Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS (Tables)

v3.23.1
INVESTMENTS (Tables)
 6 Months Ended
Mar. 31, 2023
Investments, Debt and Equity Securities [Abstract]  
Schedule of Fair Value, Assets Measured on Recurring Basis
As of March 31, 2023 and September 30, 2022, our investments, by security type, at fair value were categorized as follows within the ASC 820 fair value hierarchy:
Fair Value Measurements
Fair Value
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of March 31, 2023:
Secured first lien debt
 $ 498,947  $ —  $ —  $ 498,947 
Secured second lien debt
 117,438  —  —  117,438 
Unsecured debt
 2,372  2,336 
(B)
 — 

36 
Preferred equity
 28,298  —  — 

28,298 
Common equity/equivalents
 31,471 
(A)
 —  27 
(C)
 31,444 
Total Investments as of March 31, 2023
 $ 678,526  $ 2,336  $ 27  $ 676,163 
Fair Value Measurements
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of September 30, 2022:
Secured first lien debt
 $ 463,858  $ —  $ —  $ 463,858 
Secured second lien debt
 115,928  —  —  115,928 
Unsecured debt
 55  —  — 

55 
Preferred equity
 27,046  —  — 

27,046 
Common equity/equivalents
 36,331 
(A)
 — 

58 
(C)
 36,273 
Total Investments as of September 30, 2022
 $ 643,218  $ —  $ 58  $ 643,160 
(A)Excludes our investment in Leeds with fair values of $0.2 million and $6.4 million as of March 31, 2023 and September 30, 2022, respectively. Leeds was valued using NAV as a practical expedient.
(B)Fair value was determined based on the closing market price of B. Riley 6.75% senior notes which are traded on the Nasdaq Global Select Market under the trading symbol RILYO.
(C)Fair value was determined based on the closing market price of shares of Funko, Inc. (our units in Funko can be converted into common shares of Funko, Inc.) at the reporting date less a discount for lack of marketability as our investment was subject to certain restrictions.
The following table presents our portfolio investments, valued using Level 3 inputs within the ASC 820 fair value hierarchy and carried at fair value as of March 31, 2023 and September 30, 2022, by caption on our accompanying Consolidated Statements of Assets and Liabilities and by security type:
Total Recurring Fair Value Measurements Reported in
Consolidated Statements of Assets and Liabilities
Using Significant Unobservable Inputs (Level 3)
March 31, 2023 September 30, 2022
Non-Control/Non-Affiliate Investments
Secured first lien debt $ 447,479  $ 413,631 
Secured second lien debt 109,933  108,263 
Unsecured debt 36 
(A)
 55 
Preferred equity 19,135  17,719 
Common equity/equivalents 22,236 
(B)
 28,688 
(C)
Total Non-Control/Non-Affiliate Investments
 $ 598,819  $ 568,356 
Affiliate Investments
Secured first lien debt $ 35,650  $ 34,804 
Preferred equity 5,350  3,640 
Common equity/equivalents 1,110  647 
Total Affiliate Investments $ 42,110  $ 39,091 
Control Investments
Secured first lien debt $ 15,818  $ 15,423 
Secured second lien debt 7,505  7,665 
Preferred equity 3,813  5,687 
Common equity/equivalents 8,098  6,938 
Total Control Investments
 $ 35,234  $ 35,713 
Total Investments at Fair Value Using Level 3 Inputs $ 676,163  $ 643,160 
(A)Excludes our investment in B. Riley with a fair value of $2.3 million as of March 31, 2023. B. Riley was valued using Level 1 inputs.
(B)Excludes our investments in Leeds and Funko with fair values of $0.2 million and $27 thousand, respectively, as of March 31, 2023. Leeds was valued using NAV as a practical expedient, and Funko was valued using Level 2 inputs.
(C)Excludes our investments in Leeds and Funko with fair values of $6.4 million and $58 thousand, respectively, as of September 30, 2022. Leeds was valued using NAV as a practical expedient, and Funko was valued using Level 2 inputs.
Schedule of Fair Value Measurement Inputs and Valuation Techniques The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to our fair value measurements.
The weighted average calculations in the table below are based on the principal balances for all debt related calculations and on the cost basis for all equity related calculations for the particular input.
Quantitative Information about Level 3 Fair Value Measurements

Range / Weighted Average as of

March 31,
2023		 September 30,
2022
Valuation
Techniques/
Methodologies
Unobservable
Input
 March 31,
2023		 September 30,
2022


Secured first lien debt
 $ 458,476  $ 423,912 
Yield Analysis
 Discount Rate
11.0% - 25.7%
/ 13.7%
8.0% - 29.5%
/ 11.8%

40,471  39,946 
TEV
EBITDA multiple
4.6x – 6.4x
/ 6.0x
4.8x – 6.7x
/ 6.2x


EBITDA
$963 - $13,215
/ $9,251
$800 - $10,257
/ $7,605


Revenue multiple
0.3x – 0.6x
/ 0.4x
0.3x – 0.6x
/ 0.5x


Revenue
$14,300 - $15,483
/ $15,033
$11,514 - $16,320
/ $14,656


Secured second lien debt
 99,773  97,472 
Yield Analysis
 Discount Rate
11.3% - 15.3%
/ 14.2%
11.5% - 15.4%
/ 13.8%

10,160  10,791 
Market Quote
 IBP
63.5% - 98.5%
/ 81.4%
82.0% - 95.0%
/ 86.5%

7,505  7,665 
TEV
 EBITDA multiple
5.5x – 5.5x
/ 5.5x
5.6x – 5.6x
/ 5.6x


EBITDA
$3,095 - $3,095
/ $3,095
$3,299 - $3,299
/ $3,299


Unsecured debt(A)
36  55 
TEV
Revenue multiple
1.3x – 1.3x
/ 1.3x
0.3x – 1.3x
/ 1.0x


Revenue
$5,778 - $5,778
/ $5,778
$764 - $11,514
/ $4,249


Preferred and common equity / equivalents(B)
59,742  63,319 
TEV
 EBITDA multiple
4.4x – 12.9x
/ 6.4x
4.1x – 11.0x
/ 6.5x


EBITDA
$963 -$91,580
/ $9,806
$800 -$74,512
/ $11,742


Revenue multiple
0.3x – 3.0x
/ 1.3x
0.3x– 4.4x
/ 1.4x


Revenue
$3,162 -$15,483
/ $14,115
$764 -$42,926
/ $19,963
Total Level 3 Investments, at Fair Value
 $ 676,163  $ 643,160 
(A)Fair value as of March 31, 2023 excludes our investment in B. Riley with a fair value of $2.3 million. B. Riley was valued using Level 1 inputs as of March 31, 2023.
(B)Fair value as of March 31, 2023 excludes our investments in Leeds and Funko with fair values of $0.2 million and $27 thousand, respectively. Fair value as of September 30, 2022 excludes our investments in Leeds and Funko with fair values of $6.4 million and $58 thousand, respectively. Leeds was valued using NAV as a practical expedient and Funko was valued using Level 2 inputs as of both March 31, 2023 and September 30, 2022.
Schedule of Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation
The following tables provide the changes in fair value, broken out by security type, during the three and six months ended March 31, 2023 and 2022 for all investments for which we determine fair value using unobservable (Level 3) inputs.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three months ended March 31, 2023 Secured
First Lien
Debt		 Secured
Second Lien
Debt		 Unsecured
Debt		 Preferred
Equity		 Common
Equity/
Equivalents		 Total
Fair Value as of December 31, 2022 $ 450,243  $ 114,755  $ 45  $ 26,140  $ 28,011  $ 619,194 
Total gains (losses):
Net realized gain (loss)(A)
(107) —  —  510  —  403 
Net unrealized appreciation (depreciation)(B)
(2,035) 319  (9) 1,931  1,401  1,607 
Reversal of prior period net depreciation (appreciation) on realization(B)
107  —  —  —  —  107 
New investments, repayments and settlements: (C)
Issuances/originations
 58,385  4,060  —  371  2,032  64,848 
Settlements/repayments
 (7,646) (1,696) —  —  —  (9,342)
Net proceeds from sales
 —  —  —  (654) —  (654)
Transfers
 —  —  —  —  —  — 
Fair Value as of March 31, 2023
 $ 498,947  $ 117,438  $ 36  $ 28,298  $ 31,444  $ 676,163 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Six months ended March 31, 2023 Secured
First Lien
Debt		 Secured
Second Lien
Debt		 Unsecured
Debt		 Preferred
Equity		 Common
Equity/
Equivalents		 Total
Fair Value as of September 30, 2022
 $ 463,858  $ 115,928  $ 55  $ 27,046  $ 36,273  $ 643,160 
Total gains (losses):
Net realized gain (loss)(A)
(107) —  (95) 510  4,995  5,303 
Net unrealized appreciation (depreciation)(B)
(2,490) (225) (19) 1,025  617  (1,092)
Reversal of prior period net depreciation (appreciation) on realization(B)
210  —  95  —  (4,995) (4,690)
New investments, repayments and settlements: (C)
Issuances/originations
 69,860  4,242  —  371  2,532  77,005 
Settlements/repayments
 (32,384) (2,507) —  —  —  (34,891)
Net proceeds from sales
 —  —  —  (654) (7,978) (8,632)
Transfers
 —  —  —  —  —  — 
Fair Value as of March 31, 2023
 $ 498,947  $ 117,438  $ 36  $ 28,298  $ 31,444  $ 676,163 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three months ended March 31, 2022 Secured
First Lien
Debt		 Secured
Second
Lien Debt		 Unsecured
Debt		 Preferred
Equity		 Common
Equity/
Equivalents		 Total
Fair Value as of December 31, 2021 $ 395,753  $ 106,232  $ 66  $ 26,483  $ 41,494  $ 570,028 
Total gains (losses):
Net realized gain (loss)(A)
—  —  —  —  —  — 
Net unrealized appreciation (depreciation)(B)
(81) (180) (27) 1,452  (230) 934 
Reversal of prior period net depreciation (appreciation) on realization(B)
(285) 117  —  —  1  (167)
New investments, repayments and settlements: (C)
Issuances/originations
 12,120  166  25  —  —  12,311 
Settlements/repayments
 (29,605) (20,837) —  —  —  (50,442)
Net proceeds from sales
 —  —  —  —  (1) (1)
Transfers —  —  —  —  —  — 
Fair Value as of March 31, 2022
 $ 377,902  $ 85,498  $ 64  $ 27,935  $ 41,264  $ 532,663 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Six months ended March 31, 2022 Secured
First Lien
Debt		 Secured
Second
Lien Debt		 Unsecured
Debt		 Preferred
Equity		 Common
Equity/
Equivalents		 Total
Fair Value as of September 30, 2021
 $ 337,394  $ 135,956  $ 10  $ 29,246  $ 48,441  $ 551,047 
Total gains (losses):
Net realized gain (loss)(A)
—  —  —  —  13,876  13,876 
Net unrealized appreciation (depreciation)(B)
4,412  379  29  791  292  5,903 
Reversal of prior period net depreciation (appreciation) on realization(B)
(380) (1,601) —  (4,281) (9,113) (15,375)
New investments, repayments and settlements: (C)
Issuances/originations
 86,823  30,336  25  3,500  3,500  124,184 
Settlements/repayments
 (50,347) (79,572) —  —  —  (129,919)
Net proceeds from sales
 —  —  —  (1,321) (15,732) (17,053)
Transfers —  —  —  —  —  — 
Fair Value as of March 31, 2022
 $ 377,902  $ 85,498  $ 64  $ 27,935  $ 41,264  $ 532,663 
(A)Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of Operations for the corresponding period.
(B)Included in net unrealized appreciation (depreciation) on investments on our accompanying Consolidated Statements of Operations for the corresponding period.
(C)Includes increases in the cost basis of investments resulting from new portfolio investments, accretion of discounts, PIK, and other non-cash disbursements to portfolio companies, as well as decreases in the cost basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.
Schedule of Investment Holdings
The following table outlines our investments by security type as of March 31, 2023 and September 30, 2022:
March 31, 2023 September 30, 2022
Cost Fair Value Cost Fair Value
Secured first lien debt $ 513,175  73.7  % $ 498,947  73.5  % $ 475,806  72.5  % $ 463,858  71.4  %
Secured second lien debt 120,684  17.3  117,438  17.3  118,949  18.2  115,928  17.8 
Unsecured debt 2,614  0.4  2,372  0.3  293  0.0  55  0.0 
Total debt investments 636,473  91.4  618,757  91.1  595,048  90.7  579,841  89.2 
Preferred equity 34,732  5.0  28,298  4.2  34,505  5.3  27,046  4.2 
Common equity/equivalents 24,826  3.6  31,704  4.7  26,500  4.0  42,728  6.6 
Total equity investments
 59,558  8.6  60,002  8.9  61,005  9.3  69,774  10.8 
Total Investments
 $ 696,031  100.0  % $ 678,759  100.0  % $ 656,053  100.0  % $ 649,615  100.0  %
Our investments at fair value consisted of the following industry classifications as of March 31, 2023 and September 30, 2022:
March 31, 2023 September 30, 2022
Industry Classification Fair Value Percentage of
Total
Investments		 Fair Value Percentage of
Total
Investments
Diversified/Conglomerate Service $ 158,695  23.4  % $ 148,907  22.9  %
Diversified/Conglomerate Manufacturing 142,091  20.9  114,105  17.6 
Healthcare, Education, and Childcare 133,509  19.7  136,401  21.0 
Aerospace and Defense 86,384  12.7  88,649  13.6 
Beverage, Food, and Tobacco 70,119  10.3  64,283  9.9 
Oil and Gas 23,993  3.5  25,373  3.9 
Automobile 19,941  3.0  20,144  3.1 
Personal and Non-Durable Consumer Products 17,123  2.5  18,583  2.9 
Machinery 10,896  1.6  9,562  1.5 
Telecommunications 7,464  1.1  10,088  1.6 
Textiles and Leather —  —  7,978  1.2 
Other, < 2.0% 8,544  1.3  5,542  0.8 
Total Investments $ 678,759  100.0  % $ 649,615  100.0  %
Our investments at fair value were included in the following U.S. geographic regions as of March 31, 2023 and September 30, 2022:
March 31, 2023 September 30, 2022
Location
Fair Value
Percentage of
Total
Investments
Fair Value
Percentage of
Total Investments
South $ 303,139  44.7  % $ 326,524  50.3  %
West 194,913  28.7  169,415  26.1 
Midwest 144,399  21.3  118,191  18.2 
Northeast 36,308  5.3  35,485  5.4 
Total Investments $ 678,759  100.0  % $ 649,615  100.0  %
Schedule of Investments Classified by Contractual Maturity Date
The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments, as of March 31, 2023:
Amount
For the remaining six months ending September 30:
2023(A)
$ 5,709 
For the fiscal years ending September 30:
 2024 35,783 

2025 82,772 

2026 158,184 

2027 269,559 

Thereafter 85,828 

Total contractual repayments
 $ 637,835 

Adjustments to cost basis of debt investments (1,362)

Investments in equity securities 59,558 

Investments held as of March 31, 2023 at cost:
 $ 696,031 
(A)Includes debt investments with contractual principal amounts totaling $0.2 million for which the maturity date has passed as of March 31, 2023.