Palmer Square Capital BDC(PSBD) - 2021 Q4 - Annual Report

Investment Portfolio - As of December 31, 2021, the company had 240 debt and equity investments in 212 portfolio companies with an aggregate fair value of approximately $1.1 billion[303]. - The size of the investment portfolio at fair value increased from $600.1 million as of December 31, 2020 to $1.1 billion as of December 31, 2021, marking an 83.6% growth[314]. - Total investments amounted to $1.19 billion, up from $640.1 million as of December 31, 2020[309]. - The total principal amount of investments funded in first-lien senior secured debt investments was $829.59 million for the year ended December 31, 2021[305]. - The company has unfunded commitments totaling $11.3 million as of December 31, 2021, compared to $1.3 million in the previous year[359]. Investment Performance - For the year ended December 31, 2021, the company made gross investments of $926.35 million, with total new investments amounting to $524.59 million after accounting for sold investments[305]. - The weighted average total yield to maturity of debt and income-producing securities at fair value was 5.77% as of December 31, 2021, compared to 4.96% as of December 31, 2020[302][303]. - The company reported a weighted average interest rate of new investment commitments at 4.80% for the year ended December 31, 2021[309]. - Total investment income for the year ended December 31, 2021 was $39.7 million, up from $25.5 million in 2020, representing a 55.8% increase[312]. - Net investment income for the year ended December 31, 2021 was $22.8 million, compared to $14.7 million in 2020, reflecting a 55.5% increase[312]. - Weighted average total yield of debt and income-producing securities rose to 5.77% in 2021 from 4.96% in 2020[311]. Financial Position - Net expenses for the year ended December 31, 2021 were $16.9 million, up from $10.8 million in 2020, indicating a 56.5% increase[315]. - Average debt outstanding increased from $247.5 million in 2020 to $447.0 million in 2021, a 80.6% rise[316]. - Total net assets increased from $253.1 million as of December 31, 2020 to $452.8 million as of December 31, 2021, a 78.8% increase[316]. - Cash and cash equivalents as of December 31, 2021 were $1.1 million, up from $683 thousand in 2020[322]. - The company experienced net cash used in operating activities of $438 million during the year ended December 31, 2021[321]. Debt and Financing - Under the Bank of America Credit Facility, the commitment amount increased to $725 million as of September 29, 2021, with approximately $552 million principal outstanding as of December 31, 2021[328][331]. - The Wells Fargo Credit Facility had a facility amount of $150 million, with approximately $100 million outstanding as of December 31, 2021[333][337]. - The company reported a total outstanding indebtedness of $550.26 million under the BoA Credit Facility as of December 31, 2021[356]. - The asset coverage ratio was 170% as of December 31, 2021, exceeding the required minimum of 150%[325]. Dividends and Distributions - The company intends to distribute dividends quarterly, subject to available income, and must distribute at least 90% of its net ordinary income to maintain RIC tax treatment[338][339]. - The company has adopted a dividend reinvestment plan, allowing stockholders to reinvest dividends in additional shares of common stock unless they opt out[342]. - The company plans to distribute net capital gains at least annually, but may retain such gains for investment purposes[341]. Management and Compliance - The company is externally managed by an Investment Advisor, which is a majority-owned subsidiary of Palmer Square, specializing in global alternative investments[297]. - The company is required to comply with various covenants and reporting requirements under its credit facilities, ensuring adherence to leverage restrictions[330][336]. - As of December 31, 2021, PS BDC Funding was in compliance with the applicable covenants in both the Bank of America and Wells Fargo Credit Facilities[331][337]. Risk Management - The company is subject to interest rate sensitivity, with potential impacts on net investment income due to changes in interest rates[361]. - A hypothetical increase of 200 basis points in interest rates could result in a net investment income increase of $4.28 million[363]. - The company measures exposure to currency exchange rate fluctuations and may use hedging instruments to mitigate risks[365]. Valuation and Accounting - The company values investments without readily available market quotations using a multi-step valuation process, including independent reviews[357]. - The company’s financial statements are prepared in accordance with generally accepted accounting principles, requiring estimates and assumptions that may affect reported amounts[348]. - The company’s net realized gains or losses are measured by the difference between net proceeds from sales and the amortized cost basis of investments[353].