Fair Value Measurements

12 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 6. Fair Value Measurements

The Company follows ASC Topic 820 for measuring fair value. Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation models involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the assets or liabilities or market and the assets’ or liabilities’ complexity. The Company’s fair value analysis includes an analysis of the value of any unfunded loan commitments. Assets and liabilities are categorized for disclosure purposes based upon the level of judgment associated with the inputs used to measure their value. The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the asset or liability as of the measurement date. The three levels are defined as follows:

Level 1:     Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2:     Inputs include quoted prices for similar assets or liabilities in active markets and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the assets or liabilities.

Level 3: Inputs include significant unobservable inputs for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value are based upon the best information available and require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, an asset’s or a liability’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company assesses the levels of assets and liabilities at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfers. There were no transfers among Level 1, 2 and 3 of the fair value hierarchy for assets and liabilities during the years ended September 30, 2022 and 2021. The following section describes the valuation techniques used by the Company to measure different assets and liabilities at fair value and includes the level within the fair value hierarchy in which the assets and liabilities are categorized.

Investments

Level 1 investments are valued using quoted market prices. Level 2 investments are valued using market consensus prices that are corroborated by observable market data and quoted market prices for similar assets and liabilities. Level 3 investments are valued at fair value as determined in good faith by the Board, based on input of management, the audit committee and independent valuation firms that have been engaged at the direction of the Board to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing twelve-month period under a valuation policy and a consistently applied valuation process. This valuation process is conducted at the end of each fiscal quarter, with approximately 25% (based on the number of portfolio companies) of the Company’s valuations of debt and equity investments without readily available market quotations subject to review by an independent valuation firm. All investments as of September 30, 2022, with the exception of money market funds included in cash, cash equivalents and restricted cash and cash equivalents (Level 1 investments) and forward currency contracts (Level 2 investments), were valued using Level 3 inputs. All investments as of September 30, 2021, with the exception of money market funds included in cash, cash equivalents and restricted cash and cash equivalents and one portfolio company equity investment (Level 1 investments) and forward currency contracts (Level 2 investments), were valued using Level 3 inputs.

When determining fair value of Level 3 debt and equity investments, the Company takes into account the following factors, where relevant: the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons to publicly traded securities, and changes in the interest rate environment and the credit markets generally that affect the price at which similar investments are made and other relevant factors. The primary method for determining enterprise value uses a multiple analysis whereby appropriate multiples are applied to the portfolio company’s net income before net interest expense, income tax expense, depreciation and amortization (“EBITDA”). A portfolio company’s EBITDA can include pro forma adjustments for items such as acquisitions, divestitures, or expense reductions. The enterprise value analysis is performed to determine the value of equity investments and to determine if debt investments are credit impaired. If debt investments are credit impaired, the Company will use the enterprise value analysis or a liquidation basis analysis to determine fair value. For debt investments that are not determined to be credit impaired, the Company uses a market interest rate yield analysis to determine fair value.

In addition, for certain debt investments, the Company bases its valuation on indicative bid and ask prices provided by an independent third party pricing service. Bid prices reflect the highest price that the Company and others may be willing to pay. Ask prices represent the lowest price that the Company and others may be willing to accept. The Company generally uses the midpoint of the bid/ask range as its best estimate of fair value of such investment.

Due to the inherent uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that are ultimately received or settled. Further, such investments are generally subject to legal and other restrictions or otherwise are less liquid than publicly traded instruments. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, the Company could realize significantly less than the value at which such investment had previously been recorded. The Company’s investments are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments are traded.

The following tables present fair value measurements of the Company’s investments and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of September 30, 2022 and September 30, 2021:

As of September 30, 2022	Fair Value Measurements Using
Description	Level 1		Level 2		Level 3		Total
Assets, at fair value:
Debt investments(1)	$	—	$	—	$	5,168,537	$	5,168,537
Equity investments(1)	—		—		277,819		277,819
Money market funds(1)(2)	37,208		—		—		37,208
Forward currency contracts	—		32,333		—		32,333
Total assets, at fair value:	$	37,208	$	32,333	$	5,446,356	$	5,515,897

As of September 30, 2021	Fair Value Measurements Using
Description	Level 1		Level 2		Level 3		Total
Assets, at fair value:
Debt investments(1)	$	—	$	—	$	4,709,148	$	4,709,148
Equity investments(1)	508		—		185,230		185,738
Money market funds(1)(2)	38,317		—		—		38,317
Forward currency contracts	—		2,716		—		2,716
Total assets, at fair value:	$	38,825	$	2,716	$	4,894,378	$	4,935,919
Liabilities at fair value:
Forward currency contracts	$	—	$	(2,626)	$	—	$	(2,626)
Total liabilities, at fair value:	$	—	$	(2,626)	$	—	$	(2,626)

(1)Refer to the Consolidated Schedules of Investments for further details.

(2)Included in cash and cash equivalents and restricted cash and cash equivalents on the Consolidated Statements of Financial Condition.

The net change in unrealized appreciation (depreciation) for the years ended September 30, 2022, 2021 and 2020 reported within the net change in unrealized appreciation (depreciation) on investments in the Company’s Consolidated Statements of Operations attributable to the Company's Level 3 assets held at the end of each year was $(119,448), $68,612 and $(93,152), respectively.

The following tables present the changes in investments measured at fair value using Level 3 inputs for the years ended September 30, 2022 and 2021:

	For the year ended September 30, 2022
	Debt Investments		Equity Investments		Total Investments
Fair value, beginning of period	$	4,709,148	$	185,230	$	4,894,378
Net change in unrealized appreciation (depreciation) on investments	(53,378)		(3,365)		(56,743)
Net translation of investments in foreign currencies	(65,751)		(179)		(65,930)
Realized gain (loss) on investments	(228)		20,122		19,894
Funding of (proceeds from) revolving loans, net	1,812		—		1,812
Fundings of investments	1,766,974		116,106		1,883,080
PIK interest	21,506		—		21,506
Proceeds from principal payments and sales of portfolio investments	(1,220,593)		(40,095)		(1,260,688)
Accretion of discounts and amortization of premiums	9,047		—		9,047
Fair value, end of period	$	5,168,537	$	277,819	$	5,446,356

	For the year ended September 30, 2021
	Debt Investments		Equity Investments		Total Investments
Fair value, beginning of period	$	4,146,013	$	92,197	$	4,238,210
Net change in unrealized appreciation (depreciation) on investments	116,561		43,550		160,111
Realized gain (loss) on investments	(5,319)		18,643		13,324
Funding of (proceeds from) revolving loans, net	(12,170)		—		(12,170)
Fundings of investments	2,010,541		71,142		2,081,683
PIK interest	16,092		—		16,092
Proceeds from principal payments and sales of portfolio investments	(1,553,176)		(40,302)		(1,593,478)
Accretion of discounts and amortization of premiums	(9,394)		—		(9,394)
Fair value, end of period	$	4,709,148	$	185,230	$	4,894,378

The following tables present quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of September 30, 2022 and September 30, 2021.

    

Quantitative information about Level 3 Fair Value Measurements
	Fair value as of September 30, 2022		Valuation Techniques	Unobservable Input	Range (Weighted Average) (1)
Assets:
Senior secured loans(2)	$	472,873	Market rate approach	Market interest rate	6.8% - 20.0% (9.6%)
			Market comparable companies	EBITDA multiples	6.5x - 26.2x (14.7x)
	—		Collateral analysis	Recovery rate	N/A
One stop loans(3)(4)	$	4,668,609	Market rate approach	Market interest rate	7.0% - 17.3% (9.6%)
			Market comparable companies	EBITDA multiples	4.5x - 37.3x (16.4x)
				Revenue multiples	2.0x - 22.0x (8.3x)
Subordinated debt and second lien loans	$	27,055	Market rate approach	Market interest rate	9.8% - 13.8% (12.2%)
			Market comparable companies	EBITDA multiples	6.5x - 23.0x (21.0x)
Equity(5)	$	277,819	Market comparable companies	EBITDA multiples	4.5x - 38.0x (18.0x)
				Revenue multiples	2.0x - 24.4x (12.6x)

(1)Unobservable inputs were weighted by the relative fair value of the instruments.

(2)$25,661 of loans at fair value were valued using the market comparable companies approach only.

(3)$60,948 of loans at fair value were valued using the market comparable companies approach only.

(4)The Company valued $4,009,492 and $659,117 of one stop loans using EBITDA and revenue multiples, respectively. All one stop loans were also valued using the market rate approach.

(5)The Company valued $237,257 and $40,562 of equity investments using EBITDA and revenue multiples, respectively.

Quantitative information about Level 3 Fair Value Measurements
	Fair value as of September 30, 2021		Valuation Techniques	Unobservable Input	Range (Weighted Average)(1)
Assets:
Senior secured loans(2)	$	778,413	Market rate approach	Market interest rate	2.5% - 14.8% (5.6%)
			Market comparable companies	EBITDA multiples	6.0x - 24.2x (15.1x)
	6,172		Market comparable	Broker/dealer bids or quotes	N/A
	220		Collateral analysis	Recovery rate	1.6%
One stop loans(3)(4)	$	3,882,314	Market rate approach	Market interest rate	1.0% - 18.0% (7.5%)
			Market comparable companies	EBITDA multiples	4.5x - 35.0x (15.5x)
				Revenue multiples	2.0x - 18.5x (8.0x)
Subordinated debt and second lien loans(5)	$	42,029	Market rate approach	Market interest rate	6.8% - 19.5% (9.5%)
			Market comparable companies	EBITDA multiples	6.0x - 23.6x (17.2x)
				Revenue multiples	3.4x
Equity(6)	$	185,230	Market comparable companies	EBITDA multiples	4.5x - 26.0x (17.4x)
				Revenue multiples	2.0x - 25.0x (12.3x)

(1)Unobservable inputs were weighted by the relative fair value of the instruments.

(2)$23,989 of loans at fair value were valued using the market comparable companies approach only.

(3)$76,290 of loans at fair value were valued using the market comparable companies approach only.

(4)The Company valued $3,354,556 and $527,758 of one stop loans using EBITDA and revenue multiples, respectively. All one stop loans were also valued using the market rate approach.

(5)The Company valued $42,020 and $9 of subordinated debt and second lien loans using EBITDA and revenue multiples, respectively. All second lien and subordinated debt loans were also valued using the market rate approach.

(6)The Company valued $159,620 and $25,610 of equity investments using EBITDA and revenue multiples, respectively.

The above tables are not intended to be all-inclusive but rather to provide information on significant unobservable inputs and valuation techniques used by the Company.

The significant unobservable inputs used in the fair value measurement of the Company’s debt and equity investments are EBITDA multiples, revenue multiples and market interest rates. The Company uses EBITDA multiples and, to a lesser extent, revenue multiples on its debt and equity investments to determine any credit gains or losses. Increases or decreases in either of these inputs in isolation would have resulted in a significantly lower or higher fair value measurement. The Company uses market interest rates for loans to determine if the effective yield on a loan is commensurate with the market yields for that type of loan. If a loan’s effective yield was significantly less than the market yield for a similar loan with a similar credit profile, then the resulting fair value of the loan may have been lower.

Other Financial Assets and Liabilities

ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. As a result, with the exception of the line item titled “debt” which is reported at cost, all assets and liabilities approximate fair value on the Consolidated Statements of Financial Condition due to their short maturity. The fair value of the Company's 2024 Notes, 2026 Notes and 2027 Notes (as defined in Note 7. Borrowings) is based on vendor pricing received by the Company, which is considered a Level 2 input. The fair value of the Company’s remaining debt is estimated using Level 3 inputs by discounting remaining payments using comparable market rates or market quotes for similar instruments at the measurement date, if available.

The following are the carrying values and fair values of the Company’s debt as of September 30, 2022 and September 30, 2021.

	As of September 30, 2022				As of September 30, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Debt	$	3,093,603	$	2,902,210	$	2,569,228	$	2,594,368