Partners Group Lending Fund Inc.
03/26/2026 | Press release | Distributed by Public on 03/26/2026 06:34
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. We initially incorporated as a Delaware corporation on June 16, 2022, and we filed a certificate of conversion with the Delaware Secretary of State to convert into a Delaware limited liability company on July 12, 2023. We are externally managed by the Adviser, which manages our day-to-day operations and provides us with investment advisory services pursuant to the terms of the Amended and Restated Investment Advisory Agreement. The Adviser is registered as investment adviser with the SEC. The Fund intends to elect and qualify each taxable year hereafter, to be treated as a RIC under Subchapter M of the Code.
The Adviser oversees (subject to the oversight of the Board, a majority of whom are independent) the management of our operations and is responsible for making investment decisions with respect to our portfolio pursuant to the terms of the Amended and Restated Investment Advisory Agreement. Under the Amended and Restated Investment Advisory Agreement, we have agreed to pay the Adviser the Base Management Fee as well as the Incentive Fee based on our investment performance.
Key components of our results of operations
Investments
Our investment objectives are to generate attractive risk-adjusted returns and current income by primarily investing in a geographically and industrially well-balanced and broadly distributed portfolio of primarily senior secured loans, which will typically pay interest composed of SOFR/EURIBOR/CORRA/other variable base rates, plus a margin, to private middle market U.S. companies. As part of our strategy to achieve our investment objective, we will directly or indirectly originate Senior Secured Direct Private Credit investments. We also expect to invest in Senior Secured Broadly Syndicated Loans. Senior secured loans represent the most senior tranche in the capital structure of the relevant borrowers and often have lien security over the assets of the borrowers. In addition, to a lesser extent, our assets may include Opportunistic Credit that appears attractive on a relative value basis, including, however, not limited to, CLO Equity. We believe that the Partners Group investment platform offers strategic access to the wider private equity sponsor and borrower community and provides the Fund a significant advantage in sourcing, analyzing and executing attractive credit investments.
The Adviser expects to employ a range of techniques that seek to reduce the risk associated with our investment strategy. These techniques may include, without limitation: (i) selecting investments and commitments across a broad range of geographies, industries, sectors, and maturity dates; (ii) tracking operating performance of underlying companies and their compliance with financial covenants; and (iii) actively managing cash and liquid assets.
See "Investment Objective and Strategy" for more information about our investment strategies.
An investment in the Fund involves significant risks and loss of your investment is possible. The Fund is an appropriate investment only for those investors who can tolerate a high degree of risk and do not require a liquid investment. Repurchases of shares are at the sole discretion of the Board and you may not be able to redeem your units at the time or in the amount desired. There are no guarantees the fund will achieve its objective or pay distributions. See "Item 1A. Risk Factors."
Revenues
We generate revenue in the form of interest and fee income on debt investments, capital gains, and dividend income from our equity investments in our Portfolio Companies. Our senior and subordinated debt investments are expected to bear interest at a fixed or floating rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid PIK interest generally will become due at the maturity date. In addition, we may generate revenue from various fees in the ordinary course of business such as in the form of structuring, consent, waiver, amendment, syndication and other miscellaneous fees. Original issue discounts and market discounts or premiums will be capitalized, and we will accrete or amortize such amounts as interest income. We will record prepayment premiums on loans and debt securities as interest income. Dividend income, if any, will be recognized on an accrual basis to the extent that we expect to collect such amounts.
Expenses
We do not currently have any employees and do not expect to have any employees. Our day-to-day investment operations are managed by the Adviser, pursuant to the terms of the Amended and Restated Investment Advisory Agreement. The services necessary for our business, including the origination and administration of our investment portfolio, will be provided by individuals who are employees of Partners Group, pursuant to the terms of the Amended and Restated Investment Advisory Agreement, and our Administrator, pursuant to the terms of the Master Administrative Services Agreement. See "Item 1. Business-Master Administrative Services Agreement." All investment professionals of the Adviser, when and to the extent engaged in providing investment advisory and management services under the Amended and Restated Investment Advisory Agreement, and the compensation and routine compensation-related overhead expenses of such personnel allocable to such services, will be provided and paid for by the Adviser and not by the Fund. See "Item 1. Business - Investment Advisory Agreement." We will bear all other costs and expenses of the Fund's operations and transactions, including those listed in the Registration Statement.
From time to time, the Adviser or its affiliates may pay third-party providers of goods or services. We will reimburse the Adviser or such affiliates thereof for any such amounts paid on our behalf. All of the foregoing expenses will ultimately be borne by our unitholders.
Portfolio And Investment Activity
As of December 31, 2025, we had investments in 54 Portfolio Companies across 20 industries, excluding CLO tranches. As of December 31, 2024, we had investments in 38 Portfolio Companies across 19 industries. As of December 31, 2023, we had investments in 10 Portfolio Companies across 8 industries.
Based on fair value as of December 31, 2025, 96.2% of our portfolio is composed of senior secured direct private credit investments, followed by 1.6% of opportunistic credit and other investments. 99.6% of our direct private credit investments was invested in debt bearing a floating interest rate, which primarily are subject to interest rate floors.
As of December 31, 2025, our weighted average total yield of debt securities at amortized cost was 9.12%. As of December 31, 2024, our weighted average total yield of debt securities at amortized cost was 9.47%. As of December 31, 2023, our weighted average total yield of debt securities at amortized cost was 10.44%.
Weighted average yields includes the effect of accretion of discounts and amortization of premiums and are based on interest rates as of December 31, 2025, December 31, 2024 and December 31, 2023, respectively.
Our investment activity is presented below (information presented herein is at amortized cost unless otherwise indicated) (dollar amounts in thousands):
|
Year Ended 2025 |
Year Ended 2024 |
Period from September 1, 2023 (commencement of operations) to December 31, 2023 |
||||||||||
| Total investments, at fair value, beginning of period | $ | 328,465 | $ | 78,850 | $ | - | ||||||
| Purchases of investments, including capitalized PIK | 223,846 | 255,288 | 78,948 | |||||||||
| Proceeds from principal repayments and sales of investments | (95,700 | ) | (7,806 | ) | (387 | ) | ||||||
| Net accretion of discount on investments | 1,615 | 647 | 40 | |||||||||
| Net realized gain (loss) on investments | 139 | 7 | - | |||||||||
| Net change in unrealized appreciation (depreciation) | (19 | ) | 1,479 | 249 | ||||||||
| Total investments, at fair value, end of period | $ | 458,346 | $ | 328,465 | $ | 78,850 | ||||||
The following table presents certain selected information regarding our investment portfolio:
|
December 31, 2025 |
December 31, 2024 |
December 31, 2023 |
||||||||||
| Weighted average yield on debt and income producing investments, at amortized cost (1) | 9.12 | % | 9.47 | % | 10.44 | % | ||||||
| Weighted average yield on debt and income producing investments, at fair value (1) | 9.09 | % | 9.48 | % | 10.43 | % | ||||||
| Number of Portfolio Companies | 54 | 38 | 10 | |||||||||
| Median LTM EBITDA (2)(3) | $ | 94.20 | M | $ | 112.51 | M | $ | 59.73 | M | |||
| Weighted average net senior leverage (2)(4) | 5.83 | x | 5.72 | x | 6.01 | x | ||||||
| Weighted average loan-to-value ("LTV") (2)(5) | 41 | % | 38 | % | 43 | % | ||||||
| Percentage of debt investments bearing a floating rate, at fair value(6) | 99.6 | % | 100 | % | 100 | % | ||||||
| Percentage of debt investments bearing a fixed rate, at fair value(6) | 0.4 | % | 0 | % | 0 | % | ||||||
| (1) | Computed based on the stated interest rate or yield as of December 31, 2025, December 31, 2024 and December 31, 2023, respectively, and weighted based on the total debt investments (at fair value or amortized cost, as applicable). Actual yields earned over the life of each investment could differ materially from the yields presented above. Weighted average yield includes the effect of accretion of discounts and amortization of premiums. |
| (2) | Includes all private loan investments for which fair value is determined by the Adviser at least quarterly (with assistance, as applicable, from a third-party valuation firm, and subject to oversight by the Board). Figures are derived from the consolidated financial statements most recently obtained by the Adviser. |
| (3) | LTM EBITDA is a non-GAAP measure that refers to adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") in accordance with the underlying governing documents, over the last twelve months as reported by respective borrowers or portfolio companies. Excludes investments with no reported EBITDA or where EBITDA, in the Adviser's judgment, was not a material component of the investment thesis, such as annual recurring revenue loans, or investments with negative EBITDA. Currency fluctuations may have an adverse effect on the value, price or income and costs of our Portfolio Companies and investments which may increase or decrease as a result of changes in exchange rates. |
| (4) | Net senior leverage is the ratio of total debt minus unrestricted cash divided by LTM EBITDA and taking into account leverage through the tranche in which the Fund holds an investment, excluding recurring revenue loans. Weighted average net senior leverage is weighted based on the funded commitment of total applicable private loans. |
| (5) | LTV is calculated as net debt through each respective investment tranche in which the Fund holds an investment divided by estimated enterprise value or value of the underlying collateral of the portfolio company. Weighted average LTV is weighted based on the funded commitment of the total applicable private loans. |
| (6) | Calculated as a percentage of direct private credit investments. |
The composition of our investment portfolio at cost and fair value was as follows (dollar amounts in thousands):
| December 31, 2025 | ||||||||||||
| Amortized Cost | Fair Value |
% of Total Investments at Fair Value |
||||||||||
| Asset Backed Securities | $ | 10,008 | 10,047 | 2.19 | % | |||||||
| Secured Debt | 431,960 | 433,567 | 94.59 | |||||||||
| Unsecured Debt | - | - | - | |||||||||
| Equity Investments | 14,669 | 14,732 | 3.22 | |||||||||
| Total Investments | $ | 456,637 | $ | 458,346 | 100.00 | % | ||||||
| December 31, 2024 | ||||||||||||
| Amortized Cost | Fair Value |
% of Total Investments at Fair Value |
||||||||||
| Secured Debt | $ | 325,382 | $ | 327,122 | 99.59 | % | ||||||
| Unsecured Debt | - | - | - | |||||||||
| Equity Investments | 1,355 | 1,343 | 0.41 | |||||||||
| Total Investments | $ | 326,737 | $ | 328,465 | 100.00 | % | ||||||
| December 31, 2023 | ||||||||||||
| Amortized Cost | Fair Value |
% of Total Investments at Fair Value |
||||||||||
| Secured Debt | $ | 78,601 | $ | 78,850 | 100.00 | % | ||||||
| Unsecured Debt | - | - | - | |||||||||
| Equity Investments | - | - | - | |||||||||
| Total Investments | $ | 78,601 | $ | 78,850 | 100.00 | % | ||||||
The table below describes investments by industry composition based on fair value:
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||
| Aerospace & Defense | -% | 3.18 | % | -% | ||||||||
| Automobile Components | 0.91 | 1.29 | 4.68 | |||||||||
| Building Products | 2.21 | - | - | |||||||||
| Capital Markets | 6.42 | 3.44 | - | |||||||||
| Commercial Services & Supplies | 3.34 | 0.73 | - | |||||||||
| Containers & Packaging | 0.57 | 0.71 | - | |||||||||
| Diversified Consumer Services | 5.19 | 0.38 | - | |||||||||
| Electrical Equipment | 3.12 | 4.35 | 8.40 | |||||||||
| Electronic Equipment, Instruments & Components | 4.28 | 1.52 | 5.71 | |||||||||
| Energy Equipment & Services | - | 1.66 | - | |||||||||
| Financial Services | 4.34 | 1.97 | - | |||||||||
| Health Care Equipment & Supplies | 1.88 | 2.60 | 11.15 | |||||||||
| Health Care Providers & Services | 11.26 | 12.32 | 32.33 | |||||||||
| Health Care Technology | 2.14 | 8.80 | - | |||||||||
| Hotels, Restaurants & Leisure | 1.39 | - | - | |||||||||
| Insurance | - | 7.52 | 27.23 | |||||||||
| IT Services | 9.21 | 8.93 | 10.62 | |||||||||
| Machinery | 2.90 | 4.41 | - | |||||||||
| Professional Services | 8.93 | 2.34 | - | |||||||||
| Software | 25.17 | 27.65 | (0.12 | ) | ||||||||
| Trading Companies & Distributors | 4.55 | 6.20 | - | |||||||||
| Industrial Conglomerates | 2.19 | - | - | |||||||||
| Total | 100.00 | % | 100.00 | % | 100.00 | % | ||||||
As of December 31, 2025, December 31, 2024 and December 31, 2023, the Fund had no Portfolio Companies on non-accrual status, respectively. The following table shows the fair value of our performing debt and other income producing securities, and non-accrual investments as of December 31, 2025, December 31, 2024 and December 31, 2023 (dollar amounts in thousands):
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Fair Value | Percentage | Fair Value | Percentage | Fair Value | Percentage | |||||||||||||||||||
| Performing debt and income producing investments | $ | 450,982 | 98.39 | % | $ | 328,465 | 100.00 | % | $ | 78,850 | 100.00 | % | ||||||||||||
| Non-accrual(1) | - | - | - | - | - | - | ||||||||||||||||||
| Total | $ | 450,982 | 98.39 | % | $ | 328,465 | 100.00 | % | $ | 78,850 | 100.00 | % | ||||||||||||
| (1) | Investments on non-accrual represented 0%, 0% and 0% of amortized cost of total debt and income producing investments as of December 31, 2025, December 31, 2024, and December 31, 2023, respectively. |
Results of Operations
The following table represents our operating results (dollar amounts in thousands):
|
Year Ended December 31, 2025 |
Year Ended December 31, 2024 |
Period from September 1, 2023 (commencement of operations) to December 31, 2023 |
||||||||||
| Total investment income | $ | 41,883 | $ | 26,216 | $ | 1,129 | ||||||
| Total expenses | 24,761 | 19,549 | 1,045 | |||||||||
| Net investment income | 17,122 | 6,667 | 84 | |||||||||
| Net realized gain (loss) | 158 | 29 | 1 | |||||||||
| Net change in unrealized appreciation (depreciation) | (201 | ) | 1,284 | 202 | ||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 17,079 | $ | 7,980 | $ | 287 | ||||||
Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including acquisitions, the level of new investment commitments, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio.
Investment Income
Investment income was as follows (dollar amounts in thousands):
|
Year Ended December 31, 2025 |
Year Ended December 31, 2024 |
Period from September 1, 2023 (commencement of operations) to December 31, 2023 |
||||||||||
| Interest income | $ | 40,148 | $ | 25,465 | $ | 1,128 | ||||||
| Payment-in-kind interest income | 847 | 275 | - | |||||||||
| Dividend Income | - | - | - | |||||||||
| Other income | 888 | 476 | 1 | |||||||||
| Total investment income | $ | 41,883 | $ | 26,216 | $ | 1,129 | ||||||
Total investment income increased to $41.9 million for the year ended December 31, 2025 from $26.2 million for the year ended December 31, 2024 primarily driven by increased portfolio size of the private credit investment portfolio.
Total investment income increased to $26.2 million for the year ended December 31, 2024 from $1.1 million for the period from September 1, 2023 (commencement of operations) to December 31, 2023 primarily driven by increased portfolio size of the private credit investment portfolio. Note that 2023 period covers four months of operations as the Fund commenced operations on September 1, 2023. Meanwhile, 2024 period includes operation of twelve months.
For the year ended December 31, 2025, PIK income represented 2% of total investment income. For the year ended December 31, 2024, and for the period from September 1, 2023 (commencement of operations) to December 31, 2023, PIK income represented 1% and 0% of total investment income, respectively.
Expenses were as follows (dollar amounts in thousands):
|
Year Ended December 31, 2025 |
Year Ended December 31, 2024 |
Period from September 1, 2023 (commencement of operations) to December 31, 2023 |
||||||||||
| Interest and borrowing expenses | $ | 14,789 | $ | 14,126 | $ | 854 | ||||||
| Management fees | 2,291 | 1,063 | 3 | |||||||||
| Incentive fee | 1,593 | 880 | 32 | |||||||||
| Organization expenses | - | 505 | - | |||||||||
| Professional fees | 964 | 435 | 82 | |||||||||
| Board of Directors' fees | - | - | - | |||||||||
| Administration, custodian and transfer agent fees | 20 | 21 | 5 | |||||||||
| Other general & administrative | - | - | - | |||||||||
| Current Tax Expense | 4,714 | 1,919 | 29 | |||||||||
| Other expenses | 390 | 600 | 40 | |||||||||
| Total expenses (including current tax expense) | 24,761 | 19,549 | 1,045 | |||||||||
| Expense support | - | - | - | |||||||||
| Recoupment of expense support | - | - | - | |||||||||
| Reimbursable expenses previously borne by Adviser | - | - | - | |||||||||
| Management fees waived | - | - | - | |||||||||
| Incentive fees waived | - | - | - | |||||||||
| Net expenses (including current tax expense) | $ | 24,761 | $ | 19,549 | $ | 1,045 | ||||||
Interest Expense
Total interest expense (including unused fees, amortization of deferred financing costs, debt issuance costs and original issue discounts) increased to $14.8 million for the year ended December 31, 2025 from $14.1 million for the year ended December 31, 2024 primarily driven by an increase in the amount of borrowing, and the increase of the weighted average interest rate on our borrowings relative to the prior year period.
Total interest expense (including unused fees, amortization of deferred financing costs, debt issuance costs and original issue discounts) increased to $14.1 million for the year ended December 31, 2024 from $854 thousand for the period from September 1, 2023 (commencement of operations) to December 31, 2023 primarily driven by an increase in the amount of borrowing, and the increase of the weighted average interest rate on our borrowings relative to the period from September 1, 2023 (commencement of operations) to December 31, 2023. Note that the 2023 period covers four months of operations as the Fund commenced operations on September 1, 2023. Meanwhile, 2024 period includes operation of twelve months.
As of December 31, 2025, there was $226.0 million of debt outstanding under the NatWest Credit Facility (as defined below under "Borrowings"). For the year ended December 31, 2025, the Fund had total average debt of $207.0 million at a weighted average interest rate of 6.70%.
As of December 31, 2024, there was $172.0 million of debt outstanding under the NatWest Credit Facility. For the year ended December 31, 2024, the Fund had total average debt of $131.0 million at a weighted average interest rate of 8.06%.
As of December 31, 2023, there was $58.4 million of debt outstanding under our prior credit facility agreement with MUFG Bank Ltd. (the "MUFG Credit Facility"). For the period September 1, 2023 (commencement of operations) through December 31, 2023, the Fund had total average debt of $37.0 million at a weighted average interest rate of 7.48%. In September 2024, the MUFG Credit Facility was repaid in full using available cash at the Fund and through drawdowns on the available Capital Commitments of the Fund.
As of December 31, 2023, there was $24.6 million of debt outstanding under our prior bridge loan agreements (the "Bridge Loans") with a related party of the Fund, Partners Group Finance CHF IC Limited. As of December 31, 2023, there was $24.6 million of debt outstanding under the Bridge Loans. For the period September 1, 2023 (commencement of operations) through December 31, 2023, the Fund had total average debt of $21.1 million at a weighted average interest rate of 7.22%. In January 2024, all Bridge Loans were repaid in full using available cash at the Fund and through drawdowns on the available Capital Commitments of the Fund.
Base Management Fees
Management fees increased to $2.3 million for the year ended December 31, 2025, from $1.1 million for the year ended December 31, 2024 primarily due to an increase in net assets. Management fees are payable quarterly in arrears at an annual rate of 1.00% of the value of our Adjusted Net Assets (as defined below) as of the beginning of the first calendar day of the applicable quarter. For purposes of the Amended and Restated Investment Advisory Agreement, "Adjusted Net Assets," as of any calendar quarter end, means the sum of (i) the Fund's total net assets and (ii) any Base Management Fee and Incentive Fee expenses incurred by the Fund with respect to such calendar quarter end.
Management fees increased to $1.1 million for the year ended December 31, 2024, from $3 thousand for the period from September 1, 2023 (commencement of operations) to December 31, 2023 primarily due to an increase in net assets.
Incentive Fee
For the year ended December 31, 2025, incentive fees totaled $1.6 million. Incentive fees increased to $1.6 million for the year ended December 31, 2025 from $880 thousand for the year ended December 31, 2024 primarily due to increase in pre-incentive fee net income.
Incentive fees increased to $880 thousand for the year ended December 31, 2024 from $32 thousand for the period from September 1, 2023 (commencement of operations) to December 31, 2023 primarily due to increase in pre-incentive fee net income.
The Adviser agreed to waive any incentive fee due from the Fund to the Adviser until the earlier of (1) the Fund electing to be regulated as a BDC under the 1940 Act and (2) October 1, 2023. For the year ended December 31, 2024, the Fund incurred incentive fees of $880 thousand, of which $0 was waived and for the period September 1, 2023 (commencement of operations) through December 31, 2023, the Fund incurred incentive fees of $32 thousand, of which $0 was waived.
Other Expenses
Organization costs and offering costs include expenses incurred in our initial formation and our continuous offering. Professional fees include legal, audit, tax, valuation, and other professional fees incurred related to the management of the Fund. Administrative service expenses represent fees paid to the Administrator in accordance with the Master Administrative Services Agreement. Other general and administrative expenses include insurance, filing, research, subscriptions and other costs.
Total other expenses increased to $6.1 million for the year ended December 31, 2025 from $3.5 million for the year ended December 31, 2024, primarily driven by an increase of current tax expense and professional fees as the portfolio continues to grow.
Total other expenses increased to $3.5 million for the year ended December 31, 2024, from $156 thousand for the period September 1, 2023 (commencement of operations) through December 31, 2023 primarily driven by an increase of administrative service expenses and other general & administrative expenses due to servicing a growing portfolio and the comparison of a full year in 2024 against approximately four months in 2023.
For the year ended December 31, 2025, the year ended December 31, 2024 and for the period beginning September 1, 2023 (commencement of operations) and ending December 31, 2023, our Administrator charged $20 thousand, $21 thousand and $5 thousand, respectively, for certain costs and expenses allocable to the Fund under the terms of the Master Administrative Services Agreement.
We entered into an Expense Support and Conditional Reimbursement Agreement with the Adviser. For additional information see "Note 3. Fees, Expenses, Agreements and Related Party Transactions" to the consolidated financial statements.
Income Taxes, Including Excise Taxes
The Fund is currently classified as an association taxable as a corporation for U.S. federal tax purposes. Partners Group BDC Finance I, LLC and Partners Group Revolver Pooling BDC, LLC are treated as disregarded entities and, as such, all activities at these entities shall be reported and taxed on the Fund's U.S. federal tax return. In accordance with U.S. federal tax laws, the Fund's taxable income is subject to federal taxes at a 21% rate and state taxes at a 0% rate. The Fund has recorded $0 unrecognized tax benefits As of December 31, 2025, December 31, 2024 and December 31, 2023, respectively, and has not accrued any interest or penalties related to unrecognized tax benefits in income tax expense. For the year ended December 31, 2025, the Fund incurred $4.7 million in current tax expense and $41 thousand in deferred tax expense. For the year ended December 31, 2024, the Fund incurred $1.9 million in current tax expense and $177 thousand in deferred tax expense. For the period September 1, 2023 (commencement of operations) through December 31, 2023, the Fund incurred $29 thousand in current tax expense and $47 thousand in deferred tax expense. The increase in tax expense over the prior period is primarily attributable to the increases in income before income taxes and net unrealized investment appreciation and the comparison of a full year in 2024 against approximately four months in 2023.
The Fund intends to elect and qualify each taxable year hereafter, to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to qualify each taxable year for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, we must, among other things, distribute to our unitholders in each taxable year generally at least 90% of the sum of our investment company taxable income, as defined by the Code (without regard to the deduction for dividends paid), and net tax-exempt income (if any) for that taxable year. To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our unitholders, which generally relieve us from corporate-level U.S. federal income taxes.
Depending on the level of taxable income earned in a tax year, we may carry forward taxable income (including net capital gains, if any) in excess of current year distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year distributions from such income, we will accrue excise tax on estimated excess taxable income.
Net Realized Gain (Loss)
Net realized gains and losses were comprised of the following (dollar amounts in thousands):
|
Year Ended December 31, 2025 |
Year Ended December 31, 2024 |
Period from September 1, 2023 (commencement of operations) to December 31, 2023 |
||||||||||
| Non-controlled/non-affiliated investments | 139 | 7 | - | |||||||||
| Non-controlled/affiliated investments | - | - | - | |||||||||
| Foreign currency forward contracts | - | - | - | |||||||||
| Foreign currency transactions | 19 | 22 | 1 | |||||||||
| Net realized gain (loss) | 158 | 29 | 1 | |||||||||
For the year ended December 31, 2025, we generated net realized gains of $158 thousand, which was comprised of $19 thousand from foreign currency transactions and $139 thousand from the sale or early paydowns on non-controlled/non-affiliated investments.
For the year ended December 31, 2024, we generated net realized gains of $29 thousand, which was comprised of $22 thousand from foreign currency transactions and $7 thousand from the sale or early paydowns on non-controlled/non-affiliated investments. For the period September 1, 2023 (commencement of operations) through December 31, 2023, we generated net realized gains of $1 thousand attributable to foreign currency transactions. The increase from the prior period is attributable to sales or early paydowns on non-controlled/non-affiliated investments for the year ended December 31, 2024.
Net Change in Unrealized Appreciation (Depreciation)
Net change in unrealized appreciation (depreciation) was comprised of the following (dollar amounts in thousands):
|
Year Ended December 31, 2025 |
Year Ended December 31, 2024 |
Period from September 1, 2023 (commencement of operations) to December 31, 2023 |
||||||||||
| Non-controlled/non-affiliated investments | $ | (19 | ) | $ | 1,479 | $ | 249 | |||||
| Non-controlled/affiliated investments | - | - | - | |||||||||
| Controlled/affiliated investments | - | - | - | |||||||||
| Foreign currency forward contracts | - | - | - | |||||||||
| Deferred tax expense | (41 | ) | (177 | ) | (47 | ) | ||||||
| Translation of assets and liabilities in foreign currencies | (141 | ) | (18 | ) | - | |||||||
| Net change in unrealized appreciation (depreciation) | $ | (201 | ) | $ | 1,284 | $ | 202 | |||||
For the year ended December 31, 2025 unrealized appreciation (depreciation) on investments decreased $19 thousand due to decreased market value of the positions.
For the year ended December 31, 2024, the unrealized appreciation (depreciation) on investments increased $1.5 million due to increased market value of the positions.
For the period September 1, 2023 (commencement of operations) through December 31, 2023, the fair value of our debt investments increased $249 thousand due to market value appreciation.
Financial Condition, Liquidity and Capital Resources
We generate cash primarily from (i) the net proceeds of the Offering, (ii) cash flows from our operations, (iii) any financing arrangements we have entered into or may enter into in the future and (iv) any future offerings of our equity or debt securities. Our primary uses of cash are for (i) purchases of investments in accordance with the Fund's investment objective and strategy; (ii) general corporate purposes; and (iii) payment of operating expenses, including management and administrative services fees and other expenses such as due diligence expenses relating to potential new investments.
As of December 31, 2025, we had one asset-based credit facility, the NatWest Facility. From time to time, we may enter into additional credit facilities, increase the size of our existing credit facility and/or issue debt securities, including unsecured notes and debt securitizations. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred stock, if immediately after the borrowing or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock, is at least 150%. As of December 31, 2025, December 31, 2024 and December 31, 2023, we had an aggregate amount of $226.0 million, $172.0 million and $83 million, respectively, of principal debt outstanding and our asset coverage ratio was 222%, 198% and 102%, respectively. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage.
Cash and cash equivalents as of December 31, 2025, taken together with the $49 million of available capacity under our credit facility (subject to borrowing base availability) and the continuous offering of our Common Units is expected to be sufficient for our investing activities and to conduct our operations in the near term. This determination is based in part on our expectations for the timing of funding investment purchases and the timing and amount of future proceeds from sales of our Common Units and the use of existing and future financing arrangements.
Although we were able to close on a credit facility and amend it during 2025, any disruption in the financial markets or any other negative economic development could restrict our access to financing in the future. We may not be able to find new financing for future investments or liquidity needs and, even if we are able to obtain such financing, such financing may not be on as favorable terms as we could have obtained in the past. These factors may limit our ability to make new investments and adversely impact our results of operations.
As of December 31, 2025, we had $73.4 million in cash and cash equivalents. During the year ended December 31, 2025, cash used in operating activities was $108.1 million, primarily as a result of funding portfolio investments of $223.3 million and partially offset by proceeds from sales of investments and principal repayments of $95.7 million. Cash provided by financing activities was $167.1 million during the period, primarily as a result of new unit issuances related to $114 million of subscriptions and net borrowings (repayments) of $54 million.
As of December 31, 2024, we had $14.4 million in cash and cash equivalents. During the year ended December 31, 2024, cash used in operating activities was $238.4 million, primarily as a result of funding portfolio investments of $255.0 million and partially offset by proceeds from sales of investments and principal repayments of $7.8 million. Cash provided by financing activities was $248.1 million during the period, primarily as a result of new unit issuances related to $160 million of subscriptions and net borrowings (repayments) of $89 million.
Equity
All unit and per unit amounts of the Company's issued and outstanding units in this Annual Report have been retroactively adjusted for the 5:1 forward split effected on February 27, 2026 for all activity prior to that date, unless stated otherwise.
The following table summarizes transactions in Class I units during the year ended December 31, 2025 (dollar amounts in thousands):
| Class I Units | Amount | |||||||
| Class I Units | ||||||||
| Subscriptions | 70,434,599 | $ | 114,000 | |||||
| Distributions reinvested | - | - | ||||||
| Unit repurchases | - | - | ||||||
| Net increase (decrease) | 70,434,599 | $ | 114,000 | |||||
The following table summarizes transactions in common units during the year ended December 31, 2024 (dollar amounts in thousands):
| Common Units | Amount | |||||||
| Common Units | ||||||||
| Subscriptions | 109,180,952 | $ | 160,000 | |||||
| Distributions reinvested | - | - | ||||||
| Unit repurchases | - | - | ||||||
| Net increase (decrease) | 109,180,952 | $ | 160,000 | |||||
The following table summarizes transactions in common units during the period ended December 31, 2023 (dollar amounts in thousands):
| Common Units | Amount | |||||||
| Common Units | ||||||||
| Subscriptions | 1,000,000 | $ | 1,000 | |||||
| Distributions reinvested | - | - | ||||||
| Unit repurchases | - | - | ||||||
| Net increase (decrease) | 1,000,000 | $ | 1,000 | |||||
Distributions and Distribution Reinvestment
In December 2025, the Fund declared a distribution on its Class I Units in an amount equal to $0.1412 per unit. The distribution was made to record holders as of December 26, 2025 and was paid in cash or reinvested in additional units of the Fund for unitholders participating in the Fund's distribution reinvestment plan in January 2026.
Unit Repurchase Program
At the discretion of the Board, we intend to commence a unit repurchase program, no later than one year after the date that we made our BDC election, in which we may repurchase, in each quarter, up to 5% of the NAV of our Common Units outstanding (by number of units) as of the close of the previous calendar quarter. The Board may amend, suspend or terminate the unit repurchase program if it deems such action to be in the best interest of unitholders, such as when a repurchase offer would place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on us as a whole that would outweigh the benefit of the repurchase offer. As a result, unit repurchases may not be available each quarter. We intend to conduct such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Securities Exchange Act of 1934, as amended, and the 1940 Act. All units purchased pursuant to the terms of each tender offer will be retired and thereafter will be authorized and unissued units.
Under the unit repurchase program, to the extent we offer to repurchase units in any particular quarter, it is expected to repurchase units pursuant to tender offers using a purchase price equal to the NAV per unit as of the last calendar day of the applicable quarter, except that units that have not been outstanding for at least one year will be repurchased at 98% of such NAV (an "Early Repurchase Fee"). The one-year holding period is measured as of the subscription closing date immediately following the prospective repurchase date. The Early Repurchase Fee may be waived, at the discretion of the Board, in the case of repurchase requests arising from the death, divorce or qualified disability of the holder. The Early Repurchase Fee will be retained by us for the benefit of remaining unitholders.
Borrowings
Our outstanding debt obligations were as follows (dollar amounts in thousands):
| As of December 31, 2025 | ||||||||||||||||
|
Total Principal Amount Committed |
Principal Amount Outstanding |
Carrying Value (1) |
Fair Value (2) | |||||||||||||
| NatWest Credit Facility | $ | 275,000 | $ | 226,000 | $ | 226,000 | $ | 226,000 | ||||||||
| Total Debt | $ | 275,000 | $ | 226,000 | $ | 226,000 | $ | 226,000 | ||||||||
| As of December 31, 2024 | ||||||||||||||||
|
Total Principal Amount Committed |
Principal Amount Outstanding |
Carrying Value (1) |
Fair Value (2) | |||||||||||||
| NatWest Credit Facility | $ | 275,000 | $ | 172,000 | $ | 172,000 | $ | 172,000 | ||||||||
| Total Debt | $ | 275,000 | $ | 172,000 | $ | 172,000 | $ | 172,000 | ||||||||
| As of December 31, 2023 | ||||||||||||||||
|
Total Principal Amount Committed |
Principal Amount Outstanding |
Carrying Value (1) |
Fair Value (2) | |||||||||||||
| MUFG Credit Facility | $ | 80,000 | $ | 58,438 | $ | 58,438 | $ | 58,438 | ||||||||
| Bridge Loans | 24,600 | 24,600 | 24,600 | 24,600 | ||||||||||||
| Total Debt | $ | 104,600 | $ | 83,038 | $ | 83,038 | $ | 83,038 | ||||||||
| (1) | Carrying value of these debt obligations generally approximate fair value due to their variable interest rates. |
| (2) | The fair value of these debt obligations would be categorized as Level 2 under ASC 820-10. |
A summary of our contractual payment obligations under our credit facility, is as follows (dollar amounts in thousands):
| December 31, 2025 | ||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
| NatWest Facility | $ | 226,000 | $ | 226,000 | $ | - | $ | - | $ | - | ||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
| NatWest Facility | $ | 172,000 | $ | 172,000 | $ | - | $ | - | $ | - | ||||||||||
The NatWest Facility
On February 14, 2024, each of Partners Group BDC Finance I, LLC and Partners Group Revolver Pooling BDC, LLC, as borrowers (the "SPVs"), and the Fund, as parent, entered into a secured financing agreement with State Street Bank and Trust Company, as facility agent, collateral agent, account bank, custodian and collateral administrator, NatWest Markets PLC, as arranger and lead bank, and the financial institutions listed therein (the "NatWest Facility").
Proceeds from the NatWest Facility will be used to finance the origination and acquisition of eligible assets by the SPVs and other permitted uses under the NatWest Facility. The maximum principal amount of the NatWest Facility is $275 million. The availability of this amount is subject to a borrowing base test (which is based on the value and type of the assets held by the SPVs from time to time, an advance rate and other factors, as more fully described in the NatWest Facility documents) and satisfaction of certain conditions, including portfolio profile tests.
The SPVs may borrow amounts in U.S. dollars or certain other permitted currencies under the NatWest Facility. The NatWest Facility provides for the ability to draw and redraw on a revolving basis for a period of up to three years after the closing date (the "Investment Period") unless the Investment Period is terminated sooner as provided in the NatWest Facility. The facility will be a term facility during the period beginning from the end of the Investment Period to the Facility Maturity Date (as defined below). On and after the date which is seven years from the closing date, any lender can request prepayment of any of the advances. Unless otherwise terminated or prepaid, the NatWest Facility will mature 11 years after the closing date (the "Facility Maturity Date"). Prior to the Facility Maturity Date, proceeds received by SPVs from principal, interest or fees on assets must be used to pay fees, expenses and interest on outstanding borrowings, and the excess may be returned to the Fund, subject to certain conditions. On the Facility Maturity Date, the SPVs must pay in full all outstanding fees and expenses and all principal and interest on outstanding borrowings, and the excess may be returned to the Fund. The credit facility may be permanently reduced, in whole or in part, at the option of the SPVs, subject to a prepayment fee.
Amounts drawn on term rate advances bear interest at (i) an applicable margin (1) for EUR borrowings at 2.10% per annum, (2) for GBP borrowings at 2.10% per annum, (3) for USD borrowings at 2.10% per annum, (4) for CAD borrowings at 2.10% per annum, and (5) AUD borrowings at 2.10% per annum, plus (ii) the term reference rate (as determined under the terms of the NatWest Facility). Term rate advances may be switched to compounded rate advances under the terms of the NatWest Facility; amounts drawn on compounded rate advances will be determined under the terms of the NatWest Facility and any supplements entered into in connection with compounded rate advances. The NatWest Facility contains customary covenants, including certain maintenance covenants and customary events of default. The NatWest Facility is secured by a perfected security interest in the assets of each of the SPVs and on any payments received by each of the SPVs in respect of such assets. Assets pledged under the NatWest Facility will not be available to pay other debts of the Fund.
On January 14, 2025, we amended the NatWest Facility, to, among other things, amend the applicable margins of (1) EUR borrowings from 2.55% to 2.30% per annum, (2) GBP borrowings from 2.65% to 2.30% per annum, (3) USD borrowings from 2.85% to 2.40% per annum, (4) CAD borrowings from 3.15% to 2.70% per annum, and (5) AUD borrowings from 3.00% to 2.70% per annum.
On November 26, 2025, we amended the NatWest Facility, to, among other things, amend the applicable margins of (1) EUR borrowings from 2.30% to 2.10% per annum, (2) GBP borrowings from 2.30% to 2.10% per annum, (3) USD borrowings from 2.40% to 2.10% per annum, (4) CAD borrowings from 2.70% to 2.10% per annum, and (5) AUD borrowings from 2.70% to 2.10% per annum.
Related-Party Transactions
We entered into a number of business relationships with affiliated or related parties, including the Amended and Restated Investment Advisory Agreement and the Expense Limitation Agreement.
In addition to the aforementioned agreements, we, our Adviser and certain of our Adviser's affiliates have received exemptive relief from the SEC which permits the Fund to co-invest with other funds managed by our Adviser or its affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.
Critical Accounting Policies
This discussion of our expected operating plans is based upon our expected consolidated financial statements, which will be prepared in accordance with GAAP. The preparation of these consolidated financial statements will require our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we will describe our critical accounting policies in the notes to our future consolidated financial statements.
Investments and Fair Value Measurements
The Fund is required to report its investments, including those for which current market values are not readily available, at fair value.
The Fund's investments are measured at fair value in accordance with ASC 820, Fair Value Measurement ("ASC 820"), which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date, and Rule 2a-5 under the 1940 Act. Pursuant to Rule 2a-5, the Board designated the Adviser as "valuation designee" to perform fair value determinations and approved amended valuation procedures (the "Valuation Procedures").
Fair value is based on observable market prices or parameters or derived from such prices or parameters when such quotations are readily available. In accordance with Rule 2a-5 under the 1940 Act, a market quotation is "readily available" only when it is a quoted price (unadjusted) in active markets for identical instruments that a fund can access at the measurement date, provided that such a quotation is not considered to be readily available if it is not reliable.
The Adviser, as "valuation designee" under Rule 2a-5 of the 1940 Act, determines the fair value of the Fund's investments in conformity with GAAP, Rule 2a-5 of the 1940 Act, and the Fund's Valuation Procedures. As permitted by the Valuation Procedures, the Adviser values the Fund's non-traded investments in consultation with persons who are employees of the Adviser's parent company or one of its subsidiaries. The Valuation Procedures require evaluation of all relevant factors reasonably available to the Adviser and its affiliates at the time the Fund's non-traded investments are valued.
In assessing the fair value of the Fund's non-traded investments in accordance with the Valuation Procedures, the Adviser uses a variety of methods such as discounted cash flow and market data from third party pricing services. The Adviser makes valuation assumptions based on market conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for certain similar instruments are used for investments where appropriate. Other techniques, such as option pricing models and estimated discounted value of future cash flows, are used to determine fair value for the remaining financial instruments.
The Valuation Procedures are implemented by the Adviser and State Street Bank and Trust Company, as the Fund's Administrator. Both the Adviser and the Administrator are subject to the oversight of, and report to, the Board. The Adviser and the Administrator monitor and review the methodologies of the various third-party pricing services that are employed by the Fund.
The Adviser and certain of its affiliates act as investment advisers to clients other than the Fund. However, the valuation attributed to a non-traded investment held by the Fund and to the same non-traded investment held by another client, one of the Adviser's affiliates, or by a client of one of its affiliates might differ due to differences in accounting, regulatory or other factors applicable to the Fund, to such other client or the Adviser's affiliate.
ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material.
The Fund applies ASC 820, which establishes a framework for measuring fair value in accordance with GAAP and required disclosures of fair value measurements. The Fund discloses the fair value of its investments in a hierarchy which prioritizes and ranks the level of market observability used in the determination of fair value. In accordance with ASC 820, these levels are summarized below:
| ● | Level 1 - Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date. |
| ● | Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. |
| ● | Level 3 - Valuations based on inputs that are unobservable and significant to the fair value measurement. |
A financial instrument's level within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Transfers between levels, if any, are recognized at the beginning of the reporting period in which the transfers occur. The Fund evaluates the source of inputs used in the determination of fair value, including any markets in which the investments, or similar investments, are trading. When the fair value of an investment is determined using inputs from a pricing service (or principal market makers), the Fund considers various criteria in determining whether the investment should be classified as a Level 2 or Level 3 investment. Criteria considered includes the pricing methodologies of the pricing services (or principal market makers) to determine if the inputs to the valuation are observable or unobservable, as well as the number of prices obtained and an assessment of the quality of the prices obtained. The level of an investment within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment.
The fair value assigned to these investments is based upon available information and may fluctuate from period to period. In addition, it does not necessarily represent the amount that might ultimately be realized upon sale. Due to inherent uncertainty of valuation, the estimated fair value of an investment may differ from the value that would have been used had a ready market for the investment existed, and the difference could be material.
The Valuation Designee generally uses the income approach to determine fair value for loans where market quotations are not readily available, as long as it is appropriate. If there is deterioration in credit quality or a debt investment is in workout status, the Valuation Designee may consider other factors in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. This liquidation analysis may also include probability weighting of alternative outcomes. The Valuation Designee generally considers our debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance and the loan is otherwise not deemed to be impaired. In determining the fair value of the performing debt, the Valuation Designee considers fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions and other relevant factors, both qualitative and quantitative. In the event that a debt instrument is not performing, as defined above, the Valuation Designee will evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the debt instrument.
Under the income approach, discounted cash flow models are utilized to determine the present value of the future cash flow streams of our debt investments, based on future interest and principal payments as set forth in the associated loan agreements. In determining fair value under the income approach, the Valuation Designee also considers the following factors: applicable market yields and leverage levels, recent transactions, credit quality, prepayment penalties, the nature and realizable value of any collateral, the portfolio company's ability to make payments, and changes in the interest rate environment and the credit markets that generally may affect the price at which similar investments may be made.
Under the market approach, the enterprise value methodology is typically utilized to determine the fair value of an investment. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is generally best expressed as a range of values, from which the Valuation Designee derives a single estimate of enterprise value. In estimating the enterprise value of a portfolio company, the Valuation Designee analyzes various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio company's historical and projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public. Typically, the enterprise values of private companies are based on multiples of earnings before interest, income taxes, depreciation and amortization ("EBITDA"), cash flows, net income, revenues, or in limited cases, book value.
Revenue Recognition
Interest Income
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortizations of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized fees and unamortized discounts are recorded as interest income.
Certain investments may have contractual PIK interest. PIK interest is added to the principal amount of the investment on the interest payment date rather than being paid in cash and generally becomes due at maturity or upon the investment being called by the issuer. PIK interest is recorded as interest income.
Dividend Income
Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the Portfolio Company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private Portfolio Companies or on the ex-dividend date for publicly-traded Portfolio Companies.
Fee Income
In the general course of its business, the Fund receives certain non-recurring fees from Portfolio Companies. Such fees include loan prepayment penalties, structuring fees and loan waiver amendment fees, and commitment fees, and are recorded as other income in investment income when earned.
Non-Accrual Income
Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management's judgment, the loans are likely to remain current. Management may determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
Distributions
To the extent that the Fund has taxable income available, the Fund intends to make quarterly distributions to its unitholders. Distributions to unitholders are recorded on the record date. All distributions will be paid at the discretion of our Board and will depend on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as our Board may deem relevant from time to time.
Income Taxes
The Fund has elected to be treated as a BDC under the 1940 Act. The Fund intends to elect and qualify each taxable year hereafter, to be treated as a RIC under Subchapter M of the Code. So long as the Fund maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its unitholders as dividends. Rather, any tax liability related to income earned and distributed by the Fund would represent obligations of the Fund's investors and would not be reflected in the consolidated financial statements of the Fund.
The Fund evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are "more-likely-than-not" to be sustained by the applicable tax authority. Tax positions not deemed to meet the "more-likely-than-not" threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
To qualify for and maintain qualification as a RIC, the Fund must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Fund must distribute to its unitholders, for each taxable year, at least 90% of the sum of (i) its "investment company taxable income" for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income.
In addition, pursuant to the excise tax distribution requirements, the Fund is subject to a 4% nondeductible federal excise tax on undistributed income unless the Fund distributes in a timely manner in each taxable year an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending December 31 in that calendar year and (3) any income realized, but not distributed, in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Fund that is subject to corporate income tax is considered to have been distributed.
Contractual Obligations
We have entered into the Amended and Restated Investment Advisory Agreement with Partners Group (USA), Inc. to provide us with investment advisory services and the Master Administrative Services Agreement with State Street Bank and Trust Company to provide us with administrative services. Payments for investment advisory services under the Amended and Restated Investment Advisory Agreement and fees under the Master Administrative Services Agreement are described in "Item 1. Business -Investment Advisory Agreement and Master Administrative Services Agreement."
We have established and may in the future establish one or more credit facilities or enter into other financing arrangements from time to time to facilitate investments and the timely payment of our expenses. It is anticipated that any such credit facilities will bear interest at floating rates at to-be-determined spreads over SOFR (or other applicable reference rate). We cannot assure unitholders that we will be able to enter into a credit facility on favorable terms or at all. In connection with a credit facility or other borrowings, lenders may require us to pledge assets, commitments and/or drawdowns (and the ability to enforce the payment thereof) and may ask to comply with positive or negative covenants that could have an effect on our operations.
Off-Balance Sheet Arrangements
Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not expect to have any off-balance sheet financings or liabilities. From time to time, we may become a party to certain legal proceedings incidental to the normal course of its business. As of December 31, 2025, management is not aware of any material pending or threatened litigation.
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