0001508655false424B2Sixth Street Specialty Lending, Inc.The above table reflects the principal amount of indebtedness outstanding as of December 31, 2023, as adjusted to reflect the Company’s issuance on January 16, 2024 of $350.0 million aggregate principal amount of its 6.125% notes due 2029. As of February 28, 2024, $604.9 million was drawn on the Revolving Credit Facility. The net proceeds from the sale of our common stock in this offering are expected to be used to pay down outstanding indebtedness under the Revolving Credit Facility. See “Use of Proceeds” in this prospectus supplement.Includes our overhead expenses, such as payments under the Administration Agreement for certain expenses incurred by the Adviser, and excise taxes. See “Agreements and Related Party Transactions-Administration Agreement; Investment Advisory Agreement;” in Part I, Item 1 of our 2023 Annual Report and Note 3 to our consolidated financial statements in our 2023 Annual Report. The expenses in this table are based on our actual other expenses and excise taxes for the year ended December 31, 2023.Interest payments on borrowed funds is based on our interest expense for the year ended December 31, 2023 under our credit facilities excluding fees (such as fees on undrawn amounts and amortization of upfront fees) and including the swap-adjusted interest expense related to our 2024 Notes, 2026 Notes and 2028 Notes. This item is based on the assumption that our borrowings and interest costs after an offering will remain similar to those prior to such offering. We may borrow additional funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. On October 8, 2018, our stockholders approved the application of the minimum asset coverage ratio of 150% to us, as set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCAA. Our stockholders indirectly bear the costs of borrowings under any debt instruments we may enter into.The net assets attributable to common stock used to calculate the percentages in this table reflect our net assets of $1,496.4 million as of December 31, 2023.We may have capital gains and interest income that could result in the payment of an Incentive Fee to the Adviser in the twelve months after the date of this prospectus supplement. The Incentive Fee payable in the example above is based upon our actual results for the year ended December 31, 2023 and assumes that the Incentive Fee is 17.5% for all relevant periods. However, the Incentive Fee payable to the Adviser is based on our performance and will not be paid unless we achieve certain goals.The Management Fee is 1.5% of the average value of our gross assets (including cash and cash equivalents and assets purchased with borrowed amounts) using the values at the end of the two most recently completed calendar quarters, adjusted for any share issuances or repurchases during the period. We may from time to time decide it is appropriate to change the terms of our Investment Advisory Agreement (as defined in the accompanying prospectus). Under the 1940 Act, any material change to our Investment Advisory Agreement must be submitted to stockholders for approval. See “Management Agreements” in Part I, Item 1 of our 2023 Annual Report and in Note 3 to our consolidated financial statements in our 2023 Annual Report. The Management Fee reflected in the table is calculated by determining the ratio that the Management Fee for the year ended December 31, 2023 bears to our net assets attributable to common stock (rather than our gross assets). From time to time, our Adviser voluntarily has waived certain Management Fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Management Fees” in Part II, Item 2 of our 2023 Annual Report. The above estimates are based on our actual Management Fees for the year ended December 31, 2023. For the year ended December 31, 2023, Management Fees of $1.2 million were waived consisting solely of Management Fees pursuant to the Leverage Waiver. The Adviser intends to waive a portion of the Management Fee payable under the Investment Advisory Agreement by reducing the Management Fee on assets financed using leverage over 200% asset coverage (in other words, over 1.0x debt to equity) (the “Leverage Waiver”). Pursuant to the Leverage Waiver, the Adviser intends to waive the portion of the Management Fee in excess of an annual rate of 1.0% (0.250% per quarter) on the average value of the Company’s gross assets as of the end of the two most recently completed calendar quarters that exceeds the product of (i) 200% and (ii) the average value of our net asset value at the end of the two most recently completed calendar quarters. The Adviser waived Management Fees of $1.2 million for the year ended December 31, 2023 pursuant to the Leverage Waiver. The Adviser waived Management Fees of $0.4 million for the year ended December 31, 2022 pursuant to the Leverage Waiver.The expenses of the dividend reinvestment plan are included in “Other expenses” in the table above. The plan administrator’s fees will be paid by us. There are no brokerage charges or other charges to stockholders who participate in the plan, except that if a participant elects by written notice to the plan administrator to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15.00 transaction fee plus a brokerage commission from the proceeds. For additional information, see “Dividend Reinvestment Plan,” in the accompanying prospectus.The sales load (underwriting discount or commission) with respect to the shares of common stock sold in this offering, which is a one-time fee paid to the underwriters, is the only sales load paid in connection with this offering.Amount reflects estimated offering expenses of approximately $0.5 million. 0001508655 2024-03-01 2024-03-01 0001508655 tslx:TwoThousandTwentyNineNotesMember 2024-03-01 2024-03-01 0001508655 tslx:RevolvingCreditsFacilityMember 2024-03-01 2024-03-01 0001508655 tslx:TwoThousandTwentyFourNotesMember 2024-03-01 2024-03-01 0001508655 tslx:TwoThousandTwentySixNotesMember 2024-03-01 2024-03-01 0001508655 tslx:TwoThousandTwentyEightNotesMember 2024-03-01 2024-03-01 0001508655 tslx:CommonShareMember 2024-03-01 2024-03-01 iso4217:USD xbrli:pure
Filed Pursuant to
424(b)(2)

Registration No. 333-276252

 
 
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 22, 2023)
4,000,000 Shares
 
 
LOGO
Common Stock
 
 
We are offering for sale 4,000,000 shares of our common stock. We have also granted the underwriters a
30-day
option to purchase up to 600,000 additional shares of our common stock.
We are a specialty finance company that has elected to be regulated as a business development company under the Investment Company Act of 1940. We seek to generate current income primarily through direct originations of senior secured loans and, to a lesser extent, originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities.
As of December 31, 2023, our investment portfolio consisted of investments in 136 portfolio companies (including 42 structured credit investments, which include each series of collateralized loan obligation as a separate portfolio company investment) with an aggregate fair value of $3,283.1 million. We intend to continue to pursue an investment strategy focused primarily on direct origination of loans to middle-market companies domiciled in the United States.
We are an externally managed,
closed-end,
non-diversified
management investment company. Sixth Street Specialty Lending Advisers, LLC, or the Adviser, acts as our investment adviser and administrator. We and the Adviser are part of Sixth Street Partners, LLC, a global investment firm with over $75 billion in assets under management as of December 31, 2023.
The companies in our investment portfolio are typically highly leveraged, and, in many cases, our investments in these companies are not rated by any rating agency. If these investments were rated, we believe that most would likely receive a rating of below investment grade (that is, below
BBB-
or Baa3, which is often referred to as “junk”). Our exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower’s capacity to pay interest and repay principal. The debt investments in our portfolio generally have a significant portion of principal due at the maturity of the investment, which would result in a substantial loss to us if such borrowers are unable to refinance or repay their debt at maturity.
Substantially all of our debt investments have variable interest rates that reset periodically based on interest rate benchmarks such as the Euro Interbank Offered Rate, the Canadian Dollar Offered Rate, the Secured Overnight Financing Rate, Sterling Overnight Interbank Average Rate or the Prime Rate. As a result, significant increases in such interest rate benchmarks (or any replacement benchmarks) in the future would make it more difficult for these borrowers to service their obligations under the debt investments that we hold.
Our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol “TSLX.” On February 28, 2024, the last reported sales price of our common stock on the NYSE was $21.75 per share. The net asset value per share of our common stock at December 31, 2023 (the last date prior to the date of this prospectus supplement for which we reported net asset value) was $17.04.
 
 
Investing in our common stock involves risks, including the risk of leverage, that are described in the “Risk Factors” section beginning on page
S-8
of this prospectus supplement and page 24 of the accompanying prospectus and the matters discussed in the documents incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus.
Please read this prospectus supplement and the accompanying prospectus, including any information incorporated by reference herein or therein, before investing and keep such documents for future reference. This prospectus supplement and the accompanying prospectus, and the documents incorporated by reference herein or therein, contain important information about us that a prospective investor ought to know before investing in our securities. Information required to be included in a Statement of Additional Information may be found in this prospectus supplement and the accompanying prospectus or incorporated by reference herein or therein. We also file periodic and current reports, proxy statements and other information about us with the Securities and Exchange Commission (the “SEC”). This information is available free of charge by contacting us at 888 7th Avenue, 41st Floor, New York, NY 10106, Attention: TSLX Investor Relations, by emailing us at IRTSLX@sixthstreet.com or visiting our website at http://www.sixthstreetspecialtylending.com. Information on our website is not incorporated into or a part of this prospectus supplement or the accompanying prospectus. The SEC also maintains a website at http://www.sec.gov that contains this information.
The underwriters have agreed to purchase our common stock from us at a price of $20.52 per share, which will result in approximately $81.6 million of net proceeds to us after deducting offering expenses. The underwriters propose to offer the shares of common stock from time to time for sale in negotiated transactions or otherwise, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. See “Underwriting.”
We have also granted the underwriters an option to purchase up to an additional 600,000 shares from us at the public offering price, less the underwriting discount, within 30 days of the date of this prospectus supplement. If the underwriters exercise this option in full, the total public offering price will be $95.9 million, the total underwriting discount (sales load) paid by us will be $1.5 million, and total proceeds, before expenses, will be approximately $94.4 million.
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The shares will be ready for delivery on or about March 5, 2024.
 
 
Joint Book-Running Managers
 
Morgan Stanley
 
Wells Fargo Securities
 
 
BofA Securities
 
 
 
RBC Capital Markets
 
 
Keefe, Bruyette & Woods,  
     A Stifel Company
  
 
Raymond James
 
Citigroup
 
Goldman Sachs & Co. LLC
 
J.P. Morgan
The date of this prospectus supplement is February 29, 2024.

Prospectus Supplement
TABLE OF CONTENTS
 
    
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S-22
 
 
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S-i

Special Note Regarding Forward-Looking Statements
This prospectus supplement and the accompanying prospectus contain forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict, that could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.
In addition to factors identified elsewhere in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein or therein, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:
 
   
an economic downturn could impair our portfolio companies’ abilities to continue to operate, which could lead to the loss of some or all of our investments in those portfolio companies;
 
   
such an economic downturn could disproportionately impact the companies in which we have invested and others that we intend to target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies;
 
   
such an economic downturn could also impact availability and pricing of our financing;
 
   
an inability to access the capital markets could impair our ability to raise capital and our investment activities;
 
   
inflation could negatively impact our business, including our ability to access the debt markets on favorable terms, or could negatively impact our portfolio companies; and
 
   
the risks, uncertainties and other factors we identify in the section entitled “Risk Factors” in this prospectus supplement, the accompanying prospectus and in Part I, Item 1A of our Annual Report on Form
10-K
for the year ended December 31, 2023 (the “2023 Annual Report”), any subsequent Quarterly Reports on Form
10-Q
or Current Reports on Form
8-K
we file after the date of this prospectus supplement, and those discussed in other documents we file with the SEC.
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions are based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus supplement or the accompanying prospectus should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include, among other things, those described or identified in “Risk Factors” in this prospectus supplement, the accompanying prospectus and in Part I, Item 1A of our 2023 Annual Report, any subsequent Quarterly Reports on Form
10-Q
or Current Reports on Form
8-K
we file after the date of this prospectus supplement, and those discussed in other documents we file with the SEC and elsewhere in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein or therein. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus supplement. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein or therein, except as required by applicable law.
 
S-1

The Company
This summary highlights some of the information contained elsewhere or incorporated by reference in this prospectus supplement and the accompanying prospectus. It is not complete and may not contain all of the information that you may want to consider. You should read this entire prospectus supplement, the accompanying prospectus, any free writing prospectus relating to this offering and the documents incorporated by reference in this prospectus supplement and the accompanying prospectus carefully. In particular, you should read the more detailed information set forth under “Risk Factors” in this prospectus supplement and the accompanying prospectus and the consolidated financial statements and the related notes included elsewhere or incorporated by reference in this prospectus supplement and the accompanying prospectus.
As used in the prospectus supplement and the accompanying prospectus, except where the context suggests otherwise, references to:
 
   
“TSLX,” “Sixth Street Specialty Lending,” “we,” “us,” “our,” the “Company,” and the “Registrant” refer to Sixth Street Specialty Lending, Inc., a Delaware corporation, and its consolidated subsidiaries;
 
   
the consolidated subsidiaries of Sixth Street Specialty Lending, Inc. refers to TC Lending, LLC, Sixth Street SL SPV, LLC, Sixth Street SL Holding, LLC, each a Delaware limited liability company, and Sixth Street Specialty Lending Sub, LLC, a limited liability company incorporated under the laws of the Cayman Islands;
 
   
“Adviser” refers to Sixth Street Specialty Lending Advisers, LLC, a Delaware limited liability company; and
 
   
“Sixth Street” refers to Sixth Street Partners, LLC together with its affiliates.
We have elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, for U.S. federal income tax purposes we have elected to be treated as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended, or the Code.
Sixth Street Specialty Lending
We are a specialty finance company focused on lending to middle-market companies. Since we began our investment activities in July 2011, through December 31, 2023, we have originated approximately $31.5 billion aggregate principal amount of investments and retained approximately $10.0 billion aggregate principal amount of these investments on our balance sheet prior to any subsequent exits and repayments. We seek to generate current income primarily in U.S.-domiciled middle-market companies through direct originations of senior secured loans and, to a lesser extent, originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities.
By “middle-market companies,” we mean companies that have annual earnings before interest, income taxes, depreciation and amortization, or EBITDA, which we believe is a useful proxy for cash flow, of $10 million to $250 million, although we may invest in larger or smaller companies on occasion. As of December 31, 2023, our core portfolio companies, which excludes certain investments that fall outside of our typical borrower profile and represent 95.3% of our total investments based on fair value, had weighted average annual revenue of $230.3 million and weighted average annual EBITDA of $79.3 million.
We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on direct equity investments, capital gains on the sale of investments and various loan origination and other fees.
 
S-2

We have operated as a BDC since we began our investment activities in July 2011, and we are currently one of the largest BDCs by total assets. In conducting our investment activities, we believe that we benefit from the significant scale and resources of our Adviser and its affiliates.
Investment Portfolio
The companies in which we invest use our capital to support organic growth, acquisitions, market or product expansion and recapitalizations (including restructurings).
We invest in first-lien debt, second-lien debt, mezzanine and unsecured debt and equity and other investments. Our first-lien debt may include stand-alone first-lien loans; “last out” first-lien loans, which are loans that have a secondary priority behind super-senior “first out” first-lien loans; “unitranche” loans, which are loans that combine features of first-lien, second-lien and mezzanine debt, generally in a first-lien position; and secured corporate bonds with similar features to these categories of first-lien loans. Our second-lien debt may include secured loans, and, to a lesser extent, secured corporate bonds, with a secondary priority behind first-lien debt.
As of December 31, 2023, our portfolio based on fair value consisted of 91.3% first-lien debt investments, 1.1% second-lien debt investments, 1.2% mezzanine debt investments, 4.7% equity and other investments and 1.7% structured credit investments. As of December 31, 2023, 99.7% of our debt investments based on fair value bore interest at floating rates, with 100.0% of these subject to interest rate floors, which we believe helps act as a portfolio-wide hedge against inflation.
As of December 31, 2023, we had investments in 136 portfolio companies (including 42 structured credit investments, which include each series of collateralized loan obligation as a separate portfolio company investment) with an aggregate fair value of $3,283.1 million. For the year ended December 31, 2023, the principal amount of new investments funded was $808.4 million in thirty new portfolio companies and sixteen existing portfolio companies. For this period, we had $469.1 million aggregate principal amount in exits and repayments.
As of December 31, 2022, we had investments in 121 portfolio companies (including 43 structured credit investments, which include each series of collateralized loan obligation as a separate portfolio company investment) with an aggregate fair value of $2,787.9 million. For the year ended December 31, 2022, the principal amount of new investments funded was $864.0 million in sixty-five new portfolio companies and twenty existing portfolio companies. For this period, we had $653.8 million aggregate principal amount in exits and repayments.
As of December 31, 2023, the largest single investment based on fair value represented 2.6% of our total investment portfolio. As of December 31, 2023, the average investment size in each of our portfolio companies was approximately $24.1 million based on fair value. Portfolio companies includes investments in structured products including each series of collateralized loan obligation as a portfolio company investment. When excluding investments in structured credit investments, the average investment in our remaining portfolio companies was approximately $34.3 million as of December 31, 2023. As of December 31, 2023, the largest industry represented 18.0% of our total portfolio based on fair value.
Since we began investing in 2011 through December 31, 2023, weighted by capital invested, our exited investments have generated an average realized gross internal rate of return to us of 17.4% (based on total capital invested of $7.0 billion and total proceeds from these exited investments of $8.9 billion). Ninety percent of these exited investments resulted in a realized gross internal rate of return to us of 10% or greater. For a description of how we calculate gross internal rates of return, see the section entitled “Management’s Discussion and Analysis
 
S-3

of Financial Condition and Results of Operations-Results of Operations-Realized Gross Internal Rate of Return” in Part I, Item 2 of our 2023 Annual Report, which is incorporated herein by reference.
Corporate Structure
Sixth Street Specialty Lending, Inc. is a Delaware corporation formed on July 21, 2010. Sixth Street Specialty Lending Advisers, LLC is our external manager.
Our portfolio is subject to diversification and other requirements because we elected to be regulated as a BDC under the 1940 Act and treated as a RIC for U.S. federal income tax purposes. We made our BDC election on April 15, 2011. We intend to maintain these elections. See “Regulation as a Business Development Company” in Part I, Item 1 of our 2023 Annual Report, which is incorporated herein by reference, for more information on these requirements.
About Our Adviser
Our Adviser is a Delaware limited liability company. Our Adviser acts as our investment adviser and administrator and is a registered investment adviser with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended, or the Advisers Act.
Our Adviser sources and manages our portfolio through our Investment Team, a dedicated team of investment professionals predominately focused on us. Our Investment Team is led by our Chairman and Chief Executive Officer and our Adviser’s
Co-Chief
Investment Officer Joshua Easterly and our Adviser’s
Co-Chief
Investment Officer Alan Waxman, both of whom have substantial experience in credit origination, underwriting and asset management. Our investment decisions are made by our Investment Review Committee, which includes senior personnel of our Adviser and affiliates of Sixth Street Partners, LLC or “Sixth Street.”
Sixth Street is a global investment business with over $75 billion of assets under management as of December 31, 2023. Sixth Street’s direct lending platforms include Sixth Street Specialty Lending, Sixth Street Lending Partners, which is aimed at U.S. upper middle-market loan originations, Sixth Street Specialty Lending Europe, which is aimed at European middle-market loan originations. Additional Sixth Street core platforms include Sixth Street TAO, which has the flexibility to invest across all of Sixth Street’s private credit market investments, Sixth Street Opportunities, which focuses on actively managed opportunistic investments across the credit cycle, Sixth Street Credit Market Strategies, which is the firm’s “public-side” credit investment platform focused on investment opportunities in broadly syndicated leveraged loan markets, Sixth Street Growth, which provides financing solutions to growing companies, Sixth Street Fundamental Strategies, which primarily invests in secondary credit, and Sixth Street Agriculture, which invests in niche agricultural opportunities. Sixth Street has a long-term oriented, highly flexible capital base that allows it to invest across industries, geographies, capital structures and asset classes. Sixth Street has extensive experience with highly complex, global public and private investments executed through primary originations, secondary market purchases and restructurings, and has a team of over 580 investment and operating professionals. As of December 31, 2023, seventy (70) of these personnel are dedicated to our business, including fifty-five (55) investment professionals.
Our Adviser consults with Sixth Street in connection with a substantial number of our investments. The Sixth Street platform provides us with a breadth of large and scalable investment resources. We believe we benefit from Sixth Street’s market expertise, insights into industry, sector and macroeconomic trends and intensive due diligence capabilities, which help us discern market conditions that vary across industries and credit cycles, identify favorable investment opportunities and manage our portfolio of investments. Sixth Street and its affiliates will refer all middle-market loan origination activities for companies domiciled in the United
 
S-4

States to us and conduct those activities through us. The Adviser will determine whether it would be permissible, advisable or otherwise appropriate for us to pursue a particular investment opportunity allocated to us.
Corporate Information
Our principal executive offices are located at 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201 and our telephone number is (469)
621-3001.
Our corporate website is located at http://www.sixthstreetspecialtylending.com. Information on our website is not incorporated into or a part of this prospectus supplement or the accompanying prospectus.
 
S-5

The Offering
 
Common stock offered by us
4,000,000 shares, or 4,600,000 shares if the underwriters exercise their option to purchase additional shares
in
full.
 
Common stock outstanding prior to this offering
87,829,499 shares.
 
Common stock outstanding after this offering
91,829,499 shares, or 92,429,499 shares if the underwriters exercise their option to purchase additional shares in full.
 
Use of Proceeds
We estimate that the net proceeds we will receive from the sale of 4,000,000 shares of our common stock in this offering will be approximately $81.6 million (or approximately $93.9 million if the underwriters fully exercise their option to purchase additional shares), in each case after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
 
  We intend to use 100% of the net proceeds of this offering to pay down a portion of the outstanding indebtedness on the Revolving Credit Facility on or about the date of the closing of this offering. However, through reborrowing under the Revolving Credit Facility, we intend to make new investments in accordance with our investment objective and strategies described in this prospectus supplement and the accompanying prospectus.
 
  See “Use of Proceeds.”
 
Distributions
To the extent we have earnings available for distribution, we expect to continue distributing quarterly dividends to our stockholders. The specific tax characteristics of our distributions will be reported to stockholders after the end of the calendar year. Future quarterly dividends, if any, will be determined by our Board. See “Price Range of Common Stock and Distributions” in the accompanying prospectus.
 
  On February 15, 2024, our Board declared a first quarter 2024 base dividend of $0.46 per share for stockholders of record as of March 15, 2024, payable on March 28, 2024. Our Board also declared a fourth quarter supplemental dividend of $0.08 per share for stockholders of record as of February 29, 2024, payable on March 20, 2024. Investors in this offering who remain holders of record as of the record dates for the first quarter base dividend and fourth quarter supplemental dividend, respectively, will receive these dividends. We anticipate that these dividends will be paid from income generated primarily by interest earned on our investment portfolio.
 
 
To maintain our tax treatment as a RIC and to avoid being subject to corporate-level U.S. federal income tax on our earnings, we must make certain distributions. See “Material U.S. Federal Income Tax
 
S-6

 
Considerations—Regulated Investment Company Classification” and “Dividend Reinvestment Plan” in the accompanying prospectus.
 
Material U.S. Federal Income Tax Considerations
Certain tax considerations applicable to an investment in shares of our common stock are set forth in the section in the accompanying prospectus entitled “Material U.S. Federal Income Tax Considerations” or elsewhere, except that miscellaneous itemized deductions generally are not deductible by individuals, trusts or estates for taxable years beginning after December 31, 2017 and before January 1, 2026.
 
Symbol on the New York Stock Exchange
TSLX
 
Risk Factors
See “Risk Factors” in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference and other information in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference for a discussion of factors you should carefully consider before you decide whether to make an investment in shares of our common stock.
 
S-7

Risk Factors
Investing in our securities involves a number of significant risks. You should carefully consider the risks described in Part I, Item 1A, “Risk Factors,” in our 2023 Annual Report and those set out in the accompanying prospectus, and in any subsequent Quarterly Reports on Form
10-Q
or Current Reports on Form
8-K
we file after the date of this prospectus supplement, together with the other information set forth in this prospectus supplement, the accompanying prospectus, the documents incorporated by reference herein and therein, including our consolidated financial statements and the related notes thereto, before making a decision about investing in our securities. The risks and uncertainties described in Part I, Item 1A, “Risk Factors,” in our 2023 Annual Report and discussed in the accompanying prospectus are not the only ones we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also materially and adversely affect our business, financial condition and results of operations. In such case, our net asset value and the trading price of our securities could decline, and you may lose all or part of your investment.
 
S-8

Fees and Expenses
The following table is intended to assist you in understanding the costs and expenses that an investor in our common stock will bear directly or indirectly in the twelve months after the date of this prospectus supplement, based on the assumptions set forth below. We caution you that some of the percentages indicated in the table below are estimates and may vary. The following table should not be considered a representation of our future expenses, which may be greater or less than shown. The offering expenses shown assume that we issue 4,000,000 shares of common stock in the offering at the February 28, 2024 closing price of $21.75 and that the underwriters do not exercise their option to purchase any additional shares. Future expenses will depend on many factors, including our use of leverage, which may vary periodically depending on market conditions, our portfolio composition and our Adviser’s assessment of risks and returns. However, our total borrowings are limited under the 1940 Act so that we may not incur any additional leverage if doing so would cause our asset coverage ratio to fall below 150%, as defined in the 1940 Act. Except where the context suggests otherwise, whenever this prospectus supplement or the accompanying prospectus contains a reference to fees or expenses paid by “us,” the “Company” or “Sixth Street Specialty Lending, Inc.” or says that “we” will pay fees or expenses, stockholders will indirectly bear these fees or expenses as investors in Sixth Street Specialty Lending, Inc.
 
Stockholder transaction expenses (as a percentage of the February 28, 2024 closing price of $21.75):
  
Sales load
  
 
1.52
%
(1)
 
Offering expenses
  
 
0.06
%
(2)
 
Dividend reinvestment plan expenses
  
 
None
(3)
 
Estimated annual expenses (as a percentage of net assets attributable to common stock)
(4)
:
  
Management Fee payable under the Investment Advisory Agreement
  
 
3.10%
(5)
 
Incentive Fee payable under the Investment Advisory Agreement
  
 
2.85%
(6)
 
Interest payments on borrowed funds
  
 
8.54%
(7)
 
Other expenses
  
 
1.05%
(8)
 
Total annual expenses
     15.53%  
 
(1)
The sales load (underwriting discount or commission) with respect to the shares of common stock sold in this offering, which is a
one-time
fee paid to the underwriters, is the only sales load paid in connection with this offering.
(2)
Amount reflects estimated offering expenses of approximately $0.5 million.
(3)
The expenses of the dividend reinvestment plan are included in “Other expenses” in the table above. The plan administrator’s fees will be paid by us. There are no brokerage charges or other charges to stockholders who participate in the plan, except that if a participant elects by written notice to the plan administrator to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15.00 transaction fee plus a brokerage commission from the proceeds. For additional information, see “Dividend Reinvestment Plan,” in the accompanying prospectus.
(4)
The net assets attributable to common stock used to calculate the percentages in this table reflect our net assets of $1,496.4 million as of December 31, 2023.
(5)
The Management Fee is 1.5% of the average value of our gross assets (including cash and cash equivalents and assets purchased with borrowed amounts) using the values at the end of the two most recently completed calendar quarters, adjusted for any share issuances or repurchases during the period. We may from time to time decide it is appropriate to change the terms of our Investment Advisory Agreement (as defined in the accompanying prospectus). Under the 1940 Act, any material change to our Investment
 
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  Advisory Agreement must be submitted to stockholders for approval. See “Management Agreements” in Part I, Item 1 of our 2023 Annual Report and in Note 3 to our consolidated financial statements in our 2023 Annual Report.
The Management Fee reflected in the table is calculated by determining the ratio that the Management Fee for the year ended December 31, 2023 bears to our net assets attributable to common stock (rather than our gross assets).
From time to time, our Adviser voluntarily has waived certain Management Fees. See “
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Management Fees
” in Part II, Item 2 of our 2023 Annual Report. The above estimates are based on our actual Management Fees for the year ended December 31, 2023. For the year ended December 31, 2023, Management Fees of $1.2 million were waived consisting solely of Management Fees pursuant to the Leverage Waiver.
The Adviser intends to waive a portion of the Management Fee payable under the Investment Advisory Agreement by reducing the Management Fee on assets financed using leverage over 200% asset coverage (in other words, over 1.0x debt to equity) (the “Leverage Waiver”). Pursuant to the Leverage Waiver, the Adviser intends to waive the portion of the Management Fee in excess of an annual rate of 1.0% (0.250% per quarter) on the average value of the Company’s gross assets as of the end of the two most recently completed calendar quarters that exceeds the product of (i) 200% and (ii) the average value of our net asset value at the end of the two most recently completed calendar quarters. The Adviser waived Management Fees of $1.2 million for the year ended December 31, 2023 pursuant to the Leverage Waiver. The Adviser waived Management Fees of $0.4 million for the year ended December 31, 2022 pursuant to the Leverage Waiver.
(6)
We may have capital gains and interest income that could result in the payment of an Incentive Fee to the Adviser in the twelve months after the date of this prospectus supplement. The Incentive Fee payable in the example above is based upon our actual results for the year ended December 31, 2023 and assumes that the Incentive Fee is 17.5% for all relevant periods. However, the Incentive Fee payable to the Adviser is based on our performance and will not be paid unless we achieve certain goals.
The Incentive Fee consists of two parts, as follows:
 
  (i)
The first component, payable at the end of each quarter in arrears, equals 100% of the
pre-Incentive
Fee net investment income in excess of a 1.5% quarterly “hurdle rate,” the calculation of which is further explained below, until the Adviser has received 17.5% of the total
pre-Incentive
Fee net investment income for that quarter and, for
pre-Incentive
Fee net investment income in excess of 1.82% quarterly, 17.5% of all remaining
pre-Incentive
Fee net investment income for that quarter. The 100%
“catch-up”
provision for
pre-Incentive
Fee net investment income in excess of the 1.5% “hurdle rate” is intended to provide the Adviser with an Incentive Fee of 17.5% on all
pre-Incentive
Fee net investment income when that amount equals 1.82% in a quarter (7.28% annualized), which is the rate at which
catch-up
is achieved. Once the “hurdle rate” is reached and
catch-up
is achieved, 17.5% of any
pre-Incentive
Fee net investment income in excess of 1.82% in any quarter is payable to the Adviser.
Pre-Incentive
Fee net investment income means dividends, interest and fee income accrued by us during the calendar quarter, minus our operating expenses for the quarter (including the Management Fee, expenses payable under the Administration Agreement to the Administrator, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee).
Pre-Incentive
Fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with
pay-in-kind
interest and zero coupon securities), accrued income that we may not have received in cash.
Pre-Incentive
Fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital gains or losses.
 
  (ii)
The second component, payable at the end of each fiscal year in arrears, equaled 15% through March 31, 2014 and, beginning April 1, 2014, equals a weighted percentage
of
cumulative realized
 
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  capital gains from the Company’s inception to the end of that fiscal year, less cumulative realized capital losses and unrealized capital losses. This component of the Incentive Fee is referred to as the Capital Gains Fee. Each year, the fee paid for this component of the Incentive Fee is net of the aggregate amount of any previously paid Capital Gains Fee for prior periods. For capital gains that accrue following March 31, 2014, the Incentive Fee rate is 17.5%. The Company accrues, but does not pay, a Capital Gains Fee with respect to unrealized capital gains because a Capital Gains Fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain. The weighted percentage is intended to ensure that for each fiscal year following the completion of the IPO, the portion of the Company’s realized capital gains that accrued prior to March 31, 2014, is subject to an Incentive Fee rate of 15% and the portion of the Company’s realized capital gains that accrued beginning April 1, 2014 is subject to an Incentive Fee rate of 17.5%. As of March 31, 2020, there were no remaining investments that were made prior to April 1, 2014, and as a result, the Incentive Fee rate of 17.5% is applicable to any future realized capital gains.
For purposes of determining whether
pre-Incentive
Fee net investment income exceeds the hurdle rate,
pre-Incentive
Fee net investment income is expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter.
Pre-Incentive
Fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital gains or losses. Because of the structure of the Incentive Fee, it is possible that we may pay an Incentive Fee in a quarter in which we incur a loss. For example, if we receive
pre-Incentive
Fee net investment income in excess of the quarterly minimum hurdle rate, we will pay the applicable Incentive Fee even if we have incurred a loss in that quarter due to realized and unrealized capital losses. In addition, because the quarterly minimum hurdle rate is calculated based on our net assets, decreases in our net assets due to realized or unrealized capital losses in any given quarter may increase the likelihood that the hurdle rate is reached and therefore the likelihood of us paying an Incentive Fee for that quarter. Our net investment income used to calculate this component of the Incentive Fee is also included in the amount of our gross assets used to calculate the Management Fee because gross assets are total assets (including cash received) before deducting liabilities (such as declared dividend payments).
Section 205(b)(3) of the Advisers Act, as amended, prohibits the Adviser from receiving the payment of fees on unrealized gains until those gains are realized, if ever. There can be no assurance that such unrealized gains will be realized in the future.
See Note 3 to our consolidated financial statements in our 2023 Annual Report and “Agreements and Related Party Transactions—Administration Agreement; Investment Advisory Agreement;” in Part I, Item 1 of our 2023 Annual Report.
From time to time, our Adviser has voluntarily waived certain Incentive Fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Incentive Fees” in Part II, Item 2 of our 2023 Annual Report. The above estimates do not reflect or assume any such waivers.
 
(7)
Interest payments on borrowed funds is based on our interest expense for the year ended December 31, 2023 under our credit facilities excluding fees (such as fees on undrawn amounts and amortization of upfront fees) and including the swap-adjusted interest expense related to our 2024 Notes, 2026 Notes and 2028 Notes. This item is based on the assumption that our borrowings and interest costs after an offering will remain similar to those prior to such offering. We may borrow additional funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. On October 8, 2018, our stockholders approved the application of the minimum asset coverage ratio of 150% to us, as set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCAA. Our stockholders indirectly bear the costs of borrowings under any debt instruments we may enter into.
(8)
Includes our overhead expenses, such as payments under the Administration Agreement for certain expenses incurred by the Adviser, and excise taxes. See “Agreements and Related Party Transactions-Administration Agreement; Investment Advisory Agreement;” in Part I, Item 1 of our 2023 Annual Report and Note 3 to
 
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  our consolidated financial statements in our 2023 Annual Report. The expenses in this table are based on our actual other expenses and excise taxes for the year ended December 31, 2023.
Example
The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed we would have no additional leverage and that our annual operating expenses would remain at the levels set forth in the table above. The Incentive Fee payable in the example below assumes that the Incentive Fee is 17.5% for all relevant periods. Transaction expenses are not included in the following example.
 
    
1 year
    
3 years
    
5 years
    
10 years
 
You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return from realized capital gains
   $ 136      $ 373      $ 571      $ 937  
The foregoing table is to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. Because the income portion of the Incentive Fee under the Investment Advisory Agreement is unlikely to be significant assuming a 5% annual return, the example assumes that the 5% annual return will be generated entirely through the realization of capital gains on our assets and, as a result, will trigger the payment of the capital gains portion of the Incentive Fee under the Investment Advisory Agreement. The income portion of the Incentive Fee under the Investment Advisory Agreement, which, assuming a 5% annual return, would either not be payable or have an immaterial impact on the expense amounts shown above, is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an Incentive Fee of a material amount, our expenses, and returns to our investors, would be higher. In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, under certain circumstances, reinvestment of dividends and other distributions under our dividend reinvestment plan may occur at a price per share that differs from net asset value. See “Dividend Reinvestment Plan” in the accompanying prospectus for additional information regarding our dividend reinvestment plan.
This example and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.
 
S-12

Use of Proceeds
We estimate that the net proceeds we will receive from the sale of 4,000,000 shares of our common stock in this offering will be approximately $
81.6
 million (or approximately $93.9 million if the underwriters fully exercise their option to purchase additional shares), in each case after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
We intend to use 100% of the net proceeds of this offering to pay down a portion of the outstanding indebtedness on the Revolving Credit Facility on or about the date of the closing of this offering. As of December 31, 2023, aggregate commitments under the facility were $1.710 billion. However, through reborrowing under the Revolving Credit Facility, we intend to make new investments in accordance with our investment objective and strategies described in this prospectus supplement and the accompanying prospectus. The stated maturity date of the Revolving Credit Facility is June 12, 2028 with respect to $1.465 billion of commitments, January 31, 2025 for $25.0 million of commitments, February 4, 2026 for $50.0 million of commitments, and April 30, 2027 with respect to $170.0 million of commitments. As of December 31, 2023, amounts drawn under the facility bear interest at either the applicable reference rate plus an applicable credit spread adjustment, plus a margin of either 1.75% or 1.875%, or the base rate plus a margin of either 0.75% or 0.875%. See “
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources—Revolving Credit Facility
” in Part II, Item 2 of our 2023 Annual Report.
Affiliates of certain underwriters are lenders under the Revolving Credit Facility. Accordingly, affiliates of certain of the underwriters may receive more than 5% of the proceeds of this offering to the extent the proceeds are used to pay down a portion of the outstanding indebtedness under the Revolving Credit Facility.
 
S-13

Capitalization
The following table sets forth our consolidated capitalization at December 31, 2023, as adjusted to reflect the Company’s issuance on January 16, 2024 of $350.0 million aggregate principal amount of its 6.125% notes due 2029. You should read this table together with “Use of Proceeds” described in this prospectus supplement and our most recent balance sheet included in our 2023 Annual Report incorporated by reference in this prospectus supplement.
 
    
As of
December 31,
2023
(1)
 
(Amounts in thousands, except share and per share amounts)
  
Cash and cash equivalents
   $  25,196  
Debt
(1)
  
Revolving Credit Facility
     889,659  
2024 Notes
     347,500  
2026 Notes
     300,000  
2028 Notes
     300,000  
2029 Notes
     350,000  
Total Debt
     2,187,159  
Stockholders’ Equity
  
Preferred stock, $0.01 par value; 100,000,000 shares authorized; no shares issued and outstanding
   $ —   
Common stock, $0.01 par value; 400,000,000 shares authorized; 88,493,749 shares issued and 87,829,499 shares outstanding
     885  
Additional
paid-in
capital
     1,405,173  
Treasury stock at cost, 664,250 shares
     (10,459
Distributable earnings
     100,776  
Total stockholders’ equity
   $  1,496,375  
  
 
 
 
Total capitalization
   $  3,693,808  
  
 
 
 
 
(1)
The above table reflects the principal amount of indebtedness outstanding as of December 31, 2023, as adjusted to reflect the Company’s issuance on January 16, 2024 of $350.0 million aggregate principal amount of its 6.125% notes due 2029. As of February 28, 2024, $604.9 million was drawn on the Revolving Credit Facility. The net proceeds from the sale of our common stock in this offering are expected to be used to pay down outstanding indebtedness under the Revolving Credit Facility. See “Use of Proceeds” in this prospectus supplement.
 
S-14

Underwriting
Morgan Stanley & Co. LLC is acting as representative of each of the underwriters named below. Subject to the terms and conditions set forth in an underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the number of shares of common stock set forth opposite its name
below.
 
Underwriter
  
Number of
Shares
 
Morgan Stanley & Co. LLC
  
 
800,000
 
Wells Fargo Securities, LLC
  
 
800,000
 
BofA Securities, Inc.
  
 
500,000
 
RBC Capital Markets, LLC
  
 
500,000
 
Keefe, Bruyette & Woods, Inc.
  
 
400,000
 
Raymond James & Associates, Inc.
  
 
400,000
 
Citigroup Global Markets Inc.
  
 
200,000
 
Goldman Sachs & Co. LLC
  
 
200,000
 
J.P. Morgan Securities LLC
  
 
200,000
 
  
 
 
 
Total
  
 
4,000,000
 
  
 
 
 
Subject
to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”), or to contribute to payments the underwriters may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers’ certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
The underwriters may offer the shares of common stock from time to time for sale in one or more transactions on the NYSE, in the
over-the-counter
market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices. The underwriters may effect such transactions by selling shares of common stock to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or purchasers of shares of common stock for whom they may act as agents or to whom they may sell as principal.
The expenses of the offering, not including the underwriting discount, are estimated at $0.5 million and are payable by us.
Underwriters’ Option
We have granted the underwriters an option to buy, within 30 days from the date of this prospectus supplement, up to 600,000 additional shares of common stock. If any shares are purchased pursuant to this option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.
 
S-15

No Sales of Similar Securities
Subject to certain exceptions, we have agreed not to directly or indirectly, (i) offer, pledge, sell, contract to sell, grant any option for the sale of or otherwise transfer or dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock (except for any “shelf” registration statements filed by us), or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or otherwise), in each case without the prior written consent of Morgan Stanley & Co. LLC for a period of 30 days after the date of this prospectus supplement.
Our Adviser, our directors and certain of our executive officers have entered into
lock-up
agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 30 days after the date of this prospectus supplement, may not, subject to certain exceptions, without the prior written consent of Morgan Stanley & Co. LLC, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers, managers and members in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), or publicly disclose the intention to make any offer, sale, pledge or disposition, or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise, or (3) make any demand for or exercise any right with respect to the registration of any shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock.
NYSE Listing
The shares are listed on the NYSE under the symbol “TSLX.”
Price Stabilization, Short Positions
In connection with this offering, the underwriters may engage in stabilizing transactions, which may involve making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ option to purchase additional shares from us, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through their option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.
 
S-16

The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the sales load received by them.
These activities may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the NYSE, in the
over-the-counter
market or otherwise.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Electronic Distribution
The underwriters may make prospectuses available in electronic (PDF) format. A prospectus in electronic (PDF) format may be made available on a web site maintained by the underwriters, and the underwriters may distribute such prospectuses electronically. The underwriters may allocate a limited number of shares for sale to their online brokerage customers.
Other Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage, valuation services and other financial and
non-financial
activities and services. Certain of the underwriters and their respective affiliates have provided, currently provide, and may in the future provide, a variety of these services to us and to persons and entities with relationships with us, for which they received or will receive customary fees and expenses. Certain of the underwriters and their affiliates were underwriters in connection with our IPO and our subsequent debt and equity offerings, for which they received customary fees. Additionally, affiliates of certain underwriters are lenders under the Revolving Credit Facility.
In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to our assets, securities or instruments (directly, as collateral securing other obligations or otherwise) or persons and entities with relationships with us. Certain of the underwriters and their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities. Any such credit default swaps or short positions could adversely affect future trading prices of our securities. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long or short positions in such assets, securities and instruments.
 
S-17

We intend to use the net proceeds of this offering to pay down a portion of the outstanding indebtedness under the Revolving Credit Facility and for general corporate purposes. Affiliates of certain underwriters are lenders under the Revolving Credit Facility. Accordingly, affiliates of certain of the underwriters may receive more than 5% of the proceeds of this offering to the extent the proceeds are used to pay down a portion of the outstanding indebtedness under the Revolving Credit Facility.
Goldman Sachs & Co. LLC is also acting as our agent for the Company stock repurchase
10b5-1
Plan.
Principal Business Addresses
The principal business address of Morgan Stanley & Co. LLC is 1585 Broadway, New York, NY 10036.
Other Jurisdictions
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus supplement in any jurisdiction where action for that purpose is required. The securities offered by this prospectus supplement may not be offered or sold, directly or indirectly, nor may this prospectus supplement or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus supplement comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus supplement. This prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus supplement in any jurisdiction in which such an offer or a solicitation is unlawful.
Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus supplement relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus supplement is intended for distribution only to persons in the in the Dubai International Financial Centre, or DIFC of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person in the DIFC. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement nor taken steps to verify the information set forth herein and has no responsibility for the prospectus supplement. The common stock to which this prospectus supplement relates may be illiquid or subject to restrictions on their resale. Prospective purchasers of the common stock offered should conduct their own due diligence on the common stock. If you do not understand the contents of this prospectus supplement you should consult an authorized financial advisor.
Notice to Prospective Investors in Hong Kong
The common stock has not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (“Securities and Futures Ordinance”) and any rules made thereunder; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (“Companies (Winding Up and Miscellaneous Provisions) Ordinance”) or which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance. No advertisement, invitation or document relating to the common stock has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder.
 
S-18

Notice to Prospective Investors in Canada
This prospectus constitutes an “exempt offering document” as defined in and for the purposes of applicable Canadian securities laws. No prospectus has been filed with any securities commission or similar regulatory authority in Canada in connection with the offer and sale of the shares. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this prospectus or on the merits of the shares and any representation to the contrary is an offence.
Canadian investors are advised that this prospectus has been prepared in reliance on section 3A.3 of National Instrument
33-105
Underwriting Conflicts
(“NI
33-105”).
Pursuant to section 3A.3 of NI
33-105,
the company and the underwriters in the offering are exempt from the requirement to provide Canadian investors with certain conflicts of interest disclosure pertaining to “connected issuer” and/or “related issuer” relationships as would otherwise be required pursuant to subsection 2.1(1) of NI
33-105.
Resale Restrictions
The offer and sale of the shares in Canada is being made on a private placement basis only and is exempt from the requirement that the company prepares and files a prospectus under applicable Canadian securities laws. Any resale of shares by a Canadian investor in this offering must be made in accordance with applicable Canadian securities laws, which may vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with Canadian prospectus requirements, a statutory exemption from the prospectus requirements, in a transaction exempt from the prospectus requirements or otherwise under a discretionary exemption from the prospectus requirements granted by the applicable local Canadian securities regulatory authority. These resale restrictions may under certain circumstances apply to resales of the shares outside of Canada.
Representations of Purchasers
Each Canadian investor who purchases the shares will be deemed to have represented to the company, the underwriters and to each dealer from whom a purchase confirmation is received, as applicable, that the investor is (i) purchasing as principal, or is deemed to be purchasing as principal in accordance with applicable Canadian securities laws; (ii) an “accredited investor” as such term is defined in section 1.1 of National Instrument
45-106
Prospectus Exemptions or, in Ontario, as such term is defined in section 73.3(1) of the Securities Act (Ontario); and (iii) a “permitted client” as such term is defined in section 1.1 of National Instrument
31-103
Registration Requirements, Exemptions and Ongoing Registrant Obligations
.
Taxation and Eligibility for Investment
Any discussion of taxation and related matters contained in this prospectus does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a Canadian investor when deciding to purchase the shares and, in particular, does not address any Canadian tax considerations. No representation or warranty is hereby made as to the tax consequences to a resident, or deemed resident, of Canada of an investment in the shares or with respect to the eligibility of the Notes for investment by such investor under relevant Canadian federal and provincial legislation and regulations.
Rights of Action for Damages or Rescission
Securities legislation in certain of the Canadian jurisdictions provides certain purchasers of securities pursuant to an offering memorandum (such as this prospectus), including where the distribution involves an “eligible foreign security” as such term is defined in Ontario Securities Commission Rule
45-501
Ontario Prospectus and Registration Exemptions
and in Multilateral Instrument
45-107
Listing Representation and Statutory Rights of Action Disclosure Exemptions
, as applicable, with a remedy for damages or rescission, or
 
S-19

both, in addition to any other rights they may have at law, where the offering memorandum, or other offering document that constitutes an offering memorandum, and any amendment thereto, contains a “misrepresentation” as defined under applicable Canadian securities laws. These remedies, or notice with respect to these remedies, must be exercised or delivered, as the case may be, by the purchaser within the time limits prescribed under, and are subject to limitations and defences under, applicable Canadian securities legislation. In addition, these remedies are in addition to and without derogation from any other right or remedy available at law to the investor.
Language of Documents
Upon receipt of this document, each Canadian investor hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only.
Par la réception de ce document, chaque investisseur canadien confirme par les présentes qu’il a expressément exigé que tous les documents
faisantfoi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.
 
S-20

Legal Matters
Certain legal matters in connection with the offering will be passed upon for us by Simpson Thacher & Bartlett LLP, Washington, D.C. In addition, Morris, Nichols, Arsht & Tunnell LLP will pass on certain legal matters for us. Certain legal matters in connection with the offering will be passed upon for the underwriters by Ropes & Gray LLP.
 
S-21

Information Incorporated By Reference
This prospectus supplement is part of a registration statement that we have filed with the SEC. Pursuant to the Small Business Credit Availability Act, we are allowed to “incorporate by reference” the information that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to comprise a part of this prospectus supplement from the date we file that document. Any reports filed by us with the SEC before the date that any offering of any securities by means of this prospectus supplement and the accompanying prospectus is terminated will automatically update and, where applicable, supersede any information contained in this prospectus supplement or incorporated by reference in this prospectus supplement. This prospectus supplement incorporates by reference the documents listed below:
 
   
our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 15, 2024 (the “2023 Annual Report”);
 
   
our Current Report on Form 8-K, filed with the SEC on January 16, 2024; and
 
   
the information specifically incorporated by reference into the Annual Report on Form
10-K
for the fiscal year ended December 31, 2022, filed with the SEC on February 16, 2023 from our Definitive Proxy Statement on Schedule 14A relating to our 2023 Annual Meeting of Stockholders, filed with the SEC on April 13, 2023.
We incorporate by reference into this prospectus supplement additional documents that we may file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, until all of the securities offered by this prospectus supplement and the accompanying prospectus have been sold or we otherwise terminate the offering of these securities; provided, however, the information “furnished” under Item 2.02 or Item 7.01 of Form
8-K
or other information “furnished” to the SEC which is not deemed filed is not incorporated by reference in this prospectus supplement and any accompanying prospectus. Information that we file with the SEC will automatically update and may supersede information in this prospectus supplement, the accompanying prospectus and information previously filed with the SEC.
We will provide without charge to each person, including any beneficial owner, to whom a copy of this prospectus supplement is delivered, upon written request of any such person, a copy of any or all of the documents that has been or may be incorporated by reference into this prospectus supplement (excluding certain exhibits to the documents) at no cost. Any such request may be made by contacting us in writing at the following address:
Sixth Street Specialty Lending, Inc.
888 7th Avenue, 41st Floor
New York, NY 10106
Attention: TSLXInvestor Relations
Email: IRTSLX@sixthstreet.com.
You should rely only on the information incorporated by reference or provided in this prospectus supplement or accompanying prospectus. We have not authorized anyone to provide you with different or additional information, and you should not rely on such information if you receive it. We are not making an offer of or soliciting an offer to buy, any securities in any state or other jurisdiction where such offer or sale is not permitted. You should not assume that the information in this prospectus supplement or in the documents incorporated by reference is accurate as of any date other than the date on the front of this prospectus supplement or those documents.
 
S-22


PROSPECTUS

 

LOGO

Sixth Street Specialty Lending, Inc.

Common Stock

Preferred Stock

Subscription Rights

Warrants

Debt Securities

 

 

We are a specialty finance company focused on lending to middle-market companies that has elected to be regulated as a business development company under the Investment Company Act of 1940. We seek to generate current income primarily in U.S.-domiciled middle-market companies through direct originations of senior secured loans and, to a lesser extent, originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. By “middle-market companies,” we mean companies that have annual EBITDA, which we believe is a useful proxy for cash flow, of $10 million to $250 million, although we may invest in larger or smaller companies on occasion As of September 30, 2023, our investment portfolio consisted of investments in 131 portfolio companies (including 42 structured credit investments, which include each series of collateralized loan obligation as a separate portfolio company investment) with an aggregate fair value of $3,113.3 million. We intend to continue to pursue an investment strategy focused primarily on direct origination of loans to middle-market companies domiciled in the United States.

We are an externally-managed, closed-end, non-diversified management investment company. Sixth Street Specialty Lending Advisers, LLC, or the Adviser, acts as our investment adviser and administrator. Our investment decisions are made by our Investment Review Committee, which includes senior personnel of our Adviser and Sixth Street Partners, LLC or “Sixth Street.” Sixth Street is a global investment business with over $60 billion of assets under management as of September 30, 2023.

The companies in our investment portfolio are typically highly leveraged, and, in many cases, our investments in these companies are not rated by any rating agency. If these investments were rated, we believe that most would likely receive a rating of below investment grade (that is, below BBB- or Baa3, which is often referred to as “junk”). Our exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower’s capacity to pay interest and repay principal. The debt investments in our portfolio generally have a significant portion of principal due at the maturity of the investment, which would result in a substantial loss to us if such borrowers are unable to refinance or repay their debt at maturity.

Substantially all of our debt investments have variable interest rates that reset periodically based on interest rate benchmarks such as the London Interbank Offered Rate, the Euro Interbank Offered Rate, the Secured Overnight Financing Rate, the Sterling Overnight Interbank Average Rate, the Federal Funds Effective Rate or the Prime Rate. As a result, significant increases in such interest rate benchmarks in the future would make it more difficult for these borrowers to service their obligations under the debt investments that we hold.

We may offer, from time to time, in one or more offerings or series, our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, which we refer to, collectively, as the “securities.” The preferred stock, debt securities, subscription rights and warrants offered hereby may be


convertible or exchangeable into shares of our common stock. The securities may be offered at prices and on terms to be described in one or more supplements to this prospectus.

In the event we offer common stock, the offering price per share of our common stock less any underwriting discounts or commissions will generally not be less than the net asset value per share of our common stock at the time we make the offering. However, we may issue shares of our common stock pursuant to this prospectus at a price per share that is less than our net asset value per share (i) in connection with a rights offering to our existing stockholders, (ii) with the prior approval of the majority of our outstanding voting securities or (iii) under such other circumstances as the Securities and Exchange Commission may permit.

The securities may be offered directly to one or more purchasers, or through agents designated from time to time by us or to or through underwriters or dealers. Each prospectus supplement relating to an offering will identify any agents or underwriters involved in the sale of the securities, and will disclose any applicable purchase price, fee, discount or commissions arrangement between us and our agents or underwriters or among our underwriters or the basis upon which such amount may be calculated. See “Plan of Distribution.” We will not sell any of the securities pursuant to this registration statement through agents, underwriters or dealers without delivery of this prospectus and a prospectus supplement describing the method and terms of the offering of such securities.

Our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol “TSLX.” On December 20, 2023, the last reported sales price of our common stock on the NYSE was $21.08 per share. The net asset value per share of our common stock at September 30, 2023 (the last date prior to the date of this prospectus for which we reported net asset value) was $16.97.

Investing in our securities involves a high degree of risk. Shares of closed-end investment companies, including business development companies, frequently trade at a discount to their net asset values. If our shares trade at a discount to our net asset value, purchasers in any offering will face increased risk of loss. In addition, the companies in which we invest are subject to special risks. Before buying any securities, you should read the discussion of the material risks of investing in our securities, including the risk of leverage, in “Risk Factors“ beginning on page 24 of this prospectus and in the documents incorporated by reference herein.

This prospectus may not be used to consummate sales of our securities unless accompanied by a prospectus supplement.

Please read this prospectus and any accompanying prospectus supplements, including any information incorporated by reference herein or therein, before investing and keep such documents for future reference. This prospectus and any accompanying prospectus supplements, and the documents incorporated by reference herein or therein, contain important information about us that a prospective investor ought to know before investing in our securities. Information required to be included in a Statement of Additional Information may be found in this prospectus and an accompanying prospectus supplement, as applicable. We also file periodic and current reports, proxy statements and other information about us with the Securities and Exchange Commission. This information is available free of charge by contacting us at 888 7th Avenue, 41st Floor, New York, NY 10106, Attention: TSLX Investor Relations, by emailing us at IRTSLX@sixthstreet.com or visiting our website at https://sixthstreetspecialtylending.gcs-web.com/. Information on our website is not incorporated into or a part of this prospectus or any prospectus supplement. The Securities and Exchange Commission also maintains a website at http://www.sec.gov that contains this information.

The Securities and Exchange Commission has not approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The date of this prospectus is December 22, 2023


TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS

     i  

SUMMARY

     1  

THE OFFERING

     14  

FEES AND EXPENSES

     18  

FINANCIAL HIGHLIGHTS

     22  

RISK FACTORS

     24  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     27  

USE OF PROCEEDS

     28  

PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

     29  

SENIOR SECURITIES

     32  

PORTFOLIO COMPANIES

     34  

MANAGEMENT

     54  

DETERMINATION OF NET ASSET VALUE

     55  

SALES OF COMMON STOCK BELOW NET ASSET VALUE

     55  

DIVIDEND REINVESTMENT PLAN

     62  

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

     63  

DESCRIPTION OF OUR SECURITIES

     71  

DESCRIPTION OF OUR CAPITAL STOCK

     71  

DESCRIPTION OF OUR PREFERRED STOCK

     76  

DESCRIPTION OF OUR SUBSCRIPTION RIGHTS

     77  

DESCRIPTION OF OUR WARRANTS

     79  

DESCRIPTION OF OUR DEBT SECURITIES

     81  

CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR

     93  

BROKERAGE ALLOCATION AND OTHER PRACTICES

     93  

PLAN OF DISTRIBUTION

     94  

LEGAL MATTERS

     95  

EXPERTS

     96  

AVAILABLE INFORMATION

     97  

INFORMATION INCORPORATED BY REFERENCE

     97  

We have not authorized any dealer, salesman or other person to give any information or to make any representation other than those contained in this prospectus, any prospectus supplement to this prospectus or any information that we have incorporated by reference herein or therein. This prospectus and any such supplements do not constitute an offer to sell or a solicitation of any offer to buy any security other than the registered securities to which they relate, nor do they constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. The information contained in this prospectus and any such supplements is accurate only as of the dates on their respective covers unless the information specifically indicates that another date applies. Our business, financial condition, results of operations and prospects may have changed since then. We will update these documents to reflect material changes only as required by law.

ABOUT THIS PROSPECTUS

This prospectus is part of an automatic shelf registration statement that we filed with the U.S. Securities and Exchange Commission, or SEC, as a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”). Under the shelf registration process, which constitutes a delayed offering in reliance on Rule 415 under the Securities Act, we may offer, from time to time, in one or more offerings of our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock, or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, on terms to be determined at the time of the offering.

 

i


The securities may be offered at prices and on terms described in one or more supplements to this prospectus. This prospectus provides you with a general description of the offerings of securities that we may conduct pursuant to this prospectus. Each time we use this prospectus to sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. A prospectus supplement may also add, update or change information contained in this prospectus.

Please read this prospectus and the accompanying prospectus supplement, including any information incorporated herein or therein by reference, before you make an investment decision. You should also read the documents we have referred you to in “Available Information” and “Information Incorporated by Reference” below for information on our company and our consolidated financial statements.

 

 

ii


SUMMARY

This summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may want to consider. You should read this entire prospectus and any accompanying prospectus supplement, including any information incorporated herein or therein by reference, carefully. In particular, you should read the more detailed information set forth under “Risk Factors” and the consolidated financial statements and the related notes included elsewhere in this prospectus and any accompanying prospectus supplement or incorporated by reference herein or therein.

As used in the prospectus, except where the context suggests otherwise, references to:

 

   

“TSLX,” “Sixth Street Specialty Lending,” “we,” “us,” “our,” the “Company,” and the “Registrant” refer to Sixth Street Specialty Lending, Inc., a Delaware corporation, and its consolidated subsidiaries;

 

   

the consolidated subsidiaries of Sixth Street Specialty Lending, Inc. refers to TC Lending, LLC, Sixth Street SL SPV, LLC and Sixth Street SL Holding, LLC, each a Delaware limited liability company, and Sixth Street Specialty Lending Sub, LLC, a Cayman Islands limited liability company;

 

   

“Adviser” refers to Sixth Street Specialty Lending Advisers, LLC, a Delaware limited liability company; and

 

   

“Sixth Street” refers to Sixth Street Partners, LLC.

We have elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, for U.S. federal income tax purposes we have elected to be treated as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended, or the Code.

Sixth Street Specialty Lending

We are a specialty finance company focused on lending to middle-market companies. Since we began our investment activities in July 2011, through September 30, 2023, we have originated more than $28.6 billion aggregate principal amount of investments and retained approximately $9.8 billion aggregate principal amount of these investments on our balance sheet prior to any subsequent exits and repayments. We seek to generate current income primarily in U.S.-domiciled middle-market companies through direct originations of senior secured loans and, to a lesser extent, originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. By “middle-market companies,” we mean companies that have annual earnings before interest, income taxes, depreciation and amortization, or EBITDA, which we believe is a useful proxy for cash flow, of $10 million to $250 million, although we may invest in larger or smaller companies on occasion. As of September 30, 2023 our core portfolio companies, which excludes certain investments that fall outside of our typical borrower profile and represent 92.8% of our total investments based on fair value, had weighted average annual revenue of $209.0 million and weighted average annual EBITDA of $69.2 million.

We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on direct equity investments, capital gains on the sale of investments and various loan origination and other fees.

We have operated as a BDC since we began our investment activities in July 2011, and we are currently one of the largest BDCs by total assets. In conducting our investment activities, we believe that we benefit from the significant scale and resources of our Adviser and its affiliates.

 

1


Investment Portfolio

The companies in which we invest use our capital to support organic growth, acquisitions, market or product expansion and recapitalizations (including restructurings). We invest in first-lien debt, second-lien debt, mezzanine and unsecured debt and equity and other investments. Our first-lien debt may include stand-alone first-lien loans; “last out” first-lien loans, which are loans that have a secondary priority behind super-senior “first out” first-lien loans; “unitranche” loans, which are loans that combine features of first-lien, second-lien and mezzanine debt, generally in a first-lien position; and secured corporate bonds with similar features to these categories of first-lien loans. Our second-lien debt may include secured loans, and, to a lesser extent, secured corporate bonds, with a secondary priority behind first-lien debt.

As of September 30, 2023, based on fair value our portfolio consisted of 91.0% first-lien debt investments, 1.3% second-lien debt investments, 1.2% mezzanine debt investments, 4.8% equity and other investments and 1.7% structured credit investments. As of September 30, 2023, 99.7% of our debt investments based on fair value bore interest at floating rates, with 100.0% of these subject to interest rate floors, which we believe helps act as a portfolio-wide hedge against inflation.

As of September 30, 2023, we had investments in 131 portfolio companies (including 42 structured credit investments, which include each series of collateralized loan obligation as a separate portfolio company investment) with an aggregate fair value of $3,113.3 million. For the three months ended September 30, 2023, the principal amount of new investments funded was $151.6 million in eight new portfolio companies and two existing portfolio companies. For this period, we had $158.9 million aggregate principal amount in exits and repayments.

As of December 31, 2022, we had investments in 121 portfolio companies with an aggregate fair value of $2,787.9 million. For the three months ended September 30, 2022, the principal amount of new investments funded was $274.4 million in twenty-five new portfolio companies and six existing portfolio companies. For this period, we had $15.8 million aggregate principal amount in exits and repayments.

As of September 30, 2023, the largest single investment based on fair value represented 2.5% of our total investment portfolio. As of September 30, 2023, the average investment size in each of our portfolio companies was approximately $23.8 million based on fair value. Portfolio companies includes investments in structured products including each series of collateralized loan obligation as a portfolio company investment. When excluding investments in structured products the average investment in our remaining portfolio companies was approximately $34.4 million as of September 30, 2023. As of September 30, 2023, the largest industry represented 15.7% of our total portfolio based on fair value.

Since we began investing in 2011 through September 30, 2023, weighted by capital invested, our exited investments have generated an average realized gross internal rate of return to us of 17.5% (based on total capital invested of $6.9 billion and total proceeds from these exited investments of $8.7 billion). Ninety percent of these exited investments resulted in a realized gross internal rate of return to us of 10% or greater. For a description of how we calculate gross internal rates of return, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Realized Gross Internal Rate of Return” in Part I, Item 2 of our Quarterly Report on Form 10-Q for the three months ended September 30, 2023 (“3Q 2023 Quarterly Report”), which is incorporated by reference in this prospectus.

Corporate Structure

Sixth Street Specialty Lending, Inc. is a Delaware corporation formed on July 21, 2010. Sixth Street Specialty Lending Advisers, LLC is our external manager.

 

2


Our portfolio is subject to diversification and other requirements because we elected to be regulated as a BDC under the 1940 Act and treated as a RIC for U.S. federal income tax purposes. We made our BDC election on April 15, 2011. We intend to maintain these elections. See “Regulation as a Business Development Company” in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”) for more information on these requirements.

About Our Adviser

Our Adviser is a Delaware limited liability company. Our Adviser acts as our investment adviser and administrator and is a registered investment adviser with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended, or the Advisers Act.

Our Adviser sources and manages our portfolio through our Investment Team, a dedicated team of investment professionals predominately focused on us. Our Investment Team is led by our Chairman and Chief Executive Officer and our Adviser’s Co-Chief Investment Officer Joshua Easterly and our Adviser’s Co-Chief Investment Officer Alan Waxman, both of whom have substantial experience in credit origination, underwriting and asset management. Our investment decisions are made by our Investment Review Committee, which includes senior personnel of our Adviser and Sixth Street Partners, LLC or “Sixth Street.”

Sixth Street is a global investment business with over $75 billion of assets under management as of September 30, 2023. Sixth Street’s core platforms include Sixth Street Specialty Lending, Sixth Street Specialty Lending Europe, which is aimed at European middle-market loan originations, Sixth Street TAO, which has the flexibility to invest across all of Sixth Street’s private credit market investments, Sixth Street Opportunities, which focuses on actively managed opportunistic investments across the credit cycle, Sixth Street Credit Market Strategies, which is the firm’s “public-side” credit investment platform focused on investment opportunities in broadly syndicated leveraged loan markets, Sixth Street Growth, which provides financing solutions to growing companies, Sixth Street Fundamental Strategies, which primarily invests in secondary credit, and Sixth Street Agriculture, which invests in niche agricultural opportunities. Sixth Street has a long-term oriented, highly flexible capital base that allows it to invest across industries, geographies, capital structures and asset classes. Sixth Street has extensive experience with highly complex, global public and private investments executed through primary originations, secondary market purchases and restructurings, and has a team of over 520 investment and operating professionals. As of September 30, 2023, sixty-seven (67) of these personnel are dedicated to our business, including fifty-three (53) investment professionals.

Our Adviser consults with Sixth Street in connection with a substantial number of our investments. The Sixth Street platform provides us with a breadth of large and scalable investment resources. We believe we benefit from Sixth Street’s market expertise, insights into industry, sector and macroeconomic trends and intensive due diligence capabilities, which help us discern market conditions that vary across industries and credit cycles, identify favorable investment opportunities and manage our portfolio of investments. Sixth Street and its affiliates will refer all middle-market loan origination activities for companies domiciled in the United States to us and conduct those activities through us. The Adviser will determine whether it would be permissible, advisable or otherwise appropriate for us to pursue a particular investment opportunity allocated to us.

On April 15, 2011, the Company entered into the Investment Advisory Agreement with the Adviser. The Investment Advisory Agreement was subsequently amended on December 12, 2011. Under the terms of the Investment Advisory Agreement, the Adviser provides investment advisory services to the Company. The Adviser’s services under the Investment Advisory Agreement are not exclusive, and the Adviser is free to furnish similar or other services to others so long as its services to the Company are not impaired. Under the terms of the Investment Advisory Agreement, the Company will pay the Adviser the Management Fee and may also pay certain Incentive Fees.

 

3


About Our Administrator

On March 15, 2011, we entered into the Administration Agreement with our Adviser (the “Administration Agreement”). Under the terms of the Administration Agreement, the Adviser acts as our administrator and provides administrative services to us. These services include providing office space, equipment and office services, maintaining financial records, preparing reports to stockholders and reports filed with the SEC, and managing the payment of expenses and the oversight of the performance of administrative and professional services rendered by others. Certain of these services are reimbursable to the Adviser under the terms of the Administration Agreement. In addition, the Adviser is permitted to delegate its duties under the Administration Agreement to affiliates or third parties and we pay or reimburse the Adviser for certain expenses incurred by any such affiliates or third parties for work done on our behalf.

In February 2017, the Board of Directors of the Company and the Adviser entered into an amended and restated administration agreement (the “Administration Agreement”) reflecting certain clarifications to the agreement to provide greater detail regarding the scope of the reimbursable costs and expenses of the Administrator’s services.

In November 2023, the Board renewed the Administration Agreement. Unless earlier terminated as described below, the Administration Agreement will remain in effect until November 2024, and may be extended subject to required approvals. The Administration Agreement may be terminated by either party without penalty on 60 days’ written notice to the other party.

See the section entitled “Administration Agreement” in Note 3 to our consolidated financial statements in our 3Q 2023 Quarterly Report.

Market Opportunity

Our investment objective is to generate current income by targeting investments with favorable risk-adjusted returns. We believe the middle-market lending environment provides opportunities for us to meet this objective as a result of a combination of the following factors:

Limited availability of capital for middle-market companies. We believe that certain structural changes in the market have reduced the amount of capital available to middle-market companies. In particular, we believe there are currently fewer providers of capital to middle-market companies. Traditional middle-market lenders, such as commercial and regional banks and commercial finance companies, have contracted their origination activities and are focusing on more liquid asset classes. At the same time, institutional investors have sought to invest in larger, more liquid offerings, limiting the ability of middle-market companies to raise debt capital through public capital markets. We believe the Basel III Accord and regulations imposed by the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, or FDIC, significantly increase capital and liquidity requirements for banks, decreasing their capacity to hold non-investment grade leveraged loans on their balance sheets. We believe these factors reduce the capacity of traditional lenders to serve this market segment and, as a result, increase the cost of borrowing for middle-market companies.

Strong demand for debt capital. We believe middle-market companies will continue to require access to debt capital to refinance existing debt, support growth and finance acquisitions. In addition, we believe the large amount of uninvested capital held by funds of private equity firms, estimated by Preqin Ltd., an alternative assets industry data and research company, at over $2.7 trillion as of December 12, 2023, will continue to drive deal activity. We expect that private equity firms will continue to pursue acquisitions and to seek to leverage their equity investments with secured loans provided by companies such as ours.

 

4


Attractive investment dynamics. An imbalance between the supply of, and demand for, middle-market debt capital creates attractive pricing dynamics. The directly negotiated nature of middle-market financings also generally provides more favorable terms to the lender, including stronger covenant and reporting packages, better call protection, and lender-protective change of control provisions. Additionally, we believe BDC managers’ expertise in credit selection and ability to manage through credit cycles has generally resulted in BDCs experiencing lower loss rates than U.S. commercial banks through credit cycles. Further, we believe that historical middle-market default rates have been lower, and recovery rates have been higher, as compared to the larger market capitalization, broadly distributed market, leading to lower cumulative losses.

Conservative capital structures. Following the credit crisis, which we define broadly as occurring between mid-2007 and mid-2009, borrowers have generally been required to maintain more equity as a percentage of their total capitalization, specifically to protect lenders during periods of economic downturns. With more conservative capital structures, middle-market companies have exhibited higher levels of cash flows available to service their debt. In addition, middle-market companies often are characterized by simpler capital structures than larger borrowers, which facilitates a streamlined underwriting process and improves returns to lenders during a restructuring process.

Specialized lending requirements. Lending to middle-market companies requires specialized due diligence and underwriting capabilities, as well as extensive ongoing monitoring. Middle-market lending also is generally more labor-intensive than lending to larger companies due to smaller investment sizes and the lack of publicly available information on these companies. We believe the experience and resources of our Adviser and Sixth Street position us more strongly than many capital providers to lend to middle-market companies.

Desirability of partnering with BDCs. We believe middle-market companies see advantages in raising capital from BDCs. BDCs have the ability to offer attractive financing structures, including unitranche loans and “one-stop” financings and can provide a valuable combination of flexibility to develop loans that reflect each borrower’s distinct situation, long-term relationship focus and reliability as a potential source of future capital.

Competitive Strengths and Core Competencies

Leading platform and access to proprietary deal flow. The substantial majority of our investments are not intermediated and are originated without the assistance of investment banks or other traditional Wall Street sources. Our Adviser has a dedicated team of 53 investment professionals responsible for originating, underwriting, executing and managing the assets of our direct lending transactions. This team is responsible for sourcing and executing opportunities directly, while leveraging the resources and expertise of the Sixth Street platform. The senior members of our Investment Team have over 450 years of collective experience as commercial dealmakers.

In addition to executing direct calling campaigns on companies based on the Adviser’s sector and macroeconomic views, our Investment Team also maintains direct contact with financial sponsors, banks, corporate advisory firms, industry consultants, attorneys, investment banks, “club” investors and other potential sources of lending opportunities. By sourcing through multiple channels, we believe we are able to generate investment opportunities that have more attractive risk-adjusted return characteristics than by relying solely on origination flow from investment banks or other intermediaries.

In addition, our Adviser draws upon the resources of Sixth Street in underwriting transactions, performing due diligence, managing assets and optimizing our operations as a public company. Access to Sixth Street resources complements our Adviser’s view of markets and provides insight into important cyclical patterns.

Disciplined investment and underwriting process. Through our Adviser, we seek to achieve the highest risk-adjusted returns available as opposed to the highest absolute return available. Our investment approach seeks to

 

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combine a rigorous analysis of macroeconomic and market factors with a deep understanding of individual companies and their assets, management and prospects. We believe four factors distinguish our investment approach:

 

   

Flexibility. Our broad middle-market focus and our Adviser’s integrated position within Sixth Street allow us to determine current market opportunities and identify relative value.

 

   

Risk pricing. The risk profile of our portfolio evolves across credit cycles as credit tightens and loosens. During periods when risk premiums are tight and pricing alone may not reflect the possibility for volatility, we typically focus on investing at a senior position in deals that permit us to control duration (that is, price sensitivity as a function of time and changes in interest rates, expressed as a number of years). Conversely, during periods when risk premiums are wide, we seek to capture an incremental risk premium by offering more junior instruments that have higher rates and longer durations.

 

   

Disciplined four-tiered investment framework. Through our Adviser, we perform detailed company-specific analysis focusing on a four-tiered investment framework:

 

   

Business and sector selection. We focus on companies with enterprise value between $50 million and $1 billion. When reviewing potential investments, we seek to invest in businesses with high marginal cash flow, recurring revenue streams and where we believe credit quality will improve over time. We look for portfolio companies that we think have a sustainable competitive advantage in growing industries or distressed situations. We also seek companies where our investment will have a low loan-to-value ratio. We currently do not limit our focus to any specific industry and we may invest in larger or smaller companies.

 

   

Investment structuring. We focus on investing at the top of the capital structure and protecting that position. We carefully diligence and structure investments to include strong investor covenants. As a result, we structure investments with a view to creating opportunities for early intervention in the event of non-performance or stress. In addition, we seek to retain effective voting control in investments over the loans or particular class of securities in which we invest through maintaining affirmative voting positions or negotiating consent rights that allow us to retain a blocking position. We also aim for our loans to mature on a medium term, between two to six years after origination.

 

   

Deal dynamics. We focus on, among other deal dynamics, direct origination of investments, where we identify and lead the investment transaction. We seek transactions that are too small for the traditional high yield market. We look to invest in companies that value our commitment and ability to originate an investment that meets their goals and fits within their existing capital structure.

 

   

Risk Mitigation. We seek to mitigate non-credit-related risk on our returns in several ways, including call protection provisions to protect future payment income. In addition, most of our investments are floating rate in nature, which we believe helps act as a portfolio-wide hedge against inflation.

 

   

Robust and active investment management. Our Adviser rigorously monitors the credit profile of portfolio investments, with the aim of proactively identifying sector and operational issues and carefully managing risks. The information gathered on market trends through this process also informs our underwriting for new loans.

We tailor investments rather than focusing only on driving investment volume.

Carefully constructed, existing portfolio consisting of predominantly senior, floating rate loans across a broad range of industries and borrowers. Since we began investing in July 2011, through September 30, 2023, we have originated more than $28.6 billion aggregate principal amount of investments. As of September 30, 2023, our investment portfolio consisted of investments in 131 portfolio companies (including 42 structured credit

 

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investments, which include each series of collateralized loan obligation as a separate portfolio company investment) with an aggregate fair value of $3,113.3 million that we believe exhibits strong credit quality and broad industry composition. As of September 30, 2023, 99.7% of our debt investments based on fair value bore interest at floating rates, with 100.0% of these subject to interest rate floors, and 91.0% of the fair value of our portfolio was invested in first-lien debt investments. We believe this portfolio will allow us to generate meaningful investment income, and consequently dividend income, for our stockholders.

Experienced management team. The Adviser has a highly experienced management team consisting of nine Sixth Street Partners and nine Sixth Street Managing Directors, with deep experience identifying and executing transactions across a broad range of industries and types of financings. Over their careers, our team has developed unique relationships and access to proprietary sourcing and servicing channels. The team includes the founder of the Goldman Sachs Specialty Lending Group, Alan Waxman, who managed the group from its inception in 2003 through 2009, and other senior members, such as Joshua Easterly, who was Co-head from 2006 through 2010. The team also includes Michael Fishman, who, as National Director of Loan Originations at Wells Fargo Capital Finance, oversaw primary and secondary lending, loan distribution and syndications, strategic transactions and new lending products from 2000 to 2011, and Bo Stanley, who brings expertise in the software, payment systems, data infrastructure and business services sectors. Our Adviser’s senior team also has experience managing us as a BDC since we began our investment activities in July 2011. We believe that the broad knowledge of this group from investing across asset classes through numerous credit cycles provides us with sound decision-making and invaluable insights into the investment process.

Aligned investment professionals. We believe our investment professionals are aligned with our investment objective. The compensation structure for our investment professionals is based on our returns, as opposed to transaction volume, which we believe fosters a focus on credit quality when originating investments.

Operating and Regulatory Structure

The Adviser manages our investment activities under the direction of our board of directors, or the Board. A majority of our Board members are not “interested persons” of us, the Adviser and our respective affiliates, as such term is defined under Section 2(a)(19) of the 1940 Act.

As a BDC, we are required to comply with numerous regulatory requirements:

 

   

Leverage. Regulations under the 1940 Act limit our ability to use borrowing, also known as leverage, in significant respects. In accordance with the 1940 Act, with certain limitations, we are allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing. On October 8, 2018, our stockholders approved the application of the minimum asset coverage ratio of 150% to us, as set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCAA. As a result and subject to certain additional disclosure requirements, as of October 9, 2018, our minimum asset coverage ratio was reduced from 200% to 150%. See “Regulation as a Business Development Company” in Part I, Item 1 of our 2022 Annual Report.

 

   

Investment Allocation. As a BDC, we are required to invest at least 70% of our total assets in qualifying assets, which generally include securities of “eligible portfolio companies,” cash, cash equivalents, U.S. government securities and high-quality debt instruments maturing in one year or less from the time of investment. “Eligible portfolio companies” are defined in the 1940 Act as:

 

   

private domestic operating companies;

 

   

public domestic operating companies whose securities are not listed on a national securities exchange (e.g., the NYSE Amex Equities and The NASDAQ Global Market) or registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act; and

 

   

public domestic operating companies having a market capitalization of less than $250 million.

 

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Public domestic operating companies whose securities are quoted on the over-the-counter bulletin board and through OTC Markets Group, Inc. are not listed on a national securities exchange and, as a result, are eligible portfolio companies.

 

   

RIC Status. We have elected to be treated as a RIC for U.S. federal income tax purposes. To maintain our status as a RIC and to avoid having our earnings subject to corporate-level U.S. federal income taxation, we must satisfy certain source of income, asset diversification and distribution requirements.

See “Material U.S. Federal Income Tax Considerations.”

Use of Leverage

Leverage increases the potential for gain and loss on amounts invested and, as a result, increases the risks associated with investing in our securities. The costs associated with our borrowings, including any increase in the fees payable to the Adviser, are borne by our stockholders. Any decision on our part to use borrowings depends upon our assessment of the attractiveness of available investment opportunities in relation to the costs and perceived risks of such leverage.

On October 8, 2018, our stockholders approved the application of the minimum asset coverage ratio of 150% to us, as set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCAA. As a result and subject to certain additional disclosure requirements, as of October 9, 2018, our minimum asset coverage ratio was reduced from 200% to 150%. In other words, pursuant to Section 61(a) of the 1940 Act, as amended by the SBCAA, we are permitted to potentially increase our maximum debt-to-equity ratio from an effective level of one-to-one to two-to-one.

The Adviser intends to waive a portion of the Management Fee payable under the Investment Advisory Agreement by reducing the Management Fee on assets financed using leverage over 200% asset coverage (in other words, over 1.0x debt to equity). Pursuant to the waiver, the Adviser intends to waive the portion of the Management Fee in excess of an annual rate of 1.0% (0.250% per quarter) on the average value of our gross assets as of the end of the two most recently completed calendar quarters that exceeds the product of (i) 200% and (ii) the average value of our net asset value at the end of the two most recently completed calendar quarters. For the three and nine months ended September 30, 2023, Management Fees of $0.3 million and $0.8 million, respectively, have been waived pursuant to the Leverage Waiver. For the three and nine months ended September 30, 2022, Management Fees of $0.2 million have been waived pursuant to the Leverage Waiver.

While as a BDC the amount of leverage that we are permitted to use is limited in significant respects, we use leverage to increase our ability to make investments. The amount of leverage we use in any period depends on a variety of factors, including cash available for investing, the cost of financing and general economic and market conditions, however, under the 1940 Act, our total borrowings are limited so that our asset coverage ratio cannot fall below 150% immediately after any borrowing, as defined in the 1940 Act. In any period, our interest expense will depend largely on the extent of our borrowing and we expect interest expense will increase as we increase leverage over time within the limits of the 1940 Act. In addition, we may dedicate assets as collateral to financing facilities from time to time.

See “Business-General—Our Company”; and “Business-General-Regulation as a Business Development Company” in Part I, Item 1 of our 2022 Annual Report, as well as “Risk Factors—Legislation allows us to incur additional leverage,” “Risk Factors—We borrow money, which magnifies the potential for gain or loss and increases the risk of investing in us,” “Risk Factors—Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital,” “Risk Factors—Our indebtedness could adversely affect our business, financial conditions or results of operations,” and “Risk Factors—Even in the event the value of your investment declines, the Management Fee and, in certain circumstances, the Incentive Fee will still be payable to the Adviser.” in Part II, Item 1A of our 3Q 2023 Quarterly Report.

 

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Conflicts of Interests

Certain members of the Adviser’s senior management and the Investment Review Committee are and will continue to be active in other investment funds affiliated with Sixth Street and its affiliates that pursue investment opportunities that could overlap with those pursued by us. However, the Adviser and its affiliates intend to allocate investment opportunities in a fair and equitable manner in accordance with their allocation principles and are obligated to refer any investments to us, by means of our Adviser, that fit within certain criteria that our Board may establish from time to time (such criteria, the “Board Established Criteria”). If no Board Established Criteria are in effect, then we will be notified of all such potential investment opportunities that fall within our current investment objective and principal investment strategies. The Adviser will determine whether it would be permissible, advisable or otherwise appropriate for us to pursue a particular investment opportunity referred to us for inclusion in our portfolio. For example, certain investment opportunities which otherwise fit within our investment strategies and objectives and any Board Established Criteria may not be suitable for us if they would cause us to violate asset coverage or concentration limitations imposed by the 1940 Act, the Code or the Amended Order (as defined below), be ineligible for financing under our financing arrangements, pose adverse legal, regulatory or tax risks, constrain our resources to make future investments, involve inappropriate investment risk or otherwise be inappropriate or inadvisable as an investment for us. If the Adviser deems participation in an investment referred to us to be appropriate, it will determine an appropriate size for our investment. If the aggregate interest in an investment opportunity across Sixth Street funds or investment vehicles, including us, exceeds the size of the opportunity, the Adviser would allocate to us our pro-rata share of the investment opportunity based on the size of each respective participating Sixth Street funds’ or investment vehicles’ demand for such opportunity.

While we seek to generate current income primarily in U.S.-domiciled middle-market companies through direct originations of senior secured loans, we may also invest up to 30% of our portfolio opportunistically in securities or other instruments of issuers not deemed eligible portfolio companies under the 1940 Act. These opportunities may include, among other things, debt issued by companies located outside the United States, publicly and privately traded debt and equity securities of companies listed on a national securities exchange with a market capitalization of $250 million or more, certain high yield bonds and other instruments or assets (including consumer and commercial loans). Many of these opportunities may be required to be offered to, or may be otherwise suitable for, other Sixth Street funds or investment vehicles, in which case the scope or size of opportunities otherwise available to us may be adversely affected or reduced. In the event that an investment opportunity falls outside of our Board Established Criteria and Sixth Street is not required to, and otherwise determines not to, direct these investment opportunities to an affiliated fund, we may be permitted to take them. The decision to allocate an opportunity as between us and other Sixth Street vehicles will take into account various factors that Sixth Street and our Adviser deem appropriate.

Our ability to pursue investment opportunities other than those that meet our Board Established Criteria is subject to the allocation decisions by Sixth Street senior professionals. Such opportunities may be required to be offered to, or may be otherwise suitable for, other Sixth Street funds or investment vehicles. As a result, the Adviser and its affiliates may face conflicts in allocating investment opportunities between us and those other entities. It is possible that we may not be given the opportunity to participate in certain investments made by Sixth Street vehicles that would otherwise be suitable for us if the investment falls outside of our Board Established Criteria. Sixth Street has organized separate investment vehicles, aimed specifically at middle-market loan originations and may in the future organize vehicles aimed at other loan origination opportunities outside our primary focus (for example, based on opportunity size or geography).

See “Certain Relationships and Related Party Transactions” in our Definitive Proxy Statement on Schedule 14A relating to our 2023 Annual Meeting of Stockholders filed with the SEC on April 13, 2023 (“2023 Annual Proxy”), and such section is incorporated by reference in this prospectus.

 

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Exemptive Order

On December 16, 2014, we were granted an exemptive order from the SEC (the “Prior Order”) that allows us to co-invest, subject to certain conditions and to the extent the size of an investment opportunity exceeds the amount our Adviser has independently determined is appropriate to invest, with certain of our affiliates (including affiliates of Sixth Street).

On January 16, 2020, we filed a further application for co-investment exemptive relief with the SEC to better align our existing co-investment relief with more recent SEC exemptive orders. On August 3, 2022, the SEC granted the new order (the “Amended Order”) in response to our application. The Amended Order superseded the Prior Order, and updated the conditions pursuant to which we could co-invest with certain of our affiliates (including affiliates of Sixth Street) in investment opportunities that fall within our Board Established Criteria.

We believe our ability to co-invest with Sixth Street affiliates is particularly useful where we identify larger capital commitments than otherwise would be appropriate for us. We expect that with the ability to co-invest with Sixth Street affiliates we will continue to be able to provide “one-stop” financing to a potential portfolio company in these circumstances, which may allow us to capture opportunities where we alone could not commit the full amount of required capital or would have to spend additional time to locate unaffiliated co-investors.

See “Regulation as a Business Development Company-Transactions with our Affiliates” in our 2022 Annual Report, and such section is incorporated by reference in this prospectus.

See “Certain Relationships and Related Party Transactions—Exemptive Order” in our 2023 Annual Proxy, and such section is incorporated by reference in this prospectus.

Stock Repurchase Plan

On August 4, 2015, the Company’s Board authorized the Company to acquire up to $50 million in aggregate of the Company’s common stock from time to time over an initial six month period, and has continued to authorize the refreshment of the $50 million amount authorized under and extension of the stock repurchase program prior to its expiration since that time, most recently as of November 15, 2023. The amount and timing of stock repurchases under the program may vary depending on market conditions, and no assurance can be given that any particular amount of common stock will be repurchased.

Summary of Risk Factors

Potential investors should be aware that an investment in our securities involves risk. We cannot assure you that our objectives will be achieved or guarantee a return on invested capital. In addition, there will be occasions when the Adviser and its affiliates may encounter potential conflicts of interest. See “Risk Factors” in this prospectus, our 2022 Annual Report and our 3Q 2023 Quarterly Report, as well as the other documents that are incorporated by reference in this prospectus or in any prospectus supplement, for a description of these and other risks relating to our business and investments in our securities, including that:

Risks Related to Our Business and Structure

 

   

We are dependent upon management personnel of the Adviser, Sixth Street and their affiliates for our future success.

 

   

We are subject to significant regulations governing our operation as a BDC, which affect our ability to, and the way in which we, raise additional capital. Changes in regulation could adversely affect our business.

 

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We borrow money, which magnifies the potential for gain or loss and increases the risk of investing in us.

 

   

We operate in a highly competitive market for investment opportunities.

 

   

If we are unable to source investments, access financing or manage future growth effectively, we may be unable to achieve our investment objective.

 

   

Even in the event the value of your investment declines, the Management Fee and, in certain circumstances, the Incentive Fee will still be payable to the Adviser.

 

   

To the extent that we do not realize income or choose not to retain after-tax realized net capital gains, we will have a greater need for additional capital to fund our investments and operating expenses.

 

   

We will be subject to corporate-level U.S. federal income tax if we are unable to maintain our qualification as a RIC under Subchapter M of the Code, including as a result of our failure to satisfy the RIC distribution requirements.

 

   

We can be expected to retain some income and capital gains in excess of what is permissible for excise tax purposes and such amounts will be subject to a nondeductible 4% U.S. federal excise tax.

 

   

Our Adviser and its affiliates, officers and employees may face certain conflicts of interest.

 

   

Our Adviser can resign on 60 days’ notice. We may not be able to find a suitable replacement within that time, resulting in a disruption in our operations and a loss of the benefits from our relationship with Sixth Street. Any new investment advisory agreement would require stockholder approval.

 

   

The Adviser’s liability is limited under the Investment Advisory Agreement, and we are required to indemnify the Adviser against certain liabilities, which may lead the Adviser to act in a riskier manner on our behalf than it would when acting for its own account.

 

   

Any failure to maintain our status as a BDC would reduce our operating flexibility.

 

   

We incur significant costs as a result of being a publicly traded company.

 

   

Provisions of the General Corporation Law of the State of Delaware and our certificate of incorporation and bylaws could deter takeover attempts and have an adverse effect on the price of our common stock.

 

   

Certain investors are limited in their ability to make significant investments in us.

 

   

Cybersecurity risks and cyber incidents may adversely affect our business or those of our portfolio companies.

 

   

Our Board may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

 

   

The interest rates of our debt investments to our portfolio companies and our indebtedness that extend beyond 2023 might be subject to change based on recent regulatory changes.

Risks Related to Economic Conditions

 

   

The COVID-19 pandemic has materially and adversely affected, and is likely to continue to materially and adversely affect, our portfolio companies and the results of our operations, including our financial results.

 

   

The current state of the economy and financial markets increases the likelihood of adverse effects on our financial position and results of operations.

 

   

Uncertainty about financial stability could have a significant adverse effect on our business, results of operations and financial condition.

 

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Economic recessions or downturns could impair our portfolio companies and harm our operating results.

Risks Related to Our Portfolio Company Investments

 

   

Our investments are very risky and highly speculative.

 

   

The value of most of our portfolio securities will not have a readily available market price and we value these securities at fair value as determined in good faith by our Board, which valuation is inherently subjective, may not reflect what we may actually realize for the sale of the investment and could result in a conflict of interest with the Adviser.

 

   

The lack of liquidity in our investments may adversely affect our business.

 

   

Our portfolio may be focused on a limited number of portfolio companies or industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.

 

   

We may securitize certain of our investments, which may subject us to certain structured financing risks.

 

   

Because we generally do not hold controlling interests in our portfolio companies, we may not be in a position to exercise control over those portfolio companies or prevent decisions by management of those portfolio companies that could decrease the value of our investments.

 

   

We are exposed to risks associated with changes in interest rates.

 

   

We may not be able to realize expected returns on our invested capital.

 

   

By originating loans to companies that are experiencing significant financial or business difficulties, we may be exposed to distressed lending risks.

 

   

Our portfolio companies in some cases may incur debt or issue equity securities that rank equally with, or senior to, our investments in those companies and we may be exposed to special risks associated with bankruptcy cases.

 

   

Our failure to make follow-on investments in our portfolio companies could impair the value of our investments.

 

   

Our ability to enter into transactions with our affiliates is restricted.

 

   

Any acquisitions or strategic investments that we pursue are subject to risks and uncertainties.

 

   

We cannot guarantee that we will be able to obtain various required licenses in U.S. states or in any other jurisdiction where they may be required in the future.

 

   

Our investments in foreign companies may involve significant risks in addition to the risks inherent in U.S. investments.

 

   

We expose ourselves to risks when we engage in hedging transactions.

 

   

The new market structure applicable to derivatives imposed by the Dodd-Frank Act may affect our ability to use over-the-counter (“OTC”) derivatives for hedging purposes.

 

   

Our portfolio investments may present special tax issues, and there are certain risks associated with holding debt obligations that have original issue discount or payment-in-kind interest.

Risks Related to Our Securities

 

   

There is a risk that investors in our common stock may not receive dividends or that our dividends may not grow over time.

 

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Investing in our securities may involve a high degree of risk and the market price of our common stock may fluctuate significantly and could decline.

 

   

Our stockholders will experience dilution in their ownership percentage if they opt out of our dividend reinvestment plan.

 

   

Purchases of our common stock by us under the Company 10b5-1 Plan may result in dilution to our net asset value per share and the price of our common stock being higher than the price that otherwise might exist in the open market.

General Risk Factors

 

   

We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividend.

 

   

Changes in laws or regulations governing our operations may adversely affect our business.

 

   

The effect of global climate change may impact the operations of our portfolio companies.

 

   

Legislation allows us to incur additional leverage.

 

   

We borrow money, which magnifies the potential for gain or loss and increases the risk of investing in us.

 

   

Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital.

 

   

Our indebtedness could adversely affect our business, financial conditions or results of operations.

 

   

Even in the event the value of your investment declines, the Management Fee and, in certain circumstances, the Incentive Fee will still be payable to the Adviser.

 

   

We will have broad discretion over the use of proceeds of any offering made pursuant to this prospectus, to the extent it is successful.

 

   

The net asset value per share of our common stock may be diluted if we sell or otherwise issue shares of our common stock at prices below the then-current net asset value per share of our common stock.

 

   

Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering. In addition, if the subscription price is less than our net asset value per share, then you will experience an immediate dilution of the aggregate net asset value of your shares.

 

   

We may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock and cause the net asset value and market value of our common stock to be more volatile.

 

   

Holders of any preferred stock we might issue would have the right to elect members of the board of directors and class voting rights on certain matters.

Corporate Information

Our principal executive offices are located at 2100 McKinney Avenue, Suite 1500, Dallas, TX 75201 and our telephone number is (469) 621-3001. Our corporate website is located at https://sixthstreetspecialtylending.com. Information on our website is not incorporated into or a part of this prospectus.

 

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THE OFFERING

We may offer, from time to time, in one or more offerings or series, our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock, or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, on terms to be determined at the time of the offering. We will offer our securities at prices and on terms to be set forth in one or more supplements to this prospectus. The offering price per share of our common stock, less any underwriting commissions or discounts, generally will not be less than the net asset value per share of our common stock at the time of an offering. However, we may issue shares of our common stock pursuant to this prospectus at a price per share that is less than our net asset value per share (a) in connection with a rights offering to our existing stockholders, (b) with the prior approval of the majority of our outstanding voting securities or (c) under such other circumstances as the SEC may permit. Any such issuance of shares of our common stock at a price per share below the net asset value per share of our common stock may be dilutive to the net asset value of our common stock. See “Risk Factors—Risks Related to Offerings Pursuant to This Prospectus.”

Pursuant to approval granted at a special meeting of stockholders held on May 25, 2023, we are currently permitted to sell or otherwise issue shares of our common stock at a price below our then-current net asset value per share, subject to the approval of our Board and certain other conditions. Such stockholder approval expires on May 25, 2024. We intend to propose the extension of this approval in future years.

We may offer our securities directly to one or more purchasers, including existing stockholders in a rights offering by us, through agents that we designate from time to time or to or through underwriters or dealers. The prospectus supplement relating to each offering will identify any agents or underwriters involved in the sale of our securities, and will set forth any applicable purchase price, fee, commission or discount arrangement between us and the agents or underwriters or among the underwriters or the basis upon which such amount may be calculated. See “Plan of Distribution.” We may not sell any of the securities pursuant to this registration statement through agents, underwriters or dealers without delivery of this prospectus and a prospectus supplement describing the method and terms of the offering of our securities.

Set forth below is additional information regarding offerings of our securities:

Use of Proceeds

Unless otherwise specified in a prospectus supplement, we intend to use the net proceeds from the sale of our securities for general corporate purposes, which may include, among other things, investing in portfolio companies in accordance with our investment objective and repaying indebtedness (which will be subject to reborrowing).

Each supplement to this prospectus relating to an offering will more fully identify the use of the proceeds from such offering. See “Use of Proceeds.”

 

Symbol on the NYSE    “TSLX”
Distributions    To the extent we have earnings available for distribution, we expect to continue distributing quarterly dividends to our stockholders. The specific tax characteristics of our distributions will be reported to stockholders after the end of the calendar year. Future quarterly dividends, if any, will be determined by our Board. See “Price Range of Common Stock and Distributions.”

 

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To maintain our tax treatment as a RIC, we must make certain distributions. See “Material U.S. Federal Income Tax Considerations-Regulated Investment Company Classification.”

Anti-Takeover Provisions    Our Board is divided into three classes of directors serving staggered three-year terms. This structure is intended to provide us with a greater likelihood of continuity of management, which may be necessary for us to realize the full value of our investments. A staggered board of directors also may serve to deter hostile takeovers or proxy contests, as may certain other measures adopted by us. See “Description of Our Capital Stock—Anti-Takeover Provisions.”
Leverage   

As a BDC, we are permitted under the 1940 Act to borrow funds or issue senior securities to finance a portion of our investments. As a result, we are exposed to the risks of leverage, which may be considered a speculative investment technique.

 

Leverage increases the potential for gain and loss on amounts invested and, as a result, increases the risks associated with investing in our securities. The costs associated with our borrowings, including any increase in the fees payable to the Adviser, are borne by our stockholders. Any decision on our part to use borrowings depends upon our assessment of the attractiveness of available investment opportunities in relation to the costs and perceived risks of such leverage. See “Regulation as a Business Development Company” in Part I, Item 1 of our 2022 Annual Report.

Dividend Reinvestment Plan    We have adopted a dividend reinvestment plan for our stockholders, which is an “opt out” dividend reinvestment plan. Under this plan, if we declare a cash dividend or other distribution, our stockholders who have not elected to “opt out” of our dividend reinvestment plan will have their cash distribution automatically reinvested in additional shares of our common stock, rather than receiving the cash distribution. If a stockholder elects to “opt out,” that stockholder will receive cash dividends or other distributions.
Taxation    We have elected to be treated as a RIC for U.S. federal income tax purposes. Our status as a RIC will enable us to deduct qualifying distributions to our stockholders, so that we will be subject to corporate-level U.S. federal income taxation only in respect of earnings that we retain and do not distribute.

To maintain our status as a RIC and to avoid being subject to corporate-level U.S. federal income taxation on our earnings, we must, among other things:

 

   

maintain our election under the 1940 Act to be treated as a BDC;

 

   

derive in each taxable year at least 90% of our gross income from dividends, interest, gains from the sale or other disposition of stock or securities and other specified categories of investment income; and

 

   

maintain diversified holdings.

 

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In addition, we must distribute (or be treated as distributing) in each taxable year dividends for tax purposes equal to at least 90% of our investment company taxable income and net tax-exempt income for that taxable year.

As a RIC, we generally will not be subject to corporate-level U.S. federal income tax on our investment company taxable income and net capital gains that we distribute to stockholders. If we fail to distribute our investment company taxable income or net capital gains on a timely basis, we will be subject to a nondeductible 4% U.S. federal excise tax. We can be expected to carry forward investment company taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income. We elected to retain a portion of income and capital gains for the nine months ended September 30, 2023. For the three and nine months ended September 30, 2023 we recorded a net expense of $0.5 million and $1.8 million, respectively, for U.S. federal excise tax and other taxes. For the three and nine months ended September 30, 2022, the Company recorded a net expense of $0.4 million and $1.5 million, respectively, for U.S. federal excise tax and other taxes and for the calendar years ended December 31, 2022 and 2021 and we recorded a net expense of, $2.6 million and $0.4 million, respectively, for U.S. federal excise tax as a result. Any carryover of investment company taxable income or net capital gains must be timely declared and distributed as a dividend in the taxable year following the taxable year in which the income or gains were earned. See “Price Range of Common Stock and Distributions” and “Material U.S. Federal Income Tax Considerations.”

Stockholders who receive dividends and other distributions in the form of shares of common stock generally are subject to the same U.S. federal tax consequences as stockholders who elect to receive their distributions in cash; however, since their cash dividends will be reinvested, those stockholders will not receive cash with which to pay any applicable taxes on reinvested dividends. See “Dividend Reinvestment Plan.”

Management Arrangements

Our Adviser serves as our investment adviser and our administrator. For more information regarding our Adviser and Sixth Street and our contractual arrangements with these companies, see “Management Agreements” in Part I, Item 1 of our 2022 Annual Report and Note 3 to our consolidated financial statements in our 3Q 2023 Quarterly Report.

Trading at a Discount

Shares of closed-end investment companies, including BDCs, frequently trade at a discount to their net asset value. We are not generally able to issue and sell our common stock at a price below our net asset value per share except (a) in connection with a rights offering to our existing stockholders, (b) with the prior approval of the majority of our outstanding voting securities or (c) under such other circumstances as the SEC may permit. The risk that our shares may trade at a discount to our net asset value is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our shares will trade at a price per share above, at or below net asset value per share. See “Risk Factors-Risks Related to Offerings Pursuant to This Prospectus.”

Available Information

We have filed with the SEC a registration statement on Form N-2, of which this prospectus is a part, under the Securities Act. This registration statement contains additional information about us and the securities being offered by this prospectus. We are also required to file periodic reports, current reports, proxy statements and other information with the SEC.

We maintain a website at https://sixthstreetspecialtylending.com and make all of our periodic and current reports, proxy statements and other information available, free of charge, on or through our website. Information

 

16


on our website is not incorporated into or part of this prospectus. You may also obtain such information free of charge by contacting us in writing at 888 7th Avenue, 41st Floor, New York, NY 10106, Attention: TSLX Investor Relations, or by emailing us at IRTSLX@sixthstreet.com.

Information Incorporated by Reference

The rules of the SEC allow us to incorporate by reference information into this prospectus. The information incorporated by reference is considered to be a part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. See “Information Incorporated by Reference” for more information.

 

17


FEES AND EXPENSES

The following table is intended to assist you in understanding the costs and expenses that an investor in our common stock will bear directly or indirectly in the twelve months after the date of this prospectus, based on the assumptions set forth below. We caution you that some of the percentages indicated in the table below are estimates and may vary. The following table should not be considered a representation of our future expenses, which may be greater or less than shown. Future expenses will depend on many factors, including our use of leverage, which may vary periodically depending on market conditions, our portfolio composition and our Adviser’s assessment of risks and returns. However, our total borrowings are limited under the 1940 Act so that we may not incur any additional leverage if doing so would cause our asset coverage ratio to fall below 150%, as defined in the 1940 Act. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “us,” the “Company” or “Sixth Street Specialty Lending, Inc.” or says that “we” will pay fees or expenses, stockholders will indirectly bear these fees or expenses as investors in Sixth Street Specialty Lending, Inc.

 

Stockholder transaction expenses (as a percentage of offering price):

     

Sales load

     —         (1  ) 

Offering expenses

     —         (2  ) 

Dividend reinvestment plan expenses

     —         (3  ) 

 

Estimated annual expenses (as a percentage of net assets attributable to common stock)(4):

    

Management Fee payable under the Investment Advisory Agreement

     2.97     (5  ) 

Incentive Fee payable under the Investment Advisory Agreement

     2.49       (6  ) 

Interest payments on borrowed funds

     4.17       (7  ) 

Other expenses

     1.20       (8  ) 

Total annual expenses

     10.83  

 

(1)

In the event that the securities to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement will disclose the applicable sales load (underwriting discount or commission).

 

(2)

The related prospectus supplement will disclose the estimated amount of offering expenses, the offering price and the offering expenses borne by us as a percentage of the offering price.

 

(3)

The expenses of the dividend reinvestment plan are included in “Other expenses” in the table above. The plan administrator’s fees will be paid by us. There are no brokerage charges or other charges to stockholders who participate in the plan, except that if a participant elects by written notice to the plan administrator to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15.00 transaction fee plus a brokerage commission from the proceeds. For additional information, see “Dividend Reinvestment Plan.”

 

(4)

The net assets attributable to common stock used to calculate the percentages in this table reflect our net assets of $1,341.6 million as of December 31, 2022.

 

(5)

The Management Fee is 1.5% of the average value of our gross assets (including cash and cash equivalents and assets purchased with borrowed amounts) using the values at the end of the two most recently completed calendar quarters, adjusted for any share issuances or repurchases during the period. We may from time to time decide it is appropriate to change the terms of our Investment Advisory Agreement. Under the 1940 Act, any material change to our Investment Advisory Agreement must be submitted to stockholders for approval. See “Management Agreements” in Part I, Item 1 of our 2022 Annual Report and in Note 3 to our consolidated financial statements in our 3Q 2023 Quarterly Report.

 

18


The Management Fee reflected in the table is calculated by determining the ratio that the Management Fee for the year ended December 31, 2022 bears to our net assets attributable to common stock (rather than our gross assets).

From time to time, our Adviser voluntarily has waived certain Management Fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Management Fees” in Part II, Item 7 of our 2022 Annual Report and in Part I, Item 2 of our 3Q 2023 Quarterly Report. The above estimates are based on our actual Management Fees for the year ended December 31, 2022. For the year ended December 31, 2022, Management Fees of $0.4 million were waived consisting solely of Management Fees pursuant to the Leverage Waiver.

The Adviser intends to waive a portion of the Management Fee payable under the Investment Advisory Agreement by reducing the Management Fee on assets financed using leverage over 200% asset coverage (in other words, over 1.0x debt to equity) (the “Leverage Waiver”). Pursuant to the Leverage Waiver, the Adviser intends to waive the portion of the Management Fee in excess of an annual rate of 1.0% (0.250% per quarter) on the average value of the Company’s gross assets as of the end of the two most recently completed calendar quarters that exceeds the product of (i) 200% and (ii) the average value of our net asset value at the end of the two most recently completed calendar quarters. For the three and nine months ended September 30, 2023, Management Fees of $0.3 million and $0.8 million have been waived pursuant to the Leverage Waiver. We may have capital gains and interest income that could result in the payment of an Incentive Fee to the Adviser in the twelve months after the date of this prospectus. The Incentive Fee payable in the example below is based upon our actual results for the year ended December 31, 2022 and assumes that the Incentive Fee is 17.5% for all relevant periods. However, the Incentive Fee payable to the Adviser is based on our performance and will not be paid unless we achieve certain goals.

 

(6)

The Incentive Fee consists of two parts, as follows:

(i) The first component, payable at the end of each quarter in arrears, equals 100% of the pre-Incentive Fee net investment income in excess of a 1.5% quarterly “hurdle rate,” the calculation of which is further explained below, until the Adviser has received 17.5% of the total pre-Incentive Fee net investment income for that quarter and, for pre-Incentive Fee net investment income in excess of 1.82% quarterly, 17.5% of all remaining pre-Incentive Fee net investment income for that quarter. The 100% “catch-up” provision for pre-Incentive Fee net investment income in excess of the 1.5% “hurdle rate” is intended to provide the Adviser with an Incentive Fee of 17.5% on all pre-Incentive Fee net investment income when that amount equals 1.82% in a quarter (7.28% annualized), which is the rate at which catch-up is achieved. Once the “hurdle rate” is reached and catch-up is achieved, 17.5% of any pre-Incentive Fee net investment income in excess of 1.82% in any quarter is payable to the Adviser.

Pre-Incentive Fee net investment income means dividends, interest and fee income accrued by us during the calendar quarter, minus our operating expenses for the quarter (including the Management Fee, expenses payable under the Administration Agreement to the Administrator, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee). Pre-Incentive Fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay-in-kind interest and zero coupon securities), accrued income that we may not have received in cash. Pre-Incentive Fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital gains or losses.

(ii) The second component, payable at the end of each fiscal year in arrears, equaled 15% through March 31, 2014 and, beginning April 1, 2014, equals a weighted percentage of cumulative realized capital gains from the Company’s inception to the end of that fiscal year, less cumulative realized capital losses and unrealized

 

19


capital losses. This component of the Incentive Fee is referred to as the Capital Gains Fee. Each year, the fee paid for this component of the Incentive Fee is net of the aggregate amount of any previously paid Capital Gains Fee for prior periods. For capital gains that accrue following March 31, 2014, the Incentive Fee rate is 17.5%. The Company accrues, but does not pay, a capital gains Incentive Fee with respect to unrealized capital gains because a capital gains Incentive Fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain. The weighted percentage is intended to ensure that for each fiscal year following the completion of the IPO, the portion of the Company’s realized capital gains that accrued prior to March 31, 2014, is subject to an Incentive Fee rate of 15% and the portion of the Company’s realized capital gains that accrued beginning April 1, 2014 is subject to an Incentive Fee rate of 17.5%. As of March 31, 2020, there are no remaining investments that were made prior to April 1, 2014, and as a result, the Incentive Fee rate of 17.5% is applicable to any future realized capital gains..

For purposes of determining whether pre-Incentive Fee net investment income exceeds the hurdle rate, pre-Incentive Fee net investment income is expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter.

Pre-Incentive Fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital gains or losses. Because of the structure of the Incentive Fee, it is possible that we may pay an Incentive Fee in a quarter in which we incur a loss. For example, if we receive pre-Incentive Fee net investment income in excess of the quarterly minimum hurdle rate, we will pay the applicable Incentive Fee even if we have incurred a loss in that quarter due to realized and unrealized capital losses. In addition, because the quarterly minimum hurdle rate is calculated based on our net assets, decreases in our net assets due to realized or unrealized capital losses in any given quarter may increase the likelihood that the hurdle rate is reached and therefore the likelihood of us paying an Incentive Fee for that quarter. Our net investment income used to calculate this component of the Incentive Fee is also included in the amount of our gross assets used to calculate the Management Fee because gross assets are total assets (including cash received) before deducting liabilities (such as declared dividend payments).

Section 205(b)(3) of the Advisers Act, as amended, prohibits the Adviser from receiving the payment of fees on unrealized gains until those gains are realized, if ever. There can be no assurance that such unrealized gains will be realized in the future.

See Note 3 to our consolidated financial statements in our 2022 Annual Report and our 3Q 2023 Quarterly Report and “Management Agreements-Investment Advisory Agreement; Administration Agreement; License Agreement” in Part I, Item 1 of our 2022 Annual Report and Note 3 to our consolidated financial statements in our 3Q 2023 Quarterly Report.

From time to time, our Adviser has voluntarily waived certain Incentive Fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Incentive Fees” in Part II, Item 7 of our 2022 Annual Report and in Part I, Item 2 of our 3Q 2023 Quarterly Report. The above estimates do not reflect or assume any such waivers.

 

(7)

Interest payments on borrowed funds is based on our interest expense for the year ended December 31, 2022 under our credit facilities excluding fees (such as fees on undrawn amounts and amortization of upfront fees) and including the swap-adjusted interest expense related to our 2022 Convertible Notes, 2023 Notes, 2024 Notes and 2026 Notes. This item is based on the assumption that our borrowings and interest costs after an offering will remain similar to those prior to such offering. We may borrow additional funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. On October 8, 2018, our stockholders approved the application of the minimum asset coverage ratio of 150% to us, as set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCAA.

 

20


(8)

Includes our overhead expenses, such as payments under the Administration Agreement for certain expenses incurred by the Adviser, and excise taxes. See “Management Agreements-Investment Advisory Agreement; Administration Agreement; License Agreement” in Part I, Item 1 of our 2022 Annual Report and Note 3 to our consolidated financial statements in our 3Q 2023 Quarterly Report. The expenses in this table are based on our actual other expenses and excise taxes for the year ended December 31, 2022.

Example

The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed we would have no additional leverage and that our annual operating expenses would remain at the levels set forth in the table above. The Incentive Fee payable in the example below assumes that the Incentive Fee is 17.5% for all relevant periods. Transaction expenses are not included in the following example. In the event that shares to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement will restate this example to reflect the applicable sales load and offering expenses.

 

     1 year      3 years      5 years      10 years  

You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return from realized capital gains

   $ 92      $ 265      $ 423      $ 765  

The foregoing table is to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. Because the income portion of the Incentive Fee under the Investment Advisory Agreement is unlikely to be significant assuming a 5% annual return, the example assumes that the 5% annual return will be generated entirely through the realization of capital gains on our assets and, as a result, will trigger the payment of the capital gains portion of the Incentive Fee under the Investment Advisory Agreement. The income portion of the Incentive Fee under the Investment Advisory Agreement, which, assuming a 5% annual return, would either not be payable or have an immaterial impact on the expense amounts shown above, is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an Incentive Fee of a material amount, our expenses, and returns to our investors, would be higher. In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, under certain circumstances, reinvestment of dividends and other distributions under our dividend reinvestment plan may occur at a price per share that differs from net asset value. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.

This example and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.

 

21


FINANCIAL HIGHLIGHTS

The financial data set forth in the following table as of and for the years ended December 31, 2022, 2021, 2020, 2019, 2018, 2017, 2016, 2015, 2014 and 2013 are derived from our consolidated financial statements, which have been audited by KPMG LLP, an independent registered public accounting firm whose reports thereon are incorporated by reference in this prospectus, certain documents incorporated by reference in this prospectus or the accompanying prospectus supplement, or our Annual Reports on Form 10-K filed with the SEC, which may be obtained from www.sec.gov or upon request. The financial data set forth in the following table as of and for the nine months ended September 30, 2023, is derived from our unaudited financial statements, but in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) that are necessary to present fairly the results of such interim period. Interim results as of and for the nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. You should read these financial highlights in conjunction with our consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference into this prospectus, any documents incorporated by reference in this prospectus or the accompanying prospectus supplement, or our Annual Reports on Form 10-K filed with the SEC.

 

    Nine Months
Ended
September 30,
2023
    Year Ended
December 31,
2022
    Year Ended
December 31,
2021
    Year Ended
December 31,
2020
    Year Ended
December 31,
2019
    Year Ended
December 31,
2018
 

Per Share Data(8)

           

Net asset value, beginning of period

  $ 16.48     $ 16.84     $ 17.16     $ 16.83     $ 16.25     $ 16.09  

Net investment income(1)

    1.68       2.13       1.97       2.19       1.94       2.25  

Net realized and unrealized gains (losses)(1)

    0.35       (0.75     0.96       0.46       0.40       (0.39
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total from operations

    2.03       1.38       2.93       2.65       2.34       1.86  

Issuance of common stock, net of offering costs(2)

    0.03       0.04       0.31       0.01       0.04       0.08  

Settlement of 2022 Convertible Notes(2)

    —        0.08       0.03       —        —        —   

Repurchase of common stock(2)

    —        (0.02     —        0.01       —        —   

Repurchase of debt(2)

    —        —        —        (0.01     —        —   

Dividends declared from net investment income(2)

    —        (1.59     (2.80     (2.07     (1.81     (1.77

Dividends declared from realized gains(2)

    (1.57     (0.25     (0.79     (0.23     —        (0.01
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total increase/(decrease) in net assets

    0.49       (0.36     (0.32     0.33       0.58       0.16  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Asset Value, End of Period

  $ 16.97     $ 16.48     $ 16.84     $ 17.16     $ 16.83     $ 16.25  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Year Ended
December 31,
2017
    Year Ended
December 31,
2016
    Year Ended
December 31,
2015
    Year Ended
December 31,
2014
    Year Ended
December 31,
2013
 

Per Share Data(8)

         

Net asset value, beginning of period

  $ 15.95     $ 15.15     $ 15.53     $ 15.52     $ 15.19  

Net investment income(1)

    2.00       1.83       1.76       2.07       1.66  

Net realized and unrealized gains (losses)(1)

    (0.14     0.51       (0.58     (0.33     0.23  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total from operations

    1.86       2.34       1.18       1.74       1.89  

Issuance of common stock, net of offering costs(2)

    0.03       0.03       —        (0.20     —   

Settlement of 2022 Convertible Notes(2)

    —        —        —        —        —   

Repurchase of common stock(2)

    —        —        —        —        —   

Repurchase of debt(2)

    —        —        —        —        —   

Dividends declared from net investment income(2)

    (1.53     (1.39     (1.15     (1.51     (1.36

Dividends declared from realized gains(2)

    (0.22     (0.17     (0.41     (0.02     (0.20
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total increase/(decrease) in net assets

    0.14       0.81       (0.38     0.01       0.33  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Asset Value, End of Period

  $ 16.09     $ 15.95     $ 15.15     $ 15.53     $ 15.52  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

22


    Nine Months
Ended
September 30,
2023
    Year Ended
December 31,
2022
    Year Ended
December 31,
2021
    Year Ended
December 31,
2020
    Year Ended
December 31,
2019
    Year Ended
December 31,
2018
 

Per share market value at end of period

  $ 20.44     $ 17.80     $ 23.39     $ 20.75     $ 21.47     $ 18.09  

Total return based on market value with reinvestment of dividends(3)

    23.65     (15.78 )%      32.80     11.24     30.57     4.24

Total return based on market value(4)

    25.14     (16.03 )%      30.02     7.36     28.69     0.35

Total return based on net asset value(5)

    12.49     8.79     19.06     15.63     14.71     12.06

Shares Outstanding, End of Period

    87,546,498       81,389,287       75,771,542       67,684,209       66,524,591       65,412,817  

Ratios / Supplemental Data(6)

           

Ratio of net expenses to average net assets(7)

    16.71     11.05     11.17     11.10     11.27     11.32

Ratio of net investment income to average net assets

    13.39     12.85     11.67     13.26     11.73     13.80

Portfolio turnover

    16.12     26.67     44.23     41.88     30.89     44.57

Net assets, end of period

  $ 1,485,822     $ 1,341,569     $ 1,275,848     $ 1,161,315     $ 1,119,297     $ 1,063,202  

 

    Year Ended
December 31,
2017
    Year Ended
December 31,
2016
    Year Ended
December 31,
2015
    Year Ended
December 31,
2014
    Year Ended
December 31,
2013
 

Per share market value at end of period

  $ 19.80     $ 18.68     $ 16.22     $ 16.82       —   

Total return based on market value with reinvestment of dividends(3)

    15.75     26.74     5.75     12.28     —   

Total return based on market value(4)

    15.36     24.78     5.71     14.69     —   

Total return based on net asset value(5)

    11.87     15.54     7.62     9.92     12.44

Shares Outstanding, End of Period

    60,247,201       59,716,205       54,163,960       53,797,358       37,026,023  

Ratios / Supplemental Data(6)

         

Ratio of net expenses to average net assets(7)

    9.41     9.39     9.31     7.56     6.60

Ratio of net investment income to average net assets

    12.49     11.84     11.35     13.42     10.80

Portfolio turnover

    58.08     37.40     34.51     53.16     26.97

Net assets, end of period

  $ 969,284     $ 952,212     $ 820,741     $ 835,405     $ 574,696  

 

(1)

The per share data was derived by using the weighted average shares outstanding during the period.

(2)

The per share data was derived by using the actual shares outstanding at the date of the relevant transactions.

(3)

Total return based on market value with dividends reinvested is calculated as the change in market value per share during the period plus declared dividends per share, assuming reinvestment of dividends, divided by the beginning market value per share.

(4)

Total return based on market value is calculated as the change in market value per share during the period plus declared dividends per share, divided by the beginning market value per share.

(5)

Total return based on net asset value is calculated as the change in net asset value per share during the period plus declared dividends per share, divided by the beginning net asset value per share.

(6)

The ratios reflect an annualized amount.

(7)

The ratio of net expenses to average net assets in the table above reflects the Adviser’s waivers of its right to receive a portion of the Management Fee pursuant to the Leverage Waiver for the nine months ended September 30, 2023. Excluding the effects of the waivers, the ratio of net expenses to average net assets would have been 16.79%, for the nine months ended September 30, 2023. The ratio of net expenses to average net assets in the table above reflects the Adviser’s waivers of its right to receive a portion of the Management Fee pursuant to the Leverage Waiver for the years ended December 31, 2022 and 2021 and the Adviser’s waivers of its right to receive a portion of the Management and Incentive Fees with respect to the Company’s ownership of shares of common stock of Oxford Square Capital Corp. and Triangle Capital Corp for the year ended December 31, 2018. Excluding the effects of the waivers, the ratio of net expenses to average net assets would have been 11.08%, 11.19% and 11.33% for the years ended December 31, 2022, 2021 and 2018, respectively. The Adviser did not waive any Management Fees or Incentive Fees for the years ended December 31, 2020 and 2019. Excluding the effects of the waivers, the ratio of net expenses to average net assets would have been 9.42%, 9.43% and 9.33% for the years ended December 31, 2017, 2016 and 2015, respectively. For the years ended December 31, 2014 and 2013, the Company did not own any shares of common stock of TICC Capital Corp. or Triangle Capital Corp. For the years ended December 31, 2014 and 2013, the ratio of net expenses to average net assets in the table above reflects the Adviser’s waivers of its right to receive a portion of the Management Fee prior to the Company’s IPO. Excluding the effects of the waiver, the ratio of net expenses to average net assets would have been 7.88%, and 7.94% for the years ended December 31, 2014 and 2013, respectively.

(8)

Table may not sum due to rounding.

 

23


RISK FACTORS

Investing in our securities involves a number of significant risks. You should carefully consider the risks set out below and described in Part I, Item 1A, “Risk Factors,” in our 2022 Annual Report and Part I, Item IA, “Risk Factors,” in our quarterly report on Form 10-Q for the three months ended March 31, 2023 (the “1Q 2023 Quarterly Report”), in our quarterly report on Form 10-Q for the three months ended June 30, 2023 (the “2Q 2023 Quarterly Report”), and in our 3Q 2023 Quarterly Report, which are incorporated by reference in this prospectus, together with the other information set forth in this prospectus or in any prospectus supplement and in the other documents that we include or incorporate by reference into this prospectus before making a decision about investing in our securities. The risks and uncertainties set out below and discussed in our 2022 Annual Report, 1Q 2023 Quarterly Report, 2Q 2023 Quarterly Report, and 3Q 2023 Quarterly Report are not the only ones we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also materially and adversely affect our business, financial condition and results of operations. In such case, our net asset value and the trading price of our securities could decline, and you may lose all or part of your investment.

Risks Related to Offerings Pursuant to This Prospectus

We will have broad discretion over the use of proceeds of any offering made pursuant to this prospectus, to the extent it is successful.

We will have significant flexibility in applying the proceeds of any offering made pursuant to this prospectus. For example, we may pay operating expenses from net proceeds, which could limit our ability to achieve our investment objective.

The net asset value per share of our common stock may be diluted if we sell or otherwise issue shares of our common stock at prices below the then-current net asset value per share of our common stock.

Pursuant to approval granted at a special meeting of stockholders held on May 25, 2023, we are currently permitted to sell or otherwise issue shares of our common stock at a price below our then-current net asset value per share, subject to the approval of our Board and certain other conditions. Such stockholder approval expires on May 25, 2024. We intend to propose the extension of this approval in future years.

Any decision to sell or otherwise issue shares of our common stock below our then-current net asset value per share would be subject to the determination by our board of directors that such issuance or sale is in our and our stockholders’ best interests.

If we were to sell or otherwise issue shares of our common stock below our then-current net asset value per share, such issuances or sales would result in an immediate dilution to the net asset value per share of our common stock. This dilution would occur as a result of the issuance or sale of shares at a price below the then-current net asset value per share of our common stock and a proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such issuance or sale. Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted.

Further, if our current stockholders do not purchase any shares to maintain their percentage interest, regardless of whether such offering is above or below the then-current net asset value per share, their voting power will be diluted. For additional information and hypothetical examples of these risks, see “Sales of Common Stock Below Net Asset Value” and the prospectus supplement pursuant to which such sale is made.

 

24


Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering. In addition, if the subscription price is less than our net asset value per share, then you will experience an immediate dilution of the aggregate net asset value of your shares.

In the event we issue subscription rights, stockholders who do not fully exercise their subscription rights should expect that they will, at the completion of a rights offering pursuant to this prospectus, own a smaller proportional interest in us than would otherwise be the case if they fully exercised their rights. We cannot state precisely the amount of any such dilution in share ownership because we do not know at this time what proportion of the shares will be purchased as a result of such rights offering.

In addition, if the subscription price is less than the net asset value per share of our common stock, then our stockholders would experience an immediate dilution of the aggregate net asset value of their shares as a result of the offering. The amount of any decrease in net asset value is not predictable because it is not known at this time what the subscription price and net asset value per share will be on the expiration date of a rights offering or what proportion of the shares will be purchased as a result of such rights offering. Such dilution could be substantial.

We may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock and cause the net asset value and market value of our common stock to be more volatile.

The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive and could make the net asset value and market value of our common stock more volatile. Payment of dividends and repayment of the liquidation preference of preferred stock would take preference over any dividends or other payments to our common stockholders, and holders of preferred stock would not be subject to any of our expenses or losses and would not be entitled to participate in any income or appreciation in excess of their stated preference (other than convertible preferred stock that converts into common stock). If the dividend rate on the preferred stock were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of the common stock would be reduced. If the dividend rate on the preferred stock were to exceed the net rate of return on our portfolio, the leverage would result in a lower rate of return to the holders of common stock than if we had not issued preferred stock. Any decline in the net asset value of our investments would be borne entirely by the holders of common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in net asset value to the holders of common stock than if we were not leveraged through the issuance of preferred stock. This greater net asset value decrease would also tend to cause a greater decline in the market price for the common stock. We might be in danger of failing to maintain the required asset coverage of the preferred stock or of losing our ratings on the preferred stock or, in an extreme case, our current investment income might not be sufficient to meet the dividend requirements on the preferred stock. In order to counteract such an event, we might need to liquidate investments in order to fund a redemption of some or all of the preferred stock. In addition, under the 1940 Act, preferred stock constitutes a “senior security” for purposes of the asset coverage test.

Holders of any preferred stock we might issue would have the right to elect members of the board of directors and class voting rights on certain matters.

Holders of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of the Board at all times and in the event dividends become two full years in arrears would have the right to elect a majority of the directors until such arrearage is completely eliminated. In addition, preferred stockholders may have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and, accordingly, could veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of our credit facilities, might impair our ability to maintain our qualification as a RIC for federal income

 

25


tax purposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements.

 

26


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict, that could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

In addition to factors identified elsewhere in this prospectus and the documents incorporated by reference herein, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

 

   

an economic downturn could impair our portfolio companies’ abilities to continue to operate, which could lead to the loss of some or all of our investments in those portfolio companies;

 

   

such an economic downturn could disproportionately impact the companies in which we have invested and others that we intend to target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies;

 

   

such an economic downturn could also impact availability and pricing of our financing;

 

   

an inability to access the capital markets could impair our ability to raise capital and our investment activities;

 

   

inflation could negatively impact our business, including our ability to access the debt markets on favorable terms, or could negatively impact our portfolio companies; and

 

   

the risks, uncertainties and other factors we identify in the section entitled “Risk Factors” in this prospectus and in Part I, Item 1A of our 2022 Annual Report and Part II, Item 1A of our 3Q 2023 Quarterly Report, and those discussed in other documents we file with the SEC.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions are based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include, among other things, those described or identified in the section entitled “Risk Factors” in this prospectus and in Part I, Item 1A and Part II, Item 1A of our 3Q 2023 Quarterly Report, and in our 2022 Annual Report and those discussed in other documents we file with the SEC and elsewhere in this prospectus and the documents incorporated by reference herein. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein or therein, except as required by applicable law. You should understand that, under Section 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements made in connection with any offering of securities pursuant to this prospectus.

The “TSLX” and “TAO” marks are marks of Sixth Street.

 

27


USE OF PROCEEDS

Unless otherwise specified in a prospectus supplement, we intend to use the net proceeds from the sale of our securities pursuant to this prospectus for general corporate purposes, which may include investing in portfolio companies in accordance with our investment objective and strategies described in this prospectus and repaying indebtedness (which will be subject to reborrowing). The supplement to this prospectus relating to an offering will more fully identify the use of the proceeds from such offering.

We estimate that it will take less than three months for us to substantially invest the net proceeds of any offering made pursuant to this prospectus, depending on the availability of attractive opportunities, market conditions and the amount raised.

Proceeds not immediately used for new investments or the temporary repayment of debt will be invested primarily in cash, cash equivalents, U.S. government securities and other high-quality investments that mature in one year or less from the date of investment. These securities may have lower yields than the types of investments we would typically make in accordance with our investment objective and, accordingly, may result in lower dividends, if any, during such period.

 

28


PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

Our common stock is traded on the NYSE under the symbol “TSLX.” Our common stock has historically traded at prices both above and below our net asset value per share. It is not possible to predict whether our common stock will trade at a price per share at, above or below net asset value per share. See “Risk Factors—Risks Related to Offerings Pursuant to This Prospectus.”

The following table sets forth the net asset value per share of our common stock, the range of high and low closing sales prices of our common stock reported on the NYSE, the closing sales price as a premium (discount) to net asset value and the dividends declared by us in each fiscal quarter for the year ending December 31, 2023, and for the years ended December 31, 2022 and December 31, 2021. On December 20, 2023, the last reported closing sales price of our common stock on the NYSE was $21.08 per share, which represented a premium of approximately 24.2% to the net asset value per share reported by us as of September 30, 2023, the last date prior to the date of this prospectus for which we reported net asset value.

 

            Price Range      High Sales
Price to Net
Asset
Value(2)
    Low Sales
Price to
Net Asset
Value
    Cash
Dividend
Per
Share(3)
 
   NAV(1)      High      Low  

Year ended December 31, 2021

               

First Quarter

   $ 16.47      $ 22.76      $ 20.46        38.2     24.2   $ 1.71  

Second Quarter

     16.85        22.78        20.80        35.2     23.4     0.47  

Third Quarter

     17.18        23.97        21.13        39.5     23.0     0.43  

Fourth Quarter

     16.84        24.74        21.97        47.0     30.5     0.98  

Year ended December 31, 2022

               

First Quarter

   $ 16.88      $ 24.27      $ 22.40        43.8     23.0   $ 0.52  

Second Quarter

     16.27        23.64        18.09        45.3     11.2     0.45  

Third Quarter

     16.36        19.64        6.13        19.9     (1.4 )%      0.42  

Fourth Quarter

     16.48      19.14        16.56        16.1     0.5     0.45  

Year ending December 31, 2023

               

First Quarter

   $ 16.59      $ 19.83      $ 16.86        19.5     1.6   $ 0.55  

Second Quarter

     16.74        20.08        17.31        20.0     3.4     0.50  

Third Quarter

     16.97        20.97        19.02        23.6     12.1     0.52  

Fourth Quarter (through December 20, 2023)

     *        21.49        19.05        *     *     0.53  

 

(1)

Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low closing sales prices. The net asset values shown are based on outstanding shares at the end of the relevant quarter.

 

(2)

Calculated as the respective high or low closing sales price less net asset value, divided by net asset value (in each case, as of the applicable quarter). Does not reflect intraday trading prices.

 

(3)

Represents the dividends declared in the relevant quarter.

 

*

Net asset value has not yet been reported for this period.

To the extent we have earnings available for distribution, we expect to continue distributing quarterly dividends to our stockholders. Our quarterly dividends, if any, will be determined by our Board. Any dividends to our stockholders will be declared out of assets legally available for distribution.

 

29


The following tables summarize dividends declared during the nine months ended September 30, 2023 and years ended December 31, 2022 and 2021:

 

     Nine Months Ended September 30, 2023  
Date Declared    Dividend      Record Date      Payment Date      Dividend
per Share
 

February 16, 2023

     Supplemental        February 28, 2023        March 20, 2023      $ 0.09  

February 16, 2023

     Base        March 15, 2023        March 31, 2023        0.46  

May 8, 2023

     Supplemental        May 31, 2023        June 20, 2023        0.04  

May 8, 2023

     Base        June 15, 2023        June 30, 2023        0.46  

August 3, 2023

     Supplemental        August 31, 2023        September 20, 2023        0.06  

August 3, 2023

     Base        September 15, 2023        September 29, 2023        0.46  
           

 

 

 

Total Dividends Declared

            $ 1.57  
           

 

 

 

 

     Year Ended December 31, 2022  
Date Declared    Dividend      Record Date      Payment Date      Dividend
per Share
 

February 17, 2022

     Supplemental        February 28, 2022        March 31, 2022      $ 0.11  

February 17, 2022

     Base        March 15, 2022        April 18, 2022        0.41  

May 3, 2022

     Supplemental        May 31, 2022        September 30, 2022        0.04  

May 3, 2022

     Base        June 15, 2022        July 15, 2022        0.41  

August 2, 2022

     Base        September 15, 2022        September 30, 2022        0.42  

November 1, 2022

     Base        December 15, 2022        December 30, 2022        0.45  
           

 

 

 

Total Dividends Declared

            $ 1.84  
           

 

 

 

 

     Year Ended December 31, 2021  
Date Declared    Dividend      Record Date      Payment Date      Dividend
per Share
 

February 17, 2021

     Supplemental        February 26, 2021        March 31, 2021      $ 0.05  

February 17, 2021

     Base        March 15, 2021        April 15, 2021        0.41  

February 17, 2021

     Special        March 25, 2021        April 8, 2021        1.25  

May 4, 2021

     Supplemental        May 28, 2021        June 30, 2021        0.06  

May 4, 2021

     Base        June 15, 2021        July 15, 2021        0.41  

August 3, 2021

     Supplemental        August 31, 2021        September 30, 2021        0.02  

August 3, 2021

     Base        September 15, 2021        October 15, 2021        0.41  

November 2, 2021

     Supplemental        November 30, 2021        December 31, 2021        0.07  

November 2, 2021

     Special        December 7, 2021        December 20, 2021        0.50  

November 2, 2021

     Base        December 15, 2021        January 14, 2022        0.41  
           

 

 

 

Total Dividends Declared

            $ 3.59  
           

 

 

 

The dividends declared during the nine months ended September 30, 2023 were derived from net investment income, determined on a tax basis. The dividends declared during the year ended December 31, 2022 were derived from net investment income and net realized capital gains, determined on a tax basis.

To the extent that the amounts distributed by us are in excess of our current and accumulated earnings and profits, such excess distributions will be treated first as a return of capital to the extent of a stockholder’s tax basis in his or her shares and then as capital gain. Reducing a stockholder’s tax basis will have the effect of increasing his or her gain (or reducing loss) on a subsequent sale of shares. The specific tax characteristics of the dividend will be reported to stockholders after the end of the calendar year.

To be treated as a regulated investment company, or a RIC, for U.S. federal income tax purposes and therefore to avoid being subject to corporate-level U.S. federal income taxation of our earnings, we must

 

30


distribute (or be treated as distributing) in each taxable year dividends for tax purposes equal to at least 90% of our investment company taxable income (as defined by the Code) and 90% of our net tax-exempt income to our stockholders in that taxable year. In addition, we generally will be subject to a nondeductible U.S. federal excise tax equal to 4% of the amount by which our distributions for a calendar year are less than the sum of:

 

   

98% of our net ordinary income, excluding certain ordinary gains and losses, recognized during such calendar year;

 

   

98.2% of our capital gain net income, adjusted for certain ordinary gains and losses, recognized for the twelve-month period ending on October 31 of such calendar year; and

 

   

100% of income or gains recognized, but not distributed, in preceding years.

For these purposes, we will be deemed to have distributed any net ordinary taxable income or capital gain net income on which we have paid U.S. federal income tax. Depending on the level of taxable income earned in a calendar year, we may choose to carry forward taxable income for distribution in the following calendar year, and pay any applicable U.S. federal excise tax. We elected to retain a portion of income and capital gains for the nine months ended September 30, 2023 and for calendar years ended December 31, 2022 and 2021 for purposes of additional liquidity and we recorded a net expense of $1.8 million for the nine months ended September 30, 2023 and $2.2 million and $0.7 million for the years ended December 31, 2022, and December 31, 2021, respectively, for U.S. federal excise tax as a result. We cannot assure you that we will achieve results that will permit the payment of any dividends. See “Risk Factors—Risks Related to Our Business and Structure—We will be subject to corporate-level U.S. federal income tax if we are unable to maintain our qualification as a RIC under Subchapter M of the Code, including as a result of our failure to satisfy the RIC distribution requirements” in Part I, Item 1A of our 2022 Annual Report.

We also intend to distribute net capital gains (that is, net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions. However, we may decide in the future to retain such net capital gains for investment and elect to treat such gains as deemed distributions to our stockholders. If this happens, our stockholders will be treated for U.S. federal income tax purposes as if they had received an actual distribution of the net capital gains that we retain and they reinvested the net after-tax proceeds in us. In this situation, our stockholders would be eligible to claim a tax credit (or, in certain circumstances, a tax refund) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. See “Material U.S. Federal Income Tax Considerations.” We cannot assure you that we will achieve results that will permit us to pay any cash dividends or that we will not be limited in our ability to pay dividends under the asset coverage test applicable to us under the 1940 Act.

Unless our common stockholders elect to receive their dividends in cash, we intend to make such distributions in additional shares of our common stock under our dividend reinvestment plan. See “Dividend Reinvestment Plan.”

 

31


SENIOR SECURITIES

Information about our senior securities is shown as of the dates indicated in the below table. The report of our independent registered public accounting firm, KPMG LLP, on the senior securities table as of December 31, 2022 is included in our 2022 Annual Report and is incorporated by reference to the registration statement of which this prospectus is a part.

 

Class and Year/Period

   Total Amount
Outstanding
Exclusive of
Treasury
Securities (1)
($ in millions)
     Asset
Coverage
Per Unit
     Involuntary
Liquidating
Preference
Per Unit
     Average
Market
Value
Per Unit
 
Revolving Credit Facilities            

September 30, 2023 (unaudited)

   $ 758.2      $ 1,872.8        —         N/A  

December 31, 2022

     719.3        1,885.7        —         N/A  

December 31, 2021

     316.4        2,053.6        —         N/A  

December 31, 2020

     472.3        2,045.4        —         N/A  

December 31, 2019

     495.7        2,004.1        —         N/A  

December 31, 2018

     187.5        2,705.2        —         N/A  

December 31, 2017

     486.8        2,355.3        —         N/A  

December 31, 2016

     578.7        2,376.6        —         N/A  

December 31, 2015

     540.3        2,257.3        —         N/A  

December 31, 2014

     283.9        3,110.3        —         N/A  

December 31, 2013

     432.3        2,329.5        —         N/A  
Convertible Senior Notes due 2019            

September 30, 2023 (unaudited)

   $ —       $ —         —         N/A  

December 31, 2022

     —         —         —         N/A  

December 31, 2021

     —         —         —         N/A  

December 31, 2020

     —         —         —         N/A  

December 31, 2019

     —         —         —         N/A  

December 31, 2018

     114.3        2,705.2        —         N/A  

December 31, 2017

     113.7        2,355.3        —         N/A  

December 31, 2016

     113.1        2,376.6        —         N/A  

December 31, 2015

     112.5        2,257.3        —         N/A  

December 31, 2014

     111.9        3,110.3        —         N/A  
Convertible Senior Notes due 2022            

September 30, 2023 (unaudited)

   $ —       $ —         —         N/A  

December 31, 2022

     —         —         —         N/A  

December 31, 2021

     100.0        2,053.6        —         N/A  

December 31, 2020

     142.5        2,045.4        —         N/A  

December 31, 2019

     171.9        2,004.1        —         N/A  

December 31, 2018

     171.7        2,705.2        —         N/A  

December 31, 2017

     114.7        2,355.3        —         N/A  
2023 Notes            

September 30, 2023 (unaudited)

   $ —       $ —         —         N/A  

December 31, 2022

     150.0        1,885.7        —         N/A  

December 31, 2021

     150.0        2,053.6        —         N/A  

December 31, 2020

     150.0        2,045.4        —         N/A  

December 31, 2019

     150.0        2,004.1        —         N/A  

December 31, 2018

     150.0        2,705.2        —         N/A  

 

32


Class and Year/Period

   Total Amount
Outstanding
Exclusive of
Treasury
Securities (1)
($ in millions)
     Asset
Coverage
Per Unit
     Involuntary
Liquidating
Preference
Per Unit
     Average
Market
Value
Per Unit
 

2024 Notes

           

September 30, 2023 (unaudited)

   $ 347.1      $ 1,872.8        —         N/A  

December 31, 2022

     346.8        1,885.7        —         N/A  

December 31, 2021

     346.4        2,053.6        —         N/A  

December 31, 2020

     346.1        2,045.4        —         N/A  

December 31, 2019

     297.2        2,004.1        —         N/A  
2026 Notes            

September 30, 2023 (unaudited)

   $ 298.8      $ 1,872.8        —         N/A  

December 31, 2022

     298.5        1,885.7        —         N/A  

December 31, 2021

     298.1        2,053.6        —         N/A  

2028 Notes

           

September 30, 2023 (unaudited)

   $ 298.2      $ 1,872.8        —         N/A  

 

(1)

Total amount of each class of senior securities outstanding at carrying value, excluding the impact of deferred financing costs and hedge accounting relationships, at the end of the period presented

 

33


PORTFOLIO COMPANIES

The table set forth below contains certain information as of September 30, 2023 for each portfolio company in which we had an investment. Other than these investments, our only formal relationships with our portfolio companies are the managerial assistance that we may provide upon request and any board observer or participation rights we may receive in connection with our investment. In this table, we have further specified our descriptions of certain investments to indicate whether they are Debt Investments such as first-lien or second-lien loans, unsecured notes, or bonds, or they are Equity or Other Investments such as common equity, preferred equity, or equity warrants. We either originated or purchased in the secondary market the Debt Investments and Equity or Other Investments in our current portfolio.

 

Company (1)(6)

 

Investment

  Initial
Acquisition
Date
    Reference
Rate and
Spread
    Interest Rate     Amortized
Cost (2)(8)
    Fair Value (9)     Percentage
of Net Assets
    Percentage
of
Class Held
 

Debt Investments

               

Automotive

               

Bestpass, Inc. (3)(5)
500 New Karner Road
Albany, NY 12205
USA

 

First-lien loan ($39,900 par, due 5/2029)

    5/26/2023       SOFR + 5.75     11.07   $ 38,810     $ 39,202       2.6  

Carlstar Group, LLC (3)
725 Cool Springs Boulevard
Suite 500
Franklin, TN 37067
USA

 

First-lien loan ($26,118 par, due 7/2027)

    7/8/2022       SOFR + 6.60     11.92     25,508       26,378       1.8  
         

 

 

   

 

 

   

 

 

   
            64,318       65,580       4.4  
         

 

 

   

 

 

   

 

 

   

Business Services

               

Acceo Solutions, Inc. (3)(4)(5)
75, Queen Street
Suite 6100
Montreal, Quebec H3C 2N6
Canada

 

First-lien loan (CAD 57,353 par, due 10/2025)

    7/6/2018       C + 4.75     10.14     43,340      

42,633

(CAD 57,640

 

    2.9  

Alpha Midco, Inc. (3)(5) 3933 Lake Washington Blvd NE
#350
Kirkland, WA 98033
USA

 

First-lien loan ($68,794 par, due 8/2025)

    8/15/2019       SOFR + 7.65     12.99     68,125       69,660       4.7  

BCTO Ignition Purchaser, Inc. (3)
1801 West End Ave
Suite 300
Nashville, TN 37203
USA

 

First-lien holdco loan ($30,913 par, due 10/2030)

    4/18/2023       SOFR + 9.00    

14.31

PIK


 

    30,045       30,449       2.0  

Dye & Durham Corp. (3)(4)
25 York Street
Suite 1100
Toronto, Ontario M5J 2V5
Canada

 

First-lien loan (CAD 36,778 par, due 12/2027)

    12/3/2021       C + 5.75     11.26     28,026      

27,483

(CAD 37,157

 

    1.8  
 

First-lien revolving loan (CAD 1,086 par, due 12/2026)

    12/3/2021       C + 5.75     11.26     715      

804

(CAD 1,086

 

    0.1  

 

34


Company (1)(6)

 

Investment

  Initial
Acquisition
Date
    Reference
Rate and
Spread
    Interest Rate     Amortized
Cost (2)(8)
    Fair Value (9)     Percentage
of Net Assets
    Percentage
of
Class Held
 

ExtraHop Networks, Inc. (3)(5)
520 Pike St
Suite 1600
Seattle, WA 98101 USA

 

First-lien loan ($64,162 par, due 7/2027)

    7/22/2021       SOFR + 7.60     12.92     63,157       63,681       4.3  

ForeScout Technologies, Inc. (3) 300 Santana Row
Suite 400
San Jose, CA 95128 USA

 

First-lien loan ($2,788 par, due 8/2026)

    7/1/2022       SOFR + 9.10    

14.49

(incl. 9.00% PIK)


 

    2,737       2,803       0.2  
 

First-lien loan ($2,566 par, due 8/2026)

    8/17/2020       SOFR + 9.10    

14.49

(incl. 9.00% PIK)


 

    2,554       2,572       0.2  

Galileo Parent, Inc. (3) 
Prudential Tower, 800 Boylston Street Boston, MA 02199
USA

 

First-lien loan ($64,904 par, due 5/2030)

    5/3/2023       SOFR + 7.25     12.64     63,030       63,930       4.3  
 

First-lien revolving loan ($4,471 par, due 5/2029)

    5/3/2023       SOFR + 7.25     12.64     4,189       4,320       0.3  

Hornetsecurity Holding GmbH (3)(4) Am Listholze 78
30177 Hanover
Germany

 

First-lien loan (EUR 3,335 par, due 11/2029)

    11/14/2022       E + 6.50     10.30     3,150      

3,335

(EUR 3,150

 

    0.2  

Information Clearinghouse, LLC and MS Market Service, LLC (3)(5)
310 East Shore Road
Great Neck, NY 11023 USA

 

First-lien loan ($17,685 par, due 12/2026)

    12/20/2021       SOFR + 6.65     12.05     17,361       17,596       1.2  

Mitnick Corporate Purchaser, Inc. (3)(9)
197 East University Drive
Auburn, AL 36832 USA

 

First-lien loan ($330 par, due 5/2029)

    5/2/2022       SOFR + 4.60     9.97     330       317       0.0  

Netwrix Corp. (3)
6160 Warren Parkway
Suite 100
Frisco, TX 75034
USA

 

First-lien loan ($36,456 par, due 6/2029)

    6/9/2022       SOFR + 5.00     10.30     35,952       36,456       2.5  
 

First-lien revolving loan ($718 par, due 6/2029)

    6/9/2022       SOFR + 5.00     10.24     682       718       0.0  

OutSystems Luxco SARL(3)(4)(5)
55 Thomson Place
2nd Floor
Boston, MA 02210 USA

 

First-lien loan (EUR 3,180 par, due 12/2028)

    12/8/2022       E + 5.75     9.72     3,083      

3,180

(EUR 3,004

 

    0.2  

 

35


Company (1)(6)

 

Investment

  Initial
Acquisition
Date
    Reference
Rate and
Spread
    Interest Rate     Amortized
Cost (2)(8)
    Fair Value (9)     Percentage
of Net Assets
    Percentage
of
Class Held
 

ReliaQuest Holdings, LLC (3)(5)
777 South Harbour Island Boulevard
Suite 500
Tampa, FL 33602
USA

 

First-lien loan ($76,220 par, due 10/2026)

    10/8/2020       SOFR + 7.25     12.62     75,271       77,172       5.2  

Wrangler TopCo, LLC (3)
555 California Street
Suite 2900
San Francisco, CA 94104
USA

 

First-lien loan ($4,153 par, due 7/2029)

    7/7/2023       SOFR + 7.50     12.88     4,041       4,095       0.3  
         

 

 

   

 

 

   

 

 

   
            445,788       451,204       30.4  
         

 

 

   

 

 

   

 

 

   

Chemicals

               

Erling Lux Bidco SARL(3)(4)
1-3 Boulevard De La Foire
1528 Luxembourg
Luxembourg

 

First-lien loan (EUR 9,625 par, due 9/2028)

    9/6/2022       E + 6.75     10.61     9,514      

10,257

(EUR 9,688

 

    0.7  
 

First-lien loan (GBP 10,217 par, due 9/2028)

    9/6/2022       S + 6.75     11.94     11,276      

12,533

(GBP 10,269

 

    0.8  
 

First-lien revolving loan (GBP 312 par, due 9/2028)

    9/6/2022       S + 6.75     11.94     400      

382

(GBP 313

 

    0.0  
         

 

 

   

 

 

   

 

 

   
            21,190       23,172       1.5  
         

 

 

   

 

 

   

 

 

   

Communications

               

Banyan Software Holdings, LLC (3)(4)
303 Perimeter Center North
Suite 450
Atlanta, GA 30346
USA

 

First-lien loan ($19,850 par, due 10/2026)

    1/27/2023       SOFR + 7.35     12.67     18,803       19,651       1.3  

Celtra Technologies, Inc. (3)(5)
545 Boylston Street
11th Floor
Boston, MA 02116
USA

 

First-lien loan ($34,256 par, due 11/2026)

    11/19/2021       SOFR + 7.10     12.42     33,521       33,742       2.3  

IntelePeer Holdings, Inc.
155 Bovet Rd.
Suite 405
San Mateo, CA 94402
USA

 

First-lien loan ($33,925 par, due 12/2024) (3)

    12/2/2019       SOFR + 8.40     13.79     33,899       33,586       2.3  
 

Convertible note ($4,619 par, due 5/2028)

    5/12/2021       7.00    

7.00

PIK


 

    4,590       4,803       0.3  
         

 

 

   

 

 

   

 

 

   
            90,813       91,782       6.2  
         

 

 

   

 

 

   

 

 

   

Education

               

Astra Acquisition Corp. (3)
5201 Congress Ave.
Boca Raton, FL 33487

 

Second-lien loan ($43,479 par, due 10/2029)

    10/25/2021       SOFR + 8.99     14.53     42,796       34,566       2.3  

Destiny Solutions Parent Holding Company (3)(5)
1320 Flynn Road, Suite 100
Camarillo, CA 93012

 

First-lien loan ($59,700 par, due 6/2026)

    6/8/2021       SOFR + 5.85     11.17     58,941       59,103       4.0  

 

36


Company (1)(6)

 

Investment

  Initial
Acquisition
Date
    Reference
Rate and
Spread
    Interest Rate     Amortized
Cost (2)(8)
    Fair Value (9)     Percentage
of Net Assets
    Percentage
of
Class Held
 

EMS Linq, Inc. (3)
2528 INDEPENDENCE BLVD STE 200
WILMINGTON NC 28412-2591

 

First-lien loan ($56,216 par, due 12/2027)

    12/22/2021       SOFR + 6.35     11.67     55,240       54,916       3.7  
         

 

 

   

 

 

   

 

 

   
            156,977       148,585       10.0  
         

 

 

   

 

 

   

 

 

   

Financial Services

               

Alaska Bidco Oy (3)(4)
Linnoitustie 6
02600, Norway

 

First-lien loan (EUR 727 par, due 5/2030)

    5/30/2023       E + 6.25     10.39     754      

763

(EUR 720

 

    0.1  

BCTO Bluebill Buyer, Inc. (3)(5)
6100 W. 96th Street, Suite 100
Indianapolis, IN 46278

 

First-lien loan ($28,164 par, due 7/2029)

    7/20/2023       SOFR + 7.25     12.64     27,122       27,319       1.8  

BTRS Holdings, Inc.(3) 1009 Lenox Drive, Suite 101
Lawrenceville, NJ 08648

 

First-lien loan ($46,580 par, due 12/2028)

    12/16/2022       SOFR + 8.00     13.41     45,277       46,323       3.1  

Bear OpCo, LLC (3)(5)
5435 Corporate Drive, Suite 300
Troy, MI 48098

 

First-lien loan ($21,082 par, due 10/2024)

    10/10/2019       SOFR + 7.65     12.97     20,953       21,345       1.4  

BlueSnap, Inc. (3)(5)
800 South Street
Suite 640
Waltham, MA 02453

 

First-lien loan ($42,000 par, due 10/2024)

    10/25/2019       SOFR + 7.15     12.54     41,786       42,223       2.8  

Ibis Intermediate Co. (3)(5)
485 Lexington Ave, 20th Floor
New York, NY 10017

 

First-lien loan ($1,514 par, due 5/2027)

    5/28/2021       SOFR + 4.65     10.07     1,359       1,593       0.1  

Ibis US Blocker Co. (3) 485 Lexington Ave, 20th Floor
New York, NY 10017

 

First-lien loan ($15,419 par, due 5/2028)

    5/28/2021       SOFR + 8.40    

13.82

PIK


 

    15,196       15,342       1.0  

Kyriba Corp.(3)
4435 Eastgate Mall, Suite 200
San Diego, CA 92121

 

First-lien loan ($20,382 par, due 4/2025)

    4/9/2019       SOFR + 9.25    

14.72

(incl. 9.00% PIK)


 

    20,255       20,433       1.4  
 

First-lien loan (EUR 10,617 par, due 4/2025)

    4/9/2019       E + 9.00    

13.14

(incl. 9.00% PIK)


 

    11,782      

11,269

(EUR 10,644

 

    0.8  
 

First-lien revolving loan ($1,411 par, due 4/2025)

    4/9/2019       SOFR + 7.50     12.97     1,399       1,415       0.1  
 

First-lien revolving loan (EUR 336 par, due 4/2025)

    4/9/2019       E + 7.25     11.39     374      

356

(EUR 336

 

    0.0  

 

37


Company (1)(6)

 

Investment

  Initial
Acquisition
Date
    Reference
Rate and
Spread
    Interest Rate     Amortized
Cost (2)(8)
    Fair Value (9)     Percentage
of Net Assets
    Percentage
of
Class Held
 

Passport Labs, Inc.
128 S Tryon St, Ste 1000
Charlotte, NC 28202

 

First-lien loan ($24,349 par, due 4/2026) (3)

    4/28/2021       SOFR + 8.40     13.79     24,174       24,294       1.6  
 

Convertible Promissory Note A ($694 par, due 9/2024)

    3/2/2023       8.00     8.00     694       943       0.1  

Ping Identity Holding Corp. (3)
1001 17th Street, Suite 100
Denver, CO 80202

 

First-lien loan ($22,727 par, due 10/2029)

    10/17/2022       SOFR + 7.00     12.32     22,165       23,040       1.6  

PrimeRevenue, Inc. (3)
600 Peachtree St NE, Suite 4400
Atlanta, GA 30308

 

First-lien loan ($15,007 par, due 12/2024)

    12/31/2018       SOFR + 7.15     12.55     14,997       15,113       1.0  

TradingScreen, Inc. (3)(5)
1 Penn Plaza, 49th Fl
New York, NY 10119

 

First-lien loan ($47,318 par, due 4/2027)

    4/30/2021       SOFR + 6.35     11.72     46,421       47,081       3.2  

Volante Technologies, Inc.
Harborside 5
185 Hudson Street, #1605
Jersey City, NJ 07311

 

First-lien loan ($2,500 par, due 9/2028)

    9/29/2023       16.50    

16.50

PIK


 

    2,438       2,438       0.2  
         

 

 

   

 

 

   

 

 

   
            297,146       301,290       20.3  
         

 

 

   

 

 

   

 

 

   

Healthcare

               

BCTO Ace Purchaser, Inc. (3)
3675 Mt. Diablo Boulevard, Suite 100B
Lafayette, CA 94549

 

First-lien loan ($69,231 par, due 11/2027) (5)

    11/23/2020       SOFR + 8.45     13.87     68,271       69,577       4.7  
 

Second-lien loan ($5,401 par, due 1/2030)

    1/23/2023       SOFR + 10.70    

16.05

PIK


 

    5,266       5,374       0.4  

Edge Bidco B.V (3)(4)(5) De Lairessestraat 145
1075 HJ Amsterdam

 

First-lien loan (EUR 3,520 par, due 2/2029)

    2/24/2023       E + 7.00    

10.97

(incl. 3.25% PIK)


 

    3,590      

3,727

(EUR 3,520

 

    0.3  

Homecare Software Solutions, LLC (3)(5)
130 West 42nd Street
2nd Floor
New York, NY 10036

 

First-lien loan ($65,000 par, due 10/2026)

    10/6/2021       SOFR + 5.70     11.03     63,942       64,675       4.4  

 

38


Company (1)(6)

 

Investment

  Initial
Acquisition
Date
    Reference
Rate and
Spread
    Interest Rate     Amortized
Cost (2)(8)
    Fair Value (9)     Percentage
of Net Assets
    Percentage
of
Class Held
 

Merative L.P. (3)(5)
100 Phoenix Drive
Ann Arbor, MI 48108

 

First-lien loan ($70,103 par, due 6/2028)

    6/30/2022       SOFR + 7.25     12.65     68,127       69,052       4.6  

Raptor US Buyer II Corp. (3) 205 West Wacker Drive, Suite 1800
Chicago, IL 60606

 

First-lien loan ($15,609 par, due 3/2029)

    3/24/2023       SOFR + 6.75     12.14     15,083       15,413       1.0  

SL Buyer Corp. (3)(5)
111 South Wood Avenue Iselin, NJ 08830

 

First-lien loan ($31,475 par, due 7/2029)

    7/7/2023       SOFR + 7.00     12.32     30,096       30,520       2.1  
         

 

 

   

 

 

   

 

 

   
            254,375       258,338       17.5  
         

 

 

   

 

 

   

 

 

   

Hotel, Gaming and Leisure

               

ASG II, LLC (3)(5)
Walnut Creek, CA 94596 USA

 

First-lien loan ($60,693 par, due 5/2028)

    5/25/2022       SOFR + 6.40     11.77     59,414       60,693       4.1  

IRGSE Holding Corp. (3)(6)
1555 Palm Beach Lake Blvd
Unit 1105
West Palm Beach, FL 33401
USA

 

First-lien loan ($30,261 par, due 6/2024)

    9/29/2015       SOFR + 9.65     15.04     28,594       30,034       2.0  
 

First-lien revolving loan ($24,752 par, due 6/2024)

    9/29/2015       SOFR + 9.65     15.04     24,752       24,564       1.7  
         

 

 

   

 

 

   

 

 

   
            112,760       115,291       7.8  
         

 

 

   

 

 

   

 

 

   

Human Resource Support Services

               

Axonify, Inc. (3)(4)(5)
450 Phillip St
Waterloo, Ontario N2L 5J2
Canada

 

First-lien loan ($40,920 par, due 5/2027)

    5/5/2021       SOFR + 7.65     13.02     40,312       40,920       2.7  

bswift, LLC (3)(5)
500 W. Monroe
Suite 3800
Chicago, IL 60661
USA

 

First-lien loan ($44,470 par, due 11/2028)

    11/7/2022       SOFR + 6.63     11.91     43,287       44,582       3.0  

Elysian Finco Ltd. (3)(4)(5)
27-28 Clements Lane
London EC4N 7AE
United Kingdom

 

First-lien loan ($18,955 par, due 1/2028)

    1/31/2022       SOFR + 6.65     11.95     18,528       19,356       1.3  

Employment Hero Holdings Pty Ltd. (3)(4)
Level 2, 441 Kent Street
Sydney, New South Wales 2000
Australia

 

First-lien loan (AUD 32,270 par, due 12/2026)

    12/6/2021       B + 6.50     10.72     34,791      

32,067

(AUD 49,685

 

    2.2  

HireVue, Inc.(3)
10876 South River Front Parkway
Suite 500
South Jordan, UT 84095
USA

 

First-lien loan ($54,113 par, due 5/2029)

    5/3/2023       SOFR + 7.25     12.34     52,422       53,350       3.6  

 

39


Company (1)(6)

 

Investment

  Initial
Acquisition
Date
    Reference
Rate and
Spread
    Interest Rate     Amortized
Cost (2)(8)
    Fair Value (9)     Percentage
of Net Assets
    Percentage
of
Class Held
 

PageUp People, Ltd. (3)(4)(5)
Suite S5051, Level 5, 447 Collins Street
Melbourne, Victoria 3000
Australia

 

First-lien loan (AUD 13,916 par, due 12/2025)

    1/11/2018       B + 5.25     9.36     10,500      

8,982

(AUD 13,916

 

    0.6  
 

First-lien loan (GBP 3,258 par, due 12/2025)

    10/28/2021       S + 5.28     10.47     4,487      

3,976

(GBP 3,258

 

    0.3  
 

First-lien loan ($11,441 par, due 12/2025)

    10/28/2021       SOFR + 5.35     10.67     11,431       11,441       0.8  

PayScale Holdings, Inc. (3)(5)
255 S King Street
Ste 800
Seattle, WA 98104
USA

 

First-lien loan ($71,379 par, due 5/2027)

    5/3/2019       SOFR + 6.35     11.74     70,985       71,379       4.8  

PrimePay Intermediate, LLC (3)(5)
1487 Dunwoody Drive West Chester, PA 19380 USA

 

First-lien loan ($34,462 par, due 12/2026)

    12/17/2021       SOFR + 7.15     12.54     33,697       34,290       2.3  
         

 

 

   

 

 

   

 

 

   
            320,440       320,343       21.6  
         

 

 

   

 

 

   

 

 

   

Insurance

               

Disco Parent, Inc. (3)
22 Boston Wharf Road Boston, MA 02210
USA

 

First-lien loan ($4,545 par, due 3/2029)

    3/30/2023       SOFR + 7.50     12.92     4,431       4,495       0.3  

Internet Services

               

Arrow Buyer, Inc. (3)
12 East 49th Street
Tower 49
New York, NY 10017
USA

 

First-lien loan ($33,125 par, due 7/2030)

    6/30/2023       SOFR + 6.50     11.89     32,225       32,514       2.2  

Bayshore Intermediate #2, L.P. (3)
1400 Liberty Ridge Drive
Chesterbrook, PA 19087 USA

 

First-lien loan ($35,464 par, due 10/2028)

    10/1/2021       SOFR + 7.60    

13.00

PIK

%

 

    34,947       35,198       2.4  
 

First-lien revolving loan ($480 par, due 10/2027)

    10/1/2021       SOFR + 6.60     11.87     444       461       0.0  

Coupa Holdings, LLC (3)
1855 S. Grant Street
San Mateo, CA 94402
USA

 

First-lien loan ($43,191 par, due 2/2030)

    2/27/2023       SOFR + 7.50     12.82     42,092       43,066       2.9  

CrunchTime Information, Systems, Inc. (3)(5)
129 Portland Street
Boston, MA 02114
USA

 

First-lien loan ($59,651 par, due 6/2028)

    6/17/2022       SOFR + 6.00     11.32     58,579       59,651       4.0  

EDB Parent, LLC (3)(5)
34 Crosby Drive
Suite 201, CORPORATION TRUST CENTER 1209 ORANGE ST
Bedford, MA 01730
USA

 

First-lien loan ($61,858 par, due 7/2028)

    7/7/2022       SOFR + 6.75     12.14     60,612       61,394       4.1  

 

40


Company (1)(6)

 

Investment

  Initial
Acquisition
Date
    Reference
Rate and
Spread
    Interest Rate     Amortized
Cost (2)(8)
    Fair Value (9)     Percentage
of Net Assets
    Percentage
of
Class Held
 

Higher Logic, LLC (3)(5)
1919 North Lynn Street
Suite 500
Arlington, VA 22209
USA

 

First-lien loan ($53,658 par, due 1/2025)

    6/18/2018       SOFR + 6.75     12.14     53,464       53,792       3.6  

LeanTaaS Holdings, Inc. (3)(5)
471 El Camino Real Suite 230
Santa Clara, CA 95050
USA

 

First-lien loan ($35,413 par, due 7/2028)

    7/12/2022       SOFR + 7.50     12.89     34,602       35,556       2.4  

Lithium Technologies, LLC (3) 
One World Trade Center
Suite 46D
New York, NY 10007
USA

 

First-lien loan ($57,009 par, due 1/2025)

    10/3/2017       SOFR + 9.00    

14.37

(incl. 4.50% PIK)


 

    56,996       55,726       3.8  

Lucidworks, Inc. (3)(5)
235 Montgomery Street
Suite 500
San Francisco, CA 94104
USA

 

First-lien loan ($8,764 par, due 2/2027)

    2/11/2022       SOFR + 7.50    

12.82

(incl. 3.50% PIK)


 

    8,763       8,717       0.6  

Piano Software, Inc. (3)(5)
One World Trade Center
Suite 46D
New York, NY 10007
USA

 

First-lien loan ($51,218 par, due 2/2026)

    2/25/2021       SOFR + 7.10     12.42     50,545       50,706       3.3  

SMA Technologies Holdings, LLC(3)(5)
14237 East Sam Houston Pawkway N.
Suite 200-314
Houston, TX 77044 USA

 

First-lien loan ($36,833 par, due 10/2028)

    10/31/2022       SOFR + 6.75     12.07     35,406       36,649       2.5  
         

 

 

   

 

 

   

 

 

   
            468,675       473,430       31.8  
         

 

 

   

 

 

   

 

 

   

Manufacturing