Fair Value of Investments

9 Months Ended

Sep. 30, 2025

Fair Value of Investments [Abstract]

7. Fair Value of Investments

Fair value is defined as the price that the Company would receive upon selling an investment or paying to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. Accounting guidance emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs.

The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the investment as of the measurement date. The three levels are defined as follows:

Level 1	—	Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2	—	Valuations based on inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable at the measurement date. This category includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in non-active markets including actionable bids from third parties for privately held assets or liabilities, and observable inputs other than quoted prices such as yield curves and forward currency rates that are entered directly into valuation models to determine the value of derivatives or other assets or liabilities.

Level 3	—	Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date.

The inputs for the determination of fair value may require significant management judgment or estimation and are based upon the Adviser’s assessment of the assumptions that market participants would use in pricing the assets or liabilities. These investments include debt and equity investments in private companies or assets valued using the market or income approach and may involve pricing models whose inputs require significant judgment or estimation because of the absence of any meaningful current market data for identical or similar investments. The inputs in these valuations may include, but are not limited to, capitalization and discount rates and earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples. The information may also include pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by a disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence.

Pricing inputs and weightings applied to determine fair value require subjective determination. Accordingly, valuations do not necessarily represent the amounts that may eventually be realized from sales or other dispositions of investments.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables present the fair value hierarchy of the Company’s investments as of September 30, 2025 and December 31, 2024:

	Fair Value Hierarchy as of September 30, 2025
Description	Level 1		Level 2		Level 3		Total
Senior Secured Loan Debt Instruments	$	-	$	-	$	109,417,691	$	109,417,691
Equity Investments - Common Stock		-		-		4,328,103		4,328,103
Equity Investments - Preferred Stock		-		-		3,482,843		3,482,843
Short-Term Investments		-		115,237,061		-		115,237,061
Cash Equivalents		4,135		-		-		4,135
Total	$	4,135	$	115,237,061	$	117,228,637	$	232,469,833

	Fair Value Hierarchy as of December 31, 2024
Description	Level 1		Level 2		Level 3		Total
Senior Secured Loan Debt Instruments	$	-	$	-	$	139,921,361	$	139,921,361
Equity Investments – Common Stock		-		-		3,957,055		3,957,055
Equity Investments – Preferred Stock		-		-		3,656,818		3,656,818
Short-Term Investments		-		136,650,611		-		136,650,611
Total	$	-	$	136,650,611	$	147,535,234	$	284,185,845

The following tables present changes in the fair value of the Company’s investments for which Level 3 inputs were used to determine the fair value as of and for the nine months ended September 30, 2025 and 2024:

Senior Secured Loan Debt Instruments	For the nine months ended September 30, 2025			For the nine months ended September 30, 2024
Fair value, beginning of period	$	139,921,361		$	139,554,926
Purchases of investments		1,670,250			6,282,285
Proceeds from principal pre-payments and sales of investments		(18,328,286	)		(10,799,451	)
Net realized gain (loss)		-			-
Net change in unrealized appreciation/(depreciation)		(19,366,136	)		(2,726,816	)
Net accretion of discount on investments		5,520,502			4,706,312
Transfers into (out of) Level 3		-			-
Fair value, end of period	$	109,417,691		$	137,017,256

Equity Investments - Common Stock	For the nine months ended September 30, 2025		For the nine months ended September 30, 2024
Fair value, beginning of period	$	3,957,055	$	5,998,844
Purchases of investments		159,943		400,000
Proceeds from sales of investments		-		-
Net realized gain (loss)		-		-
Net change in unrealized appreciation/(depreciation)		211,105		(1,707,251	)
Transfers into (out of) Level 3		-		-
Fair value, end of period	$	4,328,103	$	4,691,593

Equity Investments - Preferred Stock	For the nine months ended September 30, 2025			For the nine months ended September 30, 2024
Fair value, beginning of period	$	3,656,818		$	6,356,894
Purchases of investments		231,646			268,083
Proceeds from sales of investments		(55,201	)		(19,193	)
Net realized gain (loss)		-			-
Net change in unrealized appreciation/(depreciation)		(405,621	)		275,847
Net accretion of discount on investments		55,201			19,193
Transfers into (out of) Level 3		-			-
Fair value, end of period	$	3,482,843		$	6,900,824

The following table presents the net change in unrealized appreciation/(depreciation) for the period relating to these Level 3 assets that were still held by the Company as of and for the nine months ended September 30, 2025 and 2024:

Net Change in Unrealized Appreciation/(Depreciation)	For the nine months ended September 30, 2025			For the nine months ended September 30, 2024
Senior Secured Loan Debt Instruments	$	(19,366,136	)	$	(2,726,816	)
Equity Investments - Common Stock		211,105			(1,707,251	)
Equity Investments - Preferred Stock		(405,621	)		275,847
Total	$	(19,560,652	)	$	(4,158,220	)

The following tables present quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of September 30, 2025 and December 31, 2024. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Adviser’s determination of fair value.

	Fair Value as of September 30, 2025		Valuation Technique	Unobservable Input	Range/Input		Weighted Average Inputs
Senior Secured Loan Debt Instruments	$	109,417,691	Discounted cash flow	Discount rate		3.47% - 31.39%		8.70	%
Equity Investments - Common Stock	$	4,328,103	Market approach	EBITDA multiples		3.53x - 6.81x		5.62	x
Equity Investments - Preferred Stock	$	3,482,843	Market approach	EBITDA multiples		5.31x - 7.57x		6.90	x

Total	$	117,228,637

	Fair Value as of December 31, 2024		Valuation Technique	Unobservable Input	Range/Input		Weighted Average Inputs
Senior Secured Loan Debt Instruments	$	139,921,361	Discounted cash flow	Discount rate		5.80% - 17.33%		9.05	%
Equity Investments - Common Stock	$	3,957,055	Market approach	EBITDA multiples		3.82x - 7.73x		6.20	x
Equity Investments - Preferred Stock	$	3,656,818	Market approach	EBITDA multiples		5.62x - 13.19x		7.15	x
Total	$	147,535,234

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details

Muzinich BDC, Inc. 10-Q