m.Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, 34th Street Funding, LLC, or 34th Street, and was pledged as collateral supporting the amounts outstanding under the credit facility with JPMorgan Chase Bank, National Association, or JPM, as of September 30, 2024 (see Note 8).
n.Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, Murray Hill Funding II, LLC, or Murray Hill Funding II, and was pledged as collateral supporting the amounts outstanding under the repurchase agreement with UBS AG, or UBS, as of September 30, 2024 (see Note 8).
o.Investment is held through CIC Holdco, LLC, a wholly-owned taxable subsidiary of the Company.
(1)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
(2)Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
Snap Fitness Holdings, Inc., Class A Common Stock(o)(q)
Services: Consumer
9,858 Units
3,078
4,653
Snap Fitness Holdings, Inc., Warrants(o)(q)
Services: Consumer
3,996 Units
1,247
1,886
SRA Holdings, LLC, Membership Units(m)(o)(q)
Banking, Finance, Insurance & Real Estate
224,865 Units
23,611
25,515
STATinMed Parent, LLC, Class A Preferred Units(o)(q)
Healthcare & Pharmaceuticals
6,182 Units
6,182
2,018
STATinMed Parent, LLC, Class B Preferred Units(o)(q)
Healthcare & Pharmaceuticals
51,221 Units
3,193
—
See accompanying notes to consolidated financial statements.
23
CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2023
(in thousands)
Portfolio Company(a)
Interest
Industry
Principal/ Par Amount/ Units(e)
Cost(d)
Fair Value(c)
URS Topco, LLC, Common Equity(o)
Transportation: Cargo
430,540 Units
9,669
12,201
WorkGenius, LLC, Class A Units(o)
Services: Business
500 Units
500
584
Yak Holding II, LLC, Series A Preferred Units(o)
Construction & Building
4,000,000 Units
2,000
4,000
Yak Holding II, LLC, Series B-1 Preferred Units(o)
Construction & Building
1,966,018 Units
1,966
1,986
Yak Holding II, LLC, Series A Common Units(o)
Construction & Building
127,419 Units
—
1,967
Total Equity
182,738
232,572
Short Term Investments - 12.9%(k)
First American Treasury Obligations Fund, Class Z Shares
5.24%(l)
113,446
113,446
Total Short Term Investments
113,446
113,446
TOTAL INVESTMENTS - 222.2%
$
1,975,630
1,954,270
LIABILITIES IN EXCESS OF OTHER ASSETS - (122.2)%
(1,074,707)
NET ASSETS - 100.0%
$
879,563
a.All of the Company’s investments are issued by eligible U.S. portfolio companies, as defined in the 1940 Act, except for investments specifically identified as non-qualifying per note h. below. Unless specifically identified in note s. below, investments do not contain a PIK interest provision.
b.The actual SOFR rate for each loan listed may not be the applicable SOFR rate as of December 31, 2023, as the loan may have been priced or repriced based on a SOFR rate prior to or subsequent to December 31, 2023. The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of December 31, 2023, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to December 31, 2023.
c.Fair value determined in good faith by the Company’s board of directors (see Note 9), including via delegation to CIM as the Company’s valuation designee (see Note 2), using significant unobservable inputs unless otherwise noted.
d.Represents amortized cost for debt securities and cost for equity investments.
e.Denominated in U.S. dollars unless otherwise noted.
f.Fair value determined using level 1 inputs.
g.The CLO subordinated notes are considered equity positions in the CLO vehicles and are not rated. Equity investments are entitled to recurring distributions, which are generally equal to the remaining cash flow of the payments made by the underlying vehicle's securities less contractual payments to debt holders and expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
h.The investment or a portion thereof is not a qualifying asset under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets as defined under Section 55 of the 1940 Act. As of December 31, 2023, 94.6% of the Company’s total assets represented qualifying assets.
i.The Company has entered into a proceeds agreement with Macquarie Capital Funding LLC, or Macquarie, in which any proceeds received by Macquarie from an underlying first lien term loan were passed onto the Company. The underlying first lien term loan was subsequently exchanged for common shares of the underlying portfolio company. Macquarie's obligations under the proceeds agreement are not secured by any collateral. The industry and other investment characteristics reflect the terms of the underlying equity security.
j.In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company may be entitled to receive additional residual amounts.
k.Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.
l.7-day effective yield as of December 31, 2023.
m.Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, 34th Street, and was pledged as collateral supporting the amounts outstanding under the credit facility with JPM as of December 31, 2023 (see Note 8).
n.Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, Murray Hill Funding II, and was pledged as collateral supporting the amounts outstanding under the repurchase agreement with UBS as of December 31, 2023 (see Note 8).
o.Non-income producing security.
See accompanying notes to consolidated financial statements.
24
CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2023
(in thousands)
p.Investment or a portion thereof was on non-accrual status as of December 31, 2023.
q.Investment determined to be an affiliated investment as defined in the 1940 Act as the Company owns between 5% and 25% of the portfolio company’s outstanding voting securities but does not control the portfolio company. Fair value as of December 31, 2022 and 2023, along with transactions during the year ended December 31, 2023 in these affiliated investments, were as follows:
Year Ended December 31, 2023
Year Ended December 31, 2023
Non-Controlled, Affiliated Investments
Fair Value at December 31, 2022
Gross Additions (Cost)(1)
Gross Reductions (Cost)(2)
Net Unrealized Gain (Loss)
Fair Value at December 31, 2023
Net Realized Gain (Loss)
Interest Income(3)
Dividend Income
Fee Income
Afore Insurance Services, LLC
First Lien Term Loan
$
—
$
4,583
$
—
$
—
$
4,583
$
—
$
405
$
—
$
—
ARC Financial, LLC
Membership Interests
—
—
—
—
—
—
—
25
—
Carestream Health, Inc.
First Lien Term Loan
7,539
2,976
(115)
1,023
11,423
—
1,373
—
—
Carestream Health Holdings Inc.
Common Shares
21,544
—
—
(158)
21,386
—
—
—
—
DESG Holdings, Inc.
First Lien Term Loan
246
—
(82)
(79)
85
—
—
—
—
GSC Technologies Inc.
Incremental Term Loan
154
6
(160)
—
—
—
11
—
—
First Lien Term Loan A
2,064
27
(297)
189
1,983
—
279
—
—
First Lien Term Loan B
388
103
—
451
942
—
112
—
—
Common Shares
—
—
—
1,251
1,251
—
—
—
—
Instant Web, LLC
Revolving Loan
321
2,587
—
(76)
2,832
—
247
—
—
Priming Term Loan
469
39
—
5
513
—
57
—
—
First Lien Term Loan
28,167
5,166
—
(4,778)
28,555
—
5,188
—
—
First Lien Delayed Draw Term Loan
—
1,082
—
(69)
1,013
—
42
—
—
Instant Web Holdings, LLC
Class A Common Units
—
—
—
—
—
—
—
—
—
IPP Buyer Holdings, LLC
Class A Units
—
10,740
—
1,170
11,910
—
—
—
—
Isagenix International, LLC
First Lien Term Loan
—
8,583
—
(65)
8,518
—
647
—
477
Isagenix Worldwide, Inc.
Common Shares
—
8,987
—
(583)
8,404
—
—
—
—
Lift Brands, Inc.
Term Loan A
23,287
—
(236)
(1)
23,050
—
2,965
—
64
Term Loan B
5,154
523
—
137
5,814
—
572
—
—
Term Loan C
4,732
1,724
—
(197)
6,259
—
741
—
1,891
Longview Intermediate Holdings C, LLC
Membership Units
23,995
—
—
(2,269)
21,726
—
—
3,881
—
Longview Power, LLC
First Lien Term Loan
2,348
6
(1,396)
(958)
—
—
1,306
—
—
Mount Logan Capital Inc.
Common Stock
2,341
—
—
(717)
1,624
—
—
40
—
Snap Fitness Holdings, Inc.
Class A Stock
5,123
—
—
(470)
4,653
—
—
—
—
Warrants
2,077
—
—
(191)
1,886
—
—
—
—
SRA Holdings, LLC
Membership Units
—
23,611
—
1,904
25,515
—
—
—
—
STATinMED, LLC
First Lien Term Loan
9,107
1,456
—
(205)
10,358
—
1,485
—
—
Delayed Draw First Lien Term Loan
156
6
(159)
(3)
—
—
10
—
—
STATinMed Parent, LLC
Class A Preferred Units
4,530
—
—
(2,512)
2,018
—
—
—
—
Class B Preferred Units
134
—
—
(134)
—
—
—
—
—
Totals
$
143,876
$
72,205
$
(2,445)
$
(7,335)
$
206,301
$
—
$
15,440
$
3,946
$
2,432
See accompanying notes to consolidated financial statements.
25
CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2023
(in thousands)
(1)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
(2)Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(3)Includes PIK interest income.
r.Investment determined to be a controlled investment as defined in the 1940 Act as the Company is deemed to exercise a controlling influence over the management or policies of the portfolio company due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of such portfolio company. Fair value as of December 31, 2022 and 2023, along with transactions during the year ended December 31, 2023 in these controlled investments, were as follows:
Year Ended December 31, 2023
Year Ended December 31, 2023
Controlled Investments
Fair Value at December 31, 2022
Gross Additions (Cost)(1)
Gross Reductions (Cost)(2)
Net Unrealized Gain (Loss)
Fair Value at December 31, 2023
Net Realized Gain (Loss)
Interest Income(3)
Dividend Income
Fee Income
CION/EagleTree Partners, LLC
Senior Secured Note
$
60,348
$
4,771
$
(5,521)
$
—
$
59,598
$
—
$
7,843
$
—
$
—
Participating Preferred Shares
30,766
—
—
(5,727)
25,039
—
—
4,250
—
Common Shares
—
—
—
—
—
—
—
—
—
David's Bridal, Inc.
Exit First Lien Term Loan
—
22,050
—
—
22,050
—
1,205
—
1,050
Incremental First Lien Term Loan
—
17,033
—
(339)
16,694
—
92
—
341
David's Bridal Holdings, LLC
Preferred Units
—
10,820
—
1,674
12,494
—
—
—
—
Common Units
—
23,130
—
18,288
41,418
—
—
—
—
Totals
$
91,114
$
77,804
$
(5,521)
$
13,896
$
177,293
$
—
$
9,140
$
4,250
$
1,391
(1)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
(2)Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(3)Includes PIK interest income.
See accompanying notes to consolidated financial statements.
26
CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2023
(in thousands)
s.As of December 31, 2023, the below investments contain a PIK interest provision whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities. For certain investments, the borrower may toggle between cash and PIK interest payments.
Interest Rate
Portfolio Company
Investment Type
Cash
PIK
All-in-Rate
American Clinical Solutions LLC
Senior Secured First Lien Debt
7.15%
5.35%
12.50%
Anthem Sports & Entertainment Inc.
Senior Secured First Lien Debt
3.00%
12.11%
15.11%
Celerity Acquisition Holdings, LLC
Senior Secured First Lien Debt
10.00%
4.05%
14.05%
Cennox, Inc.
Senior Secured First Lien Debt
11.65%
0.25%
11.90%
CION/EagleTree Partners, LLC
Senior Secured Note
—
14.00%
14.00%
Community Tree Service, LLC
Senior Secured First Lien Debt
14.00%
2.50%
16.50%
Deluxe Entertainment Services, Inc.
Senior Secured First Lien Debt
12.50%
1.50%
14.00%
FuseFX, LLC
Senior Secured First Lien Debt
6.47%
5.00%
11.47%
GSC Technologies Inc.
Senior Secured First Lien Debt
—
10.51%
10.51%
Hilliard, Martinez & Gonzales, LLP
Senior Secured First Lien Debt
—
17.46%
17.46%
Homer City Generation, L.P.
Senior Secured First Lien Debt
—
15.00%
15.00%
Homer City Generation, L.P.
Senior Secured First Lien Debt
—
17.00%
17.00%
Inotiv, Inc.
Senior Secured First Lien Debt
11.96%
0.25%
12.21%
Instant Web, LLC
Senior Secured First Lien Debt
—
12.47%
12.47%
Isagenix International, LLC
Senior Secured First Lien Debt
2.50%
8.54%
11.04%
K&N Parent, Inc.
Senior Secured First Lien Debt
8.72%
5.00%
13.72%
Klein Hersh, LLC
Senior Secured First Lien Debt
6.74%
12.00%
18.74%
Lift Brands, Inc.
Senior Secured First Lien Debt
—
9.50%
9.50%
Lucky Bucks Holdings LLC
Unsecured Note
—
12.50%
12.50%
Nova Compression, LLC
Senior Secured First Lien Debt
12.61%
3.25%
15.86%
Playboy Enterprises, Inc.
Senior Secured First Lien Debt
6.50%
3.25%
9.75%
Robert C. Hilliard, L.L.P.
Senior Secured First Lien Debt
—
17.44%
17.44%
RumbleOn, Inc.
Senior Secured First Lien Debt
13.86%
0.50%
14.36%
Securus Technologies Holdings, Inc.
Senior Secured First Lien Debt
6.61%
3.89%
10.50%
Securus Technologies Holdings, Inc.
Senior Secured Second Lien Debt
6.61%
7.65%
14.26%
Service Compression, LLC
Senior Secured First Lien Debt
13.46%
2.00%
15.46%
Spinal USA, Inc. / Precision Medical Inc.
Senior Secured First Lien Debt
—
15.16%
15.16%
STATinMED, LLC
Senior Secured First Lien Debt
—
14.96%
14.96%
Trademark Global, LLC
Senior Secured First Lien Debt
11.11%
1.75%
12.86%
Trammell, P.C.
Senior Secured First Lien Debt
—
20.86%
20.86%
Williams Industrial Services Group, Inc.
Senior Secured First Lien Debt
10.00%
6.18%
16.18%
WPLM Acquisition Corp.
Unsecured Note
—
15.00%
15.00%
t.The interest rate on these loans is subject to 1 month LIBOR, which as of December 31, 2023 was 5.47%.
u.The interest rate on these loans is subject to 3 month LIBOR, which as of December 31, 2023 was 5.59%.
v.The interest rate on these loans is subject to 1 month SOFR, which as of December 31, 2023 was 5.35%.
w.這些貸款的利率受3個月SOFR約束，截至2023年12月31日，該利率爲5.33%。
x.這些貸款的利率受6個月SOFR約束，截至2023年12月31日，該利率爲5.16%。
y.雖然該貸款的到期日已過，但公司預計將收回所有利息和本金。
見合併財務報表附註。
27
Courier ON Investment Corporation
合併財務報表附註（未經審計）
2024年9月30日
(單位爲千，不包括每股和每股金額)
注1。組織機構及主要業務
Courier ON Investment Corporation或公司於2011年8月9日根據馬里蘭州一般公司法註冊成立。2012年12月17日，該公司成功從無關聯外部投資者籌集了至少美元的總收益2,500，或最低發行要求，並開始運營。該公司是一家外部管理的、非多元化的、封閉式管理投資公司，根據1940年法案，選擇作爲業務發展公司（BCD）受到監管。就聯邦所得稅而言，該公司選擇被視爲受監管的投資公司（RIC），定義見1986年《國內稅收法》（經修訂）或《守則》。
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
The following tables show the composition of the Company’s investment portfolio by industry classification and geographic dispersion, and the percentage, by fair value, of the total investment portfolio assets in such industries and geographies as of September 30, 2024 and December 31, 2023:
September 30, 2024
December 31, 2023
Industry Classification
Investments at Fair Value
Percentage of Investment Portfolio
Investments at Fair Value
Percentage of Investment Portfolio
Services: Business
$
272,919
15.5
%
$
282,237
15.3
%
Healthcare & Pharmaceuticals
224,219
12.6
%
238,624
13.0
%
Retail
137,725
7.9
%
135,000
7.3
%
Media: Diversified & Production
131,196
7.5
%
135,037
7.3
%
Services: Consumer
109,005
6.2
%
107,195
5.8
%
Media: Advertising, Printing & Publishing
106,365
6.1
%
116,100
6.3
%
Construction & Building
101,037
5.8
%
104,727
5.7
%
Consumer Goods: Durable
96,513
5.5
%
59,955
3.3
%
Energy: Oil & Gas
94,504
5.4
%
104,893
5.7
%
Beverage, Food & Tobacco
89,320
5.1
%
68,780
3.7
%
Banking, Finance, Insurance & Real Estate
63,644
3.6
%
52,272
2.8
%
Diversified Financials
57,421
3.3
%
85,733
4.7
%
Hotel, Gaming & Leisure
50,199
2.9
%
50,906
2.8
%
Capital Equipment
39,092
2.2
%
49,571
2.7
%
Consumer Goods: Non-Durable
33,468
1.9
%
42,381
2.3
%
Automotive
30,934
1.8
%
12,403
0.7
%
Environmental Industries
27,413
1.6
%
15,336
0.8
%
Containers, Packaging & Glass
18,926
1.1
%
18,480
1.0
%
High Tech Industries
18,529
1.1
%
22,671
1.2
%
Metals & Mining
14,815
0.8
%
13,957
0.8
%
Aerospace & Defense
14,000
0.8
%
12,000
0.6
%
Transportation: Cargo
11,533
0.7
%
12,201
0.7
%
Telecommunications
6,538
0.4
%
17,768
1.0
%
Chemicals, Plastics & Rubber
3,411
0.2
%
82,597
4.5
%
Subtotal/total percentage
1,752,726
100.0
%
1,840,824
100.0
%
Short term investments
53,503
113,446
Total investments
$
1,806,229
$
1,954,270
September 30, 2024
December 31, 2023
Geographic Dispersion(1)
Investments at Fair Value
Percentage of Investment Portfolio
Investments at Fair Value
Percentage of Investment Portfolio
United States
$
1,714,972
97.8
%
$
1,812,416
98.4
%
Canada
36,099
2.1
%
26,350
1.4
%
Bermuda
970
0.1
%
962
0.1
%
Cayman Islands
685
—
1,096
0.1
%
Subtotal/total percentage
1,752,726
100.0
%
1,840,824
100.0
%
Short term investments
53,503
113,446
Total investments
$
1,806,229
$
1,954,270
(1)The geographic dispersion is determined by the portfolio company's country of domicile.
As of September 30, 2024 and December 31, 2023, investments on non-accrual status represented 1.8% and 0.9%, respectively, of the Company's investment portfolio on a fair value basis.
42
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
The Company’s investment portfolio may contain senior secured investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or unfunded commitments, which may require the Company to provide funding when requested in accordance with the terms of the underlying agreements. As of September 30, 2024 and December 31, 2023, the Company’s unfunded commitments amounted to $71,113 and $47,349, respectively. As of October 30, 2024, the Company’s unfunded commitments amounted to $69,980. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. Refer to Note 11 for further details on the Company’s unfunded commitments.
Note 7. Joint Venture
CION/EagleTree Partners, LLC
On December 21, 2021, the Company formed CION/EagleTree, an off-balance sheet joint venture partnership with ET-BC Debt Opportunities, LP, or ET-BC, which is an affiliate of EagleTree Capital, LP, or EagleTree. EagleTree made a Firm-level investment with proprietary capital. CION/EagleTree jointly pursues debt and equity opportunities, as well as special situation, crossover, subordinated and other junior capital investments that leverages the Company's and EagleTree's combined sourcing and portfolio management capabilities.
The Company contributed a portfolio of second lien loans and equity investments and ET-BC contributed proprietary Firm-level cash in exchange for 85% and 15%, respectively, of the senior secured notes, participating preferred equity, and common share interests of CION/EagleTree. The Company and ET-BC are not required to make any additional capital contributions to CION/EagleTree. The Company’s equity investment in CION/EagleTree is not redeemable. All portfolio and other material decisions regarding CION/EagleTree must be submitted to its board of managers, which is comprised of four members, two of whom were selected by the Company and the other two were selected by ET-BC. Further, all portfolio and other material decisions require the affirmative vote of at least one board member from the Company and one board member from ET-BC.
The Company also serves as administrative agent to CION/EagleTree to provide servicing functions and other administrative services. In certain cases, these servicing functions and other administrative services may be performed by CIM. Amounts charged to CION/EagleTree by the Company for services performed by CIM are netted against amounts the Company is charged by CIM for administrative services.
On December 21, 2021, CION/EagleTree issued senior secured notes of $61,629 to the Company and $10,875 to ET-BC, or the CION/EagleTree Notes. The CION/EagleTree Notes bear interest at a fixed rate of 14.0% per year and are secured by a first priority security interest in all of the assets of CION/EagleTree. On November 16, 2023, the Company purchased a portion of the CION/EagleTree Notes held by ET-BC. As a result, as of December 31, 2023, the Company held $59,598 and ET-BC held $4,904 of the CION/Eagletree Notes. The obligations of CION/EagleTree under the CION/EagleTree Notes are non-recourse to the Company.
In accordance with ASU 2015-02, Consolidation, the Company determined that CION/EagleTree is not a variable interest entity, or VIE, as the Company is not the primary beneficiary and therefore does not consolidate CION/EagleTree. The Company's maximum exposure to losses from CION/EagleTree is limited to its investment in CION/EagleTree.
43
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
The following table sets forth the individual investments in CION/EagleTree's portfolio as of September 30, 2024:
Portfolio Company
Interest(a)
Maturity
Industry
Principal/ Par Amount/ Units
Cost(b)
Fair Value
Senior Secured First Lien Debt
Berlitz Holdings, Inc.(e)
S+900, 1.00% SOFR Floor
5/31/2025
Services: Business
$
1,200
$
1,186
$
1,215
Community Tree Service, LLC(f)
S+1100, 1.00% SOFR Floor
6/17/2027
Construction & Building
465
465
465
Total Senior Secured First Lien Debt
1,651
1,680
Collateralized Securities and Structured Products - Equity
Ivy Hill Middle Market Credit Fund VIII, Ltd. Subordinated Loan(c)
11.84% Estimated Yield
2/2/2026
Diversified Financials
10,000
9,360
9,901
Total Collateralized Securities and Structured Products - Equity
9,360
9,901
Equity
American Clinical Solutions LLC, Class A Membership Interests(d)
Healthcare & Pharmaceuticals
6,030,384 Units
5,200
1,809
Anthem Sports and Entertainment Inc., Class A Preferred Stock Warrants(d)
Media: Diversified & Production
1,469 Units
486
53
Anthem Sports and Entertainment Inc., Class B Preferred Stock Warrants(d)
Media: Diversified & Production
255 Units
—
—
Anthem Sports and Entertainment Inc., Common Stock Warrants(d)
Media: Diversified & Production
4,746 Units
—
—
BCP Great Lakes II - Series A Holdings LP, Partnership Interests (4.2% ownership)
Diversified Financials
N/A
10,576
10,922
Carestream Health Holdings, Inc., Common Stock(d)
Healthcare & Pharmaceuticals
614,367 Units
21,759
21,589
CHC Medical Partners, Inc., Series C Preferred Stock, 12% Dividend
Healthcare & Pharmaceuticals
2,727,273 Units
8,464
12,191
CHC Medical Partners, Inc., Additional Series C Preferred Stock, 8% Dividend
Healthcare & Pharmaceuticals
183,723 Units
308
608
CTS Ultimate Holdings LLC, Class A Preferred Units(d)
Construction & Building
3,578,701 Units
1,000
1,002
Dayton HoldCo, LLC, Membership Units(d)
Construction & Building
37,264 Units
—
180
HDNet Holdco LLC, Preferred Unit Call Option(d)
Media: Diversified & Production
1 Unit
—
270
Language Education Holdings GP LLC, Common Units(d)
Services: Business
133,333 Units
—
—
Language Education Holdings LP, Ordinary Common Units(d)
Services: Business
133,333 Units
300
780
Skillsoft Corp., Class A Common Stock(d)
High Tech Industries
12,171 Units
2,000
189
Spinal USA, Inc. / Precision Medical Inc., Warrants(d)
Healthcare & Pharmaceuticals
20,667,324 Units
—
—
Total Equity
50,093
49,593
Short Term Investments(g)
First American Treasury Obligations Fund, Class Z Shares
4.75%(h)
1,427
1,427
Total Short Term Investments
1,427
1,427
TOTAL INVESTMENTS
$
62,531
$
62,601
a.The actual SOFR rate for each loan listed may not be the applicable SOFR rate as of September 30, 2024, as the loan may have been priced or repriced based on a SOFR rate prior to or subsequent to September 30, 2024.
b.Represents amortized cost for debt securities and cost for equity investments.
c.The CLO subordinated notes are considered equity positions in the CLO vehicles and are not rated. Equity investments are entitled to recurring distributions, which are generally equal to the remaining cash flow of the payments made by the underlying vehicle's securities less contractual payments to debt holders and expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
d.Non-income producing security.
e.The interest rate on these loans is subject to 1 month SOFR, which as of September 30, 2024 was 4.85%.
f.The interest rate on these loans is subject to 3 month SOFR, which as of September 30, 2024 was 4.59%.
g.Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.
h.7-day effective yield as of September 30, 2024.
44
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
The following table sets forth the individual investments in CION/EagleTree's portfolio as of December 31, 2023:
Portfolio Company
Interest(a)
Maturity
Industry
Principal/ Par Amount/ Units
Cost(b)
Fair Value
Senior Secured First Lien Debt
Berlitz Holdings, Inc.(f)
S+900, 1.00% SOFR Floor
2/14/2025
Services: Business
1,200
1,157
1,194
Community Tree Service, LLC(g)
S+850, 1.00% SOFR Floor
6/17/2027
Construction & Building
463
463
464
Total Senior Secured First Lien Debt
1,620
1,658
Senior Secured Second Lien Debt
Access CIG, LLC(g)
S+775, 0.00% SOFR Floor
2/27/2026
Services: Business
7,250
7,229
7,244
MedPlast Holdings, Inc.(e)
L+775, 0.00% LIBOR Floor
7/2/2026
Healthcare & Pharmaceuticals
6,750
6,276
6,535
Total Senior Secured Second Lien Debt
13,505
13,779
Collateralized Securities and Structured Products - Equity
Ivy Hill Middle Market Credit Fund VIII, Ltd. Subordinated Loan(c)
11.84% Estimated Yield
2/2/2026
Diversified Financials
10,000
9,717
9,117
Total Collateralized Securities and Structured Products - Equity
9,717
9,117
Equity
American Clinical Solutions LLC, Class A Membership Interests(d)
Healthcare & Pharmaceuticals
6,030,384 Units
5,200
5,065
Anthem Sports and Entertainment Inc., Class A Preferred Stock Warrants(d)
Media: Diversified & Production
1,469 Units
486
1,622
Anthem Sports and Entertainment Inc., Class B Preferred Stock Warrants(d)
Media: Diversified & Production
255 Units
—
31
Anthem Sports and Entertainment Inc., Common Stock Warrants(d)
Media: Diversified & Production
4,746 Units
—
—
BCP Great Lakes II - Series A Holdings LP, Partnership Interests (4.2% ownership)
Diversified Financials
N/A
12,144
12,464
Carestream Health Holdings, Inc., Common Stock(d)
Healthcare & Pharmaceuticals
614,367 Units
21,759
21,386
CHC Medical Partners, Inc., Series C Preferred Stock, 12% Dividend
Healthcare & Pharmaceuticals
2,727,273 Units
8,218
10,391
CTS Ultimate Holdings LLC, Class A Preferred Units(d)
Construction & Building
3,578,701 Units
1,000
895
Dayton HoldCo, LLC, Membership Units(d)
Construction & Building
37,264 Units
8,400
14,537
HDNet Holdco LLC, Preferred Unit Call Option(d)
Media: Diversified & Production
1 Unit
—
382
Language Education Holdings GP LLC, Common Units(d)
Services: Business
133,333 Units
—
—
Language Education Holdings LP, Ordinary Common Units(d)
Services: Business
133,333 Units
300
503
Skillsoft Corp., Class A Common Stock(d)
High Tech Industries
12,171 Units
2,000
214
Spinal USA, Inc. / Precision Medical Inc., Warrants(d)
Healthcare & Pharmaceuticals
20,667,324 Units
—
—
Total Equity
59,507
67,490
Short Term Investments(g)
First American Treasury Obligations Fund, Class Z Shares
5.24%(i)
1,306
1,306
Total Short Term Investments
1,306
1,306
TOTAL INVESTMENTS
$
85,655
$
93,350
a.The actual SOFR rate for each loan listed may not be the applicable SOFR rate as of December 31, 2023, as the loan may have been priced or repriced based on a SOFR rate prior to or subsequent to December 31, 2023. The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of December 31, 2023, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to December 31, 2023.
b.Represents amortized cost for debt securities and cost for equity investments.
c.The CLO subordinated notes are considered equity positions in the CLO vehicles and are not rated. Equity investments are entitled to recurring distributions, which are generally equal to the remaining cash flow of the payments made by the underlying vehicle's securities less contractual payments to debt holders and expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
d.Non-income producing security.
e.The interest rate on these loans is subject to 1 month LIBOR, which as of December 31, 2023 was 5.47%.
f.The interest rate on these loans is subject to 1 month SOFR, which as of December 31, 2023 was 5.35%.
g.The interest rate on these loans is subject to 3 month SOFR, which as of December 31, 2023 was 5.33%.
h.Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.
i.7-day effective yield as of December 31, 2023.
45
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
The following table includes selected balance sheet information for CION/EagleTree as of September 30, 2024 and December 31, 2023:
Selected Balance Sheet Information:
September 30, 2024
December 31, 2023
Investments, at fair value (amortized cost of $62,531 and $85,655, respectively)
$
62,601
$
93,350
Cash and other assets
—
14
Dividend receivable on investments
410
414
Interest receivable on investments
240
287
Total assets
$
63,251
$
94,065
Senior secured notes (net of unamortized debt issuance costs of $53 and $70, respectively)
$
40,949
$
64,432
Other liabilities
120
166
Total liabilities
41,069
64,598
Members' capital
22,182
29,467
Total liabilities and members' capital
$
63,251
$
94,065
The following table includes selected statement of operations information for CION/EagleTree for the three and nine months ended September 30, 2024 and 2023 and for the year ended December 31, 2023:
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31,
Selected Statement of Operations Information:
2024
2023
2024
2023
2023
Total investment income
$
901
$
1,777
$
3,346
$
4,840
$
6,230
Total expenses
1,638
2,541
6,329
7,799
10,213
Net realized (loss) gain on investments
—
(177)
3,325
(1)
(2,083)
Net change in unrealized appreciation (depreciation) on investments
2,247
780
(7,627)
1,226
4,338
Net increase (decrease) in net assets
$
1,510
$
(161)
$
(7,285)
$
(1,734)
$
(1,728)
46
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
Note 8. Financing Arrangements
The following table presents summary information with respect to the Company’s outstanding financing arrangements as of September 30, 2024:
Financing Arrangement
Type of Financing Arrangement
Rate
Amount Outstanding
Amount Available
Maturity Date
JPM Credit Facility
Term Loan Credit Facility
SOFR+2.55%(1)
$
450,000
$
112,500
June 15, 2027
2026 Notes(2)
Note Purchase Agreement
4.50%
125,000
—
February 11, 2026
UBS Facility
Repurchase Agreement
SOFR+3.20%
100,000
50,000
November 19, 2024
Series A Notes(3)
Israel Public Bond Offering
SOFR+3.82%
114,844
—
August 31, 2026
2027 Notes (Tranche A)
Note Purchase Agreement
SOFR+4.75%
100,000
—
November 8, 2027
2027 Notes (Tranche B)
Amended and Restated Note Purchase Agreement
SOFR+3.90%
100,000
—
November 8, 2027
2022 Term Loan
Term Loan Facility Agreement
SOFR+3.50%
50,000
—
April 27, 2027
2024 Term Loan
Term Loan Facility Agreement
SOFR+3.80%
30,000
—
September 30, 2027
$
1,069,844
$
162,500
(1)34th Street will pay an annual administration fee of 0.20% on JPM's total financing commitment. The administration fee is included in interest expense in the consolidated statements of operations.
(2)As of September 30, 2024, the fair value of the 2026 Notes was $125,000, which was based on a yield analysis and discount rate commensurate with the market yields for similar types of debt. The fair value of these debt obligations would be categorized as Level 3 under ASC 820 as of September 30, 2024.
(3)As of September 30, 2024, the fair value of the Series A Notes was $120,114, which was based on readily observable, transparent prices. The fair value of these debt obligations would be categorized as Level 1 under ASC 820 as of September 30, 2024.
JPM Credit Facility
On August 26, 2016, 34th Street entered into a senior secured credit facility with JPM. The senior secured credit facility with JPM, or the JPM Credit Facility, provided for borrowings in an aggregate principal amount of $150,000, of which $25,000 could have been funded as a revolving credit facility, each subject to conditions described in the JPM Credit Facility. On August 26, 2016, 34th Street drew down $57,000 of borrowings under the JPM Credit Facility.
On September 30, 2016, July 11, 2017, November 28, 2017 and May 23, 2018, 34th Street amended and restated the JPM Credit Facility, or the Amended JPM Credit Facility, with JPM. Under the Amended JPM Credit Facility entered into on September 30, 2016, the aggregate principal amount available for borrowings was increased from $150,000 to $225,000, of which $25,000 could have been funded as a revolving credit facility, subject to conditions described in the Amended JPM Credit Facility. Under the Amended JPM Credit Facility entered into on July 11, 2017 and November 28, 2017, certain immaterial administrative amendments were made as a result of the termination of AIM as the Company's investment sub-adviser as discussed in Note 1. Under the Amended JPM Credit Facility entered into on May 23, 2018, (i) the aggregate principal amount available for borrowings was increased from $225,000 to $275,000, of which $25,000 could have been funded as a revolving credit facility, subject to conditions described in the Amended JPM Credit Facility, (ii) the reinvestment period was extended until August 24, 2020 and (iii) the maturity date was extended to August 24, 2021.
On May 15, 2020, 34th Street amended and restated the Amended JPM Credit Facility, or the Second Amended JPM Credit Facility, with JPM in order to fully repay all amounts outstanding under the Company's prior Citibank Credit Facility and MS Credit Facility and repay $100,000 of advances outstanding under the UBS Facility (as described below). Under the Second Amended JPM Credit Facility, the aggregate principal amount available for borrowings was increased from $275,000 to $700,000, of which $75,000 could have been funded as a revolving credit facility, subject to conditions described in the Second Amended JPM Credit Facility, during the reinvestment period. Under the Second Amended JPM Credit Facility, the reinvestment period was extended until May 15, 2022 and the maturity date was extended to May 15, 2023. Advances under the Second Amended JPM Credit Facility bore interest at a floating rate equal to the three-month LIBOR, plus a spread of 3.25% per year.
On February 26, 2021, 34th Street amended and restated the Second Amended JPM Credit Facility, or the Third Amended JPM Credit Facility, with JPM. Under the Third Amended JPM Credit Facility, the aggregate principal amount available for borrowings was reduced from $700,000 to $575,000, subject to conditions described in the Third Amended JPM Credit Facility. In addition, under the Third Amended JPM Credit Facility, the reinvestment period was extended from May 15, 2022 to May 15, 2023 and the maturity date was extended from May 15, 2023 to May 15, 2024. Advances under the Third Amended JPM Credit Facility bore interest at a floating rate equal to the three-month LIBOR, plus a spread of 3.10% per year. 34th Street incurred certain customary costs and expenses in connection with the Third Amended JPM Credit Facility.
47
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
On March 28, 2022, 34th Street entered into a First Amendment to the Third Amended JPM Credit Facility with JPM, or the JPM First Amendment. Under the JPM First Amendment, the aggregate principal amount available for borrowings was increased from $575,000 to $675,000, subject to conditions described in the JPM First Amendment. Additional advances of up to $100,000 under the JPM First Amendment bore interest at a floating rate equal to the three-month SOFR, plus a credit spread of 3.10% per year, and a LIBOR to SOFR credit spread adjustment of 0.15%. 34th Street incurred certain customary costs and expenses in connection with the JPM First Amendment.
On May 15, 2023, 34th Street entered into a Second Amendment to the Third Amended JPM Credit Facility with JPM, or the JPM Second Amendment. Under the JPM Second Amendment, the aggregate principal amount available for borrowings remained unchanged of up to $675,000 but all such advances bore interest at a floating rate equal to the three-month SOFR, plus a credit spread of 3.05% per year, and a LIBOR to SOFR credit spread adjustment of 0.15%. The reinvestment period was extended from May 15, 2023 to May 15, 2024 and the maturity date was extended from May 15, 2024 to May 15, 2025. Also under the JPM Second Amendment, the amount of minimum borrowings required was reduced by $50,000 to $550,000 with a six-month non-call provision. 34th Street incurred certain customary costs and expenses in connection with the JPM Second Amendment.
On May 14, 2024 and June 17, 2024, 34th Street entered into a Third Amendment and a Fourth Amendment, respectively, to the Third Amended JPM Credit Agreement with JPM. Under these amendments, the reinvestment period was extended from May 15, 2024 to June 17, 2024 and from June 17, 2024 to July 15, 2024, respectively, as a bridge to the parties entering into a broader amendment to the Third Amended JPM Credit Facility.
On July 15, 2024, 34th Street entered into a Fifth Amendment to the Third Amended JPM Credit Agreement with JPM, or the JPM Fifth Amendment. Under the JPM Fifth Amendment, advances to 34th Street remain unchanged of up to $675,000, but the credit spread on the floating interest rate payable by 34th Street on all such advances was reduced from the three-month SOFR plus a credit spread of 3.20% per year to SOFR plus a credit spread of 2.55% per year. Also under the JPM Fifth Amendment, the reinvestment period was extended from July 15, 2024 to June 15, 2026 and the maturity date was extended from May 15, 2025 to June 15, 2027. 34th Street incurred certain customary costs and expenses in connection with the JPM Fifth Amendment and will pay an annual administrative fee of 0.20% on JPM's total financing commitment.
Interest is payable quarterly in arrears. 34th Street may prepay advances pursuant to the terms and conditions of the Third Amended JPM Credit Facility, subject to a 1.0% premium in certain circumstances. In addition, 34th Street will be subject to a non-usage fee of 0.8% per year on the amount, if any, of the aggregate principal amount available under the Third Amended JPM Credit Facility that has not been borrowed through June 14, 2026. This non-usage fee of 0.8% was reduced from 1.0% in the JPM Fifth Amendment. The non-usage fees, if any, are payable quarterly in arrears.
As of December 31, 2023, the aggregate principal amount outstanding on the Third Amended JPM Credit Facility was $550,000. On September 25, 2024, 34th Street reduced the aggregate principal borrowings available under the Third Amended JPM Credit Facility from $675,000 to $600,000 and repaid $70,000 of outstanding borrowings. On September 30, 2024, 34th Street reduced the aggregate principal borrowings available under the Third Amended JPM Credit Facility from $600,000 to $562,500 and repaid $30,000 of outstanding borrowings. As of September 30, 2024, the aggregate principal amount outstanding on the Third Amended JPM Credit Facility was $450,000 and the aggregate unfunded principal amount was $112,500. The carrying amount outstanding under the Third Amended JPM Credit Facility approximates its fair value.
The Company contributed loans and other corporate debt securities to 34th Street in exchange for 100% of the membership interests of 34th Street, and may contribute additional loans and other corporate debt securities to 34th Street in the future. 34th Street’s obligations to JPM under the Third Amended JPM Credit Facility are secured by a first priority security interest in all of the assets of 34th Street. The obligations of 34th Street under the Third Amended JPM Credit Facility are non-recourse to the Company, and the Company’s exposure under the Third Amended JPM Credit Facility is limited to the value of the Company’s investment in 34th Street.
In connection with the Third Amended JPM Credit Facility, 34th Street made certain representations and warranties and is required to comply with a borrowing base requirement, various covenants, reporting requirements and other customary requirements for similar facilities. As of and for the three months ended September 30, 2024, 34th Street was in compliance with all covenants and reporting requirements.
Through September 30, 2024, the Company incurred debt issuance costs of $18,070 in connection with obtaining and amending the JPM Credit Facility, which were recorded as a direct reduction to the outstanding balance of the Third Amended JPM Credit Facility, which is included in the Company’s consolidated balance sheet as of September 30, 2024 and will amortize to interest expense over the term of the Third Amended JPM Credit Facility. At September 30, 2024, the unamortized portion of the debt issuance costs was $5,494.
48
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
For the three and nine months ended September 30, 2024 and 2023 and for the year ended December 31, 2023, the components of interest expense, average borrowings, and weighted average interest rate for the Third Amended JPM Credit Facility were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31,
2024
2023
2024
2023
2023
Stated interest expense
$
11,226
$
13,193
$
35,007
$
37,568
$
50,223
Amortization of deferred financing costs
522
501
1,512
1,597
2,097
Non-usage fee
318
192
950
552
808
Total interest expense
$
12,066
$
13,886
$
37,469
$
39,717
$
53,128
Weighted average interest rate(1)
8.30
%
8.64
%
8.62
%
8.34
%
8.45
%
Average borrowings
$
544,348
$
600,000
$
548,102
$
602,198
$
595,342
(1)Includes the stated interest expense and non-usage fee on the unused portion of the Third Amended JPM Credit Facility and is annualized for periods covering less than one year.
2026 Notes
On February 11, 2021, the Company entered into a Note Purchase Agreement with certain purchasers, or the Note Purchase Agreement, in connection with the Company’s issuance of $125,000 aggregate principal amount of its 4.50% senior unsecured notes due in 2026, or the 2026 Notes. The net proceeds to the Company were approximately $122,300, after the deduction of placement agent fees and other financing expenses, which the Company used to repay debt under its secured financing arrangements.
The 2026 Notes mature on February 11, 2026. The 2026 Notes bear interest at a rate of 4.50% per year payable semi-annually on February 11th and August 11th of each year, which commenced on August 11, 2021. The Company has the right to, at its option, redeem all or a part that is not less than 10% of the 2026 Notes (i) after February 11, 2024 but on or before February 11, 2025, at a redemption price equal to 102% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, (ii) after February 11, 2025 but on or before August 11, 2025, at a redemption price equal to 101% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, and (iii) after August 11, 2025, at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any.
The 2026 Notes are general unsecured obligations of the Company that rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by certain of the Company’s subsidiaries, financing vehicles or similar facilities.
The Note Purchase Agreement contains other terms and conditions, including, without limitation, affirmative and negative covenants such as (i) information reporting, (ii) maintenance of the Company’s status as a BDC, (iii) minimum shareholders’ equity of $543.6 million, (iv) a minimum asset coverage ratio of not less than 150%, (v) a minimum interest coverage ratio of 1.25 to 1.00 and (vi) an unencumbered asset coverage ratio of 1.25 to 1.00, provided that (a) first lien senior secured loans and cash represent more than 65% of the total value of unencumbered assets used by the Company for purposes of the ratio and (b) equity interests or structured products in the aggregate represent less than 15% of the total value of unencumbered assets used by the Company for purposes of the ratio. As of and for the three months ended September 30, 2024, the Company was in compliance with all covenants and reporting requirements.
The Note Purchase Agreement also contains a “most favored lender” provision in favor of the purchasers in respect of any new unsecured credit facilities, loans or indebtedness in excess of $25,000 incurred by the Company, which indebtedness contains a financial covenant not contained in, or more restrictive against the Company than those contained, in the Note Purchase Agreement. In addition, the Note Purchase Agreement contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under other indebtedness or derivative securities of the Company in an outstanding aggregate principal amount of at least $25,000, certain judgments and orders, and certain events of bankruptcy.
As of September 30, 2024, the aggregate principal amount of 2026 Notes outstanding was $125,000.
Through September 30, 2024, the Company incurred debt issuance costs of $2,669 in connection with issuing the 2026 Notes, which were recorded as a direct reduction to the outstanding balance of the 2026 Notes, which is included in the Company’s consolidated balance sheet as of September 30, 2024 and will amortize to interest expense over the term of the 2026 Notes. At September 30, 2024, the unamortized portion of the debt issuance costs was $729.
49
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
For the three and nine months ended September 30, 2024 and 2023 and for the year ended December 31, 2023, the components of interest expense, average borrowings, and weighted average interest rate for the 2026 Notes were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31, 2023
2024
2023
2024
2023
Stated interest expense
$
1,407
$
1,407
$
4,219
$
4,219
$
5,625
Amortization of deferred financing costs
134
135
400
399
533
Total interest expense
$
1,541
$
1,542
$
4,619
$
4,618
$
6,158
Weighted average interest rate(1)
4.50
%
4.50
%
4.50
%
4.50
%
4.50
%
Average borrowings
$
125,000
$
125,000
$
125,000
$
125,000
$
125,000
(1)Includes the stated interest expense on the 2026 Notes and is annualized for periods covering less than one year.
UBS Facility
On May 19, 2017, the Company, through two newly-formed, wholly-owned, special-purpose financing subsidiaries, entered into a financing arrangement with UBS pursuant to which up to $125,000 was made available to the Company.
Pursuant to the financing arrangement, assets in the Company's portfolio may be contributed from time to time to Murray Hill Funding II through Murray Hill Funding, LLC, or Murray Hill Funding, each a newly-formed, wholly-owned, special-purpose financing subsidiary of the Company. On May 19, 2017, the Company contributed assets to Murray Hill Funding II. The assets held by Murray Hill Funding II secure the obligations of Murray Hill Funding II under Class A-1 Notes, or the Notes, issued by Murray Hill Funding II. Pursuant to an Indenture, dated May 19, 2017, between Murray Hill Funding II and U.S. Bank National Association, or U.S. Bank, as trustee, or the Indenture, the aggregate principal amount of Notes that may be issued by Murray Hill Funding II from time to time was $192,308. Murray Hill Funding purchased the Notes issued by Murray Hill Funding II at a purchase price equal to their par value. Murray Hill Funding makes capital contributions to Murray Hill Funding II to, among other things, maintain the value of the portfolio of assets held by Murray Hill Funding II.
Principal on the Notes will be due and payable on the stated maturity date of May 19, 2027. Pursuant to the Indenture, Murray Hill Funding II made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar transactions. The Indenture contains events of default customary for similar transactions, including, without limitation: (a) the failure to make principal payments on the Notes at their stated maturity or any earlier redemption date or to make interest payments on the Notes and such failure is not cured within three business days; (b) the failure to disburse amounts in accordance with the priority of payments and such failure is not cured within three business days; and (c) the occurrence of certain bankruptcy and insolvency events with respect to Murray Hill Funding II or Murray Hill Funding. As of and for the three months ended September 30, 2024, Murray Hill Funding II was in compliance with all covenants and reporting requirements.
Murray Hill Funding, in turn, entered into a repurchase transaction with UBS, pursuant to the terms of a Global Master Repurchase Agreement and the related Annex and Master Confirmation thereto, each dated May 19, 2017, or collectively, the UBS Facility. Pursuant to the UBS Facility, on May 19, 2017 and June 19, 2017, UBS purchased Notes held by Murray Hill Funding for an aggregate purchase price equal to 65% of the principal amount of Notes purchased. Subject to certain conditions, the maximum principal amount of Notes that may be purchased under the UBS Facility was $192,308. Accordingly, the aggregate maximum amount payable to Murray Hill Funding under the UBS Facility would not exceed $125,000. Murray Hill Funding was required to repurchase the Notes sold to UBS under the UBS Facility by no later than May 19, 2020. The repurchase price paid by Murray Hill Funding to UBS will be equal to the purchase price paid by UBS for the repurchased Notes (giving effect to any reductions resulting from voluntary partial prepayment(s)). The financing fee under the UBS Facility was equal to the three-month LIBOR plus a spread of up to 3.50% per year for the relevant period.
On December 1, 2017, Murray Hill Funding II amended and restated the Indenture, or the Amended Indenture, pursuant to which the aggregate principal amount of Notes that may be issued by Murray Hill Funding II was increased from $192,308 to $266,667. On December 1, 2017, Murray Hill Funding entered into a First Amended and Restated Master Confirmation to the Global Master Repurchase Agreement, or the Amended Master Confirmation, which sets forth the terms of the repurchase transaction between Murray Hill Funding and UBS under the UBS Facility. As part of the Amended Master Confirmation, on December 15, 2017 and April 2, 2018, UBS purchased the increased aggregate principal amount of Notes held by Murray Hill Funding for an aggregate purchase price equal to 75% of the principal amount of Notes issued. As a result of the Amended Master Confirmation, the aggregate maximum amount payable to Murray Hill Funding and made available to the Company under the UBS Facility was increased from $125,000 to $200,000.
50
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
On May 19, 2020, Murray Hill Funding entered into a Second Amended and Restated Master Confirmation to the Global Master Repurchase Agreement, or the Second Amended Master Confirmation, which extended the date that Murray Hill Funding was required to repurchase the Notes sold to UBS under the Amended UBS Facility from May 19, 2020 to November 19, 2020, and increased the spread on the financing fee from 3.50% to 3.90% per year.
On May 19, 2020, Murray Hill Funding also repurchased Notes in the aggregate principal amount of $133,333 from UBS for an aggregate repurchase price of $100,000, which was then repaid by Murray Hill Funding II. The repurchase of the Notes on May 19, 2020 resulted in a repayment of one-half of the outstanding amount of borrowings under the Amended UBS Facility as of May 19, 2020. As of December 31, 2020, Notes remained outstanding in the aggregate principal amount of $133,333, which was purchased by Murray Hill Funding from Murray Hill Funding II and subsequently sold to UBS under the Amended UBS Facility for aggregate proceeds of $100,000.
On November 12, 2020, Murray Hill Funding entered into a Third Amended and Restated Master Confirmation to the Global Master Repurchase Agreement, or the Third Amended Master Confirmation, to further extend the date that Murray Hill Funding was required to repurchase the Notes to December 18, 2020.
On December 17, 2020, Murray Hill Funding entered into a Fourth Amended and Restated Master Confirmation to the Global Master Repurchase Agreement, or the Fourth Amended Master Confirmation, which further extended the date that Murray Hill Funding was required to repurchase the Notes sold to UBS under the Amended UBS Facility from December 18, 2020 to November 19, 2023, and decreased the spread on the financing fee from 3.90% to 3.375% per year.
On December 17, 2020, Murray Hill Funding also entered into a Revolving Credit Note Agreement, or the Revolving Note Agreement, with Murray Hill Funding II, UBS and U.S. Bank, as note agent and trustee, which provides for a revolving credit facility in an aggregate principal amount of $50,000, subject to compliance with a borrowing base. Murray Hill Funding II will issue Class A-R Notes, or the Class A-R Notes, in exchange for advances under the Revolving Note Agreement. Principal on the Class A-R Notes will be due and payable on the stated maturity date of May 19, 2027, which is the same stated maturity date as the Notes.
The Class A-R Notes will be issued pursuant to a Second Amended and Restated Indenture, dated December 17, 2020, between Murray Hill Funding II and U.S. Bank, as trustee, or the Second Amended Indenture. Under the Second Amended Indenture, the aggregate principal amount of Notes and Class A-R Notes that may be issued by Murray Hill Funding II from time to time is $150,000. Murray Hill Funding, in turn, entered into a repurchase transaction with UBS pursuant to the terms of the related Annex and Master Confirmation, dated December 17, 2020, to the Global Master Repurchase Agreement, dated May 19, 2017, related to the Class A-R Notes. Murray Hill Funding was required to repurchase the Class A-R Notes that will be sold to UBS by no later than November 19, 2023. The financing fee for the funded Class A-R Notes was equal to the three-month LIBOR plus a spread of 3.375% per year while the financing fee for the unfunded Class A-R Notes is equal to 0.75% per year.
On June 14, 2023, Murray Hill Funding entered into with UBS (i) a Fifth Amended and Restated Master Confirmation (Class A-1 Notes) to the Global Master Repurchase Agreement, or the Fifth Amended Master Confirmation, and (ii) an Amended and Restated Master Confirmation (Class A-R Notes) to the Global Master Repurchase Agreement, or the Amended Master Confirmation. Under both Confirmations, the date that Murray Hill Funding will be required to repurchase the Notes and the Class A-R Notes previously sold to UBS under the Amended UBS Facility was extended from November 19, 2023 to November 19, 2024. Also under both Confirmations, the financing fee payable to UBS was revised from a floating rate equal to the three-month LIBOR, plus a spread of 3.375% per year, to a floating rate equal to the three-month SOFR, plus a spread of (a) to (but excluding) November 19, 2023, 3.525% per year, and (b) thereafter, 3.20% per year. The effective date of both Confirmations was June 15, 2023.
On July 1, 2021, December 14, 2021, April 19, 2022 and August 16, 2023, UBS purchased Class A-R Notes held by Murray Hill Funding for an aggregate purchase price equal to 100% of the principal amount of Class A-R Notes purchased, which was $21,000, $25,000, $17,500 and $22,500, respectively. On August 20, 2021, March 7, 2023 and April 14, 2023, Murray Hill Funding repurchased Class A-R Notes from UBS in the aggregate principal amount of $21,000, $17,500 and $25,000, respectively, for an aggregate repurchase price of $21,000, $17,500 and $25,000, respectively, which was then repaid by Murray Hill Funding II. The repurchase of the Class A-R Notes on August 20, 2021, March 7, 2023 and April 14, 2023 resulted in repayments of $21,000, $17,500 and $25,000, respectively, of the outstanding amount of borrowings under the Amended UBS Facility.
UBS may require Murray Hill Funding to post cash collateral if, without limitation, the sum of the market value of the portfolio of assets and the cash and eligible investments held by Murray Hill Funding II, together with any posted cash collateral, is less than the required margin amount under the Amended UBS Facility; provided, however, that Murray Hill Funding will not be required to post cash collateral with UBS until such market value has declined at least 10% from the initial market value of the portfolio assets.
51
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
The Company has no contractual obligation to post any such cash collateral or to make any payments to UBS on behalf of Murray Hill Funding. The Company may, but is not obligated to, increase its investment in Murray Hill Funding for the purpose of funding any cash collateral or payment obligations for which Murray Hill Funding becomes obligated in connection with the Amended UBS Facility. The Company’s exposure under the Amended UBS Facility is limited to the value of the Company’s investment in Murray Hill Funding.
Pursuant to the Amended UBS Facility, Murray Hill Funding made certain representations and warranties and is required to comply with a borrowing base requirement, various covenants, reporting requirements and other customary requirements for similar transactions. The Amended UBS Facility contains events of default customary for similar financing transactions, including, without limitation: (a) failure to transfer the Notes to UBS on the applicable purchase date or repurchase the Notes from UBS on the applicable repurchase date; (b) failure to pay certain fees and make-whole amounts when due; (c) failure to post cash collateral as required; (d) the occurrence of insolvency events with respect to Murray Hill Funding; and (e) the admission by Murray Hill Funding of its inability to, or its intention not to, perform any of its obligations under the Amended UBS Facility. As of and for the three months ended September 30, 2024, Murray Hill Funding was in compliance with all covenants and reporting requirements.
Murray Hill Funding paid an upfront fee and incurred certain other customary costs and expenses totaling $2,637 in connection with obtaining the Amended UBS Facility, which were recorded as a direct reduction to the outstanding balance of the Amended UBS Facility, which is included in the Company’s consolidated balance sheets and amortized to interest expense over the term of the Amended UBS Facility. At September 30, 2024, all upfront fees and other expenses were fully amortized.
As of September 30, 2024, Notes in the aggregate principal amount of $100,000 had been purchased by Murray Hill Funding from Murray Hill Funding II and subsequently sold to UBS under the Amended UBS Facility for aggregate proceeds of $100,000. The carrying amount outstanding under the Amended UBS Facility approximates its fair value. The Company funded each purchase of Notes by Murray Hill Funding through a capital contribution to Murray Hill Funding. As of September 30, 2024, the amount due at maturity under the Amended UBS Facility was $100,000. The Notes issued by Murray Hill Funding II and purchased by Murray Hill Funding eliminate in consolidation on the Company’s consolidated financial statements.
As of September 30, 2024, the fair value of assets held by Murray Hill Funding II was $234,227.
For the three and nine months ended September 30, 2024 and 2023 and for the year ended December 31, 2023, the components of interest expense, average borrowings, and weighted average interest rate for the Amended UBS Facility were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31,
2024
2023
2024
2023
2023
Stated interest expense
$
2,152
$
2,554
$
6,926
$
7,520
$
10,297
Non-usage fee
96
74
245
186
239
Total interest expense
$
2,248
$
2,628
$
7,171
$
7,706
$
10,536
Weighted average interest rate(1)
8.80
%
9.03
%
8.80
%
8.65
%
8.76
%
Average borrowings
$
100,000
$
111,250
$
107,062
$
117,299
$
118,610
(1)Includes the stated interest expense and non-usage fee on the unused portion of the Amended UBS Facility and is annualized for periods covering less than one year.
Series A Notes
On February 28, 2023, the Company entered into a Deed of Trust, or the Deed of Trust, with Mishmeret Trust Company Ltd., as trustee, under which the Company issued $80,712 in aggregate principal amount of its Series A Unsecured Notes due 2026, or the Series A Notes. The Series A Notes offering in Israel closed on February 28, 2023 and the Series A Notes listed and commenced trading on the TASE on February 28, 2023. After the deduction of fees and other offering expenses, the Company received net proceeds of approximately $77,900, which it used to make investments in portfolio companies in accordance with its investment objectives and for working capital and general corporate purposes. The Series A Notes are rated A1.il by Midroog Ltd., an affiliate of Moody’s. The carrying amount outstanding under the Series A Notes approximates its fair value.
The Series A Notes will mature on August 31, 2026 and may be redeemed in whole or in part at the Company's option at par plus a “make-whole” premium, if applicable, as set forth in the Deed of Trust. The Series A Notes bear interest at a rate equal to SOFR plus a credit spread of 3.82% per year, which will be paid quarterly on February 28, May 31, August 31, and November 30 of each year, which commenced on May 31, 2023. The Series A Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Series A Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities.
52
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
The Deed of Trust contains other terms and conditions, including, without limitation, affirmative and negative covenants such as (i) information reporting, (ii) maintenance of the Company’s status as a BDC within the meaning of the 1940 Act, (iii) minimum shareholders’ equity of $525 million, (iv) a minimum asset coverage ratio of not less than 150%, and (v) an unencumbered asset coverage ratio of 1.25 to 1.00. In addition, the Deed of Trust contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under the Company’s other indebtedness in an outstanding aggregate principal amount of at least $50,000, certain judgments and orders, and certain events of bankruptcy. As of and for the three months ended September 30, 2024, the Company was in compliance with all covenants and reporting requirements.
On February 26, 2023, the Company’s shares of common stock also listed and commenced trading on the TASE under the ticker symbol “CION”.
On October 10, 2023, the Company issued $34,132 in aggregate principal amount of its additional Series A Unsecured Notes due 2026, or the Additional Series A Notes, to institutional investors in Israel. The Additional Series A Notes were issued pursuant to the Deed of Trust and were issued by way of expanding, and have the same terms and conditions as, the existing Series A Notes that were issued by the Company on February 28, 2023. After the deduction of fees and other offering expenses, the Company received net proceeds of $32,317, which the Company used to make investments in portfolio companies in accordance with its investment objectives and for working capital and general corporate purposes. The Additional Series A Notes are rated A1.il by Midroog Ltd., an affiliate of Moody’s, and commenced trading on the TASE on October 10, 2023.
Through September 30, 2024, the Company incurred debt issuance costs of $5,139 in connection with issuing the Series A Notes and the Additional Series A Notes, which were recorded as a direct reduction to the outstanding balance of the Series A Notes and the Additional Series A Notes, which is included in the Company’s consolidated balance sheet as of September 30, 2024 and will amortize to interest expense over the term of the Series A Notes and the Additional Series A Notes. At September 30, 2024, the unamortized portion of the debt issuance costs was $3,057.
For the three months ended September 30, 2024 and 2023, for the nine months ended September 30, 2024, for the period from February 28, 2023 through September 30, 2023 and for the period from February 28, 2023 through December 31, 2023, the components of interest expense, average borrowings, and weighted average interest rate for the Series A Notes were as follows:
Three Months Ended September 30,
Nine Months Ended September 30, 2024
For the Period From February 28, 2023 Through September 30, 2023
For the Period From February 28, 2023 Through December 31, 2023
2024
2023
Stated interest expense
$
2,660
$
1,844
$
7,973
$
4,243
$
6,886
Amortization of deferred financing costs
402
217
1,197
507
887
Total interest expense
$
3,062
$
2,061
$
9,170
$
4,750
$
7,773
Weighted average interest rate(1)
9.13
%
8.97
%
9.12
%
8.87
%
8.98
%
Average borrowings
$
114,844
$
80,712
$
114,844
$
80,712
$
89,940
(1) Includes the stated interest expense on the Series A Notes and the Additional Series A Notes and is annualized for periods covering less than one year.
2027 Notes
On November 8, 2023, the Company entered into a Note Purchase Agreement with certain institutional investors, or the 2027 Note Purchase Agreement, in connection with the Company’s issuance of $100,000 aggregate principal amount of its senior unsecured notes, tranche A, due 2027, or the 2027 Notes, at a purchase price equal to 99.25% of the principal amount of the 2027 Notes. The net proceeds to the Company were $98,290, after the deduction of placement agent fees and other financing expenses, which the Company used to primarily repay debt under its senior secured financing arrangements, make investments in portfolio companies in accordance with its investment objectives, and for working capital and general corporate purposes. The 2027 Notes are rated BBB (low) by DBRS, Inc.
53
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
The 2027 Notes mature on November 8, 2027. The 2027 Notes bear interest at a floating rate equal to the three-month SOFR plus a credit spread of 4.75% per year and subject to a 2.00% SOFR floor, which will be paid quarterly on February 15, May 15, August 15, and November 15 of each year, commencing on February 15, 2024. The Company has the right to, at its option, redeem all or a part that is not less than 10% of the 2027 Notes (i) on or before August 8, 2027, at a redemption price equal to 100% of the principal amount of 2027 Notes to be redeemed plus an applicable “make-whole” amount equal to (x) the discounted value of the remaining scheduled payments with respect to the principal of such 2027 Note that is to be prepaid or becomes due and payable pursuant to the 2027 Note Purchase Agreement over (y) the amount of such called principal, plus accrued and unpaid interest, if any, and (ii) after August 8, 2027, at a redemption price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest, if any. For any redemptions occurring on or before August 8, 2027, the discounted value portion of the “make whole amount” is calculated by applying a discount rate on the same periodic basis as that on which interest on the 2027 Notes is payable equal to the sum of 0.50% plus the yield to maturity of the most recently issued U.S. Treasury securities having a maturity equal to the remaining average life of the 2027 Notes, or if there are no such U.S. Treasury securities, using such implied yield to maturity determined in accordance with the terms of the 2027 Note Purchase Agreement.
The 2027 Notes are general unsecured obligations of the Company that rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by certain of the Company’s subsidiaries, financing vehicles or similar facilities.
The 2027 Note Purchase Agreement contains other terms and conditions, including, without limitation, affirmative and negative covenants such as (i) information reporting, (ii) maintenance of the Company’s status as a business development company within the meaning of the 1940 Act, (iii) minimum shareholders’ equity of $543.6 million, (iv) a minimum asset coverage ratio of not less than 150%, (v) a minimum interest coverage ratio of 1.25 to 1.00 and (vi) an unencumbered asset coverage ratio of 1.25 to 1.00, provided that (a) first lien senior secured loans and cash represent more than 65% of the total value of unencumbered assets used by the Company for purposes of the ratio and (b) equity interests or structured products in the aggregate represent less than 15% of the total value of unencumbered assets used by the Company for purposes of the ratio. The 2027 Note Purchase Agreement also contains a “most favored lender” provision in favor of the purchasers in respect of any new credit facilities, loans, notes or unsecured indebtedness in excess of $25 million incurred by the Company, which indebtedness contains a financial covenant not contained in, or more restrictive against the Company than those contained, in the 2027 Note Purchase Agreement. In addition, the 2027 Note Purchase Agreement contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under other indebtedness or derivative securities of the Company in an outstanding aggregate principal amount of at least $25 million, certain judgments and orders, and certain events of bankruptcy. As of and for the three months ended September 30, 2024, the Company was in compliance with all covenants and reporting requirements.
On September 18, 2024, the Company entered into an Amended and Restated Note Purchase Agreement with certain institutional investors, or the AR Note Purchase Agreement, in connection with the Company’s issuance of $100,000 aggregate principal amount of its floating rate senior unsecured notes, tranche B, due 2027, or the Tranche B Notes, at a purchase price equal to par. The Tranche B Notes represent an add-on, second tranche of, and except as described herein have the same terms and conditions as, the 2027 Notes that were issued by the Company in November 2023. The net proceeds to the Company were approximately $96,200, after the deduction of a commitment fee of $2,875, placement agent fees and other financing expenses. The Tranche B Notes are rated investment grade.
The Tranche B Notes mature on November 8, 2027. The Tranche B Notes bear interest at a floating rate equal to the three-month SOFR plus a credit spread of 3.90% per year and subject to a 2.00% SOFR floor, which will be paid quarterly on February 15, May 15, August 15, and November 15 of each year, commencing on November 15, 2024.
Through September 30, 2024, the Company incurred debt issuance costs of $5,365 in connection with issuing the 2027 Notes and the Tranche B Notes, which were recorded as a direct reduction to the outstanding balance of the 2027 Notes and the Tranche B Notes, which is included in the Company’s consolidated balance sheet as of September 30, 2024 and will amortize to interest expense over the term of the 2027 Notes and the Tranche B Notes. At September 30, 2024, the unamortized portion of the debt issuance costs was $4,939.
54
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
For the three and nine months ended September 30, 2024 and for the period from November 8, 2023 through December 31, 2023, the components of interest expense, average borrowings, and weighted average interest rate for the 2027 Notes and the Tranche B Notes were as follows:
Three Months Ended September 30, 2024
Nine Months Ended September 30, 2024
For the Period From November 8, 2023 Through December 31, 2023
Stated interest expense
$
2,864
$
7,952
$
1,495
Amortization of deferred financing costs
149
362
63
Total interest expense
$
3,013
$
8,314
$
1,558
Weighted average interest rate(1)
9.82
%
9.97
%
9.97
%
Average borrowings
$
114,130
$
104,745
$
100,000
(1) Includes the stated interest expense on the 2027 Notes and the Tranche B Notes and is annualized for periods covering less than one year.
2022 Term Loan
On April 27, 2022, the Company entered into an Unsecured Term Loan Facility Agreement, or the 2022 Term Loan Agreement, with an Israeli institutional investor, as lender, which provided for an unsecured term loan to the Company in an aggregate principal amount of $50,000, or the 2022 Term Loan. On April 27, 2022, the Company drew down $50,000 of borrowings under the 2022 Term Loan. After the deduction of fees and other financing expenses, the Company received net borrowings of approximately $49,000, which it used for working capital and other general corporate purposes. The carrying amount outstanding under the 2022 Term Loan approximates its fair value.
Advances under the 2022 Term Loan bear interest at a floating rate equal to the three-month SOFR, plus a credit spread of 3.50% per year and subject to a 1.0% SOFR floor, payable quarterly in arrears. Advances under the 2022 Term Loan mature on April 27, 2027. The Company has the right to, at its option, prepay all or any portion of advances then outstanding together with a prepayment fee equal to the higher of (i) zero, or (ii) the discounted present value of all remaining interest payments that would have been paid by the Company through the maturity date with respect to the principal amount of such advance that is to be prepaid or becomes due and payable pursuant to the 2022 Term Loan Agreement. The discounted present value portion of the prepayment fee is calculated by applying a discount rate on the same periodic basis as that on which interest on advances is payable equal to the three-month SOFR plus 2.00%.
Advances under the 2022 Term Loan are general unsecured obligations of the Company that rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by certain of the Company’s subsidiaries, financing vehicles or similar facilities.
The 2022 Term Loan Agreement contains other terms and conditions, including, without limitation, affirmative and negative covenants such as (i) information reporting, (ii) maintenance of the Company’s status as a BDC within the meaning of the 1940 Act, (iii) minimum shareholders’ equity of 60% of the Company’s net asset value as of the year ended December 31, 2021 plus 50% of the net cash proceeds of the sale of certain equity interests by the Company after April 27, 2022, if any, (iv) a minimum asset coverage ratio of not less than 150%, and (v) an unencumbered asset coverage ratio of 1.25 to 1.00, provided that (a) first lien senior secured loans and cash represent more than 65% of the total value of unencumbered assets used by the Company for purposes of the ratio and (b) equity interests or structured products in the aggregate represent less than 15% of the total value of unencumbered assets used by the Company for purposes of the ratio. In addition, the 2022 Term Loan Agreement contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under other indebtedness or derivative securities of the Company in an outstanding aggregate principal amount of at least $25,000, certain judgments and orders, and certain events of bankruptcy. As of and for the three months ended September 30, 2024, the Company was in compliance with all covenants and reporting requirements.
Through September 30, 2024, the Company incurred debt issuance costs of $1,025 in connection with obtaining the 2022 Term Loan, which were recorded as a direct reduction to the outstanding balance of the 2022 Term Loan, which is included in the Company’s consolidated balance sheet as of September 30, 2024 and will amortize to interest expense over the term of the 2022 Term Loan. At September 30, 2024, the unamortized portion of the debt issuance costs was $526.
55
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
For the three and nine months ended September 30, 2024 and 2023 and for the year ended December 31, 2023, the components of interest expense, average borrowings, and weighted average interest rate for the 2022 Term Loan were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31,
2024
2023
2024
2023
2023
Stated interest expense
$
1,128
$
1,118
$
3,356
$
3,191
$
4,328
Amortization of deferred financing costs
52
51
154
153
205
Total interest expense
$
1,180
$
1,169
$
3,510
$
3,344
$
4,533
Weighted average interest rate(1)
8.83
%
8.74
%
8.82
%
8.42
%
8.54
%
Average borrowings
$
50,000
$
50,000
$
50,000
$
50,000
$
50,000
(1) Includes the stated interest expense on the 2022 Term Loan and is annualized for periods covering less than one year.
2021 Term Loan
On April 14, 2021, the Company entered into an Unsecured Term Loan Facility Agreement, or the Term Loan Agreement, with an Israeli institutional investor, as lender. The Term Loan Agreement with such lender, or the 2021 Term Loan, provided for an unsecured term loan to the Company in an aggregate principal amount of $30,000. On April 20, 2021, the Company drew down $30,000 of borrowings under the 2021 Term Loan. After the deduction of fees and other financing expenses, the Company received net borrowings of approximately $29,000, which the Company used for working capital and other general corporate purposes.
Advances under the 2021 Term Loan were scheduled to mature on September 30, 2024, and bore interest at a rate of 5.20% per year payable quarterly in arrears. The Company had the right to, at its option, prepay all or any portion of advances then outstanding together with a prepayment fee equal to the higher of (i) zero, or (ii) the discounted present value of all remaining interest payments that would have been paid by the Company through the maturity date with respect to the principal amount of such advance that was to be prepaid or became due and payable pursuant to the Term Loan Agreement. The discounted present value portion of the prepayment fee was calculated by applying a discount rate on the same periodic basis as that on which interest on advances was payable equal to the sum of 2.00% plus the yield to maturity of the most recently issued U.S. Treasury securities having a maturity equal to the remaining average life of the 2021 Term Loan, or if there were no such U.S. Treasury securities, using such implied yield to maturity determined in accordance with the terms of the Term Loan Agreement.
Advances under the 2021 Term Loan were general unsecured obligations of the Company that ranked pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, ranked effectively junior to the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and ranked structurally junior to all existing and future indebtedness (including trade payables) incurred by certain of the Company's subsidiaries, financing vehicles or similar facilities.
The Term Loan Agreement contained other terms and conditions, including, without limitation, affirmative and negative covenants such as (i) information reporting, (ii) maintenance of the Company's status as a BDC within the meaning of the 1940 Act, (iii) minimum shareholders’ equity of 60% of the Company’s net asset value as of the year ended December 31, 2020 plus 50% of the net cash proceeds of the sale of certain equity interests by the Company after April 14, 2021, if any, (iv) a minimum asset coverage ratio of not less than 150%, and (v) an unencumbered asset coverage ratio of 1.25 to 1.00, provided that (a) first lien senior secured loans and cash represented more than 65% of the total value of unencumbered assets used by the Company for purposes of the ratio and (b) equity interests or structured products in the aggregate represented less than 15% of the total value of unencumbered assets used by the Company for purposes of the ratio. In addition, the Term Loan Agreement contained customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross default under other indebtedness or derivative securities of the Company in an outstanding aggregate principal amount of at least $25,000, certain judgments and orders, and certain events of bankruptcy. As of and for the three months ended September 30, 2024, the Company was in compliance with all covenants and reporting requirements.
On September 24, 2024, the Company fully repaid all outstanding principal and interest on and otherwise satisfied all its obligations under the 2021 Term Loan.
Through September 30, 2024, the Company incurred debt issuance costs of $992 in connection with obtaining the 2021 Term Loan, which were recorded as a direct reduction to the outstanding balance of the 2021 Term Loan, which is included in the Company’s consolidated balance sheet as of September 30, 2024 and was to amortize to interest expense over the term of the 2021 Term Loan. At September 30, 2024, all upfront fees and other expenses were fully amortized.
56
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
For the three and nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023, the components of interest expense, average borrowings, and weighted average interest rate for the 2021 Term Loan were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31,
2024
2023
2024
2023
2023
Stated interest expense
$
368
$
399
$
1,157
$
1,183
$
1,582
Amortization of deferred financing costs
66
72
209
215
288
Total interest expense
$
434
$
471
$
1,366
$
1,398
$
1,870
Weighted average interest rate(1)
5.20
%
5.20
%
5.20
%
5.20
%
5.20
%
Average borrowings
$
27,717
$
30,000
$
29,234
$
30,000
$
30,000
(1) Includes the stated interest expense on the 2021 Term Loan and is annualized for periods covering less than one year.
2024 Term Loan
On September 30, 2024, the Company entered into an Unsecured Term Loan Facility Agreement, or the 2024 Term Loan Agreement, with an Israeli institutional investor, as lender, which provides for an unsecured term loan to the Company in an aggregate principal amount of $30,000, or the 2024 Term Loan. After the deduction of fees and other financing expenses, the Company received net borrowings of approximately $29,400 less customary legal fees and other expenses, which the Company used for working capital and other general corporate purposes.
Advances under the 2024 Term Loan bear interest at a floating rate equal to the three-month SOFR, plus a credit spread of 3.80% per year and subject to a 4.0% SOFR floor, payable quarterly in arrears. Advances under the 2024 Term Loan mature on September 30, 2027. The Company has the right to, at its option, prepay all or any portion of advances then outstanding together with a prepayment fee equal to the higher of (i) zero, or (ii) the discounted present value of all remaining interest payments that would have been paid by the Company through the maturity date with respect to the principal amount of such advance that is to be prepaid or becomes due and payable pursuant to the 2024 Term Loan Agreement. The discounted present value portion of the prepayment fee is calculated by applying a discount rate on the same periodic basis as that on which interest on advances is payable equal to the three-month SOFR plus 2.00%.
Advances under the 2024 Term Loan are general unsecured obligations of the Company that rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by certain of the Company's subsidiaries, financing vehicles or similar facilities.
The 2024 Term Loan Agreement contains other terms and conditions, including, without limitation, affirmative and negative covenants such as (i) information reporting, (ii) maintenance of the Company's status as a business development company within the meaning of the Investment Company Act of 1940, as amended, (iii) minimum shareholders’ equity of $543.6 million, (iv) a minimum asset coverage ratio of not less than 150%, (v) an interest coverage ratio of not less than 1.25 to 1.00, and (vi) an unencumbered asset coverage ratio of 1.25 to 1.00, provided that (a) first lien senior secured loans and cash represent more than 65% of the total value of unencumbered assets used by the Company for purposes of the ratio and (b) equity interests or structured products in the aggregate represent less than 15% of the total value of unencumbered assets used by the Company for purposes of the ratio. In addition, the 2024 Term Loan Agreement contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under other indebtedness or derivative securities of the Company in an outstanding aggregate principal amount of at least $25,000, certain judgments and orders, and certain events of bankruptcy. As of September 30, 2024, the Company was in compliance with all covenants.
On September 30, 2024, the Company incurred debt issuance costs of $180 in connection with obtaining the 2024 Term Loan, which were recorded as a direct reduction to the outstanding balance of the 2024 Term Loan, which is included in the Company’s consolidated balance sheet as of September 30, 2024 and will amortize to interest expense over the term of the 2024 Term Loan. At September 30, 2024, the unamortized portion of the debt issuance costs was $180.
57
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
As of September 30, 2024, the components of interest expense, average borrowings, and weighted average interest rate for the 2024 Term Loan were as follows:
September 30, 2024
Stated interest expense
$
7
Amortization of deferred financing costs
—
Total interest expense
$
7
Weighted average interest rate(1)
8.40
%
Average borrowings
$
30,000
(1) Includes the stated interest expense on the 2024 Term Loan and is annualized for periods covering less than one year.
Note 9. Fair Value of Financial Instruments
The following table presents fair value measurements of the Company’s portfolio investments as of September 30, 2024 and December 31, 2023, according to the fair value hierarchy:
September 30, 2024(1)
December 31, 2023(2)
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Senior secured first lien debt
$
—
$
—
$
1,494,524
$
1,494,524
$
—
$
—
$
1,565,171
$
1,565,171
Senior secured second lien debt
—
—
3,873
3,873
—
—
29,111
29,111
Collateralized securities and structured products - equity
—
—
685
685
—
—
1,096
1,096
Unsecured debt
—
—
11,761
11,761
—
—
12,874
12,874
Equity
1,511
—
221,521
223,032
1,624
—
205,909
207,533
Short term investments
53,503
—
—
53,503
113,446
—
—
113,446
Total Investments
$
55,014
$
—
$
1,732,364
$
1,787,378
$
115,070
$
—
$
1,814,161
$
1,929,231
(1)Excludes the Company's $18,851 investment in CION/EagleTree, which is measured at NAV.
(2)Excludes the Company's $25,039 investment in CION/EagleTree, which is measured at NAV.
The following tables provide a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30, 2024
Senior Secured First Lien Debt
Senior Secured Second Lien Debt
Collateralized Securities and Structured Products - Equity
Unsecured Debt
Equity
Total
Beginning balance, June 30, 2024
$
1,536,753
$
15,050
$
770
$
5,493
$
245,634
$
1,803,700
Investments purchased(2)(3)
122,203
134
—
5,187
11,326
138,850
Net realized (loss) gain
(1,792)
—
—
—
5,730
3,938
Net change in unrealized (depreciation) appreciation
(6,653)
107
(64)
1,081
(21,509)
(27,038)
Accretion of discount
1,781
83
—
—
—
1,864
Sales and principal repayments(3)
(157,768)
(11,501)
(21)
—
(19,660)
(188,950)
Ending balance, September 30, 2024
$
1,494,524
$
3,873
$
685
$
11,761
$
221,521
$
1,732,364
Change in net unrealized (depreciation) appreciation on investments still held as of September 30, 2024(1)
$
(6,228)
$
174
$
(64)
$
1,081
$
(17,503)
$
(22,540)
(1)Included in net change in unrealized (depreciation) appreciation on investments in the consolidated statements of operations.
(2)Investments purchased includes PIK interest.
(3)Includes non-cash restructured securities.
58
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
Nine Months Ended September 30, 2024
Senior Secured First Lien Debt
Senior Secured Second Lien Debt
Collateralized Securities and Structured Products - Equity
Unsecured Debt
Equity
Total
Beginning balance, December 31, 2023
$
1,565,171
$
29,111
$
1,096
$
12,874
$
205,909
$
1,814,161
Investments purchased(2)(3)
398,176
323
—
6,641
54,805
459,945
Net realized (loss) gain
(22,209)
(11,809)
(1,210)
—
9,153
(26,075)
Net change in unrealized (depreciation) appreciation
(7,672)
10,926
948
1,079
(21,635)
(16,354)
Accretion of discount
14,315
808
—
39
—
15,162
Sales and principal repayments(3)
(453,257)
(25,486)
(149)
(8,872)
(26,711)
(514,475)
Ending balance, September 30, 2024
$
1,494,524
$
3,873
$
685
$
11,761
$
221,521
$
1,732,364
Change in net unrealized (depreciation) appreciation on investments still held as of September 30, 2024(1)
$
(10,575)
$
(856)
$
(249)
$
985
$
(14,229)
$
(24,924)
(1)Included in net change in unrealized (depreciation) appreciation on investments in the consolidated statements of operations.
(2)Investments purchased includes PIK interest.
(3)Includes non-cash restructured securities.
Three Months Ended September 30, 2023
Senior Secured First Lien Debt
Senior Secured Second Lien Debt
Collateralized Securities and Structured Products - Equity
Unsecured Debt
Equity
Total
Beginning balance, June 30, 2023
$
1,468,630
$
39,544
$
1,046
$
17,301
$
133,725
$
1,660,246
Investments purchased(2)(3)
112,470
—
—
—
34,328
146,798
Net realized loss
(5,844)
—
—
—
(2,279)
(8,123)
Net change in unrealized appreciation (depreciation)
30,233
(3,473)
264
(2,675)
1,795
26,144
Accretion of discount
3,847
47
—
5
—
3,899
Sales and principal repayments(3)
(127,838)
(4)
(86)
—
—
(127,928)
Ending balance, September 30, 2023
$
1,481,498
$
36,114
$
1,224
$
14,631
$
167,569
$
1,701,036
Change in net unrealized appreciation (depreciation) on investments still held as of September 30, 2023(1)
$
10,453
$
(3,473)
$
264
$
(2,675)
$
444
$
5,013
(1)Included in net change in unrealized (depreciation) appreciation on investments in the consolidated statements of operations.
(2)Investments purchased includes PIK interest.
(3)Includes non-cash restructured securities.
59
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
Nine Months Ended September 30, 2023
Senior Secured First Lien Debt
Senior Secured Second Lien Debt
Collateralized Securities and Structured Products - Equity
Unsecured Debt
Equity
Total
Beginning balance, December 31, 2022
$
1,579,512
$
38,769
$
1,179
$
22,643
$
73,951
$
1,716,054
Investments purchased(2)(3)
231,183
—
—
4,200
99,657
335,040
Net realized loss
(23,518)
—
—
—
(8,058)
(31,576)
Net change in unrealized appreciation (depreciation)
11,547
(2,814)
308
(12,225)
2,019
(1,165)
Accretion of discount
10,657
172
—
13
—
10,842
Sales and principal repayments(3)
(327,883)
(13)
(263)
—
—
(328,159)
Ending balance, September 30, 2023
$
1,481,498
$
36,114
$
1,224
$
14,631
$
167,569
$
1,701,036
Change in net unrealized appreciation (depreciation) on investments still held as of September 30, 2023(1)
$
1,685
$
(2,814)
$
308
$
(12,225)
$
(461)
$
(13,507)
(1)Included in net change in unrealized (depreciation) appreciation on investments in the consolidated statements of operations.
(2)Investments purchased includes PIK interest.
(3)Includes non-cash restructured securities.
Significant Unobservable Inputs
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of investments as of September 30, 2024 and December 31, 2023 were as follows:
September 30, 2024
Fair Value
Valuation Techniques/ Methodologies
Unobservable Inputs
Range
Weighted Average(1)
Senior secured first lien debt
$
1,332,134
Discounted Cash Flow
Discount Rates
8.5%
—
30.0%
13.2%
67,169
Market Comparable Approach
Revenue Multiple
1.00x
—
6.50x
1.83x
28,019
EBITDA Multiple
5.38x
—
10.25x
7.99x
55,269
Broker Quotes
Broker Quotes
N/A
N/A
11,933
Other(2)
Other(2)
N/A
N/A
Senior secured second lien debt
3,873
Market Comparable Approach
EBITDA Multiple
5.88x
—
6.25x
5.99x
Collateralized securities and structured products - equity
685
Discounted Cash Flow
Discount Rates
21.0%
N/A
Unsecured debt
5,513
Discounted Cash Flow
Discount Rates
11.5%
—
13.0%
11.9%
5,298
Other(2)
Other(2)
N/A
N/A
950
Options Pricing Model
Expected Volatility
35.0%
N/A
Equity
78,754
Market Comparable Approach
EBITDA Multiple
5.00x
—
17.00x
10.84x
70,186
Revenue Multiple
0.30x
—
6.50x
0.52x
49,272
$ per kW
$442.5
N/A
8,374
Options Pricing Model
Expected Volatility
47.5%
—
100.0%
52.9%
7,613
Discounted Cash Flow
Discount Rates
19.0%
N/A
6,439
Broker Quotes
Broker Quotes
N/A
N/A
883
Other(2)
Other(2)
N/A
N/A
Total
$
1,732,364
(1)Weighted average amounts are based on the estimated fair values.
(2)Fair value is based on the expected outcome of proposed corporate transactions and/or other factors.
60
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
December 31, 2023
Fair Value
Valuation Techniques/ Methodologies
Unobservable Inputs
Range
Weighted Average(1)
Senior secured first lien debt
$
1,354,388
Discounted Cash Flow
Discount Rates
8.5%
—
32.5%
13.8%
108,992
Broker Quotes
Broker Quotes
N/A
N/A
72,229
Market Comparable Approach
Revenue Multiple
1.00x
—
2.50x
1.61x
27,867
EBITDA Multiple
9.00x
—
16.25x
14.35x
1,695
Other(2)
Other(2)
N/A
N/A
Senior secured second lien debt
27,638
Discounted Cash Flow
Discount Rates
13.4%
—
25.0%
16.1%
1,473
Market Comparable Approach
EBITDA Multiple
9.00x
N/A
Collateralized securities and structured products - equity
1,096
Discounted Cash Flow
Discount Rates
5.4%
—
21.0%
20.7%
Unsecured debt
8,739
Discounted Cash Flow
Discount Rates
16.0%
N/A
4,135
Other(2)
Other(2)
N/A
N/A
Equity
90,771
Market Comparable Approach
EBITDA Multiple
4.75x
—
17.25x
9.38x
84,328
Revenue Multiple
0.15x
—
6.50x
1.48x
29,463
$ per kW
$161.16
—
$400.00
$337.28
971
Broker Quotes
Broker Quotes
N/A
N/A
376
Options Pricing Model
Expected Volatility
115.0%
N/A
Total
$
1,814,161
(1)Weighted average amounts are based on the estimated fair values.
(2)Fair value is based on the expected outcome of proposed corporate transactions and/or other factors.
The significant unobservable inputs used in the fair value measurement of the Company’s senior secured first lien debt, senior secured second lien debt, collateralized securities and structured products, unsecured debt and equity are discount rates, EBITDA multiples, revenue multiples, broker quotes and expected volatility. A significant increase or decrease in discount rates would result in a significantly lower or higher fair value measurement, respectively. A significant increase or decrease in the EBITDA multiples, revenue multiples, expected proceeds from proposed corporate transactions, broker quotes and expected volatility would result in a significantly higher or lower fair value measurement, respectively.
Note 10. General and Administrative Expense
General and administrative expense consisted of the following items for the three and nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023:
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31,
2024
2023
2024
2023
2023
Professional fees
$
777
$
405
$
1,753
$
1,576
$
2,178
Dues and subscriptions
117
162
649
635
800
Valuation expense
205
212
578
637
853
Insurance expense
195
168
533
504
675
Director fees and expenses
171
177
519
525
696
Accounting and administrative costs
137
282
459
606
637
Transfer agent expense
121
189
368
736
911
Printing and marketing expense
127
284
292
558
351
Other expenses
5
52
147
183
281
Total general and administrative expense
$
1,855
$
1,931
$
5,298
$
5,960
$
7,382
61
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
Note 11. Commitments and Contingencies
The Company entered into certain contracts with related and other parties that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not experienced claims or losses pursuant to these contracts and believes the risk of loss related to such indemnifications to be remote.
As of September 30, 2024 and December 31, 2023, the Company’s unfunded commitments were as follows:
Unfunded Commitments
September 30, 2024(1)
December 31, 2023(1)
APS Acquisition Holdings, LLC
$
7,799
$
—
American Clinical Solutions LLC
6,450
250
American Family Care, LLC
6,364
—
Flatworld Intermediate Corp.
5,865
5,865
Rogers Mechanical Contractors, LLC
5,838
2,404
Lux Credit Consultants LLC
5,172
—
American Health Staffing Group, Inc.
3,333
3,333
Homer City Holdings LLC
3,000
196
Cennox, Inc.
2,987
—
Gold Medal Holdings, Inc.
2,498
—
Moss Holding Company
2,232
2,232
ALM Media, LLC
2,160
—
Nova Compression, LLC
1,957
2,609
Instant Web, LLC
1,947
2,164
Sleep Opco, LLC
1,750
1,750
Thrill Holdings LLC
1,739
5,000
Riddell, Inc.
1,636
—
Stengel Hill Architecture, LLC
1,500
—
Bradshaw International Parent Corp.
1,230
1,844
ESP Associates, Inc.
1,118
1,316
Mimeo.com, Inc.
1,000
2,500
Critical Nurse Staffing, LLC
1,000
1,000
Dermcare Management, LLC
627
671
BDS Solutions Intermediateco, LLC
524
1,905
HEC Purchaser Corp.
495
—
Ironhorse Purchaser, LLC
490
347
American Teleconferencing Services, Ltd.
235
234
Anthem Sports & Entertainment Inc.
167
167
Coyote Buyer, LLC
—
2,500
MacNeill Pride Group Corp.
—
2,017
Tactical Air Support, Inc.
—
2,000
Fluid Control Intermediate Inc.
—
1,765
OpCo Borrower, LLC
—
1,042
H.W. Lochner, Inc.
—
1,036
Service Compression, LLC
—
419
Invincible Boat Company LLC
—
399
RA Outdoors, LLC
—
372
HW Acquisition, LLC
—
12
Total
$
71,113
$
47,349
(1)Unless otherwise noted, the funding criteria for these unfunded commitments had not been met at the date indicated.
62
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
Unfunded commitments to provide funds to companies are not recorded on the Company’s consolidated balance sheets. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. The Company intends to use cash on hand, short-term investments, proceeds from borrowings, and other liquid assets to fund these commitments should the need arise. For information on the companies to which the Company is committed to fund additional amounts as of September 30, 2024 and December 31, 2023, refer to the table above and the consolidated schedules of investments. As of October 30, 2024, the Company was committed, upon the satisfaction of certain conditions, to fund an additional $69,980.
The Company will fund its unfunded commitments from the same sources it uses to fund its investment commitments that are funded at the time they are made (i.e., advances from its financing arrangements and/or cash flows from operations). The Company will not fund its unfunded commitments from future net proceeds generated by securities offerings, if any. The Company follows a process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments. Specifically, the Company prepares detailed analyses of the level of its unfunded commitments relative to its then available liquidity on a daily basis. These analyses are reviewed and discussed on a weekly basis by the Company's executive officers and senior members of CIM (including members of the investment committee) and are updated on a “real time” basis in order to ensure that the Company has adequate liquidity to satisfy its unfunded commitments.
Note 12. Fee Income
Fee income consists of amendment fees, capital structuring and other fees, conversion fees, commitment fees and administrative agent fees. The following table summarizes the Company’s fee income for the three and nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023:
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31,
2024
2023
2024
2023
2023
Capital structuring and other fees
$
4,951
$
1,763
$
8,180
$
2,295
$
4,309
Amendment fees
802
1,769
1,950
5,115
6,415
Commitment fees
—
—
1,760
309
308
Conversion fees
—
—
78
477
477
Administrative agent fees
50
—
50
30
185
Total(1)
$
5,803
$
3,532
$
12,018
$
8,226
$
11,694
(1)A portion of our fee income is derived from non-controlled, affiliated investments and controlled investments. Refer to notes r. and s. to the consolidated schedule of investments as of September 30, 2024 included in this report for further details on the sources of our fee income.
Administrative agent fees are recurring income as long as the Company remains the administrative agent for the related investment. Income from all other fees was non-recurring.
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CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
Note 13. Financial Highlights
The following is a schedule of financial highlights as of and for the nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023:
Nine Months Ended September 30,
Year Ended December 31,
2024
2023
2023
Per share data:(1)
Net asset value at beginning of period
$
16.23
$
15.98
$
15.98
Results of operations:
Net investment income
1.44
1.52
1.92
Net realized loss and net change in unrealized depreciation on investments and loss on foreign currency(2)
(0.91)
(0.71)
(0.18)
Net increase in net assets resulting from operations(2)
0.53
0.81
1.74
Shareholder distributions:
Distributions from net investment income
(1.11)
(1.07)
(1.61)
Net decrease in net assets resulting from shareholders' distributions
(1.11)
(1.07)
(1.61)
Capital share transactions:
Repurchases of common stock below net asset value(3)
0.08
0.08
0.12
Net increase in net assets resulting from capital share transactions
0.08
0.08
0.12
Net asset value at end of period
$
15.73
$
15.80
$
16.23
Shares of common stock outstanding at end of period
53,359,886
54,464,804
54,184,636
Total investment return-net asset value(4)
6.26
%
9.14
%
17.00
%
Total investment return-market value(5)
15.36
%
19.85
%
34.33
%
Net assets at beginning of period
$
879,563
$
883,634
$
883,634
Net assets at end of period
$
839,190
$
860,760
$
879,563
Average net assets
$
868,759
$
859,301
$
864,886
Ratio/Supplemental data(6):
Ratio of net investment income to average net assets
8.88
%
9.69
%
12.14
%
Ratio of net operating expenses to average net assets
13.51
%
12.54
%
16.88
%
Portfolio turnover rate(7)
19.56
%
11.51
%
17.43
%
Total amount of senior securities outstanding
$
1,069,844
$
1,008,212
$
1,092,344
Asset coverage ratio(8)
1.78
1.85
1.81
(1)The per share data for the nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023 was derived by using the weighted average shares of common stock outstanding during each period.
(2)The amount shown for net realized loss, net change in unrealized depreciation on investments and loss on foreign currency is the balancing figure derived from the other figures in the schedule. The amount shown at this caption for a share outstanding throughout the period may not agree with the change in the aggregate gains and losses in portfolio securities for the period because of the timing of sales and repurchases of the Company’s shares in relation to fluctuating market values for the portfolio. As a result, net increase in net assets resulting from operations in this schedule may vary from the consolidated statements of operations.
(3)Repurchases of common stock may have caused an incremental decrease or increase in net asset value per share due to the repurchase of shares at a price in excess of or below net asset value per share, respectively, on each repurchase date. The per share impact of repurchases of common stock was a decrease to net asset value of less than $0.01 per share during the nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023.
64
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
(4)Total investment return-net asset value is a measure of the change in total value for shareholders who held the Company’s common stock at the beginning and end of the period, including distributions paid or payable during the period. Total investment return-net asset value is based on (i) the beginning period net asset value per share on the first day of the period, (ii) the net asset value per share on the last day of the period of (A) one share plus (B) any fractional shares issued in connection with the reinvestment of distributions, and (iii) the value of distributions payable, if any, on the last day of the period. The total investment return-net asset value calculation assumes that distributions are reinvested in accordance with the Company's distribution reinvestment plan then in effect as described in Note 5. The total investment return-net asset value does not consider the effect of the sales load from the sale of the Company’s common stock. The total investment return-net asset value includes the effect of the issuance of shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. Total returns covering less than a full year are not annualized.
(5)Total investment return-market value for the nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023 was calculated by taking the change in the market price of the Company's common stock since the first day of the period, and including the impact of distributions reinvested in accordance with the Company’s New DRP. Total investment return-market value does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of the Company’s common stock. The historical calculation of total investment return-market value in the table should not be considered a representation of the Company’s future total return based on market value, which may be greater or less than the return shown in the table due to a number of factors, including the Company’s ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Company’s expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets, general economic conditions and fluctuations in per share market value. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods.
(6)Ratios are not annualized.
(7)Portfolio turnover rate is calculated using the lesser of year-to-date sales or purchases over the average of the invested assets at fair value, excluding short term investments.
(8)Asset coverage ratio is equal to (i) the sum of (a) net assets at the end of the period and (b) total senior securities outstanding at the end of the period (excluding unfunded commitments), divided by (ii) total senior securities outstanding at the end of the period.
Note 14. Subsequent Event
On October 3, 2024, the Company issued and sold $172,500 in aggregate principal amount of its unsecured 7.50% Notes due 2029, or the 2029 Notes, which includes $22,500 in aggregate principal amount of the 2029 Notes issued and sold pursuant to the exercise in full of the underwriters’ option to purchase additional 2029 Notes to cover overallotments. The 2029 Notes were issued pursuant to an Indenture, or the Base Indenture, and a First Supplemental Indenture, or the First Supplemental Indenture, and, together with the Base Indenture, the Indenture, between the Company and U.S. Bank Trust Company, National Association, as trustee, or the Trustee. The Company used the net proceeds of the offering of the 2029 Notes to pay down borrowings under the Company's senior secured credit facility with JPM. The 2029 Notes began trading on the NYSE under the ticker symbol “CICB” on October 9, 2024.
The 2029 Notes will mature on December 30, 2029, unless previously redeemed or repurchased in accordance with their terms. The interest rate of the 2029 Notes is 7.50% per year and will be paid quarterly in arrears on March 30, June 30, September 30 and December 30 of each year, commencing December 30, 2024. The 2029 Notes are the Company's direct unsecured obligations and rank pari passu with the Company's existing and future unsecured, unsubordinated indebtedness; senior to any series of preferred stock that the Company may issue in the future; senior to any of the Company's future indebtedness that expressly provides it is subordinated to the 2029 Notes; effectively subordinated to all of the Company's existing and future secured indebtedness (including indebtedness that is initially unsecured to which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of the Company's existing or future subsidiaries.
The 2029 Notes may be redeemed in whole or in part at any time or from time to time at the Company's option on or after December 30, 2026, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of $25 per 2029 Note plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to the date fixed for redemption.
The Indenture contains certain covenants, including covenants requiring the Company to comply with the asset coverage ratio requirements set forth in the 1940 Act, but giving effect to any exemptive relief granted to the Company by the SEC, and certain other exceptions, and to provide financial information to the holders of the 2029 Notes and the Trustee if the Company should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended.
65
CĪON Investment Corporation
Notes to Consolidated Financial Statements(unaudited)
September 30, 2024
(in thousands, except share and per share amounts)
The 2029 Notes were offered and sold in an offering registered under the Securities Act of 1933, as amended, pursuant to the Company's shelf registration statement on Form N-2 (Registration No. 333-278658) previously filed with the SEC, as supplemented by a preliminary prospectus supplement dated September 26, 2024 and a final prospectus supplement dated September 26, 2024.
66
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our” or similar terms include CĪON Investment Corporation and its consolidated subsidiaries. In addition, the term "portfolio companies" refers to companies in which we have invested, either directly or indirectly through our consolidated subsidiaries.
The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. In addition to historical information, the following discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking information that involves risks and uncertainties. Amounts and percentages presented herein may have been rounded for presentation and all dollar amounts, excluding share and per share amounts, are presented in thousands unless otherwise noted.
Forward-Looking Statements
Some of the statements within this Quarterly Report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve numerous risks and uncertainties, including statements as to:
•our future operating results;
•our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of inflation and high interest rates;
•the impact of the investments that we expect to make;
•the ability of our portfolio companies to achieve their objectives;
•our current and expected financings and investments;
•the adequacy of our cash resources, financing sources and working capital;
•the use of borrowed money to finance a portion of our investments;
•the timing of cash flows, if any, from the operations of our portfolio companies;
•our contractual arrangements and relationships with third parties;
•the actual and potential conflicts of interest with CIM and its affiliates;
•the ability of CIM's investment professionals to locate suitable investments for us and the ability of CIM to monitor and administer our investments;
•the ability of CIM and its affiliates to attract and retain highly talented professionals;
•the dependence of our future success on the general economy and its impact on the industries in which we invest, including inflation and high interest rates and the related economic disruptions caused thereby;
•the effects of a changing interest rate environment;
•our ability to source favorable private investments;
•our tax status;
•the effect of changes to tax legislation and our tax position;
•the tax status of the companies in which we invest; and
•the timing and amount of distributions and dividends from the companies in which we invest.
67
In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. Other factors that could cause actual results to differ materially include:
•changes in the economy;
•risks associated with possible disruption in our operations or the economy generally due to terrorism, pandemics, or natural disasters;
•future changes in laws or regulations and conditions in our operating areas;
•the prices at which shares of our common stock and our 2029 Notes may trade on and volume fluctuations in the NYSE; and
•the costs associated with being a publicly traded company.
We have based the forward-looking statements on information available to us on the date of this Quarterly Report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to review any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements contained in this Quarterly Report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Overview
We were incorporated under the general corporation laws of the State of Maryland on August 9, 2011 and commenced operations on December 17, 2012 upon raising proceeds of $2,500 from persons not affiliated with us, CIM or its affiliates. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. We elected to be treated for federal income tax purposes as a RIC, as defined under Subchapter M of the Code.
Our investment objective is to generate current income and, to a lesser extent, capital appreciation for investors. Our portfolio is comprised primarily of investments in senior secured debt, including first lien loans, second lien loans and unitranche loans, and, to a lesser extent, collateralized securities, structured products and other similar securities, unsecured debt, and equity, of private and thinly-traded U.S. middle-market companies. In connection with our debt investments, we may receive equity interests such as warrants or options as additional consideration. We may also purchase equity interests in the form of common or preferred stock in our target companies, either in conjunction with one of our debt investments or through a co-investment with a financial sponsor.
On October 5, 2021, shares of our common stock began trading on the NYSE under the ticker symbol “CION”. The Listing accomplished our goal of providing our shareholders with greatly enhanced liquidity. On February 26, 2023, our shares of common stock and our Series A Notes listed and commenced trading in Israel on the TASE under the ticker symbol “CION” and "CION B1", respectively. On October 9, 2024, our 2029 Notes listed and commenced trading on the NYSE under the ticker symbol “CICB”.
We are managed by CIM, our affiliate and a registered investment adviser. Pursuant to an investment advisory agreement with us, CIM oversees the management of our activities and is responsible for making investment decisions for our portfolio. On August 6, 2024, our board of directors, including a majority of directors who are not interested persons, approved the renewal of the second amended and restated investment advisory agreement with CIM for a period of twelve months, commencing August 9, 2024. We have also entered into an administration agreement with CIM to provide us with administrative services necessary for us to operate. We and CIM previously engaged AIM to act as our investment sub-adviser.
On July 11, 2017, the members of CIM entered into the Third Amended CIM LLC Agreement for the purpose of creating a joint venture between AIM and CIG. Under the Third Amended CIM LLC Agreement, AIM became a member of CIM and was issued a newly-created class of membership interests in CIM pursuant to which AIM, among other things, shares in the profits, losses, distributions and expenses of CIM with the other members in accordance with the terms of the Third Amended CIM LLC Agreement, which results in CIG and AIM each owning a 50% economic interest in CIM.
On July 10, 2017, our independent directors unanimously approved the termination of the investment sub-advisory agreement with AIM, effective as of July 11, 2017, as part of the new and ongoing relationship among us, CIM and AIM. Although the investment sub-advisory agreement and AIM's engagement as our investment sub-adviser were terminated, AIM continues to perform certain services for CIM and us. AIM is not paid a separate fee in exchange for such services, but is entitled to receive distributions as a member of CIM as described above.
68
On December 4, 2017, the members of CIM entered into the Fourth Amended CIM LLC Agreement under which AIM performs certain services for CIM, which include, among other services, providing (a) trade and settlement support; (b) portfolio and cash reconciliation; (c) market pipeline information regarding syndicated deals, in each case, as reasonably requested by CIM; and (d) monthly valuation reports and support for all broker-quoted investments. AIM may also, from time to time, provide us with access to potential investment opportunities made available on Apollo's credit platform on a similar basis as other third-party market participants. All of our investment decisions are the sole responsibility of, and are made at the sole discretion of, CIM's investment committee, which consists entirely of CIG senior personnel.
Upon the occurrence of the Listing on October 5, 2021, we and CIM entered into the second amended and restated investment advisory agreement in order to implement the changes to the advisory fees payable from us to CIM that (i) reduced the annual base management fee, (ii) amended the structure of the subordinated incentive fee on income payable from us to CIM and reduced the hurdle and incentive fee rates, and (iii) reduced the incentive fee on capital gains payable from us to CIM (as described in further detail in Notes 2 and 4 to our consolidated financial statements included in this report).
We seek to meet our investment objective by utilizing the experienced management team of CIM, which includes its access to the relationships and human capital of its affiliates in sourcing, evaluating and structuring transactions, as well as monitoring and servicing our investments. We focus primarily on the senior secured debt of private and thinly-traded U.S. middle-market companies, which we define as companies that generally possess annual EBITDA of $75 million or less, with experienced management teams, significant free cash flow, strong competitive positions and potential for growth.
Revenue
We primarily generate revenue in the form of interest income on the debt securities that we hold and capital gains on debt or other equity interests that we acquire in portfolio companies. The majority of our senior debt investments bear interest at a floating rate. Interest on debt securities is generally payable quarterly or monthly. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued, but unpaid, interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and capital structuring fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. Any such fees generated in connection with our investments will be recognized when earned.
Operating Expenses
Our primary operating expenses are the payment of management fees and subordinated incentive fees on income under the investment advisory agreement and interest expense on our financing arrangements. Our investment advisory fees compensate CIM for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments. We bear all other expenses of our operations and transactions.
Recent Developments
Q4 Base Distribution
On November 4, 2024, our co-chief executive officers declared a quarterly base distribution of $0.36 per share for the fourth quarter of 2024, payable on December 16, 2024 to shareholders of record as of December 2, 2024.
2029 Notes
On October 3, 2024, we issued and sold $172,500 in aggregate principal amount of our 2029 Notes, which includes $22,500 in aggregate principal amount of the 2029 Notes issued and sold pursuant to the exercise in full of the underwriters’ option to purchase additional 2029 Notes to cover overallotments. The 2029 Notes were issued pursuant to the Indenture between us and the Trustee. We used the net proceeds of the offering of the 2029 Notes to pay down borrowings under our senior secured credit facility with JPM. The 2029 Notes began trading on the NYSE under the ticker symbol “CICB” on October 9, 2024.
The 2029 Notes will mature on December 30, 2029, unless previously redeemed or repurchased in accordance with their terms. The interest rate of the 2029 Notes is 7.50% per year and will be paid quarterly in arrears on March 30, June 30, September 30 and December 30 of each year, commencing December 30, 2024. The 2029 Notes are our direct unsecured obligations and rank pari passu with our existing and future unsecured, unsubordinated indebtedness; senior to any series of preferred stock that we may issue in the future; senior to any of our future indebtedness that expressly provides it is subordinated to the 2029 Notes; effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of our existing or future subsidiaries.
69
The 2029 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after December 30, 2026, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of $25 per 2029 Note plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to the date fixed for redemption.
The Indenture contains certain covenants, including covenants requiring us to comply with the asset coverage ratio requirements set forth in the 1940 Act, but giving effect to any exemptive relief granted to us by the SEC, and certain other exceptions, and to provide financial information to the holders of the 2029 Notes and the Trustee if we should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended.
The 2029 Notes were offered and sold in an offering registered under the Securities Act of 1933, as amended, pursuant to our shelf registration statement on Form N-2 (Registration No. 333-278658) previously filed with the SEC, as supplemented by a preliminary prospectus supplement dated September 26, 2024 and a final prospectus supplement dated September 26, 2024.
Portfolio Investment Activity for the Three and Nine Months Ended September 30, 2024 and 2023 and the Year Ended December 31, 2023
The following table summarizes our investment activity, excluding short term investments and PIK securities, for the three and nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023:
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31,
Net Investment Activity
2024
2023
2024
2023
2023
Purchases and drawdowns
Senior secured first lien debt
$
91,286
$
102,666
$
330,952
$
186,493
$
340,704
Unsecured debt
—
—
1,096
4,200
4,200
Equity
1,183
377
19,585
5,283
5,283
Sales and principal repayments
(153,580)
(96,373)
(438,164)
(217,246)
(300,250)
Net portfolio activity
$
(61,111)
$
6,670
$
(86,531)
$
(21,270)
$
49,937
The following tables summarize the composition of our investment portfolio at amortized cost and fair value as of September 30, 2024 and December 31, 2023:
September 30, 2024
Investments Cost(1)
Investments Fair Value
Percentage of Investment Portfolio
Senior secured first lien debt
$
1,541,136
$
1,494,524
85.3
%
Senior secured second lien debt
5,116
3,873
0.2
%
Collateralized securities and structured products - equity
1,003
685
—
Unsecured debt
29,501
11,761
0.7
%
Equity
219,985
241,883
13.8
%
Subtotal/total percentage
1,796,741
1,752,726
100.0
%
Short term investments(2)
53,503
53,503
Total investments
$
1,850,244
$
1,806,229
Number of portfolio companies
103
Average annual EBITDA of portfolio companies
$51.8 million
Median annual EBITDA of portfolio companies
$32.8 million
Purchased at a weighted average price of par
97.11
%
Gross annual portfolio yield based upon the purchase price(3)
10.88
%
(1)Represents amortized cost for debt investments and cost for equity investments. Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments.
(2)Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.
(3)The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage.
70
December 31, 2023
Investments Cost(1)
Investments Fair Value
Percentage of Investment Portfolio
Senior secured first lien debt
$
1,604,111
$
1,565,171
85.0
%
Senior secured second lien debt
41,280
29,111
1.6
%
Collateralized securities and structured products - equity
2,362
1,096
0.1
%
Unsecured debt
31,693
12,874
0.7
%
Equity
182,738
232,572
12.6
%
Subtotal/total percentage
1,862,184
1,840,824
100.0
%
Short term investments(2)
113,446
113,446
Total investments
$
1,975,630
$
1,954,270
Number of portfolio companies
111
Average annual EBITDA of portfolio companies
$61.7 million
Median annual EBITDA of portfolio companies
$33.7 million
Purchased at a weighted average price of par
96.33
%
Gross annual portfolio yield based upon the purchase price(3)
12.12
%
(1)Represents amortized cost for debt investments and cost for equity investments. Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments.
(2)Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.
(3)The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage.
The following table summarizes the composition of our investment portfolio by the type of interest rate as of September 30, 2024 and December 31, 2023, excluding short term investments of $53,503 and $113,446, respectively:
September 30, 2024
December 31, 2023
Interest Rate Allocation
Investments Cost
Investments Fair Value
Percentage of Investment Portfolio
Investments Cost
Investments Fair Value
Percentage of Investment Portfolio
Floating interest rate investments
$
1,466,022
$
1,423,920
81.2
%
$
1,521,848
$
1,475,126
80.1
%
Non-income producing investments
195,146
218,049
12.5
%
154,419
184,175
10.0
%
Fixed interest rate investments
130,179
105,365
6.0
%
155,244
131,533
7.2
%
Other income producing investments
5,394
5,392
0.3
%
30,673
49,990
2.7
%
Total investments
$
1,796,741
$
1,752,726
100.0
%
$
1,862,184
$
1,840,824
100.0
%
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The following table shows the composition of our investment portfolio by industry classification and the percentage, by fair value, of the total assets in such industries as of September 30, 2024 and December 31, 2023:
September 30, 2024
December 31, 2023
Industry Classification
Investments Fair Value
Percentage of Investment Portfolio
Investments Fair Value
Percentage of Investment Portfolio
Services: Business
$
272,919
15.5
%
$
282,237
15.3
%
Healthcare & Pharmaceuticals
224,219
12.6
%
238,624
13.0
%
Retail
137,725
7.9
%
135,000
7.3
%
Media: Diversified & Production
131,196
7.5
%
135,037
7.3
%
Services: Consumer
109,005
6.2
%
107,195
5.8
%
Media: Advertising, Printing & Publishing
106,365
6.1
%
116,100
6.3
%
Construction & Building
101,037
5.8
%
104,727
5.7
%
Consumer Goods: Durable
96,513
5.5
%
59,955
3.3
%
Energy: Oil & Gas
94,504
5.4
%
104,893
5.7
%
Beverage, Food & Tobacco
89,320
5.1
%
68,780
3.7
%
Banking, Finance, Insurance & Real Estate
63,644
3.6
%
52,272
2.8
%
Diversified Financials
57,421
3.3
%
85,733
4.7
%
Hotel, Gaming & Leisure
50,199
2.9
%
50,906
2.8
%
Capital Equipment
39,092
2.2
%
49,571
2.7
%
Consumer Goods: Non-Durable
33,468
1.9
%
42,381
2.3
%
Automotive
30,934
1.8
%
12,403
0.7
%
Environmental Industries
27,413
1.6
%
15,336
0.8
%
Containers, Packaging & Glass
18,926
1.1
%
18,480
1.0
%
High Tech Industries
18,529
1.1
%
22,671
1.2
%
Metals & Mining
14,815
0.8
%
13,957
0.8
%
Aerospace & Defense
14,000
0.8
%
12,000
0.6
%
Transportation: Cargo
11,533
0.7
%
12,201
0.7
%
Telecommunications
6,538
0.4
%
17,768
1.0
%
Chemicals, Plastics & Rubber
3,411
0.2
%
82,597
4.5
%
Subtotal/total percentage
1,752,726
100.0
%
1,840,824
100.0
%
Short term investments
53,503
113,446
Total investments
$
1,806,229
$
1,954,270
Our investment portfolio may contain senior secured investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or unfunded commitments, which may require us to provide funding when requested in accordance with the terms of the underlying agreements. As of September 30, 2024 and December 31, 2023, our unfunded commitments amounted to $71,113 and $47,349, respectively. As of October 30, 2024, our unfunded commitments amounted to $69,980. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for us. Refer to the section “Commitments and Contingencies” for further details on our unfunded commitments.
Investment Portfolio Asset Quality
CIM uses an investment rating system to characterize and monitor our expected level of returns on each investment in our portfolio. These ratings are just one of several factors that CIM uses to monitor our portfolio, are not in and of themselves determinative of fair value or revenue recognition and are presented for indicative purposes. CIM rates the credit risk of all investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors.
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The following is a description of the conditions associated with each investment rating used in this ratings system:
Investment Rating
Description
1
Indicates the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit.
2
Indicates a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing in accordance with our analysis of its business and the full return of principal and interest or dividend is expected.
3
Indicates that the risk to our ability to recoup the cost of such investment has increased since origination or acquisition, but full return of principal and interest or dividend is expected. A portfolio company with an investment rating of 3 requires closer monitoring.
4
Indicates that the risk to our ability to recoup the cost of such investment has increased significantly since origination or acquisition, including as a result of factors such as declining performance and noncompliance with debt covenants, and we expect some loss of interest, dividend or capital appreciation, but still expect an overall positive internal rate of return on the investment.
5
Indicates that the risk to our ability to recoup the cost of such investment has increased materially since origination or acquisition and the portfolio company likely has materially declining performance. Loss of interest or dividend and some loss of principal investment is expected, which would result in an overall negative internal rate of return on the investment.
For investments rated 3, 4, or 5, CIM enhances its level of scrutiny over the monitoring of such portfolio company.
The following table summarizes the composition of our investment portfolio based on the 1 to 5 investment rating scale at fair value as of September 30, 2024 and December 31, 2023, excluding short term investments of $53,503 and $113,446, respectively:
September 30, 2024
December 31, 2023
Investment Rating
Investments Fair Value
Percentage of Investment Portfolio
Investments Fair Value
Percentage of Investment Portfolio
1
$
10,429
0.6
%
$
98,255
5.3
%
2
1,501,302
85.7
%
1,603,975
87.2
%
3
207,168
11.8
%
120,132
6.5
%
4
26,920
1.5
%
10,304
0.6
%
5
6,907
0.4
%
8,158
0.4
%
$
1,752,726
100.0
%
$
1,840,824
100.0
%
The amount of the investment portfolio in each rating category may vary substantially from period to period resulting primarily from changes in the composition of such portfolio as a result of new investment, repayment and exit activities. In addition, changes in the rating of investments may be made to reflect our expectation of performance and changes in investment values.
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Current Investment Portfolio
The following table summarizes the composition of our investment portfolio at fair value as of October 30, 2024:
Investments Fair Value
Percentage of Investment Portfolio
Senior secured first lien debt
$
1,509,381
85.4
%
Senior secured second lien debt
3,860
0.2
%
Collateralized securities and structured products - equity
685
—
Unsecured debt
11,705
0.7
%
Equity
241,397
13.7
%
Subtotal/total percentage
1,767,028
100.0
%
Short term investments(1)
275,755
Total investments
$
2,042,783
Number of portfolio companies
104
Average annual EBITDA of portfolio companies
$52.6 million
Median annual EBITDA of portfolio companies
$33.7 million
Purchased at a weighted average price of par
97.01
%
Gross annual portfolio yield based upon the purchase price(2)
10.93
%
(1)Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.
(2)The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage.
Results of Operations for the Three Months Ended September 30, 2024 and 2023
Our results of operations for the three months ended September 30, 2024 and 2023 were as follows:
Three Months Ended September 30,
2024
2023
Investment income
$
59,627
$
67,540
Operating expenses and income taxes
38,009
37,550
Net investment income after taxes
21,618
29,990
Net realized gain (loss) on investments and foreign currency
3,938
(8,123)
Net change in unrealized (depreciation) appreciation on investments
(25,935)
25,606
Net (decrease) increase in net assets resulting from operations
$
(379)
$
47,473
Investment Income
For the three months ended September 30, 2024 and 2023, we generated investment income of $59,627 and $67,540, respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities and structured products, and unsecured debt of 99 and 101 portfolio companies held during each respective period. The decrease in total investment income was primarily driven by a decrease in transaction fees on investments received during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
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Operating Expenses and Income Taxes
The composition of our operating expenses and income taxes for the three months ended September 30, 2024 and 2023 was as follows:
Three Months Ended September 30,
2024
2023
Management fees
$
6,854
$
6,741
Administrative services expense
1,184
996
Subordinated incentive fee on income
4,586
6,362
General and administrative
1,855
1,931
Interest expense
23,551
21,757
Income tax benefit, including excise tax
(21)
(237)
Total operating expenses and income taxes
$
38,009
$
37,550
The increase in interest expense was primarily the result of higher average borrowings under our financing arrangements during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease in subordinated incentive fee on income was primarily the result of the decrease in investment income during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
The composition of our general and administrative expenses for the three months ended September 30, 2024 and 2023 was as follows:
Three Months Ended September 30,
2024
2023
Professional fees
$
777
$
405
Valuation expense
205
212
Insurance expense
195
168
Director fees and expenses
171
177
Accounting and administrative costs
137
282
Printing and marketing expense
127
284
Transfer agent expense
121
189
Dues and subscriptions
117
162
Other expenses
5
52
Total general and administrative expense
$
1,855
$
1,931
Net Investment Income After Taxes
Our net investment income after taxes totaled $21,618 and $29,990 for the three months ended September 30, 2024 and 2023, respectively. The decrease in net investment income was a result of a decrease in our investment income during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Net Realized Gain (Loss) on Investments and Foreign Currency
Our net realized gain (loss) on investments and foreign currency totaled $3,938 and $(8,123) for the three months ended September 30, 2024 and 2023, respectively. This change was driven primarily by lower realized losses due to the restructure of certain investments during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
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Net Change in Unrealized (Depreciation) Appreciation on Investments
The net change in unrealized (depreciation) appreciation on our investments totaled $(25,935) and $25,606 for the three months ended September 30, 2024 and 2023, respectively. This change was primarily due to the decline in fair value of certain investments from mark-to-market adjustments during the three months ended September 30, 2024 compared to during the three months ended September 30, 2023.
Net (Decrease) Increase in Net Assets Resulting from Operations
For the three months ended September 30, 2024 and 2023, we recorded a net (decrease) increase in net assets resulting from operations of $(379) and $47,473, respectively, as a result of our operating activity for the respective periods.
Results of Operations for the Nine Months Ended September 30, 2024 and 2023
Our results of operations for the nine months ended September 30, 2024 and 2023 were as follows:
Nine Months Ended September 30,
2024
2023
Investment income
$
194,538
$
191,011
Operating expenses and income taxes
117,364
107,747
Net investment income after taxes
77,174
83,264
Net realized loss on investments and foreign currency
(26,075)
(31,576)
Net change in unrealized depreciation on investments
(22,655)
(7,366)
Net increase in net assets resulting from operations
$
28,444
$
44,322
Investment Income
For the nine months ended September 30, 2024 and 2023, we generated investment income of $194,538 and $191,011, respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities and structured products, and unsecured debt of 104 and 107 portfolio companies held during each respective period. The increase in total investment income was primarily driven by an increase in certain transaction fees on investments received during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Operating Expenses and Income Taxes
The composition of our operating expenses and income taxes for the nine months ended September 30, 2024 and 2023 was as follows:
Nine Months Ended September 30,
2024
2023
Management fees
$
20,559
$
19,963
Administrative services expense
3,522
2,743
Subordinated incentive fee on income
16,371
17,662
General and administrative
5,298
5,960
Interest expense
71,626
61,533
Income tax benefit, including excise tax
(12)
(114)
Total operating expenses and income taxes
$
117,364
$
107,747
The increase in interest expense was primarily the result of higher average borrowings under our financing arrangements during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
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The composition of our general and administrative expenses for the nine months ended September 30, 2024 and 2023 was as follows:
Nine Months Ended September 30,
2024
2023
Professional fees
$
1,753
$
1,576
Dues and subscriptions
649
635
Valuation expense
578
637
Insurance expense
533
504
Director fees and expenses
519
525
Accounting and administrative costs
459
606
Transfer agent expense
368
736
Printing and marketing expense
292
558
Other expenses
147
183
Total general and administrative expense
$
5,298
$
5,960
Net Investment Income After Taxes
Our net investment income after taxes totaled $77,174 and $83,264 for the nine months ended September 30, 2024 and 2023, respectively. The decrease in our net investment income was primarily the result of an increase in our interest expense during the nine months ended September 30, 2024 compared to during the nine months ended September 30, 2023.
Net Realized Loss on Investments and Foreign Currency
Our net realized loss on investments and foreign currency totaled $(26,075) and $(31,576) for the nine months ended September 30, 2024 and 2023, respectively. This decrease was driven primarily by lower realized losses due to the restructure of certain investments during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Net Change in Unrealized Depreciation on Investments
The net change in unrealized depreciation on our investments totaled $(22,655) and $(7,366) for the nine months ended September 30, 2024 and 2023, respectively. This increase was driven primarily by the decline in fair value of certain investments from mark-to-market adjustments during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Net Increase in Net Assets Resulting from Operations
For the nine months ended September 30, 2024 and 2023, we recorded a net increase in net assets resulting from operations of $28,444 and $44,322, respectively, as a result of our operating activity for the respective periods.
Financial Condition, Liquidity and Capital Resources
We generate cash primarily from cash flows from interest, fees and dividends earned from our investments as well as principal repayments and proceeds from sales of our investments. We also employ leverage to seek to enhance our returns as market conditions permit and at the discretion of CIM and pursuant to the 1940 Act. As a result, we also generate cash from our existing financing arrangements and may generate cash from future borrowings, as well as future offerings of securities including public and/or private issuances of debt and/or equity securities. We use cash primarily to (i) purchase investments in new and existing portfolio companies, (ii) pay for the cost of operations (including paying advisory fees to and reimbursing CIM), (iii) make debt service payments related to any of our financing arrangements and (iv) pay cash distributions to the holders of our shares.
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On March 23, 2018, an amendment to Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum “asset coverage” ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC’s debt to equity from a maximum of 1-to-1 to a maximum of 2-to-1, so long as certain approval and disclosure requirements are satisfied. As a result of receiving shareholder approval on December 30, 2021, effective December 31, 2021, we are required to maintain asset coverage for our senior securities of 150% rather than 200%, which allows us to increase the maximum amount of leverage that we are permitted to incur. We may from time to time enter into additional financing arrangements or amend the size of our existing financing arrangements. Any increase to our leverage would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.
As of September 30, 2024 and December 31, 2023, our asset coverage ratio was 1.78 and 1.81, respectively. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage and liquidity requirements.
On August 27, 2024, our shareholders authorized us to issue shares of our common stock at prices below the then current NAV per share in one or more offerings for a 12-month period following such shareholder approval. As of the date of this report, we are not engaged in discussions to, or have any intent to, issue any such shares.
As of September 30, 2024, we had cash of $29,765 and short term investments of $53,503 invested in a fund that primarily invests in U.S. government securities. Cash and short term investments as of September 30, 2024, taken together with the undrawn debt available under our credit facilities, is expected to be sufficient for our investing and financing activities and to conduct our operations in the near term. As of September 30, 2024, we had $162 million available under our secured financing arrangements.
Our short-term cash needs include the funding of additional portfolio investments, the payment of operating expenses including interest expense, management fees, incentive fees, administrative services expense and general and administrative expenses, as well as paying distributions to our shareholders. Our long-term cash needs will include principal payments on outstanding financing arrangements and funding of additional portfolio investments. Funding for short and long-term cash needs will come from cash provided from operating activities and/or unused net proceeds from financing activities. We believe that our liquidity and sources of capital are adequate to satisfy our short and long-term cash requirements. We cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to us in sufficient amounts in the future.
Post-Listing Share Repurchase Policy
On September 15, 2021, our board of directors, including the independent directors, approved a share repurchase policy authorizing us to repurchase up to $50 million of our outstanding common stock after the Listing. On June 24, 2022, our board of directors, including the independent directors, increased the amount of shares of our common stock that may be repurchased under the share repurchase policy by $10 million to up to an aggregate of $60 million. Under the share repurchase policy, we may purchase shares of our common stock through various means such as open market transactions, including block purchases, and privately negotiated transactions. The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at our discretion. Factors include, but are not limited to, share price, trading volume and general market conditions, along with our general business conditions. The policy may be suspended or discontinued at any time and does not obligate us to acquire any specific number of shares of our common stock.
On August 19, 2024, as part of the share repurchase policy, we entered into a new trading plan with an independent broker, Wells Fargo, in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, based in part on historical trading data with respect to our shares. The 10b5-1 trading plan permits common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. The 10b5-1 trading plan expires on August 19, 2025, and is subject to price, market volume and timing restrictions.
During the nine months ended September 30, 2024, we repurchased an aggregate of 824,750 shares under the 10b5-1 trading plan for an aggregate purchase price of $9,344, or an average purchase price of $11.33 per share.
From October 1, 2024 to October 30, 2024, we repurchased an aggregate of 73,943 shares of common stock under the 10b5-1 trading plan for an aggregate purchase price of $881, or an average purchase price of $11.92 per share. From the inception of the 10b5-1 trading plan in August 2022 through October 30, 2024, we repurchased an aggregate of 3,672,497 shares of common stock under the 10b5-1 trading plan for an aggregate purchase price of $37,187, or an average purchase price of $10.13 per share.
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RIC Status and Distributions
To qualify for and maintain RIC tax treatment, we must, among other things, distribute in respect of each taxable year at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. We will incur an excise tax of 4% imposed on RICs to the extent we do not distribute in respect of each calendar year an amount at least equal to the sum of (1) 98.0% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gains in excess of capital losses, or capital gain net income (adjusted for certain ordinary losses), for the one-year period ending on October 31 of the calendar year and (3) any net ordinary income and capital gain net income from preceding years that were not distributed during such years and on which we paid no federal income tax. For an additional discussion of our RIC status and distributions, refer to Note 2 and Note 5, respectively, of our consolidated financial statements included in this report.
We intend to make distributions in an amount sufficient to maintain RIC status each year and to avoid any federal income taxes on income. Therefore, subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to authorize, declare, and pay base distributions on a quarterly basis. Base and any supplemental and/or special distributions in respect of future periods will be evaluated by management and our board of directors based on circumstances and expectations existing at the time of consideration.
The following table presents distributions per share that were declared during the year ended December 31, 2023 and the nine months ended September 30, 2024:
Distributions
Three Months Ended
Per Share
Amount
2023
March 31, 2023 (one record date)
$
0.34
$
18,687
June 30, 2023 (one record date)
0.34
18,614
September 30, 2023 (two record dates)
0.39
21,276
December 31, 2023 (three record dates)
0.54
29,290
Total distributions for the year ended December 31, 2023
$
1.61
$
87,867
2024
March 31, 2024 (one record date)
$
0.34
$
18,279
June 30, 2024 (two record dates)
0.41
21,960
September 30, 2024 (one record date)
0.36
19,234
Total distributions for the nine months ended September 30, 2024
$
1.11
$
59,473
On November 4, 2024, our co-chief executive officers declared a quarterly base distribution of $0.36 per share for the fourth quarter of 2024 payable on December 16, 2024 to shareholders of record as of December 2, 2024.
For an additional discussion of our RIC status and distributions, refer to Note 2 and Note 5, respectively, of our consolidated financial statements included in this report.
JPM Credit Facility
As of September 30, 2024 and October 30, 2024, our aggregate outstanding borrowings under the JPM Credit Facility were $450,000 and the aggregate unfunded principal amount in connection with the JPM Credit Facility was $112,500. For a detailed discussion of our JPM Credit Facility, refer to Note 8 to our consolidated financial statements included in this report.
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UBS Facility
As of September 30, 2024 and October 30, 2024, our outstanding borrowings under the Amended UBS Facility were $100,000 and the aggregate unfunded principal amount in connection with the Amended UBS Facility was $50,000. For a detailed discussion of our Amended UBS Facility, refer to Note 8 to our consolidated financial statements included in this report.
2026 Notes
As of September 30, 2024 and October 30, 2024, we had $125,000 in aggregate principal amount of 2026 Notes outstanding and there was no unfunded principal amount in connection with the 2026 Notes. For a detailed discussion of our 2026 Notes, refer to Note 8 to our consolidated financial statements included in this report.
2021 Term Loan
On September 24, 2024, the Company fully repaid all outstanding principal and interest on and otherwise satisfied all its obligations under the 2021 Term Loan. For a detailed discussion of our 2021 Term Loan, refer to Note 8 to our consolidated financial statements included in this report.
2022 Term Loan
As of September 30, 2024 and October 30, 2024, our outstanding borrowings under the 2022 Term Loan were $50,000 and there was no unfunded principal amount in connection with the 2022 Term Loan. For a detailed discussion of our 2022 Term Loan, refer to Note 8 to our consolidated financial statements included in this report.
2024 Term Loan
As of September 30, 2024 and October 30, 2024, our outstanding borrowings under the 2024 Term Loan were $30,000 and there was no unfunded principal amount in connection with the 2024 Term Loan. For a detailed discussion of our 2024 Term Loan, refer to Note 8 to our consolidated financial statements included in this report.
Series A Notes
As of September 30, 2024 and October 30, 2024, we had approximately $114,844 in aggregate principal amount of Series A Notes outstanding and there was no unfunded principal amount in connection with the Series A Notes. For a detailed discussion of our Series A Notes, refer to Note 8 to our consolidated financial statements included in this report.
2027 Notes
As of September 30, 2024 and October 30, 2024, we had $200,000 in aggregate principal amount of 2027 Notes outstanding and there was no unfunded principal amount in connection with the 2027 Notes. For a detailed discussion of our 2027 Notes, refer to Note 8 to our consolidated financial statements included in this report.
2029 Notes
As of October 30, 2024, we had $172,500 in aggregate principal amount of 2029 Notes outstanding and there was no unfunded principal amount in connection with the 2029 Notes. For a detailed discussion of our 2029 Notes, refer to Note 14 to our consolidated financial statements included in this report.
Unfunded Commitments
As of September 30, 2024 and October 30, 2024, our unfunded commitments amounted to $71,113 and $69,980, respectively. For a detailed discussion of our unfunded commitments, refer to Note 11 to our consolidated financial statements included in this report.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included in this report for a discussion of certain recent accounting pronouncements that are applicable to us.
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Critical Accounting Policies
Our consolidated financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the consolidated financial statements, we also utilize available information, including our past history, industry standards and the current economic environment, among other factors, in forming our estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses.
Valuation of Portfolio Investments
The value of our assets is determined quarterly and at such other times that an event occurs that materially affects the valuation. The valuation is made pursuant to Section 2(a)(41) of the 1940 Act, which requires that we value our assets as follows: (i) the market price for those securities for which a market quotation is readily available, and (ii) for all other securities and assets, at fair value, as determined in good faith by our board of directors. As a BDC, Section 2(a)(41) of the 1940 Act requires the board of directors to determine in good faith the fair value of portfolio securities for which a market price is not readily available, and it does so in conjunction with the application of our valuation procedures by CIM. In accordance with Rule 2a-5 of the 1940 Act, our board of directors has designated CIM as our “valuation designee.” Our board of directors and the audit committee of our board of directors, which is comprised solely of our independent directors, oversees the activities, methodology and processes of the valuation designee.
There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each asset while employing a valuation process that is consistently followed. Determinations of fair value involve subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations in our consolidated financial statements.
Valuation Methods
With respect to investments for which market quotations are not readily available, CIM, as the valuation designee of our board of directors, undertakes a multi-step valuation process each quarter, as described below:
•our quarterly valuation process generally begins with each portfolio company or investment either being sent directly to an independent valuation firm or initially valued by certain of CIM’s investment professionals and certain members of its management team, with such valuation taking into account information received from various sources, including independent valuation firms, if applicable;
•preliminary valuation conclusions are then documented and discussed with members of CIM’s management team;
•designated members of CIM’s management team review the preliminary valuation, and, if applicable, deliver such preliminary valuation to an independent valuation firm for its review;
•designated members of CIM’s management team and, if appropriate, the relevant investment professionals meet with the independent valuation firm to discuss the preliminary valuation;
•designated members of CIM’s management team respond and supplement the preliminary valuation to reflect any comments provided by the independent valuation firm;
•our audit committee meets with members of CIM’s management team and the independent valuation firms to discuss the assistance provided and the results of the independent valuation firms' review; and
•our board of directors and our audit committee provide oversight with respect to this valuation process, including requesting such materials as they may determine appropriate.
We shall promptly (but no later than five business days after we become aware) report to our board of directors in writing on the occurrence of matters that materially affect the fair value of the designated portfolio of investments. Material matters in this instance include a significant deficiency or material weakness in the design or effectiveness of CIM’s fair value determination process resulting in a material error in the calculation of NAV of $0.01 per share or greater.
In addition to the foregoing, certain investments for which a market price is not readily available are evaluated on a quarterly basis by an independent valuation firm and certain other investments are on a rotational basis reviewed by an independent valuation firm. Finally, certain investments are not evaluated by an independent valuation firm unless certain aspects of such investments in the aggregate meet certain criteria.
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Given the expected types of investments, excluding short term investments and stock of publicly traded companies that are classified as Level 1, management expects our portfolio holdings to be classified as Level 3. Due to the uncertainty inherent in the valuation process, particularly for Level 3 investments, such fair value estimates may differ significantly from the values that would have been used had an active market for the investments existed. 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 that we ultimately realize on these investments to materially differ from the valuations currently assigned. Inputs used in the valuation process are subject to variability in the future and can result in materially different fair values.
For an additional discussion of our investment valuation process, refer to Note 2 to our consolidated financial statements included in this report.
Related Party Transactions
For a discussion of our relationship with related parties including CIM, CIG, and AIA and amounts incurred under agreements with such related parties, refer to Note 4 to our consolidated financial statements included in this report. For a discussion of our relationship with CION/EagleTree, refer to Note 7 to our consolidated financial statements included in this report.
Contractual Obligations
On August 26, 2016, 34th Street entered into the JPM Credit Facility with JPM, as amended on September 30, 2016, July 11, 2017, November 28, 2017, May 23, 2018, May 15, 2020, February 26, 2021, March 28, 2022, May 15, 2023, May 14, 2024, June 17, 2024 and July 15, 2024. See Note 8 to our consolidated financial statements for a more detailed description of the JPM Credit Facility.
On May 19, 2017, Murray Hill Funding II entered into the UBS Facility with UBS, as amended on December 1, 2017, May 19, 2020, November 12, 2020, December 17, 2020 and June 14, 2023. See Note 8 to our consolidated financial statements for a more detailed description of the UBS Facility.
On February 11, 2021, we entered into the 2026 Note Purchase Agreement with purchasers of the 2026 Notes. See Note 8 to our consolidated financial statements for a more detailed description of the 2026 Notes.
On April 14, 2021, we entered into the 2021 Term Loan with an Israeli institutional investor. See Note 8 to our consolidated financial statements for a more detailed description of the 2021 Term Loan.
On April 27, 2022, we entered into the 2022 Term Loan with an Israeli institutional investor. See Note 8 to our consolidated financial statements for a more detailed description of the 2022 Term Loan.
On February 28, 2023, we entered into a Deed of Trust with Mishmeret Trust Company Ltd., as trustee, pursuant to which we issued our Series A Notes. See Notes 8 to our consolidated financial statements for a more detailed description of the Deed of Trust and the Series A Notes.
On November 8, 2023, we entered into the 2027 Note Purchase Agreement with purchasers of the 2027 Notes (Tranche A) and on September 18, 2024, we entered into the AR Note Purchase Agreement with purchasers of the 2027 Notes (Tranche B). See Note 8 to our consolidated financial statements for a more detailed description of the 2027 Notes.
On September 30, 2024, we entered into the 2024 Term Loan with an Israeli institutional investor. See Note 8 to our consolidated financial statements for a more detailed description of the 2024 Term Loan.
On October 3, 2024, we issued and sold our 2029 Notes under the Indenture pursuant to a U.S. public offering. See Note 14 to our consolidated financial statements for a more detailed description of the 2029 Notes.
Commitments and Contingencies
We have entered into certain contracts with other parties that contain a variety of indemnifications. Our maximum exposure under these arrangements is unknown. However, we have not experienced claims or losses pursuant to these contracts and believe the risk of loss related to such indemnifications to be remote.
Our investment portfolio may contain debt investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or other unfunded commitments, which may require us to provide funding when requested in accordance with the terms of the underlying agreements. For further details on such debt investments, refer to Note 11 to our consolidated financial statements included in this report.
We currently have no off-balance sheet arrangements, except for those discussed in Note 7 and Note 11 to our consolidated financial statements included in this report.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. As of September 30, 2024, 81.2% of our investments paid variable interest rates. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments, especially to the extent that we hold variable rate investments, and to declines in the value of any fixed rate investments we may hold. To the extent that a majority of our investments may be in variable rate investments, an increase in interest rates could make it easier for us to meet or exceed our incentive fee hurdle rate, as defined in our investment advisory agreement, and may result in a substantial increase in our net investment income, and also to the amount of incentive fees payable to CIM with respect to our pre-incentive fee net investment income.
As of September 30, 2024, under the terms of the JPM Fifth Amendment, advances bear interest at a floating rate equal to the three-month SOFR, plus a credit spread of 2.55% per year, and we will pay an annual administration fee of 0.20% on JPM’s total financing commitment. Pursuant to the terms of the Amended UBS Facility, we currently pay a financing fee equal to the three-month SOFR, plus a spread of 3.20% per year. Pursuant to the terms of the Deed of Trust, the Series A Notes bear interest at a floating rate equal to average overnight SOFR, plus a credit spread of 3.82% per year. The 2027 Notes (Tranche A) bear interest at a floating rate equal to the three-month SOFR plus a credit spread of 4.75% per year and are subject to a 2.00% SOFR floor. The 2027 Notes (Tranche B) bear interest at a floating rate equal to the three-month SOFR plus a credit spread of 3.90% per year and are subject to a 2.00% SOFR floor. Pursuant to the terms of the 2022 Term Loan, advances bear interest at a floating rate equal to the three-month SOFR, plus a credit spread of 3.50% per year and subject to a 1.0% SOFR floor. Pursuant to the terms of the 2024 Term Loan, advances bear interest at a floating rate equal to the three-month SOFR, plus a credit spread of 3.80% per year and subject to a 4.0% SOFR floor. In addition, we may seek to further borrow funds in order to make additional investments. Our net investment income will be impacted, in part, by the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we would be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we have debt outstanding, our cost of funds would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments. We expect that our long-term investments will be financed primarily with equity and long-term debt. Our interest rate risk management techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates could have a material adverse effect on our business, financial condition and results of operations.
The following table shows the effect over a twelve month period of changes in interest rates on our net interest income, excluding short term investments, assuming no changes in our investment portfolio, the JPM Fifth Amendment, the Amended UBS Facility, the Series A Notes, the 2027 Notes, the 2022 Term Loan or the 2024 Term Loan in effect as of September 30, 2024:
Basis Point Change in Interest Rates
(Decrease) Increase in Net Interest Income(1)
Percentage Change in Net Interest Income
Down 300 basis points
$
(14,192)
(14.7)
%
Down 200 basis points
(9,807)
(10.2)
%
Down 100 basis points
(4,985)
(5.2)
%
Down 50 basis points
(2,504)
(2.6)
%
No change to current base rate (4.98% as of September 30, 2024)
—
—
Up 50 basis points
2,504
2.6
%
Up 100 basis points
5,008
5.2
%
Up 200 basis points
10,017
10.4
%
Up 300 basis points
15,025
15.6
%
(1)This table assumes no change in defaults or prepayments by portfolio companies over the next twelve months.
The interest rate sensitivity analysis presented above does not consider the potential impact of the changes in fair value of our fixed rate debt investments, our fixed rate borrowings (the 2026 Notes), or the NAV of our common stock in the event of sudden changes in interest rates. Approximately 6.0% of our investments paid fixed interest rates as of September 30, 2024. Rising market interest rates will most likely lead to fair value declines for fixed interest rate investments and fixed interest rate borrowings and a decline in the net asset value of our common stock, while declining market interest rates will most likely lead to an increase in the fair value of fixed interest rate investments and fixed interest rate borrowings and an increase in the NAV of our common stock.
In addition, we may have risk regarding portfolio valuation as discussed in Note 2 to our consolidated financial statements included in this report.
Inflation
Economic activity has continued to accelerate across sectors and regions. Nevertheless, due to geopolitical events, a rise in energy prices and strong consumer demand, inflation is showing signs of remaining high in the U.S. and globally. Although the current outlook is uncertain, heightened inflation may persist in the near to medium-term, particularly in the U.S., with the possibility that monetary policy may tighten in response. Persistent inflationary pressures could affect our portfolio companies' respective profit margins.
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Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
In connection with the preparation of this Quarterly Report on Form 10-Q for the three months ended September 30, 2024, we carried out an evaluation, under the supervision and with the participation of our management, including our Co-Chief Executive Officers and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) and Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended. Based on the foregoing evaluation, the Co-Chief Executive Officers and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.
In designing and evaluating our disclosure controls and procedures, we recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Disclosure controls and procedures cannot detect or prevent all error and fraud. Some inherent limitations in disclosure controls and procedures include costs of implementation, faulty decision-making, simple error and mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all anticipated and unanticipated future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with established policies or procedures.
Evaluation of internal control over financial reporting
There have been no changes in our internal control over financial reporting during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies and other third parties. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that any such proceedings will have a material effect upon our financial condition or results of operations.
Item 1A. Risk Factors
There have been no material changes from the risk factors disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We did not engage in any unregistered sales of equity securities during the three months ended September 30, 2024.
The table below provides information concerning our repurchases of shares of our common stock in the open market during the three months ended September 30, 2024 pursuant to our share repurchase policy.
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 1 to July 31, 2024
71,305
$
12.35
71,305
(1)
August 1 to August 31, 2024
26,874
11.93
26,874
(1)
September 1 to September 30, 2024
67,558
11.86
67,558
(1)
Total
165,737
$
12.08
165,737
(1)
(1)A description of the shares of our common stock that may be repurchased is set forth in a discussion of our share repurchase program in Note 3 to our unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.
The table below provides information concerning our purchases of shares of our common stock in the open market during the three months ended September 30, 2024 pursuant to our distribution reinvestment plan in order to satisfy the reinvestment portion of our distributions.
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 1 to July 31, 2024
18,789
$
12.51
18,789
(1)
August 1 to August 31, 2024
—
—
—
—
September 1 to September 30, 2024
131,659
12.10
131,659
(1)
Total
150,448
$
12.15
150,448
(1)
(1)A description of the shares of our common stock that may be purchased is set forth in a discussion of the New DRP in Note 5 to our unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the fiscal quarter ended September 30, 2024, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.