor or a controlling person, restrict or prohibit transfers of such shares or redeem any outstanding shares for such price
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and on such other terms and conditions as may be determined by or at the direction of the Board of Trustees. In the event of our liquidation, dissolution or winding up, each share of our Common Shares would be entitled to share pro rata in all of our assets that are legally available for distribution after we pay all debts and other liabilities and subject to any preferential rights of holders of our preferred shares, if any preferred shares are outstanding at such time. Subject to the rights of holders of any other class or series of shares, each share of our Common Shares will be entitled to one vote on all matters submitted to a vote of shareholders, including the election of Trustees. Except as may be provided by the Board of Trustees in setting the terms of classified or reclassified shares, and subject to the express terms of any class or series of preferred shares, the holders of our Common Shares will possess exclusive voting power. There will be no cumulative voting in the election of Trustees. Subject to the special rights of the holders of any class or series of preferred shares to elect Trustees, each Trustee will be elected by a plurality of the votes cast with respect to such Trustee’s election except in the case of a “contested election” (as defined in our bylaws), in which case Trustees will be elected by a majority of the votes cast in the contested election of Trustees. Pursuant to our Declaration of Trust, our Board of Trustees may amend the bylaws to alter the vote required to elect trustees.
Class S Shares
No upfront selling commissions are paid for sales of any Class S shares, however, if you purchase Class S shares from certain financial intermediaries, they may directly charge you transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to 3.5% cap on NAV for Class S shares.
We pay the Intermediary Manager selling commissions over time as a shareholder servicing and/or distribution fee with respect to our outstanding Class S shares equal to 0.85% per annum of the aggregate NAV of our outstanding Class S shares, including any Class S shares issued pursuant to our distribution reinvestment plan. The shareholder servicing and/or distribution fees are paid monthly in arrears. The Intermediary Manager reallows (pays) all or a portion of the shareholder servicing and/or distribution fees to participating brokers and servicing brokers for ongoing shareholder services performed by such brokers, and will waive shareholder servicing and/or distribution fees to the extent a broker is not eligible to receive it for failure to provide such services.
Class D Shares
No upfront selling commissions are paid for sales of any Class D shares, however, if you purchase Class D shares from certain financial intermediaries, they may directly charge you transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to 1.5% cap on NAV for Class D shares.
We pay the Intermediary Manager selling commissions over time as a shareholder servicing and/or distribution fee with respect to our outstanding Class D shares equal to 0.25% per annum of the aggregate NAV of all our outstanding Class D shares, including any Class D shares issued pursuant to our distribution reinvestment plan. The shareholder servicing and/or distribution fees are paid monthly in arrears. The Intermediary Manager reallows (pays) all or a portion of the shareholder servicing and/or distribution fees to participating brokers and servicing brokers for ongoing shareholder services performed by such brokers, and will waive shareholder servicing and/or distribution fees to the extent a broker is not eligible to receive it for failure to provide such services.
Class D shares are generally available for purchase in this offering only (1) through fee-based programs, also known as wrap accounts, that provide access to Class D shares, (2) through participating brokers that have alternative fee arrangements with their clients to provide access to Class D shares, (3) through transaction/ brokerage platforms at participating brokers, (4) through certain registered investment advisers, (5) through bank
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trust departments or any other organization or person authorized to act in a fiduciary capacity for its clients or customers or (6) by other categories of investors that we name in an amendment or supplement to this prospectus.
Class I Shares
No upfront selling commissions or shareholder servicing and/or distribution fees are paid for sales of any Class I shares and financial intermediaries will not charge you transaction or other such fees on Class I Shares.
Class I shares are generally available for purchase in this offering only (1) through fee-based programs, also known as wrap accounts, that provide access to Class I shares, (2) by endowments, foundations, pension funds and other institutional investors, (3) through participating brokers that have alternative fee arrangements with their clients to provide access to Class I shares, (4) through certain registered investment advisers, (5) by our executive officers and trustees and their immediate family members, as well as officers and employees of the Adviser, Blackstone, Blackstone Credit or other affiliates and their immediate family members, and joint venture partners, consultants and other service providers or (6) by other categories of investors that we name in an amendment or supplement to this prospectus. In certain cases, where a holder of Class S or Class D shares exits a relationship with a participating broker for this offering and does not enter into a new relationship with a participating broker for this offering, such holder’s shares may be exchanged into an equivalent NAV amount of Class I shares.
Other Terms of Common Shares
We will cease paying the shareholder servicing and/or distribution fee on the Class S shares and Class D shares on the earlier to occur of the following: (i) a listing of Class I shares, (ii) our merger or consolidation with or into another entity, or the sale or other disposition of all or substantially all of our assets or (iii) the date following the completion of the primary portion of this offering on which, in the aggregate, underwriting compensation from all sources in connection with this offering, including the shareholder servicing and/or distribution fee and other underwriting compensation, is equal to 10% of the gross proceeds from our primary offering. In addition, consistent with the exemptive relief allowing us to offer multiple classes of shares, at the end of the month in which the Intermediary Manager in conjunction with the transfer agent determines that total transaction or other fees, including upfront placement fees or brokerage commissions, and shareholder servicing and/or distribution fees paid with respect to the shares held in a shareholder’s account would exceed, in the aggregate, 10% of the gross proceeds from the sale of such shares (or a lower limit as determined by the Intermediary Manager or the applicable selling agent), we will cease paying the shareholder servicing and/or distribution fee on the Class S shares and Class D shares in such shareholder’s account. Compensation paid with respect to the shares in a shareholder’s account will be allocated among each share such that the compensation paid with respect to each individual share will not exceed 10% of the offering price of such share. We may modify this requirement in a manner that is consistent with applicable exemptive relief. At the end of such month, the Class S shares or Class D shares in such shareholder’s account will convert into a number of Class I shares (including any fractional shares), with an equivalent aggregate NAV as such Class S or Class D shares. In addition, immediately before any liquidation, dissolution or winding up, each Class S share and Class D share will automatically convert into a number of Class I shares (including any fractional shares) with an equivalent NAV as such share.
Preferred Shares
This offering does not include an offering of preferred shares. However, under the terms of the Declaration of Trust, our Board of Trustees may authorize us to issue preferred shares in one or more classes or series without shareholder approval, to the extent permitted by the 1940 Act. The Board of Trustees has the power to fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class or series of preferred shares. We do not currently anticipate issuing preferred shares in the near future. In the event we issue preferred shares,
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we will make any required disclosure to shareholders. We will not offer preferred shares to the Adviser or our affiliates except on the same terms as offered to all other shareholders.
Preferred shares could be issued with terms that would adversely affect the shareholders, provided that we may not issue any preferred shares that would limit or subordinate the voting rights of holders of our Common Shares. Preferred shares could also be used as an anti-takeover device through the issuance of shares of a class or series of preferred shares with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control. Every issuance of preferred shares will be required to comply with the requirements of the 1940 Act. The 1940 Act requires, among other things, that: (1) immediately after issuance and before any dividend or other distribution is made with respect to common shares and before any purchase of common shares is made, such preferred shares together with all other senior securities must not exceed an amount equal to 50% of our total assets after deducting the amount of such dividend, distribution or purchase price, as the case may be, and (2) the holders of shares of preferred shares, if any are issued, must be entitled as a class voting separately to elect two Trustees at all times and to elect a majority of the Trustees if distributions on such preferred shares are in arrears by two full years or more. Certain matters under the 1940 Act require the affirmative vote of the holders of at least a majority of the outstanding shares of preferred shares (as determined in accordance with the 1940 Act) voting together as a separate class. For example, the vote of such holders of preferred shares would be required to approve a proposal involving a plan of reorganization adversely affecting such securities.
The issuance of any preferred shares must be approved by a majority of our independent Trustees not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or to independent legal counsel.
Limitation on Liability of Trustees and Officers; Indemnification and Advance of Expenses
Delaware law permits a Delaware statutory trust to include in its declaration of trust a provision to indemnify and hold harmless any trustee or beneficial owner or other person from and against any and all claims and demands whatsoever. Our Declaration of Trust provides that our Trustees will not be liable to us or our shareholders for monetary damages for breach of fiduciary duty as a trustee to the fullest extent permitted by Delaware law. Our Declaration of Trust provides for the indemnification of any person to the full extent permitted, and in the manner provided, by Delaware law. In accordance with the 1940 Act, we will not indemnify certain persons for any liability to which such persons would be subject by reason of such person’s willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
Pursuant to our Declaration of Trust and subject to certain exceptions described therein, we will indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (i) any individual who is a present or former Trustee or officer of the Fund and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (ii) any individual who, while a Trustee or officer of the Fund and at the request of the Fund, serves or has served as a trustee, officer, partner or trustee of any corporation, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity (each such person, an “Indemnitee”), in each case to the fullest extent permitted by Delaware law. Notwithstanding the foregoing, we will not provide indemnification for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by an Indemnitee unless (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations, (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction, or (iii) a court of competent jurisdiction approves a settlement of the claims against the Indemnitee and finds that indemnification of the settlement and the related costs should be made and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities were offered or sold as to indemnification for violations of securities laws.
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We will not indemnify an Indemnitee against any liability or loss suffered by such Indemnitee unless (i) the Fund determines in good faith that the course of conduct that caused the loss or liability was in the best interest of the Fund, (ii) the Indemnitee was acting on behalf of or performing services for the Fund, (iii) such liability or loss was not the result of (A) negligence or misconduct, in the case that the party seeking indemnification is a Trustee (other than an independent Trustee), officer, employee, controlling person or agent of the Fund, or (B) gross negligence or willful misconduct, in the case that the party seeking indemnification is an independent Trustee, and (iv) such indemnification or agreement to hold harmless is recoverable only out of assets of the Fund and not from the shareholders.
In addition, the Declaration of Trust permits the Fund to advance reasonable expenses to an Indemnitee, and we will do so in advance of final disposition of a proceeding (a) if the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Fund, (b) the legal proceeding was initiated by a third party who is not a shareholder or, if by a shareholder of the Fund acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (c) upon the Fund’s receipt of (i) a written affirmation by the trustee or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the Fund and (ii) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the Fund, together with the applicable legal rate of interest thereon, if it is ultimately determined that the standard of conduct was not met.
Delaware Law and Certain Declaration of Trust Provisions
Organization and Duration
We were formed in Delaware on February 11, 2020, and will remain in existence until dissolved in accordance with our Declaration of Trust or pursuant to Delaware law.
Purpose
Under the Declaration of Trust, we are permitted to engage in any business activity that lawfully may be conducted by a statutory trust organized under Delaware law and, in connection therewith, to exercise all of the rights and powers conferred upon us pursuant to the agreements relating to such business activity.
Our Declaration of Trust contains provisions that could make it more difficult for a potential acquirer to acquire us by means of a tender offer, proxy contest or otherwise. Our Board of Trustees may, without shareholder action, authorize the issuance of shares in one or more classes or series, including preferred shares; our Board of Trustees may, without shareholder action, amend our Declaration of Trust to increase the number of our Common Shares, of any class or series, that we will have authority to issue; and our Declaration of Trust provides that, while we do not intend to list our shares on any securities exchange, if any class of our shares is listed on a national securities exchange, our Board of Trustees will be divided into three classes of Trustees serving staggered terms of three years each. These provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to negotiate first with our Board of Trustees. We believe that the benefits of these provisions outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the negotiation of such proposals may improve their terms.
Sales and Leases to the Fund
Our Declaration of Trust provides that, unless otherwise permitted by the 1940 Act or applicable guidance or exemptive relief of the SEC, except as otherwise permitted under the 1940 Act, we may not purchase or lease assets in which the Adviser or any of its affiliates have an interest unless all of the following conditions are met: (a) the transaction is fully disclosed to the shareholders in a prospectus or in a periodic report; and (b) the assets are sold or leased upon terms that are reasonable to us and at a price not to exceed the lesser of cost or fair market
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value as determined by an independent expert. However, the Adviser may purchase assets in its own name (and assume loans in connection) and temporarily hold title, for the purposes of facilitating the acquisition of the assets, the borrowing of money, obtaining financing for us, or the completion of construction of the assets, so long as all of the following conditions are met: (i) the assets are purchased by us at a price no greater than the cost of the assets to the Adviser; (ii) all income generated by, and the expenses associated with, the assets so acquired will be treated as belonging to us; and (iii) there are no other benefits arising out of such transaction to the Adviser apart from compensation otherwise permitted by the Omnibus Guidelines, as adopted by the NASAA.
Sales and Leases to our Adviser, Trustees or Affiliates
Our Declaration of Trust provides that, unless otherwise permitted by the 1940 Act or applicable guidance or exemptive relief of the SEC, we may not sell assets to the Adviser or any of its affiliates unless such sale is approved by the holders of a majority of our outstanding Common Shares. Our Declaration of Trust also provides that we may not lease assets to the Adviser or any affiliate thereof unless all of the following conditions are met: (a) the transaction is fully disclosed to the shareholders in a prospectus or in a periodic report; and (b) the terms of the transaction are fair and reasonable to us.
Loans
Our Declaration of Trust provides that, unless otherwise permitted by the 1940 Act or applicable guidance or exemptive relief of the SEC, except for the advancement of indemnification funds, no loans, credit facilities, credit agreements or otherwise may be made by us to the Adviser or any of its affiliates.
Commissions on Financing, Refinancing or Reinvestment
Our Declaration of Trust provides that, unless otherwise permitted by the 1940 Act or applicable guidance or exemptive relief of the SEC, we generally may not pay, directly or indirectly, a commission or fee to the Adviser or any of its affiliates in connection with the reinvestment of cash available for distribution, available reserves, or the proceeds of the resale, exchange or refinancing of assets.
Lending Practices
Our Declaration of Trust provides that, with respect to financing made available to us by the Adviser, the Adviser may not receive interest in excess of the lesser of the Adviser’s cost of funds or the amounts that would be charged by unrelated lending institutions on comparable loans for the same purpose. The Adviser may not impose a prepayment charge or penalty in connection with such financing and the Adviser may not receive points or other financing charges. In addition, the Adviser will be prohibited from providing financing to us with a term in excess of 12 months.
Number of Trustees; Vacancies; Removal
Our Declaration of Trust provides that the number of Trustees will be set by our Board of Trustees in accordance with our bylaws. Our bylaws provide that a majority of our entire Board of Trustees may at any time increase or decrease the number of Trustees. Our Declaration of Trust provides that the number of Trustees generally may not be less than one. Except as otherwise required by applicable requirements of the 1940 Act and as may be provided by our Board of Trustees in setting the terms of any class or series of preferred shares, pursuant to an election under our Declaration of Trust, any and all vacancies on our Board of Trustees may be filled only by the affirmative vote of a majority of the remaining Trustees in office, even if the remaining Trustees do not constitute a quorum, and any Trustee elected to fill a vacancy will serve for the remainder of the full term of the Trustee for whom the vacancy occurred and until a successor is elected and qualified, subject to any applicable requirements of the 1940 Act. Independent Trustees will nominate replacements for any vacancies among the independent Trustees’ positions.
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Our Declaration of Trust provides that a Trustee may be removed only for cause and only by a majority of the remaining Trustees (or in the case of the removal of a Trustee that is not an interested person, a majority of the remaining Trustees that are not interested persons).
We have a total of six members of our Board of Trustees, four of whom are independent Trustees. Our Declaration of Trust provides that a majority of our Board of Trustees must be independent Trustees except for a period of up to 60 days after the death, removal or resignation of an independent Trustee pending the election of his or her successor. Each Trustee will hold office until his or her successor is duly elected and qualified. While we do not intend to list our shares on any securities exchange, if any class of our shares is listed on a national securities exchange, our Board of Trustees will be divided into three classes of Trustees serving staggered terms of three years each.
Action by Shareholders
Our bylaws provide that shareholder action can be taken only at a special meeting of shareholders or by unanimous consent in lieu of a meeting. The shareholders will only have voting rights as required by the 1940 Act or as otherwise provided for in the Declaration of Trust. Under our Declaration of Trust and bylaws, the Fund is not required to hold annual meetings. Special meetings may be called by the Trustees and certain of our officers, and will be limited to the purposes for any such special meeting set forth in the notice thereof. In addition, our Declaration of Trust provides that, subject to the satisfaction of certain procedural and informational requirements by the shareholders requesting the meeting, a special meeting of shareholders will be called by our secretary upon the written request of shareholders entitled to cast 10% or more of the votes entitled to be cast at the meeting. The secretary shall provide all shareholders, within ten days after receipt of said request, written notice either in person or by mail of the date, time and location of such requested special meeting and the purpose of the meeting. Any special meeting called by such shareholders is required to be held not less than fifteen nor more than 60 days after notice is provided to shareholders of the special meeting. These provisions will have the effect of significantly reducing the ability of shareholders being able to have proposals considered at a meeting of shareholders.
With respect to special meetings of shareholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of persons for election to the Board of Trustees at a special meeting may be made only (1) pursuant to our notice of the meeting, (2) by the Board of Trustees or (3) provided that the Board of Trustees has determined that Trustees will be elected at the meeting, by a shareholder who is entitled to vote at the meeting and who has complied with the advance notice provisions of the Declaration of Trust.
Our Declaration of Trust also provides that, subject to the provisions of any class or series of shares then outstanding and the mandatory provisions of any applicable laws or regulations or other provisions of the Declaration of Trust, the following actions may be taken by the shareholders, without concurrence by our Board of Trustees or the Adviser, upon a vote by the holders of more than 50% of the outstanding shares entitled to vote to:
| • | modify the Declaration of Trust; |
| • | remove the Adviser or appoint a new investment adviser; |
| • | dissolve the Fund; or |
| • | sell all or substantially all of our assets other than in the ordinary course of business. |
The purpose of requiring shareholders to give us advance notice of nominations and other business is to afford our Board of Trustees a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or desirable by our Board of Trustees, to inform shareholders and make recommendations about such qualifications or business, as
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well as to provide a more orderly procedure for conducting meetings of shareholders. Although our Declaration of Trust does not give our Board of Trustees any power to disapprove shareholder nominations for the election of Trustees or proposals recommending certain action, they may have the effect of precluding a contest for the election of Trustees or the consideration of shareholder proposals if proper procedures are not followed and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of trustees or to approve its own proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our shareholders.
Our Adviser may not, without the approval of a vote by the holders of more than 50% of the outstanding shares entitled to vote on such matters:
| • | amend the investment advisory agreement except for amendments that would not adversely affect the rights of our shareholders; |
| • | except as otherwise permitted under the Advisory Agreement, voluntarily withdraw as our investment adviser unless such withdrawal would not affect our tax status and would not materially adversely affect our shareholders; |
| • | appoint a new investment adviser (other than a sub-adviser pursuant to the terms of the Advisory Agreement and applicable law); |
| • | sell all or substantially all of our assets other than in the ordinary course of business; or |
| • | cause the merger or similar reorganization of the Fund. |
Amendment of the Declaration of Trust and Bylaws
Our Declaration of Trust provides that shareholders are entitled to vote upon a proposed amendment to the Declaration of Trust if the amendment would alter or change the powers, preferences or special rights of the shares held by such shareholders so as to affect them adversely. Approval of any such amendment requires at least a majority of the votes cast by such shareholders at a meeting of shareholders duly called and at which a quorum is present. In addition, amendments to our Declaration of Trust to make our Common Shares a “redeemable security” or to convert the Fund, whether by merger or otherwise, from a closed-end company to an open-end company each must be approved by (a) the affirmative vote of shareholders entitled to cast at least a majority of the votes entitled to be cast on the matter prior to the occurrence of a listing of any class of our shares on a national securities exchange and (b) the affirmative vote of shareholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter upon and following the occurrence of a listing of any class of our shares on a national securities exchange.
Our Declaration of Trust provides that our Board of Trustees has the exclusive power to adopt, alter or repeal any provision of our bylaws and to make new bylaws. Except as described above and for certain provisions of our Declaration of Trust relating to shareholder voting and the removal of trustees, our Declaration of Trust provides that our Board of Trustees may amend our Declaration of Trust without any vote of our shareholders.
Actions by the Board Related to Merger, Conversion, Reorganization or Dissolution
The Board of Trustees may, without the approval of holders of our outstanding shares, approve a merger, conversion, consolidation or other reorganization of the Fund, provided that the resulting entity is a business development company under the 1940 Act. The Fund will not permit the Adviser to cause any other form of merger or other reorganization of the Fund without the affirmative vote by the holders of more than fifty percent (50%) of the outstanding shares of the Fund entitled to vote on the matter. The Fund may be dissolved at any time, without the approval of holders of our outstanding shares, upon affirmative vote by a majority of the Trustees.
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Derivative Actions
No person, other than a Trustee, who is not a shareholder shall be entitled to bring any derivative action, suit or other proceeding on behalf of the Fund. No shareholder may maintain a derivative action on behalf of the Fund unless holders of at least ten percent (10%) of the outstanding shares join in the bringing of such action.
In addition to the requirements set forth in Section 3816 of the Delaware Statutory Trust Statute, a shareholder may bring a derivative action on behalf of the Fund only if the following conditions are met: (i) the shareholder or shareholders must make a pre-suit demand upon the Board of Trustees to bring the subject action unless an effort to cause the Board of Trustees to bring such an action is not likely to succeed; and a demand on the Board of Trustees shall only be deemed not likely to succeed and therefore excused if a majority of the Board of Trustees, or a majority of any committee established to consider the merits of such action, is composed of Board of Trustees who are not “independent Trustees” (as that term is defined in the Delaware Statutory Trust Statute); and (ii) unless a demand is not required under clause (i) above, the Board of Trustees must be afforded a reasonable amount of time to consider such shareholder request and to investigate the basis of such claim; and the Board of Trustees shall be entitled to retain counsel or other advisors in considering the merits of the request and may require an undertaking by the shareholders making such request to reimburse the Fund for the expense of any such advisors in the event that the Board of Trustees determine not to bring such action. For purposes of this paragraph, the Board of Trustees may designate a committee of one or more Trustees to consider a shareholder demand.
Exclusive Delaware Jurisdiction
Each Trustee, each officer and each person legally or beneficially owning a share or an interest in a share of the Fund (whether through a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing or otherwise), to the fullest extent permitted by law, including Section 3804(e) of the Delaware Statutory Trust Statute, (i) irrevocably agrees that any claims, suits, actions or proceedings asserting a claim governed by the internal affairs (or similar) doctrine or arising out of or relating in any way to the Fund, the Delaware Statutory Trust Statute or the Declaration of Trust (including, without limitation, any claims, suits, actions or proceedings to interpret, apply or enforce (A) the provisions of the Declaration of Trust, (B) the duties (including fiduciary duties), obligations or liabilities of the Fund to the shareholders or the Board of Trustees, or of officers or the Board of Trustees to the Fund, to the shareholders or each other, (C) the rights or powers of, or restrictions on, the Fund, the officers, the Board of Trustees or the shareholders, (D) any provision of the Delaware Statutory Trust Statute or other laws of the State of Delaware pertaining to trusts made applicable to the Fund pursuant to Section 3809 of the Delaware Statutory Trust Statute or (E) any other instrument, document, agreement or certificate contemplated by any provision of the Delaware Statutory Trust Statute or the Declaration of Trust relating in any way to the Fund (regardless, in each case, of whether such claims, suits, actions or proceedings (x) sound in contract, tort, fraud or otherwise, (y) are based on common law, statutory, equitable, legal or other grounds or (z) are derivative or direct claims)), shall be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, any other court in the State of Delaware with subject matter jurisdiction, (ii) irrevocably submits to the exclusive jurisdiction of such courts in connection with any such claim, suit, action or proceeding, (iii) irrevocably agrees not to, and waives any right to, assert in any such claim, suit, action or proceeding that (A) it is not personally subject to the jurisdiction of such courts or any other court to which proceedings in such courts may be appealed, (B) such claim, suit, action or proceeding is brought in an inconvenient forum or (C) the venue of such claim, suit, action or proceeding is improper, (iv) consents to process being served in any such claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such service shall constitute good and sufficient service of process and notice thereof; provided, nothing in clause (iv) hereof shall affect or limit any right to serve process in any other manner permitted by law and (v) irrevocably waives any and all right to trial by jury in any such claim, suit, action or proceeding.
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Restrictions on Roll-Up Transactions
In connection with a proposed “roll-up transaction,” which, in general terms, is any transaction involving the acquisition, merger, conversion or consolidation, directly or indirectly, of us and the issuance of securities of an entity that would be created or would survive after the successful completion of the roll-up transaction, we will obtain an appraisal of all of our properties from an independent expert. In order to qualify as an independent expert for this purpose, the person or entity must have no material current or prior business or personal relationship with us and must be engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by us, who is qualified to perform such work. Our assets will be appraised on a consistent basis, and the appraisal will be based on the evaluation of all relevant information and will indicate the value of our assets as of a date immediately prior to the announcement of the proposed roll-up transaction. The appraisal will assume an orderly liquidation of our assets over a 12-month period. The terms of the engagement of such independent expert will clearly state that the engagement is for our benefit and the benefit of our shareholders. We will include a summary of the appraisal, indicating all material assumptions underlying the appraisal, in a report to the shareholders in connection with the proposed roll-up transaction. If the appraisal will be included in a prospectus used to offer the securities of the roll-up entity, the appraisal will be filed with the SEC and the states as an exhibit to the registration statement for the offering.
In connection with a proposed roll-up transaction, the person sponsoring the roll-up transaction must offer to the shareholders who vote against the proposal a choice of:
| • | accepting the securities of the entity that would be created or would survive after the successful completion of the roll-up transaction offered in the proposed roll-up transaction; or |
| • | one of the following: |
| • | remaining as shareholders and preserving their interests in us on the same terms and conditions as existed previously; or |
| • | receiving cash in an amount equal to their pro rata share of the appraised value of our net assets. |
We are prohibited from participating in any proposed roll-up transaction:
| • | which would result in shareholders having voting rights in the entity that would be created or would survive after the successful completion of the roll-up transaction that are less than those provided in the charter, including rights with respect to the election and removal of directors, annual and special meetings, amendments to the charter and our dissolution; |
| • | which includes provisions that would operate as a material impediment to, or frustration of, the accumulation of Common Shares by any purchaser of the securities of the entity that would be created or would survive after the successful completion of the roll-up transaction, except to the minimum extent necessary to preserve the tax status of such entity, or which would limit the ability of an investor to exercise the voting rights of its securities of the entity that would be created or would survive after the successful completion of the roll-up transaction on the basis of the number of shares held by that investor; |
| • | in which shareholders’ rights to access to records of the entity that would be created or would survive after the successful completion of the roll-up transaction will be less than those provided in the charter; |
| • | in which we would bear any of the costs of the roll-up transaction if the shareholders reject the roll-up transaction; or |
| • | unless the organizational documents of the entity that would survive the roll-up transaction provide that neither its adviser nor its intermediary-manager may vote or consent on matters submitted to its shareholders regarding the removal of its adviser or any transaction between it and its adviser or any of its affiliates. |
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Access to Records
Any shareholder will be permitted access to all of our records to which they are entitled under applicable law at all reasonable times and may inspect and copy any of them for a reasonable copying charge. Inspection of our records by the office or agency administering the securities laws of a jurisdiction will be provided upon reasonable notice and during normal business hours. An alphabetical list of the names, addresses and business telephone numbers of our shareholders, along with the number of Common Shares held by each of them, will be maintained as part of our books and records and will be available for inspection by any shareholder or the shareholder’s designated agent at our office. The shareholder list will be updated at least quarterly to reflect changes in the information contained therein. A copy of the list will be mailed to any shareholder who requests the list within ten days of the request. A shareholder may request a copy of the shareholder list for any proper and legitimate purpose, including, without limitation, in connection with matters relating to voting rights and the exercise of shareholder rights under federal proxy laws. A shareholder requesting a list will be required to pay reasonable costs of postage and duplication. Such copy of the shareholder list shall be printed in alphabetical order, on white paper, and in readily readable type size (no smaller than 10 point font).
A shareholder may also request access to any other corporate records. If a proper request for the shareholder list or any other corporate records is not honored, then the requesting shareholder will be entitled to recover certain costs incurred in compelling the production of the list or other requested corporate records as well as actual damages suffered by reason of the refusal or failure to produce the list. However, a shareholder will not have the right to, and we may require a requesting shareholder to represent that it will not, secure the shareholder list or other information for the purpose of selling or using the list for a commercial purpose not related to the requesting shareholder’s interest in our affairs. We may also require that such shareholder sign a confidentiality agreement in connection with the request.
Reports to Shareholders
Within 60 days after each fiscal quarter, we will distribute our quarterly report on Form 10-Q to all shareholders of record. In addition, we will distribute our annual report on Form 10-K to all shareholders within 120 days after the end of each calendar year, which must contain, among other things, a breakdown of the expenses reimbursed by us to the Adviser. These reports will also be available on our website at www.bcred.com and on the SEC’s website at www.sec.gov.
Subject to availability, you may authorize us to provide prospectuses, prospectus supplements, annual reports and other information, or documents, electronically by so indicating on your subscription agreement, or by sending us instructions in writing in a form acceptable to us to receive such documents electronically. Unless you elect in writing to receive documents electronically, all documents will be provided in paper form by mail. You must have internet access to use electronic delivery. While we impose no additional charge for this service, there may be potential costs associated with electronic delivery, such as on-line charges. Documents will be available on our website. You may access and print all documents provided through this service. As documents become available, we will notify you of this by sending you an e-mail message that will include instructions on how to retrieve the document. If our e-mail notification is returned to us as “undeliverable,” we will contact you to obtain your updated e-mail address. If we are unable to obtain a valid e-mail address for you, we will resume sending a paper copy by regular U.S. mail to your address of record. You may revoke your consent for electronic delivery at any time and we will resume sending you a paper copy of all required documents. However, in order for us to be properly notified, your revocation must be given to us a reasonable time before electronic delivery has commenced. We will provide you with paper copies at any time upon request. Such request will not constitute revocation of your consent to receive required documents electronically.
Conflict with the 1940 Act
Our Declaration of Trust provide that, if and to the extent that any provision of Delaware law, or any provision of our Declaration of Trust conflicts with any provision of the 1940 Act, the applicable provision of the 1940 Act will control.
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DETERMINATION OF NET ASSET VALUE
We expect to determine our NAV for each class of shares each month as of the last day of each calendar month. The NAV per share for each class of shares is determined by dividing the value of total assets attributable to the class minus liabilities attributable to the class by the total number of Common Shares outstanding of the class at the date as of which the determination is made.
We conduct the valuation of our investments, upon which our NAV is based, at all times consistent with GAAP and the 1940 Act. We value our investments in accordance with ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material.
Investments for which market quotations are readily available will typically be valued at those market quotations. To validate market quotations, we will utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Where it is possible to obtain reliable, independent market quotations from a third-party vendor, we will use these quotations to determine the value of our investments. We utilize mid-market pricing (i.e. mid-point of average bid and ask prices) to value these investments. The Adviser obtains these market quotations from independent pricing services, if available; otherwise from at least two principal market makers or primary market dealers. To assess the continuing appropriateness of pricing sources and methodologies, the Adviser regularly performs price verification procedures and issues challenges as necessary to independent pricing services or brokers, and any differences are reviewed in accordance with the valuation procedures. The Adviser does not adjust the prices unless it has a reason to believe market quotations are not reflective of the fair value of an investment.
Where prices or inputs are not available, or, in the judgment of the Adviser, not reliable, valuation approaches based on the facts and circumstances of the particular investment will be utilized. Securities that are not publicly traded or whose market prices are not readily available, as will be the case for a substantial portion of our investments, are valued at fair value as determined in good faith pursuant to procedures adopted by, and under the oversight of, the Board of Trustees, based on, among other things, the input of the Adviser, the Audit Committee and independent valuation firms engaged at the direction of the Board of Trustees to review our investments. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity. Our Board of Trustees may modify our valuation procedures from time to time.
With respect to the quarterly valuation of investments, we undertake a multi-step valuation process each quarter in connection with determining the fair value of our investments for which reliable market quotations are not readily available as of the last calendar day of each quarter, which includes, among other procedures, the following:
| • | The valuation process begins with each investment being preliminarily valued by the Adviser’s valuation team in conjunction with the Adviser’s investment professionals responsible for each portfolio investment; |
| • | In addition, independent valuation firms engaged by the Board of Trustees prepare quarter-end valuations of such investments except de minimis investments, as determined by the Adviser. The independent valuation firms provide a final range of values on such investments to the Board of Trustees and the Adviser. The independent valuation firms also provide analyses to support their valuation methodology and calculations; |
| • | The Adviser’s Valuation Committee reviews each valuation recommendation to confirm they have been calculated in accordance with the valuation policy and compares such valuations to the independent valuation firms’ valuation ranges to ensure the Adviser’s valuations are reasonable; |
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| • | The Adviser’s Valuation Committee makes valuation recommendations to the Audit Committee; |
| • | The Audit Committee reviews the valuation recommendations made by the Adviser’s Valuation Committee, including the independent valuation firms’ valuations, and once approved, recommends them for approval by the Board of Trustees; and |
| • | The Board of Trustees reviews the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Audit Committee, the Adviser’s Valuation Committee and, where applicable, the independent valuation firms or other external service providers. |
When we determine our NAV as of the last day of a month that is not also the last day of a calendar quarter, we intend to update the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, the Adviser’s valuation team will generally value such assets at the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Adviser determines such a change has occurred with respect to one or more investments, the Adviser will determine whether to update the value for each relevant investment using a range of values from an independent valuation firm, where applicable, in accordance with our valuation policy, pursuant to authority delegated by the Board of Trustees. Additionally, the Adviser may otherwise determine to update the most recent quarter end valuation of an investment without reliable market quotations that the Adviser considers to be material to the Company using a range of values from an independent valuation firm.
As part of the valuation process, we will take into account relevant factors in determining the fair value of our investments for which reliable market quotations are not readily available, many of which are loans, including and in combination, as relevant, of: (i) the estimated enterprise value of a portfolio company, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, (v) a comparison of the portfolio company’s securities to any similar publicly traded securities, and (vi) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Board of Trustees or its delegates will consider whether the pricing indicated by the external event corroborates its valuation.
Our most recently determined NAV per share for each class of shares will be available on our website: www.bcred.com. We will report our NAV per share as of the last day of each month on our website, www.bcred.com, within 20 business days of the last day of each month.
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General
We are offering a maximum of $12,500,000,000 in Common Shares pursuant to this prospectus on a “best efforts” basis through Blackstone Securities Partners L.P., the Intermediary Manager, a registered broker-dealer affiliated with the Adviser. Because this is a “best efforts” offering, the Intermediary Manager must only use its best efforts to sell the shares, which means that no underwriter, broker or other person will be obligated to purchase any shares. The Intermediary Manager is headquartered at 345 Park Avenue, New York, New York 10154.
The shares are being offered on a “best efforts” basis, which means generally that the Intermediary Manager is required to use only its best efforts to sell the shares and it has no firm commitment or obligation to purchase any of the shares. The Fund intends that the Common Shares offered pursuant to this prospectus will not be listed on any national securities exchange, and neither the Intermediary Manager nor the participating brokers intend to act as market-makers with respect to our Common Shares. Because no public market is expected for the shares, shareholders will likely have limited ability to sell their shares until there is a liquidity event for the Fund.
We are offering to the public three classes of Common Shares: Class S shares, Class D shares and Class I shares. We are offering to sell any combination of share classes with a dollar value up to the maximum offering amount. All investors must meet the suitability standards discussed in the section of this prospectus entitled “Suitability Standards.” The share classes have different ongoing shareholder servicing and/or distribution fees.
Class S shares are available through brokerage and transactional-based accounts. Class D shares are generally available for purchase in this offering only (1) through fee-based programs, also known as wrap accounts, that provide access to Class D shares, (2) through participating brokers that have alternative fee arrangements with their clients to provide access to Class D shares, (3) through transaction/brokerage platforms at participating brokers, (4) through certain registered investment advisers, (5) through bank trust departments or any other organization or person authorized to act in a fiduciary capacity for its clients or customers or (6) other categories of investors that we name in an amendment or supplement to this prospectus. Class I shares are generally available for purchase in this offering only (1) through fee-based programs, also known as wrap accounts, that provide access to Class I shares, (2) by endowments, foundations, pension funds and other institutional investors, (3) through participating brokers that have alternative fee arrangements with their clients to provide access to Class I shares, (4) through certain registered investment advisers, (5) by our executive officers and trustees and their immediate family members, as well as officers and employees of the Adviser, Blackstone, Blackstone Credit or other affiliates and their immediate family members, and joint venture partners, consultants and other service providers or (6) other categories of investors that we name in an amendment or supplement to this prospectus. In certain cases, where a holder of Class S or Class D shares exits a relationship with a participating broker for this offering and does not enter into a new relationship with a participating broker for this offering, such holder’s shares may be exchanged into an equivalent NAV amount of Class I shares. We may also offer Class I shares to certain feeder vehicles primarily created to hold our Class I shares, which in turn offer interests in themselves to investors; we expect to conduct such offerings pursuant to exceptions to registration under the Securities Act and not as a part of this offering. Such feeder vehicles may have additional costs and expenses, which would be disclosed in connection with the offering of their interests. We may also offer Class I shares to other investment vehicles. The minimum initial investment for Class I shares is $1,000,000, unless waived by the Intermediary Manager. If you are eligible to purchase all three classes of shares, then in most cases you should purchase Class I shares because participating brokers will not charge transaction or other fees, including upfront placement fees or brokerage commissions, on Class I shares and Class I shares have no shareholder servicing and/or distribution fees, which will reduce the NAV or distributions of the other share classes. However, Class I shares will not receive shareholder services. Before making your investment decision, please consult with your investment adviser regarding your account type and the classes of Common Shares you may be eligible to purchase. Neither the Intermediary Manager nor its affiliates will directly
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or indirectly compensate any person engaged as an investment advisor or bank trust department by a potential investor as an inducement for such investment advisor or bank trust department to advise favorably for an investment in us.
The number of shares we have registered pursuant to the registration statement of which this prospectus forms a part is the number that we reasonably expect to be offered and sold within two years from the initial effective date of the registration statement. Under applicable SEC rules, we may extend this offering one additional year if all of the shares we have registered are not yet sold within two years. With the filing of a registration statement for a subsequent offering, we may also be able to extend this offering beyond three years until the follow-on registration statement is declared effective. Pursuant to this prospectus, we are offering to the public all of the shares that we have registered. Although we have registered a fixed dollar amount of our shares, we intend effectively to conduct a continuous offering of an unlimited number of Common Shares over an unlimited time period by filing a new registration statement prior to the end of the three-year period described in Rule 415. In such a circumstance, the issuer may also choose to enlarge the continuous offering by including on such new registration statement a further amount of securities, in addition to any unsold securities covered by the earlier registration statement.
This offering must be registered in every state in which we offer or sell shares. Generally, such registrations are for a period of one year. Thus, we may have to stop selling shares in any state in which our registration is not renewed or otherwise extended annually. We reserve the right to terminate this offering at any time and to extend our offering term to the extent permissible under applicable law.
Purchase Price
Shares are sold at the then-current NAV per share, as described in “Determination of Net Asset Value.” Each class of shares may have a different NAV per share because shareholder servicing and/or distribution fees differ with respect to each class.
Underwriting Compensation
We entered into an Intermediary Manager Agreement with the Intermediary Manager, pursuant to which the Intermediary Manager agreed to, among other things, manage our relationships with third-party brokers engaged by the Intermediary Manager to participate in the distribution of Common Shares, which we refer to as “participating brokers,” and financial advisors. The Intermediary Manager also coordinates our marketing and distribution efforts with participating brokers and their registered representatives with respect to communications related to the terms of the offering, our investment strategies, material aspects of our operations and subscription procedures. We will not pay referral or similar fees to any accountants, attorneys or other persons in connection with the distribution of our shares.
Upfront Sales Loads
Class S, Class D and Class I Shares. No upfront sales load will be paid with respect to Class S shares, Class D shares or Class I shares, however, if you buy Class S shares or Class D shares through certain financial intermediaries, they may directly charge you transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to a 1.5% cap on NAV for Class D shares and 3.5% cap on NAV for Class S shares. Selling agents will not charge such fees on Class I shares.
Shareholder Servicing and/or Distribution Fees — Class S and Class D
The following table shows the shareholder servicing and/or distribution fees we pay the Intermediary Manager with respect to the Class S, Class D and Class I on an annualized basis as a percentage of our NAV for
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such class. The shareholder servicing and/or distribution fees will be paid monthly in arrears, calculated using the NAV of the applicable class as of the beginning of the first calendar day of the month.
| Shareholder Servicing and/or Distribution Fee as a % of NAV |
||||
| Class S shares |
0.85 | % | ||
| Class D shares |
0.25 | % | ||
| Class I shares |
— | % | ||
Subject to FINRA and other limitations on underwriting compensation described in “—Limitations on Underwriting Compensation” below, we will pay a shareholder servicing and/or distribution fee equal to 0.85% per annum of the aggregate NAV for the Class S shares and a shareholder servicing and/or distribution fee equal to 0.25% per annum of the aggregate NAV for the Class D shares, in each case, payable monthly.
The shareholder servicing and/or distribution fees will be paid monthly in arrears. The shareholder servicing and/or distribution fees are similar to sales commissions. The distribution and servicing expenses borne by the participating brokers may be different from and substantially less than the amount of shareholder servicing and/or distribution fees charged. The Intermediary Manager will reallow (pay) all or a portion of the shareholder servicing and/or distribution fees to participating brokers and servicing brokers for ongoing shareholder services performed by such brokers, and will waive shareholder servicing and/or distribution fees to the extent a broker is not eligible to receive it for failure to provide such services. All or a portion of the shareholder servicing and/or distribution fee may be used to pay for sub-transfer agency, sub-accounting and certain other administrative services that are not required to be paid pursuant to the shareholder servicing and/or distribution fees under FINRA rules. The Fund also may pay for these sub-transfer agency, sub-accounting and certain other administrative services outside of the shareholder servicing and/or distribution fees and its Distribution and Servicing Plan. Because the shareholder servicing and/or distribution fees with respect to Class S shares and Class D shares are calculated based on the aggregate NAV for all of the outstanding shares of each such class, it reduces the NAV with respect to all shares of each such class, including shares issued under our distribution reinvestment plan.
Eligibility to receive the shareholder servicing and/or distribution fee is conditioned on a broker providing the following ongoing services with respect to the Class S or Class D shares: assistance with recordkeeping, answering investor inquiries regarding us, including regarding distribution payments and reinvestments, helping investors understand their investments upon their request, and assistance with share repurchase requests. If the applicable broker is not eligible to receive the shareholder servicing and/or distribution fee due to failure to provide these services, the Intermediary Manager will waive the shareholder servicing and/or distribution fee that broker would have otherwise been eligible to receive. The shareholder servicing and/or distribution fees are ongoing fees that are not paid at the time of purchase.
Other Compensation
We or the Adviser may also pay directly, or reimburse the Intermediary Manager if the Intermediary Manager pays on our behalf, any organization and offering expenses (other than any upfront selling commissions and shareholder servicing and/or distribution fees).
Limitations on Underwriting Compensation
We will cease paying the shareholder servicing and/or distribution fee on the Class S shares and Class D shares on the earlier to occur of the following: (i) a listing of Class I shares, (ii) our merger or consolidation with or into another entity, or the sale or other disposition of all or substantially all of our assets or (iii) the date
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following the completion of the primary portion of this offering on which, in the aggregate, underwriting compensation from all sources in connection with this offering, including the shareholder servicing and/or distribution fee and other underwriting compensation, is equal to 10% of the gross proceeds from our primary offering.
In addition, consistent with the exemptive relief allowing us to offer multiple classes of shares, at the end of the month in which the Intermediary Manager in conjunction with the transfer agent determines that total transaction or other fees, including upfront placement fees or brokerage commissions, and shareholder servicing and/or distribution fees paid with respect to the shares held in a shareholder’s account would exceed, in the aggregate, 10% of the gross proceeds from the sale of such shares (or a lower limit as determined by the Intermediary Manager or the applicable selling agent), we will cease paying the shareholder servicing and/or distribution fee on the Class S shares and Class D shares in such shareholder’s account. Compensation paid with respect to the shares in a shareholder’s account will be allocated among each share such that the compensation paid with respect to each individual share will not exceed 10% of the offering price of such share. We may modify this requirement in a manner that is consistent with applicable exemptive relief. At the end of such month, the Class S shares or Class D shares in such shareholder’s account will convert into a number of Class I shares (including any fractional shares), with an equivalent aggregate NAV as such Class S or Class D shares.
This offering is being made in compliance with FINRA Rule 2310. Under the rules of FINRA, all items of underwriting compensation, including any upfront selling commissions, Intermediary Manager fees, reimbursement fees for bona fide due diligence expenses, training and education expenses, non-transaction based compensation paid to registered persons associated with the Intermediary Manager in connection with the wholesaling of our offering and all other forms of underwriting compensation, will not exceed 10% of the gross offering proceeds (excluding shares purchased through our distribution reinvestment plan).
Term of the Intermediary Manager Agreement
Either party may terminate the Intermediary Manager Agreement upon 60 days’ written notice to the other party or immediately upon notice to the other party in the event such other party failed to comply with a material provision of the Intermediary Manager Agreement. Our obligations under the Intermediary Manager Agreement to pay the shareholder servicing and/or distribution fees with respect to the Class S and Class D shares distributed in this offering as described therein shall survive termination of the agreement until such shares are no longer outstanding (including such shares that have been converted into Class I shares, as described above).
Indemnification
To the extent permitted by law and our charter, we will indemnify the participating brokers and the Intermediary Manager against some civil liabilities, including certain liabilities under the Securities Act, and liabilities arising from an untrue statement of material fact contained in, or omission to state a material fact in, this prospectus or the registration statement of which this prospectus is a part, blue sky applications or approved sales literature.
Supplemental Sales Material
In addition to this prospectus, we will use sales material in connection with the offering of shares, although only when accompanied by or preceded by the delivery of this prospectus. Some or all of the sales material may not be available in certain jurisdictions. This sales material may include information relating to this offering, the past performance of the Adviser and its affiliates, property brochures and articles and publications concerning real estate. In addition, the sales material may contain quotes from various publications without obtaining the consent of the author or the publication for use of the quoted material in the sales material.
We are offering shares only by means of this prospectus. Although the information contained in the sales material will not conflict with any of the information contained in this prospectus, the sales material does not
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purport to be complete and should not be considered as a part of this prospectus or the registration statement of which this prospectus is a part, or as incorporated by reference in this prospectus or the registration statement, or as forming the basis of the offering of the Common Shares.
Share Distribution Channels and Special Discounts
We expect our Intermediary Manager to use multiple distribution channels to sell our shares. These channels may charge different brokerage fees for purchases of our shares. Our Intermediary Manager is expected to engage participating brokers in connection with the sale of the shares of this offering in accordance with participating broker agreements.
Offering Restrictions
Notice to Non-U.S. Investors
The shares described in this prospectus have not been registered and are not expected to be registered under the laws of any country or jurisdiction outside of the United States except as otherwise described in this prospectus. To the extent you are a citizen of, or domiciled in, a country or jurisdiction outside of the United States, please consult with your advisors before purchasing or disposing of shares.
Country-Specific Legends
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State no offer of shares which are the subject of the offering contemplated by this prospectus may be made to the public in that Relevant Member State other than:
(a) to any legal entity which is a “qualified investor” as defined in the Prospectus Directive; or
(b) in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of shares shall result in a requirement for the Fund or the Intermediary Manager to publish a prospectus pursuant to Article 3 of the Prospectus Directive or a supplemental prospectus pursuant to Article 16 of the Prospectus Directive and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, warranted and agreed to and with each of the Intermediary Manager and the Fund that it is a “qualified investor” within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive.
In the case of any shares being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, each financial intermediary will also be deemed to have represented, warranted and agreed that the shares acquired by it in the offering have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to offering those shares to the public, other than their offer or resale in a Relevant Member State to “qualified investors” as so defined or in circumstances in which the prior consent of the Intermediary Manager has been obtained to each such proposed offer or resale.
The Fund, the Intermediary Manager and their affiliates will rely upon the truth and accuracy of the foregoing representations, warranties and agreements.
For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State. The expression “Prospectus Directive” means Directive
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2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State.
Notice to Prospective Investors in the United Kingdom
In the United Kingdom, this prospectus and any other material in relation to the shares described herein are being distributed only to, and are directed only at, persons who are “qualified investors” (as defined in the Prospectus Directive ) who are (i) persons having professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (for purposes of this section, the “Order”), (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order, or (iii) persons to whom it would otherwise be lawful to distribute them, all such persons together being referred to as “Relevant Persons.” The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such shares will be engaged in only with, Relevant Persons. This prospectus and its contents should not be distributed, published or reproduced (in whole or in part) or disclosed by any recipients to any other person in the United Kingdom. Any person in the United Kingdom that is not a Relevant Person should not act or rely on this prospectus or its contents. The shares are not being offered to the public in the United Kingdom.
Notice to Prospective Investors in Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the Fund, or the shares have been filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.
Notice to Prospective Investors in Hong Kong
The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue in Hong Kong, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or
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invitation for subscription or purchase, of shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
| i. | to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
| ii. | where no consideration is or will be given for the transfer; |
| iii. | where the transfer is by operation of law; |
| iv. | as specified in Section 276(7) of the SFA; or |
| v. | as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
Notice to Prospective Investors in Israel
The shares described in this prospectus have not been registered and are not expected to be registered under the Israeli Securities Law 1968 (the “Israeli Securities Law”) or under the Israeli Joint Investment Trust Law 1994. Accordingly, the shares described herein will only be offered and sold in Israel pursuant to applicable private placement exemptions to “qualified investors” described in the first addendum to the Israeli Securities Law. None of the Adviser, the Intermediary Manager or any participating broker is a licensed investment marketer or advisor under the provisions of the Regulation of Investment Advice, Marketing Investments and Portfolio Management 1995.
Notice to Prospective Investors in Mexico
The offering of shares made pursuant to this prospectus does not constitute a public offering of securities under Mexican law and therefore is not subject to obtaining the prior authorization of the Mexican National Banking and Securities Commission or the registration of shares of the Fund with the Mexican National Registry of Securities. The shares described herein will only be offered and sold in Mexico pursuant to applicable private placement exemptions to “Institutional Investors” or “Qualified Investors” under the Mexican Securities Market Law.
Notice to Prospective Investors in Chile
This offer is subject to Norma de Caracter General N° 336 issued by the Superintendence of Securities and Insurance of Chile (“SVS”) and commenced on August 31, 2016. This offer is on shares not registered in the
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Registry of Securities or in the Registry of Foreign Securities of the SVS, and therefore, it is not subject to the SVS oversight. The issuer is under no obligation to release information on the shares in Chile. These shares cannot be subject of a public offering if not previously registered in the pertinent registry of securities.
Esta oferta se realiza conforme a la Norma de Carácter General N° 336 de la Superintendencia de Valores y Seguros (“SVS”) y ha comenzado en la fecha de este 31 agosto 2016. Esta oferta versa sobre valores no inscritos en el Registro de Valores o en el Registro de Valores extranjeros que lleva la SVS y en consecuencia, estos valores no están sujetos a su fiscalización. No existe de parte del emisor obligación de entregar en Chile información pública respecto de estos valores. Estos valores no podrán ser objeto de oferta pública mientras no sean inscritos en el registro de valores correspondiente.
Notice to Prospective Investors in the People’s Republic of China
This prospectus and the related subscription agreement documents do not and are not intended to constitute a sale, an offer to sell or a solicitation of an offer to buy, directly or indirectly, any securities in the People’s Republic of China (excluding Taiwan, the Special Administrative Region of Hong Kong and the Special Administrative Region of Macao, the “PRC”).
No marketing activities, advertisements or public inducements have been or will be carried out by the Fund or the Intermediary Manager to the general public within the PRC in relation to an investment in the Fund.
This prospectus is intended solely for the use of those qualified investors for the purpose of evaluating a possible investment by them in the Fund and is not to be reproduced or distributed to any other persons (other than professional advisors of the prospective managing directors, employees and consultants receiving this prospectus).
This prospectus has not been and will not be filed with or approved by the China Securities Regulatory Commission or any other regulatory authorities or agencies of the PRC pursuant to relevant securities-related or other laws and regulations and may not be offered or sold within the PRC through a public offering or in circumstances which require an examination or approval of or registration with any securities or other regulatory authorities or agencies in the PRC unless otherwise in accordance with the laws and regulations of the PRC.
Notice to Prospective Investors in Taiwan
The interests may be made available outside Taiwan to Taiwan resident investors for purchase outside Taiwan by such investors but are not permitted to be marketed, offered or sold in Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the interests in Taiwan.
Notice to Prospective Investors in Argentina
This prospectus does not constitute an invitation to buy or a solicitation of an offer to sell securities or any other products or services in Argentina and shares in the Fund are not and will not be offered or sold in Argentina, in compliance with Section No. 310 of the Argentine Criminal Code, except in circumstances that do not constitute a public offering or distribution under Argentinean laws and regulations. No application has been or will be made the Argentine Comisión Nacional de Valores, the Argentine securities governmental authority, to publicly offer the Fund or the shares thereof in Argentina. This prospectus is being supplied or made available only to those investors who have expressly requested them in Argentina or used in connection with an offer to sell or a solicitation of an offer to buy in Argentina except in circumstances that do not constitute a public offering or distribution under Argentinean laws and regulations. This prospectus is strictly confidential and may not be distributed to any legal or natural person or entity other than the intended recipients thereof.
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Notice to Prospective Investors in the Cayman Islands
This is not an offer to the public in the Cayman Islands to subscribe for interests, and applications originating from the Cayman Islands will only be accepted from Cayman Islands exempted companies, trusts registered as exempted in the Cayman Islands, Cayman Islands exempted limited partnerships, or companies incorporated in other jurisdictions and registered as foreign corporations in the Cayman Islands or limited partnerships formed in other jurisdictions and registered as foreign limited partnerships in the Cayman Islands.
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You may buy or request that we repurchase Common Shares through your financial advisor, a participating broker or other financial intermediary that has a selling agreement with the Intermediary Manager. Because an investment in our Common Shares involves many considerations, your financial advisor or other financial intermediary may help you with this decision. Due to the illiquid nature of investments in originated loans, our Common Shares are only suitable as a long-term investment. Because there is no public market for our shares, shareholders may have difficulty selling their shares if we choose to offer to repurchase only some, or even none, of the shares that investors desire to have repurchased in a particular quarter, or if our Board of Trustees modifies or suspends the share repurchase program.
Investors who meet the suitability standards described herein may purchase Common Shares. See “Suitability Standards” in this prospectus. Investors seeking to purchase Common Shares must proceed as follows:
| • | Read this entire prospectus and any appendices and supplements accompanying this prospectus. |
| • | Complete the execution copy of the subscription agreement. A specimen copy of the subscription agreement, including instructions for completing it, is included in this prospectus as Appendix A. Subscription agreements may be executed manually or by electronic signature except where the use of such electronic signature has not been approved by the Intermediary Manager. Should you execute the subscription agreement electronically, your electronic signature, whether digital or encrypted, included in the subscription agreement is intended to authenticate the subscription agreement and to have the same force and effect as a manual signature. |
| • | Deliver a check, submit a wire transfer, instruct your broker to make payment from your brokerage account or otherwise deliver funds for the full purchase price of the Common Shares being subscribed for along with the completed subscription agreement to the participating broker. Checks should be made payable, or wire transfers directed, to “Blackstone Private Credit Fund.” For Class S and Class D shares, after you have satisfied the applicable minimum purchase requirement of $2,500, additional purchases must be in increments of $500. For Class I shares, after you have satisfied the applicable minimum purchase requirement of $1,000,000, additional purchases must be in increments of $500, unless such minimums are waived by the Intermediary Manager. The minimum subsequent investment does not apply to purchases made under our distribution reinvestment plan. |
| • | By executing the subscription agreement and paying the total purchase price for the Common Shares subscribed for, each investor attests that he or she meets the suitability standards as stated in the subscription agreement and agrees to be bound by all of its terms. Certain participating brokers may require additional documentation. |
A sale of the shares to a subscriber may not be completed until at least five business days after the subscriber receives our final prospectus. Subscriptions to purchase our Common Shares may be made on an ongoing basis, but investors may only purchase our Common Shares pursuant to accepted subscription orders as of the first day of each month (based on the NAV per share as determined as of the previous day, being the last day of the preceding month), and to be accepted, a subscription request must be made with a completed and executed subscription agreement in good order, including satisfying any additional requirements imposed by the subscriber’s broker, and payment of the full purchase price of our Common Shares being subscribed at least five business days prior to the first day of the month (unless waived by the Intermediary Manager).
For example, if you wish to subscribe for Common Shares in October, your subscription request must be received in good order at least five business days before November 1. Notice of each share transaction will be furnished to shareholders (or their financial representatives) as soon as practicable but not later than seven business days after the Fund’s NAV as of October 31 is determined and credited to the shareholder’s account, together with information relevant for personal and tax records. While a shareholder will not know our NAV
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applicable on the effective date of the share purchase, our NAV applicable to a purchase of shares will be available generally within 20 business days after the effective date of the share purchase; at that time, the number of shares based on that NAV and each shareholder’s purchase will be determined and shares are credited to the shareholder’s account as of the effective date of the share purchase. In this example, if accepted, your subscription would be effective on the first calendar day of November.
If for any reason we reject the subscription, or if the subscription request is canceled before it is accepted or withdrawn as described below, we will return the subscription agreement and the related funds, without interest or deduction, within ten business days after such rejection, cancellation or withdrawal.
Common Shares purchased by a fiduciary or custodial account will be registered in the name of the fiduciary account and not in the name of the beneficiary. If you place an order to buy shares and your payment is not received and collected, your purchase may be canceled and you could be liable for any losses or fees we have incurred.
You have the option of placing a transfer on death (TOD), designation on your shares purchased in this offering. A TOD designation transfers the ownership of the shares to your designated beneficiary upon your death. This designation may only be made by individuals, not entities, who are the sole or joint owners with right to survivorship of the shares. If you would like to place a TOD designation on your shares, you must check the TOD box on the subscription agreement and you must complete and return a TOD form, which you may obtain from your financial advisor, in order to effect the designation.
Purchase Price
Shares are sold at the then-current NAV per share, as described in “Determination of Net Asset Value.” Each class of shares may have a different NAV per share because shareholder servicing and/or distribution fees differ with respect to each class.
If you participate in our distribution reinvestment plan, the cash distributions attributable to the class of shares that you purchase in our primary offering will be automatically invested in additional shares of the same class. The purchase price for shares purchased under our distribution reinvestment plan will be equal to the most recent available NAV per share for such shares at the time the distribution is payable.
We will generally adhere to the following procedures relating to purchases of Common Shares in this continuous offering:
| • | On each business day, our transfer agent will collect purchase orders. Notwithstanding the submission of an initial purchase order, we can reject purchase orders for any reason, even if a prospective investor meets the minimum suitability requirements outlined in our prospectus. Investors may only purchase our Common Shares pursuant to accepted subscription orders as of the first day of each month (based on the NAV per share as determined as of the previous day, being the last day of the preceding month), and to be accepted, a subscription request must be made with a completed and executed subscription agreement in good order and payment of the full purchase price of our Common Shares being subscribed at least five business days prior to the first day of the month. If a purchase order is received less than five business days prior to the first day of the month, unless waived by the Intermediary Manager, the purchase order will be executed in the next month’s closing at the transaction price applicable to that month. As a result of this process, the price per share at which your order is executed may be different than the price per share for the month in which you submitted your purchase order. |
| • | Generally, within 20 business days after the first calendar day of each month, we will determine our NAV per share for each share class as of the last calendar day of the immediately preceding month, which will be the purchase price for shares purchased with that effective date. |
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| • | Completed subscription requests will not be accepted by us before two business days before the first calendar day of each month. |
| • | Subscribers are not committed to purchase shares at the time their subscription orders are submitted and any subscription may be canceled at any time before the time it has been accepted as described in the previous sentence. You may withdraw your purchase request by notifying the transfer agent, through your financial intermediary or directly on our toll-free, automated telephone line, 844-702-1299. |
| • | You will receive a confirmation statement of each new transaction in your account as soon as practicable but generally not later than seven business days after the shareholder transactions are settled when the applicable NAV per share is determined. The confirmation statement will include information on how to obtain information we have filed with the SEC and made publicly available on our website, www.bcred.com, including supplements to the prospectus. |
Our NAV may vary significantly from one month to the next. Through our website at www.bcred.com, you will have information about the most recently available NAV per share.
In contrast to securities traded on an exchange or over-the-counter, where the price often fluctuates as a result of, among other things, the supply and demand of securities in the trading market, our NAV will be calculated once monthly using our valuation methodology, and the price at which we sell new shares and repurchase outstanding shares will not change depending on the level of demand by investors or the volume of requests for repurchases.
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We do not intend to list our shares on a securities exchange and we do not expect there to be a public market for our shares. As a result, if you purchase our Common Shares, your ability to sell your shares will be limited.
At the discretion of our Board of Trustees, we have implemented a share repurchase program in which we intend to offer to repurchase, in each quarter, up to 5% of our Common Shares outstanding (either by number of shares or aggregate NAV) as of the close of the previous calendar quarter. Our Board of Trustees may amend or suspend the share repurchase program if in its reasonable judgment it deems such action to be in our best interest and the best interest of our shareholders. As a result, share repurchases may not be available each quarter, such as when a repurchase offer would place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the Fund that would outweigh the benefit of the repurchase offer. We intend to conduct such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Exchange Act and the 1940 Act. All shares purchased by us pursuant to the terms of each tender offer will be retired and thereafter will be authorized and unissued shares.
Under our share repurchase program, to the extent we offer to repurchase shares in any particular quarter, we expect to repurchase shares pursuant to quarterly tender offers using a purchase price equal to the NAV per share as of the last calendar day of the applicable quarter, except that shares that have not been outstanding for at least one year will be repurchased at 98% of such NAV (an “Early Repurchase Deduction”). The one-year holding period is measured as of the subscription closing date immediately following the prospective repurchase date. The Early Repurchase Deduction will be retained by the Fund for the benefit of remaining shareholders. This Early Repurchase Deduction will also generally apply to minimum account repurchases, discussed below. Shareholders who are exchanging a class of our shares for an equivalent aggregate NAV of another class of our shares will not be subject to, and will not be treated as repurchases for the calculation of, the 5% quarterly calculation on repurchases and will not be subject to the Early Repurchase Deduction.
We may, from time to time, waive the Early Repurchase Deduction in the following circumstances (subject to the conditions described below):
| • | repurchases resulting from death, qualifying disability or divorce; |
| • | in the event that a shareholder’s shares are repurchased because the shareholder has failed to maintain the $500 minimum account balance; or |
| • | due to trade or operational error. |
As set forth above, we may waive the Early Repurchase Deduction in respect of repurchase of shares resulting from the death, qualifying disability (as such term is defined in Section 72(m)(7) of the Code) or divorce of a shareholder who is a natural person, including shares held by such shareholder through a trust or an IRA or other retirement or profit-sharing plan, after (i) in the case of death, receiving written notice from the estate of the shareholder, the recipient of the shares through bequest or inheritance, or, in the case of a trust, the trustee of such trust, who shall have the sole ability to request repurchase on behalf of the trust, (ii) in the case of qualified disability, receiving written notice from such shareholder, provided that the condition causing the qualifying disability was not pre-existing on the date that the shareholder became a shareholder or (iii) in the case of divorce, receiving written notice from the shareholder of the divorce and the shareholder’s instructions to effect a transfer of the shares (through the repurchase of the shares by us and the subsequent purchase by the shareholder) to a different account held by the shareholder (including trust or an individual retirement account or other retirement or profit-sharing plan). We must receive the written repurchase request within 12 months after the death of the shareholder, the initial determination of the shareholder’s disability or divorce in order for the requesting party to rely on any of the special treatment described above that may be afforded in the event of the death, disability or divorce of a shareholder. In the case of death, such a written request must be accompanied by a certified copy of the official death certificate of the shareholder. If spouses are joint registered holders of
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shares, the request to have the shares repurchased may be made if either of the registered holders dies or acquires a qualified disability. If the shareholder is not a natural person, such as certain trusts or a partnership, corporation or other similar entity, the right to waiver of the Early Repurchase Deduction upon death, disability or divorce does not apply.
You may tender all of the Common Shares that you own.
In the event the amount of shares tendered exceeds the repurchase offer amount, shares will be repurchased on a pro rata basis with priority for repurchase requests in the case of the death or disability of a shareholder. All unsatisfied repurchase requests must be resubmitted in the next quarterly tender offer, or upon the recommencement of the share repurchase program, as applicable. We will have no obligation to repurchase shares, including if the repurchase would violate the restrictions on distributions under federal law or Delaware law. The limitations and restrictions described above may prevent us from accommodating all repurchase requests made in any quarter. Our share repurchase program has many limitations, including the limitations described above, and should not in any way be viewed as the equivalent of a secondary market.
We will offer to repurchase shares on such terms as may be determined by our Board of Trustees in its complete and absolute discretion unless, in the judgment of our independent Trustees, such repurchases would not be in the best interests of our shareholders or would violate applicable law. There is no assurance that our board will exercise its discretion to offer to repurchase shares or that there will be sufficient funds available to accommodate all of our shareholders’ requests for repurchase. As a result, we may repurchase less than the full amount of shares that you request to have repurchased. If we do not repurchase the full amount of your shares that you have requested to be repurchased, or we determine not to make repurchases of our shares, you will likely not be able to dispose of your shares, even if we under-perform. Any periodic repurchase offers will be subject in part to our available cash and compliance with the RIC qualification and diversification rules and the 1940 Act. Shareholders will not pay a fee to us in connection with our repurchase of shares under the share repurchase program.
The Fund will repurchase shares from shareholders pursuant to written tenders on terms and conditions that the Board of Trustees determines to be fair to the Fund and to all shareholders. When the Board of Trustees determines that the Fund will repurchase shares, notice will be provided to shareholders describing the terms of the offer, containing information shareholders should consider in deciding whether to participate in the repurchase opportunity and containing information on how to participate. Shareholders deciding whether to tender their shares during the period that a repurchase offer is open may obtain the Fund’s most recent NAV per share on our website at: www.bcred.com. However, our repurchase offers will generally use the NAV on or around the last business day of a calendar quarter, which will not be available until after the expiration of the applicable tender offer, so you will not know the exact price of shares in the tender offer when you make your decision whether to tender your shares.
Repurchases of shares from shareholders by the Fund will be paid in cash pursuant to a promissory note after the determination of the relevant NAV per share is finalized. Repurchases will be effective after receipt and acceptance by the Fund of eligible written tenders of shares from shareholders by the applicable repurchase offer deadline. The Fund does not impose any charges in connection with repurchases of shares. All shares purchased by us pursuant to the terms of each tender offer will be retired and thereafter will be authorized and unissued shares.
The majority of our assets will consist of instruments that cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. Therefore, we may not always have sufficient liquid resources to make repurchase offers. In order to provide liquidity for share repurchases, we intend to generally maintain under normal circumstances an allocation to syndicated loans and other liquid investments. We may fund repurchase requests from sources other than cash flow from operations, including the sale of assets, borrowings, return of capital or offering proceeds, and although we generally expect to fund distributions from
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cash flow from operations we have not established any limits on the amounts we may pay from such sources. Should making repurchase offers, in our judgment, place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the company as a whole, or should we otherwise determine that investing our liquid assets in originated loans or other illiquid investments rather than repurchasing our shares is in the best interests of the Fund as a whole, then we may choose to offer to repurchase fewer shares than described above, or none at all.
In the event that any shareholder fails to maintain the minimum balance of $500 of our shares, we may repurchase all of the shares held by that shareholder at the repurchase price in effect on the date we determine that the shareholder has failed to meet the minimum balance, less any Early Repurchase Deduction. Minimum account repurchases will apply even in the event that the failure to meet the minimum balance is caused solely by a decline in our NAV. Minimum account repurchases are subject to Early Repurchase Deduction.
Payment for repurchased shares may require us to liquidate portfolio holdings earlier than our Adviser would otherwise have caused these holdings to be liquidated, potentially resulting in losses, and may increase our investment-related expenses as a result of higher portfolio turnover rates. Our Adviser intends to take measures, subject to policies as may be established by our Board of Trustees, to attempt to avoid or minimize potential losses and expenses resulting from the repurchase of shares.
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DISTRIBUTION REINVESTMENT PLAN
We have adopted a distribution reinvestment plan, pursuant to which we will reinvest all cash dividends declared by the Board of Trustees on behalf of our shareholders who do not elect to receive their dividends in cash as provided below. As a result, if the Board of Trustees authorizes, and we declare, a cash dividend or other distribution, then our shareholders who have not opted out of our distribution reinvestment plan will have their cash distributions automatically reinvested in additional shares as described below, rather than receiving the cash dividend or other distribution. Distributions on fractional shares will be credited to each participating shareholder’s account to three decimal places.
No action is required on the part of a registered shareholder to have his, her or its cash dividend or other distribution reinvested in our shares, except shareholders in certain states. Shareholders can elect to “opt out” of the Fund’s distribution reinvestment plan in their subscription agreements (other than Alabama, Arkansas, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Jersey, Ohio, Oklahoma, Oregon, Texas, Vermont and Washington investors and clients of certain participating brokers that do not permit automatic enrollment in our distribution reinvestment plan). Alabama, Arkansas, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Jersey, Ohio, Oklahoma, Oregon, Texas, Vermont and Washington investors and clients of certain participating brokers that do not permit automatic enrollment in our distribution reinvestment plan will automatically receive their distributions in cash unless they elect to have their cash distributions reinvested in additional Common Shares.
If any shareholder initially elects not to participate, they may later become a participant by subsequently completing and executing an enrollment form or any distribution authorization form as may be available from the Fund or the DST Systems Inc. (the “Plan Administrator”). Participation in the distribution reinvestment plan will begin with the next distribution payable after acceptance of a participant’s subscription, enrollment or authorization. Shares will be purchased under the distribution reinvestment plan as of the first calendar day of the month following the record date of the distribution.
If a shareholder seeks to terminate its participation in the distribution reinvestment plan, notice of termination must be received by the Plan Administrator five business days in advance of the first calendar day of the next month in order for a shareholder’s termination to be effective for such month. Any transfer of shares by a participant to a non-participant will terminate participation in the distribution reinvestment plan with respect to the transferred shares. If a participant elects to tender its Common Shares in full, any Shares issued to the participant under the Plan subsequent to the expiration of the tender offer will be considered part of the participant’s prior tender, and participant’s participation in the Plan will be terminated as of the valuation date of the applicable tender offer. Any distributions to be paid to such shareholder on or after such date will be paid in cash on the scheduled distribution payment date.
If you elect to opt out of the distribution reinvestment plan, you will receive any distributions we declare in cash. There will be no upfront selling commissions or Intermediary Manager fees charged to you if you participate in the distribution reinvestment plan. We will pay the Plan Administrator fees under the distribution reinvestment plan. If your shares are held by a broker or other financial intermediary, you may change your election by notifying your broker or other financial intermediary of your election.
Any purchases of our shares pursuant to our distribution reinvestment plan are dependent on the continued registration of our securities or the availability of an exemption from registration in the recipient’s home state.
The purchase price for shares purchased under our distribution reinvestment plan will be equal to the most recent available NAV per share for such shares at the time the distribution is payable. Common Shares issued pursuant to our distribution reinvestment plan will have the same voting rights as the Common Shares offered pursuant to this prospectus.
See our Distribution Reinvestment Plan, which is filed as an exhibit to our registration statement for this offering, for more information.
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The following discussion is a general summary of the material prohibitions and descriptions governing BDCs generally. It does not purport to be a complete description of all of the laws and regulations affecting BDCs.
Qualifying Assets
Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “Qualifying Assets,” unless, at the time the acquisition is made, Qualifying Assets represent at least 70% of the company’s total assets. The principal categories of Qualifying Assets relevant to our business are any of the following:
| (1) | Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an Eligible Portfolio Company (as defined below), or from any person who is, or has been during the preceding 13 months, an affiliated person of an Eligible Portfolio Company, or from any other person, subject to such rules as may be prescribed by the SEC. An “Eligible Portfolio Company” is defined in the 1940 Act as any issuer which: |
| (a) | is organized under the laws of, and has its principal place of business in, the United States; |
| (b) | is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and |
| (c) | satisfies any of the following: |
| (i) | does not have any class of securities that is traded on a national securities exchange; |
| (ii) | has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million; |
| (iii) | is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the Eligible Portfolio Company; or |
| (iv) | is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million. |
| (2) | Securities of any Eligible Portfolio Company controlled by the Fund. |
| (3) | Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements. |
| (4) | Securities of an Eligible Portfolio Company purchased from any person in a private transaction if there is no ready market for such securities and the Fund already owns 60% of the outstanding equity of the Eligible Portfolio Company. |
| (5) | Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities. |
| (6) | Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. |
In addition, a BDC must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.
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Significant Managerial Assistance
A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described above. However, in order to count portfolio securities as Qualifying Assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its trustees, officers or employees, offers to provide and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company through monitoring of portfolio company operations, selective participation in board and management meetings, consulting with and advising a portfolio company’s officers or other organizational or financial guidance.
Temporary Investments
Pending investment in other types of Qualifying Assets, as described above, our investments can consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which are referred to herein, collectively, as temporary investments, so that 70% of our assets would be Qualifying Assets.
Warrants
Under the 1940 Act, a BDC is subject to restrictions on the issuance, terms and amount of warrants, options or rights to purchase shares that it may have outstanding at any time. In particular, the amount of shares that would result from the conversion or exercise of all outstanding warrants, options or rights to purchase shares cannot exceed 25% of the BDC’s total outstanding shares.
Leverage and Senior Securities; Coverage Ratio
We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of shares senior to our Common Shares if our asset coverage, as defined in the 1940 Act, would at least equal 150% immediately after each such issuance. On August 24, 2020, our sole shareholder approved the adoption of this 150% threshold pursuant to Section 61(a)(2) of the 1940 Act and such election became effective the following day. In addition, while any senior securities remain outstanding, we will be required to make provisions to prohibit any dividend distribution to our shareholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the dividend distribution or repurchase. We will also be permitted to borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes, which borrowings would not be considered senior securities.
We have established one or more credit facilities and/or subscription facilities and intend to enter into other financing arrangements to facilitate investments and the timely payment of our expenses. It is anticipated that any such credit facilities will bear interest at floating rates at to be determined spreads over LIBOR. We cannot assure shareholders that we will be able to enter into a credit facility. Shareholders will indirectly bear the costs associated with any borrowings under a credit facility or otherwise. In connection with a credit facility or other borrowings, lenders may require us to pledge assets, commitments and/or drawdowns (and the ability to enforce the payment thereof) and may ask to comply with positive or negative covenants that could have an effect on our operations. In addition, from time to time, our losses on leveraged investments may result in the liquidation of other investments held by us and may result in additional drawdowns to repay such amounts.
We may enter into a total return swap agreement. A TRS is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the assets underlying the TRS,
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which may include a specified security, basket of securities or securities indices during a specified period, in return for periodic payments based on a fixed or variable interest rate. A TRS effectively adds leverage to a portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Because of the unique structure of a TRS, a TRS often offers lower financing costs than are offered through more traditional borrowing arrangements. The Fund would typically have to post collateral to cover this potential obligation. To the extent the Fund segregates liquid assets with a value equal (on a daily mark-to-market basis) to its obligations under TRS transactions, enters into offsetting transactions or otherwise covers such TRS transactions in accordance with applicable SEC guidance, the leverage incurred through TRS will not be considered a borrowing for purposes of the Fund’s overall leverage limitation.
We may also create leverage by securitizing our assets (including in CLOs) and retaining the equity portion of the securitized vehicle. We may also from time to time make secured loans of our marginable securities to brokers, dealers and other financial institutions.
Code of Ethics
We and the Adviser have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code are permitted to invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. You may read and copy this code of ethics at the SEC’s Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090. You may also obtain copies of the codes of ethics, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549.
Affiliated Transactions
We may be prohibited under the 1940 Act from conducting certain transactions with our affiliates without the prior approval of our trustees who are not interested persons and, in some cases, the prior approval of the SEC. We have received an exemptive order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions.
Proxy Voting Policies and Procedures
We have delegated our proxy voting responsibility to the Adviser. The Proxy Voting Policies and Procedures of the Adviser are set forth below. The guidelines will be reviewed periodically by the Adviser, and, accordingly, are subject to change.
As an investment adviser registered under the Advisers Act, has a duty to monitor corporate events and to vote proxies, as well as a duty to cast votes in the best interest of clients and not subrogate client interests to its own interests. Rule 206(4)-6 under the Advisers Act places specific requirements on registered investment advisers with proxy voting authority.
Proxy Policies
The Adviser’s policies and procedures are reasonably designed to ensure that the Adviser votes proxies in the best interest of the Fund and addresses how it will resolve any conflict of interest that may arise when voting proxies and, in so doing, to maximize the value of the investments made by the Fund, taking into consideration the Fund’s investment horizons and other relevant factors. It will review on a case-by-case basis each proposal
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submitted for a shareholder vote to determine its impact on the portfolio securities held by its clients. Although the Adviser will generally vote against proposals that may have a negative impact on its clients’ portfolio securities, it may vote for such a proposal if there exists compelling long-term reasons to do so.
Decisions on how to vote a proxy generally are made by the Adviser. The Investment Committee and the members of the Investment Team covering the applicable security often have the most intimate knowledge of both a company’s operations and the potential impact of a proxy vote’s outcome. Decisions are based on a number of factors which may vary depending on a proxy’s subject matter, but are guided by the general policies described in the proxy policy. In addition, the Adviser may determine not to vote a proxy after consideration of the vote’s expected benefit to clients and the cost of voting the proxy. To ensure that its vote is not the product of a conflict of interest, the Adviser will require the members of the Investment Committee to disclose any personal conflicts of interest they may have with respect to overseeing a Fund’s investment in a particular company.
Proxy Voting Records
You may obtain information, without charge, regarding how we voted proxies with respect to our portfolio securities by making a written request for proxy voting information to: Chief Compliance Officer, Blackstone Credit BDC Advisors LLC, 345 Park Avenue, 31st Floor, New York, NY 10154.
Other
We will be periodically examined by the SEC for compliance with the 1940 Act, and be subject to the periodic reporting and related requirements of the 1934 Act.
We are also required to provide and maintain a bond issued by a reputable fidelity insurance company to protect against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any trustee or officer against any liability to our shareholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
We are also required to designate a chief compliance officer and to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws and to review these policies and procedures annually for their adequacy and the effectiveness of their implementation.
We are not permitted to change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (i) 67% or more of such company’s shares present at a meeting if more than 50% of the outstanding shares of such company are present or represented by proxy, or (ii) more than 50% of the outstanding shares of such company.
Our internet address is www.bcred.com. We make available free of charge on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statement and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of certain U.S. federal income tax considerations applicable to us and the purchase, ownership and disposition of our shares. This discussion does not purport to be complete or to deal with all aspects of U.S. federal income taxation that may be relevant to shareholders in light of their particular circumstances. Unless otherwise noted, this discussion applies only to U.S. shareholders that hold our shares as capital assets. A U.S. shareholder is an individual who is a citizen or resident of the United States, a U.S. corporation, a trust if it (a) is subject to the primary supervision of a court in the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) has made a valid election to be treated as a U.S. person, or any estate the income of which is subject to U.S. federal income tax regardless of its source. This discussion is based upon present provisions of the Code, the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change, or differing interpretations (possibly with retroactive effect). This discussion does not represent a detailed description of the U.S. federal income tax consequences relevant to special classes of taxpayers including, without limitation, financial institutions, insurance companies, investors in pass-through entities, U.S. shareholders whose “functional currency” is not the U.S. dollar, tax-exempt organizations, dealers in securities or currencies, traders in securities or commodities that elect mark to market treatment, or persons that will hold our shares as a position in a “straddle,” “hedge” or as part of a “constructive sale” for U.S. federal income tax purposes. In addition, this discussion does not address U.S. federal estate or gift taxes, the application of the Medicare tax on net investment income or the U.S. federal alternative minimum tax, or any tax consequences attributable to persons being required to accelerate the recognition of any item of gross income with respect to our shares as a result of such income being recognized on an applicable financial statement. Prospective investors should consult their tax advisors with regard to the U.S. federal tax consequences of the purchase, ownership, or disposition of our shares, as well as the tax consequences arising under the laws of any state, foreign country or other taxing jurisdiction.
Taxation as a Regulated Investment Company
The Fund intends to elect to be treated, and intends to qualify each taxable year thereafter, as a RIC under Subchapter M of the Code.
To qualify for the favorable tax treatment accorded to RICs under Subchapter M of the Code, the Fund must, among other things: (1) have an election in effect to be treated as a BDC under the 1940 Act at all times during each taxable year; (2) have filed with its return for the taxable year an election to be a RIC or have made such election for a previous taxable year; (3) derive in each taxable year at least 90% of its gross income from (a) dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock or securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies; and (b) net income derived from an interest in certain publicly-traded partnerships that are treated as partnerships for U.S. federal income tax purposes and that derive less than 90% of their gross income from the items described in (a) above (each, a “Qualified Publicly-Traded Partnership”); and (4) diversify its holdings so that, at the end of each quarter of each taxable year of the Fund (a) at least 50% of the value of the Fund’s total assets is represented by cash and cash items (including receivables), U.S. government securities and securities of other RICs, and other securities for purposes of this calculation limited, in respect of any one issuer to an amount not greater in value than 5% of the value of the Fund’s total assets, and to not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of the Fund’s total assets is invested in the securities (other than U.S. government securities or securities of other RICs) of (I) any one issuer, (II) any two or more issuers which the Fund controls and which are determined to be engaged in the same or similar trades or businesses or related trades or businesses or (III) any one or more Qualified Publicly-Traded Partnerships (described in 3(b) above).
As a RIC, the Fund generally will not be subject to U.S. federal income tax on its investment company taxable income (as that term is defined in the Code, but determined without regard to the deduction for dividends
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paid) and net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, that it distributes in each taxable year to its shareholders, provided that it distributes at least 90% of the sum of its investment company taxable income and its net tax-exempt income for such taxable year. Generally, the Fund intends to distribute to its shareholders, at least annually, substantially all of its investment company taxable income and net capital gains, if any.
Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% U.S. federal excise tax. To prevent imposition of the excise tax, the Fund must distribute during each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for the one-year period ending October 31 of the calendar year and (iii) any ordinary income and capital gains for previous years that were not distributed during those years. For these purposes, the Fund will be deemed to have distributed any income or gains on which it paid U.S. federal income tax.
A distribution will be treated as paid on December 31 of any calendar year if it is declared by the Fund in October, November or December with a record date in such a month and paid by the Fund during January of the following calendar year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received.
If the Fund failed to qualify as a RIC or failed to satisfy the 90% distribution requirement in any taxable year, the Fund would be subject to U.S. federal income tax at regular corporate rates on its taxable income (including distributions of net capital gain), even if such income were distributed to its shareholders, and all distributions out of earnings and profits would be taxed to shareholders as ordinary dividend income. Such distributions generally would be eligible (i) to be treated as “qualified dividend income” in the case of individual and other non-corporate shareholders and (ii) for the dividends received deduction in the case of corporate shareholders. In addition, the Fund could be required to recognize unrealized gains, pay taxes and make distributions (which could be subject to interest charges) before requalifying for taxation as a RIC.
Distributions
Distributions to shareholders by the Fund of ordinary income (including “market discount” realized by the Fund on the sale of debt securities), and of net short-term capital gains, if any, realized by the Fund will generally be taxable to shareholders as ordinary income to the extent such distributions are paid out of the Fund’s current or accumulated earnings and profits. Distributions, if any, of net capital gains properly reported as “capital gain dividends” will be taxable as long-term capital gains, regardless of the length of time the shareholder has owned our shares. A distribution of an amount in excess of the Fund’s current and accumulated earnings and profits (as determined for U.S. federal income tax purposes) will be treated by a shareholder as a return of capital which will be applied against and reduce the shareholder’s basis in his or her shares. To the extent that the amount of any such distribution exceeds the shareholder’s basis in his or her shares, the excess will be treated by the shareholder as gain from a sale or exchange of the shares. Distributions paid by the Fund generally will not be eligible for the dividends received deduction allowed to corporations or for the reduced rates applicable to certain qualified dividend income received by non-corporate shareholders.
Distributions will be treated in the manner described above regardless of whether such distributions are paid in cash or invested in additional shares pursuant to the distribution reinvestment plan. Shareholders receiving distributions in the form of additional shares will generally be treated as receiving a distribution in the amount of the fair market value of the distributed shares. The additional shares received by a shareholder pursuant to the distribution reinvestment plan will have a new holding period commencing on the day following the day on which the shares were credited to the shareholder’s account.
The Fund may elect to retain its net capital gain or a portion thereof for investment and be taxed at corporate rates on the amount retained. In such case, it may designate the retained amount as undistributed capital gains in
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a notice to its shareholders, who will be treated as if each received a distribution of his pro rata share of such gain, with the result that each shareholder will (i) be required to report its pro rata share of such gain on its tax return as long-term capital gain, (ii) receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain and (iii) increase the tax basis for its shares by an amount equal to the deemed distribution less the tax credit.
The Internal Revenue Service currently requires that a RIC that has two or more classes of stock allocate to each such class proportionate amounts of each type of its income (such as ordinary income and capital gains) based upon the percentage of total dividends paid to each class for the tax year. Accordingly, if the Fund issues preferred shares, the Fund intends to allocate capital gain dividends, if any, between its common shares and preferred shares in proportion to the total dividends paid to each class with respect to such tax year. Shareholders will be notified annually as to the U.S. federal tax status of distributions, and shareholders receiving distributions in the form of additional shares will receive a report as to the NAV of those shares.
Sale or Exchange of Shares
Upon the sale or other disposition of our shares (except pursuant to a repurchase by the Fund, as described below), a shareholder will generally realize a capital gain or loss in an amount equal to the difference between the amount realized and the shareholder’s adjusted tax basis in the shares sold. Such gain or loss will be long-term or short-term, depending upon the shareholder’s holding period for the shares. Generally, a shareholder’s gain or loss will be a long-term gain or loss if the shares have been held for more than one year. For non-corporate taxpayers, long-term capital gains are currently eligible for reduced rates of taxation.
No loss will be allowed on the sale or other disposition of shares if the owner acquires (including pursuant to the distribution reinvestment plan) or enters into a contract or option to acquire securities that are substantially identical to such shares within 30 days before or after the disposition. In such a case, the basis of the securities acquired will be adjusted to reflect the disallowed loss. Losses realized by a shareholder on the sale or exchange of shares held for six months or less are treated as long-term capital losses to the extent of any distribution of long-term capital gain received (or amounts designated as undistributed capital gains) with respect to such shares.
From time to time, the Fund may offer to repurchase its outstanding shares. Shareholders who tender all shares of the Fund held, or considered to be held, by them will be treated as having sold their shares and generally will realize a capital gain or loss. If a shareholder tenders fewer than all of its shares or fewer than all shares tendered are repurchased, such shareholder may be treated as having received a taxable dividend upon the tender of its shares. In such a case, there is a risk that non-tendering shareholders, and shareholders who tender some but not all of their shares or fewer than all of whose shares are repurchased, in each case whose percentage interests in the Fund increase as a result of such tender, will be treated as having received a taxable distribution from the Fund. The extent of such risk will vary depending upon the particular circumstances of the tender offer, and in particular whether such offer is a single and isolated event or is part of a plan for periodically redeeming shares of the Fund.
Under U.S. Treasury regulations, if a shareholder recognizes a loss with respect to shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Internal Revenue Service Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.
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Nature of the Fund’s Investments
Certain of the Fund’s hedging and derivatives transactions are subject to special and complex U.S. federal income tax provisions that may, among other things, (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (ii) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (iv) cause the Fund to recognize income or gain without a corresponding receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (vi) adversely alter the intended characterization of certain complex financial transactions and (vii) produce income that will not be treated as qualifying income for purposes of the 90% gross income test described above.
These rules could therefore affect the character, amount and timing of distributions to shareholders and the Fund’s status as a RIC. The Fund will monitor its transactions and may make certain tax elections in order to mitigate the effect of these provisions.
Below Investment Grade Instruments
The Fund expects to invest in debt securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Investments in these types of instruments may present special tax issues for the Fund. U.S. federal income tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt obligations in a bankruptcy or workout context are taxable. These and other issues will be addressed by the Fund, to the extent necessary, to preserve its status as a RIC and to distribute sufficient income to not become subject to U.S. federal income tax.
Original Issue Discount
For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as zero coupon securities, debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income 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. Because any original issue discount will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our shareholders in order to satisfy the annual distribution requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the annual distribution requirement necessary to qualify for and maintain RIC tax treatment under Subchapter M of the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may not qualify for or maintain RIC tax treatment and thus we may become subject to corporate-level income tax.
Market Discount
In general, the Fund will be treated as having acquired a security with market discount if its stated redemption price at maturity (or, in the case of a security issued with original issue discount, its revised issue price) exceeds the Fund’s initial tax basis in the security by more than a statutory de minimis amount. The Fund will be required to treat any principal payments on, or any gain derived from the disposition of, any securities acquired with market discount as ordinary income to the extent of the accrued market discount, unless the Fund makes an election to accrue market discount on a current basis. If this election is not made, all or a portion of any
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deduction for interest expense incurred to purchase or carry a market discount security may be deferred until the Fund sells or otherwise disposes of such security.
Currency Fluctuations
Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time the Fund accrues income or receivables or expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such income or receivables or pays such liabilities are generally treated as ordinary income or loss. Similarly, gains or losses on foreign currency, foreign currency forward contracts, certain foreign currency options or futures contracts and the disposition of debt securities denominated in foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as ordinary income or loss.
Foreign Taxes
The Fund’s investment in non-U.S. securities may be subject to non-U.S. withholding taxes. In that case, the Fund’s yield on those securities would be decreased. Shareholders will generally not be entitled to claim a credit or deduction with respect to foreign taxes paid by the Fund.
Preferred Shares or Borrowings
If the Fund utilizes leverage through the issuance of preferred shares or borrowings, it may be restricted by certain covenants with respect to the declaration of, and payment of, dividends on shares in certain circumstances. Limits on the Fund’s payments of dividends on shares may prevent the Fund from meeting the distribution requirements described above, and may, therefore, jeopardize the Fund’s qualification for taxation as a RIC and possibly subject the Fund to the 4% excise tax. The Fund will endeavor to avoid restrictions on its ability to make dividend payments.
Backup Withholding
The Fund may be required to withhold from all distributions and redemption proceeds payable to U.S. shareholders who fail to provide the Fund with their correct taxpayer identification numbers or to make required certifications, or who have been notified by the Internal Revenue Service that they are subject to backup withholding. Certain shareholders specified in the Code generally are exempt from such backup withholding. This backup withholding is not an additional tax. Any amounts withheld may be refunded or credited against the shareholder’s U.S. federal income tax liability, provided the required information is timely furnished to the Internal Revenue Service.
Foreign Shareholders
U.S. taxation of a shareholder who is a nonresident alien individual, a foreign trust or estate or a foreign corporation, as defined for U.S. federal income tax purposes (a “foreign shareholder”), depends on whether the income from the Fund is “effectively connected” with a U.S. trade or business carried on by the shareholder.
If the income from the Fund is not “effectively connected” with a U.S. trade or business carried on by the foreign shareholder, distributions of investment company taxable income will be subject to a U.S. tax of 30% (or lower treaty rate), which tax is generally withheld from such distributions. However, dividends paid by the Fund that are “interest-related dividends” or “short-term capital gain dividends” will generally be exempt from such withholding, in each case to the extent the Fund properly reports such dividends to shareholders. For these purposes, interest-related dividends and short-term capital gain dividends generally represent distributions of interest or short-term capital gains that would not have been subject to U.S. federal withholding tax at the source if received directly by a foreign shareholder, and that satisfy certain other requirements. A foreign shareholder
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whose income from the Fund is not “effectively connected” with a U.S. trade or business would generally be exempt from U.S. federal income tax on capital gain dividends, any amounts retained by the Fund that are designated as undistributed capital gains and any gains realized upon the sale or exchange of shares. However, a foreign shareholder who is a nonresident alien individual and is physically present in the United States for more than 182 days during the taxable year and meets certain other requirements will nevertheless be subject to a U.S. tax of 30% on such capital gain dividends, undistributed capital gains and sale or exchange gains.
If the income from the Fund is “effectively connected” with a U.S. trade or business carried on by a foreign shareholder, then distributions of investment company taxable income, any capital gain dividends, any amounts retained by the Fund that are designated as undistributed capital gains and any gains realized upon the sale or exchange of shares will be subject to U.S. federal income tax at the graduated rates applicable to U.S. citizens, residents or domestic corporations. Foreign corporate shareholders may also be subject to the branch profits tax imposed by the Code.
The Fund may be required to withhold from distributions that are otherwise exempt from U.S. federal withholding tax (or taxable at a reduced treaty rate) unless the foreign shareholder certifies his or her foreign status under penalties of perjury or otherwise establishes an exemption.
The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may differ from those described herein. Foreign shareholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund.
Additional Withholding Requirements
Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”), a 30% United States federal withholding tax may apply to any dividends that the Fund pays to (i) a “foreign financial institution” (as specifically defined in the Code), whether such foreign financial institution is the beneficial owner or an intermediary, unless such foreign financial institution agrees to verify, report and disclose its United States “account” holders (as specifically defined in the Code) and meets certain other specified requirements or (ii) a non-financial foreign entity, whether such nonfinancial foreign entity is the beneficial owner or an intermediary, unless such entity provides a certification that the beneficial owner of the payment does not have any substantial United States owners or provides the name, address and taxpayer identification number of each such substantial United States owner and certain other specified requirements are met. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. In addition, foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. You should consult your own tax advisor regarding FATCA and whether it may be relevant to your ownership and disposition of our shares.
Other Taxation
Shareholders may be subject to state, local and foreign taxes on their distributions from the Fund. Shareholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund.
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RESTRICTIONS ON SHARE OWNERSHIP
Each prospective investor that is, or is acting on behalf of, any (i) “employee benefit plan” (within the meaning of Section 3(3) of ERISA) subject to Title I of ERISA, (ii) “plan” described in Section 4975(e)(1) of the Code, subject to Section 4975 of the Code (including for e.g., IRA and a “Keogh” plan), (iii) plan, account or other arrangement that is subject to provisions under any Similar Laws, or (iv) entity whose underlying assets are considered to include the assets of any of the foregoing described in clauses (i), (ii) and (iii), pursuant to ERISA or otherwise (each of the foregoing described in clauses (i), (ii), (iii) and (iv) referred to herein as a “Plan”), must independently determine that our Common Shares are an appropriate investment, taking into account its obligations under ERISA, the Code and applicable Similar Laws.
In contemplating an investment in the Fund, each fiduciary of the Plan who is responsible for making such an investment should carefully consider, taking into account the facts and circumstances of the Plan, whether such investment is consistent with the applicable provisions of ERISA, the Code or any Similar Law relating to a fiduciary’s duties to the Plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of ERISA, the Code and any other applicable Similar Laws. Furthermore, absent an exemption, the fiduciaries of a Plan should not invest in the Fund with the assets of any Plan if the Advisor or any of its affiliates is a fiduciary with respect to such assets of the Plan.
In contemplating an investment in the Fund, fiduciaries of Plans that is a Benefit Plan Investor (defined below) subject to Title I of ERISA or Section 4975 of the Code should also carefully consider the definition of the term “plan assets” in ERISA and the Plan Asset Regulations. Under ERISA and the Plan Asset Regulations, when a Benefit Plan Investor invests in an equity interest of an entity that is neither a “publicly-offered security” (within the meaning of the Plan Asset Regulations) nor a security issued by an investment company registered under the 1940 Act, the Benefit Plan Investors’ assets include both the equity interest and an undivided interest in each of the entity’s underlying assets, unless it is established that the entity is an “operating company” or that equity participation in the entity by “benefit plan investors” (“Benefit Plan Investors”) is not “significant” (each within the meaning of the Plan Asset Regulations). The term “Benefit Plan Investor” is defined in the Plan Asset Regulations to include (a) any employee benefit plan (as defined in section 3(3) of ERISA) subject to the provisions of Title I of ERISA, (b) any plan described in section 4975(e)(1) of the Code subject to Section 4975 of the Code, and (c) any entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in the entity.
Under the Plan Asset Regulations, equity participation in an entity by Benefit Plan Investors is “significant” on any date if, immediately after the most recent acquisition of any equity interest in the entity, 25% or more of the total value of any class of equity interests is held by Benefit Plan Investors. For purposes of this determination, the value of equity interests held by a person (other than a Benefit Plan Investor) who has discretionary authority or control with respect to the assets of the entity or that provides investment advice for a fee (direct or indirect) with respect to such assets (or any affiliate of such a person) is disregarded (each such person, a “Controlling Person”).
If the assets of the Fund were deemed to be “plan assets” under the Plan Asset Regulations, this would result, among other things, in (i) the application of the prudence and other fiduciary responsibility standards of ERISA to investments made by the Fund, and (ii) the possibility that certain transactions in which the Fund might seek to engage could constitute “prohibited transactions” under ERISA and the Code. If a prohibited transaction occurs for which no exemption is available, the Adviser and/or any other fiduciary that has engaged in the prohibited transaction could be required to (i) restore to the Covered Plan any profit realized on the transaction and (ii) reimburse the Benefit Plan Investor for any losses suffered by the Benefit Plan Investor as a result of the investment. In addition, each disqualified person (within the meaning of Section 4975 of the Code) involved could be subject to an excise tax equal to 15% of the amount involved in the prohibited transaction for each year the transaction continues and, unless the transaction is corrected within statutorily required periods, to an additional tax of 100%. Fiduciaries of Benefit Plan Investors who decide to invest in the Fund could, under
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certain circumstances, be liable for prohibited transactions or other violations as a result of their investment in the Fund or as co-fiduciaries for actions taken by or on behalf of the Fund or the Adviser. With respect to an IRA that invests in the Fund, the occurrence of a prohibited transaction involving the individual who established the IRA, or his or her beneficiaries, would cause the IRA to lose its tax-exempt status.
Accordingly, for any class of Common Shares deemed not to be “publicly-offered securities” within the meaning of the Plan Asset Regulations, the Fund intends to limit Benefit Plan Investor investments in each class of our Common Shares to less than 25%, disregarding equity interests held by Controlling Persons, within the meaning of the Plan Asset Regulations and/or to prohibit “benefit plan investors” from acquiring Common Shares that are not a part of a class of Common Shares which are considered “publicly-offered securities”. In this respect, in order to avoid the possibility that our assets could be treated as “plan assets,” within the meaning of the Plan Asset Regulations, until such time as each class of our Common Shares constitutes “publicly-offered securities” within the meaning of the Plan Asset Regulations we may require any person proposing to acquire Common Shares to furnish such information as may be necessary to determine whether such person is a Benefit Plan Investor or a Controlling Person and (ii) we will have the power to (a) exclude any shareholder or potential shareholder from purchasing such class of Common Shares; (b) prohibit any redemption of such class of Common Shares; and (c) redeem some or all Common Shares held by any holder if, and to the extent that, our Board of Trustees determines that there is a substantial likelihood that such holder’s purchase, ownership or redemption of Common Shares would result in our assets to be characterized as plan assets, for purposes of the fiduciary responsibility or prohibited transaction provisions of ERISA or Section 4975 of the Code, and all Common Shares of the Fund shall be subject to such terms and conditions.
CUSTODIAN, TRANSFER AND DISTRIBUTION PAYING AGENT AND REGISTRAR
Our securities are held under a custody agreement by State Street Bank and Trust Company. The address of the custodian is 100 Summer Street, Floor 5, Boston, MA 02110. DST Systems, Inc. will act as our transfer agent, distribution paying agent and registrar. The principal business address of our transfer agent is 1055 Broadway, 7th Floor, Kansas City, Missouri 64105.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Since we will generally acquire and dispose of our investments in privately negotiated transactions, we will infrequently use brokers in the normal course of our business. Subject to policies established by our Board of Trustees, if any, our Adviser will be primarily responsible for the execution of any publicly-traded securities portfolio transactions and the allocation of brokerage commissions. Our Adviser does not expect to execute transactions through any particular broker or dealer, but will seek to obtain the best net results for us, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities. While our Adviser generally will seek reasonably competitive trade execution costs, we will not necessarily pay the lowest spread or commission available. Subject to applicable legal requirements, our Adviser may select a broker based partly upon brokerage or research services provided to it and us and any other clients. In return for such services, we may pay a higher commission than other brokers would charge if our Adviser determines in good faith that such commission is reasonable in relation to the services provided.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statement as of December 31, 2020 for Blackstone Private Credit Fund included in this prospectus has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, and has been so included in reliance on the report of such firm given upon their authority as experts in auditing and accounting.
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Certain legal matters in connection with the Common Shares have been passed upon for the Fund by Richards, Layton & Finger, P.A., Wilmington, Delaware. Simpson Thacher & Bartlett LLP, Washington, DC, acts as counsel to the Fund.
We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to the Common Shares offered by this prospectus. The registration statement contains additional information about us and the Common Shares being offered by this prospectus.
We are required to file with or submit to the SEC annual, quarterly and current reports, proxy statements and other information meeting the informational requirements of the Exchange Act. The SEC maintains an internet site that contains reports, proxy and information statements and other information filed electronically by us with the SEC, which are available on the SEC’s website at http://www.sec.gov. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.
WEBSITE DISCLOSURE
We use our website (www.bcred.com) as a channel of distribution of company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings and webcasts. The contents of our website are not, however, a part of this Registration Statement.
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Blackstone
1. Why are you seeing this notice?
| • | You may need to provide Personal Data to us as part of your investment into a fund or other investment vehicle (as applicable, the Fund) managed or advised by investment advisers that are subsidiaries of The Blackstone Group Inc. or its affiliates (and, where applicable, the general partner of the relevant Fund) (collectively, Blackstone). |
| • | We want you to understand how and why we use, store and otherwise process your Personal Data when you deal with us or our relevant affiliates (including under applicable data protection laws). If this notice (the Data Privacy Notice) has been made available to you, you may have certain rights with respect to your Personal Data under applicable data protection laws (including as described in this Data Privacy Notice). |
| • | “Personal Data” has the meaning given to it under data protection laws that apply to our processing of your personal information, and includes any information that relates to, describes, identifies or can be used, directly or indirectly, to identify an individual (such as name, address, date of birth, personal identification numbers, sensitive personal information, and economic information). |
| • | We ask that investors promptly provide the information contained in this Data Privacy Notice to any individuals whose Personal Data they provide to the Fund or its affiliates in connection with ‘know your client’/anti-money laundering requests or otherwise. |
Please read the information below carefully. It explains how and why Personal Data is processed by us.
2. Who is providing this notice?
Blackstone is committed to protecting and respecting your privacy. Blackstone is a global financial services firm with offices, operations and entities globally, including as described at this link: https://www.blackstone.com/privacy#appendixA.
| • | For transparency, the Blackstone entities on whose behalf this privacy statement is made are: (i) the Fund; and (ii) where applicable, the Blackstone general partner and/or investment adviser of the relevant Fund, in each case, with which you contract, transact or otherwise share Personal Data (together, the Fund Parties). |
| • | Where we use the terms “we”, “us” and “our” in this Data Privacy Notice, we are referring to the Fund and the Fund Parties. |
| • | Please consult your subscription documents, private placement memorandum or other offering documentation provided to you by or on behalf of the Fund Parties which will further specify the entities and contact details of the Fund Parties relevant to our relationship with you. |
| • | We welcome investors and their representatives to contact us if they have any queries with respect to the Fund Parties (in particular, which Fund Parties are relevant to their relationship with Blackstone). If you have any queries, our contact details are below. |
When you provide us with your Personal Data, each Fund Party that decides how and why Personal Data is processed acts as a “data controller”. In simple terms, this means that the Fund Party makes certain decisions on how to use and protect your Personal Data – but only to the extent that we have informed you about the use or are otherwise permitted by law.
Where your Personal Data is processed by an entity controlled by, or under common control with, the Blackstone entity/ies managing a Fund for its own purposes, this entity will also be a data controller.
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3. What Personal Data do we collect about you?
The types of Personal Data that we collect and share depends on the product or service you have with us and the nature of your investment.
The Personal Data collected about you will help us to provide you with a better service and facilitate our business relationship.
We may combine Personal Data that you provide to us with Personal Data that we collect from you, or about you from other sources, in some circumstances. This will include Personal Data collected in an online or offline context.
As a result of our relationship with you as an investor, in the past 12 months we may have collected Personal Data concerning you in the following categories:
| a) | Identifiers (e.g., real name, alias, postal address, email address, social security or driver’s licence number, government ID, signature, telephone number, education, employment, employment history, financial information, including tax-related information/codes and bank account details, information used for monitoring and background checks to comply with laws and regulations, including ‘know your client’, anti-money laundering, and sanctions checks, online registration details, and other contact information); |
| b) | Sensitive/protected characteristic information (e.g., age/date of birth, nationality, citizenship, country of residence, gender, and other information used to comply with laws and regulations); |
| c) | Commercial information (e.g., assets, income, transaction and investment history, accounts at other institutions, financial positions/returns, information concerning source of funds and any applicable restrictions on your investment such as political exposure or sanctions); |
| d) | Internet or other network activity (e.g., browsing or search history, information regarding interaction with an internet website, application, or advertisement, online identifiers such as cookies); |
| e) | Sensory and surveillance data (e.g., recordings of telephone calls where permitted or required by law, video (surveillance) recordings, closed-circuit television (CCTV) images and recordings, and other records of your interactions with us or our service providers, including electronic communications); |
| f) | Professional or employment-related information (e.g., current or past job history); and |
| g) | Inferences drawn from other personal information (e.g., profiles reflecting preferences and trends, based on information such as assets, investment experience, risk tolerance, investment activity, and transaction history). |
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4. Where do we obtain your Personal Data?
We collect, and have collected, Personal Data about you from a number of sources, including from you directly:
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WHAT
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HOW
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| 1 | Personal Data |
• from the forms and any associated documentation that you complete when subscribing for an investment, shares, interests, and/or opening an account with us. This can include information about your name, address, date of birth, passport details or other national identifier, driving licence, your national insurance or social security number and income, employment information and details about your investment or retirement portfolio(s), and financial-related data (such as returns and financial positions)
• when you provide it to us in correspondence and conversations, including electronic communications such as email and telephone calls
• when you make transactions with respect to the Fund
• when you interact with our online platforms and websites (such as bxaccess.com)
• when you purchase securities from us and/or tell us where to send money
• from cookies, web beacons, and similar interactions when you or your devices access our sites
• when we need to identify you and/or complete necessary security checks, where you visit one of our buildings or attend meetings. This can include form of ID, and your image for CCTV purposes. | ||
| 2 | Personal Data that we obtain from others |
We obtain Personal Data from:
• publicly available and accessible directories and sources
• bankruptcy registers
• tax authorities, including those that are based outside the territory in which you are located or domiciled, including the Cayman Islands, the United Kingdom (UK) and the European Economic Area (EEA), if you are subject to tax in another jurisdiction
• governmental and competent regulatory authorities to whom we have regulatory obligations
• credit agencies
• fraud prevention and detection agencies/organisations
• transaction counterparties | ||
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5. Why do we process your Personal Data?
We may process or disclose your Personal Data for the following reasons:
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WHY
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HOW
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| 1 | It is necessary to perform our contract with you to:
• administer, manage and set up your investor account(s) to allow you to purchase your holding (of shares or interests) in our Funds
• meet the resulting contractual obligations we have to you
• facilitate the continuation or termination of the contractual relationship between you and the Fund
• facilitate the transfer of funds, and administering and facilitating any other transaction, between you and the Fund
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| 2 |
Compliance with law |
It is necessary for compliance with an applicable legal or regulatory obligation to which we are subject, in order to:
• undertake our client and investor due diligence, and on-boarding checks
• carry out verification, ‘know your client’, terrorist financing, sanctions, and anti-money laundering checks
• verify the identity and addresses of our investors (and, if applicable, their beneficial owners)
• comply with requests from regulatory, governmental, tax and law enforcement authorities
• carry out surveillance and investigations
• carry out audit checks
• maintain statutory registers
• prevent and detect fraud
• comply with sanctions requirements
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| 3 |
Legitimate interests |
For our legitimate interests or those of a third party (such as a transaction counterparty or lender) to:
• manage and administer your holding in any Funds in which you are invested, and any related accounts on an ongoing basis
• assess and process any applications or requests made by you
• open, maintain or close accounts in connection with your investment in, or withdrawal from, the Fund scheme
• send updates, information and notices or otherwise correspond with you in connection with your investment in the Fund scheme
• address or investigate any complaints, claims, proceedings or disputes
• provide you with, and inform you about, our investment products and services
• monitor and improve our relationships with investors
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WHY
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HOW
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• comply with applicable regulatory obligations, including anti-money laundering, sanctions and ‘know your client’ checks
• assist our transaction counterparties to comply with their regulatory and legal obligations (including anti-money laundering, ‘know your client’ and sanctions checks)
• manage our risk and operations
• comply with our accounting and tax reporting requirements
• comply with our audit requirements
• assist with internal compliance with our policies and processes
• ensure appropriate group management and governance
• keep our internal records
• prepare reports on incidents/accidents
• protect our business against fraud, breach of confidence, theft of proprietary materials, and other financial or business crimes (to the extent that this is not required of us by law)
• analyse and manage commercial risks
• seek professional advice, including legal advice
• enable any actual or proposed assignee or transferee, participant or sub-participant of the partnership’s or Fund vehicles’ rights or obligations to evaluate proposed transactions
• facilitate business asset transactions involving the Fund partnership or Fund-related vehicles
• monitor communications to/from us using our systems
• protect the security and integrity of our information technology systems
• protect the security and safety of our buildings and locations where we operate
• operate, run and schedule online meetings, webinars and conferences (for example, using Zoom and other online meeting platforms)
• manage our financing arrangements with our financiers and financing transaction counterparties, including payment providers, intermediaries, and correspondent/agent banks
We only rely on these interests where we have considered that, on balance, the legitimate interests are not overridden by your interests, fundamental rights or freedoms.
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Monitoring as described at (3) above
We monitor communications where the law requires us to do so. We will also monitor where we are required to do so to comply with our regulatory rules and practices and, where we are permitted to do so, to protect our business and the security of our systems.
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6. Who we share your Personal Data with
Your Personal Data will be shared with:
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WHO
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WHY
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| Fund Associates |
We share your Personal Data with our associates, related parties and members of our group. This is:
• to manage our relationship with you
• for the legitimate interests of a third party in carrying out anti-money laundering and compliance checks required of them under applicable laws and regulations
• for the purposes set out in this Data Privacy Notice | |||
|
Fund Managers, Depositories, Administrators, Custodians, Investment Advisers |
• delivering the services you require
• managing your investment
• supporting and administering investment-related activities
• complying with applicable investment, anti-money laundering and other laws and regulations | |||
| Tax Authorities |
• to comply with applicable laws and regulations
• where required or requested by tax authorities in the territory in which you are located or domiciled (in particular, Cayman Island or UK/EEA tax authorities) who, in turn, may share your Personal Data with foreign tax authorities
• where required or requested by foreign tax authorities, including outside of the territory in which you are located or domiciled (including outside the Cayman Islands or UK/EEA) | |||
|
Service Providers |
• delivering and facilitating the services needed to support our business relationship with you
• supporting and administering investment-related activities
• where disclosure to the service provider is considered necessary to support Blackstone with the purposes described in section 5 of this Data Privacy Notice | |||
|
Financing Counterparties, Lenders, Correspondent and Agent Banks |
• assisting these transaction counterparties with regulatory checks, such as ‘know your client’, and anti-money laundering procedures
• sourcing credit for Fund-related entities in the course of our transactions and fund life cycles | |||
| Our Lawyers, Auditors and other Professional Advisers |
• providing you with investment-related services
• to comply with applicable legal and regulatory requirements | |||
In exceptional circumstances, we will share your Personal Data with:
| • | competent regulatory, prosecuting and other governmental agencies or litigation counterparties, in any country or territory; and |
289
| • | other organisations and agencies – where we are required to do so by law. |
For California residents, in the preceding 12 months, we may have disclosed Personal Data listed in any of the categories in section 3 above for a business purpose (in particular, as described in this section).
We have not sold Personal Data in the 12 months preceding the date of this Data Privacy Notice.
7. Do you have to provide us with this Personal Data?
Where we collect Personal Data from you, we will indicate if:
| • | provision of the Personal Data is necessary for our compliance with a legal obligation; or |
| • | it is purely voluntary and there are no implications for you if you do not wish to provide us with it. |
Unless otherwise indicated, you should assume that we require the Personal Data for business and/or compliance purposes.
Some of the Personal Data that we request is necessary for us to perform our contract with you and if you do not wish to provide us with this Personal Data, it will affect our ability to provide our services to you and manage your investment.
8. Sending your Personal Data internationally
We will transfer your Personal Data between different countries to our affiliates and group members, members of the Fund’s partnership, transaction counterparties, and third party service providers. These countries may not have similarly strict data protection and privacy laws, and will include those countries in which our affiliates and service providers operate (and may include, for example, transfers from the UK/EEA, Cayman Islands, Australia, Hong Kong, Japan or Singapore to a jurisdiction outside of such territory).
Where we transfer Personal Data to other members of our group, our service providers or another third party recipient from one country to another, we will ensure that our arrangements with them are governed by data transfer agreements or appropriate safeguards, designed to ensure that your Personal Data is protected as required under applicable data protection law (including, where appropriate, under an agreement on terms approved for this purpose by the European Commission or by obtaining your consent).
Please contact us if you would like to know more about these agreements or receive a copy of them. Please see below for our contact details.
9. Consent – and your right to withdraw it
Except as may otherwise be required by local law, we do not generally rely on obtaining your consent to process your Personal Data. In particular, we do not generally rely on obtaining your consent where our processing of your personal data is subject only to the data protection laws of the UK/EEA (in these circumstances we will usually rely on another legal basis more appropriate in the circumstances, including those set out in section 5 above). If we do rely on consent for processing of your Personal Data, you have the right to withdraw this consent at any time. Please contact us or send us an email at PrivacyQueries@Blackstone.com at any time if you wish to do so.
Where required by applicable law, we will obtain your consent for the processing of your Personal Data for direct marketing purposes. If you do receive direct marketing communications from us (for example, by post, email, fax or telephone), you may opt-out by clicking the link in the relevant communication, completing the forms provided to you (where relevant), or by contacting us (see paragraph 13 below).
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10. Retention and deletion of your Personal Data
We keep your Personal Data for as long as it is required by us for our legitimate business purposes, to perform our contractual obligations or, where longer, such longer period as is required or permitted by law or regulatory obligations which apply to us. We will generally:
| • | retain Personal Data about you throughout the life cycle of any investment you are involved in; and |
| • | retain some Personal Data after your relationship with us ends. |
As a general principle, we do not retain your Personal Data for longer than we need it.
We will usually delete your Personal Data (at the latest) after you cease to be an investor in any fund and there is no longer any legal/regulatory requirement, or business purpose, for retaining your Personal Data.
11. Your rights
You may, subject to certain limitations, have data protection rights depending on the data protection laws that apply to our processing of your Personal Data, including the right to:
| • | access your Personal Data, and some related information, including the purpose for processing the Personal Data, the categories of recipients of that Personal Data to the extent that it has been transferred internationally, and, where the Personal Data has not been collected directly from you, the source (the category information) |
| • | restrict the use of your Personal Data in certain circumstances |
| • | have incomplete or inaccurate Personal Data corrected |
| • | ask us to stop processing your Personal Data |
| • | require us to delete your Personal Data in some limited circumstances |
You also have the right in some circumstances to request us to “port” your Personal Data in a portable, re-usable format to other organisations (where this is possible).
California residents may also request certain information about our disclosure of Personal Data during the prior year, including category information (as defined above).
We review and verify requests to protect your Personal Data, and will action data protection requests fairly and in accordance with applicable data protection laws and principles.
If you wish to exercise any of these rights, please contact us (details below).
12. Concerns or queries
We take your concerns very seriously. We encourage you to bring it to our attention if you have any concerns about our processing of your Personal Data. This Data Privacy Notice was drafted with simplicity and clarity in mind. We are, of course, happy to provide any further information or explanation needed. Our contact details are below.
Please also contact us via any of the below contact methods if you have a disability and require an alternative format of this Data Privacy Notice
291
If you want to make a complaint, you can also contact the body regulating data protection in your country, where you live or work, or the location where the data protection issue arose. In particular:
|
Country
|
Supervisory Authority
| |||
|
Cayman Islands |
Cayman Islands Ombudsman (available at: https://ombudsman.ky) | |||
|
European Union |
A list of the EU data protection authorities and contact details is available by clicking this link: http://ec.europa.eu/newsroom/article29/item-detail.cfm?item_id=612080 | |||
|
United Kingdom |
Information Commissioner’s Office (available at: https://ico.org.uk/global/contact-us/) | |||
13. Contact us
Please contact us if you have any questions about this Data Privacy Notice or the Personal Data we hold about you.
Contact us by email or access our web form by emailing PrivacyQueries@Blackstone.com.
Contact us in writing using this address:
| Address | For EU/UK related queries: 40 Berkeley Square, London, W1J 5AL, United Kingdom All other queries: |
A list of country-specific addresses and contacts for locations where we operate is available at https://www.blackstone.com/privacy#appendixA.
14. Changes to this Data Privacy Notice
We keep this Data Privacy Notice under regular review. Please check regularly for any updates at our investor portal (www.bxaccess.com).
This Data Privacy Notice was last updated on 15 December 2020.
292
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-2 | ||||
| F-3 | ||||
| F-4 |
INTERIM FINANCIAL STATEMENTS
F-1
Report of Independent Registered Public Accounting Firm
To the shareholder and the Board of Trustees of Blackstone Private Credit Fund
Opinion on the Financial Statement
We have audited the accompanying statement of assets and liabilities of Blackstone Private Credit Fund (the “Company”) as of December 31, 2020 and the related notes (referred to as the “financial statement”). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audit 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 statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statement, 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 statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.
New York, New York
We have served as the Company’s auditor since 2020.
F-2
Blackstone Private Credit Fund
Statement of Assets and Liabilities
| December 31, 2020 |
||||
| ASSETS |
||||
| Cash and cash equivalents |
$ | 51,500 | ||
|
|
|
|||
| Total assets |
$ | 51,500 | ||
|
|
|
|||
| NET ASSETS |
||||
| Common shares, $0.01 par value; unlimited shares authorized; 2,060 shares issued and outstanding |
$ | 21 | ||
| Additional paid in capital |
51,479 | |||
|
|
|
|||
| Total net assets |
$ | 51,500 | ||
|
|
|
|||
| COMPOSITION OF NET ASSETS |
||||
| Total paid-in capital |
$ | 51,500 | ||
| Common shares (Class I) |
2,060 | |||
| Net asset value per share (Class I) |
$ | 25.00 | ||
The accompanying notes are an integral part of this financial statement.
F-3
Blackstone Private Credit Fund
(in thousands, unless otherwise indicated, except share and per share data)
Note 1. Organization
Blackstone Private Credit Fund (“BCRED” or the “Company”), is a Delaware statutory trust formed on February 11, 2020. The Company was formed primarily to originate loans and other securities, including broadly syndicated loans, of private middle market U.S. companies. The Company is a non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company is externally managed by Blackstone Credit BDC Advisers (the “Adviser”). The Adviser is an affiliate of Blackstone Alternative Credit Advisers LP (the “Administrator” and, collectively with its affiliates in the credit-focused business of The Blackstone Group Inc., “Blackstone Credit,” which, for the avoidance of doubt, excludes Harvest Fund Advisers LLC and Blackstone Insurance Solutions), the credit-focused business of The Blackstone Group Inc. (“Blackstone”). The Company intends to elect to be treated for federal income tax purposes, and intends to qualify annually thereafter, as a regulated investment company (“RIC”) as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As of December 31, 2020, the Company had not commenced its investing activities.
The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. Under normal circumstances, the Company will invest at least 80% of its total assets (net assets plus borrowings for investment purposes) in private credit investments (loans, bonds and other credit instruments that are issued in private offerings or issued by private companies). Once the Company has invested a substantial amount of proceeds from the offering, under normal circumstances the Company expects that the majority of its portfolio will be in privately originated and privately negotiated investments, predominantly direct lending to U.S. middle market companies through (i) first lien senior secured and unitranche loans (generally with total investment sizes less than $300 million, which criteria may change from time to time) and (ii) second lien, unsecured, subordinated or mezzanine loans and structured credit (generally with total investment sizes less than $100 million, which criteria may change from time to time), as well as broadly syndicated loans (for which the Company may serve as an anchor investor), club deals (generally investments made by a small group of investment firms) and other debt and equity securities (the investments described in this sentence, collectively, “Private Credit”). To a lesser extent, the Company will also dynamically invest in publicly traded securities of large corporate issuers (“Opportunistic Credit”). The Company expects that the Opportunistic Credit investments will generally be liquid, and may be used for the purposes of maintaining liquidity for the Company’s share repurchase program and cash management, while also presenting an opportunity for attractive investment returns.
The Company offers on a continuous basis up to $5.0 billion of common shares of beneficial interest pursuant to an offering registered with the Securities and Exchange Commission. The Company expects to offer to sell any combination of three classes of common shares, Class S shares, Class D shares and Class I shares, with a dollar value up to the maximum offering amount. The share classes have different ongoing shareholder servicing and/or distribution fees. Until the release of proceeds from escrow, the per share purchase price for common shares in the primary offering will be $25.00 per share. Thereafter, the purchase price per share for each class of common shares will equal the net asset value (“NAV”) per share, as of the effective date of the monthly share purchase date. Blackstone Securities Partners L.P. (the “Intermediary Manager”) will use its best efforts to sell shares, but is not obligated to purchase or sell any specific amount of shares in the offering.
The Company will accept purchase orders and hold investors’ funds in an interest-bearing escrow account until the Company receives purchase orders for at least $100.0 million, excluding shares purchased by the Adviser, its affiliates and trustees and officers, in any combination of purchases of Class S shares, Class D shares and Class I shares, and the Company’s Board of Trustees (the “Board”) has authorized the release of funds in the escrow account.
F-4
On August 18, 2020, an affiliate of the Adviser purchased 60 shares of the Company’s Class I shares of beneficial interest at $25.00 per share.
On October 21, 2020, an affiliate of the Adviser purchased 2,000 shares of our the Company’s Class I shares of beneficial interest at $25.00 per share in a private offering.
Note 2. Significant Accounting Policies
Basis of Presentation
The financial statement has been prepared in accordance with accounting principles generally accepted in the United States of America. The Company is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. The Company’s first fiscal year ended on December 31, 2020.
Use of Estimates
The preparation of the financial statement in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement. Such estimates could differ from those estimates and such differences could be material.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and highly liquid investments (e.g. money market funds, U.S. treasury notes) with original maturities of three months or less. Cash and cash equivalents are carried at cost which approximates fair value. The Company deposits its cash and cash equivalents with financial institutions and, at times, may exceed the Federal Deposit Insurance Corporation insured limit.
Organization and Offering Expenses
Organization and offering costs will only be borne by the Company if the Company breaks escrow for its initial offering, at which time, costs associated with the organization of the Company will be expensed as incurred. Costs associated with the offering of common shares of the Company will be capitalized as deferred offering expenses and included as prepaid and other assets on the Statement of Assets and Liabilities and amortized over a twelve-month period from incurrence. Refer to “Note 5. Commitments and Contingencies” for additional details.
Income Taxes
The Company has elected to be treated as a BDC under the 1940 Act. The Company also intends to elect to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by BCRED would represent obligations of the Company’s investors and would not be reflected in the financial statement of the Company.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statement to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in
F-5
income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of its “investment company taxable income” for that year, which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses.
In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.
Recent Accounting Pronouncements
Management does not believe any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statement.
Note 3. Fees, Expenses, Agreements and Related Party Transactions
Investment Advisory Agreement
On October 5, 2020, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Adviser, pursuant to which the Adviser will manage BCRED on a day-to-day basis. The Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring the Company’s investments and monitoring its investments and portfolio companies on an ongoing basis.
The Investment Advisory Agreement is effective for an initial two-year term and will remain in effect from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a majority of the Company’s outstanding voting securities and, in each case, a majority of the independent trustees. The Company may terminate the Investment Advisory Agreement, without payment of any penalty, upon 60 days’ written notice. The Investment Advisory Agreement will automatically terminate in the event of its assignment within the meaning of the 1940 Act and related SEC guidance and interpretations.
The Company will pay the Adviser a fee for its services under the Investment Advisory Agreement consisting of two components: a management fee and an incentive fee. The cost of both the management fee and the incentive fee will ultimately be borne by the shareholders. No base management or incentive fees will be payable to the Adviser until the commencement of investment activities. Substantial additional fees and expenses may also be charged by the Administrator to the Company, which is an affiliate of the Adviser. In addition, the Adviser has agreed to waive the management fee and incentive fee based on income for the first six months following the date on which the Company breaks escrow for the offering.
Base Management Fee
The management fee will be payable monthly in arrears at an annual rate of 1.25% of the value of the Company’s net assets as of the beginning of the first calendar day of the applicable month. For purposes of the
F-6
Investment Advisory Agreement, net assets means the Company’s total assets less liabilities determined on a consolidated basis in accordance with GAAP. The management fee calculation will be prorated for any partial month.
Incentive Fees
The incentive fee will consist of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on a percentage of income and a portion is based on a percentage of capital gains, each as described below.
(i) Income based incentive fee
The portion based on the Company’s income is based on Pre-Incentive Fee Net Investment Income Returns. “Pre-Incentive Fee Net Investment Income Returns” means, as the context requires, either the dollar value of, or percentage rate of return on the value of net assets at the end of the immediate preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that are received from portfolio companies) accrued during the calendar quarter, minus operating expenses accrued for the quarter (including the management fee, expenses payable under the Administration Agreement entered into between the Company and the Administrator, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred shares, but excluding the incentive fee and any shareholder servicing and/or distribution fees). Pre-Incentive Fee Net Investment Income Returns include, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that has not yet been received in cash. Pre-Incentive Fee Net Investment Income Returns do not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The impact of expense support payments and recoupments are also excluded from Pre-Incentive Fee Net Investment Income Returns. Pre-Incentive Fee Net Investment Income Returns, expressed as a rate of return on the value of the Company’s net assets at the end of the immediate preceding quarter, is compared to a “hurdle rate” of return of 1.25% per quarter (5.0% annualized).
The Company will pay its Adviser an income based incentive fee quarterly in arrears with respect to the Company’s Pre-Incentive Fee Net Investment Income Returns in each calendar quarter as follows:
| • | No incentive fee based on Pre-Incentive Fee Net Investment Income Returns in any calendar quarter in which Pre-Incentive Fee Net Investment Income Returns do not exceed the hurdle rate of 1.25% per quarter (5.0% annualized); |
| • | 100% of the dollar amount of Pre-Incentive Fee Net Investment Income Returns with respect to that portion of such Pre-Incentive Fee Net Investment Income Returns, if any, that exceeds the hurdle rate but is less than a rate of return of 1.43% (5.72% annualized). The Company refers to this portion of the Pre-Incentive Fee Net Investment Income Returns (which exceeds the hurdle rate but is less than 1.43%) as the “catch-up.” This “catch-up” is meant to provide the Adviser with approximately 12.5% of Pre-Incentive Fee Net Investment Income Returns as if a hurdle rate did not apply if this net investment income exceeds 1.43% in any calendar quarter; and |
| • | 12.5% of the dollar amount of Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.43% (5.72% annualized). This reflects that once the hurdle rate is reached and the catch-up is achieved, 12.5% of all Pre-Incentive Fee Net Investment Income Returns thereafter are allocated to the Adviser. |
These calculations are prorated for any period of less than three months and are adjusted for any share issuances or repurchases during the relevant quarter.
F-7
(ii) Capital gains based incentive fee
The second part of the incentive fee will be determined and payable in arrears as of the end of each calendar year in an amount equal to 12.5% of cumulative realized capital gains from inception through the end of such calendar, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains as calculated in accordance with GAAP.
Administration Agreement
On October 5, 2020, the Company entered into an administration agreement (the “Administration Agreement”) with the Administrator. Under the terms of the Administration Agreement, the Administrator will provide, or oversee the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of other service providers), preparing reports to shareholders and reports filed with the Securities and Exchange Commission (the “SEC”) and other regulators, preparing materials and coordinating meetings of the Board, managing the payment of expenses, the payment of receipt of funds for investments and the performance of administrative and professional services rendered by others and providing office space, equipment and office services. The Company will reimburse the Administrator for the costs and expenses incurred by the Administrator in performing its obligations under the Administration Agreement. Such reimbursement will include the Company’s allocable portion of compensation, overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) the Company’s chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, operations and other non-investment professionals at the Administrator that perform duties for the Company; and (iii) any internal audit group personnel of Blackstone or any of its affiliates, subject to the limitations described in Investment Advisory and Administration Agreements. In addition, pursuant to the terms of the Administration Agreement, the Administrator may delegate its obligations under the Administration Agreement to an affiliate or to a third party and the Company will reimburse the Administrator for any services performed for the Company by such affiliate or third party. The Administrator hired a sub-administrator to assist in the provision of administrative services. The sub-administrator will receive compensation for its sub-administrative services under a sub-administration agreement.
Unless earlier terminated as described below, the Administration Agreement is effective for an initial two-year term and will remain in effect from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a majority of the Company’s outstanding voting securities and, in each case, a majority of the independent trustees. The Company may terminate the Administration Agreement, without payment of any penalty, upon 60 days’ written notice. The Investment Advisory Agreement will automatically terminate in the event of its assignment within the meaning of the 1940 Act and related SEC guidance and interpretations.
Sub-Administration Agreement
On October 5, 2020, the Administrator entered into a sub-administration agreement (the “Sub-Administration Agreement”) with State Street Bank and Trust Company. The sub-administrator will receive compensation for its sub-administrative services under the Sub-Administration Agreement.
Intermediary Manager Agreement
On October 5, 2020, the Company entered into an intermediary manager agreement (the “Intermediary Manager Agreement”) with Blackstone Securities Partners L.P., the Intermediary Manager, an affiliate of the Adviser. Under the terms of the Intermediary Manager Agreement, the Intermediary Manager will serve as the
F-8
intermediary manager for the Company’s public offering of its common shares. The Intermediary Manager will be entitled to receive shareholder servicing and/or distribution fees monthly in arrears at an annual rate of 0.85% of the value of the Company’s net assets attributable to Class S shares as of the beginning of the first calendar day of the month. The Intermediary Manager will be entitled to receive shareholder servicing and/or distribution fees monthly in arrears at an annual rate of 0.25% of the value of the Company’s net assets attributable to Class D shares as of the beginning of the first calendar day of the month. No shareholder servicing and/or distribution fees will be paid with respect to Class I. The shareholder servicing and/or distribution fees will be payable to the Intermediary Manager, but the Intermediary Manager anticipates that all or a portion of the shareholder servicing fees and/or distribution fees will be retained by, or reallowed (paid) to, participating brokers.
The Company will cease paying the shareholder servicing and/or distribution fees on the Class S shares and Class D shares on the earlier to occur of the following: (i) a listing of Class I shares, (ii) a merger or consolidation with or into another entity, or the sale or other disposition of all or substantially all of the Company’s assets or (iii) the date following the completion of the primary portion of the offering on which, in the aggregate, underwriting compensation from all sources in connection with the offering, including the shareholder servicing and/or distribution fees and other underwriting compensation, is equal to 10% of the gross proceeds from the primary offering. In addition, as required by exemptive relief allowing the Company to offer multiple classes of shares, at the end of the month in which the Intermediary Manager in conjunction with the transfer agent determines that total transaction or other fees, including upfront placement fees or brokerage commissions, and shareholder servicing and/or distribution fees paid with respect to any single share held in a shareholder’s account would exceed, in the aggregate, 10% of the gross proceeds from the sale of such share (or a lower limit as determined by the Intermediary Manager or the applicable selling agent), the Company will cease paying the shareholder servicing and/or distribution fee on either (i) each such share that would exceed such limit or (ii) all Class S shares and Class D shares in such shareholder’s account. At the end of such month, the applicable Class S share or Class D share in such shareholder’s account will convert into a number of Class I shares (including any fractional shares), with an equivalent aggregate NAV as such Class S or Class D shares.
The Intermediary Manager is a broker-dealer registered with the SEC is a member of the Financial Industry Regulatory Authority (“FINRA”).
The Intermediary Manager Agreement may be terminated at any time, without the payment of any penalty, by vote of a majority of the Company’s trustees who are not “interested persons”, as defined in the 1940 Act, of the Company and who have no direct or indirect financial interest in the operation of the Company’s distribution plan or the Intermediary Manager Agreement or by vote a majority of the outstanding voting securities of the Company, on not more than 60 days’ written notice to the Intermediary Manager or the Adviser. The Intermediary Manager Agreement will automatically terminate in the event of its assignment, as defined in the 1940 Act.
Distribution and Servicing Plan
On October 5, 2020, the Board approved a distribution and servicing plan (the “Distribution and Servicing Plan”). The following table shows the shareholder servicing and/or distribution fees the Company will pay the Intermediary Manager with respect to the Class S, Class D and Class I on an annualized basis as a percentage of the Company’s NAV for such class. The shareholder servicing and/or distribution fees will be paid monthly in arrears, calculated using the NAV of the applicable class as of the beginning of the first calendar day of the month.
| Shareholder Servicing and/or Distribution Fee as a % of NAV |
||||
| Class S shares |
0.85 | % | ||
| Class D shares |
0.25 | % | ||
| Class I shares |
— | |||
F-9
Subject to FINRA and other limitations on underwriting compensation, the Company will pay a shareholder servicing and/or distribution fee equal to 0.85% per annum of the Company’s net assets attributable to Class S shares as of the beginning of the first calendar day of the month and a shareholder servicing and/or distribution fee equal to 0.25% per annum of the Company’s net assets attributable to Class D shares as of the beginning of the first calendar day of the month.
The shareholder servicing and/or distribution fees will be paid monthly in arrears. The Intermediary Manager will reallow (pay) all or a portion of the shareholder servicing and/or distribution fees to participating brokers and servicing brokers for ongoing shareholder services performed by such brokers, and will waive shareholder servicing and/or distribution fees to the extent a broker is not eligible to receive it for failure to provide such services. Because the shareholder servicing and/or distribution fees with respect to Class S shares and Class D shares are calculated based on the aggregate NAV for all of the outstanding shares of each such class, it reduces the NAV with respect to all shares of each such class, including shares issued under the Company’s distribution reinvestment plan.
Eligibility to receive the shareholder servicing and/or distribution fee is conditioned on a broker providing the following ongoing services with respect to the Class S or Class D shares: assistance with recordkeeping, answering investor inquiries regarding us, including regarding distribution payments and reinvestments, helping investors understand their investments upon their request, and assistance with share repurchase requests. If the applicable broker is not eligible to receive the shareholder servicing and/or distribution fee due to failure to provide these services, the Intermediary Manager will waive the shareholder servicing fee and/or distribution that broker would have otherwise been eligible to receive. The shareholder servicing and/or distribution fees are ongoing fees that are not paid at the time of purchase.
Expense Support and Conditional Reimbursement Agreement
The Company entered into an expense support and conditional reimbursement agreement (the “Expense Support Agreement”) with the Adviser. The Adviser may elect to pay certain Company expenses on the Company’s behalf (each, an “Expense Payment”), provided that no portion of the payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Company. Any Expense Payment that the Adviser has committed to pay must be paid by the Adviser to the Company in any combination of cash or other immediately available funds no later than forty-five days after such commitment was made in writing, and/or offset against amounts due from the Company to the Adviser or its affiliates.
Following any calendar month in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to the Company’s shareholders based on distributions declared with respect to record dates occurring in such calendar month (the amount of such excess being hereinafter referred to as “Excess Operating Funds”), the Company shall pay such Excess Operating Funds, or a portion thereof, to the Adviser until such time as all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar month have been reimbursed. Any payments required to be made by the Company shall be referred to herein as a “Reimbursement Payment.” Available Operating Funds means the sum of (i) net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) net capital gains (including the excess of net long-term capital gains over net short-term capital losses) and (iii) dividends and other distributions paid to the Company on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).
The Company’s obligation to make a Reimbursement Payment shall automatically become a liability of the Company on the last business day of the applicable calendar month, except to the extent the Adviser has waived its right to receive such payment for the applicable month.
F-10
Escrow Agreement
On October 5, 2020, the Company entered into an escrow agreement (the “Escrow Agreement”) with UMB Bank, N.A. The Company will take purchase orders and hold investors’ funds in an interest-bearing escrow account until it receives purchase orders for at least $100 million (excluding any shares purchased by the Adviser, its affiliates and the Company’s trustees and officers but including any shares purchased in any private offerings), and the Board has authorized the release of the escrowed purchase order proceeds to us so that the Company can commence operations. Even if the Company receives purchase orders for $100 million, the Board may elect to wait a substantial amount of time before authorizing, or may elect not to authorize, the release of the escrowed proceeds. If the Company does not raise the minimum amount and commence operations by October 5, 2021 (one year following the effective date of the Company’s registration statement), the Company’s offering will be terminated and the escrow agent will promptly send investors a full refund of their investment with interest and without deduction for escrow expenses. Notwithstanding the foregoing, an investor may elect to withdraw its purchase order and request a full refund of its investment with interest and without deduction for escrow expenses at any time before the escrowed funds are released to the Company. If the Company breaks escrow for its offering and commence operations, interest earned on funds in escrow will be released to the Company’s account and constitute part of the Company’s net assets.
Note 4. Share Repurchase Program
Beginning no later than the first full calendar quarter from the date on which the Company breaks escrow for the initial offering of its common shares, and at the discretion of the Board, the Company intends to commence a share repurchase program in which the Company may repurchase, in each quarter, up to 5% of the NAV of the Company’s common shares outstanding (either by number of shares or aggregate NAV) as of the close of the previous calendar quarter. The Board may amend or suspend the share repurchase program at any time if in its reasonable judgment it deems such action to be in the best interest of shareholders, such as when a repurchase offer would place an undue burden on the Company’s liquidity, adversely affect the Company’s operations or risk having an adverse impact on the Company that would outweigh the benefit of the repurchase offer. As a result, share repurchases may not be available each quarter. The Company intends to conduct such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Securities Exchange Act of 1934, as amended, and the 1940 Act. All shares purchased pursuant to the terms of each tender offer will be retired and thereafter will be authorized and unissued shares.
Under the share repurchase plan, to the extent the Company offers to repurchase shares in any particular quarter, it is expected to repurchase shares pursuant to tender offers on or around the last business day of that quarter using a purchase price equal to the NAV per share as of the last calendar day of the applicable quarter, except that shares that have not been outstanding for at least one year will be repurchased at 98% of such NAV (an “Early Repurchase Deduction”). The one-year holding period is measured as of the subscription closing date immediately following the prospective repurchase date. The Early Repurchase Deduction may be waived in the case of repurchase requests arising from the death, divorce or qualified disability of the holder. The Early Repurchase Deduction will be retained by the Company for the benefit of remaining shareholders.
Note 5. Commitments and Contingencies
The Adviser has agreed to bear all of the Company’s expenses, including organization and offering expenses, through the date on which the Company breaks escrow for the initial offering of its common shares. The Company will be obligated to reimburse the Adviser for such advanced expenses upon breaking escrow for the offering. The total organization and offering costs incurred through December 31, 2020 were $3.9 million.
From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. At December 31, 2020, management is not aware of any pending or threatened litigation.
F-11
Warehousing Transactions
The Company entered into two warehousing transactions whereby the Company agreed, subject to certain conditions, to purchase certain assets from parties unaffiliated with the Adviser. Such warehousing transactions were designed to assist the Company in deploying capital upon receipt of subscription proceeds. One of these warehousing transactions related primarily to originated or anchor investments in middle market loans (the “Facility Agreement”). The other warehouse related primarily to broadly syndicated loans (the “Syndicated Warehouse” and, together with Facility Agreement, the “Warehousing Transactions”).
Facility Agreement
On November 2, 2020, the Company entered into the Facility Agreement, which was subsequently amended on November 16, 2020, December 7, 2020 and December 28, 2020 with Goldman Sachs Bank USA (the “Financing Provider”). Under the Facility Agreement, if the Company has received subscriptions of at least $400 million (the “Capital Condition”), the Company, or its designee, has a forward obligation to purchase certain investments (the “Portfolio Investments”) from the Financing Provider, who is obligated to sell such investments. The Portfolio Investments will generally consist of originated and anchor loans to middle market companies consistent with the Company’s investment strategy. Pursuant to the Facility Agreement, the Company may request that the Financing Provider acquire such Portfolio Investments as the Company may designate from time to time, which the Financing Provider can approve or reject in its sole and absolute discretion. The Company may elect to purchase, and in certain events the Company will be required to purchase, from the Financing Provider one or more Portfolio Investments on or before June 30, 2021 (the “Facility End Date”). Prior to any sale to the Company, the Portfolio Investments will be owned and held solely for the account of the Financing Provider. Until such time as the Company has satisfied the Capital Condition, it will have no obligation to purchase the Portfolio Investments nor be entitled to any benefits or subject to any obligations under the Facility Agreement unless it waives the Capital Condition. In consideration for the forward arrangement provided by the Financing Provider (the amount of the arrangement will not exceed $200 million prior to December 15, 2020, not exceed $300 million on or after December 15, 2020 and prior to December 28, 2020, not exceed $500 million on or after December 28, 2020 and prior to January 18, 2021 and will not exceed $300 million on or after January 18, 2021 up to the Facility End Date (the “Financing Amount”)), the Company has agreed to pay, subject to satisfying the Capital Condition, certain fees and expenses to the Financing Provider, including (i) a financing fee at an annual rate of LIBOR plus 1.70% multiplied by the sum of the relevant principal amount for, each Portfolio Investment, (ii) an unused fee at an annual rate of 0.50% of the unused Financing Amount and (iii) a structuring fee equal to $1.453 million which is payable on the earlier of the termination date or the Facility End Date. As a general matter, the price the Company would pay to purchase any Portfolio Investment from the Financing Provider equals the cash amount paid by the Financing Provider subject to adjustment for, among other things, principal repayments and interest amounts earned by the Financing Provider.
As of December 31, 2020, there were 19 loans (consisting of 15 portfolio companies) that the Financing Provider previously acquired with a fair market value of $443.8 million as compared to a $442.5 million purchase obligation relating to the Facility Agreement (including fees payable to the Financing Provider). As of December 31, 2020, the Capital Condition was not met.
Syndicated Warehouse
On November 3, 2020, the Company entered into a purchase and sale agreement (the “PSA”) with Sente Master Fund, L.P. and Vibrant Ambar Fund, Ltd. (together, the “Sellers”). Under the PSA, if the Company has raised at least $200 million of equity capital by April 15, 2021, then the Company or its designee must arrange one or more transactions sufficient to repay all outstanding amounts under the Syndicated Warehouse with commitments of up to $255 million of Maple Park CLO, Ltd. (“Maple Park”), an entity expected to hold primarily broadly syndicated loans with a target portfolio size of $300 million that is managed by an affiliate of
F-12
the Company, and to redeem in full the subordinated notes (the “Subordinated Notes”) issued by Maple Park. As of December 31, 2020, the Company did not satisfy the condition discussed above.
Under the PSA, this transaction may be structured to include a purchase by the Company or its designee of the Subordinated Notes, if any, held by the unaffiliated Sellers. The purchase price to be paid to the Sellers (the “Purchase Price”) would equal (i) the notional amount of the Subordinated Notes held by the Sellers and (ii) the Sellers’ pro rata share of interest and fee collections on the portfolio of loans held by Maple Park in excess of the outstanding advances under the Syndicated Warehouse. In addition, at any time prior to April 15, 2021, the Company or its designee will have the right, but not the obligation, to purchase the Subordinated Notes held by the Sellers at the Purchase Price.
As of December 31, 2020, there were 142 loans (consisting of 137 portfolio companies) in the Syndicated Warehouse with an aggregate cost basis and fair market value of $288.2 million and $288.9 million, respectively.
Other Transactions
In December 2020, the Company entered into arrangements with two unaffiliated counterparties (the “Counterparties”) to sell certain investments that were owned and held by the Counterparties at the Company’s request. Prior to the sale to the Company, the investments will be owned and held solely for the account of the Counterparties until the Capital Condition is met. The Company is obligated to pay a certain premium (up to 0.30% of total principal of the investment), upon purchasing the investments, to the Counterparties. As of December 31, 2020, the Capital Condition was not met.
As of December 31, 2020, there were three loans (consisting of two portfolio companies) held by the Counterparties with an aggregate cost basis and fair market value of $149.2 million and $148.8 million, respectively.
Note 6. Net Assets
In connection with its formation, the Company has the authority to issue an unlimited number of common shares of beneficial interest at $0.01 per share par value. On August 18, 2020, an affiliate of the Adviser purchased 60 shares of the Company’s Class I shares of beneficial interest at $25.00 per share. On October 21, 2020, an affiliate of the Adviser purchased 2,000 shares of the Company’s Class I shares of beneficial interest at $25.00 per share in a private offering.
Note 7. Subsequent Events
The Company’s management evaluated subsequent events through the date of issuance of the financial statement. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in, the financial statement as of December 31, 2020 except as discussed below.
Initial Escrow Break
As of January 7, 2021, the Company had satisfied the minimum offering requirement, and the Company’s Board had authorized the release of proceeds from escrow. As of such date, the Company issued and sold 32,560,141 shares (consisting of 2,750,840 Class S shares, and 29,809,301 Class I shares at an offering price of $25.00 per share; no Class D shares were issued or sold as of such date), and the escrow agent released net proceeds of approximately $814.0 million to the Company as payment for such shares.
Facility Agreement
On January 7, 2021, the Company met the Capital Condition and was obligated to acquire the assets held by the Financing Provider through a forward purchase agreement prior to June 30, 2021. Accordingly, at each
F-13
reporting period after the escrow break, the Company will recognize the mark-to-market gain/loss of all investments held by the Financing Provider in its consolidated financial statements. After the Company broke escrow, it purchased debt investments from the Financing Provider with an aggregate principal amount of $453.4 million (excluding unfunded revolvers and delayed draw positions of $138.9 million), at a purchase price of $439.9 million, resulting in a realized gain of approximately $2.2 million.
Syndicated Warehouse and Other Transactions
The Company exercised its right to acquire the equity interests of the Syndicated Warehouse on January 8, 2021, effectively acquiring the assets and liabilities of the warehouse, for a total purchase price of $43.3 million. This transaction resulted in a realized gain of $2.3 million, which represented the excess of fair value of the net assets acquired over the total consideration paid for the equity interests in the Syndicated Warehouse on the date of acquisition.
In January 2021, the Company purchased investments from the Counterparties (including two revolvers and two delayed draw term loans) having an aggregate cost basis (including fees payable to Counterparties) and fair market value of $149.2 million and $148.8 million, respectively, resulting in an unrealized loss of $0.4 million.
Credit Facilities
On January 8, 2021, BCRED Castle Peak Funding LLC (“Castle Peak Funding”), the Company’s wholly-owned subsidiary, entered into a senior secured revolving credit facility (the “Castle Peak Funding Facility”) with Citibank, N.A. (“Citi”). Citi serves as administrative agent, Wilmington Trust, National Association, serves as collateral agent, custodian and collateral administrator and the Fund serves as collateral manager under the Castle Peak Funding Facility.
Advances used to finance the purchase or origination of broadly syndicated loans under the Castle Peak Funding Facility initially bear interest at a per annum rate equal to the three-month London Interbank Offered Rate in effect (“LIBOR”), plus the applicable margin of 1.50% per annum. Advances used to finance the purchase or origination of middle market loans under the Castle Peak Funding Facility initially bear interest at a per annum rate equal to LIBOR plus the applicable margin of 2.00% per annum. After the expiration of a three-year reinvestment period, the applicable margin on outstanding advances will be increased by 1.00% per annum.
The initial principal amount of the Castle Peak Funding Facility is $200 million. The Revolving Credit Facility has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Castle Peak Funding Facility to up to $800 million. Proceeds from borrowings under the Castle Peak Funding Facility may be used to fund portfolio investments by Castle Peak Funding and to make advances under revolving loans or delayed draw term loans where Castle Peak Funding is a lender. All amounts outstanding under the Castle Peak Funding Facility must be repaid by the date that is five years after the closing date of the Castle Peak Funding Facility.
On January 28, 2021, BCRED Maroon Peak Funding LLC (“Maroon Peak Funding”), the Company’s wholly-owned subsidiary, entered into a senior secured revolving credit facility (the “Maroon Peak Funding Facility”) with Morgan Stanley Bank, N.A. (“MS”). Morgan Stanley Senior Funding, Inc. serves as administrative agent, U.S. Bank National Association, serves as collateral agent and the Company serves as collateral manager under the Maroon Peak Funding Facility.
Advances may be used to finance the purchase or origination of broadly syndicated loans under the Maroon Peak Funding Facility and will initially bear interest at a per annum rate equal to the three-month LIBOR then in effect plus the applicable spread of 1.30% per annum. After the expiration of a one year base period, the applicable spread on outstanding advances will be increased to 2.00% per annum.
F-14
The initial principal amount of the Maroon Peak Funding Facility is $500 million. Effective February 10, 2021, Maroon Peak Funding exercised its accordion feature under the Maroon Peak Funding Facility, which increased the maximum commitment amount to $560 million. The Maroon Peak Funding Facility has an additional accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Maroon Peak Funding Facility to up to $700 million. Proceeds from borrowings under the Maroon Peak Funding Facility may be used to fund portfolio investments by Maroon Peak Funding and to make advances under revolving loans or delayed draw term loans where Maroon Peak Funding is a lender. All amounts outstanding under the Maroon Peak Funding Facility must be repaid by the date that is two years after the closing date of the Maroon Peak Funding Facility, unless the parties have entered into an extension agreement.
January Financial Update and Dividend Declarations:
As of January 31, 2021, the Company’s net asset value for Class S and Class I shares was $25.25 per share.
On January 29, 2021, the Company’s Board declared distributions of $0.1151 per Class I share and $0.1008 per Class S shares, which is payable on February 24, 2021 to shareholders of record as of January 31, 2021.
February Subscriptions and Dividend Declarations:
On February 1, 2021, the Company issued and sold 24,480,184 shares (consisting of 3,860,348 Class S shares, and 20,619,836 Class I shares at an offering price of $25.25 per share for both Class S and Class I shares; no Class D shares were issued or sold as of such date), and the Company received approximately $618.1 million as payment for such shares.
On February 24, 2021, the Company’s Board declared distributions of $0.1427 per Class I share and $0.1250 per Class S shares, which is payable on March 29, 2021 to shareholders of record as of February 28, 2021.
March Subscriptions
On March 1, 2021, the Company received approximately $653.6 million of net proceeds relating to the issuance of Class I and Class S shares for March subscriptions.
The Company has closed on aggregate subscriptions of approximately $2,085.8 million since the time it broke escrow on January 7, 2021.
F-15
Blackstone Private Credit Fund
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share amounts)
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Investments at fair value |
||||||||
|
Non-controlled/non-affiliated investments (cost of $11,245,755 and $0 at June 30, 2021 and December 31, 2020, respectively) |
$ | 11,313,992 | $ | — | ||||
| Non-controlled/affiliated investments (cost of $401 and $0 at June 30, 2021 and December 31, 2020, respectively) |
401 | — | ||||||
| Controlled/affiliated investments (cost of $1,421 and $0 at June 30, 2021 and December 31, 2020, respectively) |
1,424 | — | ||||||
|
|
|
|
|
|||||
| Total investments at fair value (cost of $11,247,577 and $0 at June 30, 2021 and December 31, 2020, respectively) |
11,315,817 | — | ||||||
| Cash and cash equivalents |
495,567 | 52 | ||||||
| Interest receivable |
48,033 | — | ||||||
| Deferred financing costs |
29,391 | — | ||||||
| Deferred offering costs |
1,792 | — | ||||||
| Receivable for investments sold |
255,469 | — | ||||||
| Other assets |
84 | — | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 12,146,153 | $ | 52 | ||||
|
|
|
|
|
|||||
| LIABILITIES |
||||||||
| Debt (net of unamortized debt issuance costs of $4,595 and $0 at June 30, 2021 and December 31, 2020, respectively) |
$ | 4,828,463 | $ | — | ||||
| Payable for investments purchased |
2,289,825 | — | ||||||
| Capital gains incentive fee payable |
9,319 | — | ||||||
| Interest payable |
7,711 | — | ||||||
| Due to affiliates |
4,525 | — | ||||||
| Distribution payable (Note 8) |
54,770 | — | ||||||
| Payable for share repurchases (Note 8) |
1,233 | — | ||||||
| Accrued expenses and other liabilities |
6,373 | — | ||||||
|
|
|
|
|
|||||
| Total liabilities |
7,202,219 | — | ||||||
|
|
|
|
|
|||||
| Commitments and contingencies (Note 7) |
||||||||
| NET ASSETS |
||||||||
| Common shares, $0.01 par value (191,586,126 and 2,060 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively) |
1,916 | — | ||||||
| Additional paid in capital |
4,870,315 | 52 | ||||||
| Distributable earnings (loss) |
71,703 | — | ||||||
|
|
|
|
|
|||||
| Total net assets |
4,943,934 | 52 | ||||||
|
|
|
|
|
|||||
| Total liabilities and net assets |
$ | 12,146,153 | $ | 52 | ||||
|
|
|
|
|
|||||
F-16
Blackstone Private Credit Fund
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share amounts)
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| NET ASSET VALUE PER SHARE |
||||||||
| Class I Shares: |
||||||||
| Net assets |
$ | 3,754,393 | $ | 52 | ||||
| Common shares outstanding ($0.01 par value, unlimited shares authorized) |
145,490,140 | 2,060 | ||||||
| Net asset value per share |
$ | 25.81 | $ | 25.00 | ||||
| Class S Shares: |
||||||||
| Net assets |
$ | 1,111,572 | $ | — | ||||
| Common shares outstanding ($0.01 par value, unlimited shares authorized) |
43,074,698 | — | ||||||
| Net asset value per share |
$ | 25.81 | $ | — | ||||
| Class D Shares: |
||||||||
| Net assets |
$ | 77,969 | $ | — | ||||
| Common shares outstanding ($0.01 par value, unlimited shares authorized) |
3,021,288 | — | ||||||
| Net asset value per share |
$ | 25.81 | $ | — | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-17
Blackstone Private Credit Fund
Consolidated Statements of Operations
(in thousands)
(Unaudited)
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Investment income: |
||||||||
| From non-controlled/non-affiliated investments: |
||||||||
| Interest income |
$ | 114,433 | $ | 148,636 | ||||
| Payment-in-kind interest income |
578 | 700 | ||||||
| Fee income |
8,113 | 8,177 | ||||||
|
|
|
|
|
|||||
| Total investment income |
123,124 | 157,513 | ||||||
|
|
|
|
|
|||||
| Expenses: |
||||||||
| Interest expense |
17,345 | 20,785 | ||||||
| Management fees |
12,620 | 17,000 | ||||||
| Income based incentive fee |
10,916 | 13,761 | ||||||
| Capital gains incentive fee |
6,517 | 9,319 | ||||||
| Distribution and shareholder servicing fees |
||||||||
| Class S |
1,798 | 2,156 | ||||||
| Class D |
23 | 23 | ||||||
| Professional fees |
1,009 | 1,587 | ||||||
| Board of Trustees’ fees |
140 | 279 | ||||||
| Administrative service expenses (Note 3) |
324 | 619 | ||||||
| Other general & administrative |
1,324 | 2,259 | ||||||
| Organization costs |
— | 1,090 | ||||||
| Amortization of continuous offering costs |
838 | 1,609 | ||||||
|
|
|
|
|
|||||
| Total expenses |
52,854 | 70,487 | ||||||
| Expense support (Note 3) |
— | (2,199 | ) | |||||
| Recoupment of expense support (Note 3) |
2,199 | 2,199 | ||||||
| Management fees waived (Note 3) |
(12,620 | ) | (17,000 | ) | ||||
| Incentive fees waived (Note 3) |
(10,916 | ) | (13,761 | ) | ||||
|
|
|
|
|
|||||
| Net expenses |
31,517 | 39,726 | ||||||
|
|
|
|
|
|||||
| Net investment income |
91,607 | 117,787 | ||||||
|
|
|
|
|
|||||
| Realized and unrealized gain (loss): |
||||||||
| Net change in unrealized appreciation (depreciation): |
||||||||
|
Non-controlled/non-affiliated investments |
52,318 | 68,528 | ||||||
| Controlled/Affiliated investments |
3 | 3 | ||||||
| Forward purchase obligation (Note 7) |
(1,910 | ) | — | |||||
|
|
|
|
|
|||||
| Net unrealized appreciation (depreciation) |
50,411 | 68,531 | ||||||
|
|
|
|
|
|||||
| Realized gain (loss): |
||||||||
|
Non-controlled/non-affiliated investments |
360 | 777 | ||||||
| Forward purchase obligation (Note 7) |
2,248 | 3,709 | ||||||
| Derivative (Note 7) |
— | 2,334 | ||||||
| Foreign currency transactions |
(883 | ) | (802 | ) | ||||
|
|
|
|
|
|||||
| Net realized gain (loss) |
1,725 | 6,018 | ||||||
|
|
|
|
|
|||||
| Net realized and unrealized gain (loss) |
52,136 | 74,549 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets resulting from operations |
$ | 143,743 | $ | 192,336 | ||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
F-18
Blackstone Private Credit Fund
Consolidated Statements of Changes in Net Assets
(in thousands)
(Unaudited)
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Operations: |
||||||||
| Net investment income |
$ | 91,607 | $ | 117,787 | ||||
| Net realized gain (loss) |
1,725 | 6,018 | ||||||
| Net change in unrealized appreciation (depreciation) |
50,411 | 68,531 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets resulting from operations |
143,743 | 192,336 | ||||||
|
|
|
|
|
|||||
| Distributions to common shareholders: |
||||||||
| Class I |
(76,615 | ) | (97,735 | ) | ||||
| Class S |
(19,303 | ) | (21,833 | ) | ||||
| Class D |
(1,065 | ) | (1,065 | ) | ||||
|
|
|
|
|
|||||
| Net decrease in net assets resulting from distributions |
(96,983 | ) | (120,633 | ) | ||||
|
|
|
|
|
|||||
| Share transactions: |
||||||||
| Class I: |
||||||||
| Proceeds from shares sold |
1,863,782 | 3,669,228 | ||||||
| Share transfers between classes |
2,745 | 2,745 | ||||||
| Distributions reinvested |
19,715 | 24,563 | ||||||
| Repurchased shares, net of early repurchase deduction |
(1,239 | ) | (1,239 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) from share transactions |
1,885,003 | 3,695,297 | ||||||
|
|
|
|
|
|||||
| Class S: |
||||||||
| Proceeds from shares sold |
813,582 | 1,093,871 | ||||||
| Distributions reinvested |
4,766 | 5,341 | ||||||
| Repurchased shares, net of early repurchase deduction |
6 | 6 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) from share transactions |
818,354 | 1,099,218 | ||||||
|
|
|
|
|
|||||
| Class D: |
||||||||
| Proceeds from shares sold |
80,347 | 80,347 | ||||||
| Share transfers between classes |
(2,745 | ) | (2,745 | ) | ||||
| Distributions reinvested |
62 | 62 | ||||||
| Repurchased shares, net of early repurchase deduction |
— | — | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) from share transactions |
77,664 | 77,664 | ||||||
|
|
|
|
|
|||||
| Total increase (decrease) in net assets |
2,827,781 | 4,943,882 | ||||||
| Net assets, beginning of period |
2,116,153 | 52 | ||||||
|
|
|
|
|
|||||
| Net assets, end of period |
$ | 4,943,934 | $ | 4,943,934 | ||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
F-19
Blackstone Private Credit Fund
Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
| Six Months Ended June 30, 2021 |
||||
| Cash flows from operating activities: |
||||
| Net increase (decrease) in net assets resulting from operations |
$ | 192,336 | ||
| Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: |
||||
| Net unrealized (appreciation) depreciation on investments |
(68,531 | ) | ||
| Net realized (gain) loss on investments |
(777 | ) | ||
| Net realized (gain) loss on forward purchase obligation |
(3,709 | ) | ||
| Net realized (gain) loss on derivative |
(2,334 | ) | ||
| Net accretion of discount and amortization of premium |
(6,155 | ) | ||
| Amortization of deferred financing costs |
2,268 | |||
| Amortization of debt issuance costs |
2 | |||
| Amortization of offering costs |
1,609 | |||
| Payment in connection with purchase of Syndicated Warehouse, net of cash received (Note 7) |
(44,521 | ) | ||
| Payment in connection with Twin Peaks acquisition, net of cash received (Note 10) |
(697,431 | ) | ||
| Purchases of investments |
(10,637,605 | ) | ||
| Proceeds from sale of investments and principal repayments |
723,427 | |||
| Changes in operating assets and liabilities: |
||||
| Interest receivable |
(37,620 | ) | ||
| Receivable for investments |
(255,469 | ) | ||
| Other assets |
(84 | ) | ||
| Payable for investments purchased |
2,169,374 | |||
| Capital gains incentive fee payable |
9,319 | |||
| Due to affiliates |
4,236 | |||
| Interest payable |
6,654 | |||
| Accrued expenses and other liabilities |
5,204 | |||
|
|
|
|||
| Net cash provided by (used in) operating activities |
(8,639,807 | ) | ||
|
|
|
|||
| Cash flows from financing activities: |
||||
| Borrowings of debt |
7,048,495 | |||
| Repayments of debt |
(2,689,814 | ) | ||
| Deferred financing costs paid |
(27,540 | ) | ||
| Debt issuance costs paid |
(227 | ) | ||
| Deferred offering costs paid |
(3,113 | ) | ||
| Proceeds from issuance of common shares |
4,843,446 | |||
| Dividends paid in cash |
(35,899 | ) | ||
|
|
|
|||
| Net cash provided by (used in) financing activities |
9,135,348 | |||
|
|
|
|||
| Net increase (decrease) in cash and cash equivalents |
495,541 | |||
| Effect of foreign exchange rate changes on cash and cash equivalents |
(26 | ) | ||
| Cash and cash equivalents, beginning of period |
52 | |||
|
|
|
|||
| Cash and cash equivalents, end of period |
$ | 495,567 | ||
|
|
|
|||
F-20
Blackstone Private Credit Fund
Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
| Six Months Ended June 30, 2021 |
||||
| Supplemental information and non-cash activities: |
||||
| Interest paid during the period |
$ | 11,837 | ||
| Distribution payable |
$ | 54,770 | ||
| Reinvestment of dividends during the period |
$ | 29,966 | ||
| Accrued but unpaid debt financing costs |
$ | 4,119 | ||
| Accrued but unpaid debt issuance costs |
$ | 1,135 | ||
| Accrued but unpaid offering costs |
$ | 289 | ||
| Share repurchases accrued but not yet paid |
$ | 1,233 | ||
| Non-cash assets acquired/liabilities assumed: |
||||
| Syndicated Warehouse (Note 7): |
||||
| Investments |
$ | 300,464 | ||
| Debt |
$ | (134,000 | ) | |
| Other assets/liabilities, net |
$ | (118,411 | ) | |
| Twin Peaks Acquisition (Note 10): |
||||
| Investments |
$ | 1,023,188 | ||
| Debt |
$ | (337,648 | ) | |
| Other assets/liabilities, net |
$ | 35,473 | ||
The accompanying notes are an integral part of these consolidated financial statements.
F-21
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||||
| Investments - non-controlled/non-affiliated |
||||||||||||||||||||||||||||
| First Lien Debt |
||||||||||||||||||||||||||||
| Aerospace & Defense |
||||||||||||||||||||||||||||
| Corfin Holdings, Inc. (4)(12) |
L + 6.00% | 7.00 | % | 2/5/2026 | $ | 6,652 | $ | 6,619 | $ | 6,636 | 0.13 | % | ||||||||||||||||
| Dynasty Acquisition Co, Inc. (6)(8) |
L + 3.50% | 3.65 | % | 4/6/2026 | 4,987 | 4,856 | 4,866 | 0.10 | ||||||||||||||||||||
| Loar Group, Inc. (4)(12) |
L + 7.25% | 8.25 | % | 10/2/2023 | 29,573 | 29,573 | 29,573 | 0.60 | ||||||||||||||||||||
| MAG DS Corp. (12) |
L + 5.50% | 6.50 | % | 4/1/2027 | 11,298 | 11,105 | 11,086 | 0.22 | ||||||||||||||||||||
| Peraton Corp. (11) |
L + 3.75% | 4.50 | % | 2/1/2028 | 65,078 | 64,809 | 65,380 | 1.32 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 116,961 | 117,540 | 2.38 | ||||||||||||||||||||||||||
| Air Freight & Logistics |
||||||||||||||||||||||||||||
| AGI-CFI Holdings, Inc. (4)(5)(7)(11) |
L + 5.50% | 6.25 | % | 6/11/2027 | 188,818 | 185,179 | 185,146 | 3.74 | ||||||||||||||||||||
| Livingston International, Inc. (4)(6)(12) |
L + 5.75% | 6.75 | % | 4/30/2026 | 22,542 | 22,520 | 22,571 | 0.46 | ||||||||||||||||||||
| Mode Purchaser, Inc. (4)(12) |
L + 6.25% | 7.25 | % | 12/9/2026 | 34,563 | 33,502 | 33,698 | 0.68 | ||||||||||||||||||||
| Omni Intermediate Holdings, LLC -Revolving Term Loan (4)(5)(7)(12) |
L + 5.00% | 6.00 | % | 12/30/2025 | 2,507 | 2,489 | 2,507 | 0.05 | ||||||||||||||||||||
| Omni Intermediate Holdings, LLC (4)(7)(12) |
L + 5.00% | 6.00 | % | 12/30/2026 | 143,091 | 139,960 | 142,795 | 2.89 | ||||||||||||||||||||
| R1 Holdings, LLC (4)(7)(12) |
L + 6.00% | 7.00 | % | 1/2/2026 | 36,718 | 36,718 | 36,718 | 0.74 | ||||||||||||||||||||
| SEKO Global Logistics Network, LLC (4)(7)(12) |
L + 5.00% | 6.00 | % | 12/30/2026 | 96,514 | 95,219 | 96,133 | 1.94 | ||||||||||||||||||||
| SMB Shipping Logistics, LLC (12) |
L + 4.00% | 5.00 | % | 2/2/2024 | 13,249 | 13,217 | 13,245 | 0.27 | ||||||||||||||||||||
| The Kenan Advantage Group, Inc. (11) |
L + 3.75% | 4.50 | % | 3/12/2026 | 17,391 | 17,392 | 17,460 | 0.35 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 546,196 | 550,273 | 11.13 | ||||||||||||||||||||||||||
| Airlines |
||||||||||||||||||||||||||||
| American Airlines, Inc. (6)(11) |
L + 4.75% | 5.50 | % | 3/11/2028 | 7,314 | 7,243 | 7,634 | 0.15 | ||||||||||||||||||||
| American Rock Salt Company, LLC (11) |
L + 4.00% | 4.75 | % | 6/4/2028 | 21,000 | 20,979 | 21,079 | 0.43 | ||||||||||||||||||||
| United Airlines, Inc. (6)(11) |
L + 3.75% | 4.50 | % | 4/21/2028 | 16,715 | 16,724 | 16,957 | 0.34 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 44,946 | 45,671 | 0.92 | ||||||||||||||||||||||||||
| Auto Components |
||||||||||||||||||||||||||||
| Clarios Global LP (6)(8) |
L + 3.25% | 3.35 | % | 4/30/2026 | 7,317 | 7,308 | 7,264 | 0.15 | ||||||||||||||||||||
| Metis Buyer, Inc. (5)(7)(11) |
L + 4.00% | 4.75 | % | 5/4/2028 | 50,000 | 48,459 | 50,188 | 1.02 | ||||||||||||||||||||
| Wheel Pros, Inc. (11) |
L + 4.50% | 5.25 | % | 4/23/2028 | 23,931 | 23,939 | 24,027 | 0.49 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 79,706 | 81,480 | 1.65 | ||||||||||||||||||||||||||
| Beverages |
||||||||||||||||||||||||||||
| Arterra Wines Canada, Inc. (6)(11) |
L + 3.50% | 4.25 | % | 11/24/2027 | 4,982 | 5,011 | 5,000 | 0.10 | ||||||||||||||||||||
| Triton Water Holdings, Inc. (10) |
L + 3.50% | 4.00 | % | 3/18/2028 | 26,765 | 26,726 | 26,768 | 0.54 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 31,737 | 31,768 | 0.64 | ||||||||||||||||||||||||||
| Building Products |
||||||||||||||||||||||||||||
| Cornerstone Building Brands, Inc. (6)(10) |
L + 3.25% | 3.75 | % | 4/12/2028 | 5,970 | 5,937 | 5,978 | 0.12 | ||||||||||||||||||||
| CP Atlas Buyer, Inc. (10) |
L + 3.75% | 4.25 | % | 11/23/2027 | 27,822 | 27,847 | 27,792 | 0.56 | ||||||||||||||||||||
| Empire Today, LLC (11) |
L + 5.00% | 5.75 | % | 3/8/2028 | 100,000 | 98,307 | 100,313 | 2.03 | ||||||||||||||||||||
| Fencing Supply Group Acquisition, LLC (4)(7)(12) |
L + 6.00% | 7.00 | % | 2/26/2027 | 57,653 | 56,418 | 56,938 | 1.15 | ||||||||||||||||||||
| Illuminate Merger Sub Corp. (4)(10) |
L + 3.50% | 4.00 | % | 6/30/2028 | 7,184 | 7,148 | 7,173 | 0.15 | ||||||||||||||||||||
| Jacuzzi Brands, LLC (4)(12) |
L + 6.50% | 7.50 | % | 2/25/2025 | 52,938 | 52,330 | 52,938 | 1.07 | ||||||||||||||||||||
| Kodiak BP, LLC (11) |
L + 3.25% | 4.00 | % | 2/25/2028 | 14,416 | 14,394 | 14,416 | 0.29 | ||||||||||||||||||||
F-22
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||||
| Building Products (continued) |
||||||||||||||||||||||||||||
| Latham Pool Products, Inc. (8) |
L + 6.00% | 6.10 | % | 6/18/2025 | $ | 80,709 | $ | 80,172 | $ | 81,087 | 1.64 | % | ||||||||||||||||
| Lindstrom, LLC (4)(12) |
L + 6.25% | 7.25 | % | 4/7/2025 | 28,075 | 27,817 | 28,075 | 0.57 | ||||||||||||||||||||
| Mi Windows and Doors, LLC (11) |
L + 3.75% | 4.50 | % | 12/18/2027 | 24,411 | 24,534 | 24,480 | 0.50 | ||||||||||||||||||||
| New Arclin US Holding Corp. (5)(6)(12) |
L + 4.00% | 5.00 | % | 2/28/2026 | 1,794 | 1,786 | 1,806 | 0.04 | ||||||||||||||||||||
| Symphony Technology Group (11) |
L + 5.00% | 5.75 | % | 5/3/2028 | 63,345 | 62,711 | 63,400 | 1.28 | ||||||||||||||||||||
| The Wolf Organization, LLC (4)(12) |
L + 6.50% | 7.50 | % | 9/3/2026 | 5,350 | 5,400 | 5,564 | 0.11 | ||||||||||||||||||||
| Windows Acquisition Holdings, Inc. (4)(12) |
L + 6.50% | 7.50 | % | 12/29/2026 | 62,681 | 61,524 | 62,367 | 1.26 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 526,326 | 532,327 | 10.77 | ||||||||||||||||||||||||||
| Capital Markets |
||||||||||||||||||||||||||||
| Advisor Group Holdings, Inc. (8) |
L + 4.50% | 4.60 | % | 7/31/2026 | 24,454 | 24,518 | 24,537 | 0.50 | ||||||||||||||||||||
| The Edelman Financial Engines Center, LLC (11) |
L + 3.75% | 4.50 | % | 3/15/2028 | 24,980 | 24,884 | 25,039 | 0.51 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 49,402 | 49,576 | 1.00 | ||||||||||||||||||||||||||
| Chemicals |
||||||||||||||||||||||||||||
| Dominion Colour Corporation (4)(6)(7)(12) |
|
L + 8.25% (incl. 2.00% PIK) |
|
9.25 | % | 4/6/2024 | 39,248 | 37,342 | 37,776 | 0.76 | ||||||||||||||||||
| LSF11 Skyscraper Holdco S.à r.l, LLC (4)(5)(6)(11) |
L + 3.50% | 4.25 | % | 9/29/2027 | 19,950 | 19,851 | 20,025 | 0.41 | ||||||||||||||||||||
| NIC Acquisition Corp. (11) |
L + 3.75% | 4.50 | % | 12/29/2027 | 13,906 | 13,891 | 13,899 | 0.28 | ||||||||||||||||||||
| Oxea Corporation (6)(8) |
L + 3.50% | 3.63 | % | 10/14/2024 | 4,986 | 4,980 | 4,974 | 0.10 | ||||||||||||||||||||
| Polymer Additives, Inc. (8) |
L + 6.00% | 6.18 | % | 7/31/2025 | 30,577 | 28,158 | 29,308 | 0.59 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 104,221 | 105,982 | 2.14 | ||||||||||||||||||||||||||
| Commercial Services & Supplies |
||||||||||||||||||||||||||||
| Access CIG, LLC (8) |
L + 3.75% | 3.84 | % | 2/27/2025 | 19,061 | 19,031 | 18,971 | 0.38 | ||||||||||||||||||||
| Allied Universal Holdco, LLC (10) |
L + 3.75% | 4.25 | % | 5/12/2028 | 23,564 | 23,598 | 23,659 | 0.48 | ||||||||||||||||||||
| Ascend Learning, LLC (10) |
L + 3.75% | 4.25 | % | 7/12/2024 | 6,982 | 6,986 | 6,985 | 0.14 | ||||||||||||||||||||
| Bazaarvoice, Inc. (4)(7)(8) |
L + 5.75% | 5.83 | % | 5/7/2028 | 372,166 | 372,166 | 372,166 | 7.53 | ||||||||||||||||||||
| DG Investment Intermediate Holdings 2, Inc. (7)(11) |
L + 3.75% | 4.50 | % | 3/17/2028 | 28,502 | 28,556 | 28,663 | 0.58 | ||||||||||||||||||||
| Divisions Holding Corp. (11) |
L + 4.75% | 5.50 | % | 5/29/2028 | 24,096 | 23,857 | 24,111 | 0.49 | ||||||||||||||||||||
| EAB Global, Inc. (10) |
L + 3.50% | 4.00 | % | 6/28/2028 | 9,174 | 9,128 | 9,174 | 0.19 | ||||||||||||||||||||
| ECP Gopher Holdings L.P. (12) |
L + 3.25% | 4.25 | % | 3/6/2025 | 3,979 | 3,997 | 3,565 | 0.07 | ||||||||||||||||||||
| eResearchTechnology, Inc. (12) |
L + 4.50% | 5.50 | % | 2/4/2027 | 28,246 | 28,373 | 28,409 | 0.57 | ||||||||||||||||||||
| Garda World Security Corp. (6)(8) |
L + 4.25% | 4.35 | % | 10/30/2026 | 22,500 | 22,581 | 22,636 | 0.46 | ||||||||||||||||||||
| Genuine Financial Holdings, LLC (8) |
L + 3.75% | 3.85 | % | 7/11/2025 | 10,048 | 9,907 | 9,886 | 0.20 | ||||||||||||||||||||
| JSS Holdings, Inc. (4)(12) |
L + 6.25% | 7.25 | % | 12/17/2027 | 46,739 | 46,080 | 46,505 | 0.94 | ||||||||||||||||||||
| Legalzoom.com, Inc. (8) |
L + 4.50% | 4.60 | % | 11/21/2024 | 5,967 | 5,990 | 5,969 | 0.12 | ||||||||||||||||||||
| MaxGen Energy Services Corporation (4)(12) |
L + 4.75% | 5.75 | % | 6/2/2027 | 60,000 | 58,520 | 58,800 | 1.19 | ||||||||||||||||||||
| Revspring, Inc. (8) |
L + 4.00% | 4.15 | % | 10/11/2025 | 13,439 | 13,310 | 13,418 | 0.27 | ||||||||||||||||||||
| Sciens Building Solutions, LLC (4)(7)(12) |
L + 5.75% | 6.75 | % | 5/21/2027 | 45,338 | 44,431 | 44,274 | 0.90 | ||||||||||||||||||||
| Spin Holdco Inc. (11) |
L + 4.00% | 4.75 | % | 3/1/2028 | 25,549 | 25,433 | 25,621 | 0.52 | ||||||||||||||||||||
| The Action Environmental Group, Inc. (4)(13) |
L + 6.00% | 7.25 | % | 1/16/2026 | 16,345 | 15,735 | 15,691 | 0.32 | ||||||||||||||||||||
F-23
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||||
| Commercial Services & Supplies (continued) |
||||||||||||||||||||||||||||
| TRC Companies, Inc. (12) |
L + 3.50% | 4.50 | % | 6/21/2024 | $ | 13,000 | $ | 13,023 | $ | 12,992 | 0.26 | % | ||||||||||||||||
| TruGreen Limited Partnership (11) |
L + 4.00% | 4.75 | % | 11/2/2027 | 5,985 | 6,022 | 6,020 | 0.12 | ||||||||||||||||||||
| USIC Holdings, Inc. (11) |
L + 3.50% | 4.25 | % | 5/12/2028 | 25,000 | 24,875 | 24,984 | 0.51 | ||||||||||||||||||||
| USS Ultimate Holdings, Inc. (12) |
L + 3.75% | 4.75 | % | 8/25/2024 | 12,933 | 12,975 | 12,984 | 0.26 | ||||||||||||||||||||
| Veregy Consolidated, Inc. (12) |
L + 6.00% | 7.00 | % | 11/2/2027 | 20,688 | 20,740 | 20,843 | 0.42 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 835,314 | 836,330 | 16.92 | ||||||||||||||||||||||||||
| Construction & Engineering |
||||||||||||||||||||||||||||
| Aegion Corporation (11) |
L + 4.75% | 5.50 | % | 5/17/2028 | 23,939 | 23,868 | 24,238 | 0.49 | ||||||||||||||||||||
| ASP Endeavor Acquisition, LLC (4)(10) |
L + 6.50% | 7.00 | % | 5/3/2027 | 36,000 | 35,299 | 35,280 | 0.71 | ||||||||||||||||||||
| Brand Industrial Services, Inc. (12) |
L + 4.25% | 5.25 | % | 6/21/2024 | 20,635 | 20,529 | 20,328 | 0.41 | ||||||||||||||||||||
| COP Home Services TopCo IV, Inc. (4)(7)(12) |
L + 5.00% | 6.00 | % | 12/31/2027 | 103,094 | 99,559 | 101,704 | 2.06 | ||||||||||||||||||||
| IEA Energy Services, LLC (8) |
L + 6.75% | 6.90 | % | 9/25/2024 | 6,955 | 6,975 | 6,917 | 0.14 | ||||||||||||||||||||
| Peak Utility Services Group, Inc. (7)(12) |
L + 5.00% | 6.00 | % | 2/26/2028 | 23,800 | 23,537 | 23,645 | 0.48 | ||||||||||||||||||||
| Time Manufacturing Acquisition, LLC (4)(12) |
L + 5.00% | 6.00 | % | 2/3/2023 | 14,757 | 14,728 | 14,812 | 0.30 | ||||||||||||||||||||
| Tutor Perini Corp. (6)(12) |
L + 4.75% | 5.75 | % | 8/13/2027 | 2,978 | 3,010 | 3,017 | 0.06 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 227,506 | 229,942 | 4.65 | ||||||||||||||||||||||||||
| Construction Materials |
||||||||||||||||||||||||||||
| Forterra Finance, LLC (6)(12) |
L + 3.00% | 4.00 | % | 10/25/2023 | 1,866 | 1,874 | 1,869 | 0.04 | ||||||||||||||||||||
| White Cap Buyer, LLC (10) |
L + 4.00% | 4.50 | % | 10/19/2027 | 23,947 | 24,041 | 24,019 | 0.49 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 25,915 | 25,888 | 0.52 | ||||||||||||||||||||||||||
| Containers & Packaging |
||||||||||||||||||||||||||||
| Berlin Packaging, LLC (10) |
L + 3.25% | 3.75 | % | 3/5/2028 | 11,970 | 11,930 | 11,936 | 0.24 | ||||||||||||||||||||
| Berlin Packaging, LLC (8) |
L + 3.00% | 3.15 | % | 11/7/2025 | 12,530 | 12,495 | 12,443 | 0.25 | ||||||||||||||||||||
| Charter NEX US, Inc. (11) |
L + 3.75% | 4.50 | % | 12/1/2027 | 21,508 | 21,585 | 21,586 | 0.44 | ||||||||||||||||||||
| Flex Acquisition Co., Inc. (10) |
L + 3.50% | 4.00 | % | 2/23/2028 | 16,226 | 16,193 | 16,175 | 0.33 | ||||||||||||||||||||
| Flex Acquisition Co., Inc. (8) |
L + 3.25% | 3.45 | % | 6/29/2025 | 9,519 | 9,504 | 9,439 | 0.19 | ||||||||||||||||||||
| Graham Packaging Co, Inc. (11) |
L + 3.00% | 3.75 | % | 8/4/2027 | 4,988 | 4,997 | 4,989 | 0.10 | ||||||||||||||||||||
| IBC Capital US, LLC (6)(8) |
L + 3.75% | 3.87 | % | 9/11/2023 | 18,609 | 18,564 | 18,479 | 0.37 | ||||||||||||||||||||
| MAR Bidco Sarl (4)(6)(10) |
L + 4.25% | 4.75 | % | 4/20/2028 | 3,947 | 3,928 | 3,972 | 0.08 | ||||||||||||||||||||
| ProAmpac PG Borrower, LLC (11) |
L + 3.75% | 4.50 | % | 11/3/2025 | 27,845 | 27,915 | 27,870 | 0.56 | ||||||||||||||||||||
| TricorBraun Holdings, Inc. (7)(10) |
L + 3.25% | 3.75 | % | 3/3/2028 | 11,422 | 11,373 | 11,339 | 0.23 | ||||||||||||||||||||
| Trident TPI Holdings, Inc. (12) |
L + 3.00% | 4.00 | % | 10/17/2024 | 19,948 | 19,948 | 19,907 | 0.40 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 158,432 | 158,133 | 3.20 | ||||||||||||||||||||||||||
| Distributors |
||||||||||||||||||||||||||||
| Bution Holdco 2, Inc. (4)(12) |
L + 6.25% | 7.25 | % | 10/17/2025 | 8,197 | 8,044 | 8,033 | 0.16 | ||||||||||||||||||||
| Dana Kepner Company, LLC (4)(7)(12) |
L + 6.25% | 7.25 | % | 12/29/2026 | 14,925 | 14,650 | 14,850 | 0.30 | ||||||||||||||||||||
| EIS Buyer, LLC (4)(14) |
L + 6.25% | 7.75 | % | 9/30/2025 | 13,265 | 12,898 | 12,933 | 0.26 | ||||||||||||||||||||
| NDC Acquisition Corp. (4)(7)(12) |
L + 5.75% | 6.75 | % | 3/9/2027 | 23,600 | 22,920 | 22,888 | 0.46 | ||||||||||||||||||||
| Tailwind Colony Holding Corporation (4)(7)(12) |
L + 7.50% | 8.50 | % | 11/13/2024 | 56,800 | 55,245 | 55,664 | 1.13 | ||||||||||||||||||||
| Unified Door & Hardware Group, LLC (4)(12) |
L + 6.25% | 7.25 | % | 6/30/2025 | 6,753 | 6,753 | 6,753 | 0.14 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 120,511 | 121,122 | 2.45 | ||||||||||||||||||||||||||
F-24
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||||
| Diversified Consumer Services |
||||||||||||||||||||||||||||
| APX Group, Inc. (6)(8) |
L + 5.00% | 5.09 | % | 12/31/2025 | $ | 9,945 | $ | 9,996 | $ | 9,988 | 0.20 | % | ||||||||||||||||
| Cambium Learning Group, Inc. (11) |
L + 4.50% | 5.25 | % | 12/18/2025 | 19,630 | 19,694 | 19,765 | 0.40 | ||||||||||||||||||||
| KUEHG Corp. (12) |
L + 3.75% | 4.75 | % | 2/21/2025 | 19,941 | 19,660 | 19,674 | 0.40 | ||||||||||||||||||||
| Learning Care Group (12) |
L + 3.25% | 4.25 | % | 3/13/2025 | 19,941 | 19,615 | 19,644 | 0.40 | ||||||||||||||||||||
| Pre-Paid Legal Services, Inc. (8) |
L + 3.25% | 3.35 | % | 5/1/2025 | 8,800 | 8,820 | 8,749 | 0.18 | ||||||||||||||||||||
| Weld North Education, LLC (11) |
L + 4.00% | 4.75 | % | 12/21/2027 | 24,419 | 24,460 | 24,480 | 0.50 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 102,244 | 102,301 | 2.07 | ||||||||||||||||||||||||||
| Diversified Financial Services |
||||||||||||||||||||||||||||
| Barbri Holdings, Inc. (4)(7)(11) |
L + 5.75% | 6.50 | % | 4/30/2028 | 93,000 | 91,185 | 91,140 | 1.84 | ||||||||||||||||||||
| Mitchell International, Inc. (8) |
L + 3.25% | 3.35 | % | 11/29/2024 | 11,234 | 11,179 | 11,147 | 0.23 | ||||||||||||||||||||
| Mitchell International, Inc. (10) |
L + 4.25% | 4.75 | % | 11/29/2024 | 12,952 | 13,025 | 13,031 | 0.26 | ||||||||||||||||||||
| Sedgwick Claims Management Services, Inc. (5)(6)(12) |
L + 4.25% | 5.25 | % | 9/3/2026 | 2,475 | 2,501 | 2,485 | 0.05 | ||||||||||||||||||||
| Sedgwick Claims Management Services, Inc. (6)(8) |
L + 3.25% | 3.35 | % | 12/31/2025 | 12,727 | 12,688 | 12,606 | 0.25 | ||||||||||||||||||||
| SelectQuote, Inc. (4)(7)(11) |
L + 5.00% | 5.75 | % | 11/5/2024 | 140,779 | 139,858 | 140,779 | 2.85 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 270,435 | 271,188 | 5.49 | ||||||||||||||||||||||||||
| Diversified Telecommunication Services |
||||||||||||||||||||||||||||
| Masergy Holdings, Inc. (12) |
L + 3.25% | 4.25 | % | 12/7/2026 | 20,008 | 19,968 | 20,033 | 0.41 | ||||||||||||||||||||
| Numericable US, LLC (6)(8) |
L + 3.69% | 3.87 | % | 1/31/2026 | 5,077 | 5,083 | 5,045 | 0.10 | ||||||||||||||||||||
| Numericable US, LLC (6)(8) |
L + 4.00% | 4.15 | % | 8/14/2026 | 23,951 | 23,976 | 23,950 | 0.48 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 49,027 | 49,029 | 0.99 | ||||||||||||||||||||||||||
| Electric Utilities |
||||||||||||||||||||||||||||
| Qualus Power Services Corp. (4)(7)(12) |
L + 5.50% | 6.50 | % | 3/26/2027 | 42,643 | 41,439 | 41,383 | 0.84 | ||||||||||||||||||||
| Electrical Equipment |
||||||||||||||||||||||||||||
| Madison IAQ, LLC (10) |
L + 3.25% | 3.75 | % | 6/16/2028 | 7,019 | 6,984 | 7,022 | 0.14 | ||||||||||||||||||||
| Shoals Holdings, LLC (4)(12) |
L + 3.25% | 4.25 | % | 11/25/2026 | 11,435 | 11,172 | 11,492 | 0.23 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 18,155 | 18,514 | 0.37 | ||||||||||||||||||||||||||
| Electronic Equipment, Instruments & Components |
||||||||||||||||||||||||||||
| Albireo Energy, LLC (4)(5)(7)(12) |
L + 6.00% | 7.00 | % | 12/23/2026 | 34,801 | 34,103 | 34,508 | 0.70 | ||||||||||||||||||||
| ConvergeOne Holdings, Inc. (8) |
L + 5.00% | 5.10 | % | 1/4/2026 | 34,213 | 33,229 | 33,909 | 0.69 | ||||||||||||||||||||
| CPI International, Inc. (12) |
L + 3.50% | 4.50 | % | 7/26/2024 | 17,800 | 17,790 | 17,804 | 0.36 | ||||||||||||||||||||
| Infinite Bidco, LLC (10) |
L + 3.75% | 4.25 | % | 2/24/2028 | 21,940 | 21,924 | 21,968 | 0.44 | ||||||||||||||||||||
| Ingram Micro, Inc. (10) |
L + 3.50% | 4.00 | % | 3/31/2028 | 8,500 | 8,453 | 8,525 | 0.17 | ||||||||||||||||||||
| LTI Holdings, Inc. (8) |
L + 3.50% | 3.60 | % | 9/6/2025 | 2,992 | 2,956 | 2,957 | 0.06 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 118,456 | 119,671 | 2.42 | ||||||||||||||||||||||||||
| Energy Equipment & Services |
||||||||||||||||||||||||||||
| Abaco Energy Technologies, LLC (4)(14) |
L + 7.00% | 8.50 | % | 10/4/2024 | 10,832 | 10,092 | 10,155 | 0.21 | ||||||||||||||||||||
| EnergySolutions, LLC (12) |
L + 3.75% | 4.75 | % | 5/9/2025 | 16,637 | 16,622 | 16,567 | 0.34 | ||||||||||||||||||||
| Tetra Technologies, Inc. (4)(6)(12) |
L + 6.25% | 7.25 | % | 9/10/2025 | 25,750 | 24,495 | 25,364 | 0.51 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 51,210 | 52,085 | 1.05 | ||||||||||||||||||||||||||
| Entertainment |
||||||||||||||||||||||||||||
| Recorded Books, Inc. (8) |
L + 4.00% | 4.08 | % | 8/29/2025 | 12,615 | 12,636 | 12,642 | 0.26 | ||||||||||||||||||||
| Food Products |
||||||||||||||||||||||||||||
| Quantum Bidco, Ltd. (6)(8) |
L + 6.00% | 6.11 | % | 2/5/2028 | £ | 18,500 | 24,398 | 24,996 | 0.51 | |||||||||||||||||||
| Snacking Investments US, LLC (6)(12) |
L + 4.00% | 5.00 | % | 12/18/2026 | 5,000 | 5,030 | 5,028 | 0.10 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 29,429 | 30,024 | 0.61 | ||||||||||||||||||||||||||
F-25
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||||
| Health Care Equipment & Supplies |
||||||||||||||||||||||||||||
| Auris Luxembourg III S.à r.l, LLC (6)(8) |
L + 3.75% | 3.85 | % | 2/27/2026 | $ | 17,064 | $ | 16,818 | $ | 16,907 | 0.34 | % | ||||||||||||||||
| CPI Holdco, LLC (8) |
L + 3.75% | 3.85 | % | 11/4/2026 | 15,170 | 15,221 | 15,204 | 0.31 | ||||||||||||||||||||
| Resonetics, LLC (11) |
L + 4.00% | 4.75 | % | 4/28/2028 | 12,507 | 12,470 | 12,544 | 0.25 | ||||||||||||||||||||
| Sunshine Luxembourg VII S.à r.l, LLC (6)(11) |
L + 3.75% | 4.50 | % | 10/2/2026 | 18,820 | 18,876 | 18,913 | 0.38 | ||||||||||||||||||||
| TecoStar Holdings, Inc. (12) |
L + 3.50% | 4.50 | % | 5/1/2024 | 20,909 | 20,819 | 20,756 | 0.42 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 84,203 | 84,324 | 1.71 | ||||||||||||||||||||||||||
| Health Care Providers & Services |
||||||||||||||||||||||||||||
| ADCS Clinics Intermediate Holdings, LLC (4)(7)(12) |
L + 6.25% | 7.25 | % | 5/7/2027 | 37,082 | 36,173 | 36,149 | 0.73 | ||||||||||||||||||||
| ADMI Corp. (10) |
L + 3.75% | 4.25 | % | 12/23/2027 | 15,625 | 15,547 | 15,625 | 0.32 | ||||||||||||||||||||
| AMGH Holding Corp. (12) |
L + 4.25% | 5.25 | % | 3/14/2025 | 4,987 | 4,994 | 5,007 | 0.10 | ||||||||||||||||||||
| At Home Group, Inc. (4)(10) |
L + 4.25% | 4.75 | % | 7/30/2028 | 3,125 | 3,102 | 3,125 | 0.06 | ||||||||||||||||||||
| Canadian Hospital Specialties Ltd. (4)(6)(7)(12) |
L + 4.50% | 5.50 | % | 4/14/2028 | C$ | 40,680 | 31,707 | 32,159 | 0.65 | |||||||||||||||||||
| CD&R Artemis Bidco, Inc. (5)(6)(7)(9) |
L + 6.50% | 6.75 | % | 5/12/2027 | 1,299 | 1,199 | 1,283 | 0.03 | ||||||||||||||||||||
| CHG Healthcare Services, Inc. (12) |
L + 3.00% | 4.00 | % | 6/7/2023 | 23,468 | 23,491 | 23,473 | 0.47 | ||||||||||||||||||||
| Covenant Surgical Partners, Inc. (8) |
L + 4.00% | 4.08 | % | 7/1/2026 | 2,988 | 2,938 | 2,969 | 0.06 | ||||||||||||||||||||
| Cross Country Healthcare, Inc. (4)(11) |
L + 5.75% | 6.50 | % | 6/8/2027 | 55,250 | 54,153 | 54,145 | 1.10 | ||||||||||||||||||||
| DCA Investment Holdings, LLC (4)(7)(11) |
L + 6.25% | 7.00 | % | 3/12/2027 | 33,136 | 32,595 | 32,567 | 0.66 | ||||||||||||||||||||
| Epoch Acquisition, Inc. (4)(12) |
L + 6.75% | 7.75 | % | 10/4/2024 | 29,573 | 29,573 | 29,573 | 0.60 | ||||||||||||||||||||
| ExamWorks Group, Inc. (12) |
L + 3.25% | 4.25 | % | 7/27/2023 | 18,685 | 18,728 | 18,724 | 0.38 | ||||||||||||||||||||
| GC EOS Buyer, Inc. (8) |
L + 4.50% | 4.60 | % | 8/1/2025 | 1,663 | 1,655 | 1,663 | 0.03 | ||||||||||||||||||||
| Global Medical Response, Inc. (12) |
L + 4.75% | 5.75 | % | 10/2/2025 | 21,750 | 21,840 | 21,872 | 0.44 | ||||||||||||||||||||
| Gordian Medical, Inc. (11) |
L + 6.25% | 7.00 | % | 3/29/2027 | 70,000 | 67,641 | 69,650 | 1.41 | ||||||||||||||||||||
| Heartland Dental, LLC (8) |
L + 4.00% | 4.07 | % | 4/30/2025 | 20,145 | 20,053 | 20,138 | 0.41 | ||||||||||||||||||||
| Huntsworth Limited (6)(8) |
|
L + 6.00% (incl. 0.50% PIK) |
|
6.19 | % | 5/11/2027 | 8,958 | 8,269 | 9,002 | 0.18 | ||||||||||||||||||
| Jayhawk Buyer, LLC (4)(7)(12) |
L + 5.00% | 6.00 | % | 10/15/2026 | 165,298 | 162,104 | 163,223 | 3.30 | ||||||||||||||||||||
| Lanai Holding III, Inc. (12) |
L + 3.75% | 7.00 | % | 8/29/2022 | 26,288 | 26,198 | 26,241 | 0.53 | ||||||||||||||||||||
| LifePoint Health, Inc. (8) |
L + 3.75% | 3.85 | % | 11/16/2025 | 10,000 | 10,020 | 9,989 | 0.20 | ||||||||||||||||||||
| Loire US HoldCo 2, Inc. (6)(11) |
L + 3.75% | 4.50 | % | 4/21/2027 | 4,861 | 4,837 | 4,855 | 0.10 | ||||||||||||||||||||
| Midwest Physician Administrative Services, LLC (11) |
L + 3.25% | 4.00 | % | 3/5/2028 | 2,993 | 2,978 | 2,989 | 0.06 | ||||||||||||||||||||
| Monroe Capital Holdings, LLC (4)(7)(12) |
L + 6.25% | 7.25 | % | 9/8/2026 | 21,632 | 21,382 | 22,281 | 0.45 | ||||||||||||||||||||
| MPH Acquisition Holdings (6)(12) |
L + 2.75% | 3.75 | % | 6/7/2023 | 17,600 | 17,613 | 17,571 | 0.36 | ||||||||||||||||||||
| National Mentor Holdings, Inc. (7)(11) |
L + 3.75% | 4.50 | % | 2/18/2028 | 21,986 | 21,968 | 22,051 | 0.45 | ||||||||||||||||||||
| Odyssey Holding Company, LLC (4)(12) |
L + 5.75% | 6.75 | % | 11/16/2025 | 46,316 | 46,316 | 46,316 | 0.94 | ||||||||||||||||||||
| Onex TSG Intermediate Corp. (6)(11) |
L + 4.75% | 5.50 | % | 2/28/2028 | 15,333 | 15,102 | 15,465 | 0.31 | ||||||||||||||||||||
| Padagis, LLC (4)(6)(10) |
L + 4.75% | 5.25 | % | 6/30/2028 | 5,707 | 5,649 | 5,707 | 0.12 | ||||||||||||||||||||
F-26
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||
| Health Care Providers & Services (continued) |
||||||||||||||||||||||||||
| Pathway Vet Alliance, LLC (8) |
L + 3.75% | 3.85 | % | 3/31/2027 | $ | 7,429 | $ | 7,419 | $ | 7,421 | 0.15 | % | ||||||||||||||
| PetVet Care Centers, LLC (11) |
L + 3.50% | 4.25 | % | 2/14/2025 | 33,213 | 33,311 | 33,353 | 0.67 | ||||||||||||||||||
| Phoenix Guarantor, Inc. (8) |
L + 3.25% | 3.34 | % | 3/5/2026 | 4,915 | 4,920 | 4,882 | 0.10 | ||||||||||||||||||
| Phoenix Guarantor, Inc. (8) |
L + 3.50% | 3.57 | % | 3/5/2026 | 8,127 | 8,127 | 8,089 | 0.16 | ||||||||||||||||||
| Pluto Acquisition I, Inc. (8) |
L + 4.00% | 4.14 | % | 6/22/2026 | 400 | 400 | 400 | 0.01 | ||||||||||||||||||
| PSKW Intermediate, LLC (4)(12) |
L + 6.25% | 7.25 | % | 3/9/2026 | 22,219 | 22,219 | 22,219 | 0.45 | ||||||||||||||||||
| Radnet, Inc. (6)(11) |
L + 3.00% | 3.75 | % | 4/22/2028 | 4,924 | 4,900 | 4,930 | 0.10 | ||||||||||||||||||
| Snoopy Bidco, Inc. (4)(7)(11) |
L + 6.00% | 6.75 | % | 6/1/2028 | 186,150 | 179,166 | 179,083 | 3.62 | ||||||||||||||||||
| Surgery Centers Holdings, Inc. (6)(11) |
L + 3.75% | 4.50 | % | 8/31/2026 | 24,881 | 24,855 | 25,016 | 0.51 | ||||||||||||||||||
| The GI Alliance Management, LLC (4)(7)(12) |
L + 6.25% | 7.25 | % | 11/4/2024 | 110,163 | 107,322 | 107,504 | 2.17 | ||||||||||||||||||
| TTF Holdings, LLC (4)(11) |
L + 4.25% | 5.00 | % | 3/24/2028 | 7,025 | 6,974 | 7,034 | 0.14 | ||||||||||||||||||
| Unified Women’s Healthcare, LLC (11) |
L + 4.25% | 5.00 | % | 12/16/2027 | 18,365 | 18,374 | 18,412 | 0.37 | ||||||||||||||||||
| US Acute Care Solutions (5)(8) |
6.38% | 6.38 | % | 3/1/2026 | 7,071 | 7,071 | 7,331 | 0.15 | ||||||||||||||||||
| U.S. Anesthesia Partners, Inc. (12) |
L + 3.00% | 4.00 | % | 6/23/2024 | 16,210 | 16,121 | 16,120 | 0.33 | ||||||||||||||||||
| WHCG Purchaser III, Inc. (4)(7)(11) |
L + 5.75% | 6.50 | % | 6/22/2028 | 84,259 | 81,926 | 81,918 | 1.66 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 1,230,931 | 1,237,524 | 25.03 | ||||||||||||||||||||||||
| Health Care Technology |
||||||||||||||||||||||||||
| athenahealth, Inc. (8) |
L + 4.25% | 4.41 | % | 2/11/2026 | 19,285 | 19,409 | 19,363 | 0.39 | ||||||||||||||||||
| Edifecs, Inc. (4)(12) |
L + 7.00% | 8.00 | % | 9/21/2026 | 29,809 | 29,669 | 30,107 | 0.61 | ||||||||||||||||||
| Netsmart Technologies, Inc. (11) |
L + 4.00% | 4.75 | % | 10/1/2027 | 24,938 | 25,050 | 25,036 | 0.51 | ||||||||||||||||||
| NMC Crimson Holdings, Inc. (4)(7)(11) |
L + 6.00% | 6.75 | % | 3/1/2028 | 71,173 | 68,692 | 69,101 | 1.40 | ||||||||||||||||||
| Project Ruby Ultimate Parent Corp. (11) |
L + 3.25% | 4.00 | % | 3/3/2028 | 8,590 | 8,547 | 8,575 | 0.17 | ||||||||||||||||||
| Therapy Brands Holdings, LLC (4)(5)(7)(11) |
L + 4.00% | 4.75 | % | 5/12/2028 | 6,373 | 6,341 | 6,373 | 0.13 | ||||||||||||||||||
| Verscend Holding Corp. (8) |
L + 4.00% | 4.10 | % | 8/27/2025 | 25,553 | 25,635 | 25,654 | 0.52 | ||||||||||||||||||
| Waystar Technologies, Inc. (8) |
L + 4.00% | 4.10 | % | 10/22/2026 | 22,917 | 23,002 | 22,988 | 0.46 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 206,345 | 207,198 | 4.19 | ||||||||||||||||||||||||
| Hotels, Restaurants & Leisure |
||||||||||||||||||||||||||
| CEC Entertainment, Inc. (5)(8) |
6.75% | 6.75 | % | 5/1/2026 | 94,317 | 94,294 | 96,911 | 1.96 | ||||||||||||||||||
| IRB Holding Corp. (12) |
L + 3.25% | 4.25 | % | 12/15/2027 | 39,880 | 39,963 | 39,927 | 0.81 | ||||||||||||||||||
| Scientific Games International, Inc. (6)(8) |
L + 2.75% | 2.85 | % | 8/14/2024 | 3,768 | 3,731 | 3,745 | 0.08 | ||||||||||||||||||
| Tacala Investment Corp. (11) |
L + 3.75% | 4.50 | % | 2/5/2027 | 35,657 | 35,748 | 35,727 | 0.72 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 173,736 | 176,309 | 3.57 | ||||||||||||||||||||||||
| Household Durables |
||||||||||||||||||||||||||
| AI Aqua Merger Sub, Inc. (4)(6)(7)(12) |
L + 3.25% | 4.25 | % | 12/13/2023 | 16,393 | 16,403 | 16,426 | 0.33 | ||||||||||||||||||
| AI Aqua Merger Sub, Inc. (6)(12) |
L + 3.75% | 4.75 | % | 12/13/2023 | 12,477 | 12,469 | 12,503 | 0.25 | ||||||||||||||||||
| AI Aqua Merger Sub, Inc. (6)(7)(10) |
L + 4.00% | 4.50 | % | 6/16/2028 | 16,580 | 16,537 | 16,629 | 0.34 | ||||||||||||||||||
| Alterra Mountain Company (11) |
L + 3.50% | 4.25 | % | 8/1/2026 | 4,987 | 5,003 | 5,006 | 0.10 | ||||||||||||||||||
| Instant Brands Holdings, Inc. (4)(11) |
L + 5.00% | 5.75 | % | 4/12/2028 | 85,000 | 83,766 | 84,894 | 1.72 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 134,178 | 135,457 | 2.74 | ||||||||||||||||||||||||
F-27
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||
| Independent Power and Renewable Electricity Producers |
||||||||||||||||||||||||||
| Enviva Holdings LP (4)(12) |
L + 5.50% | 6.50 | % | 2/11/2026 | $ | 24,554 | $ | 24,325 | $ | 24,830 | 0.50 | % | ||||||||||||||
| Industrial Conglomerates |
||||||||||||||||||||||||||
| Excelitas Technologies Corp. (12) |
L + 3.50% | 4.50 | % | 12/2/2024 | 22,907 | 22,932 | 22,942 | 0.46 | ||||||||||||||||||
| FCG Acquisitions, Inc. (7)(10) |
L + 3.75% | 4.25 | % | 3/16/2028 | 26,097 | 26,112 | 26,161 | 0.53 | ||||||||||||||||||
| TSL Engineered Products, LLC (4)(6)(11) |
L + 4.75% | 5.50 | % | 1/8/2028 | 24,439 | 24,206 | 24,378 | 0.49 | ||||||||||||||||||
| Vertical US Newco, Inc. (6)(8) |
L + 4.25% | 4.48 | % | 7/30/2027 | 17,689 | 17,791 | 17,735 | 0.36 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 91,042 | 91,215 | 1.84 | ||||||||||||||||||||||||
| Insurance |
||||||||||||||||||||||||||
| Acrisure, LLC (8) |
L + 3.50% | 3.60 | % | 2/15/2027 | 1,995 | 1,979 | 1,976 | 0.04 | ||||||||||||||||||
| Alliant Holdings Intermediate, LLC (8) |
L + 3.25% | 3.35 | % | 5/9/2025 | 10,043 | 10,028 | 9,948 | 0.20 | ||||||||||||||||||
| Alliant Holdings Intermediate, LLC (10) |
L + 3.75% | 4.25 | % | 10/8/2027 | 14,039 | 14,009 | 14,081 | 0.28 | ||||||||||||||||||
| AssuredPartners, Inc. (8) |
L + 3.50% | 3.60 | % | 2/12/2027 | 15,031 | 15,101 | 15,045 | 0.30 | ||||||||||||||||||
| Baldwin Risk Partners, LLC (6)(10) |
L + 3.50% | 4.00 | % | 10/14/2027 | 8,714 | 8,704 | 8,720 | 0.18 | ||||||||||||||||||
| BroadStreet Partners, Inc. (8) |
L + 3.25% | 3.35 | % | 1/27/2027 | 11,932 | 11,906 | 11,847 | 0.24 | ||||||||||||||||||
| CCC Information Services, Inc. (12) |
L + 3.00% | 4.00 | % | 11/18/2024 | 6,474 | 6,476 | 6,481 | 0.13 | ||||||||||||||||||
| High Street Buyer, Inc. (4)(7)(11) |
L + 6.00% | 6.75 | % | 4/14/2028 | 31,304 | 30,361 | 30,069 | 0.61 | ||||||||||||||||||
| Howden Group Holdings Limited (6)(11) |
L + 3.25% | 4.00 | % | 11/12/2027 | 12,650 | 12,678 | 12,658 | 0.26 | ||||||||||||||||||
| HUB International Limited (8) |
L + 2.75% | 2.93 | % | 4/25/2025 | 9,255 | 9,247 | 9,197 | 0.19 | ||||||||||||||||||
| Integrity Marketing Acquisition, LLC (4)(7)(12) |
L + 5.75% | 6.75 | % | 8/27/2025 | 16,642 | 16,095 | 16,043 | 0.32 | ||||||||||||||||||
| Jones Deslauriers Insurance Management, Inc. (4)(6)(7)(11) |
L + 4.25% | 5.00 | % | 3/28/2028 | 55,944 | 43,777 | 45,308 | 0.92 | ||||||||||||||||||
| NFP Corp. (8) |
L + 3.25% | 3.35 | % | 2/15/2027 | 13,424 | 13,401 | 13,253 | 0.27 | ||||||||||||||||||
| SG Acquisition, Inc. (4)(10) |
L + 5.00% | 5.50 | % | 1/27/2027 | 108,204 | 107,549 | 106,581 | 2.16 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 301,311 | 301,207 | 6.09 | ||||||||||||||||||||||||
| Interactive Media & Services |
||||||||||||||||||||||||||
| Bungie, Inc. (4)(12) |
L + 6.25% | 7.25 | % | 8/28/2024 | 2,500 | 2,500 | 2,500 | 0.05 | ||||||||||||||||||
| Cengage Learning, Inc. (12) |
L + 4.75% | 5.75 | % | 6/29/2026 | 28,112 | 27,831 | 27,901 | 0.56 | ||||||||||||||||||
| MH Sub I, LLC (12) |
L + 3.75% | 4.75 | % | 9/13/2024 | 23,818 | 23,912 | 23,900 | 0.48 | ||||||||||||||||||
| Project Boost Purchaser, LLC (10) |
L + 3.50% | 4.00 | % | 6/1/2026 | 8,511 | 8,489 | 8,511 | 0.17 | ||||||||||||||||||
| Project Boost Purchaser, LLC (8) |
L + 3.50% | 3.60 | % | 6/1/2026 | 3,625 | 3,625 | 3,608 | 0.07 | ||||||||||||||||||
| SurveyMonkey, Inc. (6)(8) |
L + 3.75% | 3.85 | % | 10/10/2025 | 6,865 | 6,858 | 6,839 | 0.14 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 73,216 | 73,258 | 1.48 | ||||||||||||||||||||||||
| Internet & Direct Marketing Retail |
||||||||||||||||||||||||||
| Donuts, Inc. (4)(12) |
L + 6.00% | 7.00 | % | 12/29/2026 | 114,413 | 112,271 | 113,841 | 2.30 | ||||||||||||||||||
| Shutterfly, LLC (12) |
L + 6.00% | 7.00 | % | 9/25/2026 | 5,000 | 5,018 | 5,019 | 0.10 | ||||||||||||||||||
| Shutterfly, LLC (12) |
L + 6.50% | 7.50 | % | 9/25/2026 | 49,645 | 49,920 | 49,851 | 1.01 | ||||||||||||||||||
| Shutterfly, LLC (5)(8) |
8.50% | 8.50 | % | 10/1/2026 | 13,217 | 14,114 | 14,532 | 0.29 | ||||||||||||||||||
| Wireless Vision, LLC (4)(7)(12) |
L + 5.50% | 6.50 | % | 12/30/2025 | 22,841 | 22,841 | 22,841 | 0.46 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 204,164 | 206,084 | 4.17 | ||||||||||||||||||||||||
F-28
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||
| IT Services |
||||||||||||||||||||||||||
| Ahead DB Holdings, LLC (5)(11) |
L + 3.75% | 4.50 | % | 10/18/2027 | $ | 6,087 | $ | 6,119 | $ | 6,106 | 0.12 | % | ||||||||||||||
| Dcert Buyer, Inc. (8) |
L + 4.00% | 4.10 | % | 10/16/2026 | 13,311 | 13,332 | 13,345 | 0.27 | ||||||||||||||||||
| Endurance International Group Holdings, Inc. (11) |
L + 3.50% | 4.25 | % | 2/10/2028 | 29,694 | 29,539 | 29,607 | 0.60 | ||||||||||||||||||
| Ensono Holdings, LLC (11) |
L + 4.00% | 4.75 | % | 5/19/2028 | 34,286 | 34,237 | 34,411 | 0.70 | ||||||||||||||||||
| GlobalLogic Holdings, Inc. (11) |
L + 3.75% | 4.50 | % | 9/14/2027 | 19,926 | 19,997 | 19,985 | 0.40 | ||||||||||||||||||
| NAB Holdings, LLC (12) |
L + 3.00% | 4.00 | % | 7/1/2024 | 9,956 | 9,950 | 9,981 | 0.20 | ||||||||||||||||||
| Park Place Technologies, LLC (12) |
L + 5.00% | 6.00 | % | 11/10/2027 | 41,895 | 40,894 | 42,094 | 0.85 | ||||||||||||||||||
| Red River Technology, LLC (4)(7)(12) |
L + 6.00% | 7.00 | % | 5/26/2027 | 151,200 | 148,597 | 148,554 | 3.00 | ||||||||||||||||||
| ThoughtWorks, Inc. (10) |
L + 3.25% | 3.75 | % | 3/23/2028 | 9,352 | 9,329 | 9,366 | 0.19 | ||||||||||||||||||
| TierPoint, LLC (11) |
L + 3.75% | 4.50 | % | 5/6/2026 | 29,870 | 29,749 | 29,902 | 0.60 | ||||||||||||||||||
| Virtusa Corp. (11) |
L + 4.25% | 5.00 | % | 2/11/2028 | 17,459 | 17,558 | 17,558 | 0.36 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 359,301 | 360,910 | 7.30 | ||||||||||||||||||||||||
| Leisure Products |
||||||||||||||||||||||||||
| Lew’s Intermediate Holdings, LLC (4)(11) |
L + 5.00% | 5.75 | % | 1/26/2028 | 26,334 | 26,082 | 26,466 | 0.54 | ||||||||||||||||||
| Recess Holdings, Inc. (12) |
L + 3.75% | 4.75 | % | 9/30/2024 | 19,922 | 19,897 | 19,858 | 0.40 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 45,979 | 46,323 | 0.94 | ||||||||||||||||||||||||
| Life Sciences Tools & Services |
||||||||||||||||||||||||||
| Albany Molecular Research, Inc. (12) |
L + 3.25% | 4.25 | % | 8/30/2024 | 27,904 | 28,001 | 27,979 | 0.57 | ||||||||||||||||||
| Cambrex Corp. (11) |
L + 3.50% | 4.25 | % | 12/4/2026 | 20,170 | 20,263 | 20,246 | 0.41 | ||||||||||||||||||
| Maravai Intermediate Holdings, LLC (6)(12) |
L + 3.75% | 4.75 | % | 10/19/2027 | 1,989 | 2,012 | 2,000 | 0.04 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 50,277 | 50,225 | 1.02 | ||||||||||||||||||||||||
| Machinery |
||||||||||||||||||||||||||
| Apex Tool Group, LLC (13) |
L + 5.25% | 6.50 | % | 8/1/2024 | 71,088 | 71,196 | 71,478 | 1.45 | ||||||||||||||||||
| Blount International, Inc. (12) |
L + 3.75% | 4.75 | % | 4/12/2023 | 18,160 | 18,233 | 18,239 | 0.37 | ||||||||||||||||||
| Phoenix Services Merger Sub, LLC (12) |
L + 3.75% | 4.75 | % | 3/1/2025 | 5,969 | 5,945 | 5,968 | 0.12 | ||||||||||||||||||
| Pro Mach Group, Inc. (8) |
L + 2.75% | 2.85 | % | 3/7/2025 | 6,268 | 6,237 | 6,189 | 0.13 | ||||||||||||||||||
| Titan Acquisition, Ltd. (6)(8) |
L + 3.00% | 3.17 | % | 3/28/2025 | 13,030 | 12,908 | 12,831 | 0.26 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 114,518 | 114,705 | 2.32 | ||||||||||||||||||||||||
| Marine |
||||||||||||||||||||||||||
| Navico, Inc. (5)(6)(12) |
L + 4.25% | 5.25 | % | 3/31/2023 | 1,924 | 1,862 | 1,924 | 0.04 | ||||||||||||||||||
| Media |
||||||||||||||||||||||||||
| Altice Financing S.A. (6)(8) |
L + 2.75% | 2.90 | % | 1/31/2026 | 1,990 | 1,963 | 1,959 | 0.04 | ||||||||||||||||||
| Digital Media Solutions, LLC (5)(6)(11) |
L + 5.00% | 5.75 | % | 5/24/2026 | 40,000 | 39,016 | 39,817 | 0.81 | ||||||||||||||||||
| Radiate Holdco, LLC (11) |
L + 3.50% | 4.25 | % | 9/25/2026 | 34,895 | 35,017 | 34,971 | 0.71 | ||||||||||||||||||
| Terrier Media Buyer, Inc. (8) |
L + 3.50% | 3.60 | % | 12/17/2026 | 7,967 | 7,966 | 7,936 | 0.16 | ||||||||||||||||||
| Univision Communications, Inc. (12) |
L + 3.75% | 4.75 | % | 3/15/2026 | 22,824 | 22,817 | 22,902 | 0.46 | ||||||||||||||||||
| UPC Financing Partnership (6)(8) |
L + 3.00% | 3.07 | % | 1/31/2029 | 2,681 | 2,655 | 2,667 | 0.05 | ||||||||||||||||||
| WideOpenWest Finance, LLC (6)(12) |
L + 3.25% | 4.25 | % | 8/18/2023 | 10,438 | 10,461 | 10,440 | 0.21 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 119,896 | 120,692 | 2.44 | ||||||||||||||||||||||||
| Metals & Mining |
||||||||||||||||||||||||||
| SCIH Salt Holdings, Inc. (11) |
L + 4.00% | 4.75 | % | 3/16/2027 | 36,396 | 36,306 | 36,514 | 0.74 | ||||||||||||||||||
F-29
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||
| Oil, Gas & Consumable Fuels |
||||||||||||||||||||||||||
| Eagle Midstream Canada Finance, Inc. (4)(6)(14) |
L + 6.25% | 7.75 | % | 11/26/2024 | $ | 36,013 | $ | 35,520 | $ | 35,923 | 0.73 | % | ||||||||||||||
| Personal Products |
||||||||||||||||||||||||||
| Paula’s Choice Holdings, Inc. (4)(12) |
L + 6.25% | 7.25 | % | 11/17/2025 | 19,750 | 19,255 | 19,750 | 0.40 | ||||||||||||||||||
| Pharmaceuticals |
||||||||||||||||||||||||||
| ANI Pharmaceuticals, Inc. (6)(11) |
L + 6.00% | 6.75 | % | 4/27/2028 | 54,930 | 53,831 | 54,243 | 1.10 | ||||||||||||||||||
| Jazz Pharmaceuticals, Inc. (6)(10) |
L + 3.50% | 4.00 | % | 4/21/2028 | 12,442 | 12,379 | 12,495 | 0.25 | ||||||||||||||||||
| Motion Finco, LLC (6)(8) |
L + 3.25% | 3.40 | % | 11/12/2026 | 4,988 | 4,839 | 4,841 | 0.10 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 71,049 | 71,579 | 1.45 | ||||||||||||||||||||||||
| Professional Services |
||||||||||||||||||||||||||
| ALKU, LLC (4)(11) |
L + 5.25% | 6.00 | % | 3/1/2028 | 165,066 | 163,476 | 164,241 | 3.32 | ||||||||||||||||||
| AqGen Ascensus, Inc. (12) |
L + 4.00% | 5.00 | % | 12/13/2026 | 16,922 | 17,014 | 16,975 | 0.34 | ||||||||||||||||||
| Aqgen Island Holdings, Inc. (10) |
L + 3.50% | 4.00 | % | 5/20/2028 | 27,837 | 27,728 | 27,824 | 0.56 | ||||||||||||||||||
| Arches Buyer, Inc. (12) |
L + 4.00% | 5.00 | % | 12/6/2027 | 1,995 | 1,991 | 1,993 | 0.04 | ||||||||||||||||||
| Ascend Performance Materials Operations, LLC (12) |
L + 4.00% | 5.00 | % | 8/27/2026 | 4,987 | 5,064 | 5,067 | 0.10 | ||||||||||||||||||
| BMC Acquisition, Inc. (12) |
L + 5.25% | 6.25 | % | 12/28/2024 | 5,084 | 5,072 | 5,082 | 0.10 | ||||||||||||||||||
| BPPH2 Limited (4)(6)(8) |
L + 6.75% | 6.75 | % | 3/2/2028 | £ | 25,500 | 34,329 | 35,201 | 0.71 | |||||||||||||||||
| Camelot US Acquisition, LLC (5)(6)(12) |
L + 3.00% | 4.00 | % | 10/30/2026 | 4,975 | 4,994 | 4,985 | 0.10 | ||||||||||||||||||
| Cast & Crew Payroll, LLC (8) |
L + 3.75% | 3.85 | % | 2/9/2026 | 15,924 | 15,795 | 15,859 | 0.32 | ||||||||||||||||||
| Deerfield Dakota Holding, LLC (12) |
L + 3.75% | 4.75 | % | 4/9/2027 | 22,109 | 22,197 | 22,244 | 0.45 | ||||||||||||||||||
| Emerald US, Inc. (6)(8) |
L + 3.50% | 3.65 | % | 7/10/2026 | 5,074 | 5,070 | 5,077 | 0.10 | ||||||||||||||||||
| Guidehouse LLP (8) |
L + 4.00% | 4.10 | % | 5/1/2025 | 21,466 | 21,518 | 21,543 | 0.44 | ||||||||||||||||||
| IG Investments Holdings, LLC (12) |
L + 3.75% | 4.75 | % | 5/23/2025 | 22,404 | 22,413 | 22,482 | 0.45 | ||||||||||||||||||
| Inmar, Inc. (12) |
L + 4.00% | 5.00 | % | 5/1/2024 | 4,987 | 4,990 | 4,990 | 0.10 | ||||||||||||||||||
| Minotaur Acquisition, Inc. (8) |
L + 4.75% | 4.85 | % | 3/27/2026 | 53,082 | 53,005 | 53,137 | 1.07 | ||||||||||||||||||
| National Intergovernmental Purchasing Alliance Co. (8) |
L + 3.50% | 3.65 | % | 5/23/2025 | 15,362 | 15,292 | 15,272 | 0.31 | ||||||||||||||||||
| Trinity Air Consultants Holdings Corp. (4)(7)(11) |
L + 5.25% | 6.00 | % | 6/29/2027 | 138,870 | 135,400 | 135,412 | 2.74 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 555,347 | 557,384 | 11.27 | ||||||||||||||||||||||||
| Real Estate Management & Development |
||||||||||||||||||||||||||
| Cumming Group, Inc. (4)(7)(12) |
L + 6.00% | 7.00 | % | 5/26/2027 | 113,208 | 110,778 | 110,736 | 2.24 | ||||||||||||||||||
| McCarthy & Stone PLC (4)(5)(6)(8) |
7.00% | 7.00 | % | 12/16/2025 | £ | 20,000 | 27,989 | 27,471 | 0.56 | |||||||||||||||||
| Progress Residential PM Holdings, LLC (4)(7)(11) |
L + 6.25% | 7.00 | % | 2/16/2028 | 55,898 | 54,575 | 55,200 | 1.12 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 193,341 | 193,407 | 3.91 | ||||||||||||||||||||||||
| Road & Rail |
||||||||||||||||||||||||||
| Grab Technology, LLC (6)(12) |
L + 4.50% | 5.50 | % | 1/29/2026 | 29,839 | 29,410 | 30,361 | 0.61 | ||||||||||||||||||
| Software |
||||||||||||||||||||||||||
| 2U, Inc. (4)(6)(11) |
L + 5.75% | 6.50 | % | 11/30/2024 | 54,000 | 53,055 | 53,055 | 1.07 | ||||||||||||||||||
| Apttus Corp. (13) |
L + 5.25% | 6.50 | % | 4/27/2028 | 8,488 | 8,479 | 8,549 | 0.17 | ||||||||||||||||||
| Belfor Holdings, Inc. (8) |
L + 3.75% | 3.85 | % | 4/6/2026 | 4,987 | 5,006 | 4,994 | 0.10 | ||||||||||||||||||
| Boxer Parent Company, Inc. (8) |
L + 3.75% | 3.85 | % | 10/2/2025 | 12,066 | 12,066 | 12,012 | 0.24 | ||||||||||||||||||
| Brave Parent Holdings, Inc. (8) |
L + 4.00% | 4.10 | % | 4/18/2025 | 5,638 | 5,631 | 5,638 | 0.11 | ||||||||||||||||||
| CoreLogic, Inc. (10) |
L + 3.50% | 4.00 | % | 6/2/2028 | 20,000 | 19,912 | 19,973 | 0.40 | ||||||||||||||||||
| Delta Topco, Inc. (11) |
L + 3.75% | 4.50 | % | 12/1/2027 | 22,500 | 22,595 | 22,580 | 0.46 | ||||||||||||||||||
| Diligent Corporation (4)(12) |
L + 5.75% | 6.75 | % | 8/4/2025 | 89,775 | 88,591 | 88,653 | 1.79 | ||||||||||||||||||
| ECI Macola Max Holding, LLC (6)(11) |
L + 3.75% | 4.50 | % | 11/9/2027 | 24,917 | 24,998 | 25,005 | 0.51 | ||||||||||||||||||
F-30
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||
| Software (continued) |
||||||||||||||||||||||||||
| Epicor Software Corp. (11) |
L + 3.25% | 4.00 | % | 7/30/2027 | $ | 11,960 | $ | 12,016 | $ | 11,961 | 0.24 | % | ||||||||||||||
| Episerver, Inc. (4)(5)(7)(12) |
L + 5.50% | 6.50 | % | 4/9/2026 | 18,183 | 17,857 | 17,852 | 0.36 | ||||||||||||||||||
| Flexera Software, LLC (11) |
L + 3.75% | 4.50 | % | 1/26/2028 | 12,466 | 12,521 | 12,508 | 0.25 | ||||||||||||||||||
| Formula One Management Limited (6)(12) |
L + 2.50% | 3.50 | % | 2/1/2024 | 5,000 | 4,995 | 4,986 | 0.10 | ||||||||||||||||||
| GI Consilio Parent, LLC (7)(10) |
L + 4.00% | 4.50 | % | 4/30/2028 | 125,000 | 120,868 | 125,010 | 2.53 | ||||||||||||||||||
| Gigamon Inc. (11) |
L + 3.75% | 4.50 | % | 12/27/2024 | 25,681 | 25,735 | 25,777 | 0.52 | ||||||||||||||||||
| GraphPAD Software, LLC (4)(7)(12) |
L + 5.50% | 6.50 | % | 4/27/2027 | 17,500 | 17,204 | 17,195 | 0.35 | ||||||||||||||||||
| Greeneden U.S. Holdings II, LLC (11) |
L + 4.00% | 4.75 | % | 12/1/2027 | 39,963 | 40,128 | 40,105 | 0.81 | ||||||||||||||||||
| HS Purchaser, LLC (4)(7)(11) |
L + 4.00% | 4.75 | % | 11/19/2026 | 17,842 | 17,887 | 17,899 | 0.36 | ||||||||||||||||||
| Hyland Software, Inc. (11) |
L + 3.50% | 4.25 | % | 7/1/2024 | 23,435 | 23,491 | 23,505 | 0.48 | ||||||||||||||||||
| Idera, Inc. (5)(11) |
L + 3.75% | 4.50 | % | 2/4/2028 | 30,418 | 30,330 | 30,478 | 0.62 | ||||||||||||||||||
| Imperva, Inc. (12) |
L + 4.00% | 5.00 | % | 1/12/2026 | 19,416 | 19,513 | 19,509 | 0.39 | ||||||||||||||||||
| Imprivata, Inc. (10) |
L + 3.50% | 4.00 | % | 12/1/2027 | 14,525 | 14,565 | 14,570 | 0.29 | ||||||||||||||||||
| Informatica, LLC (8) |
L + 3.25% | 3.35 | % | 2/25/2027 | 3,722 | 3,729 | 3,706 | 0.07 | ||||||||||||||||||
| ION Trading Finance Ltd. (6)(8) |
L + 4.75% | 4.92 | % | 3/26/2028 | 17,795 | 17,787 | 17,895 | 0.36 | ||||||||||||||||||
| Ivanti Software, Inc. (12) |
L + 4.75% | 5.75 | % | 12/1/2027 | 25,099 | 25,204 | 25,174 | 0.51 | ||||||||||||||||||
| Ivanti Software, Inc. (11) |
L + 4.00% | 4.75 | % | 12/1/2027 | 4,014 | 4,004 | 4,002 | 0.08 | ||||||||||||||||||
| LD Lower Holdings, Inc. (4)(7)(12) |
L + 6.50% | 7.50 | % | 2/8/2026 | 119,575 | 116,861 | 118,380 | 2.39 | ||||||||||||||||||
| MA FinanceCom, LLC (6)(12) |
L + 4.25% | 5.25 | % | 6/5/2025 | 5,000 | 5,069 | 5,074 | 0.10 | ||||||||||||||||||
| Maverick Acquisition, Inc. (4)(7)(12) |
L + 6.00% | 7.00 | % | 6/1/2027 | 39,000 | 38,071 | 38,058 | 0.77 | ||||||||||||||||||
| Maverick Acquisition, Inc. (11) |
L + 3.75% | 4.50 | % | 4/28/2028 | 17,000 | 16,916 | 17,036 | 0.34 | ||||||||||||||||||
| MeridianLink, Inc. (12) |
L + 3.75% | 4.75 | % | 5/30/2025 | 25,010 | 24,986 | 25,022 | 0.51 | ||||||||||||||||||
| Mic Glen, LLC (11) |
L + 6.75% | 7.25 | % | 6/23/2028 | 4,011 | 3,991 | 4,011 | 0.08 | ||||||||||||||||||
| Mobileum, Inc. (4)(7)(12) |
L + 4.75% | 5.75 | % | 6/1/2028 | 48,623 | 48,006 | 45,810 | 0.93 | ||||||||||||||||||
| MRI Software, LLC (4)(7)(12) |
L + 5.50% | 6.50 | % | 2/10/2026 | 11,903 | 11,817 | 11,927 | 0.24 | ||||||||||||||||||
| NAVEX TopCo, Inc. (8) |
L + 3.25% | 3.36 | % | 9/5/2025 | 7,561 | 7,548 | 7,511 | 0.15 | ||||||||||||||||||
| Paya Holdings III, LLC (4)(5)(6)(7)(11) |
L + 3.25% | 4.00 | % | 6/16/2028 | 9,500 | 9,324 | 9,456 | 0.19 | ||||||||||||||||||
| PaySimple, Inc. (4)(8) |
L + 5.50% | 5.61 | % | 8/23/2025 | 47,340 | 47,346 | 47,103 | 0.95 | ||||||||||||||||||
| Perforce Software, Inc. (8) |
L + 3.75% | 3.85 | % | 7/1/2026 | 11,740 | 11,733 | 11,665 | 0.24 | ||||||||||||||||||
| Project Alpha Intermediate Holding, Inc. (8) |
L + 4.00% | 4.11 | % | 4/26/2024 | 23,901 | 23,981 | 23,965 | 0.48 | ||||||||||||||||||
| Project Leopard Holdings, Inc. (12) |
L + 4.75% | 5.75 | % | 7/7/2024 | 25,917 | 25,979 | 26,046 | 0.53 | ||||||||||||||||||
| Quest Software US Holdings, Inc. (6)(8) |
L + 4.25% | 4.44 | % | 5/16/2025 | 19,049 | 19,074 | 19,066 | 0.39 | ||||||||||||||||||
| RealPage, Inc. (10) |
L + 3.25% | 3.75 | % | 4/24/2028 | 8,933 | 8,920 | 8,916 | 0.18 | ||||||||||||||||||
| Relativity ODA, LLC (4)(7)(12) |
L + 7.50% PIK | 8.50 | % | 5/12/2027 | 42,275 | 41,130 | 41,095 | 0.83 | ||||||||||||||||||
| Rocket Software, Inc. (8) |
L + 4.25% | 4.35 | % | 11/28/2025 | 23,249 | 23,068 | 22,865 | 0.46 | ||||||||||||||||||
| S2P Acquisition Borrower, Inc. (6)(8) |
L + 3.75% | 3.85 | % | 8/14/2026 | 2,980 | 2,990 | 2,986 | 0.06 | ||||||||||||||||||
| Sophia LP (8) |
L + 3.75% | 3.90 | % | 10/7/2027 | 19,937 | 20,001 | 19,979 | 0.40 | ||||||||||||||||||
| SpecialtyCare, Inc. (4)(5)(7)(12) |
L + 5.75% | 6.75 | % | 6/18/2028 | 69,276 | 66,919 | 66,913 | 1.35 | ||||||||||||||||||
| Spitfire Parent, Inc. (4)(7)(12) |
L + 5.50% | 6.50 | % | 3/11/2027 | 66,000 | 64,538 | 64,459 | 1.30 | ||||||||||||||||||
| Spitfire Parent, Inc. (4)(12) |
L + 5.50% | 6.50 | % | 3/11/2027 | € | 19,500 | 23,117 | 22,663 | 0.46 | |||||||||||||||||
| Storable, Inc. (10) |
L + 3.25% | 3.75 | % | 2/26/2028 | 1,370 | 1,367 | 1,366 | 0.03 | ||||||||||||||||||
| Surf Holdings, LLC (6)(8) |
L + 3.50% | 3.63 | % | 3/5/2027 | 7,771 | 7,775 | 7,730 | 0.16 | ||||||||||||||||||
F-31
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||
| Software (continued) |
||||||||||||||||||||||||||
| Tegra118 Wealth Solutions, Inc. (8) |
L + 4.00% | 4.16 | % | 2/18/2027 | $ | 3,980 | $ | 4,007 | $ | 3,992 | 0.08 | % | ||||||||||||||
| The Ultimate Software Group, Inc. (11) |
L + 3.25% | 4.00 | % | 5/4/2026 | 10,945 | 10,976 | 10,972 | 0.22 | ||||||||||||||||||
| Triple Lift, Inc. (4)(7)(11) |
L + 5.75% | 6.50 | % | 5/6/2028 | 91,000 | 88,940 | 88,894 | 1.80 | ||||||||||||||||||
| University Support Services, LLC (10) |
L + 3.25% | 3.75 | % | 6/29/2028 | 16,862 | 16,778 | 16,803 | 0.34 | ||||||||||||||||||
| Veritas US, Inc. (6)(12) |
L + 5.00% | 6.00 | % | 9/1/2025 | 20,630 | 20,816 | 20,790 | 0.42 | ||||||||||||||||||
| Virgin Pulse, Inc. (11) |
L + 4.00% | 4.75 | % | 4/6/2028 | 42,553 | 42,141 | 42,686 | 0.86 | ||||||||||||||||||
| Vision Solutions, Inc. (11) |
L + 4.25% | 5.00 | % | 3/4/2028 | 41,256 | 41,054 | 41,274 | 0.83 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 1,543,406 | 1,547,101 | 31.29 | ||||||||||||||||||||||||
| Specialty Retail |
||||||||||||||||||||||||||
| CustomInk, LLC (4)(12) |
L + 6.21% | 7.21 | % | 5/3/2026 | 30,000 | 29,367 | 29,400 | 0.59 | ||||||||||||||||||
| EG America, LLC (6)(10) |
L + 4.25% | 4.75 | % | 3/10/2026 | 15,043 | 14,961 | 15,074 | 0.30 | ||||||||||||||||||
| Petco Health & Wellness Co, Inc. (11) |
L + 3.25% | 4.00 | % | 2/24/2028 | 14,931 | 14,902 | 14,918 | 0.30 | ||||||||||||||||||
| PetSmart, Inc. (5)(11) |
L + 3.75% | 4.50 | % | 2/11/2028 | 3,295 | 3,264 | 3,301 | 0.07 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 62,493 | 62,693 | 1.27 | ||||||||||||||||||||||||
| Technology Hardware, Storage & Peripherals |
||||||||||||||||||||||||||
| Deliver Buyer, Inc. (4)(12) |
L + 6.25% | 7.25 | % | 5/1/2024 | 19,900 | 19,989 | 20,012 | 0.40 | ||||||||||||||||||
| Lytx, Inc. (4)(7)(12) |
L + 6.25% | 7.25 | % | 2/28/2026 | 37,475 | 37,658 | 37,599 | 0.76 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 57,647 | 57,611 | 1.17 | ||||||||||||||||||||||||
| Textiles, Apparel & Luxury Goods |
||||||||||||||||||||||||||
| Mad Engine Global, LLC (4)(12) |
L + 7.00% | 8.00 | % | 6/30/2027 | 40,000 | 39,000 | 39,000 | 0.79 | ||||||||||||||||||
| S&S Holdings, LLC (10) |
L + 5.00% | 5.50 | % | 3/4/2028 | 29,925 | 29,057 | 29,775 | 0.60 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 68,057 | 68,775 | 1.39 | ||||||||||||||||||||||||
| Trading Companies & Distributors |
||||||||||||||||||||||||||
| Core & Main LP (12) |
L + 2.75% | 3.75 | % | 8/1/2024 | 7,565 | 7,581 | 7,572 | 0.15 | ||||||||||||||||||
| DiversiTech Holdings, Inc. (12) |
L + 3.25% | 4.25 | % | 12/3/2024 | 15,864 | 15,910 | 15,899 | 0.32 | ||||||||||||||||||
| Foundation Building Materials, Inc. (10) |
L + 3.25% | 3.75 | % | 2/3/2028 | 7,159 | 7,136 | 7,119 | 0.14 | ||||||||||||||||||
| HNC Holdings, Inc. (12) |
L + 4.00% | 5.00 | % | 10/5/2023 | 3,990 | 4,007 | 4,007 | 0.08 | ||||||||||||||||||
| LBM Acquisition, LLC (7)(11) |
L + 3.75% | 4.50 | % | 12/17/2027 | 41,162 | 41,009 | 40,923 | 0.83 | ||||||||||||||||||
| Park River Holdings, Inc. (11) |
L + 3.25% | 4.00 | % | 12/28/2027 | 27,171 | 27,138 | 27,069 | 0.55 | ||||||||||||||||||
| Porcelain Acquisition Corp. (4)(7)(12) |
L + 6.00% | 7.00 | % | 4/30/2027 | 71,693 | 68,679 | 68,724 | 1.39 | ||||||||||||||||||
| SRS Distribution, Inc. (10) |
L + 3.75% | 4.25 | % | 6/4/2028 | 38,229 | 38,122 | 38,253 | 0.77 | ||||||||||||||||||
| The Cook & Boardman Group, LLC (12) |
L + 5.75% | 6.75 | % | 10/17/2025 | 46,600 | 44,982 | 45,552 | 0.92 | ||||||||||||||||||
| The Hillman Group (8) |
L + 4.00% | 4.10 | % | 5/31/2025 | 8,544 | 8,557 | 8,542 | 0.17 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 263,121 | 263,660 | 5.33 | ||||||||||||||||||||||||
| Transportation Infrastructure |
||||||||||||||||||||||||||
| AIT Worldwide Logistics Holdings, Inc. (11) |
L + 4.75% | 5.50 | % | 3/31/2028 | 46,968 | 46,157 | 47,027 | 0.95 | ||||||||||||||||||
| Atlas CC Acquisition Corp. (5)(11) |
L + 4.25% | 5.00 | % | 4/28/2028 | 47,807 | 46,267 | 48,016 | 0.97 | ||||||||||||||||||
| Capstone Logistics, LLC (7)(12) |
L + 4.75% | 5.75 | % | 11/12/2027 | 21,731 | 21,806 | 21,836 | 0.44 | ||||||||||||||||||
| Frontline Road Safety, LLC (4)(7)(11) |
L + 5.75% | 6.50 | % | 5/3/2027 | 124,635 | 122,210 | 122,142 | 2.47 | ||||||||||||||||||
F-32
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||
| First Lien Debt (continued) |
||||||||||||||||||||||||||
| Transportation Infrastructure (continued) |
||||||||||||||||||||||||||
| Liquid Tech Solutions Holdings, LLC (4)(11) |
L + 4.75% | 5.50 | % | 3/19/2028 | $ | 15,500 | $ | 15,425 | $ | 15,500 | 0.31 | % | ||||||||||||||
| Roadsafe Holdings, Inc. (4)(7)(12) |
L + 5.75% | 6.75 | % | 10/19/2027 | 63,295 | 61,656 | 61,604 | 1.25 | ||||||||||||||||||
| Spireon, Inc. (4)(12) |
L + 6.50% | 7.50 | % | 10/4/2024 | 42,838 | 42,838 | 42,838 | 0.87 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 356,360 | 358,963 | 7.26 | ||||||||||||||||||||||||
| Wireless Telecommunication Services |
||||||||||||||||||||||||||
| CCI Buyer, Inc. (11) |
L + 4.00% | 4.75 | % | 12/17/2027 | 28,976 | 29,122 | 29,057 | 0.59 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total First Lien Debt |
$ | 10,095,919 | $ | 10,147,833 | 205.26 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Second Lien Debt |
||||||||||||||||||||||||||
| Aerospace & Defense |
||||||||||||||||||||||||||
| Peraton Corp. (4)(11) |
L + 7.75% | 8.50 | % | 2/26/2029 | 75,000 | 73,891 | 76,875 | 1.55 | ||||||||||||||||||
| Airlines |
||||||||||||||||||||||||||
| American Rock Salt Company, LLC (4)(5)(11) |
L + 7.25% | 8.00 | % | 6/4/2029 | 17,000 | 16,830 | 17,000 | 0.34 | ||||||||||||||||||
| Building Products |
||||||||||||||||||||||||||
| Symphony Technology Group (4)(11) |
L + 8.25% | 9.00 | % | 5/3/2029 | 41,667 | 41,042 | 41,354 | 0.84 | ||||||||||||||||||
| Chemicals |
||||||||||||||||||||||||||
| NIC Acquisition Corp. (11) |
L + 7.75% | 8.50 | % | 12/29/2028 | 31,500 | 31,051 | 31,736 | 0.64 | ||||||||||||||||||
| Commercial Services & Supplies |
||||||||||||||||||||||||||
| DG Investment Intermediate Holdings 2, Inc. (11) |
L + 6.75% | 7.50 | % | 3/18/2029 | 29,464 | 29,321 | 29,520 | 0.60 | ||||||||||||||||||
| USIC Holdings, Inc. (4)(5)(11) |
L + 6.50% | 7.25 | % | 5/7/2029 | 10,000 | 9,900 | 10,200 | 0.21 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 39,221 | 39,720 | 0.80 | ||||||||||||||||||||||||
| Construction & Engineering |
||||||||||||||||||||||||||
| COP Home Services TopCo IV, Inc. (4)(12) |
L + 8.75% | 9.75 | % | 12/31/2028 | 34,895 | 34,230 | 34,895 | 0.71 | ||||||||||||||||||
| Electronic Equipment, Instruments & Components |
||||||||||||||||||||||||||
| Infinite Bidco, LLC (5)(10) |
L + 7.00% | 7.50 | % | 2/24/2029 | 20,833 | 20,733 | 21,042 | 0.43 | ||||||||||||||||||
| Health Care Providers & Services |
||||||||||||||||||||||||||
| Canadian Hospital Specialties Ltd. (4)(6)(8) |
8.75% | 8.75 | % | 4/15/2029 | C$ | 15,800 | 12,370 | 12,495 | 0.25 | |||||||||||||||||
| Jayhawk Buyer, LLC (4)(12) |
L + 8.75% | 9.75 | % | 10/15/2027 | 29,372 | 28,793 | 28,784 | 0.58 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 41,163 | 41,279 | 0.83 | ||||||||||||||||||||||||
| Health Care Technology |
||||||||||||||||||||||||||
| Therapy Brands Holdings, LLC (4)(5)(7)(11) |
L + 6.75% | 7.50 | % | 5/18/2029 | 3,519 | 3,484 | 3,519 | 0.07 | ||||||||||||||||||
| Insurance |
||||||||||||||||||||||||||
| Jones Deslauriers Insurance Management, Inc. (4)(6)(7)(10) |
L + 7.50% | 8.00 | % | 3/26/2029 | C$ | 20,859 | 16,201 | 16,993 | 0.34 | |||||||||||||||||
| Interactive Media & Services |
||||||||||||||||||||||||||
| MH Sub I, LLC (5)(8) |
L + 6.25% | 6.35 | % | 2/12/2029 | 15,113 | 15,077 | 15,373 | 0.31 | ||||||||||||||||||
| IT Services |
||||||||||||||||||||||||||
| Dcert Buyer, Inc. (8) |
L + 7.00% | 7.10 | % | 2/16/2029 | 39,277 | 39,319 | 39,736 | 0.80 | ||||||||||||||||||
F-33
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||
| Second Lien Debt (continued) |
||||||||||||||||||||||||||
| Professional Services |
||||||||||||||||||||||||||
| Aqgen Island Holdings, Inc. (5)(10) |
L + 6.50% | 7.00 | % | 5/4/2029 | $ | 28,238 | $ | 27,956 | $ | 28,097 | 0.57 | % | ||||||||||||||
| Deerfield Dakota Holding, LLC (4)(11) |
L + 6.75% | 7.50 | % | 4/7/2028 | 30,000 | 29,854 | 30,825 | 0.62 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 57,809 | 58,922 | 1.19 | ||||||||||||||||||||||||
| Software |
||||||||||||||||||||||||||
| Celestial Saturn Parent, Inc. (4)(10) |
L + 6.50% | 7.00 | % | 4/13/2029 | 118,488 | 117,311 | 119,525 | 2.42 | ||||||||||||||||||
| HS Purchaser, LLC (5)(11) |
L + 6.75% | 7.50 | % | 11/19/2027 | 51,000 | 51,150 | 51,526 | 1.04 | ||||||||||||||||||
| Idera, Inc. (5)(11) |
L + 6.75% | 7.50 | % | 2/4/2029 | 35,430 | 35,268 | 35,430 | 0.72 | ||||||||||||||||||
| Maverick Acquisition, Inc. (4)(5)(11) |
L + 6.75% | 7.50 | % | 4/28/2029 | 17,000 | 16,916 | 17,170 | 0.35 | ||||||||||||||||||
| Mic Glen, LLC (5)(11) |
L + 6.75% | 7.25 | % | 6/22/2029 | 17,000 | 16,915 | 17,151 | 0.35 | ||||||||||||||||||
| Proofpoint, Inc. (5)(10) |
L + 6.25% | 6.75 | % | 6/8/2029 | 95,000 | 94,525 | 96,306 | 1.95 | ||||||||||||||||||
| Quest Software US Holdings, Inc. (5)(6)(8) |
L + 8.25% | 8.44 | % | 5/18/2026 | 11,098 | 11,104 | 11,101 | 0.22 | ||||||||||||||||||
| Virgin Pulse, Inc. (5)(11) |
L + 7.25% | 8.00 | % | 3/30/2029 | 26,000 | 25,793 | 26,065 | 0.53 | ||||||||||||||||||
| Vision Solutions, Inc. (5)(11) |
L + 7.25% | 8.00 | % | 3/4/2029 | 110,950 | 109,976 | 110,973 | 2.24 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 478,958 | 485,247 | 9.81 | ||||||||||||||||||||||||
| Transportation Infrastructure |
||||||||||||||||||||||||||
| Atlas CC Acquisition Corp. (4)(5)(11) |
L + 7.63% | 8.38 | % | 5/25/2029 | 44,520 | 43,861 | 43,852 | 0.89 | ||||||||||||||||||
| Drive Chassis Holdco, LLC (5)(8) |
L + 7.00% | 7.19 | % | 4/10/2026 | 96,086 | 96,156 | 97,808 | 1.98 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 140,017 | 141,660 | 2.87 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Second Lien Debt |
$ | 1,049,026 | $ | 1,065,350 | 21.55 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Unsecured Debt |
||||||||||||||||||||||||||
| Auto Components |
||||||||||||||||||||||||||
| Mavis Tire Express Services TopCo LP (5)(8) |
6.50% | 6.50 | % | 5/15/2029 | 7,000 | 7,000 | $ | 6,903 | 0.14 | % | ||||||||||||||||
| Commercial Services & Supplies |
||||||||||||||||||||||||||
| Garda World Security Corp. (5)(6)(8) |
6.00% | 6.00 | % | 6/1/2029 | 2,674 | 2,674 | 2,657 | 0.05 | ||||||||||||||||||
| Communications Equipment |
||||||||||||||||||||||||||
| Plantronics, Inc. (5)(6)(8) |
4.75% | 4.75 | % | 3/1/2029 | 11,480 | 11,480 | 11,411 | 0.23 | ||||||||||||||||||
| IT Services |
||||||||||||||||||||||||||
| Endurance International Group Holdings, Inc. (5)(8) |
6.00% | 6.00 | % | 2/15/2029 | 25,000 | 24,603 | 24,785 | 0.50 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Unsecured Debt |
$ | 45,757 | $ | 45,757 | 0.93 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Equity |
||||||||||||||||||||||||||
| Aerospace & Defense |
||||||||||||||||||||||||||
| Corfin Holdco, Inc. - Common Stock (4) |
52,143 | $ | 125 | $ | 125 | 0.00 | ||||||||||||||||||||
| Loar Acquisition 13, LLC - Common Units (4) |
2,890,586 | 4,336 | 4,336 | 0.09 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 4,461 | 4,461 | 0.09 | ||||||||||||||||||||||||
F-34
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| Investments (1) |
Reference Rate and Spread |
Interest Rate (2) |
Maturity Date |
Par Amount/Units |
Cost (3) | Fair Value | Percentage of Net Assets |
|||||||||||||||||||
| Equity (continued) |
||||||||||||||||||||||||||
| Air Freight & Logistics |
||||||||||||||||||||||||||
| AGI Group Holdings LP - A2 Common Units (4) |
$ | 1,674 | $ | 1,674 | $ | 1,674 | 0.03 | % | ||||||||||||||||||
| Mode Holdings, L.P. - Class A-2 Common Units (4) |
1,076,923 | 1,077 | 1,077 | 0.02 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 2,751 | 2,751 | 0.06 | ||||||||||||||||||||||||
| Health Care Providers & Services |
||||||||||||||||||||||||||
| Jayhawk Holdings, LP - A-1 Common Units (4) |
12,472 | 2,220 | 2,220 | 0.04 | ||||||||||||||||||||||
| Jayhawk Holdings, LP - A-2 Common Units (4) |
6,716 | 1,195 | 1,195 | 0.02 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 3,415 | 3,415 | 0.07 | ||||||||||||||||||||||||
| Professional Services |
||||||||||||||||||||||||||
| OHCP V TC COI, LP. - LP Interest (4) |
6,500,000 | 6,500 | 6,500 | 0.13 | ||||||||||||||||||||||
| Transportation Infrastructure |
||||||||||||||||||||||||||
| Atlas Intermediate Holding LLC - Preferred Interest (4) |
34,238,400 | 33,725 | 33,725 | 0.68 | ||||||||||||||||||||||
| Frontline Road Safety Investments, LLC - Class A Common Units (4) |
39,999 | 4,200 | 4,200 | 0.08 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 37,925 | 37,925 | 0.77 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Equity Investments |
$ | 55,052 | $ | 55,052 | 1.11 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Investments - non-controlled/non-affiliated |
$ | 11,245,755 | $ | 11,313,993 | 228.85 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Investments — non-controlled/affiliated |
||||||||||||||||||||||||||
| Equity |
||||||||||||||||||||||||||
| Distributors |
||||||||||||||||||||||||||
| GSO DL Co-Invest EIS LP (EIS Acquisition Holdings, LP) - Class A Common Units (4)(15) |
$ | 401 | $ | 401 | 0.01 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Equity |
$ | 401 | $ | 401 | 0.01 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Investments - non-controlled/affiliated |
$ | 401 | $ | 401 | 0.01 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Investments — controlled/affiliated |
||||||||||||||||||||||||||
| Equity |
||||||||||||||||||||||||||
| Specialty Retail |
||||||||||||||||||||||||||
| GSO DL CoInvest CI LP (CustomInk, LLC) - Series A Preferred Units (4)(15) |
$ | 1,421 | $ | 1,424 | 0.03 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Equity |
$ | 1,421 | $ | 1,424 | 0.03 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Investments - controlled/affiliated |
$ | 1,421 | $ | 1,424 | 0.03 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Investment Portfolio |
$ | 11,247,577 | $ | 11,315,817 | 228.88 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Cash and Cash Equivalents |
||||||||||||||||||||||||||
| Other Cash and Cash Equivalents |
$ | 495,567 | $ | 495,567 | 10.02 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Portfolio Investments, Cash and Cash Equivalents |
$ | 11,743,144 | $ | 11,811,384 | 238.91 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
F-35
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| (1) | Unless otherwise indicated, issuers of debt and equity investments held by the Company (which such term “Company” shall include the Company’s consolidated subsidiaries for purposes of this Consolidated Schedule of Investments) are denominated in dollars. All debt investments are income producing unless otherwise indicated. All equity investments are non-income producing unless otherwise noted. Certain portfolio company investments are subject to contractual restrictions on sales. The total par amount is presented for debt investments and the number of shares or units owned is presented for equity investments. Each of the Company’s investments is pledged as collateral, under one or more of its credit facilities unless otherwise indicated. |
| (2) | Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate (“F”) or the U.S. Prime Rate (“P”)), which generally resets periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of June 30, 2021. As of June 30, 2021, the reference rates for our variable rate loans were the 30-day L at 0.10%, the 90-day L at 0.15% and the 180-day L at 0.16% and P at 3.25%. Variable rate loans typically include an interest reference rate floor feature, which is generally 0.75% or 1.00%. |
| (3) | The cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). |
| (4) | These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Board of Trustees (the “Board”) (see Note 2 and Note 5), pursuant to the Company’s valuation policy. |
| (5) | These debt investments are not pledged as collateral under any of the Company’s credit facilities. For other debt investments that are pledged to the Company’s credit facilities, a single investment may be divided into parts that are individually pledged as collateral to separate credit facilities. |
| (6) | The investment is not a qualifying asset under Section 55(a) of the 1940 Act. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of June 30, 2021, non-qualifying assets represented 12.1% of total assets as calculated in accordance with regulatory requirements. |
| (7) | Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. Negative cost and fair value results from unamortized fees, which are capitalized to the investment cost. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments (all commitments are first lien, unless otherwise noted): |
|
Investments—non-controlled/non-affiliated |
Commitment Type | Commitment Expiration Date |
Unfunded Commitment |
Fair Value |
||||||||||||
| First and Second Lien Debt |
||||||||||||||||
| ADCS Clinics Intermediate Holdings, LLC |
Delayed Draw Term Loan | 5/7/2023 | $ | 11,267 | $ | (113 | ) | |||||||||
| ADCS Clinics Intermediate Holdings, LLC |
Revolver | 5/7/2027 | 3,902 | (78 | ) | |||||||||||
| AGI-CFI Holdings, Inc. |
Delayed Draw Term Loan | 6/11/2023 | 42,157 | — | ||||||||||||
| AGI-CFI Holdings, Inc. |
Revolver | 6/11/2027 | 18,144 | — | ||||||||||||
| AI Aqua Merger Sub, Inc. |
Delayed Draw Term Loan | 12/13/2023 | 2,003 | — | ||||||||||||
| Albireo Energy, LLC |
Delayed Draw Term Loan | 6/23/2022 | 11,898 | — | ||||||||||||
F-36
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
|
Investments—non-controlled/non-affiliated |
Commitment Type | Commitment Expiration Date |
Unfunded Commitment |
Fair Value |
||||||||||||
| First and Second Lien Debt (continued) |
||||||||||||||||
| Atlas CC Acquisition Corp. |
Revolver | 5/26/2026 | $ | 18,518 | $ | — | ||||||||||
| Atlas CC Acquisition Corp. |
Letter of Credit | 5/26/2026 | 14,403 | — | ||||||||||||
| Barbri , Inc. |
Delayed Draw Term Loan | 4/28/2023 | 28,251 | — | ||||||||||||
| Bazaarvoice, Inc. |
Delayed Draw Term Loan | 11/7/2022 | 57,432 | — | ||||||||||||
| Bazaarvoice, Inc. |
Revolver | 5/7/2026 | 42,994 | — | ||||||||||||
| Canadian Hospital Specialties Ltd. |
Delayed Draw Term Loan | 4/14/2023 | 8,795 | (151 | ) | |||||||||||
| Canadian Hospital Specialties Ltd. |
Revolver | 4/14/2027 | 4,313 | — | ||||||||||||
| Capstone Logistics, LLC |
Delayed Draw Term Loan | 11/12/2027 | 2,189 | — | ||||||||||||
| CD&R Artemis Bidco, Inc. |
Delayed Draw Term Loan | 6/9/2022 | 9,740 | — | ||||||||||||
| COP Home Services TopCo IV, Inc. |
Delayed Draw Term Loan | 12/31/2022 | 9,500 | (245 | ) | |||||||||||
| COP Home Services TopCo IV, Inc. |
Revolver | 12/31/2025 | 10,538 | — | ||||||||||||
| Cumming Group, Inc. |
Delayed Draw Term Loan | 5/26/2027 | 25,112 | (208 | ) | |||||||||||
| Cumming Group, Inc. |
Revolver | 5/26/2027 | 10,387 | — | ||||||||||||
| Dana Kepner Company, LLC |
Delayed Draw Term Loan | 12/29/2021 | 6,250 | — | ||||||||||||
| DCA Investment Holdings, LLC |
Delayed Draw Term Loan | 3/12/2023 | 9,586 | (72 | ) | |||||||||||
| DG Investment Intermediate Holdings 2, Inc. |
Delayed Draw Term Loan | 3/5/2028 | 1,236 | — | ||||||||||||
| Dominion Colour Corporation |
Delayed Draw Term Loan | 5/6/2027 | 7,649 | — | ||||||||||||
| Episerver, Inc. |
Revolver | 4/9/2026 | 3,833 | (57 | ) | |||||||||||
| FCG Acquisitions, Inc. |
Delayed Draw Term Loan | 3/31/2028 | 1,161 | — | ||||||||||||
| Fencing Supply Group Acquisition, LLC |
Delayed Draw Term Loan | 2/24/2023 | 13,776 | (138 | ) | |||||||||||
| Frontline Road Safety, LLC - A |
Delayed Draw Term Loan | 5/3/2027 | 17,754 | — | ||||||||||||
| Frontline Road Safety, LLC - B |
Delayed Draw Term Loan | 5/3/2022 | 39,526 | — | ||||||||||||
| GI Consilio Parent, LLC |
Revolver | 5/14/2026 | 6,300 | (49 | ) | |||||||||||
| GraphPAD Software, LLC |
Revolver | 4/27/2027 | 2,832 | (42 | ) | |||||||||||
| High Street Buyer, Inc. |
Delayed Draw Term Loan | 4/16/2028 | 26,259 | (523 | ) | |||||||||||
| High Street Buyer, Inc. |
Revolver | 4/16/2027 | 4,186 | (84 | ) | |||||||||||
| HS Purchaser, LLC |
Delayed Draw Term Loan | 11/19/2027 | 5,000 | — | ||||||||||||
| Integrity Marketing Acquisition, LLC |
Delayed Draw Term Loan | 8/27/2025 | 23,316 | — | ||||||||||||
| Jayhawk Buyer, LLC |
Delayed Draw Term Loan | 10/15/2021 | 667 | — | ||||||||||||
| Jones Deslauriers Insurance Management, Inc. |
Delayed Draw Term Loan | 3/28/2022 | 12,385 | — | ||||||||||||
| Jones Deslauriers Insurance Management, Inc. (2nd Lien) |
Delayed Draw Term Loan | 3/28/2022 | 1,943 | — | ||||||||||||
| LBM Acquisition, LLC |
Delayed Draw Term Loan | 12/17/2027 | 1,437 | — | ||||||||||||
| LD Lower Holdings, Inc. |
Delayed Draw Term Loan | 2/8/2023 | 19,979 | — | ||||||||||||
| Lytx, Inc. |
Delayed Draw Term Loan | 2/28/2022 | 9,108 | — | ||||||||||||
| Maverick Acquisition, Inc. |
Delayed Draw Term Loan | 6/1/2023 | 16,185 | (162 | ) | |||||||||||
| Metis Buyer, Inc. |
Revolver | 5/4/2026 | 9,000 | (34 | ) | |||||||||||
| Mobileum, Inc. |
Delayed Draw Term Loan | 8/12/2024 | 26,377 | — | ||||||||||||
| Monroe Capital Holdings, LLC |
Delayed Draw Term Loan | 6/8/2022 | 8,839 | — | ||||||||||||
| MRI Software, LLC |
Delayed Draw Term Loan | 1/31/2022 | 8,600 | — | ||||||||||||
| MRI Software, LLC |
Delayed Draw Term Loan | 1/31/2022 | 276 | (3 | ) | |||||||||||
F-37
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
|
Investments—non-controlled/non-affiliated |
Commitment Type | Commitment Expiration Date |
Unfunded Commitment |
Fair Value |
||||||||||||
| First and Second Lien Debt (continued) |
||||||||||||||||
| MRI Software, LLC |
Delayed Draw Term Loan | 1/31/2022 | $ | 864 | $ | — | ||||||||||
| MRI Software, LLC |
Revolver | 2/10/2026 | 673 | — | ||||||||||||
| National Mentor Holdings, Inc. |
Delayed Draw Term Loan | 2/18/2028 | 989 | — | ||||||||||||
| NDC Acquisition Corp. |
Revolver | 3/9/2027 | 2,269 | — | ||||||||||||
| NMC Crimson Holdings, Inc. |
Delayed Draw Term Loan | 3/1/2023 | 31,400 | (471 | ) | |||||||||||
| Omni Intermediate Holdings, LLC |
Delayed Draw Term Loan | 12/30/2021 | 37,050 | (296 | ) | |||||||||||
| Omni Intermediate Holdings, LLC |
Revolver | 12/30/2025 | 8,049 | — | ||||||||||||
| Paya Holdings III, LLC |
Revolver | 6/16/2028 | 3,375 | (32 | ) | |||||||||||
| Peak Utility Services Group, Inc. |
Delayed Draw Term Loan | 3/2/2028 | 7,200 | — | ||||||||||||
| Porcelain Acquistion Corp. |
Delayed Draw Term Loan | 4/30/2022 | 33,940 | (997 | ) | |||||||||||
| Progress Residential PM Holdings, LLC |
Delayed Draw Term Loan | 2/16/2022 | 16,623 | — | ||||||||||||
| Qualus Power Services Corp. |
Delayed Draw Term Loan | 3/26/2023 | 15,545 | (194 | ) | |||||||||||
| R1 Holdings, LLC |
Delayed Draw Term Loan | 4/19/2022 | 7,898 | — | ||||||||||||
| Red River Technology, LLC |
Delayed Draw Term Loan | 5/26/2023 | 47,832 | — | ||||||||||||
| Relativity ODA, LLC |
Revolver | 5/12/2027 | 4,937 | (123 | ) | |||||||||||
| Roadsafe Holdings, Inc. |
Delayed Draw Term Loan | 10/19/2021 | 42,476 | (425 | ) | |||||||||||
| Sciens Building Solutions, LLC |
Delayed Draw Term Loan | 5/21/2027 | 36,563 | (457 | ) | |||||||||||
| Sciens Building Solutions, LLC |
Revolver | 5/21/2027 | 3,150 | (39 | ) | |||||||||||
| SEKO Global Logistics Network, LLC |
Delayed Draw Term Loan | 12/30/2022 | 15,200 | (210 | ) | |||||||||||
| SEKO Global Logistics Network, LLC |
Revolver | 12/30/2026 | 3,739 | — | ||||||||||||
| SelectQuote, Inc. |
Delayed Draw Term Loan | 11/5/2024 | 78,250 | — | ||||||||||||
| Snoopy Bidco, Inc. |
Delayed Draw Term Loan | 6/1/2023 | 98,850 | — | ||||||||||||
| SpecialtyCare, Inc. |
Delayed Draw Term Loan | 9/18/2021 | 7,139 | (107 | ) | |||||||||||
| SpecialtyCare, Inc. |
Revolver | 6/18/2026 | 5,935 | (178 | ) | |||||||||||
| Spitfire Parent, Inc. |
Delayed Draw Term Loan | 9/4/2022 | 22,132 | (221 | ) | |||||||||||
| Tailwind Colony Holding Corporation |
Delayed Draw Term Loan | 2/10/2022 | 18,493 | — | ||||||||||||
| The GI Alliance Management, LLC |
Delayed Draw Term Loan | 10/26/2022 | 67,122 | — | ||||||||||||
| Therapy Brands Holdings, LLC |
Delayed Draw Term Loan | 5/18/2028 | 3,109 | — | ||||||||||||
| TricorBraun Holdings, Inc. |
Delayed Draw Term Loan | 3/3/2028 | 2,465 | — | ||||||||||||
| Trinity Air Consultants Holdings Corp. |
Delayed Draw Term Loan | 6/29/2023 | 44,729 | — | ||||||||||||
| Trinity Air Consultants Holdings Corp. |
Revolver | 6/29/2027 | 11,629 | — | ||||||||||||
| Triple Lift, Inc. |
Revolver | 5/6/2028 | 14,295 | (286 | ) | |||||||||||
| WHCG Purchaser III, Inc. |
Delayed Draw Term Loan | 6/22/2023 | 40,653 | (250 | ) | |||||||||||
| WHCG Purchaser III, Inc. |
Revolver | 6/22/2026 | 12,486 | (407 | ) | |||||||||||
| Wireless Vision, LLC |
Delayed Draw Term Loan | 12/30/2025 | 2,100 | — | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total Unfunded Commitments |
$ | 1,364,162 | $ | (6,652 | ) | |||||||||||
|
|
|
|
|
|||||||||||||
| (8) | There are no interest rate floors on these investments. |
| (9) | The interest rate floor on these investments as of June 30, 2021 was 0.25%. |
| (10) | The interest rate floor on these investments as of June 30, 2021 was 0.50%. |
| (11) | The interest rate floor on these investments as of June 30, 2021 was 0.75%. |
| (12) | The interest rate floor on these investments as of June 30, 2021 was 1.00%. |
F-38
Blackstone Private Credit Fund
Consolidated Schedule of Investments
(in thousands)
(Unaudited)
| (13) | The interest rate floor on these investments as of June 30, 2021 was 1.25%. |
| (14) | The interest rate floor on these investments as of June 30, 2021 was 1.50%. |
| (15) | Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”), the Company is deemed to “control” a portfolio company if the Company owns more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. Under the 1940 Act, the Company is deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of June 30, 2021, the Company’s controlled/affiliated and non-controlled/affiliated investments were as follows: |
| Fair value as of December 31, 2020 |
Gross Additions |
Gross Reductions |
Change in Unrealized Gains (Losses) |
Fair value as of June 30, 2021 |
Dividend and Interest Income |
|||||||||||||||||||
| Non-Controlled/Affiliated Investments |
||||||||||||||||||||||||
| GSO DL Co-Invest EIS LP |
$ | — | $ | 401 | $ | — | $ | — | $ | 401 | $ | — | ||||||||||||
| Controlled/Affiliated Investments |
||||||||||||||||||||||||
| GSO DL Co-Invest CI LP |
— | 1,421 | — | 3 | 1,424 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | — | $ | 1,822 | $ | — | $ | 3 | $ | 1,825 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-39
Blackstone Private Credit Fund
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except per share data, percentages and as otherwise noted)
Note 1. Organization
Blackstone Private Credit Fund (together with its consolidated subsidiaries “BCRED” or the “Company”), is a Delaware statutory trust formed on February 11, 2020. The Company was formed to invest primarily in originated loans and other securities, including broadly syndicated loans, of private middle market U.S. companies. The Company is a non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company is externally managed by Blackstone Credit BDC Advisors LLC (the “Adviser”). The Adviser is an affiliate of Blackstone Alternative Credit Advisors LP (the “Administrator” and, collectively with its affiliates in the credit-focused business of Blackstone Inc. (“Blackstone”), “Blackstone Credit,” which, for the avoidance of doubt, excludes Harvest Fund Advisers LLC and Blackstone Insurance Solutions). The Company intends to elect to be treated for U.S. federal income tax purposes, and intends to qualify annually thereafter, as a regulated investment company (“RIC”) as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. Under normal circumstances, the Company will invest at least 80% of its total assets (net assets plus borrowings for investment purposes) in private credit investments (loans, bonds and other credit instruments that are issued in private offerings or issued by private companies). Under normal circumstances, the Company expects that the majority of its portfolio will be in privately originated and privately negotiated investments, predominantly direct lending to U.S. middle market companies through (i) first lien senior secured and unitranche loans and (ii) second lien, unsecured, subordinated or mezzanine loans and structured credit, as well as broadly syndicated loans (for which the Company may serve as an anchor investor), club deals (generally investments made by a small group of investment firms) and other debt and equity securities (the investments described in this sentence, collectively, “Private Credit”). To a lesser extent, the Company may also dynamically invest in publicly traded securities of large corporate issuers (“Opportunistic Credit”). The Company expects that the Opportunistic Credit investments will generally be liquid, and may be used for the purposes of maintaining liquidity for the Company’s share repurchase program and cash management, while also presenting an opportunity for attractive investment returns.
The Company offers on a continuous basis up to $5.0 billion of common shares of beneficial interest pursuant to an offering registered with the Securities and Exchange Commission. The Company offers to sell any combination of three classes of common shares, Class S shares, Class D shares and Class I shares, with a dollar value up to the maximum offering amount. The share classes have different ongoing shareholder servicing and/or distribution fees. The initial purchase price for the common shares of beneficial interest was $25.00 per share. Thereafter, the purchase price per share for each class of common shares equals the net asset value (“NAV”) per share, as of the effective date of the monthly share purchase date. Blackstone Securities Partners L.P. (the “Intermediary Manager”) will use its best efforts to sell shares, but is not obligated to purchase or sell any specific amount of shares in the offering. The Company also engages in private offerings of its common shares.
The Company accepted purchase orders and held investors’ funds in an interest-bearing escrow account until the Company received purchase orders for at least $100.0 million, excluding shares purchased by the Adviser, its affiliates and trustees and officers, in any combination of purchases of Class S shares, Class D shares and Class I shares, and the Company’s Board of Trustees (the “Board”) authorized the release of funds in the escrow account. As of January 7, 2021, the Company had satisfied the minimum offering requirement and commenced its operations after the Company’s Board had authorized the release of proceeds from escrow. As of such date, the Company issued and sold 32,560,141 shares (consisting of 2,750,840 Class S shares, and
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29,809,301 Class I shares at an offering price of $25.00 per share; no Class D shares were issued or sold as of such date), and the escrow agent released net proceeds of approximately $814.0 million to the Company as payment for such shares.
The six months ended June 30, 2021 represents the period from January 7, 2021 (commencement of operations) to June 30, 2021.
Note 2. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with U.S. GAAP. As an investment company, the Company applies the accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies (“ASC 946”) issued by the Financial Accounting Standards Board (“FASB”). U.S. GAAP for an investment company requires investments to be recorded at fair value.
The interim consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 6 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of financial statements for the interim period presented, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2021. All intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Such amounts could differ from those estimates and such differences could be material. Assumptions and estimates regarding the valuation of investments involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements. Actual results may ultimately differ from those estimates.
Consolidation
As provided under ASC 946, the Company will not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiaries.
As of June 30, 2021, the Company’s consolidated subsidiaries were BCRED Bard Peak Funding, LLC (“Bard Peak Funding”), BCRED Castle Peak Funding LLC (“Castle Peak Funding”), BCRED Denali Peak Funding LLC (“Denali Peak Funding”), BCRED Maroon Peak Funding LLC (“Maroon Peak Funding”), BCRED Twin Peaks LLC (“Twin Peaks”), BCRED Siris Peak Funding LLC (“Siris Peak Funding”), BCRED Summit Peak Funding LLC (“Summit Peak Funding”), BCRED Bushnell Peak Funding LLC (“Bushnell Peak Funding”), BCRED Middle Peak Funding LLC (“Middle Peak Funding”) and BCRED Granite Peak Funding LLC (“Granite Peak Funding”), BCRED Bison Peak Funding LLC (“Bison Peak”), BCRED Investments LLC and BCRED BSL CLO 2021-1, LLC.
As of December 31, 2020, amounts presented in the financial statements are unconsolidated as the Company had no subsidiaries.
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Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and highly liquid investments, such as money market funds, with original maturities of three months or less. Cash and cash equivalents are carried at cost, which approximates fair value. The Company deposits its cash and cash equivalents with financial institutions and, at times, may exceed the Federal Deposit Insurance Corporation insured limit.
Investments
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.
The Company is required to report its investments for which current market values are not readily available at fair value. The Company values its investments in accordance with FASB ASC 820, Fair Value Measurements (“ASC 820”), which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. See “– Note 5. Fair Value Measurements.”
Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. The Company utilizes mid-market pricing (i.e., mid-point of average bid and ask prices) to value these investments. These market quotations are obtained from independent pricing services, if available; otherwise from at least two principal market makers or primary market dealers. To assess the continuing appropriateness of pricing sources and methodologies, the Adviser regularly performs price verification procedures and issues challenges as necessary to independent pricing services or brokers, and any differences are reviewed in accordance with the valuation procedures. The Adviser does not adjust the prices unless it has a reason to believe market quotations are not reflective of the fair value of an investment. Examples of events that would cause market quotations to not reflect fair value could include cases when a security trades infrequently or not at all, causing a quoted purchase or sale price to become stale, or in the event of a “fire sale” by a distressed seller. All price overrides require approval from the Board.
Where prices or inputs are not available or, in the judgment of the Board, not reliable, valuation techniques based on the facts and circumstances of the particular investment will be utilized. Securities that are not publicly traded or for which market prices are not readily available are valued at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, the Audit Committee of the Board (the “Audit Committee”) and independent valuation firms engaged on the recommendation of the Adviser and at the direction of the Board. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.
With respect to the quarterly valuation of investments, the Company’s Board undertake a multi-step valuation process each quarter in connection with determining the fair value of our investments for which reliable market quotations are not readily available as of the last calendar day of each quarter, which includes, among other procedures, the following:
| • | The valuation process begins with each investment being preliminarily valued by the Adviser’s valuation team in conjunction with the Adviser’s investment professionals responsible for each portfolio investment; |
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| • | In addition, independent valuation firms engaged by the Board prepare quarter-end valuations of such investments except de minimis investments, as determined by the Adviser. The independent valuation firms provide a final range of values on such investments to the Board and the Adviser. The independent valuation firms also provide analyses to support their valuation methodology and calculations; |
| • | The Adviser’s Valuation Committee reviews each valuation recommendation to confirm they have been calculated in accordance with the valuation policy and compares such valuations to the independent valuation firms’ valuation ranges to ensure the Adviser’s valuations are reasonable; |
| • | The Adviser’s Valuation Committee makes valuation recommendations to the Audit Committee; |
| • | The Audit Committee reviews the valuation recommendations made by the Adviser’s Valuation Committee, including the independent valuation firms’ quarterly valuations, and once approved, recommends them for approval by the Board; and |
| • | The Board reviews the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Audit Committee, the Adviser’s Valuation Committee and, where applicable, the independent valuation firms and other external service providers. |
When the Company determines its NAV as of the last day of a month that is not also the last day of a calendar quarter, the Company intends to update the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, pursuant to authority delegated by the Board, the Adviser’s valuation team will generally value such assets at the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Adviser determines such a change has occurred with respect to one or more investments, the Adviser will determine whether to update the value for each relevant investment using a range of values from an independent valuation firm, where applicable, in accordance with the Company’s valuation policy, pursuant to authority delegated by the Board. Additionally, the Adviser may otherwise determine to update the most recent quarter end valuation of an investment without reliable market quotations that the Adviser considers to be material to the Company using a range of values from an independent valuation firm.
As part of the valuation process, the Board will take into account relevant factors in determining the fair value of our investments for which reliable market quotations are not readily available, many of which are loans, including and in combination, as relevant, of: (i) the estimated enterprise value of a portfolio company, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, (v) a comparison of the portfolio company’s securities to any similar publicly traded securities, and (vi) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Board or its delegates will consider whether the pricing indicated by the external event corroborates its valuation.
The Board has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of the Company’s portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board may reasonably rely on that assistance. However, the Board is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company’s valuation policy and a consistently applied valuation process.
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Receivables/Payables From Investments Sold/Purchased
Receivables/payables from investments sold/purchased consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date. As of June 30, 2021, the Company had $255.5 million of receivables for investments sold. As of June 30, 2021, the Company had $2,289.8 million of payables for investments purchased.
Derivative Instruments
The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result the Company presents changes in fair value through current period gains or losses.
In the normal course of business, the Company has commitments and risks resulting from its investment transactions, which may include those involving derivative instruments. Derivative instruments are measured in terms of the notional contract amount and derive their value based upon one or more underlying instruments. While the notional amount gives some indication of the Company’s derivative activity, it generally is not exchanged, but is only used as the basis on which interest and other payments are exchanged. Derivative instruments are subject to various risks similar to non-derivative instruments including market, credit, liquidity, and operational risks. The Company manages these risks on an aggregate basis as part of its risk management process.
Forward Purchase Agreement
The Company was party to a forward purchase agreement (the “Facility Agreement”, defined in Note 7) whereby it was obligated to purchase certain assets that were acquired by the Financing Provider, subject to certain contingencies.
Forward purchase agreements are recognized at fair value through current period gains or losses on the date on which the contract is entered into and are subsequently re-measured at fair value. All forward purchase agreements are carried as assets when fair value is positive and as liabilities when fair value is negative. A forward purchase agreement is derecognized when the obligation specified in the contract is discharged, canceled or expired.
Foreign Currency Transactions
Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates effective on the last business day of the period; and (ii) purchases and sales of investments, borrowings and repayments of such borrowings, income, and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on the transaction dates.
The Company includes net changes in fair values on investments held resulting from foreign exchange rate fluctuations in translation of assets and liabilities in foreign currencies on the Consolidated Statements of Operations, if any. Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.
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Revenue Recognition
Interest Income
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortizations of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including loan origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period. For the three and six months ended June 30, 2021, the Company recorded $0.2 million and $1.1 million, respectively, in non-recurring interest income (e.g. prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts and ticking fees).
PIK Income
The Company has loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statements of Operations. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest is generally reversed through interest income. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to shareholders in the form of dividends, even though the Company has not yet collected cash. For the three and six months ended June 30, 2021, the Company recorded PIK income of $0.6 million and $0.7 million, respectively.
Dividend Income
Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.
Fee Income
The Company may receive various fees in the ordinary course of business such as structuring, consent, waiver, amendment, syndication and other miscellaneous fees as well as fees for managerial assistance rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. For the three and six months ended June 30, 2021, the Company recorded fee income of $8.1 million and $8.2 million, respectively.
Non-Accrual Income
Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
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Organization and Offering Expenses
Costs associated with the organization of the Company are expensed as incurred. These expenses consist primarily of legal fees and other costs of organizing the Company.
Costs associated with the offering of the Company’s shares are capitalized as “deferred offering costs” on the Consolidated Statements of Assets and Liabilities and amortized over a twelve-month period from incurrence. These expenses consist primarily of legal fees and other costs incurred in connection with the Company’s continuous offering.
For the three and six months ended June 30, 2021, the Company accrued organization costs of $0.0 million and $1.1 million, respectively. For the three and six months ended June 30, 2021, the Company accrued offering costs of $0.8 million and $1.6 million, respectively.
Deferred Financing Costs and Debt Issuance Costs
Deferred financing and debt issuance costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. These expenses are deferred and amortized into interest expense over the life of the related debt instrument using the straight-line method. Deferred financing costs related to revolving credit facilities are presented separately as an asset on the Company’s Statements of Assets and Liabilities. Debt issuance costs related to any issuance of installment debt or notes (including the 2021-1 Notes, defined in Note 6) are presented net against the outstanding debt balance of the related security.
Income Taxes
The Company has elected to be treated as a BDC under the 1940 Act. The Company also intends to elect to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by the Company would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of the sum of (i) its “investment company taxable income” for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income.
In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (iii) any income realized, but not distributed, in prior years. For this purpose, however, any
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ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.
For the three and six months ended June 30, 2021, the Company did not incur any U.S. federal exercise tax.
Allocation of Income, Expenses, Gains and Losses
Income, expenses (other than those attributable to a specific class), gains and losses are allocated to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Distributions
To the extent that the Company has taxable income available, the Company intends to make monthly distributions to its shareholders. Distributions to shareholders are recorded on the record date. All distributions will be paid at the discretion of the Board and will depend on the Company’s earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time. Although the gross distribution per share is generally equivalent for each share class, the net distribution for each share class is reduced for any class specific expenses, including distribution and shareholder servicing fees, if any.
Recent Accounting Pronouncements
In March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued guidance providing optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR (London Interbank Offered Rate) or other interbank-offered based reference rates as of the end of December 2021. Management continues to evaluate the impact of the guidance and may apply other elections, as applicable, as the expected market transition to alternative reference rates evolves. The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the six months ended June 30, 2021.
Note 3. Fees, Expenses, Agreements and Related Party Transactions
Investment Advisory Agreement
On October 5, 2020, the Company entered into an investment advisory agreement with the Adviser (the “Investment Advisory Agreement”), pursuant to which the Adviser manages the Company on a day-to-day basis. The Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring the Company’s investments and monitoring its investments and portfolio companies on an ongoing basis.
The Investment Advisory Agreement is effective for an initial two-year term and will remain in effect from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a majority of the Company’s outstanding voting securities and, in each case, a majority of the independent trustees. The Company may terminate the Investment Advisory Agreement, without payment of any penalty, upon 60 days’ written notice. The Investment Advisory Agreement will automatically terminate in the event of its assignment within the meaning of the 1940 Act and related SEC guidance and interpretations.
The Company pays the Adviser a fee for its services under the Investment Advisory Agreement consisting of two components: a management fee and an incentive fee. The cost of both the management fee and the incentive fee will ultimately be borne by the shareholders. Substantial additional fees and expenses may also be charged by the Administrator to the Company, which is an affiliate of the Adviser. The Adviser has agreed to waive the management fee and incentive fee based on income through July 7, 2021.
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Base Management Fee
The management fee is payable monthly in arrears at an annual rate of 1.25% of the value of the Company’s net assets as of the beginning of the first calendar day of the applicable month. For purposes of the Investment Advisory Agreement, net assets means the Company’s total assets less liabilities determined on a consolidated basis in accordance with GAAP. The management fee calculation will be prorated for any partial months, including the first calendar month in which the Company commenced operations.
For the three and six months ended June 30, 2021, base management fees representing $12.6 million and $17.0 million, respectively, were fully waived. As of June 30, 2021 and December 31, 2020, there were no amounts payable to the Adviser relating to management fees.
Incentive Fees
The incentive fee consists of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on a percentage of income and a portion is based on a percentage of capital gains, each as described below.
| (i) | Income based incentive fee |
The portion based on the Company’s income is based on Pre-Incentive Fee Net Investment Income Returns. “Pre-Incentive Fee Net Investment Income Returns” means, as the context requires, either the dollar value of, or percentage rate of return on the value of net assets at the end of the immediate preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that are received from portfolio companies) accrued during the calendar quarter, minus operating expenses accrued for the quarter (including the management fee, expenses payable under the Administration Agreement entered into between the Company and the Administrator, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred shares, but excluding the incentive fee and any shareholder servicing and/or distribution fees). Pre-Incentive Fee Net Investment Income Returns include, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that has not yet been received in cash. Pre-Incentive Fee Net Investment Income Returns do not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The impact of expense support payments and recoupments are also excluded from Pre-Incentive Fee Net Investment Income Returns. Pre-Incentive Fee Net Investment Income Returns, expressed as a rate of return on the value of the Company’s net assets at the end of the immediate preceding quarter, is compared to a “hurdle rate” of return of 1.25% per quarter (5.0% annualized).
The Company pays its Adviser an income based incentive fee quarterly in arrears with respect to the Company’s Pre-Incentive Fee Net Investment Income Returns in each calendar quarter as follows:
| • | No incentive fee based on Pre-Incentive Fee Net Investment Income Returns in any calendar quarter in which Pre-Incentive Fee Net Investment Income Returns do not exceed the hurdle rate of 1.25% per quarter (5.0% annualized); |
| • | 100% of the dollar amount of Pre-Incentive Fee Net Investment Income Returns with respect to that portion of such Pre-Incentive Fee Net Investment Income Returns, if any, that exceeds the hurdle rate but is less than a rate of return of 1.43% (5.72% annualized). The Company refers to this portion of the Pre-Incentive Fee Net Investment Income Returns (which exceeds the hurdle rate but is less than 1.43%) as the “catch-up.” This “catch-up” is meant to provide the Adviser with approximately 12.5% of Pre-Incentive Fee Net Investment Income Returns as if a hurdle rate did not apply if this net investment income exceeds 1.43% in any calendar quarter; and |
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| • | 12.5% of the dollar amount of Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.43% (5.72% annualized). |
These calculations are prorated for any period of less than three months, including the first quarter the Company commenced operations, and are adjusted for any share issuances or repurchases during the relevant quarter.
| (ii) | Capital gains incentive fee |
The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year in an amount equal to 12.5% of cumulative realized capital gains from inception through the end of such calendar, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains as calculated in accordance with U.S. GAAP.
For the three and six months ended June 30, 2021, the Company accrued income based incentive fees of $10.9 million and $13.8 million, respectively, which were fully waived. As of June 30, 2021 and December 31, 2020, there were no amounts payable to the Adviser for the income based incentive fees. For the three and six months ended June 30, 2021 the Company accrued capital gains incentive fees of $6.5 million and $9.3 million, respectively, none of which was payable as of June 30, 2021 under the Investment Advisory Agreement.
Administration Agreement
On October 5, 2020, the Company entered into an administration agreement (the “Administration Agreement”) with the Administrator. Under the terms of the Administration Agreement, the Administrator provides, or oversees the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of the Company’s other service providers), preparing reports to shareholders and reports filed with the United States Securities and Exchange Commission (the “SEC”) and other regulators, preparing materials and coordinating meetings of the Company’s Board, managing the payment of expenses, the payment of receipt of funds for investments and the performance of administrative and professional services rendered by others and providing office space, equipment and office services. The Company will reimburse the Administrator for the costs and expenses incurred by the Administrator in performing its obligations under the Administration Agreement. Such reimbursement will include the Company’s allocable portion of compensation, overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) the Company’s chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, operations and other non-investment professionals at the Administrator that perform duties for the Company; and (iii) any internal audit group personnel of Blackstone or any of its affiliates, subject to the limitations described in Investment Advisory and Administration Agreements. In addition, pursuant to the terms of the Administration Agreement, the Administrator may delegate its obligations under the Administration Agreement to an affiliate or to a third party and the Company will reimburse the Administrator for any services performed for the Company by such affiliate or third party. The Administrator hired a sub-administrator to assist in the provision of administrative services. The sub-administrator will receive compensation for its sub-administrative services under a sub-administration agreement.
Unless earlier terminated as described below, the Administration Agreement is effective for an initial two-year term and will remain in effect from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a majority of the Company’s outstanding voting securities and, in each case, a majority of the independent trustees. The Company may terminate the Administration Agreement, without payment of any penalty, upon 60 days’ written notice. The Investment Advisory Agreement will automatically terminate in the event of its assignment within the meaning of the 1940 Act and related SEC guidance and interpretations.
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For the three and six months ended June 30, 2021, the Company incurred $0.3 million and $0.6 million, respectively, in expenses under the Administration Agreement, which were recorded in “administrative service expenses” in the Company’s Consolidated Statements of Operations. As of June 30, 2021 and December 31, 2020, $0.4 million and $0.0 million, respectively, was unpaid and included in “due to affiliates” in the Consolidated Statements of Assets and Liabilities, respectively.
Sub-Administration Agreement
On October 5, 2020, the Administrator entered into a sub-administration agreement (the “Sub Administration Agreement”) with State Street Bank and Trust Company. The sub-administrator will receive compensation for its sub-administrative services under the Sub-Administration Agreement.
Intermediary Manager Agreement
On October 5, 2020, the Company entered into an intermediary manager agreement (the “Intermediary Manager Agreement”) with Blackstone Securities Partners L.P. (the “Intermediary Manager”), an affiliate of the Adviser. Pursuant to the Intermediary Manager Agreement, no upfront transaction fee will be paid with respect to Class S shares, Class D shares or Class I shares, however, if shareholders purchase Class S shares or Class D shares through certain financial intermediaries, they may directly charge shareholders transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to a 1.5% cap on NAV for Class D shares and 3.5% cap on NAV for Class S shares. Under the terms of the Intermediary Manager Agreement, the Intermediary Manager will serve as the intermediary manager for the Company’s public offering of its common shares. The Intermediary Manager will be entitled to receive shareholder servicing and/or distribution fees monthly in arrears at an annual rate of 0.85% and 0.25% of the value of the Company’s net assets attributable to Class S and Class D shares, respectively, as of the beginning of the first calendar day of the month. No shareholder servicing and/or distribution fees will be paid with respect to Class I. The shareholder servicing and/or distribution fees will be payable to the Intermediary Manager, but the Intermediary Manager anticipates that all or a portion of the shareholder servicing fees and/or distribution fees will be retained by, or reallowed (paid) to, participating brokers.
The Company will cease paying the shareholder servicing and/or distribution fees on the Class S shares and Class D shares on the earlier to occur of the following: (i) a listing of Class I shares, (ii) a merger or consolidation with or into another entity, or the sale or other disposition of all or substantially all of the Company’s assets or (iii) the date following the completion of the primary portion of the offering on which, in the aggregate, underwriting compensation from all sources in connection with the offering, including the shareholder servicing and/or distribution fees and other underwriting compensation, is equal to 10% of the gross proceeds from the primary offering. In addition, consistent with the exemptive relief allowing the Company to offer multiple classes of shares, at the end of the month in which the Intermediary Manager in conjunction with the transfer agent determines that total transaction or other fees, including upfront placement fees or brokerage commissions, and shareholder servicing and/or distribution fees paid with respect to the shares held in a shareholder’s account would exceed, in the aggregate, 10% of the gross proceeds from the sale of such shares (or a lower limit as determined by the Intermediary Manager or the applicable selling agent), the Company will cease paying the shareholder servicing and/or distribution fee on the Class S shares and Class D shares in such shareholder’s account. Compensation paid with respect to the shares in a shareholder’s account will be allocated among each share such that the compensation paid with respect to each individual share will not exceed 10% of the offering price of such share. The Company may modify this requirement in a manner that is consistent with applicable exemptive relief. At the end of such month, the Class S shares or Class D shares in such shareholder’s account will convert into a number of Class I shares (including any fractional shares), with an equivalent aggregate NAV as such Class S or Class D shares.
The Intermediary Manager is a broker-dealer registered with the SEC is a member of the Financial Industry Regulatory Authority (“FINRA”).
F-50
The Intermediary Manager Agreement may be terminated at any time, without the payment of any penalty, by vote of a majority of the Company’s trustees who are not “interested persons”, as defined in the 1940 Act, of the Company and who have no direct or indirect financial interest in the operation of the Company’s distribution plan or the Intermediary Manager Agreement or by vote a majority of the outstanding voting securities of the Company, on not more than 60 days’ written notice to the Intermediary Manager or the Adviser. The Intermediary Manager Agreement will automatically terminate in the event of its assignment, as defined in the 1940 Act.
Distribution and Servicing Plan
On October 5, 2020, the Board approved a distribution and servicing plan (the “Distribution and Servicing Plan”). The following table shows the shareholder servicing and/or distribution fees the Company pays the Intermediary Manager with respect to the Class S, Class D and Class I on an annualized basis as a percentage of the Company’s NAV for such class.
| Shareholder Servicing and/or Distribution Fee as a % of NAV |
||||
| Class S shares |
0.85 | % | ||
| Class D shares |
0.25 | % | ||
| Class I shares |
— | |||
The shareholder servicing and/or distribution fees is paid monthly in arrears , calculated using the NAV of the applicable class as of the beginning of the first calendar day of the month and subject to FINRA and other limitations on underwriting compensation.
The Intermediary Manager will reallow (pay) all or a portion of the shareholder servicing and/or distribution fees to participating brokers and servicing brokers for ongoing shareholder services performed by such brokers, and will waive shareholder servicing and/or distribution fees to the extent a broker is not eligible to receive it for failure to provide such services. Because the shareholder servicing and/or distribution fees with respect to Class S shares and Class D shares are calculated based on the aggregate NAV for all of the outstanding shares of each such class, it reduces the NAV with respect to all shares of each such class, including shares issued under the Company’s distribution reinvestment plan.
Eligibility to receive the shareholder servicing and/or distribution fee is conditioned on a broker providing the following ongoing services with respect to the Class S or Class D shares: assistance with recordkeeping, answering investor inquiries regarding the Company, including regarding distribution payments and reinvestments, helping investors understand their investments upon their request, and assistance with share repurchase requests. If the applicable broker is not eligible to receive the shareholder servicing and/or distribution fee due to failure to provide these services, the Intermediary Manager will waive the shareholder servicing fee and/or distribution that broker would have otherwise been eligible to receive. The shareholder servicing and/or distribution fees are ongoing fees that are not paid at the time of purchase.
For the three and six months ended June 30, 2021, the Company accrued distribution and shareholder servicing fees of $1.8 million and $2.2 million, respectively, which were attributable to Class S shares. For the three and six months ended June 30, 2021, the Company accrued distribution and shareholder servicing fees of $0.0 million and $0.0 million, respectively, which were attributable to Class D shares.
Expense Support and Conditional Reimbursement Agreement
On October 5, 2020, the Company entered into an expense support and conditional reimbursement agreement (the “Expense Support Agreement”) with the Adviser. The Adviser may elect to pay certain
F-51
Company expenses on the Company’s behalf (each, an “Expense Payment”), provided that no portion of the payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Company. Any Expense Payment that the Adviser has committed to pay must be paid by the Adviser to the Company in any combination of cash or other immediately available funds no later than forty-five days after such commitment was made in writing, and/or offset against amounts due from the Company to the Adviser or its affiliates.
Following any calendar month in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to the Company’s shareholders based on distributions declared with respect to record dates occurring in such calendar month (the amount of such excess being hereinafter referred to as “Excess Operating Funds”), the Company shall pay such Excess Operating Funds, or a portion thereof, to the Adviser until such time as all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar month have been reimbursed. Any payments required to be made by the Company shall be referred to herein as a “Reimbursement Payment.” “Available Operating Funds” means the sum of (i) the Company’s net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) the Company’s net capital gains (including the excess of net long-term capital gains over net short-term capital losses) and (iii) dividends and other distributions paid to the Company on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).
The Company’s obligation to make a Reimbursement Payment shall automatically become a liability of the Company on the last business day of the applicable calendar month, except to the extent the Adviser has waived its right to receive such payment for the applicable month.
The following table presents a summary of Expense Payments and the related Reimbursement Payments since the Company’s commencement of operations:
| For the Month Ended |
Expense Payments by Adviser |
Reimbursement Payments to Adviser |
Unreimbursed Expense Payments |
|||||||||
| $ | 1,608 | $ | (1,608 | ) | $ | — | ||||||
| 591 | (591 | ) | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 2,199 | $ | (2,199 | ) | $ | — | |||||
|
|
|
|
|
|
|
|||||||
For the three and six months ended June 30, 2021, the Adviser made Expense Payments in the amount of $0.0 million and $2.2 million, respectively. For the three and six months ended June 30, 2021, there were Reimbursement Payments made to the Adviser of $2.2 million and $2.2 million, respectively.
Escrow Agreement
On October 5, 2020, the Company entered into an escrow agreement (the “Escrow Agreement”) with UMB Bank, N.A. The Company received purchase orders and held investors’ funds in an interest-bearing escrow account until it received purchase orders for at least $100 million (excluding any shares purchased by the Adviser, its affiliates and the Company’s trustees and officers but including any shares purchased in any private offerings), and the Board authorized the release of the escrowed purchase order proceeds to the Company, which occurred on January 7, 2021.
F-52
Note 4. Investments
The composition of the Company’s investment portfolio at cost and fair value was as follows:
| June 30, 2021 | ||||||||||||
| Cost | Fair Value | % of Total Investments at Fair Value |
||||||||||
| First lien debt |
$ | 10,095,919 | $ | 10,147,833 | 89.69 | % | ||||||
| Second lien debt |
1,049,026 | 1,065,350 | 9.41 | |||||||||
| Unsecured debt |
45,757 | 45,757 | 0.40 | |||||||||
| Equity investments |
56,875 | 56,877 | 0.50 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 11,247,577 | $ | 11,315,817 | 100.00 | % | ||||||
|
|
|
|
|
|
|
|||||||
The industry composition of investments at fair value was as follows:
| June 30, 2021 | ||||
| Aerospace & Defense |
1.76 | % | ||
| Air Freight & Logistics |
4.89 | |||
| Airlines |
0.55 | |||
| Auto Components |
0.78 | |||
| Beverages |
0.28 | |||
| Building Products |
5.07 | |||
| Capital Markets |
0.44 | |||
| Chemicals |
1.22 | |||
| Commercial Services & Supplies |
7.77 | |||
| Communications Equipment |
0.10 | |||
| Construction Materials |
0.23 | |||
| Construction & Engineering |
2.34 | |||
| Containers & Packaging |
1.40 | |||
| Distributors |
1.07 | |||
| Diversified Consumer Services |
0.90 | |||
| Diversified Financial Services |
2.40 | |||
| Diversified Telecommunication Services |
0.43 | |||
| Electrical Equipment |
0.16 | |||
| Electronic Equipment, Instruments & Components |
1.24 | |||
| Electric Utilities |
0.37 | |||
| Energy Equipment & Services |
0.46 | |||
| Entertainment |
0.11 | |||
| Food Products |
0.27 | |||
| Health Care Equipment & Supplies |
0.75 | |||
| Health Care Providers & Services |
11.33 | |||
| Health Care Technology |
1.86 | |||
| Hotels, Restaurants & Leisure |
1.56 | |||
| Household Durables |
1.20 | |||
| Independent Power and Renewable Electricity Producers |
0.22 | |||
| Industrial Conglomerates |
0.81 | |||
| Insurance |
2.81 | |||
| Interactive Media & Services |
0.78 | |||
| Internet & Direct Marketing Retail |
1.82 | |||
| IT Services |
3.76 | |||
| Leisure Products |
0.41 | |||
F-53
| June 30, 2021 | ||||
| Life Sciences Tools & Services |
0.44 | |||
| Machinery |
1.01 | |||
| Marine |
0.02 | |||
| Media |
1.07 | |||
| Metals & Mining |
0.32 | |||
| Oil, Gas & Consumable Fuels |
0.32 | |||
| Personal Products |
0.17 | |||
| Pharmaceuticals |
0.63 | |||
| Professional Services |
5.50 | |||
| Real Estate Management & Development |
1.71 | |||
| Road & Rail |
0.27 | |||
| Software |
17.96 | |||
| Specialty Retail |
0.57 | |||
| Technology Hardware, Storage & Peripherals |
0.51 | |||
| Textiles, Apparel & Luxury Goods |
0.61 | |||
| Trading Companies & Distributors |
2.33 | |||
| Transportation Infrastructure |
4.75 | |||
| Wireless Telecommunication Services |
0.26 | |||
|
|
|
|||
| Total |
100.00 | % | ||
|
|
|
|||
The geographic composition of investments at cost and fair value was as follows:
| June 30, 2021 | ||||||||||||||||
| Cost | Fair Value | % of Total Investments at Fair Value |
Fair Value as % of Net Assets |
|||||||||||||
| United States |
$ | 10,818,846 | $ | 10,881,143 | 96.16 | % | 220.09 | % | ||||||||
| Canada |
242,610 | 246,350 | 2.18 | 4.98 | ||||||||||||
| Europe |
186,121 | 188,324 | 1.66 | 3.81 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 11,247,577 | $ | 11,315,817 | 100.00 | % | 228.88 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
As of June 30, 2021, no loans in the portfolio were on non-accrual status.
As of June 30, 2021, on a fair value basis, approximately 98.4% of our performing debt investments bore interest at a floating rate and approximately 1.6% of our performing debt investments bore interest at a fixed rate.
Note 5. Fair Value Measurements
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date.
The fair value hierarchy under ASC 820 prioritizes the inputs to valuation methodology used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities. The three levels of the fair value hierarchy are as follows:
| • | Level 1: Inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including equities and derivatives, listed in active markets. |
F-54
| • | Level 2: Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities and certain over-the-counter derivatives where the fair value is based on observable inputs. |
| • | Level 3: Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include debt and equity investments in privately held entities, collateralized loan obligations (“CLOs”) and certain over-the-counter derivatives where the fair value is based on unobservable inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurs.
In addition to using the above inputs in investment valuations, the Company applies the valuation policy approved by its Board that is consistent with ASC 820. Consistent with the valuation policy, the Company evaluates the source of the inputs, including any markets in which its investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When an investment is valued based on prices provided by reputable dealers or pricing services (that is, broker quotes), the Company subjects those prices to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment.
In the absence of independent, reliable market quotes, an enterprise value analysis is typically performed to determine the value of equity investments, control debt investments and non-control debt investments that are credit-impaired, and to determine if debt investments are credit impaired. Enterprise value (“EV”) means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. When an investment is valued using an EV analysis, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e. “waterfall” allocation).
If debt investments are credit-impaired, which occurs when there is insufficient coverage under the EV analysis through the respective investment’s position in the capital structure, the Adviser uses the enterprise value “waterfall” approach or a recovery method (if a liquidation or restructuring is deemed likely) to determine fair value. For debt investments that are not determined to be credit-impaired, the Adviser uses a market interest rate yield analysis (discussed below) to determine fair value.
The Adviser will generally utilize approaches including the market approach, the income approach or both approaches, as appropriate, when calculating EV. The primary method for determining EV for non-control investments, and control investments without reliable projections, uses a multiple analysis whereby appropriate multiples are applied to the portfolio company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) or another key financial metric (e.g. such as revenues, cash flows or net income) (“Performance Multiple”). Performance Multiples are typically determined based upon a review of publicly traded comparable companies and market comparable transactions, if any. The second method for determining EV (and primary method for control investments with reliable projections) uses a discounted cash flow analysis whereby future expected cash flows and the anticipated terminal value of the portfolio company are discounted to determine a present value using estimated discount rates. The income approach is generally used when the Adviser has visibility into the long term projected cash flows of a portfolio company, which is more common with control investments.
F-55
Subsequently, for non-control debt investments that are not credit-impaired, and where there is an absence of available market quotations, fair value is determined using a yield analysis. To determine fair value using a yield analysis, the expected cash flows are projected based on the contractual terms of the debt security and discounted back to the measurement date based on a market yield. A market yield is determined based upon an assessment of current and expected market yields for similar investments and risk profiles. The Company considers the current contractual interest rate, the maturity and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the enterprise value of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable. The fair value of loans with call protection is generally capped at par plus applicable prepayment premium in effect at the measurement date.
The following table presents the fair value hierarchy of financial instruments:
| June 30, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| First lien debt |
$ | — | $ | 4,801,566 | $ | 5,346,267 | $ | 10,147,833 | ||||||||
| Second lien debt |
— | 611,863 | 453,487 | 1,065,350 | ||||||||||||
| Unsecured debt |
— | 45,757 | — | 45,757 | ||||||||||||
| Equity investments |
— | — | 56,877 | 56,877 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | — | $ | 5,459,186 | $ | 5,856,631 | $ | 11,315,817 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following table presents change in the fair value of financial instruments for which Level 3 inputs were used to determine the fair value:
| Three Months Ended June 30, 2021 | ||||||||||||||||||||
| First Lien Debt |
Second Lien Debt |
Equity | Total Investments |
Forward Purchase Obligation |
||||||||||||||||
| Fair value, beginning of period |
$ | 2,566,565 | $ | 179,588 | $ | 7,360 | $ | 2,753,513 | $ | 1,910 | ||||||||||
| Purchases of investments |
3,015,062 | 320,265 | 49,514 | 3,384,841 | — | |||||||||||||||
| Proceeds from principal repayments and sales of investments |
(88,599 | ) | — | — | (88,599 | ) | (2,248 | ) | ||||||||||||
| Accretion of discount/amortization of premium |
3,269 | 95 | — | 3,364 | — | |||||||||||||||
| Net realized gain (loss) |
(122 | ) | — | — | (122 | ) | 2,248 | |||||||||||||
| Net change in unrealized appreciation (depreciation) |
16,679 | 5,371 | 3 | 22,053 | (1,910 | ) | ||||||||||||||
| Transfers into Level 3 (1) |
82,297 | — | — | 82,297 | — | |||||||||||||||
| Transfers out of Level 3 (1) |
(248,884 | ) | (51,832 | ) | — | (300,716 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Fair value, end of period |
$ | 5,346,267 | $ | 453,487 | $ | 56,877 | $ | 5,856,631 | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net change in unrealized appreciation (depreciation) included in earnings related to financial instruments still held as of June 30, 2021 |
$ | 16,489 | $ | 5,371 | $ | 3 | 21,863 | $ | — | |||||||||||
F-56
| Six Months Ended June 30, 2021 | ||||||||||||||||||||
| First Lien Debt |
Second Lien Debt |
Equity | Total Investments |
Forward Purchase Obligation |
||||||||||||||||
| Fair value, beginning of period |
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Purchases of investments |
5,392,982 | 444,576 | 56,874 | 5,894,432 | — | |||||||||||||||
| Proceeds from principal repayments and sales of investments |
(73,005 | ) | — | — | (73,005 | ) | (3,709 | ) | ||||||||||||
| Accretion of discount/amortization of premium |
4,657 | 106 | — | 4,763 | — | |||||||||||||||
| Net realized gain (loss) |
(64 | ) | — | — | (64 | ) | 3,709 | |||||||||||||
| Net change in unrealized appreciation (depreciation) |
21,697 | 8,805 | 3 | 30,505 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Fair value, end of period |
$ | 5,346,267 | $ | 453,487 | $ | 56,877 | $ | 5,856,631 | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net change in unrealized appreciation (depreciation) included in earnings related to financial instruments still held as of June 30, 2021 |
$ | 21,697 | $ | 8,805 | $ | 3 | 30,505 | $ | — | |||||||||||
| (1) | For the three and six months ended June 30, 2021, transfers into or out of Level 3 were primarily due to decreased or increased price transparency, respectively. |
The following table presents quantitative information about the significant unobservable inputs of the Company’s Level 3 financial instruments. The table is not intended to be all-inclusive but instead captures the significant unobservable inputs relevant to the Company’s determination of fair value.
| June 30, 2021 | ||||||||||||||||||||
| Fair Value | Valuation |
Unobservable |
Range | |||||||||||||||||
| Low | High | Weighted Average (1) |
||||||||||||||||||
| Investments in first lien debt |
$ | 4,649,307 | Yield analysis |
Discount rate |
4.02 | % | 11.33 | % | 7.48 | % | ||||||||||
| 696,960 | Market quotations |
Broker quoted price |
96.25 | 101.13 | 99.41 | |||||||||||||||
|
|
|
|||||||||||||||||||
| 5,346,267 | ||||||||||||||||||||
| Investments in second lien debt |
120,026 | Yield analysis |
Discount rate |
9.42 | % | 10.59 | % | 10.03 | % | |||||||||||
| 333,461 | Market quotations |
Broker quoted price |
99.25 | 102.75 | 101.22 | |||||||||||||||
|
|
|
|||||||||||||||||||
| 453,487 | ||||||||||||||||||||
| Investments in equity |
23,152 | Market approach |
Performance multiple |
7.75 | x | 18.50 | x | 14.16 | x | |||||||||||
| 33,725 | Yield analysis |
Discount rate |
11.81 | % | 11.81 | % | 11.81 | % | ||||||||||||
|
|
|
|||||||||||||||||||
| 56,877 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| Total |
$ | 5,856,631 | ||||||||||||||||||
|
|
|
|||||||||||||||||||
| (1) | Weighted averages are calculated based on fair value of investments. |
The significant unobservable input used in the yield analysis is the discount rate based on comparable market yields. The significant unobservable input used for market quotations are broker quoted prices provided by independent pricing services. The significant unobservable input used under the market approach is the performance multiple. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in quoted prices or performance multiples would result in a significantly lower fair value measurement.
F-57
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of the Company’s investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.
Financial Instruments Not Carried at Fair Value
Debt
The fair value of the Company’s credit facilities, which would be categorized as Level 3 within the fair value hierarchy, as of June 30, 2021, approximates their carrying value as the credit facilities have variable interest based on selected short term rates.
The fair value of the Company’s 2024 Notes (as defined in Note 6), which would be categorized as Level 2 within the fair value hierarchy, as of June 30, 2021 was $431.7 million, based on vendor pricing received by the Company.
The fair value of the Company’s 2021-1 Debt (as defined in Note 6), which would be categorized as Level 3, is equivalent to the principal amount outstanding of $663.0 million as of June 30, 2021 as the transaction closed on June 29, 2021.
Other
The carrying amounts of the Company’s financial assets and liabilities, other than investments at fair value, the 2024 Notes and the 2021-1 Debt, approximate fair value. These financial instruments are categorized as Level 3 within the hierarchy.
Note 6. Borrowings
In accordance with the 1940 Act, with certain limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing. As of June 30, 2021, the Company’s asset coverage was 202.3%.
SPV Financing Facilities
The following wholly-owned subsidiaries of the Company have entered into secured financing facilities, as described below: Bard Peak Funding, Castle Peak Funding, Maroon Peak Funding, Summit Peak Funding, Denali Peak Funding, Siris Peak Funding, Bushnell Peak Funding, Granite Peak Funding, and Middle Peak Funding, which are collectively referred to as the “SPVs”, and the secured financing facilities described below are collectively referred to as the “SPV Financing Facilities”.
The obligations of each SPV to the lenders under the applicable SPV Financing Facility are secured by a first priority security interest in all of the applicable SPV’s portfolio investments and cash. The obligations of each SPV under the applicable SPV Financing Facility are non-recourse to the Company, and the Company’s exposure to the credit facility is limited to the value of its investment in the applicable SPV.
F-58
In connection with the SPV Financing Facilities, the applicable SPV has made certain customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. Each SPV Financing Facility contains customary events of default for similar financing transactions, including if a change of control of the applicable SPV occurs. Upon the occurrence and during the continuation of an event of default, the lenders under the applicable SPV Financing Facility may declare the outstanding advances and all other obligations under the applicable SPV Financing Facility immediately due and payable. The occurrence of an event of default (as described above) triggers a requirement that the applicable SPV obtain the consent of the lenders under the applicable SPV Financing Facility prior to entering into any sale or disposition with respect to portfolio investments.
As of June 30, 2021, the Company was in compliance with all covenants and other requirements of the SPV Financing Facilities.
Bard Peak Funding Facility
On March 15, 2021, Bard Peak Funding, a wholly-owned subsidiary of the Company, entered into a senior secured revolving credit facility (the “Bard Peak Funding Facility”) with BNP Paribas (“BNPP”). BNPP serves as administrative agent, Wells Fargo Bank, National Association, serves as collateral agent, and the Company serves as servicer under the Bard Peak Funding Facility.
Advances under the Bard Peak Funding Facility initially bear interest at a per annum rate equal to the three-month LIBOR in effect, plus an applicable margin of 1.55% to 2.15% per annum depending on the nature of the advances being requested under the credit facility. After March 15, 2024, the applicable margin on all outstanding advances will be 3.15% per annum. Effective July 15, 2021, Bard Peak Funding will pay a commitment fee of 0.90% per annum if the unused facility amount is greater than 50% or 0.35% per annum if the unused facility amount is less than or equal to 50% and greater than 25%, based on the average daily unused amount of the financing commitments until March 15, 2024, in addition to certain other fees as agreed between Bard Peak Funding and BNPP.
The initial principal amount of the commitments under the Bard Peak Funding Facility is $600 million. Proceeds from borrowings under the credit facility may be used to fund portfolio investments by Bard Peak and to make advances under delayed draw term loans and revolving loans where Bard Peak is a lender. The period during which Bard Peak Funding may make borrowings under the Bard Peak Funding Facility expires on March 15, 2024, and the Bard Peak Funding Facility will mature and all amounts outstanding under credit facility must be repaid by March 15, 2026.
On March 15, 2021, concurrent with the closing of the Bard Peak Funding Facility, Maple Park (as defined in Note 7) merged with and into Bard Peak (the “Merger”) pursuant to an Agreement and Plan of Merger, with Bard Peak the surviving entity of the Merger.
Upon consummation of the Merger, Bard Peak used the proceeds of borrowings under the Bard Peak Funding Facility to repay in full all outstanding indebtedness under the Syndicated Warehouse (as defined in Note 7); and to redeem in full the Subordinated Notes (as defined in Note 7).
Castle Peak Funding Facility
On January 8, 2021, Castle Peak Funding entered into a senior secured revolving credit facility (the “Castle Peak Funding Facility”) with Citibank, N.A. (“Citi”). Citi serves as administrative agent, Wilmington Trust, National Association, serves as collateral agent, custodian and collateral administrator and the Company serves as collateral manager under the Castle Peak Funding Facility.
Advances used to finance the purchase or origination of broadly syndicated loans under the Castle Peak Funding Facility initially bear interest at a per annum rate equal to the three-month LIBOR, plus the applicable
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margin of 1.50% per annum. Advances used to finance the purchase or origination of middle market loans under the Castle Peak Funding Facility initially bear interest at a per annum rate equal to LIBOR plus the applicable margin of 2.00% per annum. After January 8, 2024, the applicable margin on outstanding advances will be increased by 1.00% per annum. Castle Peak Funding pays a commitment fee of 1.85% per annum if the unused facility amount is greater than 30% or 0.50% per annum if the unused facility amount is less than or equal to 30% and greater than 10%, based on the average daily unused amount of the financing commitments until January 8, 2024, in addition to certain other fees as agreed between Castle Peak Funding and Citi.
The initial principal amount of the Castle Peak Funding Facility was $200 million. On March 15, 2021, the aggregate principal amount of the revolving credit commitments under the credit facility was increased to $800 million under an accordion feature. Proceeds from borrowings under the Castle Peak Funding Facility may be used to fund portfolio investments by Castle Peak and to make advances under revolving loans or delayed draw term loans where Castle Peak is a lender. The period during which Castle Peak Funding may make borrowings under the Castle Peak Funding Facility expires on January 8, 2024, and the Castle Peak Funding Facility will mature and all amounts outstanding under the credit facility must be repaid by January 8, 2026.
Maroon Peak Funding Facility
On January 28, 2021, Maroon Peak Funding entered into a senior secured revolving credit facility (the “Maroon Peak Funding Facility”) with Morgan Stanley Bank, N.A. (“MS”). Morgan Stanley Senior Funding, Inc. serves as administrative agent , U.S. Bank National Association, serves as collateral agent and the Company serves as collateral manager under the Maroon Peak Funding Facility.
Advances may be used to finance the purchase or origination of broadly syndicated loans under the Maroon Peak Funding Facility and initially bear interest at a per annum rate equal to the three-month LIBOR then in effect plus the applicable spread of 1.30% per annum. After January 28, 2022, the applicable spread on outstanding advances will increase to 2.00% per annum. Effective July 28, 2021, Maroon Peak Funding will pay a commitment fee of 0.50% per annum if the unused facility amount is greater than 10% based on the average daily unused amount of the financing commitments, in addition to certain other fees as agreed between Maroon Peak Funding and MS.
The initial principal amount of the Maroon Peak Funding Facility was $500 million. On February 26, 2021, the aggregate principal amount of the revolving credit commitments under the credit facility was increased to $560 million, and on March 23, 2021, the aggregate principal amount of the revolving credit commitments under the credit facility was increased to $1,000 million. Proceeds from borrowings under the Maroon Peak Funding Facility may be used to fund portfolio investments by Maroon Peak and to make advances under revolving loans or delayed draw term loans where Maroon Peak Funding is a lender. All amounts outstanding under the Maroon Peak Funding Facility must be repaid by January 28, 2023, unless the parties have entered into an extension agreement.
Summit Peak Funding Facility
On March 3, 2021, Summit Peak Funding entered into a senior secured revolving credit facility (which was subsequently amended on May 12, 2021 and as further amended from time to time, the “Summit Peak Funding Facility”) with Société Générale (“SG”). SG serves as agent, Wilmington Trust, National Association, serves as collateral agent, custodian and collateral administrator and the Fund serves as servicer under the Summit Peak Funding Facility.
Advances used to finance the purchase or origination of broadly syndicated loans under the Summit Peak Funding Facility initially bear interest at a blended per annum rate adjusted monthly based on the proportion of the broadly syndicated loans in the portfolio to the proportion of middle market loans in the portfolio, with the rate attributable to broadly syndicated loans equal to the three-month LIBOR plus the applicable margin of
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1.50% per annum, and the rate attributable to middle market loans equal to LIBOR plus the applicable margin of 2.15% per annum, and with such blended rate subject to a floor of LIBOR plus 2.00% per annum. Effective September 3, 2021, Summit Peak Funding will pay a commitment fee of 0.25% per annum if the unused facility amount is greater than 25% based on the average daily unused amount of the financing commitments, and effective January 3, 2022, such fee shall increase to 0.40% per annum, terminating on March 1, 2024, in addition to certain other fees as agreed between Summit Peak Funding and SG.
The initial principal amount of the Summit Peak Funding Facility is $500 million. Effective May 12, 2021, the maximum commitment amount of the Summit Peak Funding Facility was increased to $1,000 million. Proceeds from borrowings under the Summit Peak Funding Facility may be used to fund portfolio investments by Summit Peak Funding and to make advances under revolving loans or delayed draw term loans where Summit Peak Funding is a lender. The period during which Summit Peak Funding may make borrowings under the Summit Peak Funding Facility expires on March 1, 2024, and the Summit Peak Funding Facility will mature and all amounts outstanding under the credit facility must be repaid by March 3, 2026.
Denali Peak Funding Facility
Pursuant to the Purchase Agreement (as discussed in Note 10), Denali Peak Funding is now indirectly wholly-owned by the Company. Denali Peak Funding is party to a senior secured revolving credit facility (the “Denali Peak Funding Facility”), dated as of October 11, 2018, with Deutsche Bank AG, New York Branch (“DB”), which credit facility was indirectly assumed by the Company pursuant to the Purchase Agreement. DB serves as agent, U.S. Bank National Association serves as collateral agent and collateral custodian and Twin Peaks (as discussed in Note 10) serves as servicer under the Denali Peak Funding Facility.
Advances under the Denali Peak Funding Facility initially bear interest at a per annum rate equal to the three-month LIBOR, plus the applicable margin of 2.00% per annum. After October 11, 2021, the applicable margin on outstanding advances will be increased by 0.25% per annum.
As of June 30, 2021, the maximum commitment amount of the Denali Peak Funding Facility was $200.0 million, which was fully drawn. Proceeds from borrowings under the Denali Peak Funding Facility may be used to fund portfolio investments by Denali Peak Funding and to make advances under revolving loans where Denali Peak Funding is a lender. The period during which Denali Peak Funding may make borrowings under the Denali Peak Funding Facility expires on October 11, 2021, and the Denali Peak Funding Facility will mature and all amounts outstanding under the credit facility must be repaid by October 11, 2023.
Siris Peak Funding Facility
Pursuant to the Purchase Agreement (as discussed in Note 10), Siris Peak Funding is now indirectly wholly-owned by the Company. Siris Peak Funding is party to a senior secured credit facility (the “Siris Peak Funding Facility”), dated as of October 11, 2018, with SG, which credit facility was indirectly assumed by the Company pursuant to the Purchase Agreement. SG serves as agent, Citibank N.A. serves as collateral agent and collateral custodian, Virtus Group, LP serves as collateral administrator and Twin Peaks (as discussed in Note 10) serves as servicer under the Siris Peak Funding Facility.
Advances under the Siris Peak Funding Facility bear interest at a per annum rate equal to the three-month LIBOR, plus the applicable margin of 2.25% per annum.
As of June 30, 2021, the maximum commitment amount of the Siris Peak Funding Facility was $165.9 million, which was fully drawn and which may not be reborrowed once repaid. Proceeds from borrowings under the Siris Peak Funding Facility may be used to fund portfolio investments by Siris Peak Funding and to make advances under revolving loans where Siris Peak Funding is a lender. The Siris Peak Funding Facility will mature and all amounts outstanding under the credit facility must be repaid by October 11, 2023.
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Bushnell Peak Funding Facility
On May 12, 2021, Bushnell Peak Funding, a wholly-owned subsidiary of the Company, entered into a senior secured revolving credit facility (the “Bushnell Peak Funding Facility”) with Bank of America, N.A. (“Bank of America”). Bank of America serves as administrative agent, Wells Fargo Bank, N.A. serves as collateral administrator and the Company serves as investment adviser under the Bushnell Peak Credit Facility.
Advances under the Bushnell Peak Credit Facility bear interest at a per annum rate equal to the “base rate” (which is the greatest of (i) the sum of (A) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System plus (B) 0.5%, (ii) the prime rate as publicly announced by Bank of America and (iii) one month LIBOR) plus the applicable margin of 1.35% per annum. Bushnell Peak Funding is required to utilize a minimum percentage of the financing commitments (the “Minimum Utilization Amount”), which amount is equal to 80% of the aggregate commitments beginning one month after the closing date of the Bushnell Peak Credit Facility and thereafter. Unused amounts below the Minimum Utilization Amount accrue a fee at a rate of 1.35% per annum. In addition, Bushnell Peak Funding will pay an unused fee of 0.50% per annum on the daily unused amount of the financing commitments in excess of the Minimum Utilization Amount, commencing one month after the closing date of the Bushnell Peak Credit Facility.
The initial principal amount of the Bushnell Peak Credit Facility is $425 million. The Bushnell Peak Credit Facility has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Bushnell Peak Credit Facility to up to $600 million. Proceeds from borrowings under the Bushnell Peak Credit Facility may be used to fund portfolio investments by Bushnell Peak Funding and to make advances under revolving loans or delayed draw term loans where Bushnell Peak Funding Facility is a lender. All amounts outstanding under the Bushnell Peak Credit Facility must be repaid by the date that is two years after the closing date of the Bushnell Peak Credit Facility.
Granite Peak Funding Facility
On June 17, 2021, Granite Peak Funding, a wholly-owned subsidiary of the Company, entered into a senior secured revolving credit facility (the “Granite Peak Funding Facility”) with Goldman Sachs Bank USA (“GS”). GS serves as administrative agent, Wilmington Trust, National Association, serves as collateral agent, custodian and collateral administrator, and the Company serves as servicer under the Granite Peak Funding Facility.
Advances under the Granite Peak Funding Facility initially bear interest at a per annum rate equal to, in the case of dollar advances, three-month LIBOR, and in the case of foreign currency advances, the applicable benchmark in effect for such currency, plus an applicable margin of 2.10% per annum. Commencing on October 15, 2021, Granite Peak Funding will pay an unused commitment fee of 0.25% per annum on the average daily unused commitments under the Granite Peak Funding Facility, which fee shall increase to 0.40% per annum from and after January 13, 2022. The unused commitment fee will be payable only when more than 25% of the total commitments under the Granite Peak Funding Facility are unused, and will terminate when Granite Peak Funding is no longer permitted to make borrowings under the Granite Peak Funding Facility. Granite Peak Funding will also pay to GS an administrative agency fee at a rate of 0.15% per annum on the aggregate principal amount of outstanding advances under the Granite Peak Funding Facility, in addition to certain other fees as agreed between Granite Peak Funding and GS.
The initial principal amount of the commitments under the Granite Peak Funding Facility is $250 million. Proceeds from borrowings under the Granite Peak Funding Facility may be used to fund portfolio investments by Granite Peak Funding and to make advances under delayed draw term loans and revolving loans where Granite Peak Funding is a lender. The period during which Granite Peak Funding may make borrowings under the Granite Peak Funding Facility expires on June 17, 2024, and the Granite Peak Funding Facility will mature and all amounts outstanding under the credit facility must be repaid by June 17, 2026.
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Middle Peak Funding Facility
On June 30, 2021, Middle Peak Funding, a wholly-owned subsidiary of the Company, entered into a senior secured revolving credit facility (the ”Middle Peak Funding Facility”) with MS. MS serves as agent, Wilmington Trust, National Association, serves as collateral agent, custodian and collateral administrator and the Company serves as collateral manager under the Middle Peak Funding Facility.
Advances under the Middle Peak Funding Facility initially bear interest at a per annum rate equal to, in the case of dollar advances, three-month LIBOR, and in the case of foreign currency advances, the applicable benchmark in effect for such currency, plus an applicable margin. The applicable margin will initially be 1.60% per annum for advances used to finance the purchase or origination of broadly syndicated loans, and 2.00% per annum for advances used to finance the purchase or origination of middle market loans. Effective December 30, 2021, the applicable margin for all advances will be 2.00% per annum, and will increase to 2.10% per annum effective on June 30, 2024. Effective October 30, 2021, Middle Peak Funding will pay a commitment fee of 0.35% per annum if the unused facility amount is greater than 10% based on the average daily unused amount of the financing commitments, terminating on June 30, 2024. Effective October 30, 2021, Middle Peak Funding will pay interest on an interest-only loan in the notional amount of the aggregate commitments under the Middle Peak Funding Facility, in an amount of 0.15% per annum if the unused facility amount is greater than 10% based on the average daily unused amount of the financing commitments, terminating on June 30, 2024, in addition to certain other fees as agreed between Middle Peak Funding and MS.
The initial principal amount of the Middle Peak Funding Facility is $500 million. Proceeds from borrowings under the Middle Peak Funding Facility may be used to fund portfolio investments by Middle Peak Funding and to make advances under revolving loans or delayed draw term loans where Middle Peak Funding is a lender. The period during which Middle Peak Funding may make borrowings under the Middle Peak Funding Facility expires on June 30, 2024, and the Middle Peak Funding Facility will mature and all amounts outstanding under the credit facility must be repaid by June 30, 2026.
Revolving Credit Facility
On May 18, 2021, the Company, entered into a senior secured credit facility (the “Revolving Credit Facility”) with Citi. Citi serves as administrative agent and collateral agent.
The Revolving Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $1,425.0 million. Borrowings under the Revolving Credit Facility are subject to compliance with a borrowing base. The Revolving Credit Facility has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Revolving Credit Facility to up to $2,500.0 million. The Revolving Credit Facility provides for the issuance of letters of credit on behalf of the Company in an aggregate face amount not to exceed $100 million. Proceeds from the borrowings under the Revolving Credit Facility may be used for general corporate purposes of the Company and its subsidiaries. The period during which the Company may make borrowings on the Revolving Credit Facility expires on May 18, 2025, and the Revolving Credit Facility will mature and all amounts outstanding under the credit facility must be repaid by May 18, 2026, pursuant to an amortization schedule.
Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to, (x) for loans for which the Company elects the base rate option, the “alternate base rate” (which is the greatest of (a) the prime rate as publicly announced by Citi, (b) the sum of (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System plus (ii) 0.5%, and (c) one month LIBOR plus 1% per annum) plus (A) if the gross borrowing base is equal to or greater than 1.6 times the combined revolving debt amount, 0.75%, or (B) if the gross borrowing base is less than 1.6 times the combined revolving debt amount, 0.875%, (y) for loans for which the Company elects the Eurocurrency option, the applicable LIBO Rate for the related Interest Period for such Borrowing plus (A) if the gross borrowing base is equal to or greater than 1.6
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times the combined revolving debt amount, 1.75%, or (B) if the gross borrowing base is less than 1.6 times the combined revolving debt amount, 1.875% and (z) with respect to any loan denominated in Pounds Sterling, SONIA for the applicable date plus (A) if the gross borrowing base is equal to or greater than 1.6 times the combined revolving debt amount, 1.8693%, or (B) if the gross borrowing base is less than 1.6 times the combined revolving debt amount, 1.9943%. The Company will pay an unused fee of 0.375% per annum on the daily unused amount of the revolver commitments. The Company will pay letter of credit participation fees and a fronting fee on the average daily amount of any lender’s exposure with respect to any letters of credit issued under the Revolving Credit Facility.
The Company’s obligations to the lenders under the Revolving Credit Facility are secured by a first priority security interest in substantially all of the Company’s assets.
In connection with the Revolving Credit Facility, the Company has made certain customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. In addition, the Company must comply with the following financial covenants: (a) the Company must maintain a minimum shareholders’ equity, measured as of each fiscal quarter end; and (b) the Company must maintain at all times a 150% asset coverage ratio.
The Revolving Credit Facility contains customary events of default for similar financing transactions. Upon the occurrence and during the continuation of an event of default, Citi may terminate the commitments and declare the outstanding advances and all other obligations under the Revolving Credit Facility immediately due and payable.
As of June 30, 2021, the Company was in compliance with all covenants and other requirements of the Revolving Credit Facility.
Unsecured Bonds
2024 Notes
On June 21, 2021, the Company entered into a Note Purchase Agreement (the ”Note Purchase Agreement”) governing the issuance of $435.0 million in aggregate principal amount of its 2.56% Series A Senior Notes (the “2024 Notes”) to qualified institutional investors in a private placement. The 2024 Notes were issued on June 21, 2021 and will mature on June 21, 2024 unless redeemed, purchased or prepaid prior to such date by the Company or its affiliates in accordance with their terms. Interest on the 2024 Notes will be due semiannually on June 3 and December 3. In addition, the Company is obligated to offer to repay the 2024 Notes at par if certain change in control events occur. The 2024 Notes are general unsecured obligations of the Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company. In addition, in the event that 2024 notes receive a below investment grade rating by either one rating agency if there are only one or two rating agencies providing ratings of the 2024 Notes, or two-thirds of the rating agencies if there are three rating agencies who are rating the notes (a “Below Investment Grade Event”), the 2024 Notes will bear interest at a fixed rate of 3.56% per year from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event is no longer continuing
As of June 30, 2021, the Company was in compliance with all covenants and other requirements of the 2024 Notes.
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Debt Securitizations
2021-1 Debt Securitization
On June 29, 2021, the Company completed a $876.6 million term debt securitization (the “2021-1 Debt Securitization”), $819.5 million of which was funded on the closing date. Term debt securitizations are also known as collateralized loan obligations and are a form of secured financing incurred by the Company, which is consolidated by the Company for financial reporting purposes and subject to its overall asset coverage requirement. The notes offered in the 2021-1 Debt Securitization (collectively, the “2021-1 Notes”) were issued by BCRED BSL CLO 2021-1, Ltd. (“BCRED BSL CLO Ltd.”) and BCRED BSL CLO 2021-1, LLC, wholly-owned and consolidated subsidiaries of the Company (collectively, the “Issuers”), and are secured by a diversified portfolio of senior secured loans and participation interests therein.
The following table presents information on the secured and unsecured notes issued in the 2021-1 Debt Securitization:
| June 30, 2021 | ||||||||||
| Description |
Type |
Principal Outstanding |
Interest Rate |
Credit Rating | ||||||
| Class A Notes |
Senior Secured Floating Rate |
$ | 499,800 | L+1.25% |
Aaa | |||||
| Class B Notes |
Senior Secured Floating Rate |
38,760 | L+1.80% |
Aa2 | ||||||
| Class C Notes |
Mezzanine Secured Deferrable Floating Rate |
59,160 | L+2.15% |
A2 | ||||||
| Class D Notes |
Mezzanine Secured Deferrable Floating Rate |
65,280 | L+3.35% |
Baa3 | ||||||
| Class E Notes(1) |
Junior Secured Deferrable Floating Rate |
— | L+7.00% |
Ba3 | ||||||
|
|
|
|||||||||
| Total Secured Notes (“2021-1 Debt”) |
663,000 | |||||||||
| Subordinated Notes (2) |
156,500 | None |
Not rated | |||||||
|
|
|
|||||||||
| Total 2021-1 Notes |
$ | 819,500 | ||||||||
|
|
|
|||||||||
| (1) | The Class E Notes were initially issued as unfunded, undrawn class of notes, in the amount of $57.1 million, that may be funded after closing at direction of the Company. |
| (2) | The Company retained all of the Subordinated Notes issued in the 2021-1 Debt Securitization which are eliminated in consolidation. |
The 2021-1 Notes mature in July 2034, unless redeemed by the Issuers, at the direction of the Company as holder of the Subordinated Notes on any business day after July 20, 2023. In connection with the sale and contribution, the Company has made customary representations, warranties and covenants to the Issuers. The Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes are the secured obligations of the Issuers and the Subordinated Notes are the unsecured obligations of BCRED BSL CLO Ltd. The indenture governing the 2021-1 Notes includes customary covenants and events of default.
The 2021-1 Notes have not been, and will not be, registered under the Securities Act, or any state securities or “blue sky” laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from registration.
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The Company serves as collateral manager to BCRED BSL CLO Ltd. under a collateral management agreement and has agreed to irrevocably waive all collateral management fees payable pursuant to the collateral management agreement.
The Company’s outstanding debt obligations were as follows:
| June 30, 2021 | ||||||||||||||||||||
| Aggregate Principal Committed |
Outstanding Principal |
Carrying Value |
Unused Portion (1) |
Amount Available (2) |
||||||||||||||||
| Bard Peak Funding Facility (3) |
$ | 600,000 | $ | 599,425 | $ | 599,425 | $ | 575 | $ | 575 | ||||||||||
| Castle Peak Funding Facility (4) |
800,000 | 796,391 | 796,391 | 3,609 | 3,131 | |||||||||||||||
| Maroon Peak Funding Facility |
1,000,000 | 97,350 | 97,350 | 902,650 | 604,111 | |||||||||||||||
| Summit Peak Funding Facility (5) |
1,000,000 | 370,289 | 370,289 | 629,711 | 561,777 | |||||||||||||||
| Denali Peak Funding Facility |
200,000 | 200,000 | 200,000 | — | — | |||||||||||||||
| Siris Peak Funding Facility |
165,919 | 165,919 | 165,919 | — | — | |||||||||||||||
| Bushnell Peak Funding Facility |
425,000 | 125,000 | 125,000 | 300,000 | 42,068 | |||||||||||||||
| Granite Peak Funding Facility |
250,000 | 15,000 | 15,000 | 235,000 | 83,759 | |||||||||||||||
| Middle Peak Funding Facility |
500,000 | — | — | 500,000 | 37,050 | |||||||||||||||
| Revolving Credit Facility (6) |
1,425,000 | 1,365,684 | 1,365,684 | 59,316 | 59,316 | |||||||||||||||
| 2024 Notes (7) |
435,000 | 435,000 | 431,539 | — | — | |||||||||||||||
| 2021-1 Debt(8) |
663,000 | 663,000 | 661,866 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 7,463,919 | $ | 4,833,058 | $ | 4,828,463 | $ | 2,630,861 | $ | 1,391,787 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | The unused portion is the amount upon which commitment fees, if any, are based. |
| (2) | The amount available reflects any limitations related to each respective credit facility’s borrowing base. |
| (3) | Under the Bard Peak Funding Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Company had borrowings denominated in Euros (EUR) of 19.5 million. |
| (4) | Under the Castle Peak Funding Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Company had borrowings denominated in Canadian Dollars (CAD) and British Pounds (GBP) of 60.0 million and 42.4 million, respectively. |
| (5) | Under the Summit Peak Funding Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Company had borrowings denominated in Canadian Dollars (CAD) of 60.0 million. |
| (6) | Under the Revolving Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Company had borrowings denominated in Canadian Dollars (CAD) and British Pounds (GBP) of 11.3 million and 19.6 million, respectively. |
| (7) | The carrying value of the Company’s 2024 Notes is presented net of unamortized debt issuance costs of $3.5 million as of June 30, 2021. |
| (8) | The carrying value of the Company’s 2021-1 Debt is presented net of unamortized debt issuance costs of $1.1 million as of June 30, 2021. |
As of June 30, 2021 and December 31, 2020, $7.4 million and $0.0 million, respectively, of interest expense and $0.3 million and $0.0 million, respectively, of unused commitment fees were included in interest payable. For the three months ended June 30, 2021, the weighted average interest rate on all borrowings outstanding was 2.21% (including unused fees and accretion of net discounts on unsecured debt) and the average principal debt outstanding was $2,814.1 million. For the six months ended June 30, 2021, the weighted average interest rate on all borrowings outstanding was 2.16% (including unused fees) and the average principal debt outstanding was $1,777.0 million.
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The components of interest expense were as follows:
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Borrowing interest expense |
$ | 14,939 | $ | 17,809 | ||||
| Facility unused fees |
570 | 682 | ||||||
| Accretion of original issue discount |
30 | 30 | ||||||
| Amortization of financing costs and debt issuance costs |
1,806 | 2,264 | ||||||
|
|
|
|
|
|||||
| Total interest expense |
$ | 17,345 | $ | 20,785 | ||||
|
|
|
|
|
|||||
| Cash paid for interest expense |
$ | 11,336 | $ | 11,837 | ||||
Note 7. Commitments and Contingencies
The Company’s investment portfolio may contain debt investments which are in the form of lines of credit or delayed draw commitments, which require us to provide funding when requested by portfolio companies in accordance with underlying loan agreements. As of June 30, 2021, the Company had unfunded delayed draw terms loans and revolvers in the aggregate principal amount of $1,364.2 million.
Additionally, from time to time, the Adviser and its affiliates may commit to an investment on behalf of the funds it manages, including the Company. Certain terms of these investments are not finalized at the time of the commitment and each respective fund’s allocation may change prior to the date of funding. In this regard, as of June 30, 2021, the Company estimates that it had $3,090.1 million of investments that are committed but not yet funded.
The Adviser agreed to bear all of the Company’s expenses, including organization and offering expenses, through January 7, 2021, the date on which the Company broke escrow for the initial offering of its common shares, on which date the Company became obligated to reimburse the Adviser for such advanced expenses upon breaking escrow for the offering.
From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. At June 30, 2021, management is not aware of any pending or threatened material litigation.
Warehousing Transactions
The Company entered into two warehousing transactions whereby the Company agreed, subject to certain conditions, to purchase certain assets from parties unaffiliated with the Adviser. Such warehousing transactions were designed to assist the Company in deploying capital upon receipt of subscription proceeds. One of these warehousing transactions related primarily to originated or anchor investments in middle market loans (the “Facility Agreement”). The other warehouse related primarily to broadly syndicated loans (the “Syndicated Warehouse” and, together with Facility Agreement, the “Warehousing Transactions”).
Facility Agreement
On November 2, 2020, the Company entered into the Facility Agreement, which was subsequently amended on November 16, 2020, December 7, 2020 and December 28, 2020 with Goldman Sachs Bank USA (the “Financing Provider”). Under the Facility Agreement, if the Company received subscriptions of at least $400 million (the “Capital Condition”), the Company, or its designee, has a forward obligation to purchase certain investments (the “Portfolio Investments”) from the Financing Provider, who is obligated to sell such investments. The Portfolio Investments will generally consist of originated and anchor loans to middle market
F-67
companies consistent with the Company’s investment strategy. Pursuant to the Facility Agreement, the Company may request that the Financing Provider acquire such Portfolio Investments as the Company may designate from time to time, which the Financing Provider can approve or reject in its sole and absolute discretion. The Company may elect to purchase, and in certain events the Company will be required to purchase, from the Financing Provider one or more Portfolio Investments on or before June 30, 2021 (the “Facility End Date”). Prior to any sale to the Company, the Portfolio Investments will be owned and held solely for the account of the Financing Provider. Until such time as the Company satisfied the Capital Condition, which occurred on January 7, 2021, it had no obligation to purchase the Portfolio Investments nor be entitled to any benefits or subject to any obligations under the Facility Agreement unless it waived the Capital Condition. In consideration for the forward arrangement provided by the Financing Provider (the amount of the arrangement will not exceed $200 million prior to December 15, 2020, not exceed $300 million on or after December 15, 2020 and prior to December 28, 2020, not exceed $500 million on or after December 28, 2020 and prior to January 18, 2021 and will not exceed $300 million on or after January 18, 2021 up to the Facility End Date (the “Financing Amount”)), the Company has agreed to pay, subject to satisfying the Capital Condition, certain fees and expenses to the Financing Provider, including (i) a financing fee at an annual rate of LIBOR plus 1.70% multiplied by the sum of the relevant principal amount for each Portfolio Investment, (ii) an unused fee at an annual rate of 0.50% of the unused Financing Amount and (iii) a structuring fee equal to $1.453 million which is payable on the earlier of the termination date or the Facility End Date. As a general matter, the price the Company would pay to purchase any Portfolio Investment from the Financing Provider equals the cash amount paid by the Financing Provider subject to adjustment for, among other things, principal repayments and interest amounts earned by the Financing Provider.
Effective January 7, 2021, the Company has a contractual obligation to acquire all assets under the Facility Agreement through a forward purchase agreement on or before June 30, 2021. The mark-to-market gain/loss of all investments held by the Financing Provider, in addition to other economic rights and obligations held by the Company, are recognized in the Company’s consolidated financial statements. These gains (losses) are realized at the time the Company settles on the purchases of each underlying asset from the Financing Provider.
For the three months ended June 30, 2021, the Company acquired $170.7 million of investments (which represented the remaining assets held by the Financing Provider) from the Financing Provider, resulting in net realized gains of $2.2 million. For the three months ended June 30, 2021, the Company recorded unrealized losses of $1.9 million which represented the reversal of previously accrued unrealized gains relating to this forward purchase obligation. For the six months ended June 30, 2021, the Company acquired $610.6 million of investments from the Financing Provider, resulting in net realized gains of $3.7 million.
Following the acquisition of all the assets held by the Financing Provider, the Facility Agreement was terminated on June 22, 2021.
Syndicated Warehouse
On November 3, 2020, the Company entered into a purchase and sale agreement (the “PSA”) with Sente Master Fund, L.P. and Vibrant Ambar Fund, Ltd. (together, the “Sellers”). Under the PSA, if the Company has raised at least $200 million of equity capital by April 15, 2021, then the Company or its designee must arrange one or more transactions sufficient to repay all outstanding amounts under the Syndicated Warehouse with commitments of up to $255 million of Maple Park CLO, Ltd. (“Maple Park”), an entity expected to hold primarily broadly syndicated loans with a target portfolio size of $300 million that is managed by an affiliate of the Company, and to redeem in full the subordinated notes (the “Subordinated Notes”) issued by Maple Park. The Company satisfied the condition described above on January 7, 2021.
Under the PSA, this transaction may be structured to include a purchase by the Company or its designee of the Subordinated Notes, if any, held by the unaffiliated Sellers. The purchase price to be paid to the Sellers (the “Purchase Price”) would equal (i) the notional amount of the Subordinated Notes held by the Sellers and
F-68
(ii) the Sellers’ pro rata share of interest and fee collections on the portfolio of loans held by Maple Park in excess of the outstanding advances under the Syndicated Warehouse. In addition, at any time prior to April 15, 2021, the Company or its designee will have the right, but not the obligation, to purchase the Subordinated Notes held by the Sellers at the Purchase Price.
On January 8, 2021, the Company exercised its right to acquire the equity interests of the Syndicated Warehouse, effectively acquiring the assets and liabilities of Maple Park for a total purchase price of $45.7 million, which included $2.8 million paid to a minority interest holder shortly thereafter. This transaction resulted in a realized gain of $2.3 million, which represented the excess of fair value of the net assets acquired over the total consideration paid for the Subordinated Notes in the Syndicated Warehouse on the date of acquisition.
The following table summarizes the assets and liabilities of Maple Park as of the acquisition date:
| January 8, 2021 | ||||
| ASSETS |
||||
| Investments at fair value |
$ | 300,464 | ||
| Cash and cash equivalents |
1,679 | |||
| Interest receivable |
394 | |||
|
|
|
|||
| Total assets |
302,537 | |||
|
|
|
|||
| LIABILITIES |
||||
| Debt |
134,000 | |||
| Payable for investments purchased |
120,451 | |||
| Interest payable |
33 | |||
|
|
|
|||
| Total liabilities |
254,484 | |||
|
|
|
|||
| NET ASSETS |
||||
| Total net assets |
48,053 | |||
|
|
|
|||
| Total liabilities and net assets |
$ | 302,537 | ||
|
|
|
|||
Note 8. Net Assets
In connection with its formation, the Company has the authority to issue an unlimited number of Class I, Class S and Class D common shares of beneficial interest at $0.01 per share par value. On August 18, 2020, an affiliate of the Adviser purchased 60 shares of the Company’s Class I shares of beneficial interest at $25.00 per share. On October 21, 2020, an affiliate of the Adviser purchased 2,000 shares of the Company’s Class I shares of beneficial interest at $25.00 per share in a private offering.
As of January 7, 2021, the Company had satisfied the minimum offering requirement, and the Company’s Board had authorized the release of proceeds from escrow. As of such date, the Company issued and sold 32,560,141 shares (consisting of 2,750,840 Class S shares, and 29,809,301 Class I shares at an offering price of $25.00 per share; no Class D shares were issued or sold as of such date), and the escrow agent released net proceeds of approximately $814.0 million, of which $25.0 was from an affiliate of the Adviser, to the Company as payment for such shares.
F-69
The following table summarizes transactions in common shares of beneficial interest during the three months ended June 30, 2021 (dollars in thousands except share amounts):
| Shares | Amount | |||||||
| CLASS I |
||||||||
| Subscriptions |
72,765,283 | $ | 1,863,782 | |||||
| Share transfers between classes |
106,389 | 2,745 | ||||||
| Distributions reinvested |
768,399 | 19,715 | ||||||
| Share repurchases |
(48,738 | ) | (1,258 | ) | ||||
| Early repurchase deduction |
— | 19 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
73,591,333 | $ | 1,885,003 | |||||
|
|
|
|
|
|||||
| CLASS S |
||||||||
| Subscriptions |
31,758,213 | $ | 813,582 | |||||
| Distributions reinvested |
185,595 | 4,766 | ||||||
| Share repurchases |
— | — | ||||||
| Early repurchase deduction |
— | 6 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
31,943,808 | $ | 818,354 | |||||
|
|
|
|
|
|||||
| CLASS D |
||||||||
| Subscriptions |
3,125,266 | $ | 80,347 | |||||
| Share transfers between classes |
(106,389 | ) | (2,745 | ) | ||||
| Distributions reinvested |
2,411 | 62 | ||||||
| Share repurchases |
— | — | ||||||
| Early repurchase deduction |
— | — | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
3,021,288 | $ | 77,664 | |||||
|
|
|
|
|
|||||
| Total net increase (decrease) |
108,556,429 | $ | 2,781,021 | |||||
|
|
|
|
|
|||||
The following table summarizes transactions in common shares of beneficial interest during the six months ended June 30, 2021 (dollars in thousands except share amounts):
| Shares | Amount | |||||||
| CLASS I |
||||||||
| Subscriptions |
144,470,591 | $ | 3,669,228 | |||||
| Share transfers between classes |
106,389 | 2,745 | ||||||
| Distributions reinvested |
959,838 | 24,563 | ||||||
| Share repurchases |
(48,738 | ) | (1,258 | ) | ||||
| Early repurchase deduction |
— | 19 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
145,488,080 | $ | 3,695,297 | |||||
|
|
|
|
|
|||||
| CLASS S |
||||||||
| Subscriptions |
42,866,403 | $ | 1,093,871 | |||||
| Distributions reinvested |
208,295 | 5,341 | ||||||
| Share repurchases |
— | — | ||||||
| Early repurchase deduction fees |
— | 6 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
43,074,698 | $ | 1,099,218 | |||||
|
|
|
|
|
|||||
F-70
| Shares | Amount | |||||||
| CLASS D |
||||||||
| Subscriptions |
3,125,266 | $ | 80,347 | |||||
| Transfers |
(106,389 | ) | (2,745 | ) | ||||
| Distributions reinvested |
2,411 | 62 | ||||||
| Share repurchases |
— | — | ||||||
| Early repurchase deduction fees |
— | — | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) |
3,021,288 | $ | 77,664 | |||||
|
|
|
|
|
|||||
| Total net increase (decrease) |
191,584,066 | $ | 4,872,179 | |||||
|
|
|
|
|
|||||
Net Asset Value per Share and Offering Price
The Company determines NAV for each class of shares as of the last day of each calendar month. Share issuances related to monthly subscriptions are effective the first calendar day of each month. Shares are issued at an offering price equivalent to the most recent NAV per share available for each share class, which will be the prior calendar day NAV per share (i.e. the prior month-end NAV). The following table summarizes each month-end NAV per share for Class I, Class S and Class D common shares of beneficial interest during the six months ended June 30, 2021:
| NAV Per Share | ||||||||||||
| For the Months Ended |
Class I | Class S | Class D (1) | |||||||||
| $ | 25.25 | $ | 25.25 | $ | — | |||||||
| 25.36 | 25.36 | — | ||||||||||
| 25.49 | 25.49 | — | ||||||||||
| 25.59 | 25.59 | — | ||||||||||
| 25.80 | 25.80 | 25.80 | ||||||||||
| 25.81 | 25.81 | 25.81 | ||||||||||
| (1) | Class D commenced operations on May 1, 2021. |
Distributions
The Board authorizes and declares monthly distribution amounts per share of Class I, Class S and Class D common shares of beneficial interest. The following table presents distributions that were declared during the six months ended June 30, 2021:
| Class I | ||||||||||||
| Declaration Date |
Record Date |
Payment Date |
Distribution Per Share | Distribution Amount | ||||||||
| $ | 0.1151 | $ | 3,431 | |||||||||
| 0.1427 | 7,206 | |||||||||||
| 0.1458 | 10,483 | |||||||||||
| 0.1510 | 15,074 | |||||||||||
| 0.1563 | 19,336 | |||||||||||
| 0.1667 | 24,261 | |||||||||||
| 0.1233 | 17,944 | (1) | ||||||||||
|
|
|
|
|
|||||||||
| $ | 1.0009 | $ | 97,735 | |||||||||
|
|
|
|
|
|||||||||
F-71
| Class S | ||||||||||||
| Declaration Date |
Record Date |
Payment Date |
Distribution Per Share | Distribution Amount | ||||||||
| $ | 0.1008 | $ | 277 | |||||||||
| 0.1250 | 827 | |||||||||||
| 0.1281 | 1,426 | |||||||||||
| 0.1329 | 2,994 | |||||||||||
| 0.1382 | 4,607 | |||||||||||
| 0.1484 | 6,391 | |||||||||||
| 0.1233 | 5,311 | (1) | ||||||||||
|
|
|
|
|
|||||||||
| $ | 0.8967 | $ | 21,833 | |||||||||
|
|
|
|
|
|||||||||
| Class D | ||||||||||||
| Declaration Date |
Record Date |
Payment Date |
Distribution Per Share | Distribution Amount | ||||||||
| 0.1510 | 205 | |||||||||||
| 0.1613 | 487 | |||||||||||
| 0.1233 | 373 | (1) | ||||||||||
|
|
|
|
|
|||||||||
| $ | 0.4356 | $ | 1,065 | |||||||||
|
|
|
|
|
|||||||||
| (1) | Represents a special distribution. |
Distribution Reinvestment Plan
The Company has adopted a distribution reinvestment plan, pursuant to which the Company will reinvest all cash dividends declared by the Board of Trustees on behalf of our shareholders who do not elect to receive their dividends in cash as provided below. As a result, if the Board authorizes, and the Company declares, a cash dividend or other distribution, then shareholders who have not opted out of our distribution reinvestment plan will have their cash distributions automatically reinvested in additional shares as described below, rather than receiving the cash dividend or other distribution. Distributions on fractional shares will be credited to each participating shareholder’s account to three decimal places.
Character of Distributions
The Company may fund its cash distributions to shareholders from any source of funds available to the Company, including but not limited to offering proceeds, net investment income from operations, capital gains proceeds from the sale of assets, dividends or other distributions paid to it on account of preferred and common equity investments in portfolio companies and expense support from the Adviser, which is subject to recoupment.
Through June 30, 2021, a portion of the Company’s distributions resulted from expense support from the Adviser, and future distributions may result from expense support from the Adviser, each of which is subject to repayment by the Company within three years from the date of payment. The purpose of this arrangement avoids distributions being characterized as a return of capital for U.S. federal income tax purposes. Shareholders should understand that any such distribution is not based solely on the Company’s investment performance, and can only be sustained if the Company achieves positive investment performance in future periods and/or the Adviser continues to provide expense support. Shareholders should also understand that the Company’s future repayments of expense support will reduce the distributions that they would otherwise receive. There can be no assurance that the Company will achieve the performance necessary to sustain these distributions, or be able to pay distributions at all.
F-72
Sources of distributions, other than net investment income and realized gains on a U.S. GAAP basis, include required adjustments to U.S. GAAP net investment income in the current period to determine taxable income available for distributions. The following tables reflect the sources of cash distributions on a U.S. GAAP basis that the Company has declared on its shares of common stock during the six months ended June 30, 2021:
| Class I | Class S | Class D | ||||||||||||||||||||||
| Source of Distribution |
Per Share | Amount | Per Share | Amount | Per Share | Amount | ||||||||||||||||||
| Net investment income |
$ | 0.9871 | $ | 95,729 | $ | 0.8829 | $ | 21,239 | $ | 0.4218 | $ | 1,023 | ||||||||||||
| Net realized gains |
0.0138 | 2,006 | 0.0138 | 594 | 0.0138 | 42 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 1.0009 | $ | 97,735 | $ | 0.8967 | $ | 21,833 | $ | 0.4356 | $ | 1,065 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Share Repurchase Program
At the discretion of the Board, the Company intends to commence a share repurchase program in which the Company may repurchase, in each quarter, up to 5% of the NAV of the Company’s common shares outstanding (either by number of shares or aggregate NAV) as of the close of the previous calendar quarter. The Board may amend or suspend the share repurchase program at any time if in its reasonable judgment it deems such action to be in the best interest of shareholders, such as when a repurchase offer would place an undue burden on the Company’s liquidity, adversely affect the Company’s operations or risk having an adverse impact on the Company that would outweigh the benefit of the repurchase offer. As a result, share repurchases may not be available each quarter. The Company intends to conduct such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Securities Exchange Act of 1934, as amended, and the 1940 Act. All shares purchased pursuant to the terms of each tender offer will be retired and thereafter will be authorized and unissued shares.
Under the share repurchase plan, to the extent the Company offers to repurchase shares in any particular quarter, it is expected to repurchase shares pursuant to tender offers using a purchase price equal to the NAV per share as of the last calendar day of the applicable quarter, except that shares that have not been outstanding for at least one year will be repurchased at 98% of such NAV (an “Early Repurchase Deduction”). The one-year holding period is measured as of the subscription closing date immediately following the prospective repurchase date. The Early Repurchase Deduction may be waived in the case of repurchase requests arising from the death, divorce or qualified disability of the holder. The Early Repurchase Deduction will be retained by the Company for the benefit of remaining shareholders across all shares.
During the three and six months ended June 30, 2021, approximately 48,738 shares were repurchased (total value of $1.3 million based on June 30, 2021 NAV of 25.81).
The following table further summarizes the share repurchases completed during the six months ended June 30, 2021:
| Repurchase deadline request |
Percentage of Outstanding Shares the Company Offered to Repurchase(1) |
Repurchase |
Amount Repurchased (all classes) |
Number of Shares Repurchased (all classes) |
Percentage of Outstanding Shares Repurchased (1) |
|||||||||||||
| 5.00 | % | June 30, 2021 | $ | 1,233 | 48,738 | 0.06 | % | |||||||||||
| (1) | Percentage is based on total shares as of the close of the previous calendar quarter. All repurchase requests were satisfied in full. |
F-73
Note 9. Financial Highlights
The following are the financial highlights for the six months ended June 30, 2021:
| Six Months Ended June 30, 2021 | ||||||||||||
| Class I | Class S | Class D (6) | ||||||||||
| Per Share Data: |
||||||||||||
| Net asset value, beginning of period |
$ | 25.00 | $ | 25.00 | $ | 25.59 | ||||||
| Net investment income (1) |
1.08 | 1.01 | 0.39 | |||||||||
| Net unrealized and realized gain (loss) (2) |
0.73 | 0.70 | 0.27 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net increase (decrease) in net assets resulting from operations |
1.81 | 1.71 | 0.66 | |||||||||
| Distributions from net investment income (3) |
(0.99 | ) | (0.89 | ) | (0.43 | ) | ||||||
| Distributions from net realized gains (3) |
(0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net increase (decrease) in net assets from shareholders’ distributions |
(1.00 | ) | (0.90 | ) | (0.44 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Early repurchase deduction fees (7) |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total increase (decrease) in net assets |
0.81 | 0.81 | 0.22 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value, end of period |
$ | 25.81 | $ | 25.81 | $ | 25.81 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstanding, end of period |
145,490,140 | 43,074,698 | 3,021,288 | |||||||||
| Total return based on NAV (4) |
7.34 | % | 6.91 | % | 2.57 | % | ||||||
| Ratios: |
||||||||||||
| Ratio of net expenses to average net assets (5) |
2.69 | % | 3.68 | % | 3.33 | % | ||||||
| Ratio of net investment income to average net assets (5) |
8.77 | % | 8.15 | % | 8.96 | % | ||||||
| Portfolio turnover rate |
13.28 | % | 13.28 | % | 13.28 | % | ||||||
| Supplemental Data: |
||||||||||||
| Net assets, end of period |
$ | 3,754,393 | $ | 1,111,572 | $ | 77,969 | ||||||
| Asset coverage ratio |
202.3 | % | 202.3 | % | 202.3 | % | ||||||
| (1) | The per share data was derived by using the weighted average shares outstanding during the period. |
| (2) | For the six months ended June 30, 2021, the amount shown does not correspond with the aggregate amount for the period as it includes a $0.05, $0.04 and $0.03 impact, on Class I, Class S and Class D, respectively, from the effect of the timing of capital transactions. |
| (3) | The per share data for distributions was derived by using the actual shares outstanding at the date of the relevant transactions (refer to Note 8). |
| (4) | Total return is calculated as the change in NAV per share during the period, plus distributions per share (assuming dividends and distributions are reinvested in accordance with the Company’s dividend reinvestment plan) divided by the beginning NAV per share. Total return does not include upfront transaction fee, if any. |
| (5) | For the six months ended June 30, 2021, amounts are annualized except for organizational costs. For the six months ended June 30, 2021, the ratio of total operating expenses to average net assets was 4.95%, 5.94% and 6.20% on Class I, Class S and Class D respectively, on an annualized basis, excluding the effect of expense support/(recoupment) and management fee and income based incentive fee waivers by the Adviser which represented 2.26%, 2.26% and 2.87% on Class I, Class S and Class D, respectively, of average net assets. |
| (6) | Class D commenced operations on May 1, 2021. |
| (7) | The per share amount rounds to less than $0.01 per share. |
F-74
Note 10. Twin Peaks Acquisition
Pursuant to a Securities Purchase Agreement, dated March 5, 2021 (the “Purchase Agreement”), by and among the Company, Twin Peaks Parent LLC, a Delaware limited liability company not affiliated with the Company (the “Seller”), Twin Peaks, Teacher Retirement System of Texas, an investor in Seller, and the Adviser, the Company acquired Twin Peaks which includes a portfolio of assets from Seller consisting of loans to 41 borrowers (including delayed draw term loans), five equity investments, cash and other assets (collectively, the “Assets”) for an aggregate purchase price of $721.0 million. The purchase price represents the fair market value of the Assets of $1,059.0 million determined pursuant to the Company’s valuation procedures (including approval of the valuations by the Company’s Board after review of reports provided by independent valuation providers) within 48 hours of the closing, less the amount of assumed borrowings (including accrued interest) of $338.0 million. The Seller is an entity owned and controlled by a third party and advised by an affiliate of the Adviser. An affiliate of the Adviser owns an approximately 2.9% non-voting interest in the Seller. The acquisition of Twin Peaks was funded with cash on hand, which primarily consists of proceeds from the Company’s offering of its common shares.
Pursuant to the Purchase Agreement, the Company purchased 100% of the limited liability company interests in Twin Peaks, which directly holds Assets and two wholly-owned financing subsidiaries (the “Financing Subsidiaries”), each of which directly holds Assets. Each of the Financing Subsidiaries (Denali Peak Funding and Siris Peak Funding - as defined in Note 2) are now indirectly wholly-owned by the Company and have entered into credit facilities that have been assumed by the Company pursuant to the Purchase Agreement.
The following table summarizes the assets and liabilities of Twin Peaks as of the acquisition date:
| March 5, 2021 | ||||
| ASSETS |
||||
| Investments at fair value |
$ | 1,023,188 | ||
| Cash and cash equivalents |
23,609 | |||
| Interest receivable |
10,018 | |||
| Other assets |
2,211 | |||
|
|
|
|||
| Total assets |
$ | 1,059,026 | ||
|
|
|
|||
| LIABILITIES |
||||
| Debt |
$ | 337,648 | ||
| Interest payable |
365 | |||
|
|
|
|||
| Total liabilities |
338,013 | |||
|
|
|
|||
| NET ASSETS |
||||
| Total net assets |
721,013 | |||
|
|
|
|||
| Total liabilities and net assets |
$ | 1,059,026 | ||
|
|
|
|||
Note 11. Subsequent Events
The Company’s management evaluated subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in the consolidated financial statements as of June 30, 2021, except as discussed below.
July Subscriptions and Dividend Declarations
The Company received approximately $1,136.6 million of net proceeds relating to the issuance of Class I shares, Class S shares, and Class D shares for subscriptions effective July 1, 2021.
F-75
On July 21, 2021, the Company’s Board declared distributions of $0.1740 per Class I share, $0.1557 per Class S share, and $0.1686 per Class D share, which is payable on August 27, 2021 to shareholders of record as of July 31, 2021.
August Subscriptions
The Company received approximately $945.3 million of net proceeds relating to the issuance of Class I, Class D and Class S shares for subscriptions effective August 1, 2021.
The Company has closed on aggregate subscriptions of approximately $6,925.4 million since the time it commenced operations on January 7, 2021.
Financing Transactions
On July 15, 2021, the Company amended the Castle Peak Funding Facility to, among other things, increase the maximum commitment amount to $1,300.0 million from $800.0 million.
On July 23, 2021, the Company amended the Bard Peak Funding Facility to, among other things, increase the maximum commitment amount to $1,000.0 million from $600.0 million.
On July 23, 2021, Bison Peak Funding, a wholly-owned subsidiary of the Company, entered into a senior secured revolving credit facility (the ”Bison Peak Funding Facility”) with Bank of America. Bank of America serves as administrative agent, Wilmington Trust, National Association, serves as collateral administrator and the Company serves as manager under the Bison Peak Funding Facility.
Advances under the Bison Peak Funding Facility bear interest initially bear interest at a per annum rate equal to, in the case of dollar advances, three-month LIBOR, and in the case of foreign currency advances, the applicable benchmark in effect for such currency, plus an applicable margin adjusted at one-month or three-month intervals based on the proportion of the broadly syndicated loans, large corporate loans and middle market loans in the portfolio, with the applicable margin attributable to broadly syndicated loans equal to 1.50% per annum, the applicable margin attributable to large corporate loans equal to 1.75% per annum and the applicable margin applicable to middle market loans equal to 2.00% per annum. The applicable margin for all advances will increase by 0.50% per annum effective on July 23, 2024. Effective January 23, 2022, Bison Peak Funding is required to utilize a minimum percentage of the financing commitments, which amount increases in three-month intervals from 20% on such effective date to 80% from and after October 23, 2022 and thereafter. Unused amounts below such minimum utilization amount accrue a fee at a rate of 2.00% per annum. In addition, effective on September 23, 2021, Bison Peak Funding will pay an unused fee on the daily unused amount of the financing commitments in excess of such minimum utilization amount, which amount shall initially be 0.20% per annum and shall increase to 0.40% per annum from and after November 23, 2021, in addition to certain other fees as agreed between Bison Peak Funding and Morgan Stanley.
The initial maximum commitment amount of the Bison Peak Funding Facility is $1,000 million. Proceeds from borrowings under the Bison Peak Funding Facility may be used to fund portfolio investments by Bison Peak Funding and to make advances under revolving loans or delayed draw term loans where Bison Peak Funding is a lender. All amounts outstanding under the Bison Peak Funding Facility must be repaid by July 23, 2026.
Other
On August 4, 2021, the Board appointed Kate Rubenstein as Chief Operating Officer of the Company, effective immediately.
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Sample
APPENDIX A: FORM OF SUBSCRIPTION AGREEMENT
NOT FOR EXECUTION
|
Subscription Agreement for Shares of Blackstone Private Credit Fund |
| 1. | Your Investment |
A. Investment Information
| Investment Amount $ | ||||||||
| B. Investment Method | ||||||||
| ☐ By mail: | Please make checks payable to BLACKSTONE PRIVATE CREDIT FUND and attach to this agreement. * | |||||
| ☐ By wire: | Please wire funds according to the instructions below. | |||||
| Name: DST Agent for BLACKSTONE PRIVATE CREDIT FUND | ||||||
| Bank Name: State Street Bank and Trust Company | ||||||
| ABA: 011-000-028 | ||||||
| DDA: 99000952 | ||||||
| 1 Lincoln Street | ||||||
| Boston MA 02111 | ||||||
| ☐ Broker / Financial advisor will make payment on your behalf | ||||||
| * Cash, cashier’s checks/official bank checks, temporary checks, foreign checks, money orders, third party checks, or travelers’ checks are not accepted. | ||||||||
| C. Share Class Selection | ||||||||
|
☐Share Class S |
☐Share Class D ** |
☐Share Class I ** | ||||||
| (Theminimum investment is $2,500) (The minimum investment is $2,500) (The minimum investment is $1,000,000 (unless waived)) | ||||||||
| ** Available for certain fee-based wrap accounts and other eligible investors as disclosed in the prospectus, as amended and supplemented. | ||||||||
| 2. | Ownership Type (Select only one) |
| A. Taxable Accounts | B. Non-Taxable Accounts | |||||||
| Brokerage Account Number | Custodian Account Number | |||||||
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☐ Individual or Joint Tenant With Rights of Survivorship |
☐ IRA (Custodian Signature Required) | |||||||
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Transfer on Death (Optional Designation. Not Available for Louisiana Residents. See Section 3C.)
☐ Tenants in Common
☐ Community Property |
☐ Roth IRA (Custodian Signature Required)
☐ SEP IRA (Custodian Signature Required)
☐ Rollover IRA (Custodian Signature Required)
| |||||||
| ☐ Uniform Gift/Transfer to Minors
Stateof
Dateof Birth
☐ Trust (Include Certification of Investment Powers Form or 1st and Last page of Trust Documents)
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☐ Inherited IRA
☐ Pension Plan (Include Certification of Investment Powers Form)
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| ☐ Other
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C. Custodian Information (To Be Completed By Custodian) | ||||||||
| ☐ C Corporation
☐ S Corporation
☐ Profit-Sharing Plan
☐ Non-Profit Organization
☐ Limited Liability Corporation
☐ Corporation / Partnership / Other (Corporate Resolution or Partnership Agreement Required)
|
Custodian Name
Custodian Tax ID #
Custodian Phone # | |||||||
| Custodian Stamp Here | ||||||||
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D. Entity Name – Retirement Plan / Trust / Corporation / Partnership / Other
Trustee(s) and/or authorized signatory(s) information MUST be provided in Sections 3A and 3B
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| Entity Name |
Tax ID Number | Date of Formation | Exemptions (See Form W-9 instructions at www.irs.gov) | |||||||
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| Entity Address (Legal Address. Required) |
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| Entity Type (Select one. Required) |
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☐ Retirement Plan ☐ Trust ☐ S-Corp |
☐ C-Corp ☐ LLC ☐ Partnership | Exempt payee code (if any) | ||
| ☐ Other |
Jurisdiction (if Non-U.S.) | |||
| (Attach a completed applicable Form W-8) | ||||
| Exemption from FATCA reporting code (if any) | ||||
| 3. | Investor Information |
| A. Investor Name (Investor / Trustee / Executor / Authorized Signatory Information) |
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| Residential street address MUST be provided. See Section 4 if mailing address is different than residential street address
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First Name
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(MI)
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Last Name
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Gender
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| Social Security Number / Tax ID
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Date of Birth (MM/DD/YYYY)
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Daytime Phone Number
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| Residential Street Address
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City
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State | Zip Code | |||||||||||||||||||||||||||
| Email Address
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| If you are a non-U.S. citizen, please specify your country of citizenship (required): |
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| ☐ Resident Alien |
☐ Non-Resident Alien (Attach a completed Form W-8BEN, Rev. J) |
Country of Citizenship |
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| Please specify if you are a Blackstone employee/officer/director/affiliate (required): |
☐ Blackstone Employee |
☐ Blackstone Officer or Director | ||||
| ☐ Immediate Family Member of Blackstone Officer or Director | ☐ Blackstone Affiliate | ☐ Not Applicable | ||
| B. Co-Investor Name (Co-Investor / Co-Trustee / Co-Authorized Signatory Information, if applicable) |
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First Name
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(MI)
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Last Name
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Gender
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| Social Security Number / Tax ID
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Date of Birth (MM/DD/YYYY)
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Daytime Phone Number
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| Residential Street Address
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City
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State | Zip Code | |||||||||||||||||||||||||||
| Email Address
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| If you are a non-U.S. citizen, please specify your country of citizenship (required): |
| |||||||||||||||||||||||||||||
| ☐ Resident Alien |
☐ Non-Resident Alien (Attach a completed Form W-8BEN, Rev. J) |
Country of Citizenship |
||||||||||||
| Please specify if you are a Blackstone employee/officer/director/affiliate (required): |
☐ Blackstone Employee |
☐ Blackstone Officer or Director | ||||
| ☐ Immediate Family Member of Blackstone Officer or Director | ☐ Blackstone Affiliate | ☐ Not Applicable | ||||||||||||||
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Sample
C. Transfer on Death Beneficiary Information (Individual or Joint Account with rights of survivorship only. Not available for Louisiana residents. Beneficiary date of birth required. Whole percentages only; must equal 100%.)
| First Name |
(MI) | Last Name | SSN | Date of Birth (MM/DD/YYYY) | ☐ Primary | |||||||
|
☐ Secondary % | ||||||||||||
| First Name |
(MI) | Last Name | SSN | Date of Birth (MM/DD/YYYY) | ☐ Primary | |||||||
|
☐ Secondary % | ||||||||||||
| First Name |
(MI) | Last Name | SSN | Date of Birth (MM/DD/YYYY) | ☐ Primary | |||||||
|
☐ Secondary % | ||||||||||||
| First Name |
(MI) | Last Name | SSN | Date of Birth (MM/DD/YYYY) | ☐ Primary | |||||||
|
☐ Secondary % | ||||||||||||
Custodian/Guardian for a minor Beneficiary (required, cannot be same as Investor or Co-Investor):
D. ERISA Plan Asset Regulations
All investors are required to complete Appendix B attached hereto.
| 4. | Contact Information (If different than provided in Section 3A) |
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| Mailing Address
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City
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State
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ZipCode
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| 5. | Select How You Want to Receive Your Distributions (Please Read Entire Section and Select only one) |
You are automatically enrolled in our Distribution Reinvestment Plan, unless you are a resident of ALABAMA, ARKANSAS, IDAHO, KANSAS, KENTUCKY, MAINE, MARYLAND, MASSACHUSETTS, NEBRASKA, NEW JERSEY, OHIO, OKLAHOMA, OREGON, TEXAS, VERMONT OR WASHINGTON.
☐ If you ARE a resident of Alabama, Arkansas, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Jersey, Ohio, Oklahoma, Oregon, Texas, Vermont or Washington, you are not automatically enrolled in the Distribution Reinvestment Plan. Please check here if you wish to enroll in the Distribution Reinvestment Plan. You will automatically receive cash distributions unless you elect to enroll in the Distribution Reinvestment Plan.
☐ If you are not a resident of the states listed above, you are automatically enrolled in the Distribution Reinvestment Plan; please check here if you DO NOT wish to be enrolled in the Distribution Reinvestment Plan and complete the Cash Distribution Information section below.
ONLY complete the following information if you do not wish to enroll in the Distribution Reinvestment Plan. For custodial held accounts, if you elect cash distributions the funds must be sent to the custodian.
| A. Check mailed to street address in 3A (only available for non-custodial investors).
|
| B. Check mailed to secondary address in 3B (only available for non-custodial investors).
|
| C. Direct Deposit by ACH (only available for non-custodial investors). PLEASE ATTACH A PRE-VOIDED CHECK
|
| D. Check mailed to Third party Financial Institution (complete section below) |
I authorize Blackstone Private Credit Fund or its agent to deposit my distribution into my checking or savings account. This authority will remain in force until I notify Blackstone Private Credit Fund in writing to cancel it. In the event that Blackstone Private Credit Fund deposits funds erroneously into my account, they are authorized to debit my account for an amount not to exceed the amount of the erroneous deposit.
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| Financial Institution Name
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Mailing Address
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City
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State
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ZipCode
| ||||
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Your Bank’s ABA Routing Number |
Your Bank Account Number |
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Sample
| 6. | Broker / Financial Advisor Information (Required Information. All fields must be completed.) |
The Financial Advisor must sign below to complete the order. The Financial Advisor hereby warrants that he/she is duly licensed and may lawfully sell shares in the state designated as the investor’s legal residence.
| Broker
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Financial Advisor Name
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| Advisor Mailing Address
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||||||
| City
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State
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Zip
Code
| ||||
| Financial Advisor Number
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Branch Number
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Telephone
Number
| ||||
| E-mail Address
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Fax Number
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| Operations Contact Name
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Operations Contact Email Address
| |||||
Please note that unless previously agreed to in writing by Blackstone Private Credit Fund, all sales of securities must be made through a Broker, including when an RIA has introduced the sale. In all cases, Section 6 must be completed.
The undersigned confirm(s), which confirmation is made on behalf of the Broker with respect to sales of securities made through a Broker, that they (i) have reasonable grounds to believe that the information and representations concerning the investor identified herein are true, correct and complete in all respects; (ii) have discussed such investor’s prospective purchase of shares with such investor; (iii) have advised such investor of all pertinent facts with regard to the lack of liquidity and marketability of the shares; (iv) have delivered or made available a current prospectus and related supplements, if any, to such investor; (v) have reasonable grounds to believe that the investor is purchasing these shares for his or her own account; (vi) have reasonable grounds to believe that the purchase of shares is a suitable investment for such investor, that such investor meets the suitability standards applicable to such investor set forth in the prospectus and related supplements, if any, and that such investor is in a financial position to enable such investor to realize the benefits of such an investment and to suffer any loss that may occur with respect thereto; and (vii) have advised such investor that the shares have not been registered and are not expected to be registered under the laws of any country or jurisdiction outside of the United States except as otherwise described in the prospectus. The undersigned Broker, Financial Advisor or Financial Representative listed in Section 6 further represents and certifies that, in connection with this subscription for shares, he/she has complied with and has followed all applicable policies and procedures of his or her firm relating to, and performed functions required by, federal and state securities laws, rules promulgated under the Securities Exchange Act of 1934, as amended, including, but not limited to Rule 15l-1 (“Regulation Best Interest”) and FINRA rules and regulations including, but not limited to Know Your Customer, Suitability and PATRIOT Act (Anti Money Laundering, Customer Identification) as required by its relationship with the investor(s) identified on this document.
THIS SUBSCRIPTION AGREEMENT AND ALL RIGHTS HEREUNDER SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
If you do not have another broker or other financial intermediary introducing you to Blackstone Private Credit Fund, then Blackstone Securities Partners L.P. (“BSP”) may be deemed to act as your broker of record in connection with any investment in Blackstone Private Credit Fund. BSP is not a full-service broker-dealer and may not provide the kinds of financial services that you might expect from another financial intermediary, such as holding securities in an account. If BSP is your broker of record, then your shares will be held in your name on the books of Blackstone Private Credit Fund. BSP will not monitor your investments, and has not and will not make any recommendation regarding your investments. If you want to receive financial advice regarding a prospective investment in the shares, contact your broker or other financial intermediary.
| X | X | |||||||||||||||
| Financial Advisor Signature | Date | Branch Manager Signature (If required by Broker) |
Date |
| 7. | Electronic Delivery Form (Optional) |
Instead of receiving paper copies of the prospectus, prospectus supplements, annual reports, proxy statements, and other shareholder communications and reports, you may elect to receive electronic delivery of shareholder communications from Blackstone Private Credit Fund. If you would like to consent to electronic delivery, including pursuant to email, please check the box below for this election.
We encourage you to reduce printing and mailing costs and to conserve natural resources by electing to receive electronic delivery of shareholder communications and statement notifications. By consenting below to electronically receive shareholder communications, including your account-specific information, you authorize said offering(s) to either (i) email shareholder communications to you directly or (ii) make them available on our website and notify you by email when and where such documents are available.
You will not receive paper copies of these electronic materials unless specifically requested, the delivery of electronic materials is prohibited or we, in our sole discretion, elect to send paper copies of the materials.
A-4
Sample
By consenting to electronic access, you will be responsible for certain costs, such as your customary internet service provider charges, and may be required to download software in connection with access to these materials. You understand this electronic delivery program may be changed or discontinued and that the terms of this agreement may be amended at any time. You understand that there are possible risks associated with electronic delivery such as emails not transmitting, links failing to function properly and system failure of online service providers, and that there is no warranty or guarantee given concerning the transmissions of email, the availability of the website, or information on it, other than as required by law.
| I consent to electronic delivery
|
☐ |
E-mail Address
If blank, the email provided in Section 4 will be used.
| 8. | Subscriber Signatures |
Blackstone Private Credit Fund is required by law to obtain, verify and record certain personal information from you or persons on your behalf in order to establish the account. Required information includes name, date of birth, permanent residential address and social security/taxpayer identification number. We may also ask to see other identifying documents. If you do not provide the information, Blackstone Private Credit Fund may not be able to open your account. By signing the Subscription Agreement, you agree to provide this information and confirm that this information is true and correct. If we are unable to verify your identity, or that of another person(s) authorized to act on your behalf, or if we believe we have identified potentially criminal activity, we reserve the right to take action as we deem appropriate which may include closing your account.
Please separately initial each of the representations below. EA power of attorney to make representations on behalf of an investor can only be granted for fiduciary accounts; if applicable, by signing the Subscription Agreement you represent and warrant that you have the requisite authority. In order to induce Blackstone Private Credit Fund to accept this subscription, I hereby represent and warrant to you as follows:
| 8a. Please Note: All Items in this section 8.a. must be read and initialed
|
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| Primary Investor Initials |
Co-Investor Initials |
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| (i) I have received the prospectus (as amended or supplemented) for Blackstone Private Credit Fund at least five business days prior to the date hereof. |
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| Initials
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Initials
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| (ii) I have (A) a minimum net worth (not including home, home furnishings and personal automobiles) of at least $250,000, or (B) a minimum net worth (as previously described) of at least $70,000 and a minimum annual gross income of at least $70,000. |
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| Initials
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Initials
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| (iii) In addition to the general suitability requirements described above, I meet the higher suitability requirements, if any, imposed by my state of primary residence as set forth in the prospectus under “SUITABILITY STANDARDS.” |
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| Initials
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Initials
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| (iv) If I am an entity that was formed for the purpose of purchasing shares, each individual that owns an interest in such entity meets the general suitability requirements described above. |
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| Initials
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Initials
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| (v) I acknowledge that there is no public market for the shares, shares of this offering are not liquid and appropriate only as a long-term investment. |
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| Initials
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Initials
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| (vi) I acknowledge that the shares have not been registered and are not expected to be registered under the laws of any country or jurisdiction outside of the United States except as otherwise described in the prospectus. |
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| Initials
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Initials
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| (vii) I am purchasing the shares for my own account, or if I am purchasing shares on behalf of a trust or other entity of which I am a trustee or authorized agent, I have due authority to execute this subscription agreement and do hereby legally bind the trust or other entity of which I am trustee or authorized agent. |
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Initials
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Initials
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| (viii) I acknowledge that Blackstone Private Credit Fund may enter into transactions with Blackstone affiliates that involve conflicts of interest as described in the prospectus. |
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| Initials
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Initials
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Sample
| Primary Investor Initials |
Co-Investor Initials | |||||
| (ix) I acknowledge that subscriptions must be submitted at least five business days prior to first day of each month my investment will be executed as of the first day of the applicable month at the NAV per share as of the day preceding day. I acknowledge that I will not know the NAV per share at which my investment will be executed at the time I subscribe and the NAV per share will generally be made available at www.bcred.com as of the last day of each month within 20 business days of the last day of each month. |
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| Initials
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Initials
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| (x) I acknowledge that my subscription request will not be accepted any earlier than two business days before the first calendar day of each month. I acknowledge that I am not committed to purchase shares at the time my subscription order is submitted and I may cancel my subscription at any time before the time it has been accepted as described in the previous sentence. I understand that I may withdraw my purchase request by notifying the transfer agent, through my financial intermediary or directly on Blackstone Private Credit Fund’s toll-free, automated telephone line, 844-702-1299. |
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| Initials
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Initials
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| 8b. If you live in any of the following states, please complete Appendix A to Blackstone Private Credit Fund Subscription Agreement: Alabama, California, Idaho, Iowa, Kansas, Kentucky, Maine, Massachusetts, Missouri, Nebraska, New Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Puerto Rico, Tennessee, Texas and Vermont
|
In the case of sales to fiduciary accounts, the minimum standards in Appendix A shall be met by the beneficiary, the fiduciary, account, or, by the donor or grantor, who directly or indirectly supplies the funds to purchase the shares if the donor or grantor is the fiduciary.
If you do not have another broker or other financial intermediary introducing you to Blackstone Private Credit Fund, then BSP may be deemed to be acting as your broker of record in connection with any investment in Blackstone Private Credit Fund. For important information in this respect, see Section 6 above. I declare that the information supplied in this Subscription Agreement is true and correct and may be relied upon by Blackstone Private Credit Fund. I acknowledge that the Broker / Financial Advisor (Broker / Financial Advisor of record) indicated in Section 6 of this Subscription Agreement and its designated clearing agent, if any, will have full access to my account information, including the number of shares I own, tax information (including the Form 1099) and redemption information. Investors may change the Broker / Financial Advisor of record at any time by contacting Blackstone Private Credit Fund Investor Relations at the number indicated below.
SUBSTITUTE IRS FORM W-9 CERTIFICATIONS (required for U.S. investors):
Under penalties of perjury, I certify that:
| (1) | The number shown on this Subscription Agreement is my correct taxpayer identification number (or I am waiting for a number to be issued to me); and |
| (2) | I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and |
| (3) | I am a U.S. citizen or other U.S. person (including a resident alien) (defined in IRS Form W-9); and |
| (4) | The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct. |
Certification instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return.
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding.
| X | X | |||||||||||||||
| Signature of Investor | Date | Signature of Co-Investor or Custodian (If applicable) |
Date |
(MUST BE SIGNED BY CUSTODIAN OR TRUSTEE IF PLAN IS ADMINISTERED BY A THIRD PARTY)
| 9. | Miscellaneous |
If investors participating in the Distribution Reinvestment Plan or making subsequent purchases of shares of Blackstone Private Credit Fund experience a material adverse change in their financial condition or can no longer make the representations or warranties set forth in Section 8 above, they are asked to promptly notify Blackstone Private Credit Fund and the Broker in writing. The Broker may notify Blackstone Private Credit Fund if an investor participating in the Distribution Reinvestment Plan can no longer make the representations or warranties set forth in Section 8 above, and Blackstone Private Credit Fund may rely on such notification to terminate such investor’s participation in the Distribution Reinvestment Plan.
A-6
Sample
No sale of shares may be completed until at least five business days after you receive the final prospectus. To be accepted, a subscription request must be made with a completed and executed subscription agreement in good order and payment of the full purchase price at least five business prior to the first calendar day of the month (unless waived). You will receive a written confirmation of your purchase.
All items on the Subscription Agreement must be completed in order for your subscription to be processed. Subscribers are encouraged to read the prospectus in its entirety for a complete explanation of an investment in the shares of Blackstone Private Credit Fund.
Return the completed Subscription Agreement to:
| Blackstone Private Credit Fund | ||||
| PO Box 219270 | ||||
| Kansas City, MO 64121-9270 |
Street and Overnight Address (suite number MUST be included):
| Blackstone Private Credit Fund | ||||
| 430 W 7th Street, Suite 219270 | ||||
| Kansas City, MO 64105-1407 |
Blackstone Private Credit Fund Investor Relations: 844-702-1299
| Appendix A |
For purposes of determining whether you satisfy the standards below, your net worth is calculated excluding the value of your home, home furnishings and automobiles, and, unless otherwise indicated, “liquid net worth” is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable investments.
Investors in the following states have the additional suitability standards as set forth below.
| Primary Investor Initials |
Co-Investor Initials | |||||
| If I am an Alabama resident, in addition to the suitability standards set forth above, an investment in Blackstone Private Credit Fund will only be sold to me if I have a liquid net worth of at least 10 times my investment in Blackstone Private Credit Fund and its affiliates. |
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| Initials
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Initials
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| If I am a California resident, in addition to the suitability standards set forth above, I must have either (a) a liquid net worth of $350,000 and annual gross income of $65,000 or (b) a liquid net worth of $500,000. Additionally, I may not invest more than 10% of my liquid net worth in Blackstone Private Credit Fund. |
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Initials
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| If I am an Idaho resident, I must have either (a) a liquid net worth of $85,000 and annual gross income of $85,000 or (b) a liquid net worth of $300,000. Additionally, the total investment in Blackstone Private Credit Fund shall not exceed 10% of my liquid net worth. |
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| Initials
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Initials
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| If I am an Iowa resident, I (i) have either (a) an annual gross income of at least $100,000 and a net worth of at least $100,000, or (b) a net worth of at least $350,000 (net worth should be determined exclusive of home, auto and home furnishings); and (ii) limit my aggregate investment in this offering and in the securities of other non-traded business development companies to 10% of my liquid net worth (liquid net worth should be determined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities). | ||||||
| Initials
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Initials
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| If I am a Kansas resident, I understand that it is recommended by the Office of the Securities Commissioner that I limit my total investment in Blackstone Private Credit Fund’s securities and other non-traded business development companies to not more than 10% of my liquid net worth. For these purposes, liquid net worth shall be defined as that portion of total net worth (total assets minus total liabilities) that is comprised of cash, cash equivalents and readily marketable securities. |
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| Initials
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Initials
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| If I am a Kentucky resident, I may not invest more than 10% of my liquid net worth in Blackstone Private Credit Fund or its affiliates. “Liquid net worth” is defined as that portion of net worth that is comprised of cash, cash equivalents and readily marketable securities. |
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| Initials
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Initials
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| If I am a Maine resident, I acknowledge that it is recommended by the Maine Office of Securities that my aggregate investment in this offering and other similar direct participation investments not exceed 10% of my liquid net worth. For this purpose, “liquid net worth” is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities. |
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| Initials
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Initials
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Sample
| Primary Investor Initials |
Co-Investor Initials | |||||
| If I am a Massachusetts resident, in addition to the suitability standards set forth above, I may not invest more than 10% of my liquid net worth in Blackstone Private Credit Fund and in other illiquid direct participation programs. |
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Initials
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| If I am a Missouri resident, in addition to the suitability standards set forth above, I may not invest more than 10% of my liquid net worth in Blackstone Private Credit Fund. |
|
| ||||
| Initials
|
Initials
| |||||
| If I am a Nebraska resident, I must have (i) either (a) an annual gross income of at least $70,000 and a net worth of at least $70,000, or (b) a net worth of at least $250,000; and (ii) I must limit my aggregate investment in this offering and the securities of other business development companies to 10% of such investor’s net worth. Investors who are accredited investors as defined in Regulation D under the Securities Act of 1933 are not subject to the foregoing investment concentration limit. |
|
| ||||
| Initials
|
Initials
| |||||
| If I am a New Jersey resident, (1) I have either (a) a minimum liquid net worth of at least $100,000 and a minimum annual gross income of not less than $85,000, or (b) a minimum liquid net worth of $350,000. For these purposes, “liquid net worth” is defined as that portion of net worth (total assets exclusive of home, home furnishings, and automobiles, minus total liabilities) that consists of cash, cash equivalents and readily marketable securities. In addition, my total investment in Blackstone Private Credit Fund, its affiliates and other non-publicly traded direct investment programs (including real estate investment trusts, business development companies, oil and gas programs, equipment leasing programs and commodity pools, but excluding unregistered, federally and state exempt private offerings) may not exceed 10% of my liquid net worth, and (2) I acknowledge that although GSO Asset Management LLC (the “Adviser”), the investment adviser to Blackstone Private Credit Fund, will advance all organization and offering expenses of Blackstone Private Credit Fund, and may elect to pay certain of Blackstone Private Credit Fund’s expenses, Blackstone Private Credit Fund is obligated to reimburse the Adviser, and this will reduce the returns available to investors. |
|
| ||||
| Initials
|
Initials
| |||||
| If I am a New Mexico resident, in addition to the general suitability standards listed above, I may not invest, and I may not accept from an investor more than ten percent (10%) of my liquid net worth in shares of Blackstone Private Credit Fund, its affiliates and in other non-traded business development companies. Liquid net worth is defined as that portion of net worth which consists of cash, cash equivalents and readily marketable securities. |
|
| ||||
| Initials
|
Initials
| |||||
| If I am a North Dakota resident, I have a net worth of at least ten times my investment in Blackstone Private Credit Fund. |
|
| ||||
| Initials
|
Initials
| |||||
| If I am an Ohio resident, it is unsuitable to invest more than 10% of my liquid net worth in the issuer, affiliates of the issuer, and in any other non-traded business development company. “Liquid net worth” is defined as that portion of net worth (total assets exclusive of primary residence, home furnishings and automobiles minus, total liabilities) comprised of cash, cash equivalents and readily marketable securities. |
|
| ||||
| Initials
|
Initials
| |||||
| If I am an Oklahoma resident, I may not invest more than 10% of my liquid net worth in Blackstone Private Credit Fund. |
|
| ||||
| Initials
|
Initials | |||||
| If I am an Oregon resident, in addition to the suitability standards set forth above, I may not invest more than 10% of my liquid net worth. Liquid net worth is defined as net worth excluding the value of the investor’s home, home furnishings and automobile. |
|
| ||||
| Initials
|
Initials
| |||||
| If I am a Puerto Rico resident, I may not invest more than 10% of my liquid net worth in Blackstone Private Credit Fund, its affiliates and other non-traded real estate investment programs. For these purposes, “liquid net worth” is defined as that portion of net worth (total assets exclusive of primary residence, home furnishings and automobiles minus total liabilities) consisting of cash, cash equivalents and readily marketable securities. |
|
| ||||
| Initials
|
Initials | |||||
| If I am a Tennessee resident, I must have a liquid net worth of at least ten times my investment in Blackstone Private Credit Fund. |
|
| ||||
| Initials
|
Initials
|
A-8
Sample
| Primary Investor Initials |
Co-Investor Initials | |||||
| If I am a Texas resident, I must have a minimum annual gross income of $85,000 and a minimum net worth of $85,000 or a minimum net worth of $330,000. Net worth shall be determined exclusive of home, home furnishings, and automobiles. In addition to the higher suitability standards set forth above, my aggregate investment in Blackstone Private Credit Fund, its affiliates, and other non- traded direct investment programs (including business development companies, oil and gas programs, real estate investment trusts, equipment leasing programs and commodity pools, but excluding unregistered, federally and state exempt private offerings) may not exceed 10% of my liquid net worth, defined as the portion of an investor’s net worth (total assets exclusive of primary residence, home furnishings and automobiles, minus total liabilities) consisting of cash, cash equivalents and readily marketable securities. |
|
| ||||
| Initials
|
Initials
| |||||
| If I am a Vermont resident and I am an accredited investor in Vermont, as defined in 17 C.F.R. § 230.501, I may invest freely in this offering. In addition to the suitability standards described above, if I am non-accredited Vermont investors, I may not purchase an amount in this offering that exceeds 10% of my liquid net worth. For these purposes, “liquid net worth” is defined as an investor’s total assets (not including home, home furnishings or automobiles) minus total liabilities. | ||||||
| Initials
|
Initials
|
A-9
APPENDIX B: SUPPLEMENTAL PERFORMANCE INFORMATION OF THE ADVISER
The Fund is a recently organized, non-diversified, closed-end management investment company with limited operating history that has elected to be regulated as a BDC under the 1940 Act. The performance information presented below is for funds and accounts currently or previously advised or sub-advised by the Adviser or its affiliates that have investment strategies that are substantially similar to the investment strategies of the Fund (“Similar Accounts”). Performance information is presented for funds and accounts that invest primarily in secured debt investments with a focus on originated transactions, including first and/or second lien senior secured loans and unitranche loans and, to a lesser extent, in subordinated and junior loans and other debt or equity instruments. The Similar Accounts represent all funds and accounts managed by Adviser or its affiliates that have substantially similar investment strategies to the investment strategies of the Fund.
This supplemental performance information is provided to illustrate the past performance of the Adviser and its affiliates, in managing funds and accounts with investment strategies that are substantially similar to the investment strategies of the Fund.
The performance of the Similar Accounts presented below is not the performance record of the Fund and should not be considered a substitute for the Fund’s own performance. Past returns are not indicative of future performance.
Certain of the Similar Accounts are not subject to investment limitations, leverage restrictions, diversification requirements and other restrictions imposed on business development companies by the 1940 Act and RICs under the Code. If these accounts were operated as business development companies and/or RICs their returns might have been lower. The fees and expenses of the Fund may be higher than those of certain of the Similar Accounts. Had the Similar Accounts’ performance reflected the anticipated fees and expenses of the Fund, their performance may have been lower. In addition, although the Similar Accounts have substantially similar investment strategies to the investment strategies of the Fund, the Fund will not always make the same investments as any Similar Accounts, and, therefore, the investment performance of the Fund will differ from the investment performance of the Similar Accounts. For certain of the Similar Accounts, affiliates of the Adviser act or acted as a non-discretionary investment adviser or sub-adviser. Thus, while these affiliates of the Adviser propose or proposed investment opportunities to the advisers or investors of such accounts for investment, such advisers or investors have or had investment discretion to approve or reject such investment recommendations.
The following table sets forth the historical “net” and “gross” annualized total returns of the Similar Accounts for periods ending June 30, 2021.
Similar Accounts*
| 1 year | 3 year | 5 year | 10 year | Since Inception (January 2009) | ||||||
|
Net |
17.7% | 9.7% | 10.1% | 8.6% | 11.1% | |||||
|
Gross |
22.7% | 13.8% | 15.3% | 14.4% | 18.0% |
*Performance presented for the Similar Accounts excludes the three month period ended June 30, 2018, during which the Adviser and its affiliates did not advise or sub-advise any Similar Accounts, except for certain sub-advised funds for which the resignation of the Adviser’s affiliates had already been announced but did not become effective until April 9, 2018.
Returns for periods over one year are annualized. The Similar Accounts include unitized and non-unitized funds with returns for unitized funds calculated on a total return basis and returns for separately managed accounts and non-unitized funds calculated on an internal rate of return basis. Annualized returns for the Similar Accounts are calculated by geometrically linking weighted fund quarterly returns. The historical performance presented above does not reflect the impact of any sales load, transaction or other fees, distribution fees or servicing fees.
“Net” returns are presented after management fees, distribution fees, organizational expenses, fund expenses, and performance-based compensation but before any taxes or tax withholding incurred by investors. “Gross” returns are returns presented before management fees, organizational expenses, fund expenses, performance-based compensation and taxes and tax withholding incurred by investors, which in the aggregate are expected to be substantial.
Blackstone Private Credit Fund
Maximum Offering of $12,500,000,000 in Common Shares
PROSPECTUS
You should rely only on the information contained in this prospectus. No intermediary, salesperson or other person is authorized to make any representations other than those contained in this prospectus and supplemental literature authorized by Blackstone Private Credit Fund and referred to in this prospectus, and, if given or made, such information and representations must not be relied upon. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of these securities. You should not assume that the delivery of this prospectus or that any sale made pursuant to this prospectus implies that the information contained in this prospectus will remain fully accurate and correct as of any time subsequent to the date of this prospectus.
PART C
Other Information
Item 25. Financial Statements And Exhibits
| (1) | Financial Statements |
The following financial statements of Blackstone Private Credit Fund are included in Part A of this Registration Statement.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-2 | ||||
| F-3 | ||||
| F-4 |
| (2) | Exhibits |
C-1
| * |
| (1) | Previously filed on March 5, 2021 with the Registrant’s Annual Report on Form 10-K (File No. 814-01358) and incorporated by reference herein. |
| (2) | Previously filed on December 10, 2020 with the Registrant’s Registration Statement on Form N-2 (File Nos. 333-248432 ) and incorporated by reference herein. |
| (3) | Previously filed on September 30, 2020 with the Registrant’s Registration Statement on Form N-2 (File Nos. 333-248432 ) and incorporated by reference herein. |
| (4) | Previously filed on August 26, 2020 with the Registrant’s Registration Statement on Form N-2 (File No. 333-248432) and incorporated by reference herein. |
| (5) | Previously filed on June 29, 2021 with the Registrant’s Current Report on Form 8-K (File No. 814-01358) and incorporated by reference herein. |
Item 26. Marketing Arrangements
The information contained under the heading “Plan of Distribution” in this Registration Statement is incorporated herein by reference.
Item 27. Other Expenses Of Issuance And Distribution
Not applicable.
Item 28. Persons Controlled By Or Under Common Control
The following list sets forth each of our subsidiaries, the state or country under whose laws the subsidiary is organized, and the percentage of voting securities or membership interests owned by us in such subsidiary:
| Name |
Jurisdiction | Ownership | ||||||
| BCRED BARD PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED BISON PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED BLANCA PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED BUSHNELL PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED CASTLE PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED DENALI PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED GRANITE PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED MAROON PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED MIDDLE PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED SIRIS PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED SUMMIT PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED TWIN PEAKS LLC |
DELAWARE | 100 | % | |||||
| BCRED WISDOM PEAK FUNDING LLC |
DELAWARE | 100 | % | |||||
| BCRED INVESTMENTS LLC |
DELAWARE | 100 | % | |||||
| BCRED BSL CLO 2021-1, LLC |
DELAWARE | 100 | % | |||||
C-2
Item 29. Number Of Holders Of Securities
The following table sets forth the number of record holders of the Registrant’s common shares at June 1, 2021.
| Title of Class |
Number of Record Holders |
|||
| Class S |
5,881 | |||
| Class D |
517 | |||
| Class I |
951 | |||
| Total |
7,349 | |||
Item 30. Indemnification
The information contained under the heading “Description of our Shares.” “Advisory Agreement and Administration Agreement” and “Plan of Distribution—Indemnification” in this Registration Statement is incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the provisions described above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer or controlling person in the successful defense of an action suit or proceeding) is asserted by a Trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is again public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The Registrant obtains and maintains liability insurance for the benefit of its Trustees and officers (other than with respect to claims resulting from the willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office) on a claims-made basis.
Item 31. Business and Other Connections of Adviser
A description of any other business, profession, vocation or employment of a substantial nature in which Blackstone Credit BDC Advisors LLC, and each managing director, director or executive officer of Blackstone Credit BDC Advisors LLC, is or has been, during the past two fiscal years, engaged in for his or her own account or in the capacity of director, officer, employee, partner or trustee, is set forth in Part A of this Registration Statement in the section entitled “Management of the Fund.” Additional information regarding Blackstone Credit BDC Advisors LLC and its officers and managing member is set forth in its Form ADV, as filed with the Securities and Exchange Commission (SEC File No. 801-113393), and is incorporated herein by reference.
Item 32. Location of Accounts and Records
All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, and the rules thereunder are maintained at the offices of:
| (1) |
| (2) | the transfer agent; |
| (3) | the Custodian; |
C-3
| (4) | the Adviser; and |
| (5) | the Administrator. |
Item 33. Management Services
Not Applicable.
Item 34. Undertakings
We hereby undertake:
(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment will be deemed to be a new registration statement relating to the securities offered therein, and the offering of those securities at that time will be deemed to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;
(4) that, for the purpose of determining liability under the Securities Act to any purchaser, if the Registrant is subject to Rule 430C 17 CFR 230.430C: Each prospectus filed pursuant to Rule 497(b), (c), (d) or (e) under the Securities Act 17 CFR 230.497(b), (c), (d) or (e) as part of a registration statement relating to an offering, other than prospectuses filed in reliance on Rule 430A under the Securities Act 17 CFR 230.430A, will be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use; and
(5) that for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distribution of securities. The undersigned Registrant undertakes that in an offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser:
(i) any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 497 under the Securities Act 17 CFR 230.497;
(ii) the portion of any advertisement pursuant to Rule 482 under the Securities Act 17 CFR 230.482 relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and
(iii) any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
C-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the “Securities Act”), the Registrant certifies that this Registration Statement on Form N-2 meets all of the requirements for effectiveness under Rule 486(b) under the Securities Act and has duly caused this Registration Statement on Form N-2 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York on September 2, 2021.
| BLACKSTONE PRIVATE CREDIT FUND | ||
| By: | /s/ Brad Marshall | |
| Name: | Brad Marshall | |
| Title: | Chairperson, Chief Executive Officer and Trustee | |
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacity and on the date indicated.
| Signature |
Title |
Date | ||
| /s/ Brad Marshall |
Chairperson, Chief Executive Officer and Trustee (Principal Executive Officer) | September 2, 2021 | ||
| Chief Financial Officer (Principal Financial Officer) | September 2, 2021 | |||
| /s/ Robert Busch |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) | September 2, 2021 | ||
| /s/ Daniel H. Smith, Jr.* |
Trustee | September 2, 2021 | ||
| /s/ Robert Bass* |
Trustee | September 2, 2021 | ||
| /s/ James F. Clark* |
Trustee | September 2, 2021 | ||
| /s/ Tracy Collins* |
Trustee |
|||
| /s/ Vicki L. Fuller* |
Trustee |
|||
| *By: | /s/ Brad Marshall | |
| Brad Marshall | ||
| As Agent or Attorney-in-Fact |
The original powers of attorney authorizing Brad Marshall, Steve Kuppenheimer, Robert Busch and Marisa J. Beeney to execute the Registration Statement, and any amendments thereto, for the trustees of the Registrant on whose behalf this Amendment is filed have been executed and filed as exhibits to the Registration Statement.
Schedule of Exhibits
| (l) |
| (n) |
| This ‘N-2’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 7/23/26 | ||||
| 6/30/26 | ||||
| 6/17/26 | ||||
| 5/18/26 | ||||
| 3/15/26 | ||||
| 3/3/26 | ||||
| 1/8/26 | ||||
| 5/18/25 | ||||
| 7/23/24 | ||||
| 6/30/24 | ||||
| 6/21/24 | ||||
| 6/17/24 | ||||
| 3/15/24 | ||||
| 3/1/24 | ||||
| 1/8/24 | ||||
| 10/11/23 | ||||
| 7/20/23 | ||||
| 6/30/23 | ||||
| 1/28/23 | ||||
| 10/23/22 | ||||
| 1/28/22 | SC TO-I | |||
| 1/23/22 | ||||
| 1/13/22 | 8-K | |||
| 1/3/22 | ||||
| 12/31/21 | 10-K | |||
| 12/30/21 | ||||
| 11/23/21 | 8-K | |||
| 10/30/21 | ||||
| 10/15/21 | ||||
| 10/11/21 | ||||
| 10/5/21 | ||||
| 9/23/21 | 8-K | |||
| Filed as of: | 9/3/21 | |||
| Filed on: | 9/2/21 | |||
| 8/27/21 | ||||
| 8/26/21 | ||||
| 8/4/21 | 3, 8-K, SC TO-I | |||
| 8/1/21 | ||||
| 7/31/21 | ||||
| 7/28/21 | ||||
| 7/27/21 | ||||
| 7/23/21 | ||||
| 7/21/21 | 8-K | |||
| 7/15/21 | 40-APP/A | |||
| 7/7/21 | ||||
| 7/1/21 | ||||
| 6/30/21 | 10-Q | |||
| 6/29/21 | 8-K | |||
| 6/28/21 | ||||
| 6/22/21 | 486BPOS | |||
| 6/21/21 | ||||
| 6/17/21 | ||||
| 6/1/21 | ||||
| 5/31/21 | ||||
| 5/28/21 | ||||
| 5/26/21 | 8-K | |||
| 5/25/21 | 8-K | |||
| 5/18/21 | 424B3, 8-K | |||
| 5/12/21 | ||||
| 5/1/21 | ||||
| 4/30/21 | ||||
| 4/28/21 | ||||
| 4/27/21 | ||||
| 4/23/21 | 8-K | |||
| 4/15/21 | ||||
| 3/31/21 | 10-Q, 8-K | |||
| 3/30/21 | ||||
| 3/29/21 | ||||
| 3/23/21 | 4 | |||
| 3/15/21 | 8-K | |||
| 3/5/21 | 10-K, 8-K, 8-K/A | |||
| 3/4/21 | 10-K | |||
| 3/3/21 | 8-K | |||
| 3/1/21 | ||||
| 2/28/21 | ||||
| 2/26/21 | ||||
| 2/24/21 | ||||
| 2/10/21 | ||||
| 2/1/21 | ||||
| 1/31/21 | ||||
| 1/29/21 | ||||
| 1/28/21 | 8-K | |||
| 1/26/21 | ||||
| 1/18/21 | ||||
| 1/8/21 | ||||
| 1/7/21 | 4, 8-K | |||
| 12/31/20 | 10-K | |||
| 12/30/20 | ||||
| 12/28/20 | ||||
| 12/15/20 | ||||
| 12/10/20 | 8-K, POS EX | |||
| 12/7/20 | 424B3, 8-K, SC 13D/A | |||
| 11/16/20 | 10-Q, 3 | |||
| 11/3/20 | ||||
| 11/2/20 | 8-K, SC 13D | |||
| 10/21/20 | 4 | |||
| 10/5/20 | 3, 8-A12G, EFFECT, N-54A | |||
| 9/30/20 | 10-Q, N-2/A | |||
| 8/26/20 | N-2, N-6F | |||
| 8/24/20 | ||||
| 8/21/20 | ||||
| 8/18/20 | ||||
| 6/30/20 | ||||
| 3/13/20 | ||||
| 3/11/20 | ||||
| 2/11/20 | ||||
| 1/31/20 | ||||
| 12/31/18 | ||||
| 10/11/18 | ||||
| 10/1/18 | ||||
| 6/30/18 | ||||
| 4/9/18 | ||||
| 1/3/18 | ||||
| 7/27/17 | ||||
| 8/31/16 | ||||
| 10/1/15 | ||||
| 10/1/10 | ||||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 2/14/24 Blackstone Private Credit Fund N-14 8C 5:3M Donnelley … Solutions/FA 8/25/23 Blackstone Private Credit Fund N-2/A 3:19M Donnelley … Solutions/FA 1/13/23 Blackstone Private Credit Fund N-2/A 1:12M Donnelley … Solutions/FA 12/16/22 Blackstone Private Credit Fund N-2/A 5:12M Donnelley … Solutions/FA 7/25/22 Blackstone Private Credit Fund N-14MEF 7/25/22 5:213K Donnelley … Solutions/FA 6/30/22 Blackstone Private Credit Fund N-14 8C/A 7:3M Donnelley … Solutions/FA 4/21/22 Blackstone Private Credit Fund N-2 3:4M Donnelley … Solutions/FA |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 6/29/21 Blackstone Private Credit Fund 8-K:3,5,7,8 6/23/21 2:122K Donnelley … Solutions/FA 3/05/21 Blackstone Private Credit Fund 10-K 12/31/20 21:2.6M Donnelley … Solutions/FA 2/26/21 Blackstone Inc. 10-K 12/31/20 136:33M Donnelley … Solutions/FA 12/10/20 Blackstone Private Credit Fund POS EX 12/10/20 3:125K Donnelley … Solutions/FA 9/30/20 Blackstone Private Credit Fund N-2/A 11:2.8M Donnelley … Solutions/FA 8/27/20 Blackstone Private Credit Fund N-2 15:2.9M Donnelley … Solutions/FA |