false

10-K

Entity Address, Address Line One

450 Park Avenue

Entity Address, State or Province

NY

City Area Code

(212)

Entity Well-known Seasoned Issuer

No

Entity Ex Transition Period

false

Risk Factors [Table Text Block]

Item 1A. Risk Factors

An investment in our common stock involves certain risks relating to our structure and investment objective. The risks set forth below are not the only risks we face, and we may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable. Before making an investment decision, you should carefully consider the following risk factors, together with the other information contained in this Form 10-K. If any of the circumstances described in any of the following risks occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our NAV and the price per share of our common stock could decline significantly, and you may lose all or part of your investment.

Summary of Risk Factors

Risks Relating to Our Business and Structure

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We have a limited operating history.

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We are a non-diversified investment company within the meaning of the 1940 Act; therefore, we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.

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Prior to our formation, our Adviser and its management had no prior experience managing a BDC.

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We are subject to regulatory constraints that may significantly reduce our operating flexibility. If we fail to comply with the regulatory requirements applicable to BDCs, we might be regulated as a closed-end investment company, which would subject us to additional regulatory restrictions.

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We will be subject to U.S. federal income tax imposed at corporate rates on all of our income if we are unable to qualify as a RIC under Subchapter M of the Code, which would have a material adverse effect on our financial performance.

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We are dependent upon the management personnel of our Adviser and Muzinich & Co., and their respective abilities to attract and retain talented personnel, for our future success.

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Our Adviser and its affiliates, officers, investment professionals and employees may have certain conflicts of interest.

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Our ability to grow depends on our ability to raise additional capital, which may not be available to us or may only be available on terms that are not favorable to us.

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We may borrow money and enter into transactions, which may magnify the potential for gain or loss and may increase the risk of investing in us.

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Even if the value of an investor’s investment in us declines, the Management Fee will still be payable to the Adviser. In addition, the structure of the Incentive Fee may induce the Adviser to make more speculative investments than if it were investing for its own account.

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Certain investors will be limited in their ability to make significant investments in us due to restrictions imposed under the 1940 Act.

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Controlling stockholders may exert influence over our management and affairs and control over votes requiring stockholder approval.

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In the future, we may decide to fund a portion of our investments with preferred stock, which would increase our risk profile and magnify the potential for gain or loss.

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Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

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Our Adviser can resign on 60 days’ notice, and the Resource Sharing Agreement may be terminated on 60 days’ notice. We and/or our Adviser, respectively, may not be able to find a suitable replacement within that time, which could adversely affect our financial condition, business and results of operations.

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Our ability to enter into transactions with our affiliates will be restricted.

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We may form one or more collateralized loan obligation vehicles, also known as “CLOs,” to finance our investments, the creation of which may subject us to certain structured financing risks.

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Certain provisions of our Certificate of Incorporation, bylaws, and the Delaware General Corporation Law (“DGCL”) could deter takeover attempts.

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Changes in laws or regulations governing our operations or the operations of our portfolio companies, changes in the interpretation thereof or newly enacted laws or regulations, and any failure by us or our portfolio companies to comply with these laws or regulations, could necessitate changes to certain of our or our portfolio companies’ business practices, negatively impact our or our portfolio companies’ operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.

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Commodity Futures Trading Commission (“CFTC”) rulemakings and provisions under the Code may limit our ability to enter into swap transactions or derivatives, which may have a negative impact on us and our Adviser.

Risks Related to Our Portfolio Company Investments

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Our investments are very risky and highly speculative.

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Investing in middle-market companies involves a number of significant risks.

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We will incur credit risk when we loan money or commit to loan money to a portfolio company.

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The value of our portfolio securities may not have readily available market quotations and, in such a case, our Adviser will determine the fair value of these securities in good faith under procedures adopted by our Board, which valuation is inherently subjective and may not reflect what we may actually realize for the sale of the investment.

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The lack of liquidity in our investments may adversely affect our business.

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Our portfolio may be focused in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies default on their obligations under any of their debt instruments or if there is a downturn in a particular industry.

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Loan prepayments may affect our ability to invest and reinvest available funds in appropriate investments.

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When we are a debt or minority equity investor in a portfolio company, we are often not in a position to exert influence on the entity, and certain decisions made by management of our portfolio companies could negatively impact the value of our investments.

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Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.

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Economic recessions or downturns could impair our portfolio companies and harm our operating results.

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Our debt investments may be risky and we could lose all or part of our investment.

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By originating loans to companies that are experiencing significant financial or business difficulties, we may be exposed to distressed lending risks.

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We have broad discretion over the use of proceeds of the funds we raise from investors, and may use such proceeds in ways with which stockholders may not agree or for purposes other than those contemplated at the time of the capital raise.

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Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio.

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Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies.

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Our portfolio companies may be highly leveraged.

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Our investments in non-U.S. companies may involve significant risks in addition to the risks inherent in U.S. investments.

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We may invest in instruments with a deferred interest feature, which are subject to unique risks.

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We may expose ourselves to risks if we engage in hedging transactions.

Risks Relating to the Offering and Ownership of Our Common Stock

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We may experience fluctuations in our quarterly results.

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Our common stock will be subject to significant transfer restrictions, and an investment in our common stock generally will be illiquid.

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We will incur significant costs as a result of being subject to the Exchange Act.

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We may not be able to pay distributions on our common stock, our distributions may not grow over time and a portion of our distributions may be a return of capital for U.S. federal income tax purposes.

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We may have difficulty paying our required distributions if we recognize taxable income before or without receiving cash representing such income.

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Beneficial owners of our equity securities may be subject to certain regulatory requirements and filing requirements based on their ownership percentages.

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Certain investors may be subject to the short-swing profits rules under the Exchange Act as a result of their investment in us.

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Our stockholders may receive shares of our common stock as dividends, which could result in adverse tax consequences to them.

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If we are not treated as a “publicly offered regulated investment company,” as defined in the Code, U.S. stockholders that are individuals, trusts or estates will be taxed as though they received a distribution of some of our expenses.

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Non-U.S. stockholders may be subject to withholding of U.S. federal income tax on dividends we pay.

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If the current period of capital market disruption and instability continues for an extended period of time, there is a risk that our distributions may not grow over time and a portion of our distributions may be a return of capital.

General Risk Factors

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We operate in a highly competitive market for investment opportunities.

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We are exposed to risks associated with changes in interest rates.

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The capital markets may experience periods of disruption, instability and uncertainty, including at present. Such market conditions may materially and adversely affect debt and equity capital markets in the United States, which may have a negative impact on our business and operations.

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We are susceptible to cybersecurity risks that may result in financial losses or violations of privacy law.

Risks Relating to Our Business and Structure

We have a limited operating history.

We were formed in May 2019. Commensurate with this shorter operating history, we are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially or your investment could become worthless. The results of any other funds or accounts managed by our Adviser or any of its affiliates which have or have had an investment program which is similar to or different from our investment program may not be indicative of the results that we may achieve. We have and expect to have a different investment portfolio and expect to employ different investment strategies and techniques from such other funds and accounts. Accordingly, our results may differ from and are independent of the results obtained by such other funds and accounts.

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, subject to the Diversification Tests in Subchapter M of the Code; as a result, our investments may be concentrated in relatively few portfolio companies or market sectors, increasing the risk of volatility in our performance.

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. Beyond our asset diversification requirements as a RIC under the Code, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies. To the extent that we assume large positions in the securities of a small number of issuers, 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, and we may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company, increasing the risk of volatility in our performance results.

Prior to our formation, our Adviser and its management had no prior experience managing a BDC.

Although Muzinich and its investment team are experienced in managing portfolios of assets, prior to our formation, they had no prior experience managing a portfolio that takes the form of a BDC, and the investment philosophy and techniques used by our Adviser to manage us as a BDC may differ from those previously employed by Muzinich and its investment team in identifying and managing past investments. Accordingly, we can offer no assurance that we will replicate the historical performance of other clients or entities that Muzinich has advised in the past, and our investment returns could be substantially lower than the returns achieved by other clients of Muzinich.

Our day-to-day investment operations are managed by the Adviser. Pursuant to its Resource Sharing Agreement with Muzinich & Co., our Adviser has access to Muzinich’s team of experienced investment professionals. Our Adviser may hire additional investment professionals to provide services to us based upon its needs.

Under the 1940 Act, BDCs are generally required to invest at least 70% of their total assets in securities of “qualifying assets,” which include qualifying U.S. private or thinly traded public companies, cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less from the time of investment. Our Adviser and its Investment Team have limited experience in managing this type of portfolio, which may hinder their respective abilities to take advantage of attractive investment opportunities and, as a result, achieve our investment objective.

We are subject to regulatory constraints that may significantly reduce our operating flexibility. If we fail to comply with the regulatory requirements applicable to BDCs, we might be regulated as a closed-end investment company, which would subject us to additional regulatory restrictions.

The 1940 Act imposes numerous regulatory constraints on the operations of BDCs. For example, as noted above, BDCs generally are required to invest at least 70% of their total assets in “qualifying assets,” as defined in the 1940 Act, and we must maintain a minimum asset coverage ratio of 150% (given our satisfaction of certain conditions under the 1940 Act). Any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants.

Most of our portfolio company investments constitute qualifying assets. However, we may be precluded from investing in what our Adviser believes are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act and more than 30% of our total assets are comprised of investments in non-qualifying assets. If we do not invest at least 70% of our assets in qualifying assets, we will be prohibited from making any additional investment that is not a qualifying asset and may not be able to take advantage of attractive investment opportunities. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies which are not qualifying assets, which could result in the dilution of our position.

In addition, if we fail to comply with the regulations applicable to BDCs, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to additional regulatory restrictions and significantly decrease our operating flexibility.

These constraints, along with the U.S. federal income tax requirements discussed below, may hinder our Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective.

We will be subject to U.S. federal income tax imposed at corporate rates on all of our income if we are unable to qualify as a RIC under Subchapter M of the Code, which would have a material adverse effect on our financial performance.

We have elected to be treated, qualify, and intend to qualify annually as a RIC under Subchapter M of the Code; however, we cannot assure you that we will be able to qualify for and maintain RIC status. To qualify as a RIC, we must meet the Annual Distribution Requirement, 90% Income Test and Diversification Tests described below.

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The Annual Distribution Requirement generally will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our investment company taxable income for each taxable year. We expect to use debt financing, are subject to a minimum asset coverage ratio requirement under the 1940 Act, and are subject to certain financial covenants contained in our credit agreements and other debt financing agreements. This asset coverage ratio requirement and these financial covenants could, under certain circumstances, restrict us from making distributions to our stockholders that are necessary for us to satisfy the Annual Distribution Requirement. If we are unable to obtain cash from other sources, and thus are unable to make sufficient distributions to our stockholders, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax (and in addition to any applicable U.S. state and local taxes).

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The 90% Income Test requirement will be satisfied if we derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities, net income derived from an interest in a qualified publicly traded partnership or other income derived with respect to our business of investing in such stock or securities.

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The Diversification Tests requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. Specifically, to satisfy this requirement (a) at least 50% of the value of our assets must consist of (i) cash, cash items (including receivables), U.S. government securities, securities of other RICs, and (ii) other acceptable securities if such securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and (b) no more than 25% of the value of our assets can be invested in (i) the securities, other than U.S. government securities or securities of other RICs, of one issuer, (ii) the securities, other than the securities of other RICs, of two or more issuers that are controlled by us and which are determined, under applicable Treasury regulations, to be engaged in the same or similar or related trades or businesses, or (iii) the securities of certain qualified publicly traded partnerships. Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of our RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.

If we fail to qualify for or maintain our RIC tax status for any reason, and we do not qualify for certain relief provisions under the Code, we would be subject to U.S. federal income tax (as well as any applicable U.S. state and local taxes). In this event, the resulting taxes could substantially reduce our net assets, the amount of our income available for distribution and, accordingly, the amount of our distributions to our stockholders, which would have a material adverse effect on our financial performance.

We are dependent upon the management personnel of our Adviser and Muzinich & Co., and their respective abilities to attract and retain talented personnel, for our future success.

Our Adviser identifies, evaluates, negotiates, structures, closes, monitors and manages our investments. Pursuant to the Resource Sharing Agreement between our Adviser and Muzinich & Co., Muzinich & Co. provides the Adviser with experienced investment professionals and services so as to enable the Adviser to fulfill these and other obligations of the Adviser under the Investment Management Agreement. Accordingly, in addition to our reliance upon personnel of the Adviser to provide services under the Investment Management Agreement and the risks associated with that reliance (as described below), we also depend on the experience, diligence, skill and network of business contacts of Muzinich & Co. and its investment team for our success. Our operating results and future success may depend significantly on the continued service and coordination of the senior investment professionals of the Adviser and Muzinich & Co. If either of these parties were to lose the services of these investment professionals, our Adviser’s ability to service us could be adversely affected, which could have a material adverse effect on our business, financial condition and results of operations. In addition, we cannot assure you that our Adviser will remain our investment adviser or that we will continue to have access to Muzinich & Co. or its investment professionals under the Resource Sharing Agreement. Moreover, the Resource Sharing Agreement may be terminated by either party on 60 days’ notice; as such, the termination of the Resource Sharing Agreement may have a material adverse consequence on our operations.

Our ability to achieve our investment objective will depend on our Adviser’s ability to identify, invest in and monitor companies that meet our investment criteria. To accomplish this on a cost-effective basis, our Adviser must provide competent, attentive and efficient services to us. Our officers and the investment professionals of our Adviser have substantial responsibilities in connection with their roles at Muzinich & Co. and with respect to other clients of Muzinich & Co. and its subsidiaries, as well as with respect to the Adviser’s responsibilities under the Investment Management Agreement. Further, we may also be called upon to provide significant managerial assistance to certain of our portfolio companies. These and other demands on these individuals’ time may increase as the number of our investments grows, and these demands could be substantial and may slow our rate of investment. In order to grow, our Adviser (and its affiliates, including Muzinich & Co.) may need to hire, train, supervise, manage and retain new employees in a competitive environment, as well as retain their current teams of investment professionals; however, we cannot assure you that they will be able to do so effectively. These parties’ ability to attract and retain personnel with the requisite credentials, experience and skills to manage our business effectively depends on several factors including, but not limited to, their ability to offer competitive wages, benefits and professional growth opportunities. Many of the entities with which Muzinich & Co. competes for experienced personnel, including other investment advisers and/or financial services companies, have greater resources than it has, which may stymie its ability to compete with such peers for this talent.

Our Adviser and its affiliates, officers, investment professionals and employees may have certain conflicts of interest.

Our Adviser and its affiliates, officers, investment professionals and employees serve or may serve as investment advisers, officers, directors or principals of other entities, including investment companies, other BDCs or private funds, that operate in the same or a related line of business as us. Accordingly, these individuals may have obligations to investors in those entities, the fulfillment of which might not be in our best interests or the best interests of our stockholders. Moreover, our Adviser has entered into a Resource Sharing Agreement with Muzinich & Co. whereby Muzinich & Co. provides our Adviser with the resources — including the relevant individuals — necessary to fulfill the Adviser’s obligations under the Investment Management Agreement. Although the Adviser and these individuals will devote as much time to the management of our investments as they deem appropriate to perform their duties in accordance with the Investment Management Agreement and in accordance with reasonable commercial standards, the investment professionals of the Adviser may have conflicts in allocating their time and services among us and other entities they advise. Our Adviser and its affiliates are not restricted from managing and/or forming additional funds, from entering into other investment advisory relationships or from engaging in certain other business activities, even though such activities may involve substantial time and resources of our Adviser and its professional staff. These activities may be viewed as creating a conflict of interest, and any such conflict could inure to the detriment of our performance, financial condition and results of operations.

In addition, an investment vehicle and/or other account managed by the Adviser or its affiliates may have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. As a result of the foregoing, our Adviser and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although our Adviser and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by other clients or entities managed by our Adviser or its affiliates, thereby denying us potential growth opportunities. In certain circumstances, negotiated co-investments between us and other entities managed by our Adviser and/or its affiliates may be made only pursuant to the terms and conditions set forth in the exemptive order that we have obtained from the SEC.

Our ability to grow depends on our ability to raise additional capital, which may not be available to us or may only be available on terms that are not favorable to us.

We may need to periodically access the capital markets to raise cash to fund new investments. We may be unable to raise substantial capital on terms that are favorable to us or at all, which could result in us being unable to structure our investment portfolio as anticipated and achieve our investment objectives.

We expect to use debt financing to fund our growth, if any. Unfavorable economic or general market conditions may increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy, which could decrease our earnings, if any. In addition, difficulty raising capital on favorable terms may arise due to circumstances that are beyond our control, such as a protracted disruption in the credit markets, a severe decline in the value of the U.S. dollar, a general economic downturn or any potential operational problem that affects us or our third-party service providers, and could have a material adverse effect on our business, financial condition and results of operations.

In addition, under specified conditions, we will be permitted to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance (e.g., for every $100 of net assets, we may raise $200 from borrowings and issuing senior securities). The amount of leverage that we will employ will depend on our Adviser’s and our Board of Directors’ assessments of market conditions and other factors at the time of any proposed borrowing or issuance of senior securities.

Furthermore, additional equity capital may be difficult to raise because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price per share less than NAV without first obtaining approval for such issuance from our stockholders and our Independent Directors. We cannot assure you that we will be able to obtain lines of credit, issue additional securities or otherwise raise additional capital at all or on terms that are acceptable to us.

We may borrow money and enter into transactions, which may magnify the potential for gain or loss and may increase the risk of investing in us.

We may borrow from and issue senior debt securities to banks, insurance companies and other lenders or investors as part of our investment strategy, which is known as “leverage.” Holders of these senior securities will have fixed-dollar claims on our assets that are superior to the claims of our common stockholders. If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have if we did not employ leverage. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to declare dividends on our common stock. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. There can be no assurance that we will use leverage or that our leveraging strategy will be successful during any period in which it is employed.

Furthermore, any credit agreement or other debt financing agreement into which we enter may impose financial and operating covenants that restrict our investment activities, our ability to call capital, remedies on default and similar matters. In connection with borrowings, our lenders may also require us to pledge assets, investor commitments to fund capital calls and/or the proceeds of those capital calls, thereby allowing the lender to call for capital contributions upon the occurrence of an event of default under such financing arrangement. To the extent such an event of default does occur, stockholders could therefore be required to fund any shortfall up to their remaining capital commitments without regard to the underlying value of their investment.

Lastly, we may be unable to obtain any desired debt financing, which would affect our ability to execute on our investment strategy and, in turn, our investors’ return on their investment in us.

Even if the value of your investment declines, the Management Fee will still be payable.

Even if the value of your investment declines, the Management Fee will still be payable. The Management Fee is calculated as a percentage of the average of our net asset value (excluding uninvested cash and cash equivalents, which are defined for these purposes as money market funds, U.S. government securities and investment grade debt instruments maturing within one year of our purchase of such instrument) at the end of each of the then-current calendar quarter and the prior calendar quarter. Accordingly, the Management Fee is payable regardless of whether our net asset value and/or the value of your investment has decreased.

The Incentive Fee may induce the Adviser to make speculative investments.

The Incentive Fee payable by us to our Adviser may create an incentive for our Adviser to incur leverage or to make certain investments that are riskier or more speculative than those that might have been made in the absence of such a compensation arrangement. Our Adviser receives the Incentive Fee based on the return of our investment portfolio. As a result, our Adviser may have an incentive to invest in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

Certain investors will be limited in their ability to make significant investments in us.

Private funds that are excluded from the definition of “investment company” pursuant to Section 3(c)(1) or Section 3(c)(7) of the 1940 Act are generally restricted from acquiring directly or through a controlled entity more than 3% of our total outstanding voting stock (measured at the time of the acquisition). As a result, certain investors may be precluded from acquiring additional shares at a time that they might desire to do so, and we will not be able to access or utilize the capital contributions of such investors due to these restrictions.

Controlling stockholders may exert influence over our management and affairs and control over votes requiring stockholder approval.

Certain stockholders may own a significant portion of our common stock. Therefore, these entities may be able to exert influence over our management and policies and may have significant influence on votes requiring stockholder approval. This concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of us, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of us and might ultimately affect the market price of our common stock, should a market for our common stock develop.

In the future, we may decide to fund a portion of our investments by issuing preferred stock, which would increase our risk profile and magnify the potential for gain or loss.

In the future, we may decide to fund investments by issuing preferred stock. Preferred stock, which is a form of leverage, has the same risks to our common stockholders as borrowings because the dividends on any preferred stock we may issue in the future must be cumulative. Payment of such dividends and repayment of the liquidation preference of such preferred stock must take preference over any dividends or other payments to our common stockholders, and preferred stockholders are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference. To the extent we decide to issue preferred stock, investors in our common stock and preferred stock will be subject to these risks, as applicable.

Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

Absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. However, our Board of Directors has the authority to modify or waive certain of our operating policies and strategies, including our investment objective, without prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and the value of our stock. Nevertheless, if such changes were to occur, they could adversely affect our business and financial condition and impact our ability to make distributions.

Our Adviser can resign on 60 days’ notice, and the Resource Sharing Agreement may be terminated on 60 days’ notice. We and/or our Adviser, respectively, may not be able to find a suitable replacement within that time, which could adversely affect our financial condition, business and results of operations.

Under the Investment Management Agreement, our Adviser has the right to resign at any time upon not less than 60 days’ written notice, regardless of whether we have found a replacement. If our Adviser resigns, we may not be able to find a new external investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions (including dividends on our preferred stock, if any) are likely to be adversely affected, and the market price of our common stock, if a market develops, may decline.

Moreover, pursuant to the Resource Sharing Agreement, Muzinich & Co. provides the Adviser with experienced investment professionals and services so as to enable our Adviser to fulfill its obligations under the Investment Management Agreement, and such Resource Sharing Agreement may be terminated on 60 days’ notice. If Muzinich & Co. were to terminate the Resource Sharing Agreement, our Adviser may be required to seek to find an alternative means of fulfilling its obligations under the Investment Management Agreement, or to resign. If the Adviser is unable to find an alternate means of fulfilling these obligations, its services to us may be negatively affected or disrupted, which could have a material impact on our business, financial condition and results of operations

Our Adviser may act in a riskier manner on our behalf than it would when acting for its own account because its responsibilities and liability to us are limited under the Investment Management Agreement.

Pursuant to the Investment Management Agreement, our Adviser and its respective directors, stockholders, officers, employees or controlling persons will not be liable to us for their acts under the Investment Management Agreement, absent willful misfeasance, bad faith or gross negligence in the performance of their duties, a breach of fiduciary duty, or by reason of their reckless disregard of their obligations and duties under the Investment Management Agreement. These protections may lead our Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account, which could impact our business and financial condition.

Our ability to enter into transactions with our affiliates is restricted.

As a BDC, we are prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without, among other things, the prior approval of a majority of our Independent Directors who have no financial interest in the transaction, or in some cases, the provision of exemptive relief from the SEC. For example, any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is deemed our affiliate for purposes of the 1940 Act and, if this is the only reason such person is our affiliate, we are generally prohibited from buying any asset from or selling any asset (other than our capital stock) to such affiliate absent approval of the Independent Directors. The 1940 Act also prohibits “joint” transactions with an affiliate, which could include joint investments in the same portfolio company, without approval of our Independent Directors or, in some cases, the provision of exemptive relief from the SEC. Moreover, except in certain limited circumstances, we are prohibited from buying any asset from or selling any asset to a holder of more than 25% of our voting securities absent prior approval from the SEC. The analysis of whether a particular transaction constitutes a “joint transaction” requires a review of the relevant facts and circumstances then existing.

We may rely on exemptive relief granted to us, the Adviser and certain of its affiliates by the SEC that allows us to engage in co-investment transactions with other funds managed by the Adviser and/or its affiliates, subject to certain terms and conditions. We may co-invest on a concurrent basis with funds managed by our Adviser and/or its affiliates unless doing so is impermissible under existing regulatory guidance, applicable regulations and our allocation procedures. If our Adviser decides not to proceed with an investment on our behalf, the diligence expenses and related costs associated with the investment opportunity will be allocated between us and the other applicable entities pursuant to an expense allocation policy adopted by Muzinich & Co. In certain circumstances, negotiated co-investments may only be made pursuant to the terms and conditions set forth in the exemptive relief we have obtained from the SEC.

We may form one or more collateralized loan obligation vehicles, also known as “CLOs,” to finance our investments, the creation of which may subject us to certain structured financing risks.

To finance investments, we may securitize certain of our investments, including through the formation of one or more CLOs, while retaining all or most of the exposure to the performance of these investments. This would involve contributing a pool of assets to a special purpose entity, selling debt interests in such entity on a non-recourse or limited-recourse basis to purchasers and retaining a debt and/or equity interest in the special purpose entity. Any interest in any such CLO that we hold will be considered a “non-qualifying asset” for purposes of Section 55 of the 1940 Act.

If we create a CLO, we will depend in part on distributions from the CLO’s assets out of its earnings and cash flows to enable us to make distributions to our stockholders. The ability of a CLO to make distributions will be subject to various limitations, including the terms and covenants of the debt it issues. For example, tests based on interest coverage or other financial ratios or other criteria may restrict the CLO’s ability to pay us as holder of the CLO’s debt and/or equity interests. There is no assurance any such performance tests will be satisfied. 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. As a result, there may be a lag, which could be significant, between the repayment or other realization on a loan or other assets in, and the distribution of cash out of, a CLO, or cash flow may be completely restricted for the life of the CLO. If we do not receive cash flow from any such CLO in amounts necessary to satisfy the annual distribution requirement for maintaining our RIC status, and we are unable to obtain cash from other sources necessary to satisfy this requirement, we could fail to maintain our qualification as a RIC, which, if unremedied, would have a material adverse effect on our financial performance.

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 its earnings and, in turn, cash potentially available for distribution to us that we may in turn distribute to our stockholders.

To the extent that any losses are incurred by a CLO in respect of any collateral, such losses will be borne first by us as owner of equity interests. Finally, any equity interests that we retain in a CLO will not be secured by the assets of the CLO, and we will rank behind all creditors of the CLO.

Certain provisions of our Certificate of Incorporation, bylaws, and the DGCL could deter takeover attempts.

The DGCL contains provisions that are intended to discourage, delay or make more difficult a change in control of us or the removal of our directors. Our Certificate of Incorporation and bylaws also contain provisions that limit liability and provide for indemnification of our directors and officers. These provisions and others also could have the effect of deterring hostile takeovers or delaying changes in control or management. We are subject to Section 203 of the DGCL, the application of which is subject to any applicable requirements of the 1940 Act. This section generally prohibits us from engaging in mergers and other business combinations with stockholders that beneficially own 15% or more of our voting stock, or with their affiliates, unless our directors or stockholders approve such a business combination in the prescribed manner. If our Board of Directors does not approve a business combination, Section 203 of the DGCL could discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer.

We have also adopted measures that could make it difficult for a third party to obtain control of us, including provisions of our Certificate of Incorporation classifying our Board of Directors in three classes serving staggered three-year terms, and provisions of our Certificate of Incorporation authorizing our Board of Directors to classify or reclassify shares of our preferred stock, if any, in one or more classes or series, to cause the issuance of additional shares of our common stock or preferred stock, and to amend our Certificate of Incorporation without stockholder approval in certain instances. These provisions, as well as other provisions of our Certificate of Incorporation and bylaws, could delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.

Changes in laws or regulations governing our operations or the operations of our portfolio companies, changes in the interpretation thereof or newly enacted laws or regulations, and any failure by us or our portfolio companies to comply with these laws or regulations, could necessitate changes to certain of our or our portfolio companies’ business practices, negatively impact our or our portfolio companies’ operations, cash flows or financial condition, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.

We and our portfolio companies are subject to regulation by laws and regulations at the local, state, federal and, in some cases, foreign levels. These laws and regulations, as well as their interpretation, are likely to change from time to time, and new laws and regulations may be enacted. Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations and any failure by us or our portfolio companies to comply with these laws or regulations, could require changes to certain of our or our portfolio companies’ business practices, negatively impact our or our portfolio companies’ operations, cash flows or financial condition, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. In addition to the legal, tax and regulatory changes that are expected to occur, there may be unanticipated changes. The legal, tax and regulatory environment for BDCs, investment advisers, and the instruments that they utilize (including, without limitation, derivative instruments) is continuously evolving.

The Dodd-Frank Act impacts many aspects of the financial services industry. Many of the provisions of the Dodd-Frank Act have been implemented, while others still require final rulemaking by regulatory authorities. While the full impact of the Dodd-Frank Act on us and our portfolio companies may not be known for an extended period of time, the Dodd-Frank Act, including current rules and regulations and proposed rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals directed at the financial services industry that are proposed or pending in the U.S. Congress, may negatively impact the operations, cash flows or financial condition of us and our portfolio companies, impose additional costs on us and our portfolio companies, intensify the regulatory supervision of us and our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.

Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulations. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.

As a result of the 2024 U.S. election, the Republican Party currently controls both the executive and legislative branches of government, which increases the likelihood that legislation may be adopted that could significantly affect the regulation of U.S. financial markets. The United States may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the United States. In addition, in June 2024, the U.S. Supreme Court in Loper Bright Enterprises v. Raimondo reversed its longstanding approach under the Chevron doctrine, which provided for judicial deference to regulatory agencies. As a result of this decision, we cannot be sure whether there will be increased challenges to existing agency regulations or how lower courts will apply the Loper decision in the context of other regulatory schemes without more specific guidance from the U.S. Supreme Court. For example, the U.S. Supreme Court’s decision in Loper could significantly impact how federal agencies will regulate consumer protection, advertising, cybersecurity, privacy, anti-corruption and anti-money laundering practices and other regulatory regimes with which we are required to comply. Any such regulatory developments could result in uncertainty about and changes in the ways such regulations apply to us, and may require additional resources to ensure our continued compliance.

Commodity Futures Trading Commission (“CFTC”) rulemakings and provisions of the Code limit our ability to engage in swap transactions or use derivatives, which may have a negative impact on us and our Adviser.

The CFTC and the SEC have issued final rules establishing that certain swap transactions will be subject to CFTC regulation. Engaging in such swap or other commodity interest transactions such as futures contracts or options on futures contracts may cause us to fall within the definition of “commodity pool” under the Commodity Exchange Act and related CFTC regulations. Our Adviser has claimed relief from CFTC registration and regulation as a commodity pool operator (“CPO”) pursuant to CFTC Rule 4.5 with respect to our operations, with the result that we will be limited in our ability to use futures contracts or options on futures contracts or engage in swap transactions. Specifically, CFTC Rule 4.5 imposes strict limitations on using such derivatives other than for hedging purposes, whereby the use of derivatives not used solely for hedging purposes is generally limited to situations where (i) the aggregate initial margin and premiums required to establish such positions does not exceed five percent of the liquidation value of our portfolio, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into; or (ii) the aggregate net notional value of such derivatives does not exceed 100% of the liquidation value of our portfolio. Our use of derivatives may also be limited by the requirements of the Code for qualification as a RIC for U.S. federal income tax purposes. In the event that our Adviser is required to register as a CPO, our disclosure and operations would need to comply with all applicable CFTC regulations, and such compliance increase our operational expenses and negatively impact our business and financial condition.

Risks Related to Our Portfolio Company Investments

Our investments are very risky and highly speculative.

We invest primarily in secured debt, including first lien, second lien and unitranche debt, unsecured debt, including mezzanine debt and, to a lesser extent, in equity instruments of private companies.

Secured Debt. When we make a secured debt investment, we generally take a security interest in the available assets of the portfolio company, including the equity interests of any subsidiaries, which we expect to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our debt investment may decrease in value over time, 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. In some circumstances, our liens could be subordinated to claims of other creditors, such as trade 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 investment. Additionally, unitranche debt is similar to second lien debt and subordinated notes in that such debt typically permits borrowers to incur additional indebtedness evidenced by such debt that represents a larger percentage of the borrower’s total capitalization than would be permitted by a senior secured first lien loan, such unitranche debt is typically priced at interest rates that more closely approximate the average of the pricing available to second lien debt instruments and first lien debt instruments. Unitranche debt typically pays a higher rate of interest than traditional senior debt instruments, but also poses greater risk associated with a lesser amount of asset coverage. Consequently, the fact that our debt is secured does not guarantee that we will receive principal and interest payments according to the debt investment’s terms, or at all, or that we will be able to collect on the loan in full or at all should we be forced to enforce our remedies.

Unsecured Debt, Including Mezzanine Debt. Our unsecured debt investments, including mezzanine debt investments, generally will be subordinated to senior debt that will rank senior to our investment in the event of an insolvency. Mezzanine debt may be issued with or without registration rights. This may result in an above-average amount of risk and loss of principal.

Covenant-Lite Loans. A significant number of leveraged loans in the market may consist of loans that do not contain financial maintenance covenants, which we refer to as “Covenant-Lite Loans.” Although we do not intend to invest in Covenant-Lite Loans as part of our principal investment strategy, it is possible that such loans may comprise a portion of our portfolio. Such loans do not require the borrower to maintain debt service or other financial ratios. Ownership of Covenant-Lite Loans may expose us to different risks, including with respect to liquidity, price volatility, ability to restructure, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.

Equity Investments. When we invest in secured debt or unsecured debt, including mezzanine debt, we may acquire equity securities from the company in which we make the investment. In addition, we may invest in the equity securities of portfolio companies independent of any debt investment. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we hold may not appreciate in value and, in fact, may decline in value. The value of equity securities may fall due to general market and economic conditions, perceptions regarding the markets in which the issuers of the equity securities participate, or factors relating to the specific issuers. 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.

Investing in middle-market companies involves a number of significant risks.

Investing in middle-market companies involves a number of significant risks, including:

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such companies may have limited financial resources, shorter operating histories, narrower product lines, smaller market shares than larger companies and tend to be more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;

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such companies 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 any guarantees we may have obtained in connection with our investment;

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such 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;

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such companies may 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; and

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such 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 incur credit risk when we loan money or commit to loan money to a portfolio company.

We are exposed to credit risk, which is the risk that the value of our investments may change in response to the credit ratings of our portfolio securities or other instruments. High yield bonds, loans and other types of high yield debt securities or other instruments have greater credit risk than higher quality debt securities or other instruments because the companies that issue them are not as financially strong as companies with investment grade ratings and may be highly leveraged. The quality of our portfolio has a significant impact on our earnings. Credit risk is a component of our valuation of our secured floating rate loans and other investments we make. Generally, investment risk and price volatility increase as a security or instrument’s credit rating declines. Increased delinquencies and default rates would impact our results of operations. Deterioration in the credit quality of our portfolio could have a material adverse effect on our business, financial condition and results of operations.

The value of our portfolio securities may not have a readily available market quotation; in such a case, our Adviser, as our valuation designee, will determine the fair value of these investments in good faith under procedures adopted by our Board of Directors, which valuation is inherently subjective and may not reflect what we may actually realize upon sale of the investment.

The majority of our investments are in debt instruments that do not have readily ascertainable market quotations. The fair value of assets for which market quotations are not readily available will be determined by the Adviser, as our valuation designee pursuant to Rule 2a-5 under the 1940 Act, in good faith under procedures adopted by our Board of Directors. Our Adviser may also use the services of independent third-party valuation firms to assist in determining the fair value of any securities. Regardless, the determination of fair value in good faith may involve subjective judgments and estimates, and due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market quotation, the fair value of our investments may differ significantly from the values that would have been used had a readily available market quotation existed for such investments, and the differences could be material. 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 from the valuations currently assigned. Finally, the participation of our Adviser in our valuation process could result in a conflict of interest, since the Management Fee is based in part on our gross assets and also because our Adviser is receiving a performance-based Incentive Fee.

Because fair valuations, and particularly fair valuations of private securities and private companies, are inherently uncertain, the value of our investments may fluctuate over short periods of time and are often based to a large extent on estimates, comparisons and qualitative evaluations of private information. Such factors could make it more difficult for investors to value accurately our investments and could lead to undervaluation or overvaluation of our common stock. In addition, the valuation of these types of securities may result in substantial write-downs and earnings volatility.

Finally, our NAV as of a particular date may be materially greater than or less than the value that would be realized if our assets were to be liquidated as of such date. For example, if we were required to sell a certain asset or all or a substantial portion of our assets on a particular date, the actual price that we would realize upon the disposition of such asset or assets could be materially less than the value of such asset or assets as reflected in our NAV. Volatile market conditions could also cause reduced liquidity in the market for certain assets, which could result in liquidation values that are materially less than the values of such assets as reflected in our NAV.

The lack of liquidity in our investments may adversely affect our business.

Various restrictions render our investments relatively illiquid, which may adversely affect our business. As we generally make investments in private companies, substantially all of these investments are subject to legal and other restrictions on resale or are otherwise less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises, or at times or in quantities that are optimal to maximize our gains on such investments. Therefore, if we are required to or desire to liquidate all or a portion of our portfolio quickly, we could realize significantly less than the value at which we have recorded our investments.

Our portfolio may be focused in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies default on their obligations under any of their debt instruments or if there is a downturn in a particular industry.

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, excluding limitations on investments in other investment companies. The risks of investing in us may be intensified because we are invested in a limited number of portfolio companies. To the extent that we assume large positions in the securities of a small number of issuers or industries, 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 or industry. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. In addition, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment.

A downturn in any particular industry in which we are invested could significantly affect our aggregate returns. As of December 31, 2024, 12.03% of our portfolio at fair value was invested in companies in the leisure products industry, and 10.01% of our portfolio at fair value was invested in the diversified support services sector. Our investments in each of these sectors are subject to certain particularized risks.

Our investments in the leisure products sector are subject to risks associated with changes in consumer preferences, intense competition, supply chain disruptions, macroeconomic risks such as inflation and reductions in discretionary consumer purchasing power, the imposition of new or changing trade measures or restrictions, including tariffs, and unexpected events such as weather conditions and natural catastrophes, among others. Companies operating in the leisure products sector may be especially impacted by macroeconomic changes that reduce consumer purchasing power, including inflationary environments and conditions, given the discretionary nature of these goods. Additionally, such companies may be subject to intense competition and may experience production disruptions as a result of supply chain interruptions or other challenges, including increased demand for raw materials or price increases due to the imposition of trade restrictions, including tariffs. Finally, these companies may experience fluctuations in consumer demand as a result of unexpected or uncontrollable events, including weather conditions and natural catastrophes. Any or all of these phenomena could impact the business, financial condition, and results of operations of any of these portfolio companies and, in turn, our investment in such companies.

Additionally, our investments in companies operating in the diversified support services sector are subject to unique risks. In particular, these companies may be impacted by macroeconomic conditions affecting the industries of their clients, the imposition of new or changing contracting guidelines or mandates at the federal, state, and local levels, generalized contracting risk, labor shortages, and force majeure events. Companies operating in the diversified support services sector typically provide support pursuant to contracts with their clients, including governmental bodies, which are subject to regulation by the applicable government. New legislation or amendments to existing legislation relating to government contracts may impact these contracts and our portfolio companies’ ability to meet standards and criteria imposed by such legislation, which in turn could impact their business, financial condition, and results of operations. Generalized contracting risks, such as the risk of nonpayment or default by such companies’ clients or failure to negotiate provisions or terms that benefit our portfolio company may also impact these companies and their conditions, and other events, such as labor shortages or force majeure events such as natural catastrophes or public health emergencies, including pandemics, could negatively impact demand for such companies’ services, which would, in turn, affect our business, financial condition, and results of operations.

Loan prepayments by our portfolio companies may affect our ability to invest and reinvest available funds in appropriate investments.

Our loans to our portfolio companies may be prepayable, in whole or in part, at any time at the option of the obligor thereof at par plus accrued unpaid interest and prepayment premiums or breakage fees, if any. Prepayments on loans may be caused by a variety of factors and are difficult to predict. Consequently, there exists a risk that loans purchased at a price greater than par may experience a capital loss as a result of such prepayment. In addition, principal proceeds and prepayment premiums or breakage fees, if any, received upon any prepayment are subject to reinvestment risk, and if market spreads have decreased, the interest proceeds that we will earn from reinvestment may be reduced.

When we are a debt or minority equity investor in a portfolio company, we are often not in a position to exert influence on the entity, and certain decisions made by management of our portfolio companies could negatively impact the value of our investments.

We offer to make available managerial assistance to our portfolio companies consistent with 1940 Act requirements. However, when we make debt or minority equity investments, we are often subject to the risk that a portfolio company may make business decisions with which we disagree, or the risk that the other equity holders and management of such company take risks or otherwise act in ways that do not serve our interests. As a result, a portfolio company may make decisions that could decrease the value of our investment and, in turn, our financial condition and results of operations.

Our failure to make follow-on investments in our portfolio companies could dilute our existing investment in such companies or negatively impact the value of our portfolio.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments in order to:

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increase or maintain in whole or in part our equity ownership percentage;

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exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or

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attempt to preserve or enhance the value of our investment.

We will have the discretion to make follow-on investments, subject to potential contractual limitations or the availability of capital resources. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial or preceding investments, or may result in a missed opportunity for us to increase our participation in a successful portfolio company. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with BDC regulatory requirements or other requirements necessary to maintain our status as a RIC.

Economic recessions or downturns could impair our portfolio companies and harm our operating results.

Our portfolio companies may be more susceptible to economic downturns or recessions than more established companies and may be unable to repay our loans during these periods. Therefore, during these periods, our non-performing assets may increase and the value of our portfolio may decrease if we are required to write down the values of our investments. Adverse economic conditions may also decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. 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. These events could prevent us from increasing investments and harm our operating results.

We are subject to covenant-related risks.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, accelerate the time when loans are due and foreclosure on its assets representing collateral for its obligations, which could trigger cross-defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt that we hold and the value of any equity securities we own. Any of these events could negatively impact the value of our investment and, in turn, our results of operations. Further, if any of these risks were to occur, we may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company.

Our debt investments may be risky and we could lose all or part of our investment.

The debt in which we invest is typically not initially rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, Inc. (“Moody’s”) or lower than “BBB-” by Fitch Ratings, Inc. (“Fitch”) or Standard & Poor’s Rating Group, a division of The McGraw-Hill Companies, Inc. (“S&P”)). Such investments are generally referred to as “junk bonds,” “high yield” or “leveraged loans.” Securities in these lower rating categories (or unrated securities but deemed to be of comparable quality) are subject to greater risk of loss of principal and interest than higher-rated securities, and are generally considered to be speculative with respect to the issuer’s ability to pay interest and repay principal. They are also generally considered to be subject to greater risk than securities with higher ratings in the case of deterioration of general economic conditions. High yield securities are generally more volatile and may or may not be subordinated to certain other outstanding securities and obligations of the issuer, which may be secured by substantially all of the issuer’s assets. High yield securities may also not be protected by financial covenants or limitations on additional indebtedness. We also may invest in assets other than first and second lien and mezzanine debt investments, including high-yield securities, U.S. government securities, structured securities and certain direct equity investments. These investments entail additional risks that could adversely affect our investment returns.

By originating loans to companies that are experiencing significant financial or business difficulties, we may be exposed to distressed lending risks.

As part of our lending activities, we may originate loans to companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Although the terms of such financing may result in significant financial returns to us, they involve a substantial degree of risk. The level of analytical sophistication, both financial and legal, necessary for successful financing to 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. During an economic downturn or periods of fluctuating interest rates, such companies may experience stress that would adversely affect their ability to service their principal and interest payment obligations, to meet their projected business goals or to obtain additional financing. In any reorganization or liquidation proceeding relating to a company that we fund, we may lose all or part of the amounts advanced to the borrower or may be required to accept collateral with a value less than the amount of the loan advanced by us to the borrower.

We may be exposed to special risks associated with bankruptcy cases involving our portfolio companies.

Many of the events occurring in the course of a bankruptcy case are adversarial and often beyond the control of the creditors. While creditors generally are afforded an opportunity to object to significant actions, there can be no assurance that a bankruptcy court would not approve actions that may be contrary to our interests. A bankruptcy filing of a portfolio company may adversely and permanently affect the market position and operations of the company. Furthermore, there are instances where creditors can lose their ranking and priority if they are considered to have taken over management of a borrower.

The reorganization of a company can involve substantial legal, professional and administrative costs to a lender and the borrower; it is subject to unpredictable and lengthy delays; and during the process, a company’s competitive position may erode, key management may depart and a company may not be able to invest its capital adequately. In some cases, the debtor company may not be able to reorganize and may be required to liquidate assets. The debt of companies in a financial reorganization will not, in most cases, pay current interest, may not accrue interest during reorganization and may be adversely affected by an erosion of the issuer’s fundamental value.

We may participate on committees formed by creditors to negotiate with debtors with respect to restructuring issues. There can be no assurance that our participation would yield favorable results, and such participation may subject us to additional duties, and trading restrictions. We may also receive illiquid securities in connection with a workout or bankruptcy proceeding, which may be subject to the risks inherent to illiquid securities discussed in this Form 10-K.

In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower’s business or exercised control over the borrower. For example, we could become subject to a lender’s liability claim if, among other things, the borrower requests significant managerial assistance from us and we provide such assistance as contemplated by the 1940 Act. Any such claims could distract our officers or employees of our Adviser or otherwise negatively impact our business or financial condition.

We have broad discretion over the use of proceeds of the funds we raise from investors, and may use such proceeds in ways with which stockholders may not agree or for purposes other than those contemplated at the time of the capital raise.

There can be no assurance that we will be able to locate a sufficient number of suitable investment opportunities to allow us to successfully deploy capital that we raise from investors in a timeframe that will permit investors to earn above-market returns. To the extent we are unable to invest substantially all of the capital we raise within our contemplated timeframe, our investment income, and in turn our results of operations, will likely be materially and adversely affected. See “Risks Relating to Our Business and Structure — We have a limited operating history.”

We have significant flexibility in applying the proceeds of the funds we raise from investors and may use the net proceeds from such capital raisings in ways with which stockholders may not agree, or for purposes other than those contemplated at the time of the capital raise. We will also pay operating expenses, and may pay other expenses such as due diligence expenses associated with potential new investments, from net proceeds. Our ability to achieve our investment objective may be limited to the extent that net proceeds of the funds we raise from investors, pending full investment by us in portfolio companies, are used to pay operating expenses.

Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio.

As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by our Adviser (pursuant to our Board of Directors’ appointment of the Adviser as valuation designee under Rule 2a-5) under procedures adopted by our Board of Directors. To this end, the Adviser may take into account the following types of factors, among others, in determining the fair value of our investments:

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the enterprise value of a portfolio company (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);

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the nature and realizable value of any collateral;

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the portfolio company’s ability to make payments and its earnings and discounted cash flow;

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the markets in which the portfolio company does business;

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a comparison of the portfolio company’s securities to similar publicly traded securities; and

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other relevant factors.

When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Adviser uses the pricing indicated by the external event to corroborate or revise its valuation. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of the valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). As a result, volatility in the capital markets can also adversely affect investment valuations. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. The effect of all of these factors on our portfolio can reduce our NAV by increasing net unrealized depreciation in our portfolio. Depending on market conditions, we could incur substantial realized losses and may suffer unrealized losses, which could have a material adverse impact on our business, financial condition and results of operations.

Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies.

Our portfolio companies may have or may be permitted to incur other debt, or issue other equity securities that rank equally with or senior to our investments. By their terms, such instruments may provide that the holders are entitled to receive payment of dividends, interest or principal on or before the dates on which we are entitled to receive payments in respect of our investments. These debt instruments would usually prohibit the portfolio companies from paying interest on or repaying our investments in the event and during the continuance of a default under such debt. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company typically are entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such holders, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of securities ranking equally with our investments, we would have to share on an equal basis any distributions with other security holders in the event of the insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

The rights we may have with respect to the collateral securing any junior priority loans we make to our portfolio companies 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 senior obligations are outstanding, we may forfeit certain rights with respect to the collateral to the holders of the senior obligations. These rights may include the right to commence enforcement proceedings against the collateral, the right to control the conduct of such enforcement proceedings, the right to approve amendments to collateral documents, the right to release liens on the collateral and the right to waive past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights as junior lenders are adversely affected.

Our portfolio companies may be highly leveraged.

Borrowings by our portfolio companies are not subject to the limitations on borrowings set forth in the 1940 Act. Accordingly, some of our portfolio companies may be highly leveraged, which may have adverse consequences for these companies and for 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. Our investments in these companies will accordingly increase in risk to the extent they incur leverage, thereby increasing the risk of investing in us.

Our investments in non-U.S. companies may involve significant risks in addition to the risks inherent to investments in U.S. companies.

Pursuant to our investment strategy, we may invest in the securities of non-U.S. companies, including companies located in countries with emerging markets, to the extent permissible under the 1940 Act. Such non-U.S. investments would not be considered “qualifying assets,” as defined under Section 55(a) of the 1940 Act, and therefore are limited with all other non-qualifying assets to no more than 30% of our assets. Investing in non-U.S. companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of non-U.S. taxes (potentially at confiscatory levels), less liquid markets, less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. In addition, the legal remedies for investors may be more limited than the remedies available in the United States. Further, there can be no assurance that collateral located in a non-U.S. jurisdiction securing a loan could be readily liquidated or would satisfy the borrower’s obligation in the event of non-payment of scheduled interest or principal payments. The risks of investing in companies located in countries with emerging markets may be greater than the risks associated with investments in foreign countries with developed economies.

From time to time, certain of the companies in which we invest may operate in, or have dealings with, countries subject to sanctions or embargoes imposed by the U.S. Government and the United Nations and/or countries identified by the U.S. Government as state sponsors of terrorism. A company may suffer damage to its reputation if it is identified as such a company and, as an investor in such companies, we will be indirectly subject to those risks. Economic sanctions could, among other things, effectively restrict or eliminate our ability to purchase or sell securities or groups of securities for a substantial period of time, and may make our investments in such securities harder to value. For example, in response to the conflict between Russia and Ukraine, the U.S. government and other governments have imposed severe sanctions, embargoes, and other restrictive actions against Russia and Russian interests and have threatened additional sanctions and controls. Further, such controls have arisen in response to the ongoing conflict in the Middle East. Sanctions, export controls, tariffs, trade wars and other governmental actions resulting from continued conflict between Russia and Ukraine, unrest in the Middle East, and other nations and regions, as well as changing national policy in the United States or other nations, as applicable, could have a material adverse effect on our business, financial condition, cash flows and results of operations, and could cause the market value of our investments to decline.

Any investments we may make that are denominated in a non-U.S. currency will be subject to the risk that the value of that currency will change in relation to the U.S. dollar. Among the factors that may affect currency values are trade balances, the effects of the monetary policies of the United States, foreign governments, central banks or supranational entities, the level of short-term interest rates, differences in relative values of similar assets in different currencies, the imposition of currency controls, long-term opportunities for investment and capital appreciation and political developments. The economies of certain emerging market countries can be significantly affected by currency devaluations. We may, but are not required to, employ hedging techniques to attempt to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us.

We may invest in instruments with a deferred interest feature, which are subject to unique risks.

We may invest in instruments with a deferred interest feature (such as OID, debt instruments with PIK interest or zero-coupon securities). The risks presented by investments in PIK securities may include, but are not limited to, that (i) higher interest rates on PIK securities reflect the payment deferral and increased credit risk associated with such instruments and that such investments generally represent a significantly higher credit risk than coupon loans; (ii) even if accounting conditions were met, the borrower could still default when our actual collection is supposed to occur at the maturity of the obligation; (iii) such securities may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral; and (iv) PIK interest has the effect of generating investment income and increasing the Incentive Fees payable at a compounding rate. In addition, the deferral of PIK interest also reduces the loan-to-value ratio at a compounding rate. Any or all of these events could negatively impact the value of our investment and, accordingly, our returns, financial conditions, and results of operations.

We may expose ourselves to risks if we engage in hedging transactions.

We may enter into hedging transactions, which may expose us to risks associated with such transactions. Such hedging may utilize instruments such as forward contracts, currency options, credit default, interest rate and currency swaps, as well as options thereon, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Credit default swaps carry specific risks including, but not limited to, high levels of leverage, the possibility that premiums are paid for credit default swaps which expire worthless, wide bid/offer spreads and documentation risks. The use of hedging instruments may also entail counterparty risk and may involve commissions or other transaction costs.

Hedging against a decline in the value of any of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.

Currency hedging involves risks, including counterparty risk, illiquidity and, to the extent the view as to certain market movements is incorrect, the risk that the use of hedging could result in losses greater than if they had not been used. In addition, in certain countries in which we may invest, currency hedging opportunities may not be available. The use of currency transactions can result in us incurring losses because of the imposition of exchange controls, suspension of settlements or the inability of us to deliver or receive a specified currency.

The success of any hedging transactions we may enter into will depend on our ability to correctly predict movements in currencies and interest rates. Therefore, while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to (or be able to) establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations.

Risks Relating to the Offering and Ownership of Our Common Stock

We may experience fluctuations in our quarterly results.

We could experience fluctuations in our quarterly operating results due to a number of factors, including interest rates payable on debt investments we make, default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in certain markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Our common stock is subject to significant transfer restrictions, and an investment in our common stock generally will be illiquid.

Each investor in our common stock must be prepared to bear the economic risk of an investment in our common stock for an indefinite period. Shares of our common stock are subject to the restrictions on transfer described herein and as set forth in our Certificate of Incorporation and in such investors’ subscription agreements. In addition, an investment in our common stock is not freely transferable under the securities laws. Further, purchasers of shares of our common stock prior to any IPO and/or listing, if any, will not be permitted to transfer their shares without our prior written consent until a date to be established by us following our IPO and/or listing. If an IPO and/or listing does not occur, our common stockholders will be prohibited from transferring their shares without our prior written consent.

We have no obligation to conduct an IPO and/or listing and can offer no assurances as to whether or when we may conduct an IPO and/or listing. Further, pre-listing stockholders are not expected to be able to sell their common stock until some time after our listing. Even if we consummate an IPO and/or listing, we can offer no assurances as to the price our shares of common stock will be offered in our IPO and/or listing, and they could be sold below the price of this offering.

Shares of our common stock have not been registered under the Securities Act and, therefore, under the securities laws, cannot be sold unless such shares are subsequently registered under the Securities Act or an exemption from such registration is available. Shares of our common stock are illiquid assets for which there is not a secondary market and there is no guarantee that a secondary market will develop in the future. An investment in our common stock is therefore suitable only for certain sophisticated investors that can bear the risks associated with the illiquidity of their common stock.

In the event of any liquidation, dissolution or winding up of our affairs, our common stockholders would receive any remaining net assets only after payment or provision or payment of our debts and other liabilities and subject to the prior rights of any outstanding preferred stock. During the wind-down period, we may begin liquidating all or a portion of our portfolio, and we may deviate from our investment strategy of investing in secured debt, including first lien, second lien and unitranche debt, unsecured debt, including mezzanine debt and, to a lesser extent, in equity instruments of private companies. It is expected that stockholders will receive cash in any liquidating distribution. However, if on the date of termination and dissolution, we own instruments for which no market exists or instruments are trading at depressed prices, such instruments may be placed in a liquidating trust. Stockholders generally will realize capital gain or loss in an amount equal to the difference between the amount of cash or other property received (including any property deemed received by reason of its being placed in a liquidated trust) and the stockholder’s adjusted tax basis in our common stock for U.S. federal income tax purposes.

We will incur significant costs as a result of being subject to the Exchange Act.

Companies incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act, and other rules implemented by the SEC. Accordingly, as a result of our common stock being registered under the Exchange Act, we will incur significant additional costs.

We may not be able to pay distributions on our common stock, our distributions may not grow over time, and a portion of our distributions may be a return of capital for U.S. federal income tax purposes.

We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution. We cannot assure you 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. If we are unable to satisfy the asset coverage test applicable to us as a BDC, or if we violate certain covenants under our credit agreements and other debt financing agreements, if any, our ability to pay distributions to our stockholders could be limited. All distributions will be paid at the discretion of our Board of Directors and will depend on our earnings, financial condition, maintenance of our RIC status, compliance with applicable BDC regulations, compliance with covenants under any credit agreements or debt financing agreements we may enter into, and such other factors as our Board of Directors may deem relevant from time to time. The distributions we pay to our stockholders in a year may exceed our current and accumulated earnings and profits for U.S. federal income tax purposes and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes.

We may have difficulty paying our required distributions if we recognize taxable income before or without receiving cash representing such income.

For U.S. federal income tax purposes, we will include in our taxable income certain amounts that we have not yet received in cash, such as original issue discount or accruals on a contingent payment debt instrument, which may occur if we receive warrants in connection with the origination of a loan or possibly in other circumstances or contracted PIK interest, which generally represents contractual interest added to the loan balance and due at the end of the loan term. Such original issue discount and PIK interest will be included in our taxable income before we receive any corresponding cash payments. We also may be required to include in our taxable income certain other amounts that we will not receive in cash.

Because in certain cases we may recognize taxable income before or without receiving cash representing such income, we may have difficulty making distributions to our stockholders that will be sufficient to enable us to meet the Annual Distribution Requirement necessary for us to be subject to tax as a RIC. Accordingly, we may need to sell some of our assets at times and/or at prices that we would not consider advantageous, we may need to raise additional equity or debt capital, or we may need to forego new investment opportunities or otherwise take actions that are disadvantageous to our business (or be unable to take actions that are advantageous to our business) to enable us to make distributions to our stockholders that will be sufficient to enable us to meet the Annual Distribution Requirement. If we are unable to obtain cash from other sources to meet the Annual Distribution Requirement, we may fail to qualify as a RIC for U.S. federal income tax purposes and, thus, become subject to U.S. federal income tax.

Beneficial owners of our equity securities may be subject to certain regulatory requirements and filing requirements based on their ownership percentages.

A beneficial owner, either directly or indirectly, of more than 25% of our voting securities is presumed to control us under the 1940 Act. Control of us would also arise under the 1940 Act if a person has the power to exercise a controlling influence over our management or policies, unless that power is solely the result of an official position with us. Certain events beyond an investor’s control may result in an increase in the percentage of such investor’s beneficial ownership of our shares, including the repurchase by us of shares from other stockholders. In the event you are or become a person that controls us, you and certain of your affiliated persons will be subject to, among other things, prohibitions or restrictions on engaging in certain transactions with us and certain of our affiliated persons.

A beneficial owner of a large number of our equity securities may also become subject to public reporting obligations in light of our being a public reporting company under the Exchange Act. Ownership information for any person that beneficially owns more than 5% of our common stock will have to be disclosed in a Schedule 13D or 13G, as applicable, 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. Although we will provide you with quarterly statements that state the amount of outstanding stock you own, the responsibility for determining the applicability of the filing obligation and preparing the filing remains with the investor.

Certain investors may be subject to the short-swing profits rules under the Exchange Act as a result of their investment in us.

In light of our common stock being registered under the Exchange Act, persons with the right to appoint a director or who beneficially own more than 10% of our common stock may be subject to Section 16(b) of the Exchange Act, which recaptures for our benefit profits from the purchase and sale of registered stock within a six-month period. These “short-swing profits” rules would negatively impact these investors’ returns.

Our stockholders may receive shares of our common stock as dividends, which could result in adverse tax consequences to them.

In order to satisfy the Annual Distribution Requirement applicable to RICs, we have the ability to declare a large portion of a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash and certain requirements are met, the entire distribution will generally be treated as a dividend for U.S. federal income tax purposes. In such case, for U.S. federal income tax purposes, a shareholder will be treated as receiving dividend income equal to the value of any cash and stock received, even though most of the dividend was paid in shares of our common stock. We currently do not intend to pay dividends in shares of our common stock.

If we are not treated as a “publicly offered regulated investment company,” as defined in the Code, U.S. stockholders that are individuals, trusts or estates will be taxed as though they received a distribution of some of our expenses.

We will be treated as a “publicly offered regulated investment company” (within the meaning of Section 67 of the Code) if either (i) shares of our common stock and our preferred stock collectively are held by at least 500 persons at all times during a taxable year, (ii) shares of our common stock are treated as regularly traded on an established securities market or (iii) shares of our common stock are continuously offered pursuant to a public offering (within the meaning of Section 4 of the Securities Act). We cannot assure you that we will be treated as a publicly offered regulated investment company. If we are not treated as a publicly offered regulated investment company for the applicable calendar year, each U.S. stockholder that is an individual, trust or estate will be treated as having received a dividend from us in the amount of such U.S. stockholder’s allocable share of the management and incentive fees paid to our Adviser and certain of our other expenses for such calendar year, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S. stockholder. For taxable years beginning before 2026, miscellaneous itemized deductions generally are not deductible by a U.S. stockholder that is an individual, trust or estate. For taxable years beginning in 2026 or later, miscellaneous itemized deductions generally are deductible by a U.S. stockholder that is an individual, trust or estate only to the extent that the aggregate of such U.S. stockholder’s miscellaneous itemized deductions exceeds 2% of such U.S. stockholder’s adjusted gross income for U.S. federal income tax purposes, are not deductible for purposes of the alternative minimum tax and are subject to the overall limitation on itemized deductions under the Code.

Non-U.S. stockholders may be subject to withholding of U.S. federal income tax on dividends we pay.

Subject to the discussion below, distributions of our investment company taxable income to a non-U.S. stockholder that are not effectively connected with the non-U.S. stockholder’s conduct of a trade or business within the United States may be subject to withholding of U.S. federal income tax at a 30% rate (or lower rate provided by an applicable income tax treaty) to the extent of our current or accumulated earnings and profits.

Certain properly designated dividends are generally exempt from withholding of U.S. federal income tax where they are paid in respect of a RIC’s (i) “qualified net interest income” (generally, its U.S.-source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which the RIC or the non-U.S. stockholder are at least a 10% stockholder, reduced by expenses that are allocable to such income) or (ii) “qualified short-term capital gains” (generally, the excess of the RIC’s net short-term capital gain over the RIC’s long-term capital loss for such taxable year), and certain other requirements are satisfied.

No assurance can be given as to whether any of our distributions will be eligible for this exemption from withholding of U.S. federal income tax or, if eligible, will be designated as such by us. In the case of common stock held through an intermediary, the intermediary may withhold U.S. federal income tax even if we designate the payment as a dividend derived from qualified net interest income or qualified short-term capital gain. Also, because our common stock will be subject to significant transfer restrictions, and an investment in our common stock will generally be illiquid, non-U.S. stockholders whose distributions on our common stock are subject to withholding of U.S. federal income tax may not be able to transfer their shares of our common stock easily or quickly or at all.

If the current period of capital market disruption and instability continues for an extended period of time, there is a risk that our distributions may not grow over time and a portion of our distributions may be a return of capital.

We intend to make distributions to our stockholders out of assets legally available for distribution. We cannot assure you 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 Annual Report on Form 10-K. For example, if market disruptions (including disruptions to the energy markets), sanctions, or embargoes in connection with the conflict between Russian and Ukraine or the conflict in the Middle East continue or worsen, it could result in reduced cash flows to us from our portfolio companies, which could reduce cash available for distribution to our stockholders. If we are unable to satisfy the asset coverage test applicable to us under the 1940 Act as a BDC we may be limited in our ability to make distributions. To the extent we make distributions to stockholders that include a return of capital, such portion of the distribution essentially constitutes a return of the stockholder’s investment. Although such return of capital may not be taxable, such distributions would generally decrease a stockholder’s basis in our common stock and may therefore increase such stockholder’s tax liability for capital gains upon the future sale of such stock. A return of capital distribution may cause a stockholder to recognize a capital gain from the sale of our common stock even if the stockholder sells its shares for less than the original purchase price.

Investing in our common stock involves a high degree of risk.

The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and volatility or loss of principal. As a result, there is a risk that you may lose all or a portion of your money by investing in us. Our investments in portfolio companies may be highly speculative and aggressive, and therefore, an investment in our common stock may not be suitable for someone with lower risk tolerance.

General Risk Factors

We operate in a highly competitive market for investment opportunities.

The activity of identifying and completing the types of investment opportunities targeted by our Adviser is highly competitive and involves a significant degree of uncertainty. A number of entities compete with us to make the types of investments that we make in middle-market companies. We compete with other BDCs, commercial and investment banks, commercial financing companies, collateralized loan obligations, private funds, including hedge funds and, to the extent they provide an alternative form of financing, private equity funds. Many of our competitors are more experienced, substantially larger and have considerably greater financial, technical and marketing resources than we do. Some competitors may have a lower cost of funds 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, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, certain of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC and that the Code will impose on us as a RIC. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to secure attractive investment opportunities from time to time. Moreover, it is possible that competition for appropriate investment opportunities may increase, thus further reducing the number of opportunities available to us.

We do not seek to compete primarily based on the interest rates we offer, and our Adviser believes that some of our competitors may make loans with interest rates that are comparable to or lower than the rates we offer. Rather, we seek to differentiate ourselves from our competitors based on our reputation in the market, existing investment platform, the seasoned investment professionals of our Adviser, our experience and focus on middle-market companies, disciplined investment philosophy, extensive industry focus and relationships and flexible transaction structuring. We may, however, lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we do match our competitors’ pricing, terms and structure, on the other hand, we may experience decreased net interest income and increased risk of credit loss. As a result of operating in such a competitive environment, we may make investments that are on less favorable terms than what we may have originally anticipated, which may impact our return on these investments.

Furthermore, our business model depends to a significant extent upon strong referral relationships to generate investment opportunities. We depend upon Muzinich to maintain its relationships with financial intermediaries (including regional banks), private equity investment firms, lawyers, accountants, experienced senior management teams and other middle-market lenders, and we expect to rely to a significant extent upon these relationships to provide us with potential investment opportunities. If Muzinich fails to maintain such relationships, or to develop new relationships with other sources of investment opportunities, we may not be able to grow our investment portfolio. In addition, individuals with whom Muzinich has relationships are not obligated to provide us with investment opportunities, and we can offer no assurance that these relationships will generate investment opportunities for us in the future.

We are exposed to risks associated with changes in interest rates.

Increases in the general level of interest rates from 2022 to 2024 have led to higher interest rates applicable to our debt investments, which may result in an increase of the amount of incentive fees payable to the Adviser. Although the Federal Reserve cut interest rates at the end of 2024, the elevated interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our distribution rate, which could reduce the value of our common stock. 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, our cost of funds would increase except to the extent we have issued fixed rate debt or preferred stock, which could reduce our net investment income. Conversely, in periods of declining interest rates, we may earn less interest income from investments and our cost of funds will also decrease, to a lesser extent, resulting in lower net investment income.

You should also be aware that an increase 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 the general level of interest rates would make it easier for us to meet or exceed the performance threshold in the Investment Management Agreement and may result in an increase in the amount of the Incentive Fee payable to our Adviser with respect to ordinary income.

The capital markets may experience periods of disruption, instability and uncertainty, including at present. Such market conditions may materially and adversely affect debt and equity capital markets in the United States, which may have a negative impact on our business and operations.

From time to time, capital markets may experience periods of disruption and instability. For example, from 2008 to 2009, the global capital markets were unstable as evidenced by the lack of liquidity in the debt capital markets, significant write-offs in the financial services sector, the repricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of the U.S. federal government and various foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. While market conditions have improved since this disruption, there have been periods of volatility and there can be no assurance that adverse market conditions will not repeat themselves in the future. If such adverse and volatile market conditions occur, we and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital in order to grow. Equity capital may be particularly difficult to raise during periods of adverse or volatile market conditions because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than NAV per share without first obtaining approval for such issuance from our stockholders and our Independent Directors.

Moreover, the re-appearance of market conditions similar to those experienced from 2008 through 2009 for any substantial length of time could make it difficult for us to borrow money or for us to extend the maturity of or refinance any indebtedness we may have under similar terms and any failure to do so could have a material adverse effect on our business.

During periods of volatility and dislocation in the capital markets, many BDCs have faced, and may in the future face, a challenging environment in which to raise or access capital. In addition, periods of volatility and disruption have caused in recent years, and in the future may cause, a negative effect on the valuations of BDCs’ investments and on the potential for liquidity events involving such investments. While most of our investments are not expected to be publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). As a result, volatility in the capital markets can adversely affect our investment valuations. Further, the illiquidity of our investments may make it difficult for us to sell such investments to access capital if required. As a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes. In addition, a prolonged period of market illiquidity may cause us to reduce the volume of loans and debt securities we originate and/or fund and adversely affect the value of our portfolio investments, which could have a material and adverse effect on our business, financial condition, results of operations and cash flows. An inability to raise or access capital could have a material adverse impact on our business, financial condition or results of operations.

The U.S. capital markets have experienced extreme volatility and disruption following the global outbreak of COVID-19. The ongoing conflict between Russia and Ukraine, and the resulting sanctions, embargoes, and other restrictive actions against Russia, as well as the conflict in the Middle East have contributed to significant volatility, disruptions, and uncertainty, which could also lead to an economic downturn. An economic downturn could be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. These events may limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments.

We and our service providers may be susceptible to cybersecurity risks that may result in financial losses or violations of privacy law.

We and our service providers may be susceptible to cybersecurity risks that include, among other things, theft, unauthorized monitoring, release, misuse, loss, destruction or corruption of confidential and highly restricted data; denial of service attacks; unauthorized access to relevant systems, compromises to networks or devices that we and our service providers use to service our operations; or operational disruption or failures in the physical infrastructure or operating systems that support us and our service providers. Cyberattacks against us or our service providers, or security breakdowns that we or our service providers experience, may adversely impact us and stockholders, potentially resulting in, among other things: financial losses, the inability to process transactions, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs. We may incur additional costs for cybersecurity risk management and remediation purposes. In addition, cybersecurity risks may also impact the portfolio companies in which we invest, which may cause our investment to lose value. There can be no assurance that we or our service providers will not suffer losses relating to cyberattacks or other information security breaches in the future.

We are susceptible to cybersecurity risks that may result in financial losses or violations of privacy law.

We and our service providers are susceptible to cyber security risks that include, among other things, theft, unauthorized monitoring, release, misuse, loss, destruction or corruption of confidential and highly restricted data; denial of service attacks; unauthorized access to relevant systems, compromises to networks or devices that we and our service providers use to service our operations; or operational disruption or failures in the physical infrastructure or operating systems that support us and our service providers. Cyber-attacks against or security breakdowns of us or our service providers may adversely impact us and stockholders, potentially resulting in, among other things, financial losses; the inability to process transactions; violations of applicable privacy and other laws; regulatory fines, penalties, reputational damage, reimbursement or other compensation costs; and/or additional compliance costs. We may incur additional costs for cyber security risk management and remediation purposes. In addition, cyber security risks may also impact the portfolio companies in which we invest, which may cause our investment to lose value. There can be no assurance that we or our service providers will not suffer losses relating to cyber-attacks or other information security breaches in the future.

NAV Per Share

$ 1,016.2

$ 1,047.73

$ 1,045.12

$ 1,070.38

$ 995.02

$ 981.81

General Description of Registrant [Abstract]

Muzinich BDC, Inc. 10-K