Fair Value Measurements

9 Months Ended

Jun. 30, 2024

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 three and nine months ended June 30, 2024 and 2023. 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 June 30, 2024 and September 30, 2023, with the exception of one portfolio company investment (Level 1 investments), were valued using Level 3 inputs. As of June 30, 2024 and September 30, 2023, all money market funds included in cash and cash equivalents and restricted cash and cash equivalents were valued using Level 1 inputs and all forward currency contracts and interest rate swaps were valued using Level 2 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 June 30, 2024 and September 30, 2023:

As of June 30, 2024	Fair Value Measurements Using
Description	Level 1		Level 2		Level 3		Total
Assets, at fair value:
Debt investments(1)	$	—	$	—	$	7,341,979	$	7,341,979
Equity investments(1)	93		—		525,442		525,535
Money market funds(1)(2)	372,879		—		—		372,879
Forward currency contracts	—		23,368		—		23,368
Interest rate swaps	—		2,083		—		2,083
Total assets, at fair value:	$	372,972	$	25,451	$	7,867,421	$	8,265,844
Liabilities, at fair value:
Forward currency contracts	$	—	$	(1,003)	$	—	$	(1,003)
Interest rate swaps	—		(15,827)		—		(15,827)
Total liabilities, at fair value:	$	—	$	(16,830)	$	—	$	(16,830)

As of September 30, 2023	Fair Value Measurements Using
Description	Level 1		Level 2		Level 3		Total
Assets, at fair value:
Debt investments(1)	$	—	$	—	$	5,219,183	$	5,219,183
Equity investments(1)	100		—		297,330		297,430
Money market funds(1)(2)	72,822		—		—		72,822
Forward currency contracts	—		15,011		—		15,011
Total assets, at fair value:	$	72,922	$	15,011	$	5,516,513	$	5,604,446
Liabilities at fair value:
Forward currency contracts	$	—	$	(70)	$	—	$	(70)
Total liabilities, at fair value:	$	—	$	(70)	$	—	$	(70)

(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 three and nine months ended June 30, 2024 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 as of June 30, 2024 was $(61,787) and $(37,732), respectively. The net change in unrealized appreciation (depreciation) for the three and nine months ended June 30, 2023 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 as of June 30, 2023 and was $9,785 and $(293), respectively.

The following tables present the changes in investments measured at fair value using Level 3 inputs for the nine months ended June 30, 2024 and 2023:

	For the nine months ended June 30, 2024
	Debt Investments		Equity Investments		Total Investments
Fair value, beginning of period	$	5,219,183	$	297,330	$	5,516,513
Net change in unrealized appreciation (depreciation) on investments	(41,400)		5,803		(35,597)
Net translation of investments in foreign currencies	14,457		(2)		14,455
Realized gain (loss) on investments	(51,729)		2,224		(49,505)
Realized gain (loss) on translation of investments in foreign currencies	(6,831)		—		(6,831)
Fundings of (proceeds from) revolving loans, net	4,658		—		4,658
Fundings of investments	484,277		70,244		554,521
PIK interest and non-cash dividends	36,551		13,890		50,441
Proceeds from non-cash dividends	—		(47)		(47)
Proceeds from principal payments and sales of portfolio investments	(855,953)		(11,280)		(867,233)
Transfer in - GBDC 3 Merger	2,527,770		147,280		2,675,050
Accretion of discounts and amortization of premiums	10,996		—		10,996
Fair value, end of period	$	7,341,979	$	525,442	$	7,867,421

	For the nine months ended June 30, 2023
	Debt Investments		Equity Investments		Total Investments
Fair value, beginning of period	$	5,168,537	$	277,819	$	5,446,356
Net change in unrealized appreciation (depreciation) on investments	11,678		(16,761)		(5,083)
Net translation of investments in foreign currencies	47,721		103		47,824
Realized gain (loss) on investments	(48,084)		1,529		(46,555)
Realized gain (loss) on translation of investments in foreign currencies	(1,402)		—		(1,402)
Funding of (proceeds from) revolving loans, net	2,449		—		2,449
Fundings of investments	556,489		27,244		583,733
PIK interest and non-cash dividends	27,660		10,767		38,427
Proceeds from principal payments and sales of portfolio investments	(534,196)		(16,647)		(550,843)
Accretion of discounts and amortization of premiums	9,994		—		9,994
Fair value, end of period	$	5,240,846	$	284,054	$	5,524,900

The following tables present quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of June 30, 2024 and September 30, 2023.

    

Quantitative Information about Level 3 Fair Value Measurements
	Fair value as of June 30, 2024		Valuation Techniques	Unobservable Input	Range (Weighted Average) (1)
Assets:
Senior secured loans(2)	$	567,375	Yield analysis	Market interest rate	7.5% - 15.5% (10.5%)
			Market comparable companies	EBITDA multiples	2.1x - 33.3x (12.9x)
One stop loans(3)(4)	$	6,681,549	Yield analysis	Market interest rate	7.0% - 19.3% (10.8%)
			Market comparable companies	EBITDA multiples	2.8x - 39.0x (16.1x)
				Revenue multiples	1.0x - 18.4x (8.3x)
	52,785		Broker/dealer bids or quotes	Broker/dealer bids or quotes	N/A
Subordinated debt and second lien loans	$	40,270	Yield analysis	Market interest rate	9.3% - 15.8% (13.1%)
			Market comparable companies	EBITDA multiples	5.5x - 24.0x (16.4x)
Equity(5)	$	525,442	Market comparable companies	EBITDA multiples	5.5x - 35.0x (16.5x)
				Revenue multiples	1.3x - 18.4x (10.4x)

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

(2)$15,120 of loans at fair value were valued using the market comparable companies approach only.

(3) $99,389 of loans at fair value were valued using the market comparable companies approach only.

(4)The Company valued $5,557,365 and $1,124,184 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 $470,773 and $54,669 of equity investments using EBITDA and revenue multiples, respectively.

Quantitative Information about Level 3 Fair Value Measurements
	Fair value as of September 30, 2023		Valuation Techniques	Unobservable Input	Range (Weighted Average)(1)
Assets:
Senior secured loans(2)	$	503,985	Yield analysis	Market interest rate	8.0% - 17.8% (10.6%)
			Market comparable companies	EBITDA multiples	5.2x - 24.0x (14.7x)
One stop loans(3)(4)	$	4,678,099	Yield analysis	Market interest rate	7.3% - 26.3% (10.9%)
			Market comparable companies	EBITDA multiples	4.0x - 34.0x (16.3x)
				Revenue multiples	1.5x - 27.0x (7.7x)
Subordinated debt and second lien loans(5)	$	37,099	Yield analysis	Market interest rate	10.3% - 24.5% (14.6%)
			Market comparable companies	EBITDA multiples	8.3x - 22.0x (19.5x)
Equity(5)	$	297,330	Market comparable companies	EBITDA multiples	5.2x - 35.0x (16.9x)
				Revenue multiples	1.5x - 18.0x (9.6x)

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

(2)$44,510 of loans at fair value were valued using the market comparable companies approach only.

(3)$123,841 of loans at fair value were valued using the market comparable companies approach only.

(4)The Company valued $3,895,527 and $782,572 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 $258,046 and $39,284 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, 2027 Notes, 2028 Notes and 2029 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 June 30, 2024 and September 30, 2023.

	As of June 30, 2024				As of September 30, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
Debt	$	4,337,697	$	4,281,789	$	3,133,332	$	2,990,685