PIMCO Capital Solutions BDC Corp.

08/13/2024 | Press release | Distributed by Public on 08/13/2024 11:58

Quarterly Report for Quarter Ending JUNE 30, 2024 (Form 10-Q)

10-Q

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER:
814-01549
PIMCO Capital Solutions BDC Corp.
(Exact name of registrant as specified in its charter)
Delaware
87-4705230
(State of incorporation)
(I.R.S. Employer
Identification No.)
650 Newport Center Drive
Newport Beach,
CA
92660
(Address of principal executive offices)
(949)
720-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
-
-
-
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule
12b-2
of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated
filer 		☒ Smaller reporting company ☐
Emerging Growth Company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).  Yes ☐ No ☒
The issuer had 21,602,602 shares of common stock, $0.001 par value per share, outstanding as of Augus
t 13, 2
024.

Table of Contents

PIMCO CAPITAL SOLUTIONS BDC CORP.

FORM 10-QFOR THE QUARTER ENDED JUNE 30, 2024

Table of Contents

INDEX

PAGE
NO.

PART I.

FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements 2
Consolidated Statements of Assets and Liabilities as of June 30, 2024 and December 31, 2023 (Unaudited) 2
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 3
Consolidated Statements of Changes in Net Assets for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited) 5
Consolidated Schedules of Investments as of June 30, 2024 and December 31, 2023 (Unaudited) 6
Notes to Unaudited Consolidated Financial Statements 11

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations 24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk 32

Item 4.

Controls and Procedures 33

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings 33

Item 1A.

Risk Factors 33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds 33

Item 3.

Defaults Upon Senior Securities 33

Item 4.

Mine Safety Disclosures 33

Item 5.

Other Information 34

Item 6.

Exhibits 34

SIGNATURES

35

1

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements
PIMCO Capital Solutions BDC Corp.
Consolidated Statements of Assets and Liabilities
(Amounts in thousands, except share and per share)
(Unaudited)
June 30, 2024
December 31, 2023
Assets
Investments at fair value
Non-controlled,
non-affiliated
investments, at fair value (cost of $185,605 and $220,859, respectively)
$ 181,356 $ 215,975
Cash
640 2,306
Restricted cash
12,447 1,009
Interest receivable
2,182 2,428
Receivable for paydowns of investments
96 59
Organizational costs paid by Advisor
21 194
Deferred financing fee
2,149 2,280
Total Assets
$
198,891
$
224,251
Liabilities
Interest payable
263 325
Accrued administration fee
73 87
Organizational costs payable to Advisor
1,152 1,153
Offering costs payable to Advisor
20 20
Directors fee reimbursement to Advisor
155 152
Accrued legal fee
251 153
Accrued commitment fee
189 171
Other payable
242 140
Total Liabilities
$
2,345
$
2,201
Commitments & Contingencies (Note 7)
Net Assets
Common stock, $0.001 par value, 250,000,000 shares authorized, 21,602,602 and 25,387,884 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively
$ 22 $ 25
Paid-in-capital
in excess of par
220,619 253,745
Distributable earnings (loss)
(24,095 ) (31,720 )
Total Net Assets
$
196,546
$
222,050
Total Liabilities and Net Assets
$
198,891
$
224,251
Net asset value per share
$
9.10
$
8.75
The accompanying notes are part of these unaudited consolidated financial statements.
2
Table of Contents
PIMCO Capital Solutions BDC Corp.
Consolidated Statements of Operations
(Amounts in thousands, except share and per share)
(Unaudited)
Three Months Ended
Six Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Investment Income
From
non-controlled,
non-affiliated
investments:
Interest income
$ 5,144 $ 6,410 $ 8,647 $ 10,050
Payment
in-kind
interest
796 861 3,247 3,375
Other income
77 9 101 9
Total investment income
$
6,017
$
7,280
$
11,995
$
13,434
Expenses
Management fee
$ 609 $ 751 $ 1,258 $ 1,480
Directors fee
43 61 86 123
Administration fee
73 90 148 178
Interest expense
366 8 585 8
Tax expense
84 1 84 1
Offering costs
-  5 -  10
Legal expenses
36 181 99 185
Other expenses
81 52 207 80
Recoupment of prior expenses paid by the Advisor
86 100 172 199
Total expenses
$
1,378
$
1,249
$
2,639
$
2,264
Less: Waivers (Note 3)
(609 ) (751 ) (1,258 ) (1,480 )
Net expenses
769
498
1,381
784
Net investment income (loss)
$
5,248
$
6,782
$
10,614
$
12,650
Net realized and unrealized gains (losses) on investment transactions:
Net realized gain (loss) from:
Non-controlled/non-affiliated
investments
(372 ) (171 ) (415 ) (17,922 )
Net change in unrealized appreciation (depreciation) from:
Non-controlled/non-affiliated
investments
(787 ) (859 ) 635 16,735
Net realized and unrealized gains (losses)
(1,159
)
(1,030
)
220
(1,187
)
Net Increase (Decrease) in Net Assets Resulting from Operations
$
4,089
$
5,752
$
10,834
$
11,463
Weighted average shares outstanding (basic and diluted)
21,602,602 25,387,884 22,122,559 25,387,884
Net Investment income (loss) per share (basic and diluted)
$ 0.24 $ 0.27 $ 0.48 $ 0.50
Earnings (loss) per share (basic and diluted)
$ 0.19 $ 0.23 $ 0.49 $ 0.45
The accompanying notes are part of these unaudited consolidated financial statements.
3
Table of Contents
PIMCO Capital Solutions BDC Corp.
Consolidated Statements of Changes in Net Assets
(Amounts in thousands, except share and per share)
(Unaudited)
Three Months Ended
Six Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Increase (Decrease) in Net Assets Resulting from Operations:
Net investment income
$ 5,248 $ 6,782 $ 10,614 $ 12,650
Net realized gain (loss)
(372 ) (171 ) (415 ) (17,922 )
Net change in unrealized appreciation (depreciation)
(787 ) (859 ) 635 16,735
Net Increase (Decrease) in Net Assets Resulting from Operations
$
4,089
$
5,752
$
10,834
$
11,463
Distributions to stockholders from:
Distributable earnings
(3,100 ) (3,000 ) (3,100 ) (3,000 )
Total distributions to stockholders
(3,100
)
(3,000
)
(3,100
)
(3,000
)
Capital Share Transactions
Redemption of common shares
$ -  $ -  $ (33,238 ) $ - 
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions
$
- 
$
- 
$
(33,238
)
$
- 
Total Increase (Decrease) in Net Assets
$
989
$
2,752
$
(25,504
)
$
8,463
Net Assets
Beginning of period
$ 195,557 $ 239,506 $ 222,050 $ 233,795
End of period
$ 196,546 $ 242,258 $ 196,546 $ 242,258
Capital Share Activity
Shares redeemed
-  -  (3,785,282 ) - 
Net Increase (Decrease) in Shares Outstanding
- 
- 
(3,785,282
)
- 
The accompanying notes are part of these unaudited consolidated financial statements.
4
Table of Contents
PIMCO Capital Solutions BDC Corp.
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Six Months Ended
June 30, 2024
June 30, 2023
Cash Flows From Operating Activities:
Net Increase (Decrease) in Net Assets from Operations
$ 10,834 $ 11,463
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used for) operating activities:
Purchases of long-term securities
(10,182 ) (22,253 )
Proceeds from sales of long-term securities
28,750 20,417
Sales (Purchases) of short-term portfolio investments, net
20,963 4
Net change in unrealized (appreciation) depreciation on investments
(635 ) (16,735 )
Net realized (gain) loss on investments
415 17,922
Payment
in-kind
interest
(3,247 ) (3,375 )
Net (accretion) on investments
(1,201 ) (1,434 )
Paydown (gain)
(244 ) (86 )
Amortization of deferred financing cost
134 8
Amortization of deferred offering costs
-  10
Increase/(decrease) in operating assets and liabilities:
(Increase) decrease in interest receivable
246 (586 )
(Increase) decrease in paydown receivable
(37 ) - 
(Increase) decrease in organizational costs paid by Advisor
173 199
(Increase) decrease in due from affiliate
-  2
Increase (decrease) in due to affiliate
-  (435 )
Increase (decrease) in interest payable
(62 ) - 
Increase (decrease) in accrued administration fee
(14 ) (4 )
Increase (decrease) in organizational costs payable to Advisor
(1 ) - 
Increase (decrease) in directors fee reimbursement to Advisor
3 123
Increase (decrease) in accrued legal fee
98 - 
Increase (decrease) in accrued commitment fee
18 - 
Increase (decrease) in other payable
102 266
Increase (decrease) in other liabilities
-  71
Net cash provided by (used for) operating activities
$ 46,113 $ 5,577
Cash Flows From Financing Activities:
Redemption of common shares
$ (33,238 ) $ - 
Distributions paid
(3,100 ) (3,000 )
Deferred financing fees paid
(3 ) (2,249 )
Net cash provided by (used for) financing activities
$
(36,341
)
$
(5,249
)
Net increase (decrease) in cash and restricted cash
9,772 328
Cash and restricted cash, beginning of period
3,315 800
Cash and restricted cash, end of period
$ 13,087 $ 1,128
Supplemental and Cash Flow Information:
Interest paid during the period
$ 513 $ 8
Tax expenses paid during the period
$ 84 $ 1
Supplemental and
Non-Cash
Information:
Exchange of investments
11,554 -
The accompanying notes are part of these unaudited consolidated financial statements.
5
Table of Contents
PIMCO Capital Solutions BDC Corp.
Consolidated Schedule of Investments as of June 30, 2024
(Amounts in thousands, except share amounts)
(Unaudited)
Investments
(1)
Non-Controlled,
Non-Affiliated
Investments
Reference Rate
Spread
(4)
Interest
Rate
Maturity
Date
Par Amount/

Shares
Cost
Fair Value
Percentage of

Net Assets
Debt Investments
First Lien Senior Secured
Chemicals
Puris Term Loan
SOFR + 5.750% 11.085 % 06/30/2031 4,881 $ 4,807 $ 4,807 2.45 %
Total Chemicals
4,807 4,807 2.45 %
Consumer Services
BCPE Empire Holdings, Inc. Term Loan
(8)
SOFR + 4.000% 9.344 % 12/11/2028 2,488 2,490 2,491 1.27 %
Total Consumer Services
2,490 2,491 1.27 %
Diversified Manufacturing
TK Elevator Midco GmbH Facility B2 Loan
(2)(8)(10)
SOFR + 3.500% 8.791 % 04/30/2030 2,481 2,481 2,498 1.27 %
Total Diversified Manufacturing
2,481 2,498 1.27 %
Entertainment
AP Core Holdings II, LLC Term
B-2
Loan
SOFR + 5.614% 10.958 % 09/01/2027 2,231 2,209 1,954 0.99 %
Total Entertainment
2,209 1,954 0.99 %
Financial Other
Asurion, LLC
B-8
Term Loan
(8)
SOFR + 3.364% 8.708 % 12/23/2026 2,481 2,425 2,464 1.25 %
Total Financial Other
2,425 2,464 1.25 %
Healthcare
U.S. Renal Care, Inc. Closing Date Term Loan
SOFR + 5.100% 10.444 % 06/20/2028 1,583 1,012 1,390 0.71 %
Total Healthcare
1,012 1,390 0.71 %
Insurance Life
Integrity Marketing Acquisition, LLC Delayed Draw Term Loan
(3)
SOFR + 6.000% 11.347 % 08/27/2026 3,672 3,672 3,672 1.87 %
Integrity Marketing Acquisition, LLC Incremental Term Loan
(3)
SOFR + 6.000% 11.347 % 08/27/2026 5,500 5,390 5,500 2.80 %
Total Insurance Life
9,062 9,172 4.67 %
IT Services
Alorica, Inc. Term Loan
(3)
SOFR + 6.875% 12.219 % 12/21/2027 11,627 11,536 11,437 5.82 %
Total IT Services
11,536 11,437 5.82 %
Packaging
Clydesdale Acquisition Holdings, Inc. Seven Year Term Loan
(8)
SOFR + 3.775% 9.119 % 04/13/2029 2,192 2,118 2,199 1.12 %
LABL, Inc. Initial Dollar Term Loan
(8)
SOFR + 5.100% 10.444 % 10/29/2028 2,481 2,475 2,454 1.25 %
Total Packaging
4,593 4,653 2.37 %
Pharmaceuticals
Gainwell Acquisition Corp. Term B Loan
(8)
SOFR + 4.100% 9.435 % 10/01/2027 2,226 2,212 2,161 1.10 %
Total Pharmaceuticals
2,212 2,161 1.10 %
Retailers
LBM Acquisition, LLC Incremental Term Loan
(8)
SOFR + 3.850% 9.194 % 05/30/2031 2,216 1,853 2,182 1.11 %
Total Retailers
1,853 2,182 1.11 %
Technology
Cloud Software Group, Inc. Term Loan
(8)
SOFR + 4.000% 9.335 % 03/30/2029 2,487 2,496 2,488 1.26 %
CoreWeave Compute Acquisition Co. IV, LLC Initial Term Loan
(3)
SOFR + 6.000% 11.335 % 05/16/2029 154 154 154 0.08 %
Endurance International Group Holdings, Inc. Initial Term Loan
(8)
SOFR + 3.614% 8.944 % 02/10/2028 6,859 6,592 6,387 3.25 %
Mavenir Systems, Inc. Initial Term Loan
(2)
SOFR + 5.012% 10.348 % 08/18/2028 9,775 9,703 7,344 3.74 %
McAfee Corp. Term Loan
(8)
SOFR + 3.250% 8.593 % 03/01/2029 2,346 2,217 2,346 1.19 %
MH Sub I, LLC Term Loan
(8)
SOFR + 4.250% 9.594 % 05/03/2028 2,481 2,402 2,482 1.26 %
Planview Parent, Inc. Closing Date Term Loan
(8)
SOFR + 3.750% 9.085 % 12/17/2027 6,876 6,753 6,878 3.50 %
Polaris Newco, LLC Dollar Term Loan
SOFR + 4.262% 9.591 % 06/02/2028 2,388 2,325 2,390 1.22 %
Total Technology
32,642 30,469 15.50 %
Wireless
Windstream Services, LLC Incremental Term Loan
(3)
SOFR + 4.100% 9.444 % 02/23/2027 7,000 6,765 7,000 3.56 %
Total Wireless
6,765 7,000 3.56 %
Total First Lien Senior Secured
84,087 82,678 42.07 %
The accompanying notes are part of these unaudited consolidated financial statements.
6
Table of Contents
PIMCO Capital Solutions BDC Corp.
Consolidated Schedule of Investments as of June 30, 2024
(Amounts in thousands, except share amounts)
(Unaudited)
Investments
(1)
Non-Controlled,
Non-Affiliated
Investments
Reference Rate
Spread
(4)
Interest
Rate
(5)
Maturity
Date
Par Amount/

Shares
Cost
Fair Value
Percentage of

Net Assets
Debt Investments
Second Lien Senior Secured
Chemicals
K2 Pure Solutions Nocal Holding Term Loan
(3)(6)(9)
N/A 17.000 % 01/30/2029 5,147 $ 4,747 $ 4,739 2.41 %
Total Chemicals
4,747 4,739 2.41 %
Technology
Altar BidCo, Inc. Initial Term Loan
(8)
SOFR + 5.600% 10.399 % 02/01/2030 2,900 2,875 2,851 1.45 %
Total Technology
2,875 2,851 1.45 %
Total Second Lien Senior Secured
7,622 7,590 3.86 %
Senior Unsecured
Consumer Services
LEAF Home Solutions Note
(3)(6)(8)
N/A 12.000 % 02/26/2027 34,170 34,058 32,108 16.34 %
Total Consumer Services
34,058 32,108 16.34 %
Technology
GCOM
(3)(6)(9)
N/A 17.000 % 02/16/2029 14,443 11,929 11,578 5.89 %
Total Technology
11,929 11,578 5.89 %
Total Senior Unsecured
45,987 43,686 22.23 %
Total Debt Investments
137,696 133,954 68.16 %
Corporate Bonds
Automotive
Rivian Holdings/Auto LLC 144A
(2)
SOFR + 5.625% 11.310 % 10/15/2026 18,601 18,413 18,857 9.59 %
Total Automotive
18,413 18,857 9.59 %
Total Corporate Bonds
18,413 18,857 9.59 %
Common Stocks
Chemicals
K2 Propco Class S Units
(3)(7)(9)
N/A N/A N/A 897 285 297 0.15 %
K2 Pure Solutions Class S Units
(3)(7)(9)
N/A N/A N/A 113 36 37 0.02 %
Total Chemicals
321 334 0.17 %
Retailers
West Marine/Rising Tide Holdings, Inc.
(3)(7)
N/A N/A N/A 25,000 359 158 0.08 %
Total Retailers
359 158 0.08 %
Total Common Stocks
680 492 0.25 %
Warrants
Retailers
West Marine/Rising Tide Holdings, Inc.
(3)(7)
N/A N/A 09/08/2028 47,166 -  -  0.00 %
Total Retailers
-  -  0.00 %
Technology
GCOM
(3)(7)(9)
N/A N/A 08/11/2033 2,491,250 2,491 1,727 0.88 %
Total Technology
2,491 1,727 0.88 %
Total Warrants
2,491 1,727 0.88 %
Short-Term Investments
U.S. Treasury Bills
U.S. Treasury Bill
N/A 2.618 % 07/02/2024 5,100 5,099 5,099 2.59 %
U.S. Treasury Bill
N/A 4.761 % 07/11/2024 1,500 1,498 1,498 0.76 %
U.S. Treasury Bill
N/A 5.085 % 08/01/2024 7,800 7,765 7,765 3.95 %
U.S. Treasury Bill
N/A 5.101 % 08/06/2024 400 398 398 0.20 %
U.S. Treasury Bill
N/A 5.210 % 08/29/2024 1,100 1,091 1,091 0.55 %
U.S. Treasury Bill
N/A 5.179 % 09/05/2024 900 891 891 0.45 %
U.S. Treasury Bill
N/A 5.208 % 09/12/2024 1,900 1,880 1,880 0.96 %
U.S. Treasury Bill
N/A 5.205 % 09/17/2024 1,800 1,779 1,780 0.92 %
U.S. Treasury Bill
N/A 5.227 % 09/26/2024 6,000 5,924 5,924 3.01 %
Total U.S. Treasury Bills
26,325 26,326 13.39 %
Total Short-Term Investments
26,325 26,326 13.39 %
Total
Non-Controlled,
Non-Affiliated
Investments
$ 185,605 $ 181,356 92.27 %
Total Investments
$ 185,605 $ 181,356 92.27 %
The accompanying notes are part of these unaudited consolidated financial statements.
7
Table of Contents
PIMCO Capital Solutions BDC Corp.
Consolidated Schedule of Investments as of June 30, 2024
(Amounts in thousands)
(Unaudited)
(1)
All investments are U.S. domiciled, unless otherwise indicated.
(2)
The investment is treated as a non-qualifying asset under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act''). Under the 1940 Act, the Company cannot acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least
70
% of the Company's total assets. As of June 30, 2024, total non-qualifying assets at fair value represented
14.6
% of the Company's total net assets calculated in accordance with the 1940 Act.
(3)
The fair value of the investment was valued using significant unobservable inputs. See Note 6. Fair Value Measurements in the Notes to Unaudited Consolidated Financial Statements.
(4)
Unless otherwise indicated, the interest rate on the principal balance outstanding for all floating rate loans is indexed to the Term Secured Overnight Financing Rate ("SOFR"), which typically resets semiannually, quarterly, or monthly at the borrower's option. The applicable base rate may be subject to a floor. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, we have provided the applicable margin over the reference rate based on each respective credit agreement. As of June 30, 2024, the reference rates for the floating rate loans were the 1 Month SOFR of
5.34
%, 3 Month SOFR of
5.32
% and 6 Month SOFR of
5.25
%.
(5)
Interest rates on short-term investments are annualized.
(6)
All or a portion of the interest on this position is paid-in-kind (PIK).
(7)
Non-income producing security.
(8)
Pledged as collateral against the credit facility. See Note 4. Borrowings in the Notes to Unaudited Consolidated Financial Statements for additional information.
(9)
Represents co-investments made with the Company's affiliates in accordance with the terms of the exemptive relief received from the U.S. Securities and Exchange Commission. See Note 3. Related Party Transactions in the Notes to Unaudited Consolidated Financial Statements.
(10)
Investment is Germany domiciled.
The accompanying notes are part of these unaudited consolidated financial statements.
8
Table of Contents
PIMCO Capital Solutions BDC Corp.
Consolidated Schedule of Investments as of December 31, 2023
(Amounts in thousands)
Investments
(1)
Non-Controlled,
Non-Affiliated
Investments
Reference Rate
Spread
(4)
Interest
Rate
Maturity
Date
Par Amount/

Shares
Cost
Fair Value
Percentage of

Net Assets
Debt Investments
First Lien Senior Secured
Consumer Services
BCPE Empire Holdings, Inc. Extended Term Loan
SOFR + 4.750% 10.106 % 12/11/2028 2,494 $ 2,496 $ 2,504 1.13 %
Total Consumer Services
2,496 2,504 1.13 %
Diversified Manufacturing
TK Elevator Midco GmbH Facility B1 Loan
SOFR + 3.928% 9.381 % 07/30/2027 2,494 2,494 2,503 1.13 %
Total Diversified Manufacturing
2,494 2,503 1.13 %
Entertainment
AP Core Holdings II, LLC Term
B-1
Loan
SOFR + 5.614% 10.970 % 09/01/2027 2,165 2,140 2,124 0.96 %
AP Core Holdings II, LLC Term
B-2
Loan
SOFR + 5.614% 10.970 % 09/01/2027 2,231 2,205 2,184 0.98 %
PLNTF Holdings, LLC Initial Term Loan
(8)
SOFR + 8.262% 13.633 % 03/22/2026 11,116 10,989 10,671 4.80 %
Total Entertainment
15,334 14,979 6.74 %
Financial Other
Asurion, LLC
B-8
Term Loan
SOFR + 3.364% 8.720 % 12/23/2026 2,494 2,428 2,492 1.12 %
Total Financial Other
2,428 2,492 1.12 %
Healthcare
U.S. Renal Care, Inc. Closing Date Term Loan
SOFR + 5.356% 10.470 % 06/20/2028 1,591 977 1,213 0.55 %
Total Healthcare
977 1,213 0.55 %
Insurance Life
Integrity Marketing Acquisition, LLC Delayed Draw Term Loan
(3)
SOFR + 6.000% 11.388 % 08/27/2026 3,691 3,691 3,671 1.65 %
Integrity Marketing Acquisition, LLC Incremental Term Loan
(3)
SOFR + 6.000% 11.388 % 08/27/2026 5,528 5,417 5,498 2.48 %
Total Insurance Life
9,108 9,169 4.13 %
IT Services
Alorica, Inc. Term Loan
(3)
SOFR + 6.875% 12.231 % 12/21/2027 12,250 12,137 11,999 5.40 %
Total IT Services
12,137 11,999 5.40 %
Packaging
Clydesdale Acquisition Holdings, Inc. Seven Year Term Loan
(8)
SOFR + 4.275% 9.631 % 04/13/2029 2,203 2,122 2,215 1.00 %
LABL, Inc. Initial Dollar Term Loan
SOFR + 5.100% 10.456 % 10/29/2028 2,494 2,485 2,398 1.08 %
Total Packaging
4,607 4,613 2.08 %
Pharmaceuticals
Gainwell Acquisition Corp. Term B Loan
(8)
SOFR + 4.100% 9.448 % 10/01/2027 2,238 2,221 2,182 0.98 %
Total Pharmaceuticals
2,221 2,182 0.98 %
Retailers
LBM Acquisition, LLC Initial Term Loan
(8)
SOFR + 3.850% 9.206 % 12/17/2027 2,222 2,207 2,201 0.99 %
Rising Tide Holdings, Inc. FILO Term Loan
(3)
SOFR + 9.000% 14.356 % 06/01/2026 4,570 4,426 4,406 1.98 %
Total Retailers
6,633 6,607 2.97 %
Technology
Endurance International Group Holdings, Inc. Initial Term Loan
SOFR + 3.928% 9.422 % 02/10/2028 6,894 6,594 6,772 3.05 %
Mavenir Systems, Inc. Initial Term Loan
(2)
SOFR + 5.012% 10.390 % 08/18/2028 9,825 9,746 6,951 3.13 %
McAfee Corp. Term Loan
(8)
SOFR + 3.850% 9.193 % 03/01/2029 2,352 2,241 2,348 1.06 %
MH Sub I, LLC Term Loan
SOFR + 4.250% 9.606 % 05/03/2028 2,494 2,405 2,456 1.11 %
Planview Parent, Inc. Closing Date Term Loan
(8)
SOFR + 4.262% 9.610 % 12/17/2027 6,893 6,758 6,850 3.08 %
Polaris Newco, LLC Dollar Term Loan
SOFR + 4.114% 9.470 % 06/02/2028 2,400 2,331 2,371 1.07 %
TIBCO Software, Inc. Dollar Term Loan B
SOFR + 4.600% 9.948 % 03/30/2029 2,494 2,389 2,442 1.10 %
Total Technology
32,464 30,190 13.60 %
Wireless
Windstream Services, LLC Incremental Term Loan
SOFR + 4.100% 9.456 % 02/23/2027 7,000 6,725 6,930 3.12 %
Total Wireless
6,725 6,930 3.12 %
Total First Lien Senior Secured
97,624 95,381 42.95 %
Second Lien Senior Secured
Technology
Altar BidCo, Inc. Initial Term Loan
SOFR + 5.600% 10.813 % 02/01/2030 2,900 2,875 2,878 1.30 %
Total Technology
2,875 2,878 1.30 %
Total Second Lien Senior Secured
2,875 2,878 1.30 %
The accompanying notes are part of these unaudited consolidated financial statements.
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Table of Contents
PIMCO Capital Solutions BDC Corp.
Consolidated Schedule of Investments as of December 31, 2023
(Amounts in thousands)
Investments
(1)
Non-Controlled,
Non-Affiliated
Investments
Reference Rate
Spread
(4)
Interest
Rate
(5)
Maturity
Date
Par Amount/

Shares
Cost
Fair Value
Percentage of

Net Assets
Senior Unsecured
Consumer Services
LEAF Home Solutions Note
(3)(6)(8)
N/A 12.000 % 02/26/2027 32,235 $ 32,090 $ 29,526 13.30 %
Total Consumer Services
32,090 29,526 13.30 %
Technology
GCOM
(3)(6)(9)
N/A 17.000 % 02/16/2029 13,277 10,622 10,535 4.74 %
Total Technology
10,622 10,535 4.74 %
Total Senior Unsecured
42,712 40,061 18.04 %
Total Debt Investments
143,211 138,320 62.29 %
Corporate Bonds
Automotive
Rivian Holdings/Auto LLC 144A
(2)
SOFR + 5.625% 11.493 % 10/15/2026 28,601 28,255 28,658 12.91 %
Total Automotive
28,255 28,658 12.91 %
Total Corporate Bonds
28,255 28,658 12.91 %
Common Stocks
Retailers
West Marine/Rising Tide Holdings, Inc.
(3)(7)
N/A N/A N/A 25,000 359 263 0.12 %
Total Retailers
359 263 0.12 %
Total Common Stocks
359 263 0.12 %
Warrants
Retailers
West Marine/Rising Tide Holdings, Inc.
(3)(7)
N/A N/A 09/08/2028 47,166 -  -  0.00 %
Total Retailers
-  -  0.00 %
Technology
GCOM
(3)(7)(9)
N/A N/A 08/11/2033 2,491,250 2,491 2,181 0.98 %
Total Technology
2,491 2,181 0.98 %
Total Warrants
2,491 2,181 0.98 %
Short-Term Investments
U.S. Treasury Bills
U.S. Treasury Bill
N/A 0.000 % 01/02/2024 8,000 7,999 8,000 3.61 %
U.S. Treasury Bill
N/A 4.820 % 01/23/2024 6,200 6,180 6,181 2.78 %
U.S. Treasury Bill
N/A 5.094 % 02/20/2024 4,300 4,268 4,269 1.92 %
U.S. Treasury Bill
N/A 5.096 % 03/14/2024 27,200 26,911 26,918 12.12 %
U.S. Treasury Bill
N/A 5.137 % 03/28/2024 1,200 1,185 1,185 0.53 %
Total U.S. Treasury Bills
46,543 46,553 20.96 %
Total Short-Term Investments
46,543 46,553 20.96 %
Total
Non-Controlled,
Non-Affiliated
Investments
$ 220,859 $ 215,975 97.26 %
Total Investments
$ 220,859 $ 215,975 97.26 %
(1)
All investments are U.S. domiciled.
(2)
The investment is treated as a
non-qualifying
asset under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act''). Under the 1940 Act, the Company cannot acquire any
non-qualifying
asset unless, at the time the acquisition is made, qualifying assets represent at least
70
% of the Company's total assets. As of December 31, 2023, total
non-qualifying
assets at fair value represented
16.0
% of the Company's total net assets calculated in accordance with the 1940 Act.
(3)
The fair value of the investment was valued using significant unobservable inputs. See Note 6. Fair Value Measurements in the Notes to Unaudited Consolidated Financial Statements.
(4)
Unless otherwise indicated, the interest rate on the principal balance outstanding for all floating rate loans is indexed to the Term Secured Overnight Financing Rate ("SOFR"), which typically resets semiannually, quarterly, or monthly at the borrower's option. The applicable base rate may be subject to a floor. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, we have provided the applicable margin over the reference rate based on each respective credit agreement. As of December 31, 2023, the reference rates for the floating rate loans were the 1 Month SOFR of
5.35
%, 3 Month SOFR of
5.33
% and 6 Month SOFR of
5.16
%.
(5)
Interest rates on short-term investments are annualized.
(6)
All or a portion of the interest on this position is
paid-in-kind
(PIK).
(7)
Non-income
producing security.
(8)
Pledged as collateral against the credit facility. See Note 4. Borrowings in the Notes to Unaudited Consolidated Financial Statements for additional information.
(9)
Represents
co-investments
made with the Company's affiliates in accordance with the terms of the exemptive relief received from the U.S. Securities and Exchange Commission. See Note 3. Related Party Transactions in the Notes to Unaudited Consolidated Financial Statements.
The accompanying notes are part of these unaudited consolidated financial statements.
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Table of Contents
PIMCO Capital Solutions BDC Corp.
Notes to Unaudited Consolidated Financial Statements
June 30, 2024
1. Organization
PIMCO Capital Solutions BDC Corp. (collectively with its consolidated subsidiaries, the "Company," "we," "our," and "us"), is an externally managed,
non-diversified,
closed-end
management investment company that elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"), on July 11, 2022. The Company was incorporated under the laws of the state of Delaware on December 23, 2021. In addition, for U.S. federal income tax purposes, the Company has elected as of August 1, 2022 to be treated as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
The Company invests primarily in privately negotiated loans and equity investments to middle market companies generally with annual revenues greater than $20 million and earnings before interest, taxes, depreciation and amortization ("EBITDA") of less than $50 million. Pacific Investment Management Company LLC ("PIMCO" or the "Advisor") serves as the Company's external investment advisor pursuant to an investment management agreement (the "Advisory Agreement"). PIMCO is an investment advisor registered with the U.S. Securities and Exchange Commission (the "SEC") under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). PIMCO also serves as the Company's administrator (in such capacity, the "Administrator") pursuant to an administration agreement (the "Administration Agreement"). The Administrator may retain a
sub-administrator
to perform any or all of its obligations under the Administration Agreement.
The Company is conducting private offerings (each a "Private Offering") of its common stock to investors in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). At the closing of any Private Offering, each investor makes a capital commitment (a "Capital Commitment") to purchase Shares (as defined below) pursuant to a subscription agreement ("Subscription Agreement") entered into with the Company or PIMCO Capital Solutions US Feeder LP, a feeder fund established by the Advisor to invest in Shares of the Company ("Feeder Fund"). The Company is a perpetual-life investment vehicle, without a fixed termination date or commitment period. Investors will be required to fund drawdowns to purchase Shares up to the amount of their respective Capital Commitment on an
as-needed
basis each time the Company delivers a capital draw-down notice to its investors. The Company entered into an initial subscription agreement on June 9, 2022, received capital contributions on June 10, 2022 (date of inception), and commenced investment operations on June 30, 2022.
The initial meeting of the Board of Directors (the "Board") of the Company was held on June 22, 2022. There were no operations prior to June 10, 2022 (date of inception). Effective June 10, 2022, affiliated entities of the Advisor (the "PIMCO Entities") indirectly contributed $15 (amount in thousands) of capital to the Company by investing in interests of the Feeder Fund. In exchange for this contribution, the PIMCO Entities, through their interest in the Feeder Fund, each indirectly received common stock of the Company, par value $0.001 ("Shares"). On June 29, 2022, the PIMCO Entities made an additional capital contribution and, pursuant to Transfer Agreements entered into on June 30, 2022, the PIMCO Entities contributed additional assets to the Company with a fair market value of $143,864 and unrealized loss of $6,588 (amounts in thousands). As a result of these foregoing transactions, the Company issued and sold a total of 25,387,884 Shares at an aggregate purchase price of $253,879 (amount in thousands).
On January 25, 2024, the Company repurchased 3,785,281.95 shares of common stock, par value $0.001 per share from PIMCO Capital Solutions US Feeder LP for $33,238 (amount in thousands) at $8.78 per share in accordance with its offer to repurchase (the "Tender Offer") its own shares up to the amount of shares that could be repurchased with approximately $40,000 (amount in thousands).
As of June 30, 2024, the Company had total Capital Commitments of $216,026 (amount in thousands), of which 0% is unfunded. Capital Commitments may be drawn down by the Company on a pro rata basis, as needed (including
follow-on
investments), for paying the Company's expenses, including fees under the Advisory Agreement and Administration Agreement (as defined below), and/or maintaining a reserve account for the payment of future expenses or liabilities.
The Company's fiscal year ends December 31.
2. Significant Accounting Policies
Basis of Accounting
The Company's consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). The Company is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, Financial Services - Investment Companies. The functional and reporting currency for the Company is the U.S. dollar.
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Table of Contents
The interim consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form
10-Q
and Articles 6, 10 and 12 of Regulation
S-
X
.
Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2024, and its results of operations for the three months and six months ended June 30, 2024 and 2023, and its cash flows for the six months ended June 30, 2024 and 2023. The consolidated balance sheet at December 31, 2023, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
Basis of Consolidation
As provided under ASC Topic 946 and Regulation
S-X,
the Company will generally not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company's wholly-owned subsidiaries, Emerald CS LLC, Ruby CS LLC, Amber CS LLC, Citrine CS LLC, Diamond CS LLC, Opal CS LLC, Quartz CS LLC, Jade CS LLC, Pearl CS LLC, Sapphire CS LLC, Topaz CS LLC, Garnet CS LLC, Turquoise CS LLC, Aquamarine CS LLC, Tanzanite CS LLC and Peridot CS LLC. All material intercompany transactions are eliminated in consolidation.
Fair Value of Investments
The Company applies fair value to all of its financial instruments in accordance with ASC Topic 820 - Fair Value Measurement ("ASC Topic 820"). ASC Topic 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements. In accordance with ASC Topic 820, the Company has categorized its financial instruments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy. Fair value is a market-based measure considered from the perspective of the market participant who holds the financial instrument rather than an entity-specific measure. Therefore, when market assumptions are not readily available, the Company's own assumptions are set to reflect those that management believes market participants would use in pricing the financial instrument at the measurement date.
Revenue Recognition
Securities transactions are recorded as of the trade date for financial reporting purposes. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled 15 days or more after the trade date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividend income is recorded on the
ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend
date may have passed, which are recorded as soon as the Company is informed of the dividend. Tax liabilities realized as a result of such security sales are reflected as a component of net realized gain (loss) on investments on the Consolidated Statements of Operations. Paydown gains and losses on asset-backed securities are recorded as components of interest income on the Consolidated Statements of Operations.
Investments are placed on
non-accrual
status when it is probable that principal, interest or dividends will not be collected according to contractual terms. Interest or dividend payments received on
non-accrual
investments may be recognized as income or applied to principal depending upon management's judgement.
Non-accrual
investments are restored to accrual status when past due principal and interest or dividends are paid and, in management's judgement, principal and interest or dividend payments are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection.
Interest income and interest expense are recognized on an accrual basis. Interest income on debt instruments is accrued and recognized for those issuers who are currently paying in full or expected to pay in full. For those issuers who are in default or expected to default, interest is not accrued and is only recognized when received or applied to principal depending upon management's judgement. Interest income and expense include discounts accreted and premiums amortized on certain debt instruments as determined in good faith by the Company and calculated using the effective interest method. Loan origination fees, original issue discounts and market discounts or premiums are capitalized as part of the underlying cost of the investments and accreted or amortized over the life of the investment as interest income.
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Table of Contents
Paydown gains and losses on investments in debt instruments are reported in Interest income on the Consolidated Statements of Operations. The Company records dividend income from private securities pursuant to the terms of the respective investments.
The Company may earn various fees during the life of the loans. Such fees include, but are not limited to, syndication, commitment, administration, prepayment and amendment fees, some of which are paid to the Company on an ongoing basis. These fees and any other income are recognized as earned as a component of Other income, if applicable, on the Consolidated Statements of Operations. Certain commitment fees are deferred and included in Other Liabilities on the Consolidated Statement of Assets and Liabilities. The commitment fees are amortized over the life of the investment as other income.
Deferred Financing Fees
Deferred financing fees represent fees and other direct incremental costs incurred in connection with the Company's borrowings. As of June 30, 2024 and December 31, 2023, the Company had deferred financing costs of $2,149 and $2,280, respectively (amounts in thousands). These amounts are amortized and included in interest expense in the Consolidated Statements of Operations over the life of the borrowings.
Payment
In-Kind
Interest
The Company may have investments that contain
Payment-In-Kind
("PIK") provisions. PIK income, computed at the contractual rate specified in the Company investment agreement, is added to the principal balance of the investment and recorded as Payment
in-kind
interest on the Consolidated Statements of Operations. The Company prospectively ceases recognition of PIK income and the associated principal balance if such amounts and balances are deemed to be doubtful of collection. For investments with PIK income, the Company calculates income accruals based on the principal balance including any PIK.
Organizational Costs
Organizational costs to establish the Company are charged to expense as incurred. These expenses consist primarily of legal fees and other costs of organizing the Company. The Advisor may elect to pay certain organizational costs of the Company on the Company's behalf and for which the Company reimburses the Advisor. If the Company is dissolved prior to the full reimbursement of the organizational costs, the Advisor shall not seek reimbursement of any remaining amounts upon dissolution. The Company has entered into an Expense Support and Conditional Reimbursement Agreement (the "Expense Reimbursement Agreement") with the Advisor pursuant to which the Advisor may elect to pay certain expenses on the Company's behalf and the Company may be required to repay the Advisor from its excess operating funds until such time as all expenses made by the Advisor on behalf of the Company within three years have been reimbursed. These expenses consist primarily of legal fees and other costs of organizing the Company. As of June 30, 2024 and December 31, 2023, $21 and $194, respectively (amounts in thousands), were recoverable by the Advisor for organizational expenses paid on the Company's behalf and are recorded as "Organizational costs paid by Advisor" on the Consolidated Statements of Assets and Liabilities. As of June 30, 2024 and December 31, 2023, $1,152 and $1,153, respectively (amounts in thousands), owed to the Advisor for organizational expenses paid on the Company's behalf and are recorded as "Organizational costs payable to Advisor" on the Consolidated Statements of Assets and Liabilities.
Offering Costs
Offering costs in connection with the offering of common stock of the Company are capitalized as a deferred charge and amortized to expense on a straight-line basis over 12 months from the commencement of operations. The Advisor may elect to pay certain offering costs of the Company on the Company's behalf and for which the Company may reimburse the Advisor pursuant to the Expense Reimbursement Agreement between the Company and Advisor. If the Company is dissolved prior to the full reimbursement of the offering costs, the Advisor shall not seek reimbursement of any remaining amounts upon dissolution. As of both June 30, 2024 and December 31, 2023, there were $0 recoverable by the Advisor for offering costs paid on the Company's behalf. As of both June 30, 2024 and December 31, 2023, there were $20 (amount in thousands) owed to the Advisor for offering costs paid on the Company's behalf, which were recorded as "Offering costs payable to Advisor" on the Consolidated Statements of Assets and Liabilities.
Other Expenses
All costs associated with consummated investments are included in the cost of such investments. Broken deal expenses incurred in connection with investment transactions which are not successfully consummated are expensed as a component of Other expenses on the Consolidated Statements of Operations. In addition, valuation, insurance, filing, research, consulting, subscriptions, directors'
out-of-pocket
expenses and other costs, are included as components of Other expenses on the Consolidated Statements of Operations and Other payables on the Statement of Assets and Liabilities.
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Table of Contents
Legal Expense
Legal expenses are primarily for legal guidance related to investments, financing,
co-investment
matters and Board Member advice. These expenses are included as Legal expenses on the Consolidated Statement of Operations and Legal expenses payable on the Consolidated Statement of Assets and Liabilities.
Cash and Foreign Currency
Cash is comprised of cash at the custodian bank. The consolidated financial statements of the Company are presented using the currency of the primary economic environment in which it operates. The functional and reporting currency for the Company is the U.S. dollar. Restricted cash is subject to a contractual restriction by a third party, including restriction of withdrawal and use until transferred to the operating account of the Company. The restricted cash is held at an account controlled by the Credit Facility servicer as disclosed in
Note 4. Borrowings
.
Cash and restricted cash consisted of the following as of June 30, 2024 and December 31, 2023.
June 30, 2024
December 31, 2023
Cash
$ 640 $ 2,306
Restricted Cash
12,447 1,009
Total cash and restricted cash in the Consolidated Statement of Cash Flows
$ 13,087 $ 3,315
Income Taxes
The Company has elected, as of August 1, 2022, to be treated as a RIC under the Code and intends each year to qualify and be eligible to be treated as such, so that it generally will not be subject to U.S. federal income tax on its net investment income or net short-term or long-term capital gains, that are distributed (or deemed distributed, as described below) to stockholders. In order to qualify and be eligible for such treatment, the Company must meet certain asset diversification tests, derive at least 90% of its gross income for such year from certain types of qualifying income, and distribute to its stockholders at least 90% of its "investment company taxable income" as that term is defined in the Code (which includes, among other things, dividends, taxable interest and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses).
The Company's investment strategy will potentially be limited by its intention to continue qualifying for treatment as a RIC and can limit the Company's ability to continue qualifying as such. The tax treatment of certain of the Company's investments under one or more of the qualification or distribution tests applicable to RICs is uncertain. An adverse determination or future guidance by the Internal Revenue Service or a change in law might affect the Company's ability to qualify or be eligible for such treatment.
If, in any year, the Company were to fail to qualify for treatment as a RIC under the Code and were ineligible to or did not otherwise cure such failure, the Company would be subject to tax on its taxable income at corporate rates and, when such income is distributed, stockholders would be subject to further tax on such distributions to the extent of the Company's current or accumulated earnings and profits.
The Company accounts for income taxes in conformity with ASC Topic 740-Income Taxes ("ASC Topic 740"). ASC Topic 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company's tax returns to determine whether the tax positions are
"more-likely-than-not"
to be sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the
more-likely-than-not
threshold would be recorded as a tax expense or tax benefit in the current year. It is the Company's policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. There were no material unrecognized tax benefits or unrecognized tax liabilities related to uncertain income tax positions through June 30, 2024. As of June 30, 2024, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are the years 2022-2023 (with limited exceptions), assuming tax filings have been made for the previous two years.
Distributions
Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. Differences between tax regulations and U.S. GAAP may cause timing differences between income and capital gain recognition. Further, the character of investment income and capital gains may be different for certain transactions under the two methods of accounting. As a result, income distributions and capital gain distributions declared during a fiscal period may differ significantly from the net investment income (loss) and realized gains (losses) reported on the Company's financial statements presented under U.S. GAAP.
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Table of Contents
The Company has adopted an "opt out" distribution reinvestment plan ("DRIP"). As a result, unless stockholders elect to "opt
out
" of the DRIP, stockholders will have their cash dividends or distributions automatically reinvested in additional Shares, rather than receiving cash. Shareholders who receive distributions in the form of Shares will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, those stockholders will not receive cash with which to pay any applicable taxes.
New Accounting Pronouncement
In March 2020, the FASB issued Accounting Standards Update ("ASU"), ASU
2020-04,
which provides guidance to account for certain contract modifications prospectively to ease the potential accounting burden associated with transitioning away from the LIBOR (as defined below) and other reference rates that are expected to be discontinued. ASU
2020-04
is effective upon release of the update on March 12, 2020 through December 31, 2022. In March 2021, the administrator for LIBOR announced the extension of the publication of a majority of the USD LIBOR settings to June 30, 2023. In December 2022, the FASB issued ASU
2022-06,
which extends the sunset date established by ASU
2020-04
from December 31, 2022 to December 31, 2024 in order to capture the time period in which the aforementioned contract modifications may occur. Management is continuously evaluating the potential effect a discontinuation of LIBOR could have on the Company's investments and has determined that it is unlikely the ASU's adoption will have a material impact on the Company's consolidated financial statements.
3. Related Party Transactions
Advisory Agreement
On June 30, 2022, the Company entered into an Advisory Agreement, pursuant to which the Company will pay the Advisor, quarterly in arrears, a base management fee calculated at an annual rate of 1.25%. The base management fee is calculated based on the average of the Company's total net assets (including cash or cash equivalents but excluding assets purchased with borrowed amounts) as of the end of the two most recently completed calendar quarters. The base management fee for any partial month or quarter is appropriately prorated. The Advisor has agreed to waive all management fees payable pursuant to the Advisory Agreement for so long as the only stockholders of the Company are PIMCO Entities. The Advisory Agreement does not provide for the payment of incentive fees.
For the three months ended June 30, 2024 and 2023, the Company incurred a management fee of $609 and $751, respectively (amounts in thousands), of which 100% was waived by the Advisor. For the six months ended June 30, 2024 and 2023, the Company incurred a management fee of $1,258 and $1,480, respectively (amounts in thousands), of which 100% was waived by the Advisor.
Administration Agreement
On June 30, 2022, the Company entered into an Administration Agreement with PIMCO in its capacity as Administrator. Under the Administration Agreement, the Administrator provides or causes to be furnished certain supervisory and administrative and other services reasonably necessary for the operation of the Company. Pursuant to the Administration Agreement, the Company pays the Administrator an annual fee calculated and payable quarterly in arrears on the last business day of calendar quarter in an amount equal to 0.15% of the Company's total net assets.
For the three months ended June 30, 2024 and 2023, the Company incurred an administration fee of $73 and $90, respectively (amounts in thousands). For the six months ended June 30, 2024 and 2023, the Company incurred an administration fee of $148 and $178, respectively (amounts in thousands).
Expense Reimbursement Agreement
The Company has entered into an Expense Reimbursement Agreement with the Advisor. The Advisor may elect to make certain Expense Payments on the Company's behalf, provided that no portion of the payment will be used to pay any of the Company's interest expense. The Advisor has agreed to make Expense Payments on the Company's behalf through June 30, 2025. During the three month period ended June 30, 2024 and the year ended December 31, 2023, the Advisor paid directors fees on behalf of the Company. As of June 30, 2024 and the year ended December 31, 2023, $155 and $152, respectively (amounts in thousands), are reimbursable to the Advisor for directors fees and are recorded as "Directors fee reimbursement to Advisor" on the Consolidated Statements of Assets and Liabilities.
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Following any calendar year in which Available Operating Funds (defined below) exceed the cumulative distributions accrued to the Company's stockholders based on distributions declared with respect to record dates occurring in such calendar year (the amount of such excess, "Excess Operating Funds"), the Company shall pay Excess Operating Funds, or a portion thereof, to the Advisor until such time as all Expense Payments made by the Advisor to or on behalf of the Company within three years prior to the last business day of such calendar year have been reimbursed. Any payments required to be made by the Company shall be referred to herein as a "Reimbursement Payment." "Available Operating Funds" means the sum of (i) the Company's net "investment company taxable income", as defined by the Code, which generally includes net ordinary income and net short-term taxable gains reduced by net long-term capital losses, (ii) the Company's net capital gains (including the excess of net long-term capital gains over net short-term capital losses) and (iii) distributions and other distributions paid to the Company on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above). No Reimbursement Payment for any calendar year will be made if the Company's Operating Expense Ratio (defined below) at the time of such Reimbursement Payment is greater than the Operating Expense Ratio at the time the expense payment was made to which such Reimbursement Payment relates. The "Operating Expense Ratio" is calculated by dividing all of the Company's operating costs and expenses incurred, as determined in accordance with U.S. GAAP for investment companies, less organizational and offering expenses, base management fees owed to the Advisor, and interest expense, by the Company's average net assets.
The Expense Reimbursement Agreement may require the Company to repay the Advisor for previously waived reimbursement of Expense Payments under certain circumstances. The previously waived expenses are potentially subject to repayment by the Company, if at all, within a period not to exceed three years from the date of the relevant waiver.
For the three months ended June 30, 2024 and 2023, the Company waived organization costs of $0 and $0, respectively. For the six months ended June 30, 2024 and 2023, the Company waived organization costs of $0 and $0, respectively.
For the three months ended June 30, 2024 and 2023, the Advisor recouped $86 and $100, respectively (amounts in thousands), from the Company for prior expenses paid and were recorded as "Recoupment of prior expenses paid by the Advisor" on the Consolidated Statement of Operations. For the six months ended June 30, 2024 and 2023, the Advisor recouped $172 and $199, respectively (amounts in thousands), from the Company for prior expenses paid and were recorded as "Recoupment of prior expenses paid by the Advisor" on the Consolidated Statement of Operations.
Directors Fee
The Company compensates each of its Independent Directors for their services. Their compensation is included in Directors fee on the Consolidated Statements of Operations. The Independent Directors also receive reimbursement of
reasonable out-of-pocket expenses
incurred in connection with attending each meeting, which are included as components of Other expenses on the Consolidated Statements of Operations and Other payables on the Statement of Assets and Liabilities.
Co-Investment
Relief
The Company has received exemptive relief from the SEC that, to the extent the Company relies on such relief, permits it to (among other things)
co-invest
with certain other persons, including certain affiliates of the Advisor and certain public or private funds managed by the Advisor and its affiliates, subject to certain terms and conditions. The exemptive relief from the SEC with respect to
co-investments
imposes extensive conditions on any
co-investments
made in reliance on such relief.
See
Note 1. Organization
for other related party transactions.
4. Borrowings
The Company is permitted to borrow amounts such that its asset coverage ratio, as defined in the 1940 Act, is at least 150% after such borrowing (if certain requirements are met). As of June 30, 2024 and December 31, 2023, the Company did not have any borrowings outstanding and, therefore, the asset coverage ratio is not applicable.
Credit Facility
On June 19, 2023, Amber CS LLC (the "Subsidiary"), as borrower and portfolio asset servicer, a wholly-owned financing subsidiary of the Company, Topaz CS LLC, as equity holder of Subsidiary, and Opal CS LLC and Quartz CS LLC, as Subsidiary guarantors, entered into a loan servicing agreement (the "Credit Facility") with Massachusetts Mutual Life Insurance Company, as initial lender, administrative agent, facility servicer, and collateral custodian, and MassMutual Ascend Life Insurance Company, as initial lender. Under the Credit Facility, the maximum aggregate committed borrowing amount is $150,000 (amount in thousands) (the "Maximum Facility Amount") with a scheduled maturity date of June 19, 2032. On
June 10, 2024
, the maximum aggregate committed borrowing amount was reduced to $100,000 (amount in thousands).
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The facility bears interest at a rate of the applicable Benchmark plus (a) 2.85% for SOFR advances, and (b) 1.85% for an advance bearing interest at the alternate base rate which is a rate of interest per annum equal to the higher of
(a) the Prime Rate in effect on such day; and (b) the Federal Funds Rate in effect on such day plus 0.5% per annum (as such terms are defined in the Credit Facility).
The facility bears an Unused Commitment Fee on the average daily unused amount in excess of the Minimum Usage Amount, if any, at a rate of .40% per annum (as such terms are defined in the Credit Facility). The Minimum Usage Amount is (a) zero prior to June 19, 2024, and (b) an amount equal to 70% of the Maximum Facility Amount (as such term is defined in the Credit Facility) any date on or after June 19, 2024. The Subsidiary pays a Utilization Fee (as such term is defined in the Credit Facility) for the difference between (a) the amount of interest that would have accrued under this Credit Facility on the principal amount of the advances if the advances outstanding was equal to the Minimum Usage Amount and (b) the amount of interest that actually accrued under this Credit Facility on the principal amounts of the advances. The Subsidiary also pays a Facility Servicer Fee in an aggregate amount equal to 0.03% per annum of the Maximum Facility Amount, an annual Collateral Custodian Fee (as such term is defined in the Credit Facility) of $5, an Agent Fee in an annual amount of $25, and a Rating fee of $175 for the initial rating and an annual fee of $45 thereafter (amounts in thousands).
The Credit Facility contains certain covenants including: (i) the Subsidiary acquiring a Debt Rating of
BBB-,
BBB (low) or Baa3 or higher and (ii) maintaining a loan to value less than minimums dictated by the number of assets in the portfolio. As of June 30, 2024, the Company is in compliance with these covenants.
Certain investments, as disclosed on the Consolidated Schedule of Investments and their related cash flows, are pledged as collateral for the Credit Facility.
In connection with the establishment of the loan facility, the Company paid upfront fees and incurred legal expenses of $2,427 (amount in thousands), which are being amortized into interest expense through the scheduled maturity date. The Company had $0 of outstanding borrowings as of June 30, 2024. Interest expense, inclusive of Utilization Fees, related to the borrowings and amortization of deferred financing costs are disclosed as a component of interest expense on the Consolidated Statements of Operations. For the three months ended June 30, 2024 and 2023, the Company had interest expense of $366 and $8, respectively, inclusive of amortization expense for deferred financing fees of $67 and $8, respectively, unused commitment fee of $124 and $0, respectively, and utilization fee of $175 and $0, respectively (amounts in thousands). For the six months ended June 30, 2024 and 2023, the Company had interest expense of $585 and $8, respectively, inclusive of amortization expense for deferred financing fees of $134 and $8, respectively, unused commitment fee of $276 and $0, respectively, and utilization fee of $175 and $0, respectively (amounts in thousands).
5. Investments
Under the 1940 Act, the Company is required to separately identify
non-controlled
investments where it owns 5% or more of a portfolio company's outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company as investments in "affiliated" companies. In addition, under the 1940 Act, the Company is required to separately identify investments where it owns more than 25% of a portfolio company's outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company as investments in "controlled" companies. Under the 1940 Act,
"non-affiliated
investments" are defined as investments that are neither controlled investments nor affiliated investments. Detailed information with respect to the Company's
non-controlled,
non-affiliated;
non-controlled,
affiliated; and controlled affiliated investments is contained in the consolidated financial statements, including the Consolidated Schedules of Investments. The information in the tables below is presented on an aggregate portfolio basis, without regard to whether they are
non-controlled,
non-affiliated;
non-controlled,
affiliated; or controlled affiliated investments.
Investments at fair value and cost consisted of the following as of June 30, 2024 and December 31, 2023:
June 30, 2024
December 31, 2023
(Amounts in thousands)
Cost
Fair Value
Cost
Fair Value
First Lien Secured
$ 84,087 $ 82,678 $ 97,624 $ 95,381
Second Lien Secured
7,622 7,590 2,875 2,878
Senior Unsecured
45,987 43,686 42,712 40,061
Corporate Bonds
18,413 18,857 28,255 28,658
Common Stocks
680 492 359 263
Warrants
2,491 1,727 2,491 2,181
Short-Term Investments
26,325 26,326 46,543 46,553
Total investments
$ 185,605 $ 181,356 $ 220,859 $ 215,975
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The industry composition of investments as a percentage of total investments based on fair value as of June 30, 2024 and December 31, 2023 was as follows:
June 30, 2024
December 31, 2023
Automotive
10.4 % 13.3 %
Chemicals
5.4 % - %
Consumer Services
19.1 % 14.8 %
Diversified Manufacturing
1.4 % 1.1 %
Entertainment
1.1 % 6.9 %
Financial Other
1.3 % 1.2 %
Healthcare
0.8 % 0.6 %
Insurance Life
5.0 % 4.3 %
Packaging
2.6 % 2.1 %
Pharmaceuticals
1.2 % 1.0 %
Retailers
1.3 % 3.2 %
Technology
25.7 % 21.2 %
Treasury Bills
14.5 % 21.5 %
IT Services
6.3 % 5.6 %
Wireless
3.9 % 3.2 %
Total
100.0 % 100.0 %
As of June 30, 2024, 98.6% of investments held were based in the United States and 1.4% of investments held were based in Germany.
As of December 31, 2023, 100.0% of investments held were based in the United States.
6. Fair Value Measurement
In accordance with ASC Topic 820, fair value is defined as the price that the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a framework for measuring fair value and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability as of the reporting date.
Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation.
The three-tier hierarchy of inputs is summarized below:
•
Level 1 - Quoted prices in active markets for identical investments.
•
Level 2 - Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
•
Level 3 - Significant unobservable inputs (including the Company's own assumptions in determining the fair value of investments at the reporting date).
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. If a fair value measurement uses price data vendors or observable market price quotations, that measurement may be a Level 2 or Level 3 measurement depending on the source of the base price. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. The determination of what constitutes "observable" requires significant judgment by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
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Valuation of Investments
Investments are valued at fair value as determined in good faith by the Advisor, subject to the oversight of the Board, based on input from management and independent valuation firms that have been engaged to assist in the valuation of portfolio investments without readily available market quotations. This valuation process is conducted at the end of each fiscal quarter.
Common stocks, warrants and financial derivative instruments, such as futures contracts or options on futures that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy.
Investments for which market quotations are not readily available are valued at fair value as determined in good faith pursuant to Rule
2a-5
under the 1940 Act and ASC Topic 820. As a general principle, the fair value of a security or other asset is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Pursuant to Rule
2a-5,
the Board has designated PIMCO as the valuation designee ("Valuation Designee") for the Company to perform the fair value determination relating to all Company investments. PIMCO may carry out its designated responsibilities as Valuation Designee through various teams and committees. The Valuation Designee's policies and procedures govern the Valuation Designee's selection and application of methodologies for determining and calculating the fair value of Company investments. The Valuation Designee may value Company portfolio securities for which market quotations are not readily available and other Company assets utilizing inputs from pricing sources, quotation reporting systems, valuation agents and other third-party sources (together, "Pricing Sources").
The fair values of loan investments based upon pricing data vendors or observable market price quotations are generally categorized as Level 2 or Level 3. Loan investments priced using internal models with significant unobservable inputs are categorized as Level 3.
Short-term debt instruments (such as commercial paper) held by the Company having a remaining maturity of 60 days or less may be valued at amortized cost, so long as the amortized cost value of such short-term debt instruments is approximately the same as the fair value of the instrument as determined without the use of amortized cost valuation. These securities are categorized as Level 2 or Level 3 of the fair value hierarchy depending on the source of the base price. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter (absent unusual circumstances) assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuations in general market rates of interest on the value of the instrument.
If third-party evaluated vendor pricing is not available or not deemed to be indicative of fair value, the Company may elect to obtain broker quotes directly from the broker-dealer or passed through from a third-party vendor. In the event that fair value is based upon a single sourced broker quote, these securities are categorized as Level 3 of the fair value hierarchy. Broker quotes are typically received from established market participants. Although independently received, the Company does not have the transparency to view the underlying inputs which support the market quotation. Significant changes in the broker quote would have direct and proportional changes in the fair value of the security.
Discounted cash flow valuation uses an internal analysis based on the Advisor's expectation of future income and expenses, capital structure, exit multiples of a security, and other unobservable inputs which may include contractual and factual loan factors, estimated future payments and credit rating. Significant changes in the unobservable inputs of the models would result in direct and proportional changes in the fair value of the security. These securities are categorized as Level 3 of the fair value hierarchy.
Proxy pricing procedures set the base price of a fixed income security and subsequently adjust the price proportionally to market value changes of a
pre-determined
security deemed to be comparable in duration, generally a U.S. Treasury or sovereign note based on country of issuance. The base price may be a broker-dealer quote, transaction price, or an internal value as derived by analysis of market data. The base price of the security may be reset on a periodic basis based on the availability of market data and procedures approved by the Valuation Oversight Committee. Significant changes in the unobservable inputs of the proxy pricing process (the base price) would result in direct and proportional changes in the fair value of the security. These securities are categorized as Level 3 of the fair value hierarchy.
The market approach generally involves multiplying a key performance metric of the company, such as earnings before interest, taxes, depreciation and amortization ("EBITDA"), by a valuation multiple observed in a range of comparable companies or transactions. The selection of a population of comparable companies requires judgment, including qualitative and quantitative analysis of the comparability of the companies. The Advisor may also adjust the valuation multiple for differences between the investment and the referenced comparable.
A cost approach is generally used when a recent transaction price for a specific asset is indicative of fair value.
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Due to the inherent uncertainty of valuations, however, estimated fair values may differ from the values that would have been used had a readily available market for the securities existed and the differences could be material.
The following tables summarize the fair value of the Company's investments as of June 30, 2024 and December 31, 2023 (amounts in thousands):
June 30, 2024
Assets
Level 1
Level 2
Level 3
Total
First Lien Senior Secured
$ - $ 54,915 $ 27,763 $ 82,678
Second Lien Senior Secured
- 2,851 4,739 7,590
Senior Unsecured
- - 43,686 43,686
Corporate Bonds
- 18,857 - 18,857
Common Stocks
- - 492 492
Warrants
- - 1,727 1,727
Short-Term Investments
- 26,326 - 26,326
Total assets
$ - $ 102,949 $ 78,407 $ 181,356
December 31, 2023
Assets
Level 1
Level 2
Level 3
Total
First Lien Senior Secured
$ - $ 69,807 $ 25,574 $ 95,381
Second Lien Senior Secured
- 2,878 - 2,878
Senior Unsecured
- - 40,061 40,061
Corporate Bonds
- 28,658 - 28,658
Common Stocks
- - 263 263
Warrants
- - 2,181 2,181
Short-Term Investments
- 46,553 - 46,553
Total assets
$ - $ 147,896 $ 68,079 $ 215,975
Assets or liabilities categorized as Level 2 or Level 3 as of period end have been transferred between Level 2 and 3 since the prior period due to changes in the method utilized in valuing the investments. Transfers from Level 2 to Level 3 are a result of a change, in the normal course of business, from the use of methods used by Pricing Services (Level 2) to the use of a broker quote or valuation technique which utilizes significant unobservable inputs due to an absence of current or reliable market-based data (Level 3). Transfers from Level 3 to Level 2 are a result of the availability of current and reliable market-based data provided by Pricing Services or other valuation techniques which utilize significant observable inputs. In accordance with the requirements of U.S. GAAP, the amounts of transfers into and out of Level 3, if material, are disclosed in the tables below.
The below tables present a summary of changes in fair value of Level 3 assets by investment type (amounts in thousands) for the six months ended June 30, 2024 and 2023:
Net
Net Change in
Beginning
Purchases
Net Sales
Accrued
Realized
Unrealized
Transfers
Ending
Balance at
and
In-Kind
and
Discounts/
Gain/
Appreciation/
Transfers
out of
Balance at
12/31/2023
Drawdowns
Contributions
Paydowns
(Premiums)
(Loss)
(Depreciation)
into Level 3
Level 3
6/30/24
Term Loans First Lien Secured
$ 25,574 $ 154 $ 0 ($ 5,240 ) $ 68 $ 138 $ 139 $ 6,930 $ 0 $ 27,763
Term Loans Second Lien Secured
0 4,726 0 0 21 0 (8 ) 0 0 4,739
Term Loans Senior Unsecured
40,061 3,100 0 0 176 0 349 0 0 43,686
Common Stocks
263 642 0 (321 ) 0 0 (92 ) 0 0 492
Unlisted Warrants
2,181 0 0 0 0 0 (454 ) 0 0 1,727
Totals
$
68,079
$
8,622
$
0
($
5,561
)
$
265
$
138
($
66
)
$
6,930
$
0
$
78,407
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Net
Net Change in
Beginning
Purchases
Net Sales
Accrued
Realized
Unrealized
Transfers
Ending
Balance at
and
In-Kind
and
Discounts/
Gain/
Appreciation/
Transfers
out of
Balance at
12/31/2022
Drawdowns
Contributions
Paydowns
(Premiums)
(Loss)
(Depreciation)
into Level 3
Level 3
6/30/23
Term Loans First Lien Secured
$ 22,082 $ 23,185 $ 0 $ 2,782 $ 128 ($ 3,758 ) $ 6,251 $ 9,414 ($ 6,120 ) $ 53,964
Term Loans Second Lien Secured
8,062 722 0 (3,001 ) 37 (13,930 ) 9,105 0 0 995
Term Loans Senior Unsecured
25,562 1,721 0 0 19 0 154 0 0 27,456
Totals
$
55,706
$
25,628
$
0
($
219
)
$
184
($
17,688
)
$
15,510
$
9,414
($
6,120
)
$
82,415
The following tables present quantitative information about the significant unobservable inputs of the Company's Level 3 financial instruments. The tables are not intended to be
all-inclusive
but instead captures the significant unobservable inputs relevant to the Company's determination of fair value (amounts in thousands).
Fair Value
as of
  June 30, 2024  
Valuation
Techniques
Unobservable
Input
Range
Weighted Average
(1)
Term Loans
$ 25,348 Discounted Cash Flow Discount Rate 10.90% - 21.04% 13.46%
7,000 Third Party Vendor Broker Quote n/a 100.00%
154 Recent Transaction Purchase Price n/a n/a
Senior Unsecured
43,686 Discounted Cash Flow Discount Rate 14.91% - 23.62% 17.22%
Common Stocks
334 Comparable Multiple EBITDA Multiple n/a 6.00x
158 Discounted Cash Flow/Comparable Multiple Discount Rate/Revenue Multiple n/a 20.75%/0.50x
Warrants
1,727 Comparable Multiple EBITDA Multiple n/a 10.25x
Total Assets
$ 78,407
Fair Value
as of
December 31, 2023
Valuation
Techniques
Unobservable
Input
Range
Weighted Average
(3)
Term Loans
$ 25,574 Discounted Cash Flow Discount Rate 10.67% - 16.39% 12.23%
Senior Unsecured
40,061 Discounted Cash Flow Discount Rate 15.41% - 23.37% 17.50%
Common Stocks
263 Discounted Cash Flow/Comparable Multiple Discount Rate/Revenue Multiple n/a 17.25%/0.55x
Warrants
2,181 Comparable Multiple EBITDA Multiple n/a 10.00x
Total Assets
$ 68,079
(1)
Weighted average is calculated by weighing the significant unobservable input by the relative fair value of each investment in the category.
7. Commitments & Contingencies
Commitments
The Company may enter into commitments to fund investments. As of June 30, 2024, the Advisor believed that the Company had adequate financial resources to satisfy its unfunded commitments, if any. The amounts associated with unfunded commitments to provide funds to portfolio companies are not recorded in the Company's Consolidated Statements of Assets and Liabilities. Since these commitments and the associated amounts may expire without being drawn upon, the total commitment amount does not necessarily represent a future cash requirement.
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As of June 30, 2024, the Company had the following outstanding commitments to fund investments in current portfolio companies (amounts in thousands):
Portfolio Company
Investment Type
June 30, 2024
Integrity Marketing Acquisition, LLC
Revolver $ 741
CoreWeave Compute Acquisition Co. IV, LLC
Delayed Draw Term Loan $ 4,843
Contingencies
In the normal course of business, the Company enters into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.
Litigation
As of the issuance date of this report, the Company is not named as a defendant in any material litigation or arbitration proceedings and is not aware of any material litigation or claim pending or threatened against it.
8. Net Assets
Equity Issuance
For the three months and six months ended June 30, 2024, the Company's authorized stock consisted of 250,000,000 Shares of common stock, par value $0.001 per share, and 1,000,000 shares of preferred stock, par value $0.001 per share.
The Company did not hold a closing of the continuous Private Offering for the three months or six months ended June 30, 2024.
Distributions
For the six month period ended June 30, 2024, the Board declared the following distributions:
On May 22, 2024, the Company paid a dividend of $0.14 per share to stockholders of record as of May 20, 2024.
Share Repurchase Program
At the discretion of the Board, the Company may repurchase Shares (either by number of Shares or aggregate net asset value) as of such quarter end pursuant to a quarterly share repurchase program. Repurchases of Shares will be made at the current net offering price per Share on the date of such repurchase.
In the event the amount of Shares tendered exceeds the repurchase offer amount, Shares will be repurchased on a pro rata basis. All unsatisfied repurchase requests must be resubmitted in the next quarterly tender offer, or upon the recommencement of the Share repurchase
program
, as applicable.
On January 25, 2024, the Company repurchased
3,785,281.95
shares of common stock, par value $0.001 per share, from PIMCO Capital Solutions US Feeder LP for $33,238 (amount in thousands) at $8.78 per share in accordance with its offer to repurchase (the "Tender Offer") its own shares up to the amount of shares that could be repurchased with approximately $40,000 (amount in thousands). The Tender Offer expired on January 25, 2024 and $33,238 (amount in thousands) was paid to PIMCO Capital Solutions US Feeder LP on January 31, 2024. For the three months ended June 30, 2024,
no
Share repurchase was offered or requested and
no
Shares were repurchased.
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9. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings (loss) per common share for the three month periods and six month periods ended June 30, 2024 and 2023:
Three Months Ended
Six Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Net increase (decrease) in net assets resulting from operations
$ 4,089 $ 5,752 $ 10,834 $ 11,463
Weighted average shares of common stock outstanding - basic and diluted
21,602,602 25,387,884 22,122,559 25,387,884
Earnings (loss) per common share (basic and diluted)
$ 0.19 $ 0.23 $ 0.49 $ 0.45
10. Financial Highlights
Six Months Ended
June 30, 2024
June 30, 2023
Per share data:
Net asset value, beginning of period
$ 8.75 $ 9.21
Net investment income (loss)
(1)
0.48 0.50
Net realized and unrealized gain (loss) on investment transactions
(2)
0.01 (0.05 )
Net increase (decrease) in net assets from operations
(1)
0.49 0.45
Distributions declared
(1)
(0.14 ) (0.12 )
Total increase (decrease) in net assets
0.35 0.33
Net asset value, end of period
$ 9.10 $ 9.54
Shares Outstanding, end of period
21,602,602 25,387,884
Total Return
(3)
5.77 % 4.93 %
Ratios / supplemental data
Ratio of expenses to average net assets, gross of waivers
(4)(5)
2.61 % 1.81 %
Ratio of expenses to average net assets, net of waivers
(4)(5)
1.33 % 0.57 %
Ratio of net investment income (loss) to average net assets
(4)(5)
10.92 % 10.07 %
Net Assets, end of period
$ 196,546 $ 242,258
Weighted average shares outstanding
22,122,559 25,387,884
Total capital commitments, end of period
$ 216,026 $ 253,879
Portfolio turnover rate
(6)
6.15 % 10.24 %
(1)
Per share amounts are calculated based on the weighted average shares outstanding during the period.
(2)
Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset value ("NAV") per share for the period, and may not reconcile with the aggregate gains and losses in the Consolidated Statements of Operations due to share transactions during the period.
(3)
Total return is calculated as the change in NAV per share during the period, plus distributions per share, if any, divided by the NAV per share at the beginning of the period. Total return is for the period indicated and has not been annualized.
(4)
All expenses are annualized with the exception of organizational expenses.
(5)
Average net assets are computed using the average balance of net assets at the end of each month of the reporting period.
(6)
Not annualized.
11. Subsequent Events
Subsequent events after the Consolidated Statements of Assets and Liabilities date have been evaluated through the date the consolidated financial statements were issued. The Company has concluded that there are no events requiring adjustment or disclosure in the consolidated financial statements, except as discussed below.
On July 1, 2024, the Company had a drawdown on the Credit Facility in the amount of $11,450 (amount in thousands).
On August 7, 2024, the Company's board of directors declared a dividend of $0.15 per share, which is payable on August 22, 2024 to stockholders of record as of August 20, 2024.
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Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Statements contained in this Form 10-Q("Report") (including those relating to current and future market conditions and trends in respect thereof) that are not historical facts are based on current expectations, estimates, projections, opinions and/or beliefs of the Company and PIMCO. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. Certain information contained in this Report constitutes "forward-looking statements," which can be identified by the use of forward-looking terminology such as "may," "will," "should," "seek," "expect," "anticipate," "project," "estimate," "intend," "continue," "target," or "believe" or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Company may differ materially from those reflected or contemplated in such forward-looking statements.

The information contained in this section should be read in conjunction with "Item 1. Unaudited Consolidated Financial Statements." Although the Company believes that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions are based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, the forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Report should not be regarded as a representation by us that the Company's plans and objectives will be achieved. This discussion contains forward-looking statements, which relate to future events or the Company's future performance or financial condition and involves numerous risks and uncertainties, including, but not limited to, those set forth in "Risk Factors" in Item 1A of this Report and elsewhere in this Report. Investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this Report. The Company does not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law.

The following factors are among those that may cause actual results to differ materially from the Company's forward-looking statements:

•

the Company's future operating results;

•

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets;

•

interest rate volatility;

•

the Company's business prospects and the prospects of the Company's prospective portfolio companies;

•

the impact of increased competition;

•

the Company's contractual arrangements and relationships with third parties;

•

the dependence of the Company's future success on the general economy and its impact on the industries in which the Company invests;

•

the ability of the Company's prospective portfolio companies to achieve their objectives;

•

the relative and absolute performance of the Advisor;

•

the ability of the Advisor and its affiliates to retain talented professionals;

•

the Company's expected financings and investments;

•

the Company's ability to pay dividends or make distributions;

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•

the adequacy of the Company's cash resources;

•

the risks associated with possible disruptions due to terrorism in the Company's operations or the economy generally;

•

the impact of future acquisitions and divestitures;

•

the Company's regulatory structure and tax status as a business development company ("BDC") and a regulated investment company (a "RIC"); and

•

future changes in laws or regulations and conditions in the Company's operating areas.

Investors are advised to consult any additional disclosures that the Company makes directly to investors or through reports that the Company has filed or will file with the SEC, including our registration statement on Form 10 and our annual reports on Form 10-K,quarterly reports on Form 10-Qand current reports on Form 8-K.

Investors should understand that under Section 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports that the Company files under the Exchange Act.

Overview

The Company is an externally managed, non-diversified,closed-endmanagement investment company that elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the "1940 Act"), on July 11, 2022. The Company was incorporated under the laws of the state of Delaware on December 23, 2021. In addition, for U.S. federal income tax purposes, the Company has elected, as of August 1, 2022, to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").

The Company's investment objectives are to generate current income and to a lesser extent longer-term capital appreciation. The Company seeks to achieve its investment objectives by investing primarily in privately negotiated loans and equity investments to middle-market companies generally with annual revenues greater than $20 million and earnings before interest, taxes, depreciation and amortization ("EBITDA") of less than $50 million. To accomplish this, the Company plans to make direct investments in middle-market companies. The Company may make select investments in non-U.S.portfolio companies. The Company seeks to provide investors with access to:

•

a diversified portfolio of credit investments expected to provide stable income and high assurances of debt repayment;

•

current income distributions;

•

capital protection through defensive structures with affirmative, negative and financial maintenance covenants and active portfolio management;

•

assets of varying vintage, industry and geography through direct originations and acquisitions of loan portfolios; and

•

generally low volatility and low correlation to public market indices.

Without limiting the generality of the foregoing, the Company primarily invests in directly originated senior secured term loans including first lien senior secured term loans (including unitranche loans), second lien senior secured term loans, mezzanine debt, unsecured loans, other subordinated loans, and covenant-lite loans. The Company invests to a lesser degree in equity investments and other opportunistic asset purchases. The Company may engage in hedging transactions. The Company may also make investments in traded bank loans and other liquid debt securities of U.S. corporate issuers, including broadly syndicated loans, which may provide more liquidity than the Company's private credit investments. Depending on various factors, including, without limitation, the Company's cash flows, the state of the loan market, and the need to quickly ramp-upthe Company's portfolio, the Company expects that at times its liquid loan portfolio could represent a material portion of the Company's portfolio.

The Company generates revenues primarily in the form of interest income from investments it holds. In addition, the Company generates income from dividends or distributions of income on any direct equity investments, capital gains on the sale of loans and equity securities and various other loan origination and other fees, including commitment, origination, amendment, structuring, syndication or due diligence fees, fees for providing managerial assistance and consulting fees.

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Key Components Of Our Results Of Operations

Investments

The Company's level of investment activity can, does, and will vary substantially from period to period depending on many factors, including the amount of debt available to middle-market companies, the general economic environment and the competitive environment for the type of investments the Company makes.

Revenues

The Company generates revenue primarily in the form of interest income on debt investments it holds. In addition, the Company generates income from dividends or distributions on income on direct equity investments, capital gains on the sales of loans and equity securities and various loan origination and other fees. The Company's debt investments generally have a stated term of five to eight years and typically bear interest at a floating rate usually determined on the basis of a benchmark such as SOFR. Interest on these debt investments is paid quarterly. In some instances, the Company receives payments on its debt investments based on scheduled amortization of the outstanding balances. In addition, the Company may receive repayments of some of its debt investments prior to their scheduled maturity date. The frequency or volume of these repayments is expected to fluctuate significantly from period to period. The Company's portfolio activity also reflects the proceeds of sales of securities. The Company may also generate revenue in the form of commitment, origination, amendment, structuring, syndication or due diligence fees, fees for providing managerial assistance and consulting fees.

Investments are placed on non-accrualstatus when it is probable that principal, interest or dividends will not be collected according to contractual terms. Interest or dividend payments received on non-accrualinvestments may be recognized as income or applied to principal depending upon management's judgement. Non-accrualinvestments are restored to accrual status when past due principal and interest or dividends are paid and, in management's judgement, principal and interest or dividend payments are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection.

Expenses

The Company's primary operating expenses include the payment of: (i) investment advisory fees to the Advisor pursuant to the Advisory Agreement between the Company and the Advisor (unless waived); (ii) administrative fees payable to the Administrator in performing its administrative obligations under the Administration Agreement between the Company and the Administrator; and (iii) other operating expenses as detailed below:

•

salaries and other compensation or expenses, including travel expenses, of any of the Company's executive officers, directors and employees, if any, who are not officers, directors, stockholders, members, partners or employees of PIMCO or its subsidiaries or affiliates;

•

taxes and governmental fees, if any, levied against the Company;

•

brokerage fees and commissions, and other portfolio transaction expenses incurred by or for the Company (including, fees and expenses of outside legal counsel or third-party consultants retained in connection with reviewing, negotiating and structuring loans and other investments made by the Company, and any costs associated with originating loans (such as third-party sourcing fees, due diligence expenses and travel, lodging and meal expenses related thereto), asset securitizations, alternative lending-related strategies and so-called "broken-dealcosts" (e.g., fees, costs, expenses and liabilities, including, for example, due diligence-related fees, costs, expenses and liabilities, with respect to unconsummated investments));

•

expenses related to SPVs (including, without limitation, overhead expenses related thereto);

•

expenses of the Company's securities lending (if any), including any securities lending agent fees, as governed by a separate securities lending agreement;

•

costs, including interest expenses, of borrowing money or engaging in other types of leverage financing including, without limitation, through the use by the Company of reverse repurchase agreements, dollar rolls/buy backs, bank borrowings, credit facilities and tender option bonds;

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•

costs, including dividend and/or interest expenses and other costs (including, without limitation, offering and related legal costs, fees to brokers, fees to auction agents, fees to transfer agents, fees to ratings agencies and fees to auditors associated with satisfying ratings agency requirements for preferred shares or other securities issued by the Company and other related requirements in the Company's organizational documents) associated with the Company's issuance, offering, redemption and maintenance of preferred shares, commercial paper or other instruments (such as the use of reverse repurchase agreements, dollar rolls/buy backs, bank borrowings, credit facilities and tender option bonds) for the purpose of incurring leverage;

•

fees and expenses of any underlying funds or other pooled vehicles in which the Company invests;

•

expenses of any third party valuation agent engaged to assist in valuing the Company's assets;

•

dividend and interest expenses on short positions taken by the Company;

•

extraordinary expenses, including extraordinary legal expenses, as may arise, including, without limitation, expenses incurred in connection with litigation, proceedings, other claims, and the legal obligations of the Company to indemnify its directors, officers, employees, stockholders, distributors, and agents with respect thereto;

•

fees and expenses, including legal, printing and mailing, solicitation and other fees and expenses associated with and incident to stockholder meetings and proxy solicitations;

•

organizational and offering expenses of the Company, including registration (including Share registration fees), legal, marketing, printing, accounting and other expenses associated with organizing the Company in its state of jurisdiction and in connection with the initial election of the Company to be regulated under the 1940 Act and, as applicable, the initial registration of its Shares under the Securities Act and fees and expenses associated with seeking, applying for and obtaining formal exemptive, no-action and/orother relief from the SEC;

•

expenses incurred in connection with a stockholder that defaults in respect of a Capital Commitment;

•

allocated costs incurred by PIMCO in providing managerial assistance to those companies in which the Company has invested who request it;

•

all other expenses incurred by the Company in connection with maintaining its status as a BDC;

•

expenses payable under any underwriting agreement, including associated fees, expenses and any indemnification obligations;

•

any expenses allocated or allocable to a specific class of Shares, including, as applicable, sub-transfer agencyexpenses and distribution and/or service fees paid pursuant to a Rule 12b-1 orsimilar plan adopted by the Board of the Company for a particular share class (if any);

•

the Company's pro rata portion of the fidelity bond required by Section 17(g) of the 1940 Act, or other insurance premiums (including costs relating to directors' and officers' liability insurance and errors and omissions insurance);

•

all fees, costs, expenses, and liabilities relating to currency hedging and portfolio hedging transactions;

•

all fees, costs, expenses and liabilities of liquidating the Company;

•

all fees, costs, expenses and liabilities that are specific to the operations of the Company; and

•

all expenses of the Company that are capitalized in accordance with U.S. GAAP.

The Company reimburses the Administrator and Advisor or its affiliates for amounts paid or costs borne that properly constitute Company expenses as set forth in the Administration Agreement and Advisory Agreement or otherwise. The Company expects our general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.

Portfolio, Investment Activity And Results Of Operations

As of June 30, 2024, the Company had investments, excluding cash equivalents, in 27 portfolio companies across 14 industries. Based on fair value as of June 30, 2024, approximately 68% of the Company's debt portfolio was invested in debt bearing a floating interest rate, which are primarily subject to interest rate floors. Approximately 68% of the Company's debt portfolio at fair value had an interest rate floor denoted in SOFR. The weighted average interest rate floor across the Company's floating-rate portfolio was approximately 0.7% as of June 30, 2024. These floors allow the Company to mitigate (to a degree) any impact of spread widening on the valuation of the Company's investments. As of June 30, 2024, the Company's estimated weighted average total yield of investments in debt securities was 12.1%. Weighted average yields are based on interest rates as of June 30, 2024.

As of December 31, 2023, the Company had investments, excluding cash equivalents, in 25 portfolio companies across 13 industries. Based on fair value as of December 31, 2023, 76% of the Company's debt portfolio was invested in debt bearing a floating interest rate, which are primarily subject to interest rate floors. Approximately 76% of the Company's debt portfolio at fair value had an interest rate floor denoted in SOFR. The weighted average interest rate floor across the Company's floating-rate portfolio was approximately 0.7% as of December 31, 2023. These floors allow the Company to mitigate (to a degree) any impact of spread widening on the valuation of the Company's investments. As of December 31, 2023, the Company's estimated weighted average total yield of investments in debt securities was 11.9%. Weighted average yields are based on interest rates as of December 31, 2023.

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As part of the monitoring process, the Advisor has developed risk policies pursuant to which it regularly assesses the risk profile of each of our debt investments. The Advisor has developed a classification system to group investments into four categories. The investments are evaluated regularly and assigned a category based on certain credit metrics. The Advisor's ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments. Please see below for a description of the four categories of the Advisor's Internal Risk Rating system:

Category 1 - In the opinion of the Advisor, investments in Category 1 involve the least amount of risk relative to the Company's initial cost basis at the time of origination or acquisition. Category 1 investments performance is above the Company's initial underwriting expectations and the business trends and risk factors are generally favorable, which may include the performance of the portfolio company, or the likelihood of a potential exit.

Category 2 - In the opinion of the Advisor, investments in Category 2 involve a level of risk relative to the Company's initial cost basis at the time of origination or acquisition. Category 2 investments are generally performing in line with the Company's initial underwriting expectations and risk factors to ultimately recoup the cost of our principal investment are neutral to favorable. All new originated or acquired investments are initially included in Category 2.

Category 3 - In the opinion of the Advisor, investments in Category 3 indicate that the risk to the Company's ability to recoup the initial cost basis at the time of origination or acquisition has increased materially since the origination or acquisition of the investment, such as declining financial performance and non-compliancewith debt covenants; however, principal and interest payments are not more than 120 days past due.

Category 4 - In the opinion of the Advisor, investments in Category 4 involve a borrower performing substantially below expectations and indicate that the loan's risk has increased substantially since origination or acquisition. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. For Category 4 investments, it is anticipated that the Company will not recoup the Company's initial cost basis and may realize a substantial loss of the Company's initial cost basis at the time of origination or acquisition upon exit.

The distribution of the Company's portfolio, including cash equivalents, on the Advisor's Internal Risk Rating System is as follows:

June 30, 2024
Fair Value (amounts in thousands) % of Portfolio Number of Portfolio Companies

Risk rating 1

$ -  -  % - 

Risk rating 2

181,356 100.0 28

Risk rating 3

-  -  - 

Risk rating 4

-  -  - 
$ 181,356 100 % 28
December 31, 2023
Fair Value (amounts in thousands) % of Portfolio Number of Portfolio Companies

Risk rating 1

$ -  -  % - 

Risk rating 2

214,762 99.4 25

Risk rating 3

1,213 0.6 1

Risk rating 4

-  -  - 
$ 215,975 100 % 26

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Consolidated Results Of Operations

The following table represents our operating results (amounts in thousands):

For the Three Months Ended For the Six Months Ended
June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Total investment income

$ 6,017 $ 7,280 $ 11,995 $ 13,434

Less: Net expenses

769 498 1,381 784

Net investment income (loss)

5,248 6,782 10,614 12,650

Net realized gain (loss)

(372 ) (171 ) (415 ) (17,922 )

Net change in unrealized appreciation (depreciation)

(787 ) (859 ) 635 16,735

Net increase (decrease) in Net Assets resulting from operations

$ 4,089 $ 5,752 $ 10,834 $ 11,463

Investment income was as follows (amounts in thousands):

For the Three Months Ended For the Six Months Ended
June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Investment income:

Interest income

$ 5,144 $ 6,410 $ 8,647 $ 10,050

Payment in-kindinterest

796 861 3,247 3,375

Other income

77 9 101 9

Total Investment Income

$ 6,017 $ 7,280 $ 11,995 $ 13,434

For the three month periods and six month periods ended June 30, 2024 and 2023, total investment income was driven by the Company's deployment of capital and invested balance of investments. The size of the Company's investment portfolio at fair value was approximately $180 million as of June 30, 2024 and, as of such date, all of the Company's debt investments were income producing.

Interest income on the Company's debt investments is dependent on the composition and credit quality of the portfolio. Generally, the Company expects the portfolio to generate predictable quarterly interest income based on the terms stated in each loan's credit agreement.

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Expenses

Expenses were as follows (amounts in thousands):

For the Three Months Ended For the Six Months Ended
June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Expenses:

Management fee

$ 609 $ 751 $ 1,258 $ 1,480

Directors fees

43 61 86 123

Administration fee

73 90 148 178

Interest expense

366 8 585 8

Tax expense

84 1 84 1

Offering costs

-  5 -  10

Legal expenses

36 181 99 185

Other expenses

81 52 207 80

Recoupment of prior expenses paid by the Advisor

86 100 172 199

Total expenses

$ 1,378 $ 1,249 $ 2,639 $ 2,264

Waivers

(609 ) (751 ) (1,258 ) (1,480 )

Net expenses

$ 769 $ 498 $ 1,381 $ 784

Other expenses include valuation, insurance, filing, research, subscriptions and other costs. Organization and offering costs include expenses incurred in the Company's initial formation and the Company's offering of Shares.

Waivers include organizational costs and management fee waivers.

Income Taxes, Including Excise Taxes

The Company has elected, as of August 1, 2022, to be treated as a RIC under Subchapter M of the Code, and the Company intends to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, the Company must, among other things, distribute to the Company's stockholders in each taxable year generally at least 90% of the sum of our Investment Company Taxable Income, as defined by the Code (without regard to the deduction for dividends paid), and net tax-exemptincome for that taxable year. To maintain the Company's tax treatment as a RIC, the Company, among other things, intends to make the requisite distributions to its stockholders, which generally relieve the Company from corporate-level U.S. federal income taxes.

For the three month periods and six month periods ended June 30, 2024 and 2023, we did not incur any excise tax.

Financial Condition, Liquidity And Capital Resources

The Company generates cash from the net proceeds of offerings of its Shares, and from cash flows from interest and fees earned from its investments and principal repayments and proceeds from sales of its investments. The Company may also fund a portion of its investments through borrowings from banks and issuances of senior securities, including before the Company has fully invested the proceeds of any closing of the Company's continuous private offering of its Shares. The Company's primary use of cash will be investments in portfolio companies, payments of Company expenses and payment of cash distributions to stockholders.

Financing Transactions

The Company intends to utilize leverage (including through the establishment of wholly-owned financing subsidiaries) to finance its investments and operations. The amount of leverage that the Company employs will be subject to the restrictions of the 1940 Act and the supervision of the Board. At the time of any proposed borrowing, the amount of leverage the Company employs will also depend on the Advisor's assessment of market and other factors. The Company may use leverage for investments, working capital, expenses and general corporate purposes (including to pay dividends or distributions).

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The Company is subject to limitations on leverage applicable to BDCs under the 1940 Act. As a BDC, with certain limited exceptions, the Company is only permitted to borrow amounts such that the Company's asset coverage ratio, as defined in the 1940 Act, equals at least 150% after (and including) such borrowing. As of June 30, 2024, our asset coverage ratio, as defined under the 1940 Act as the ratio of our total assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, was not applicable because the Company did not have any borrowings outstanding as of that date.

In determining whether to borrow money or issue debt on behalf of the Company, the Advisor will analyze, as applicable, the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to the Company's investment outlook, among other factors. Any such leverage, if incurred, would increase the total capital available for investment by the Company.

On June 19, 2023, the Company, entered into the Credit Facility with Massachusetts Mutual Life Insurance Company under which the Company is permitted to borrow up to $150,000 (amount in thousands). See "Note 4. Borrowings" in "Item 1. Unaudited Consolidated Financial Statements" in this Report for more information.

As of June 30, 2024, the Company did not have any outstanding borrowings.

The Company may also from time to time enter into new credit facilities, increase the size of existing credit facilities or issue debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.

Contractual Obligations

The Company has entered into an Advisory Agreement with the Advisor pursuant to the 1940 Act to provide the Company with investment advisory services and the Administration Agreement with the Administrator to provide the Company with administrative services. Payments for investment advisory services under the Advisory Agreement are described under Item 1. Consolidated Financial Statements - Notes to Unaudited Consolidated Financial Statements - Note 3. Related Party Transactions. Payments for administration services under the Administration Agreement are described under Item 1. Consolidated Financial Statements - Notes to Unaudited Consolidated Financial Statements - Note 3. Related Party Transactions.

Off-BalanceSheet Arrangements

The Company may become a party to investment commitments and to financial instruments with off-balancesheet risk in the normal course of its business to fund investments and to meet the financial needs of its portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the Consolidated Statements of Assets and Liabilities. As of June 30, 2024, the Company believed it had adequate resources to satisfy its unfunded commitments. The unfunded commitments to provide funds to portfolio companies were as follows (amount in thousands):

Unfunded Commitments

As of June 30, 2024

First Lien Senior Secured

$ 5,584

Unregistered Sales of Equity Securities

For the three month periods and six month periods ended June 30, 2024 and 2023, the Company did not hold closings of our continuous private offering of Shares.

Distributions and Distribution Reinvestment

For the six month period ended June 30, 2024, the Board declared the following distributions:

On May 22, 2024, the Company paid a dividend of $0.14 per share to stockholders of record as of May 20, 2024.

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The Company has adopted an "opt out" DRIP. As a result, unless stockholders elect to "opt out" of the DRIP, stockholders will have their cash dividends or distributions automatically reinvested in additional shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), rather than receiving cash. Shareholders who receive distributions in the form of shares of Common Stock will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, those stockholders will not receive cash with which to pay any applicable taxes.

Critical Accounting Estimates

The preparation of the Company's financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. For a description of our critical accounting policies, see Note 2 "Significant Accounting Policies" to our consolidated financial statements included in this Report. We consider the most significant accounting policies to be those related to our Fair Value of Investments, Revenue Recognition, Deferred Financing Fees, Distribution Policy, and Income Taxes. There have been no material changes in our critical accounting policies and practices.

The Company's critical accounting policies, including those relating to the valuation of its investment portfolio, should be read in connection with the Company's financial statements in Part I, Item 1 of this Report, "Risk Factors" in Part II, Item 1A of this Report, and "Risk Factors" in Item 1A of the Company's initial registration statement on Form 10 ("Form 10") and most recent Form 10-K.

Related Party Transactions

The Company has entered into a number of business relationships with affiliated or related parties, including the following (which are defined in the notes to the accompanying unaudited consolidated financial statements if not defined herein):

•

the Advisory Agreement;

•

the Administration Agreement; and

•

the Expense Reimbursement Agreement.

See "Item 1. Consolidated Financial Statements-Notes to the Unaudited Consolidated Financial Statements-Note 3. Related Party Transactions."

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to financial market risks, including changes in interest rates. To the extent that the Company borrows money to make investments, the Company's net investment income is dependent upon the difference between the rate at which the Company borrows funds and the rate at which the Company invests these funds. In periods of rising interest rates, the Company's cost of funds would increase, which may reduce the Company's net investment income. Because the Company expects that most of its investments will bear interest at floating rates, the Company anticipates that an increase in interest rates would have a corresponding increase in the Company's interest income that would likely offset any increase in the Company's cost of funds and, thus, net investment income would not be reduced. However, there can be no assurance that a significant change in market interest rates will not have an adverse effect on the Company's net investment income.

The Company will generally invest in illiquid loans and securities including debt and equity securities of middle-market companies. Because the Company expects that there will not be a readily available market for many of the investments in the Company's portfolio, the Company expects to value many of its portfolio investments at fair value as determined in good faith by the Advisor using a documented valuation policy and a consistently applied valuation process, subject to Board oversight. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company's investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

Assuming that the Consolidated Statement of Assets and Liabilities as of June 30, 2024, were to remain constant and that the Company took no actions to alter its existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates (amounts in thousands).

Change in Interest Rates

Increase (Decrease) in
Interest Income 		Increase (Decrease) in
Interest Expense 		Net Increase (Decrease) in
Net Investment Income

Down 25 basis points

$ (270 ) $ -  $ (270 )

Up 100 basis points

$ 1,079 $ -  $ 1,079

Up 200 basis points

$ 2,159 $ -  $ 2,159

Up 300 basis points

$ 3,238 $ -  $ 3,238

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In addition, although the Company does not currently intend to make investments that are denominated in a foreign currency, to the extent it does, the Company will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved.

The Company may hedge against interest rate and currency exchange rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate the Company against adverse changes in interest rates, they may also limit the Company's ability to participate in benefits of lower interest rates with respect to the Company's portfolio of investments with fixed interest rates.

Item 4.

Controls and Procedures

Evaluation of disclosure controls and procedures

As of the end of the period covered by this Report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's President and Treasurer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e)and 15d-15(e)under the Exchange Act). Based on that evaluation, the Company's President and Treasurer have concluded that the Company's current disclosure controls and procedures are effective in timely alerting them to material information relating to the Company that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act.

Changes in internal control over financial reporting

There have been no changes in the Company's internal control over financial reporting that occurred during the Company's most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

The Company is not currently subject to any material legal proceedings, nor, to the Company's knowledge, is any material legal proceeding threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company's rights under loans to or other contracts with the Company's portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon the Company's financial condition or results of operations.

Item 1A.

Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in "Item 1A. Risk Factors" in the Company's Form 10-K,which could materially affect the Company's business, financial condition and/or operating results. The risks described in the Company's Form 10-Kare not the only risks the Company faces. Additional risks and uncertainties that are not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company's business, financial condition and/or operating results. During the three months ended June 30, 2024, there have been no material changes from the risk factors set forth in the Company's most recent Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The Company did not sell any securities during the period covered by this Report that were not registered under the Securities Act.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosure

Not applicable.

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Item 5.

Other Information

None.

Item 6.

Exhibits

The following exhibits are filed as part of this Report or are hereby incorporated by reference to exhibits previously filed with the SEC:

24.1* Power of Attorney for John W. Lane.
24.2* Power of Attorney for Crystal Porter.
31.1** Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
31.2** Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
32.1** Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
101.INS** Inline XBRL Instance Document
101.SCH** Inline XBRL Taxonomy Extension Schema
101.CAL** Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF** Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB** Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE** Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*

Previously filed as an exhibit to the Company's Form 10-Kfiled on March 24, 2023 and incorporated herein by reference.

**

Filed herewith.

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PIMCO CAPITAL SOLUTIONS BDC CORP.
Date:August 13, 2024 By:

/s/ John W. Lane*

John W. Lane
President
(Principal Executive Officer)
Date:August 13, 2024 By:

/s/ Crystal Porter*

Crystal Porter
Treasurer
(Principal Financial and Accounting Officer)
Date:August 13, 2024 *By:

/s/ William J. Bielefeld

William J. Bielefeld
As attorney-in-fact
*

Pursuant to power of attorney filed herewith.

35