Palmer Square Capital BDC(PSBD) - 2023 Q2 - Quarterly Report

Investment Portfolio - As of June 30, 2023, the company had 208 debt and equity investments in 177 portfolio companies with an aggregate fair value of approximately $966.0 million[173]. - The total investments at fair value as of June 30, 2023, were $1.06 billion, up from $1.02 billion as of December 31, 2022[177]. - The investment portfolio at fair value decreased from $966.9 million at the end of 2022 to $966.0 million by June 30, 2023[183]. - The company values investments based on market quotations or fair value determined by the Investment Advisor, which may involve subjective judgments[221]. Financial Performance - Total investment income for Q2 2023 was $27.44 million, up from $16.50 million in Q2 2022, representing a 66.6% increase[181]. - Net investment income for the first half of 2023 was $27.79 million, compared to $18.22 million in the same period of 2022, reflecting a 52.5% increase[181]. - The weighted average total yield to maturity of debt and income-producing securities at fair value was 11.40% as of June 30, 2023, compared to 11.47% as of December 31, 2022[172]. - The weighted average interest rate of debt and income-producing securities increased to 9.82% in Q2 2023 from 8.83% in Q2 2022[179]. - Net expenses for Q2 2023 were $13.24 million, significantly higher than $6.95 million in Q2 2022, marking an increase of 90.5%[184]. Investment Activities - For the three months ended June 30, 2023, the company made gross investments of $46.67 million, while total new investments amounted to $12.86 million after accounting for sold investments[175]. - The principal amount of first-lien senior secured debt investments funded was $46.67 million for the three months ended June 30, 2023[175]. - The company reported total principal amount of investments sold or repaid at $33.82 million for the three months ended June 30, 2023[175]. - The average new investment commitment amount in Q2 2023 was $4.12 million, compared to $3.27 million in Q2 2022, indicating a 25.9% increase[177]. Cash and Liquidity - As of June 30, 2023, the company had cash and cash equivalents of $6.7 million, a significant increase from $99 thousand as of June 30, 2022[193]. - During the six months ended June 30, 2023, net cash provided by operating activities was $18.0 million, primarily due to proceeds from the sale of investments totaling $136.0 million[191]. - The company experienced a net increase in cash and cash equivalents of $5.1 million during the six months ended June 30, 2023[191]. Debt and Financing - As of June 30, 2023, the principal outstanding under the BoA Credit Facility was $490.0 million, down from $541.5 million as of June 30, 2022[193]. - The asset coverage ratio as of June 30, 2023, was 168%, exceeding the required minimum of 150%[195]. - The company has a total contractual obligation of $627.4 million, with $491.6 million due under the BoA Credit Facility and $135.7 million under the WF Credit Facility[227]. - The company has two unfunded commitments totaling $1.5 million as of June 30, 2023, which may expire without being drawn upon[228]. Risk Management - The company is subject to financial market risks, including changes in interest rates, which may materially affect its net investment income[230]. - A hypothetical increase of 100 basis points in interest rates would result in an increase of $10.3 million in net investment income[233]. - A hypothetical increase of 200 basis points in interest rates would lead to an increase of $20.4 million in net investment income[233]. - A hypothetical increase of 300 basis points in interest rates would result in an increase of $30.3 million in net investment income[233]. - A decrease of 25 basis points in interest rates would result in a decrease of $2.58 million in net investment income[233]. - The company measures exposure to interest rate and currency exchange rate fluctuations on an ongoing basis[235]. - The company may hedge against interest rate and currency exchange rate fluctuations using standard hedging instruments[235]. - Risks associated with foreign currency investments include significant fluctuations in foreign currency markets and potential illiquidity[234]. Management and Governance - The company is externally managed by an investment advisor registered with the SEC, which oversees day-to-day operations and investment management[167]. - The company has elected to be regulated as a business development company (BDC) and as a regulated investment company (RIC) under the Internal Revenue Code[166]. - The Investment Advisor has agreed to waive its right to receive management fees in excess of 1.75% of total net assets prior to a Listing[225]. Dividend Policy - The company intends to distribute dividends at least equal to 90% of its net ordinary income and net short-term capital gains to maintain RIC tax treatment[211]. - The company has adopted a dividend reinvestment plan that allows stockholders to reinvest dividends in additional shares unless they opt to receive cash[214]. - The company intends to distribute net capital gains at least annually, but may retain such gains for investment purposes[213].