Annual report pursuant to Section 13 and 15(d)

INVESTMENTS (Tables)

v3.23.1
INVESTMENTS (Tables)
 12 Months Ended
Mar. 31, 2023
Investments, Debt and Equity Securities [Abstract]  
Fair Value, Assets Measured on Recurring Basis
As of March 31, 2023 and 2022, our investments, by security type, at fair value were categorized as follows within the ASC 820 fair value hierarchy:
Fair Value Measurements
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of March 31, 2023:
Secured first lien debt
 $ 437,517  $ —  $ —  $ 437,517 
Secured second lien debt
 75,734  —  —  75,734 
Preferred equity
 222,585  —  — 

222,585 
Common equity/equivalents
 17,707  — 

27 
(A)

17,680 
Total Investments at March 31, 2023
 $ 753,543  $ —  $ 27  $ 753,516 
Fair Value Measurements
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of March 31, 2022:
Secured first lien debt
 $ 425,087  $ —  $ —  $ 425,087 
Secured second lien debt
 67,958  —  —  67,958 
Preferred equity
 217,599  —  —  217,599 
Common equity/equivalents
 3,752  — 

74 
(A)
 3,678 
Total Investments at March 31, 2022
 $ 714,396  $ —  $ 74  $ 714,322 
(A)Fair value was determined based on the closing market price of shares of Funko, Inc. (our units in Funko can be converted into common shares of Funko, Inc.) at the reporting date less a discount for lack of marketability, as our investment was subject to certain restrictions.

The following table presents our investments, valued using Level 3 inputs within the ASC 820 fair value hierarchy, and carried at fair value as of March 31, 2023 and 2022, by caption on our accompanying Consolidated Statements of Assets and Liabilities, and by security type:

Total Recurring Fair Value Measurements
Reported in Consolidated Statements
of Assets and Liabilities
Valued Using Level 3 Inputs

March 31,

2023 2022
Non-Control/Non-Affiliate Investments
Secured first lien debt
 $ 279,748  $ 233,673 
Secured second lien debt
 50,842  66,917 
Preferred equity
 164,534  139,927 
Common equity/equivalents(A)
1,724  1,533 
Total Non-Control/Non-Affiliate Investments
 496,848  442,050 

Affiliate Investments
Secured first lien debt
 157,769  191,414 
Secured second lien debt
 24,892  1,041 
Preferred equity
 58,051  77,672 
Common equity/equivalents
 15,243  1,432 
Total Affiliate Investments
 255,955  271,559 

Control Investments
Secured first lien debt
 —  — 
Secured second lien debt
 —  — 
Preferred equity
 —  — 
Common equity/equivalents
 713  713 
Total Control Investments
 713  713 

Total investments at fair value using Level 3 inputs
 $ 753,516  $ 714,322 
(A)Excludes our investment in Funko with a fair value of $27 thousand and $74 thousand as of March 31, 2023 and 2022, respectively, which was valued using Level 2 inputs.
Fair Value Measurement Inputs and Valuation Techniques The weighted-average calculations in the table below are based on the principal balances for all debt-related calculations and on the cost basis for all equity-related calculations for the particular input.
Quantitative Information about Level 3 Fair Value Measurements
Fair Value as of
Valuation
Technique/
Methodology
 Unobservable
Input		 Range / Weighted-Average as of
March 31, 2023 March 31, 2022 March 31, 2023 March 31, 2022
Secured first lien debt $ 432,126  $ 411,023  TEV EBITDA multiple
4.4x – 7.7x /
6.4x
3.4x – 9.3x /
7.0x
EBITDA
$4,251 – $19,083 /
$10,764
$3,990 – $13,707 /
$8,221
Revenue multiple
0.3x – 0.6x /
0.3x
0.7x – 0.7x /
0.7x
Revenue
$15,483 – $109,615 /
$94,957
$14,072 – $14,072 / $14,072
5,391  14,064  Yield Analysis Discount Rate
19.4% – 19.9% / 19.7%
11.3% – 15.2% /
14.6%
Secured second lien debt 62,750  39,637  TEV EBITDA multiple
5.4x – 6.6x /
6.2x
5.6x – 6.8x /
6.0x
EBITDA
$4,112 – $6,379 /
$5,501
$3,953 – $5,488 /
$4,959
Revenue multiple N/A
0.7x – 0.7x /
0.7x
Revenue N/A
$14,072 – $14,072 /
$14,072
12,984  28,321  Yield Analysis Discount Rate
14.0% – 14.0% /
14.0%
10.0% – 12.2% /
 11.6%
Preferred equity 222,585  217,599  TEV EBITDA multiple
4.4x – 7.7x /
5.9x
3.4x – 9.3x /
6.8x
EBITDA
$4,251 – $19,083 /
$9,486
$1,210 – $13,707 /
$6,926
Revenue multiple
0.3x – 0.6x /
0.4x
0.7x – 0.7x /
0.7x
Revenue
$15,483 – $109,615 /
$69,247
$14,072 – $14,072 /
$14,072
Common equity/equivalents(A)
17,680  3,678  TEV EBITDA multiple
4.7x – 7.2x /
6.4x
4.8x – 8.4x /
5.8x

EBITDA
$1,105 – $30,833 /
$6,273
$829 – $13,707 /
$5,709

Revenue multiple N/A
0.7x – 0.7x /
0.7x

Revenue N/A
$14,072 – $14,072 /
$14,072
Total $ 753,516  $ 714,322 
(A)Fair value as of both March 31, 2023 and 2022 excludes our investment in Funko with a fair value of $27 thousand and $74 thousand, respectively, which was valued using Level 2 inputs.
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation
The following tables provide our portfolio’s changes in fair value, broken out by security type, during the years ended March 31, 2023 and 2022 for all investments for which the Adviser determines fair value using unobservable (Level 3) inputs.
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

 Secured
First Lien
Debt		 Secured
Second Lien
Debt		 Preferred
Equity		 Common
Equity/
Equivalents		 Total
Year ended March 31, 2023:
Fair value as of March 31, 2022
 $ 425,087  $ 67,958  $ 217,599  $ 3,678  $ 714,322 
Total gain (loss):


Net realized gain (loss)(A)
—  (10,000) 20,778  —  10,778 
Net unrealized appreciation (depreciation)(B)
(29,552) (5,235) 11,216  13,622  (9,949)
Reversal of previously recorded (appreciation) depreciation upon realization(B)
—  10,001  (12,250) —  (2,249)
New investments, repayments and settlements(C):


Issuances / originations
 107,200  5,188  21,000  380  133,768 
Settlements / repayments
 (50,800) (6,596) —  —  (57,396)
Sales(D)
—  —  (35,758) —  (35,758)
Transfers(E)
(14,418) 14,418  —  —  — 
Fair value as of March 31, 2023
 $ 437,517  $ 75,734  $ 222,585  $ 17,680  $ 753,516 

Secured
First Lien
Debt		 Secured
Second Lien
Debt		 Preferred
Equity		 Common
Equity/
Equivalents		 Total
Year ended March 31, 2022:
Fair value as of March 31, 2021
 $ 368,688  $ 102,897  $ 159,478  $ 2,671  $ 633,734 
Total gain (loss):


Net realized gain (loss)(A)
(10,000) —  23,725  —  13,725 
Net unrealized appreciation (depreciation)(B)
756  2,956  111,405  (15,027) 100,090 
Reversal of previously recorded (appreciation) depreciation upon realization(B)
860  —  (26,053) —  (25,193)
New investments, repayments and settlements(C):


Issuances / originations
 68,638  9,648  14,472  —  92,758 
Settlements / repayments
 (48,898) (2,500) —  —  (51,398)
Sales
 —  —  (49,394) —  (49,394)
Transfers(E)
45,043  (45,043) (16,034) 16,034  — 
Fair value as of March 31, 2022
 $ 425,087  $ 67,958  $ 217,599  $ 3,678  $ 714,322 
(A)Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of Operations for the respective years ended March 31, 2023 and 2022.
(B)Included in net unrealized appreciation (depreciation) of investments on our accompanying Consolidated Statements of Operations for the respective years ended March 31, 2023 and 2022.
(C)Includes increases in the cost basis of investments resulting from new portfolio investments, the amortization of discounts, and other non-cash disbursements to portfolio companies, as well as decreases in the cost basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs, and other cost-basis adjustments.
(D)Includes $13.4 million of proceeds from the recapitalization of Old World Christmas, Inc. ("Old World") and $12.3 million of proceeds from the recapitalization of Horizon Facilities Services, Inc ("Horizon").
(E)2023: Transfers include (1) secured second lien debt of Ginsey with a total cost basis and fair value of $12.2 million, which was converted into secured first lien debt in August 2022 and (2) secured first lien debt of PSI Molded Plastics, Inc. with a total cost basis and fair value of $26.6 million, which was converted into secured second lien debt in September 2022.
2022: Transfers represent (1) secured second lien debt of J.R. Hobbs with a total cost basis and fair value of $52.5 million and $$52.4 million, respectively, which was converted into secured first lien debt in June 2021, (2) secured first lien debt of D.P.M.S., Inc. ("Danco") with a total cost basis and fair value of $12.3 million and $7.3 million, respectively, which was converted into secured second lien debt of Galaxy Technologies Holdings, Inc. (“Galaxy Technologies Holdings”) in September 2021, (3) preferred equity of Galaxy Technologies, Inc. ("Galaxy") with a total cost basis and fair value of $11.5 million and $16.0 million, respectively, which was converted into common equity of Galaxy Technologies Holdings in September 2021 and (4) preferred equity of SOG Specialty Knives & Tools, LLC with a total cost and fair value of $0.6 million and $0.0 million, respectively, which was converted into common equity of Gladstone SOG Investments, Inc. in December 2021.
Summary Investment Holdings
The following table summarizes our investments by security type as of March 31, 2023 and 2022:
March 31, 2023 March 31, 2022
Cost Fair Value Cost Fair Value
Secured first lien debt $ 471,439  65.4  % $ 437,517  58.1  % $ 429,457  64.2  % $ 425,087  59.5  %
Secured second lien debt 84,158  11.7  % 75,734  10.1  % 81,147  12.1  % 67,958  9.5  %
Total debt 555,597  77.1  % 513,251  68.2  % 510,604  76.3  % 493,045  69.0  %
Preferred equity 149,099  20.7  % 222,585  29.5  % 143,079  21.4  % 217,599  30.5  %
Common equity/equivalents 15,934  2.2  % 17,707  2.3  % 15,565  2.3  % 3,752  0.5  %
Total equity/equivalents 165,033  22.9  % 240,292  31.8  % 158,644  23.7  % 221,351  31.0  %
Total investments
 $ 720,630  100.0  % $ 753,543  100.0  % $ 669,248  100.0  % $ 714,396  100.0  %
Investments at fair value consisted of the following industry classifications as of March 31, 2023 and 2022:
March 31, 2023 March 31, 2022
Fair Value
Percentage of
Total Investments
 Fair Value Percentage of
Total Investments
Diversified/Conglomerate Services $ 268,954  35.7  % $ 307,403  43.0  %
Home and Office Furnishings, Housewares, and Durable Consumer Products 143,685  19.1  % 125,440  17.6  %
Buildings and Real Estate 60,571  8.0  % —  —  %
Hotels, Motels, Inns, and Gaming 58,713  7.8  % 37,923  5.3  %
Leisure, Amusement, Motion Pictures, and Entertainment 47,616  6.3  % 46,514  6.5  %
Healthcare, Education, and Childcare 37,445  5.0  % 39,252  5.5  %
Mining, Steel, Iron and Non-Precious Metals 25,998  3.5  % 24,250  3.4  %
Chemicals, Plastics, and Rubber 24,891  3.3  % 26,618  3.7  %
Aerospace and Defense 22,215  2.8  % 25,296  3.5  %
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) 20,088  2.7  % 13,823  1.9  %
Telecommunications 18,987  2.5  % 32,467  4.6  %
Cargo Transport 14,707  2.0  % 14,533  2.0  %
Diversified/Conglomerate Manufacturing 9,646  1.3  % 14,064  2.0  %
Other < 2.0% 27  0.0  % 6,813  1.0  %
Total investments
 $ 753,543  100.0  % $ 714,396  100.0  %
Investments at fair value were included in the following geographic regions of the U.S. as of March 31, 2023 and 2022:

 March 31, 2023 March 31, 2022
Location
 Fair Value
Percentage of
Total Investments
 Fair Value
Percentage of
Total Investments
Northeast $ 266,612  35.4  % $ 194,100  27.2  %
West 197,989  26.3  % 158,607  22.2  %
South 171,056  22.7  % 188,978  26.4  %
Midwest 117,886  15.6  % 172,711  24.2  %
Total investments
 $ 753,543  100.0  % $ 714,396  100  %
The geographic region indicates the location of the headquarters for our portfolio companies. A portfolio company may have additional business locations in other geographic regions.
Investments Classified by Contractual Maturity Date
The following table summarizes the contractual principal repayment and maturity of our investment portfolio for the next five fiscal years and thereafter, assuming no voluntary prepayments, as of March 31, 2023:

 Amount
For the fiscal years ending March 31:
 2024 $ 81,218 
2025 89,614 
2026 202,419 
2027 144,096 
2028 38,250 
Thereafter — 
Total contractual repayments $ 555,597 
Investments in equity securities 165,033 
Total cost basis of investments held as of March 31, 2023:
 $ 720,630