ThZeal - The Zeal

csl-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period to

Commission File No. 814-01410

Carlyle Secured Lending III

(Exact name of Registrant as specified in its charter)


Delaware						86-6498423
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

One Vanderbilt Avenue, Suite 3400, New York, NY 10017						(212) 813-4900
(Address of principal executive office) (Zip Code)						(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of the registrant’s common shares of beneficial interest, $0.001 par value per share, outstanding at May 12, 2023 was 6,974,983.

CARLYLE SECURED LENDING III

INDEX



Part I.	Financial Information
Item 1.	Financial Statements
	Consolidated Statements of Assets and Liabilities as of March 31, 2023 (unaudited) and December 31, 2022	1
	Consolidated Statements of Operations for the three month periods ended March 31, 2023 and March 31, 2022 (unaudited)	2
	Consolidated Statements of Changes in Net Assets for the three month periods ended March 31, 2023 and March 31, 2022 (unaudited)	3
	Consolidated Statements of Cash Flows for the three month periods ended March 31, 2023 and March 31, 2022 (unaudited)	4
	Consolidated Schedules of Investments as of March 31, 2023 (unaudited) and December 31, 2022	5
	Notes to Consolidated Financial Statements (unaudited)	21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54
Part II.	Other Information
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	55
	Signatures	57

CARLYLE SECURED LENDING III

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(dollar amounts in thousands, except per share data)



	March 31, 2023		December 31, 2022
ASSETS	(unaudited)
Investments—non-controlled/non-affiliated, at fair value (amortized cost of $238,478 and $202,115, respectively)	$	237,472	$	200,081
Cash, cash equivalents and restricted cash	27,379		6,761

Deferred offering costs	57		72
Receivable for investments sold	35		181
Due from Investment Adviser	644		1,490
Interest and other income receivable from investments	2,344		1,977
Receivable for issuance of common shares of beneficial interest	111		138
Prepaid expenses and other assets	2,342		2,477
Total assets	$	270,384	$	213,177
LIABILITIES
Secured borrowings (Note 5)	$	127,104	$	98,631



Interest and credit facility fees payable (Note 5)	1,297		727
Dividend payable (Note 7)	2,814		1,947
Incentive fees payable (Note 4)	769		507
Administrative service fees payable (Note 4)	277		396

Deferred financing costs payable	—		548
Deferred offering costs payable	—		260
Accrued organizational expenses	—		157
Deferred income	—		81


Other accrued expenses and liabilities	121		251
Total liabilities	132,382		103,505
Commitments and contingencies (Notes 4, 6 and 9)
NET ASSETS
Common shares of beneficial interest, $0.001 par value; unlimited shares authorized; 6,906,313 and 5,568,950 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	7		6
Paid-in capital in excess of par value	137,542		110,873


Total distributable earnings (loss)	453		(1,207)
Total net assets	$	138,002	$	109,672
NET ASSETS PER SHARE	$	19.98	$	19.69

The accompanying notes are an integral part of these consolidated financial statements.

CARLYLE SECURED LENDING III

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(dollar amounts in thousands, except per share data)


	For the three month periods ended
		March 31, 2023		March 31, 2022
Investment income:
From non-controlled/non-affiliated investments:
Interest income		$	6,502	$	7
PIK income		139		0
Other income		226		39

Total investment income		6,867		46
Expenses:
Organizational expenses (Note 2)		10		2
Offering cost expense (Note 2)		33		35

Net investment income incentive fees (Note 4)		769		—

Professional fees		245		151
Administrative service fees (Note 4)		140		—

Interest expense and credit facility fees (Note 5)		2,405		—

Trustees’ fees and expenses (Note 4)		67		98
Other general and administrative		160		124
Total expenses		3,829		410
Less waivers and reimbursements of expenses (Note 4)		(574)		(1,195)
Expenses after waivers and reimbursements of expenses		3,255		(785)
Net investment income (loss) before taxes		3,612		831
Excise tax expense		9		—
Net investment income (loss)		3,603		831
Net realized gain (loss) and net change in unrealized appreciation (depreciation):
Net realized gain (loss) on investments:
Non-controlled/non-affiliated investments		9		—
Net realized currency gain (loss) on non-investment assets and liabilities		(3)		—
Net change in unrealized appreciation (depreciation) on investments:
Non-controlled/non-affiliated investments		1,028		(2)
Net change in unrealized currency gains (losses) on non-investment assets and liabilities		(158)		(0)
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities		876		(2)
Net increase (decrease) in net assets resulting from operations		$	4,479	$	829
Basic and diluted earnings per common share (Note 7)		$	0.79	$	61.90
Weighted-average common shares of beneficial interest outstanding—basic and diluted (Note 7)		5,665,083		13,400

The accompanying notes are an integral part of these consolidated financial statements.

CARLYLE SECURED LENDING III

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

(dollar amounts in thousands)


	For the three month periods ended
	March 31, 2023		March 31, 2022
Net increase (decrease) in net assets resulting from operations:
Net investment income (loss)	$	3,603	$	831
Net realized gain (loss) on investments and non-investment assets and liabilities	6		—
Net change in unrealized appreciation (depreciation) on investments	1,028		(2)
Net change in unrealized appreciation (depreciation) on non-investment assets and liabilities	(158)		—
Net increase (decrease) in net assets resulting from operations	4,479		829
Capital share transactions:
Common shares of beneficial interest issued	25,319		15,221
Dividend reinvestment	1,351		—
Dividends declared	(2,819)		—
Net increase (decrease) in net assets resulting from capital share transactions	23,851		15,221
Net increase (decrease) in net assets	28,330		16,050
Net assets at beginning of period	109,672		(628)
Net assets at end of period	$	138,002	$	15,422

The accompanying notes are an integral part of these consolidated financial statements.

CARLYLE SECURED LENDING III

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(dollar amounts in thousands)


	For the three month periods ended
	March 31, 2023		March 31, 2022
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	4,479	$	829
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Amortization of deferred financing costs	165
Amortization of deferred offering costs	33		35
Net accretion of discount on investments	(246)		(0)
Paid-in-kind interest	(116)		(0)
Net realized (gain) loss on investments and non-investment assets and liabilities	(6)		—
Net change in unrealized (appreciation) depreciation on investments	(1,028)		2
Net change in unrealized currency (gains) losses on non-investment assets and liabilities	158		—
Cost of investments purchased	(37,610)		(15)
Proceeds from sales and repayments of investments and change in receivable for investments sold	1,756		1
Changes in operating assets:
Interest and other income receivable	(367)		(14)

Due from Investment Adviser	846		(1,195)
Changes in operating liabilities:

Interest and credit facility fees payable	570		—
Incentive fees payable	262		—
Administrative service fees payable	(119)		—


Accrued organizational expenses	(157)		2

Deferred income	(81)		(5)


Other accrued expenses and liabilities	(130)		275
Net cash provided by (used in) operating activities	(31,591)		(85)
Cash flows from financing activities:
Proceeds from issuance of common shares of beneficial interest, net of change in receivable for issuance of common shares of beneficial interest	25,346		14,943
Borrowings on the Credit Facilities	44,720		—
Repayments of the Credit Facilities	(16,400)		—


Dividends paid in cash	(601)		—
Debt issuance costs paid	(30)		—

Deferred financing cost payable	(548)		—
Deferred offering cost payable	(278)		—
Net cash provided by (used in) financing activities	52,209		14,943
Net increase (decrease) in cash, cash equivalents and restricted cash	20,618		14,858
Cash, cash equivalents and restricted cash, beginning of period	6,761		185
Cash, cash equivalents and restricted cash, end of period	$	27,379	$	15,043
Supplemental disclosures:

Interest and credit facility fees paid during the period	$	1,776	$	—
Dividends reinvested during the period	1,351		—
Dividends declared during the period	2,819		—
Taxes, including excise tax, paid during the period	33		—

The accompanying notes are an integral part of these consolidated financial statements.

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of March 31, 2023 (unaudited)

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate (2)	Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount**		Amortized Cost (4)		Fair Value (5)		% of Net Assets
First Lien Debt (98.7% of fair value)
ADPD Holdings, LLC	#^	(2)(3)(8)(9)	Consumer Services	SOFR	6.00%	11.24%	8/16/2022	8/15/2028	$	7,177	$	6,916	$	6,922	5.02	%
Alpine Acquisition Corp II	#^	(2)(3)(8)(9)	Transportation: Cargo	SOFR	5.50%	10.27%	4/19/2022	11/30/2026	8,685		8,517		8,305		6.02
Apex Companies Holdings, LLC	#^	(2)(3)(9)	Environmental Industries	SOFR	6.25%	10.94%	1/31/2023	1/31/2028	10,014		9,678		9,657		7.00
Ascend Buyer, LLC	#^	(2)(3)(8)(9)	Containers, Packaging & Glass	SOFR	6.40%	11.45%	9/30/2021	9/30/2028	14,861		14,440		14,465		10.48
Associations, Inc.	#	(2)(3)(9)	Construction & Building	SOFR	4.00%, 2.50% PIK	10.54%	7/2/2021	7/2/2027	1,549		1,500		1,431		1.04
Atlas AU Bidco Pty Ltd (Australia)	#	(2)(3)(6)(9)	High Tech Industries	SOFR	7.25%	11.98%	12/15/2022	12/12/2029	723		700		709		0.51
Avalara, Inc.	#^	(2)(3)(9)	Diversified Financial Services	SOFR	7.25%	12.15%	10/19/2022	10/19/2028	13,500		13,149		13,287		9.63
BlueCat Networks, Inc. (Canada)	#^	(2)(3)(6)(9)	High Tech Industries	SOFR	4.00%, 2.00% PIK	10.94%	8/8/2022	8/8/2028	6,429		6,227		6,206		4.50
Bradyifs Holdings, LLC	#	(2)(3)(8)	Wholesale	SOFR	6.25%	11.23%	1/6/2022	11/22/2025	5		5		5		0.00
Bradyifs Holdings, LLC	^	(2)(3)(8)	Wholesale	SOFR	6.75%	11.63%	12/21/2022	11/22/2025	2,873		2,815		2,830		2.05
CD&R Madison Parent Ltd (United Kingdom)	^	(2)(6)	Business Services	EURIBOR	8.00%	10.70%	2/27/2023	2/27/2030	€	1,200	1,231		1,262		0.91
CD&R Madison Parent Ltd (United Kingdom)	#^	(2)(6)(9)	Business Services	SONIA	8.50%	12.43%	2/27/2023	2/27/2030	£	2,434	2,818		2,905		2.11
Celerion Buyer, Inc.	^	(2)(3)(9)	Healthcare & Pharmaceuticals	SOFR	6.50%	11.18%	11/3/2022	11/3/2029	3,144		3,051		3,066		2.22
Coupa Holdings, LLC	#	(2)(3)(9)	Software	SOFR	7.50%	12.29%	2/27/2023	2/27/2030	2,160		2,098		2,097		1.52
CPI Intermediate Holdings, Inc.	^	(2)(3)(9)	Telecommunications	SOFR	5.50%	10.19%	10/6/2022	10/6/2029	11,617		11,378		11,288		8.18
CST Holding Company	^	(2)(3)(8)(9)	Consumer Goods: Non-Durable	SOFR	6.75%	11.66%	11/1/2022	11/1/2028	5,019		4,864		4,885		3.54
DCA Investment Holding LLC	#	(2)(3)	Healthcare & Pharmaceuticals	SOFR	6.41%	11.39%	2/25/2022	4/3/2028	2		2		2		0.00
Denali Midco 2, LLC	#^	(2)(3)(8)(9)	Consumer Services	SOFR	6.50%	11.41%	9/15/2022	12/22/2027	5,684		5,411		5,306		3.84
Dwyer Instruments, Inc.	#^	(2)(3)(9)	Capital Equipment	LIBOR	6.00%	11.16%	7/21/2021	7/21/2027	8,125		7,881		7,988		5.79
Eliassen Group, LLC	#^	(2)(3)(9)	Business Services	SOFR	5.50%	10.41%	4/14/2022	4/14/2028	8,064		7,912		7,971		5.78
Ellkay, LLC	#	(2)(3)(9)	Healthcare & Pharmaceuticals	LIBOR	6.25%	11.39%	9/14/2021	9/14/2027	4		4		3		0.00
Excel Fitness Holdings, Inc.	^	(2)(3)(8)(9)	Leisure Products & Services	SOFR	5.25%	10.27%	4/29/2022	4/29/2029	4,485		4,400		4,297		3.11
Excelitas Technologies Corp.	^	(2)(3)(8)(9)	Capital Equipment	SOFR	5.75%	10.63%	8/12/2022	8/12/2029	4,039		3,923		3,856		2.79
Excelitas Technologies Corp.	^	(2)	Capital Equipment	EURIBOR	5.75%	8.36%	8/12/2022	8/12/2029	€	1,190	1,199		1,252		0.91
FPG Intermediate Holdco, LLC	#	(2)(3)(8)(9)	Consumer Services	SOFR	6.50%	11.41%	8/5/2022	3/5/2027	43		(170)		(457)		(0.33)
Guidehouse LLP	#	(2)(3)	Sovereign & Public Finance	LIBOR	6.25%	11.16%	9/30/2022	10/16/2028	79		78		78		0.06

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2023 (unaudited)

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate (2)	Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount**		Amortized Cost (4)		Fair Value (5)		% of Net Assets
Hercules Borrower LLC	#	(2)(3)(9)	Environmental Industries	LIBOR	5.50%	10.37%	9/10/2021	12/14/2026	$	1	$	1	$	1	0.00	%
Hoosier Intermediate, LLC	#	(2)(3)(9)	Healthcare & Pharmaceuticals	LIBOR	5.50%	10.36%	11/15/2021	11/15/2028	4		4		4		0.00
HS Spa Holdings Inc.	^	(2)(3)(9)	Consumer Services	SOFR	5.75%	10.45%	6/2/2022	6/2/2029	858		841		839		0.61
IQN Holding Corp.	^	(2)(3)(9)	Business Services	SOFR	5.25%	10.14%	5/2/2022	5/2/2029	2,418		2,366		2,379		1.72
Jeg's Automotive, LLC	#	(2)(3)(9)	Automotive	LIBOR	6.00%	10.95%	12/22/2021	12/22/2027	4		4		4		0.00
Kaseya, Inc.	#	(2)(3)(9)	High Tech Industries	SOFR	5.75%	10.65%	6/23/2022	6/23/2029	994		886		840		0.61
LVF Holdings, Inc.	#	(2)(3)(8)(9)	Beverage & Food	SOFR	6.25%	11.30%	6/10/2021	6/10/2027	20		20		19		0.01
Material Holdings, LLC	#	(2)(3)(9)	Business Services	SOFR	5.75%	10.75%	8/19/2021	8/19/2027	4		4		4		0.00
Maverick Acquisition, Inc.	#	(2)(3)	Aerospace & Defense	LIBOR	6.25%	11.09%	6/1/2021	6/1/2027	22		21		18		0.01
Medical Manufacturing Technologies, LLC	#	(2)(3)(8)(9)	Healthcare & Pharmaceuticals	SOFR	5.50%	10.42%	12/23/2021	12/23/2027	4		4		4		0.00
NEFCO Holding Company LLC	#^	(2)(3)(8)(9)	Construction & Building	SOFR	6.50%	11.28%	8/5/2022	8/5/2028	4,108		3,970		3,895		2.82
North Haven Fairway Buyer, LLC	#^	(2)(3)(9)	Consumer Services	SOFR	6.50%	11.37%	5/17/2022	5/17/2028	15,100		14,818		14,631		10.60
North Haven Stallone Buyer, LLC	#	(2)(3)(9)	Consumer Services	SOFR	5.75%	11.57%	10/11/2022	5/24/2027	20		16		17		0.01
Oak Purchaser, Inc.	#^	(2)(3)(9)	Business Services	SOFR	5.50%	10.36%	4/28/2022	4/28/2028	3,932		3,869		3,758		2.72
Oranje Holdco, Inc.	#^	(2)(3)(9)	Business Services	SOFR	7.75%	12.43%	2/1/2023	2/1/2029	8,052		7,828		7,860		5.70
Pestco Intermediate, LLC	^	(2)(3)(8)(9)	Environmental Industries	SOFR	6.75%	11.86%	2/6/2023	2/17/2028	5,560		5,325		5,320		3.86
PF Atlantic Holdco 2, LLC	#	(2)(3)(8)(9)	Leisure Products & Services	SOFR	5.50%	10.74%	11/12/2021	11/12/2027	4		4		4		0.00
Project Castle, Inc.	^	(2)(3)	Capital Equipment	SOFR	5.50%	10.40%	6/24/2022	6/1/2029	995		898		843		0.61
PXO Holdings I Corp.	#	(2)(3)(8)(9)	Chemicals, Plastics & Rubber	SOFR	5.50%	10.44%	3/8/2022	3/8/2028	4		4		4		0.00
QNNECT, LLC	^	(2)(3)(9)	Aerospace & Defense	SOFR	7.00%	11.69%	11/2/2022	11/2/2029	5,342		5,151		5,224		3.79
Quantic Electronics, LLC	#	(2)(3)(8)(9)	Aerospace & Defense	SOFR	6.25%	11.23%	8/17/2021	3/1/2027	7		7		7		0.01
Radwell Parent, LLC	#^	(2)(3)(8)(9)	Wholesale	SOFR	6.75%	11.66%	12/1/2022	4/1/2029	14,059		13,627		13,741		9.96
RSC Acquisition, Inc.	#	(2)(3)(8)(9)	Diversified Financial Services	SOFR	5.50%	10.38%	5/31/2022	11/1/2026	5,433		5,349		5,085		3.68
SCP Eye Care HoldCo, LLC	#^	(2)(3)(8)(9)	Healthcare & Pharmaceuticals	SOFR	5.75%	10.48%	10/7/2022	10/7/2029	7,657		7,354		7,379		5.35
Smarsh Inc.	#	(2)(3)(9)	Software	SOFR	6.50%	11.29%	2/18/2022	2/18/2029	1		1		1		0.00
Spotless Brands, LLC	#^	(2)(3)(8)(9)	Consumer Services	SOFR	6.50%	11.32%	6/21/2022	7/25/2028	14,159		13,894		13,757		9.97
TIBCO Software Inc.	#	(2)(3)	High Tech Industries	SOFR	4.50%	9.50%	9/30/2022	3/31/2029	2,500		2,284		2,267		1.64
The Carlstar Group LLC	#^	(2)(3)(8)(9)	Automotive	SOFR	6.50%	11.34%	7/8/2022	7/8/2027	7,131		6,964		7,053		5.11
Trader Corporation (Canada)	#^	(2)(3)(6)(9)	Automotive	CDOR	6.75%	11.68%	12/22/2022	12/22/2029	C$	12,081	8,652		8,708		6.31

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2023 (unaudited)

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate (2)	Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount**		Amortized Cost (4)		Fair Value (5)		% of Net Assets
Tufin Software North America, Inc.	^	(2)(3)(8)(9)	Software	SOFR	7.69%	12.44%	8/17/2022	8/17/2028	$	7,260	$	7,121	$	7,077	5.13	%
USALCO, LLC	#	(2)(3)	Chemicals, Plastics & Rubber	LIBOR	6.00%	11.16%	10/19/2021	10/19/2027	5		5		5		—
USR Parent Inc.	^	(2)(3)	Retail	SOFR	7.60%	12.27%	4/22/2022	4/25/2027	4,111		4,076		3,978		2.88
Wineshipping.com LLC	#	(2)(3)(8)(9)	Beverage & Food	SOFR	5.75%	10.77%	10/29/2021	10/29/2027	4		4		4		—
Yellowstone Buyer Acquisition, LLC	#	(2)(3)	Consumer Goods: Durable	LIBOR	5.75%	10.57%	9/13/2021	9/13/2027	2		2		2		—

























First Lien Debt Total											$	235,401	$	234,348	169.79	%
Second Lien Debt (0.0% of fair value)
11852604 Canada Inc. (Canada)	#	(2)(3)(6)	Healthcare & Pharmaceuticals	LIBOR	9.50% (100% PIK)	13.17%	9/30/2021	9/30/2028	$	4	$	4	$	4	0.00	%
AP Plastics Acquisition Holdings, LLC	#	(2)(3)	Chemicals, Plastics & Rubber	LIBOR	7.50%	12.28%	8/10/2021	8/10/2029	10		10		10		0.01
Blackbird Purchaser, Inc.	#	(2)(3)(8)(9)	Capital Equipment	SOFR	7.50%	12.41%	12/14/2021	4/8/2027	2		2		2		0.00
















Second Lien Debt Total											$	16	$	16	0.01	%


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Acquisition Date	Shares/ Units	Cost		Fair Value (5)		% of Net Assets
Equity Investments (1.3% of fair value)
Blackbird Holdco, Inc.	#	(7)	Capital Equipment	12/14/2021	—	$	2	$	2	0.00	%
Buckeye Parent, LLC	#	(7)	Automotive	12/22/2021	—	—		—		0.00
GB Vino Parent, L.P.	#	(7)	Beverage & Food	10/29/2021	—	—		—		0.00
NearU Holdings LLC	#	(7)	Consumer Services	8/16/2022	5	494		494		0.36
NEFCO Holding Company LLC	#	(7)	Construction & Building	8/5/2022	—	152		152		0.11
Pascal Ultimate Holdings, L.P	#	(7)	Capital Equipment	7/21/2021	—	—		—		0.00
Picard Parent, Inc.	#	(7)	High Tech Industries	9/30/2022	2	2,219		2,230		1.62
Profile Holdings I, LP	#	(7)	Chemicals, Plastics & Rubber	3/8/2022	—	—		—		0.00
Talon MidCo 1 Limited	#	(7)	Software	8/17/2022	19,417	194		230		0.17
















Equity Investments Total						$	3,061	$	3,108	2.26	%
Total investments—non-controlled/non-affiliated						$	238,478	$	237,472	172.06	%
Total investments						$	238,478	$	237,472	172.06	%

# Denotes that all or a portion of the assets are owned by Carlyle Secured Lending III (together with its consolidated subsidiary, "we," "us," "our," "CSL III," or the "Company"). The Company has entered into a senior secured revolving credit facility (the "Subscription Facility"). The lenders of the Subscription Facility have a first lien security interest in substantially all of the portfolio investments held by the Company (see

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2023 (unaudited)

(dollar amounts in thousands)

Note 5, Borrowings, to these unaudited consolidated financial statements). Accordingly, such assets are not available to creditors of the Company's wholly owned subsidiary, Carlyle Secured Lending III SPV, L.L.C. (the "SPV").

^ Denotes that all or a portion of the assets are owned by the Company’s wholly owned subsidiary, the SPV. The SPV has entered into a senior secured revolving credit facility (as amended, the “SPV Credit Facility” and, together with the Subscription Facility, the “Credit Facilities”). The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 5, Borrowings). Accordingly, such assets are not available to creditors of the Company.

** Par amount is denominated in USD (“$”) unless otherwise noted, as denominated in Euro (“€”), Canadian Dollar (“C$”), or British Pound (“£”).

(1) Unless otherwise indicated, issuers of debt and equity investments held by the Company are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of March 31, 2023, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of March 31, 2023, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales.

(2)Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR, the Secured Overnight Financing Rate (“SOFR”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of March 31, 2023. As of March 31, 2023, the reference rates for our variable rate loans were the 30-day LIBOR at 4.86%, the 90-day LIBOR at 5.19%, the 180-day LIBOR at 5.31%, the 30-day SOFR at 4.80%, the 90-day SOFR at 4.91%, the 180-day SOFR at 4.90%, the daily SONIA at 4.18%, the 90-day EURIBOR at 3.04% and the 30-day CDOR at 5.03% .

(3)Loan includes interest rate floor feature, which is generally 1.00%.

(4)Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

(5)Fair value is determined in good faith by CSL III Advisor, LLC, the Company’s investment adviser, as the valuation designee pursuant to Rule 2a-5 under the Investment Company Act (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements, to these unaudited consolidated financial statements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments and equity investments was determined using significant unobservable inputs.

(6)The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(7)Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of March 31, 2023, the aggregate fair value of these securities is $3,108, or 2.26% of the Company's net assets.

(8)Loans include a credit spread adjustment that ranges from 0.10% to 0.25%.

(9)As of March 31, 2023, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:


Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount**		Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
ADPD Holdings, LLC	Delayed Draw	0.50	%	$	98	$	(2)
ADPD Holdings, LLC	Delayed Draw	0.50		6,264		(111)
ADPD Holdings, LLC	Revolver	0.50		828		(15)
Alpine Acquisition Corp II	Revolver	0.50		1,551		(57)
Apex Companies Holdings, LLC	Delayed Draw	1.00		2,305		(67)
Ascend Buyer, LLC	Revolver	0.50		0		0
Associations, Inc.	Delayed Draw	1.00		4,253		(87)
Associations, Inc.	Revolver	0.50		1		0
Atlas AU Bidco Pty Ltd (Australia)	Revolver	0.50		67		(1)
Avalara, Inc.	Revolver	0.50		1,350		(19)
Blackbird Purchaser, Inc.	Delayed Draw	1.00		1		0
BlueCat Networks, Inc. (Canada)	Delayed Draw	0.50		62		(1)
BlueCat Networks, Inc. (Canada)	Delayed Draw	0.50		4,556		(92)

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2023 (unaudited)

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount**		Fair Value
CD&R Madison Parent Ltd (United Kingdom)	Delayed Draw	1.50	%	£	542	$	(13)
Celerion Buyer, Inc.	Delayed Draw	1.00		499		(10)
Celerion Buyer, Inc.	Revolver	0.50		249		(5)
Coupa Holdings, LLC	Delayed Draw	1.00		193		(5)
Coupa Holdings, LLC	Revolver	0.50		148		(4)
CPI Intermediate Holdings, Inc.	Delayed Draw	1.00		2,782		(63)
CST Holding Company	Revolver	0.50		423		(10)
Denali Midco 2, LLC	Delayed Draw	1.00		4,300		(163)
Dwyer Instruments, Inc.	Delayed Draw	1.00		5,946		(56)
Dwyer Instruments, Inc.	Revolver	0.50		659		(6)
Eliassen Group, LLC	Delayed Draw	1.00		3,741		(30)
Ellkay, LLC	Revolver	0.50		0		0
Excel Fitness Holdings, Inc.	Revolver	0.50		245		(10)
Excelitas Technologies Corp.	Delayed Draw	0.50		1,517		(45)
Excelitas Technologies Corp.	Revolver	0.50		673		(20)
FPG Intermediate Holdco, LLC	Delayed Draw	1.00		12,317		(497)
Hercules Borrower LLC	Delayed Draw	1.00		1		0
Hoosier Intermediate, LLC	Revolver	0.50		1		0
HS Spa Holdings Inc.	Revolver	0.50		124		(2)
IQN Holding Corp.	Delayed Draw	1.00		2,976		(20)
IQN Holding Corp.	Revolver	0.50		489		(3)
Jeg's Automotive, LLC	Delayed Draw	1.00		1		0
Kaseya, Inc.	Delayed Draw	0.50		4,485		(115)
Kaseya, Inc.	Revolver	0.50		514		(13)
LVF Holdings, Inc.	Delayed Draw	1.00		2		0
LVF Holdings, Inc.	Revolver	0.50		1		0
Material Holdings, LLC	Delayed Draw	—		4		0
Medical Manufacturing Technologies, LLC	Delayed Draw	1.00		0		0
Medical Manufacturing Technologies, LLC	Revolver	0.50		0		0
NEFCO Holding Company LLC	Delayed Draw	1.00		2,903		(81)
NEFCO Holding Company LLC	Revolver	0.50		628		(17)
North Haven Fairway Buyer, LLC	Revolver	0.50		923		(27)
North Haven Stallone Buyer, LLC	Delayed Draw	1.00		180		(3)
Oak Purchaser, Inc.	Delayed Draw	0.50		2,793		(67)
Oak Purchaser, Inc.	Revolver	0.50		584		(14)
Oranje Holdco, Inc.	Revolver	0.50		1,006		(21)

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2023 (unaudited)

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount**		Fair Value
PESTCO Intermediate, LLC	Delayed Draw	2.00	%	$	2,081	$	(62)
PESTCO Intermediate, LLC	Revolver	0.50		357		(11)
PF Atlantic Holdco 2, LLC	Delayed Draw	1.00		1		0
PF Atlantic Holdco 2, LLC	Revolver	0.50		0		0
PXO Holdings I Corp.	Delayed Draw	1.00		0		0
PXO Holdings I Corp.	Revolver	0.50		0		0
QNNECT, LLC	Delayed Draw	1.00		1,325		(23)
Quantic Electronics, LLC	Delayed Draw	1.00		3		0
Radwell Parent, LLC	Revolver	0.38		907		(19)
RSC Acquisition, Inc.	Delayed Draw	1.00		4,866		(165)
SCP Eye Care HoldCo, LLC	Delayed Draw	1.00		2,352		(61)
SCP Eye Care HoldCo, LLC	Revolver	0.50		696		(18)
Smarsh Inc.	Delayed Draw	1.00		0		0
Smarsh Inc.	Revolver	0.50		0		0
Spotless Brands, LLC	Revolver	0.50		366		(10)
The Carlstar Group LLC	Revolver	0.50		1,829		(16)
Trader Corporation (Canada)	Revolver	0.50		C$	906	(28)
Tufin Software North America, Inc.	Delayed Draw	—		51		(1)
Tufin Software North America, Inc.	Revolver	0.50		357		(9)
Wineshipping.com LLC	Delayed Draw	1.00		0		0
Wineshipping.com LLC	Revolver	0.50		0		0
Total unfunded commitments				$	89,173	$	(2,195)

As of March 31, 2023, investments at amortized cost and fair value consisted of the following:


Type	Amortized Cost		Fair Value		% of Fair Value


First Lien Debt	$	235,401	$	234,348	98.7	%
Second Lien Debt	16		16		—
Equity Investments	3,061		3,108		1.3
Total	$	238,478	$	237,472	100.0	%

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2023 (unaudited)

(dollar amounts in thousands)

The rate type of debt investments at amortized cost and fair value as of March 31, 2023 was as follows:


Rate Type	Amortized Cost		Fair Value		% of Fair Value of First and Second Lien Debt
Floating Rate	$	235,417	$	234,364	100.0	%
Fixed Rate	—		—		—
Total	$	235,417	$	234,364	100.0	%

The industry composition of investments at amortized cost and fair value as of March 31, 2023 was as follows:


Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	5,179	$	5,249	2.2	%
Automotive	15,620		15,765		6.6
Beverage & Food	24		23		—
Business Services	26,028		26,139		10.9
Capital Equipment	13,905		13,943		5.9
Chemicals, Plastics & Rubber	19		19		—
Construction & Building	5,622		5,478		2.3
Consumer Goods: Durable	2		2		—
Consumer Goods: Non-Durable	4,864		4,885		2.1
Consumer Services	42,220		41,509		17.5
Containers, Packaging & Glass	14,440		14,465		6.1
Diversified Financial Services	18,498		18,372		7.7

Environmental Industries	15,004		14,978		6.3
Healthcare & Pharmaceuticals	10,423		10,462		4.4
High Tech Industries	12,316		12,252		5.2
Leisure Products & Services	4,404		4,301		1.8


Retail	4,076		3,978		1.7
Software	9,414		9,405		4.0
Sovereign & Public Finance	78		78		—
Telecommunications	11,378		11,288		4.8
Transportation: Cargo	8,517		8,305		3.5

Wholesale	16,447		16,576		7.0
Total	$	238,478	$	237,472	100.0	%

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2023 (unaudited)

(dollar amounts in thousands)

The geographical composition of investments at amortized cost and fair value as of March 31, 2023 was as follows:


Geography	Amortized Cost		Fair Value		% of Fair Value
Australia	$	700	$	709	0.3	%
Canada	14,883		14,918		6.3
United Kingdom	4,049		4,167		1.8
United States	218,846		217,678		91.6
Total	$	238,478	$	237,472	100.0	%

The accompanying notes are an integral part of these consolidated financial statements.

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of December 31, 2022

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate (2)	Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount**		Amortized Cost (4)		Fair Value (5)		% of Net Assets
First Lien Debt (98.5% of fair value)
ADPD Holdings, LLC	#^	(2)(3)(9)(10)	Consumer Services	SOFR	6.00%	10.37%	8/16/2022	8/15/2028	$	7,108	$	6,833	$	6,750	6.15	%
Alpine Acquisition Corp II	^	(2)(3)(9)(10)	Transportation: Cargo	SOFR	5.50%	9.76%	4/19/2022	11/30/2026	8,534		8,356		8,154		7.44
Ascend Buyer, LLC	#^	(2)(3)(9)(10)	Containers, Packaging & Glass	SOFR	6.25%	10.67%	9/30/2021	9/30/2028	14,898		14,463		14,636		13.35
Associations, Inc.	#	(2)(3)(10)	Construction & Building	SOFR	4.00%, 2.50% PIK	11.04%	7/2/2021	7/2/2027	443		391		271		0.24
Atlas AU Bidco Pty Ltd (Australia)	#	(2)(3)(6)(10)	High Tech Industries	SOFR	7.25%	11.48%	12/15/2022	12/12/2029	723		699		699		0.64
Avalara, Inc.	^	(2)(3)(10)	Diversified Financial Services	SOFR	7.25%	11.83%	10/19/2022	10/19/2028	13,500		13,138		13,051		11.90
BlueCat Networks, Inc. (Canada)	#	(2)(3)(6)(10)	High Tech Industries	SOFR	4.00%, 2.00% PIK	10.46%	8/8/2022	8/8/2028	6,413		6,205		6,106		5.57
Bradyifs Holdings, LLC	#	(2)(3)(9)	Wholesale	SOFR	6.25%	10.83%	1/6/2022	11/22/2025	5		5		5		0.00
Bradyifs Holdings, LLC	^	(2)(3)(9)	Wholesale	SOFR	6.75%	11.41%	12/21/2022	11/22/2025	2,880		2,822		2,822		2.57
Celerion Buyer, Inc.	^	(2)(3)(10)	Healthcare & Pharmaceuticals	SOFR	6.50%	10.64%	11/3/2022	11/3/2029	3,152		3,056		3,054		2.79
CPI Intermediate Holdings, Inc.	^	(2)(3)(10)	Telecommunications	SOFR	5.50%	9.68%	10/6/2022	10/6/2029	11,617		11,371		11,328		10.33
CST Holding Company	^	(2)(3)(9)(10)	Consumer Goods: Non-Durable	SOFR	6.75%	10.97%	11/1/2022	11/1/2028	5,031		4,871		4,868		4.44
DCA Investment Holding LLC	#	(2)(3)(10)	Healthcare & Pharmaceuticals	SOFR	6.41%	10.46%	2/25/2022	4/3/2028	2		2		2		0.00
Denali Midco 2, LLC	#^	(2)(3)(9)(10)	Consumer Services	SOFR	6.50%	10.92%	9/15/2022	12/22/2027	3,994		3,709		3,613		3.29
Dwyer Instruments, Inc.	#^	(2)(3)(10)	Capital Equipment	LIBOR	6.00%	10.74%	7/21/2021	7/21/2027	8,090		7,833		7,863		7.17
Eliassen Group, LLC	#^	(2)(3)(10)	Business Services	SOFR	5.50%	10.07%	4/14/2022	4/14/2028	8,085		7,926		7,947		7.25
Ellkay, LLC	#	(2)(3)(10)	Healthcare & Pharmaceuticals	LIBOR	6.25%	11.00%	9/14/2021	9/14/2027	3		3		3		0.00
Excel Fitness Holdings, Inc.	^	(2)(3)(9)(10)	Leisure Products & Services	SOFR	5.25%	10.25%	4/29/2022	4/29/2029	4,447		4,360		4,229		3.86
Excelitas Technologies Corp.	#	(2)(3)(9)(10)	Capital Equipment	SOFR	5.75%	10.12%	8/12/2022	8/12/2029	3,414		3,296		3,186		2.90
Excelitas Technologies Corp.	#	(2)	Capital Equipment	EURIBOR	5.75%	7.55%	8/12/2022	8/12/2029	€	1,190	1,198		1,229		1.11
FPG Intermediate Holdco, LLC	#	(2)(3)(9)(10)	Consumer Services	SOFR	6.50%	10.92%	8/5/2022	3/5/2027	43		(183)		(498)		(0.45)
Guidehouse LLP	#	(2)(3)	Sovereign & Public Finance	LIBOR	6.25%	10.63%	9/30/2022	10/16/2028	79		78		78		0.07
Hercules Borrower LLC	#	(2)(3)(10)	Environmental Industries	LIBOR	5.50%	9.75%	9/10/2021	12/14/2026	1		1		1		0.00
Hoosier Intermediate, LLC	#	(2)(3)(10)	Healthcare & Pharmaceuticals	LIBOR	5.50%	10.11%	11/15/2021	11/15/2028	4		4		4		0.00
HS Spa Holdings Inc.	^	(2)(3)(10)	Consumer Services	SOFR	5.75%	10.45%	6/2/2022	6/2/2029	860		842		834		0.76

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2022

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate (2)	Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount**		Amortized Cost (4)		Fair Value (5)		% of Net Assets
IQN Holding Corp.	^	(2)(3)(10)	Business Services	SOFR	5.25%	9.64%	5/2/2022	5/2/2029	$	2,424	$	2,370	$	2,332	2.13	%
Jeg's Automotive, LLC	#	(2)(3)(10)	Automotive	LIBOR	6.00%	10.75%	12/22/2021	12/22/2027	4		4		4		0.00
Kaseya, Inc.	#	(2)(3)(10)	High Tech Industries	SOFR	5.75%	10.33%	6/23/2022	6/23/2029	994		882		819		0.75
LinQuest Corporation	#	(2)(3)(10)	Aerospace & Defense	LIBOR	5.75%	9.10%	7/28/2021	7/28/2028	—		—		—		0.00
LVF Holdings, Inc.	#	(2)(3)(10)	Beverage & Food	LIBOR	6.25%	10.98%	6/10/2021	6/10/2027	21		20		19		0.02
Material Holdings, LLC	#	(2)(3)(10)	Business Services	SOFR	6.00%	10.67%	8/19/2021	8/19/2027	4		4		4		0.00
Maverick Acquisition, Inc.	#	(2)(3)	Aerospace & Defense	LIBOR	6.25%	10.98%	6/1/2021	6/1/2027	22		21		18		0.01
Medical Manufacturing Technologies, LLC	#	(2)(3)(9)(10)	Healthcare & Pharmaceuticals	SOFR	5.50%	10.18%	12/23/2021	12/23/2027	4		4		4		0.00
NEFCO Holding Company LLC	#^	(2)(3)(9)(10)	Construction & Building	SOFR	6.50%	10.95%	8/5/2022	8/5/2028	3,611		3,467		3,462		3.16
North Haven Fairway Buyer, LLC	#^	(2)(3)(10)	Consumer Services	SOFR	6.50%	11.08%	5/17/2022	5/17/2028	15,132		14,840		14,844		13.53
North Haven Stallone Buyer, LLC	#	(2)(3)(10)	Consumer Services	SOFR	5.75%	10.34%	10/11/2022	5/24/2027	—		(4)		(4)		0.00
Oak Purchaser, Inc.	#^	(2)(3)(10)	Business Services	SOFR	5.50%	9.48%	4/28/2022	4/28/2028	3,763		3,697		3,592		3.27
PF Atlantic Holdco 2, LLC	#	(2)(3)(10)	Leisure Products & Services	LIBOR	5.50%	10.25%	11/12/2021	11/12/2027	4		4		4		0.00
Project Castle, Inc.	^	(2)(3)	Capital Equipment	SOFR	5.50%	10.08%	6/24/2022	6/1/2029	997		898		802		0.73
PXO Holdings I Corp.	#	(2)(3)(9)(10)	Chemicals, Plastics & Rubber	SOFR	5.50%	9.05%	3/8/2022	3/8/2028	4		4		4		0.00
QNNECT, LLC	^	(2)(3)(10)	Aerospace & Defense	SOFR	7.00%	11.11%	11/2/2022	11/2/2029	5,281		5,085		5,081		4.63
Quantic Electronics, LLC	#	(2)(3)(10)	Aerospace & Defense	LIBOR	6.25%	10.95%	8/17/2021	3/1/2027	7		7		7		0.01
Radwell Parent, LLC	#^	(2)(3)(9)(10)	Wholesale	SOFR	6.75%	11.33%	12/1/2022	4/1/2029	13,953		13,508		13,503		12.31
RSC Acquisition, Inc.	#	(2)(3)(9)(10)	Diversified Financial Services	SOFR	5.50%	9.83%	5/31/2022	11/1/2026	3,018		2,928		2,551		2.33
SCP Eye Care HoldCo, LLC	#^	(2)(3)(9)(10)	Healthcare & Pharmaceuticals	SOFR	5.75%	9.47%	10/7/2022	10/7/2029	7,337		7,024		7,075		6.45
Smarsh Inc.	#	(2)(3)(10)	Software	SOFR	6.50%	11.29%	2/18/2022	2/18/2029	1		1		1		0.00
Spotless Brands, LLC	#^	(2)(3)(9)(10)	Consumer Services	SOFR	6.50%	10.80%	6/21/2022	7/25/2028	14,119		13,846		13,680		12.47
TIBCO Software Inc.	#	(2)(3)	High Tech Industries	SOFR	4.50%	9.18%	9/30/2022	3/31/2029	2,500		2,278		2,228		2.03
The Carlstar Group LLC	#^	(2)(3)(9)(10)	Automotive	SOFR	6.50%	10.92%	7/8/2022	7/8/2027	7,223		7,045		7,105		6.48
Trader Corporation (Canada)	#^	(2)(3)(6)(10)	Automotive	CDOR	6.75%	11.61%	12/22/2022	12/22/2029	C$	12,081	8,643		8,683		7.92
Trafigura Trading LLC	#	(2)(3)(8)(9)(10)	Metals & Mining	SOFR	8.35%	12.89%	7/26/2021	1/13/2023	3		2		3		0.00

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2022

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate (2)	Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount**		Amortized Cost (4)		Fair Value (5)		% of Net Assets
Tufin Software North America, Inc.	^	(2)(3)(9)(10)	Software	SOFR	7.69%	12.01%	8/17/2022	8/17/2028	$	7,211	$	7,067	$	6,977	6.36	%
USALCO, LLC	#	(2)(3)	Chemicals, Plastics & Rubber	LIBOR	6.00%	10.73%	10/19/2021	10/19/2027	5		5		5		0.00
USR Parent Inc.	^	(2)(3)	Retail	SOFR	7.60%	11.72%	4/22/2022	4/25/2027	4,222		4,185		4,025		3.67
Wineshipping.com LLC	#	(2)(3)(10)	Beverage & Food	LIBOR	5.75%	10.15%	10/29/2021	10/29/2027	4		4		3		0.00
Yellowstone Buyer Acquisition, LLC	#	(2)(3)	Consumer Goods: Durable	LIBOR	5.75%	10.07%	9/13/2021	9/13/2027	2		2		2		0.00
First Lien Debt Total											$	199,120	$	197,068	179.64	%

Second Lien Debt (0.0% of fair value)
11852604 Canada Inc. (Canada)	#	(2)(3)(6)	Healthcare & Pharmaceuticals	LIBOR	9.50% (100% PIK)	13.70%	9/30/2021	9/30/2028	$	4	$	4	$	4	0.00	%
AP Plastics Acquisition Holdings, LLC	#	(2)(3)	Chemicals, Plastics & Rubber	LIBOR	7.50%	11.85%	8/10/2021	8/10/2029	10		10		9		0.01
Blackbird Purchaser, Inc.	#	(2)(3)(10)	Capital Equipment	LIBOR	7.50%	11.88%	12/14/2021	4/8/2027	2		2		2		0.00
Second Lien Debt Total											$	16	$	15	0.01	%


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Acquisition Date	Shares/ Units	Cost		Fair Value (5)		% of Net Assets
Equity Investments (1.5% of fair value)
Blackbird Holdco, Inc.	#	(7)	Capital Equipment	12/14/2021	0	$	2	$	2	0.00	%
Buckeye Parent, LLC	#	(7)	Automotive	12/22/2021	0	0		0		0.00
GB Vino Parent, L.P.	#	(7)	Beverage & Food	10/29/2021	0	0		0		0.00
NearU Holdings LLC	#	(7)	Consumer Services	8/16/2022	5	494		494		0.45
NEFCO Holding Company LLC	#	(7)	Construction & Building	8/5/2022	0	157		157		0.14
Pascal Ultimate Holdings, L.P	#	(7)	Capital Equipment	7/21/2021	0	0		0		0.00
Picard Parent, Inc.	#	(7)	High Tech Industries	9/30/2022	3	2,132		2,130		1.94
Profile Holdings I, LP	#	(7)	Chemicals, Plastics & Rubber	3/8/2022	0	0		0		0.00
Talon MidCo 1 Limited	#	(7)	Software	8/17/2022	19,417	194		215		0.20
Equity Investments Total						$	2,979	$	2,998	2.73	%
Total investments—non-controlled/non-affiliated						$	202,115	$	200,081	182.38	%
Total investments						$	202,115	$	200,081	182.38	%

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2022

(dollar amounts in thousands)

^ Denotes that all or a portion of the assets are owned by the Company’s wholly owned subsidiary, the SPV. The SPV has entered into a senior secured revolving credit facility (the “SPV Credit Facility” and, together with the Subscription Facility, the “Credit Facilities”). The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 5, Borrowings). Accordingly, such assets are not available to creditors of the Company.

** Par amount is denominated in USD (“$”) unless otherwise noted, as denominated in Euro (“€”) or Canadian Dollar (“C$”).

(1) Unless otherwise indicated, issuers of debt and equity investments held by the Company are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2022, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2022, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales.

(2)Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2022. As of December 31, 2022, the reference rates for all LIBOR loans were the 30-day LIBOR at 4.39%, the 90-day LIBOR at 4.77% and the 180-day LIBOR at 5.14%, the 30-day SOFR at 4.36%, and the 90-day SOFR at 4.59%.

(3)Loan includes interest rate floor feature, generally 1.00%.

(7)Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of December 31, 2022, the aggregate fair value of these securities is $2,998, or 2.73% of the Company’s net assets.

(8)The investment is secured by receivables purchased from the portfolio company, with an implied discount of 12.89%. The investment was made via a tranched participation arrangement between the purchaser of such receivables and the Company. The investment has a secondary priority behind the rights of such purchaser.

(9)Loans include a credit spread adjustment that ranges from 0.10% to 0.26%.

(10)As of December 31, 2022, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:


Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
ADPD Holdings, LLC	Delayed Draw	0.50	%	$	209	$	(5)
ADPD Holdings, LLC	Delayed Draw	0.50		98		(2)
ADPD Holdings, LLC	Delayed Draw	0.50		6,264		(155)
ADPD Holdings, LLC	Revolver	0.50		828		(20)
Alpine Acquisition Corp II	Revolver	0.50		1,724		(64)
Ascend Buyer, LLC	Revolver	0.50		0		(0)
Associations, Inc.	Delayed Draw	1.00		5,356		(159)
Associations, Inc.	Revolver	0.50		1		(0)
Atlas AU Bidco Pty Ltd (Australia)	Revolver	0.50		67		(2)
Avalara, Inc.	Revolver	0.50		1,350		(41)
Blackbird Purchaser, Inc.	Delayed Draw	1.00		1		(0)
BlueCat Networks, Inc. (Canada)	Delayed Draw	0.50		62		(2)
BlueCat Networks, Inc. (Canada)	Delayed Draw	0.50		4,556		(127)

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2022

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
Celerion Buyer, Inc.	Delayed Draw	1.00	%	$	499	$	(12)
Celerion Buyer, Inc.	Revolver	0.50		249		(6)
CPI Intermediate Holdings, Inc.	Delayed Draw	—		2,782		(56)
CST Holding Company	Revolver	0.50		423		(13)
DCA Investment Holding LLC	Delayed Draw	1.00		0		(0)
Denali Midco 2, LLC	Delayed Draw	1.00		6,000		(228)
Dwyer Instruments, Inc.	Delayed Draw	1.00		5,946		(91)
Dwyer Instruments, Inc.	Revolver	0.50		715		(11)
Eliassen Group, LLC	Delayed Draw	1.00		3,741		(43)
Ellkay, LLC	Revolver	0.50		0		(0)
Excel Fitness Holdings, Inc.	Revolver	0.50		292		(13)
Excelitas Technologies Corp.	Delayed Draw	0.50		2,334		(86)
Excelitas Technologies Corp.	Revolver	0.50		480		(18)
FPG Intermediate Holdco, LLC	Delayed Draw	1.00		12,317		(539)
Hercules Borrower LLC	Delayed Draw	1.00		1		(0)
Hoosier Intermediate, LLC	Revolver	0.50		1		(0)
HS Spa Holdings Inc.	Revolver	0.50		124		(3)
IQN Holding Corp.	Delayed Draw	1.00		2,976		(46)
IQN Holding Corp.	Revolver	0.50		489		(8)
Jeg's Automotive, LLC	Delayed Draw	1.00		1		(0)
Kaseya, Inc.	Delayed Draw	0.50		4,485		(131)
Kaseya, Inc.	Revolver	0.50		514		(15)
LinQuest Corporation	Delayed Draw	1.00		10,000		—
LVF Holdings, Inc.	Delayed Draw	1.00		2		(0)
LVF Holdings, Inc.	Revolver	0.50		0		(0)
Material Holdings, LLC	Delayed Draw	—		4		(0)
Medical Manufacturing Technologies, LLC	Delayed Draw	1.00		0		(0)
Medical Manufacturing Technologies, LLC	Revolver	0.50		0		(0)
NEFCO Holding Company LLC	Delayed Draw	1.00		2,988		(58)
NEFCO Holding Company LLC	Delayed Draw	1.00		41		(1)
NEFCO Holding Company LLC	Revolver	0.50		1,018		(20)
North Haven Fairway Buyer, LLC	Revolver	0.50		923		(17)
North Haven Stallone Buyer, LLC	Delayed Draw	1.00		200		(4)
Oak Purchaser, Inc.	Delayed Draw	0.50		2,963		(69)
Oak Purchaser, Inc.	Revolver	0.50		584		(14)
PF Atlantic Holdco 2, LLC	Delayed Draw	1.00		1		(0)
PF Atlantic Holdco 2, LLC	Revolver	0.50		0		(0)

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2022

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
PXO Holdings I Corp.	Delayed Draw	1.00	%	$	0	$	(0)
PXO Holdings I Corp.	Revolver	0.50		0		(0)
QNNECT, LLC	Delayed Draw	1.00		1,386		(42)
Quantic Electronics, LLC	Delayed Draw	1.00		3		(0)
Radwell Parent, LLC	Revolver	0.38		1,047		(31)
RSC Acquisition, Inc.	Delayed Draw	1.00		7,293		(331)
SCP Eye Care HoldCo, LLC	Delayed Draw	1.00		2,352		(57)
SCP Eye Care HoldCo, LLC	Revolver	0.50		1,035		(25)
Smarsh Inc.	Delayed Draw	1.00		0		(0)
Smarsh Inc.	Revolver	0.50		0		(0)
Spotless Brands, LLC	Revolver	0.50		457		(14)
The Carlstar Group LLC	Revolver	0.50		1,829		(24)
Trader Corporation (Canada)	Revolver	0.50		C$	906	(31)
Trafigura Trading LLC	Revolver	0.50		0		(0)
Tufin Software North America, Inc.	Delayed Draw	—		31		(1)
Tufin Software North America, Inc.	Revolver	0.50		357		(11)
Wineshipping.com LLC	Delayed Draw	1.00		0		(0)
Wineshipping.com LLC	Revolver	0.50		0		(0)


Total unfunded commitments				$	100,069	$	(2,646)

As of December 31, 2022, investments at amortized cost and fair value consisted of the following:


Type	Amortized Cost		Fair Value		% of Fair Value


First Lien Debt	$	199,120	$	197,068	98.5	%
Second Lien Debt	16		15		—
Equity Investments	2,979		2,998		1.5
Total	$	202,115	$	200,081	100.0	%

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2022

(dollar amounts in thousands)

The rate type of debt investments at amortized cost and fair value as of December 31, 2022 was as follows:


Rate Type	Amortized Cost		Fair Value		% of Fair Value of First and Second Lien Debt
Floating Rate	$	199,136	$	197,083	100.0	%
Fixed Rate	—		—		—
Total	$	199,136	$	197,083	100.0	%

The industry composition of investments at amortized cost and fair value as of December 31, 2022 was as follows:


Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	5,113	$	5,106	2.6	%
Automotive	15,692		15,792		7.9
Beverage & Food	24		23		—
Business Services	13,997		13,875		6.9
Capital Equipment	13,229		13,083		6.6
Chemicals, Plastics & Rubber	19		19		—
Construction & Building	4,014		3,890		1.9
Consumer Goods: Durable	2		2		—
Consumer Goods: Non-Durable	4,871		4,868		2.4
Consumer Services	40,378		39,712		19.8
Containers, Packaging & Glass	14,463		14,636		7.3
Diversified Financial Services	16,067		15,602		7.8
Environmental Industries	1		1		—
Healthcare & Pharmaceuticals	10,097		10,146		5.1
High Tech Industries	12,195		11,982		6.0
Leisure Products & Services	4,364		4,233		2.1
Metals & Mining	2		3		—

Retail	4,185		4,025		2.0
Software	7,262		7,192		3.6
Sovereign & Public Finance	78		78		—
Telecommunications	11,371		11,328		5.7
Transportation: Cargo	8,356		8,154		4.1

Wholesale	16,335		16,331		8.2
Total	$	202,115	$	200,081	100.0	%

CARLYLE SECURED LENDING III

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2022

(dollar amounts in thousands)

The geographical composition of investments at amortized cost and fair value as of December 31, 2022 was as follows:


Geography	Amortized Cost		Fair Value		% of Fair Value
Australia	$	699	$	699	0.3	%
Canada	14,851		14,793		7.4




United States	186,565		184,589		92.3
Total	$	202,115	$	200,081	100.0	%

The accompanying notes are an integral part of these consolidated financial statements.

CARLYLE SECURED LENDING III

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of March 31, 2023

(dollar amounts in thousands, except per share data)

1. ORGANIZATION

Carlyle Secured Lending III (together with its consolidated subsidiary, the “Company” or “CSL III”) is a Delaware statutory trust formed on February 8, 2021 and structured as an externally managed, non-diversified closed-end investment company. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). In addition, the Company intends to elect to be treated, and to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”) beginning with the year ending December 31, 2022 as well as maintain such election in future taxable years. However, there is no guarantee that the Company will qualify to make such an election for any taxable year. For the initial tax year ended December 31, 2021, the Company was taxed as a regular C Corporation.

The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through assembling a portfolio of secured debt investments with favorable risk-adjusted returns. The Company’s investment strategy seeks to extract enhanced yield from a directly originated, and defensively constructed, portfolio of credit investments. The strategy’s core focus is U.S. middle market cash flow finance, principally in companies supported by financial sponsors. This core strategy is opportunistically supplemented with differentiated and complementary lending and investing strategies, which take advantage of the broad capabilities of Carlyle’s Global Credit platform while offering risk diversifying portfolio benefits. In describing the Company’s business, the Company uses the term “middle market” to refer generally to companies with approximately $25 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”). The Company seeks to achieve its investment objective primarily through a portfolio weighted towards first lien loans or unitranche loans (including last out portions of such loans), while a minority of our portfolio may also include, but not be limited to, assets such as second lien loans, unsecured debt, subordinated debt and select investments in preferred and common equities with loans that typically have a contractual maturity of six to seven years and typically do not preclude early repayment.

The Company invests primarily in loans to middle market companies whose debt has been rated below investment grade, or would likely be rated below investment grade if it was rated. These securities, which are often referred to as “junk,” have predominately speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.

On February 24, 2022, the Company completed its initial closing of capital commitments from unaffiliated investors in the Company’s private offering (the “Initial Closing Date”). The Company has held and intends to hold additional closings subsequent to the Initial Closing Date. The Company commenced operations on May 28, 2021 (“Commencement”).

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

The Company is externally managed by CSL III Advisor, LLC (together with its successors, the “Investment Adviser”), an investment adviser registered under the Investment Advisers Act of 1940, as amended. Carlyle Global Credit Administration L.L.C. (the “Administrator”) provides the administrative services necessary for the Company to operate. Both the Investment Adviser and the Administrator are consolidated subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of The Carlyle Group Inc. “Carlyle” refers to The Carlyle Group Inc. and its affiliates and its consolidated subsidiaries (other than portfolio companies of its affiliated funds), a global investment firm publicly traded on the Nasdaq Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.

Carlyle Secured Lending III SPV, L.L.C. (the “SPV”) is a Delaware limited liability company that was formed on August 31, 2022. The SPV, which invests in first and second lien senior secured loans, is a wholly owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation.

As a BDC, the Company is required to comply with certain regulatory requirements. As part of these requirements, the Company must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of its total assets are qualifying assets (with certain limited exceptions).

To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to its shareholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. Pursuant to this election, the Company generally does not have to pay corporate level taxes on any income that it distributes to shareholders, provided that the Company satisfies those requirements.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies (“ASC 946”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the SPV. All significant intercompany balances and transactions have been eliminated. U.S. GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.

The interim consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the interim periods presented have been included. These adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2022. The results of operations for the three month period ended March 31, 2023 are not necessarily indicative of the operating results to be expected for the full year.

Certain reclassifications were made to prior year amounts to conform to the current period presentation. For the three month period ended March 31, 2022, the Company separately presented sub-administrative service fees in the accompanying Consolidated Statements of Operations. For the three month period ended March 31, 2023, these amounts are presented as a component of other general and administrative expenses on their respective statements. There was no change to total net assets as a result of this reclassification.

The dollar amounts on the consolidated financial statements are presented in thousands. Prior periods have been conformed to the current presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment at the time of exit using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the accompanying Consolidated Statements of Operations reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See Note 3, Fair Value Measurements, for further information about fair value measurements.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash consist of demand deposits and highly liquid investments (e.g., money market funds, U.S. treasury notes) with original maturities of three months or less. Cash equivalents are carried at amortized cost, which approximates fair value. The Company’s cash, cash equivalents and restricted cash are held with two large financial institutions and cash held in such financial institutions may, at times, exceed the Federal Deposit Insurance Corporation insured limit. As of March 31, 2023 and December 31, 2022, the Company held restricted cash balances of $760 and $726, respectively, which represent amounts that are collected and held by trustees appointed by the Company for payment of interest expense and principal on the outstanding borrowings, or reinvestment into new assets, and as custodians of the assets securing certain of the Company’s financing transactions.

Revenue Recognition

Interest from Investments

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization 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. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. The Company may have delayed draw loans in its portfolio with original issue discount (“OID”) interest received at origination. OID received prior to funding on delayed draw loans is included in deferred income in the Consolidated Statements of Assets and Liabilities. This amount is recorded and accreted into interest income over the life of the respective security using the effective interest method.

The Company may have loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK income represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. As of March 31, 2023 and December 31, 2022, the fair value of the loans in the portfolio with PIK provisions was $7,641 and $6,381 respectively, which represented approximately 3.2% and 3.2%, respectively, of total investments at fair value. For the three month periods ended March 31, 2023 and 2022, the Company earned $139 and $0, respectively, in PIK income. In 2022, the Company began presenting PIK income as a separate financial statement line item in the accompanying Consolidated Statements of Operations, which had previously been included in interest income. Prior periods have been conformed to the current presentation.

Other Income

Other income may include income such as consent, waiver, amendment, unused, underwriting and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the accompanying Consolidated Statements of Assets and Liabilities. For the three month periods ended March 31, 2023 and 2022, the Company earned $226 and $39, respectively, in other income, primarily from unused fees and arranger fees.

Non-Accrual Income

Loans are generally placed on non-accrual status when principal or interest payments are past due or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a 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 are current or there is no longer any reasonable doubt that such principal or interest will be collected in full and, in management’s judgment, are likely to remain current. Management may determine not to place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of March 31, 2023 and March 31, 2022, there were no first or second lien debt investments on non-accrual status.

Organizational Expenses and Offering Costs

The Company will bear, among other expenses and costs, organizational expenses and offering costs relating to the offering of the common shares of beneficial interest of the Company incurred on or prior to the final closing date (collectively, the “Organizational and Offering Costs”) up to a maximum aggregate amount of 0.15% of the Company’s total capital

commitments. The Company’s final closing date was extended on February 21, 2023 by the Board of Trustees to permit the Company to accept shares up to and on August 24, 2023 (such date, as extended and as it may be further extended, the “Final Closing Date”). In order to more fairly allocate the organizational expenses in connection with the Company’s formation among all shareholders, investors subscribing after the initial capital drawdown from investors in the Company’s private offering (the “Initial Drawdown” and the date on which the Initial Drawdown occurs, the “Initial Drawdown Date”) will be required to bear a pro rata portion of such expenses at the time of their first investment in the Company. To the extent the Company’s total capital commitments later increase, the Investment Adviser or its affiliates may be reimbursed by the Company for past payments of excess Organizational and Offering Costs made on the Company’s behalf; provided, that the total Organizational and Offering Costs borne by the Company do not exceed 0.15% of total capital commitments; provided, further, that the Investment Adviser or its affiliates may not be reimbursed for payment of excess Organizational and Offering Costs that were incurred more than three years prior to the proposed reimbursement.

The Company’s offering costs will be amortized over the twelve months beginning on the closing date for all closings occurring after the Initial Closing Date. As of March 31, 2023 and March 31, 2022, the Investment Advisor has incurred $2,217 and $2,085, respectively, of Organizational and Offering Costs, of which $445 and $228, respectively, would be reimbursable by the Company, subject to the Reimbursement Agreement (as defined below) and included in accrued organizational expenses and deferred offering costs payable in the accompanying Consolidated Statements of Assets and Liabilities. For the three months ended March 31, 2023, organizational expense and offering cost expense amounted to $10 and $33, respectively. For the three months ended March 31, 2022, organizational expense and offering cost expense amounted to $2 and $35, respectively.

Credit Facilities – Related Costs, Expenses and Deferred Financing Costs

The Company and the SPV have each entered into a senior secured revolving credit facility (the “Subscription Facility” and, as amended, the “SPV Credit Facility,” respectively, and together, the “Credit Facilities”). Interest expense and unused commitment fees on the Credit Facilities are recorded on an accrual basis. Unused commitment fees are included in interest expense and credit facility fees in the accompanying Consolidated Statements of Operations.

The Credit Facilities are recorded at carrying value, which approximates fair value.

Deferred financing costs include capitalized expenses related to the closing or amendments of the Credit Facilities. Amortization of deferred financing costs for each credit facility is computed on the straight-line basis over the respective term of each credit facility. The unamortized balance of such costs is included in prepaid expenses and other assets in the accompanying Consolidated Statements of Assets and Liabilities. The amortization of such costs is included in interest expense and credit facility fees in the accompanying Consolidated Statements of Operations.

In 2022, the Company began presenting interest expense and credit facility fees together in the accompanying Consolidated Statements of Operations, which had previously been presented as separate financial statement line items. Prior periods have been conformed to the current presentation.

Income Taxes

The Company was taxed as a regular C Corporation for the initial tax year ended December 31, 2021. Beginning with the year ending December 31, 2022, for federal income tax purposes, the Company intends to elect to be treated as a RIC under the Code, and intends to make the required distributions to its shareholders as specified therein. In order to qualify as a RIC, the Company must, among other things, meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its shareholders at least 90% of its investment company taxable income(“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate

income tax is considered to have been distributed. The Company intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements as reasonable. For the three months ended March 31, 2023 and 2022, the Company incurred $9 and $0 in excise tax expense, respectively.

The Company 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. The SPV is a disregarded entity for tax purposes and is consolidated with the tax return of the Company. All penalties and interest associated with income taxes, if any, are included in income tax expense.

Dividends and Distributions to Shareholders

To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its shareholders. Dividends and distributions to shareholders are recorded on the record date. The amount to be distributed, if any, is determined by the Board of Trustees each quarter. Any dividends to the Company’s shareholders will be declared out of assets legally available for distribution.

Functional Currency

The functional currency of the Company is the U.S. Dollar. Investments are generally made in the local currency of the country in which the investments are domiciled and are translated into U.S. Dollars with foreign currency translation gains or losses recorded within net change in unrealized appreciation (depreciation) on investments in the accompanying Consolidated Statements of Operations. Foreign currency translation gains and losses on non-investment assets and liabilities are separately reflected in the accompanying Consolidated Statements of Operations.

Earnings Per Common Share

The Company computes earnings per common share in accordance with ASC 260, Earnings Per Share (“ASC 260”). Basic earnings per common share is calculated by dividing the net increase (decrease) in net assets resulting from operations attributable to common stock by the weighted average number of shares of common stock outstanding. Diluted earnings per common share reflects the assumed conversion of all dilutive securities.

Recent Accounting Standards Updates

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848), which defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact of the adoption of ASU 2020-04, 2021-01 and 2022-06 on its consolidated financial statements. The Company does not expect this guidance to impact its consolidated financial statements.

3. FAIR VALUE MEASUREMENTS

The Company applies fair value accounting in accordance with the terms of FASB ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. Effective September 8, 2022, the Investment Adviser, as the valuation designee pursuant to Rule 2a-5 under the Investment Company Act, determines in good faith the fair value of the Company’s investment portfolio for which market quotations are not readily available. The Investment

Adviser values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Investment Adviser may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Investment Adviser determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. The Investment Adviser may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments (i.e., illiquid securities/instruments), a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of personnel of the Investment Adviser; (iii) the Board of Trustees engages a third-party valuation firm to provide positive assurance on portions of first lien senior secured loans, “unitranche” loans and second lien senior secured loans each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) if applicable, prior to September 8, 2022, the Audit Committee of the Board of Trustees (the “Audit Committee”) reviewed the assessments of the Investment Adviser and the third-party valuation firm; and (v) if applicable, prior to September 8, 2022, the Board of Trustees discussed the valuation recommendations of the Audit Committee and determined the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

•the nature and realizable value of any collateral;

•call features, put features and other relevant terms of debt;

•the portfolio company’s leverage and ability to make payments;

•the portfolio company’s public or private credit rating;

•the portfolio company’s actual and expected earnings and discounted cash flow;

•prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

•the markets in which the portfolio company does business and recent economic and/or market events; and

•comparisons to comparable transactions and publicly traded securities.

Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of March 31, 2023 and December 31, 2022.

U.S. GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair

value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in determination of fair values, as follows:

•Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. Financial instruments in this category generally include unrestricted securities, including equities and derivatives, listed in active markets. The Investment Adviser does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

•Level 2—inputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. Financial instruments in this category generally include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

•Level 3—inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments in this category generally include investments in privately-held entities, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Investment Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the three month periods ended March 31, 2023 and 2022, there were no transfers between levels.

The following tables summarize the Company’s investments measured at fair value on a recurring basis by the above fair value hierarchy levels as of March 31, 2023 and December 31, 2022:


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets
First Lien Debt	$	—	$	—	$	234,348	$	234,348
Second Lien Debt	—		—		16		16
Equity Investments	—		—		3,108		3,108
Total	$	—	$	—	$	237,472	$	237,472



	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
First Lien Debt	$	—	$	—	$	197,068	$	197,068
Second Lien Debt	—		—		15		15
Equity Investments	—		—		2,998		2,998
Total	$	—	$	—	$	200,081	$	200,081

The changes in the Company’s investments at fair value for which the Company has used Level 3 inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level 3 investments still held are as follows:


	Financial Assets
	For the three months ended March 31, 2023
	First Lien Debt		Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	197,068	$	15	$	2,998	$	200,081
Purchases	37,637		—		81		37,718
Sales	25		—		—		25
Paydowns	(1,635)		—		—		(1,635)
Accretion of discount	244		1		1		246
Net realized gains (losses)	9		—		—		9
Net change in unrealized appreciation (depreciation)	1,000		—		28		1,028
Balance, end of period	$	234,348	$	16	$	3,108	$	237,472
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included on the Consolidated Statements of Operations	$	1,000	$	—	$	28	$	1,028



	Financial Assets
	For the three months ended March 31, 2022
	First Lien Debt		Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	99	$	15	$	2	$	116
Purchases	15		0		0		15

Paydowns	(1)		—		—		(1)
Accretion of discount	0		0		—		0
Net change in unrealized appreciation (depreciation)	(1)		(0)		0		(1)

Balance, end of period	$	112	$	15	$	2	$	129
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included on the Consolidated Statements of Operations	$	(1)	$	(0)	$	0	$	(1)

The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:

Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Investment Adviser carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value the Company’s portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.

Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.

Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant security’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the security’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.

Investments in equities are generally valued using a market approach and/or an income approach. The market approach utilizes EBITDA multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The income approach typically uses a discounted cash flow analysis of the portfolio company.

The following tables summarize the quantitative information related to the significant unobservable inputs for Level 3 instruments which are carried at fair value as of March 31, 2023 and December 31, 2022:


	Fair Value as of March 31, 2023		Valuation Techniques	Significant Unobservable Inputs	Range
					Low		High		Weighted Average
Investments in First Lien Debt	$	222,764	Discounted Cash Flow	Discount Rate	6.76	%	13.10	%	8.10	%
	11,584		Consensus Pricing	Indicative Quotes	97.00	%	97.50	%	97.09	%


Total First Lien Debt	234,348
Investments in Second Lien Debt	16		Discounted Cash Flow	Discount Rate	8.73	%	12.84	%	10.36	%

Total Second Lien Debt	16
Investments in Equity	3,108		Income Approach	Discount Rate	13.70	%	18.67	%	17.95	%

Total Equity Investments	3,108
Total Level 3 Investments	$	237,472



	Fair Value as of December 31, 2022		Valuation Techniques	Significant Unobservable Inputs	Range
					Low		High		Weighted Average
Investments in First Lien Debt	$	158,355	Discounted Cash Flow	Discount Rate	6.82	%	13.13	%	8.03	%
	38,713		Consensus Pricing	Indicative Quotes	97.00	%	99.25	%	97.22	%


Total First Lien Debt	197,068
Investments in Second Lien Debt	15		Discounted Cash Flow	Discount Rate	9.61	%	12.91	%	10.46	%

Total Second Lien Debt	15
Investments in Equity	2,998		Income Approach	Discount Rate	13.70	%	18.67	%	18.66	%

Total Equity Investments	2,998
Total Level 3 Investments	$	200,081

The significant unobservable inputs used in the fair value measurement of the Company’s investments in first and second lien debt securities are discount rates and indicative quotes. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement. Significant decreases in indicative quotes in isolation would result in a significantly lower fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Company’s investments in equities are discount rates. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement.

Financial instruments disclosed but not carried at fair value

The carrying values of the secured borrowings generally approximate their respective fair values due to their variable interest rates. Secured borrowings are categorized as Level 3 within the hierarchy.

The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.

4. RELATED PARTY TRANSACTIONS

Investment Advisory Agreement

On June 21, 2021, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with Carlyle Global Credit Investment Management L.L.C. (the “Initial Investment Adviser”). On November 2, 2021, the Board of Trustees approved a novation agreement, which was executed by the Company, the Investment Adviser and the Initial Investment Adviser, on November 11, 2021, pursuant to which a novation of the Investment Advisory Agreement was effected so that the Investment Adviser was substituted for the Initial Investment Adviser and the Initial Investment Adviser was released from its obligations under the Investment Advisory Agreement. In connection therewith, the Board of Trustees approved an amended and restated investment advisory agreement, which was executed by the Company and the Investment Adviser on November 11, 2021, the terms of which are substantially identical to the terms of the Investment Advisory Agreement, except for (1) the substitution of the Investment Adviser for the Initial Investment Adviser as a party thereto, (2) associated changes relating to the legal forms of such parties, and (3) a limited number of non-material changes to the existing Investment Advisory Agreement.

The initial term of the Investment Advisory Agreement is two years from June 21, 2021 and, unless terminated earlier, the Investment Advisory Agreement will renew automatically for successive annual periods, provided such continuance is specifically approved at least annually by the vote of the Board of Trustees and by the vote of a majority of the trustees of the Company who are not “interested persons” of the Company as defined in Section 2(a)(19) of the Investment Company Act (“Independent Trustees”). The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. On May 4, 2023, the Company’s Board of Trustees, including a majority of the Independent Trustees approved at an in-person meeting the continuance of the Company’s Investment Advisory Agreement with the Investment Adviser for an additional one year term. Pursuant to the Investment Advisory Agreement and subject to the overall supervision of the Board of Trustees, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives fees from the Company consisting of two components—a base management fee and an incentive fee.

The base management fee is calculated and payable quarterly in arrears at an annual rate of 1.50% of the average value of the Company's gross assets at the end of the two most recently completed fiscal quarters; provided, however, that the annual rate shall be 1.00% with respect to the amount of such average value of the gross assets as of the end of the two most recently completed calendar quarters that exceeds the product of (A) 200% and (B) the average of the Company’s net asset value (“NAV”) at the end of the two most recently completed calendar quarters. The base management fee will be appropriately adjusted for any share issuances or repurchases during such fiscal quarter and the base management fees for any partial month or quarter will be pro-rated. The Company’s gross assets exclude any cash, cash equivalents and restricted cash and include assets acquired through the incurrence of debt from the use of leverage.

The Investment Adviser has irrevocably agreed to waive its rights to receive any base management fee for quarterly periods ending on or prior to the date of the closing of a Liquidity Event, which means (i) a quotation or listing of the Company’s securities on a stock exchange, including through an initial public offering (an “Exchange Listing”), (ii) a transaction or series of transactions, including, but not limited to, by way of merger, division, consolidation, share exchange (including by way of an optional exchange of the Company’s shares for shares of a publicly traded BDC), recapitalization, reorganization, or sale of shares, in each case for consideration of either cash and/or publicly listed securities, or (iii) the sale of all or substantially all of the Company’s assets to, or other liquidity event with, another entity. Potential transactions for purposes of clauses (ii) and (iii) of the definition of “Liquidity Event” could include counterparties, including but not limited to other BDCs, that are advised by the Investment Adviser or its affiliates.

The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 17.5% of pre-incentive fee net investment income for the immediately preceding calendar quarter, subject to a preferred return of 1.5% per quarter (6% annualized), or “hurdle rate,” and a “catch-up” feature. The second part is determined and payable in arrears as of the end of each calendar year in an amount equal to 17.5% of cumulative realized capital gains, if any, from inception through the end of each calendar year, computed net of all cumulative realized capital losses and unrealized capital depreciation less the aggregate amount of any previously paid capital gain incentive fees; provided, that the incentive fee determined at the end of the first calendar year of operations may be calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation. The Investment Adviser irrevocably agreed to waive its rights to receive any incentive fee for quarterly periods ending on or prior to the date on which the value of the Company’s gross assets first exceeds $150 million, which occurred in 2022.

Accrued capital gains incentive fees are based upon the cumulative net realized and unrealized appreciation (depreciation) from inception. Accordingly, the accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual.

On June 21, 2021, the Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”), an affiliate of the Investment Adviser and a wholly-owned subsidiary of Carlyle, pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.

Expense Support and Conditional Reimbursement Agreement

On May 13, 2022, the Company entered into an Expense Support and Conditional Reimbursement Agreement (the “Reimbursement Agreement”) with the Investment Adviser. Under the Reimbursement Agreement, the Investment Adviser shall pay other operating expenses of the Company on the Company’s behalf (the “Required Expense Payment”) such that other operating expenses of the Company do not exceed 0.125% (0.50% on annualized basis) (the “Expense Limitation”) (i) of the Company’s total investments at amortized cost, excluding cash, cash equivalents and restricted cash, as of the end of the applicable calendar quarter with respect to any such quarter after the first calendar quarter for which the total investments at amortized cost exceeds $150 million, and (ii) of the average of the Company’s total investments at amortized cost, excluding cash, cash equivalents and restricted cash, as of the beginning of the applicable calendar quarter and as of the end of such calendar quarter with respect to any calendar quarter up to and including the first calendar quarter for which the total investments at amortized cost exceeds $150 million. For any calendar quarter prior to March 31, 2022 (the “Effective Date” and any such quarter, a “Prior Quarter”), the Investment Adviser shall make a Required Expense Payment as if the Expense Limitation had been in effect for such quarter. The Investment Adviser’s obligation to make a Required Expense Payment with respect to a Prior Quarter shall become a liability of the Investment Adviser and the Company’s right to receive a Required Expense Payment shall be an asset of the Company commencing only on and as of the Effective Date.

Other operating expenses means the Company’s organization and offering expenses, professional fees, trustee fees, administration fees, and other general and administrative expenses, all as determined in accordance with U.S. GAAP, and shall include the Company’s allocable portion of compensation, overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement (as defined below). Other operating expenses shall include disbursements made by the Investment Adviser that if made by the Company would constitute an other operating expense and does not include management fees, incentive fees and interest expense.

The Company has agreed to reimburse the Investment Adviser in the amount of all Required Expense Payments made by the Investment Adviser subject to the limitation that a reimbursement will be made by the Company only if and to the extent that (i) it is made not more than three years from the date on which the applicable Required Expense Payment became an obligation of the Investment Adviser; and (ii) the Investment Adviser reimbursement does not cause the Company’s total other operating expenses during the applicable quarter to exceed the Expense Limitation.

For the three months ended March 31, 2023 and 2022, $574 and $1,195 of other operating expenses were reimbursable by the Investment Adviser under the agreement relating to other operating expenses incurred during the respective periods. As of March 31, 2023, the Company has incurred other operating expenses of $3,644 which are subject to reimbursement by the Investment Adviser under the agreement, of which $644 and $1,490, respectively, are included in Due from Investment Adviser on the Consolidated Statements of Assets and Liabilities as of March 31, 2023 and December 31, 2022. All are amounts eligible for recovery by the Investment Adviser from the Company at March 31, 2023 and will expire three years after the first Required Expense Payment.

Administration Agreement

On June 21, 2021, the Company entered into an administration agreement (the “Administration Agreement”) with the Administrator. Pursuant to the Administration Agreement, the Administrator furnishes the Company with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, the Administrator also performs, or oversees the performance of, our required administrative services, which include, among other things, providing assistance in accounting, legal, compliance, operations, technology and investor relations, and being responsible for the financial records that the Company is required to maintain and preparing reports to the Company’s shareholders and reports filed with the SEC. Payments under the Administration Agreement are equal to an amount that reimburses the Administrator for its costs and expenses and the Company’s allocable portion of overhead incurred by the

Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer, Chief Financial Officer and Treasurer) and their respective staff who provide services to the Company, operations staff who provide services to the Company, and internal audit staff in their role of performing the internal control assessment under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Reimbursement under the Administration Agreement occurs quarterly in arrears.

The initial term of the Administration Agreement is two years from June 21, 2021, and, unless terminated earlier, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Trustees or by a majority vote of the outstanding voting securities of the Company, and (ii) the vote of a majority of the Company’s Independent Trustees. On May 4, 2023, the Company’s Board of Trustees, including a majority of the Independent Trustees, approved the continuance of the Administration Agreement for a one year period. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon 60 days’ written notice to the other party.

For the three month period ended March 31, 2023, the Company incurred $140 in fees under the Administration Agreement. For the three month period ended March 31, 2022, the Company incurred no fees under the Administration Agreement. Fees incurred under the Administration Agreement are included in administrative service fees in the accompanying unaudited Consolidated Statements of Operations. As of March 31, 2023 and December 31, 2022, $277 and $396, respectively, was unpaid and included in administrative service fees payable in the accompanying unaudited Consolidated Statements of Assets and Liabilities.

Sub-Administration Agreements

On June 21, 2021, the Administrator entered into a sub-administration agreement with Carlyle Employee Co. (the “Carlyle Sub-Administration Agreement”). Pursuant to the Carlyle Sub-Administration Agreement, Carlyle Employee Co. provides the Administrator with access to personnel. The Company will ultimately bear the costs of the Carlyle Sub-Administration Agreement and any additional sub-administration agreements that the Administrator enters into.

On March 17, 2021, the Administrator entered into a sub-administration agreement with DST Asset Manager Solutions, Inc. (“DST” and, such agreement, the “DST Sub-Administration Agreement”).

On June 30, 2021, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street” and, such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreements and the DST Sub-Administration Agreement, the “Sub-Administration Agreements”).

On May 4, 2023, the Company’s Board of Trustees, including a majority of the Independent Trustees, approved the continuance of the Sub-Administration Agreements for a one year period.

For the three month periods ended March 31, 2023 and 2022, fees incurred in connection with the State Street Sub-Administration Agreement and the DST Sub-Administration Agreement amounted to $77 and $111, respectively. These fees are included in other general and administrative expenses in the accompanying unaudited Consolidated Statements of Operations. As of March 31, 2023 and December 31, 2022, $119 and $47, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying unaudited Consolidated Statements of Assets and Liabilities.

Placement Fees

On June 21, 2021, the Company entered into a placement fee arrangement with TCG Capital Markets L.L.C. (“TCG”), a licensed broker dealer and an affiliate of the Investment Adviser, which may require shareholders to pay a placement fee to TCG for TCG’s services.

For the three month periods ended March 31, 2023 and 2022, TCG did not earn placement fees from the Company’s shareholder in connection with the issuance or sale of common shares of beneficial interest of the Company, par value $0.001 per share.

Board of Trustees

The Company’s Board of Trustees currently consists of seven members, four of whom are Independent Trustees. The Board of Trustees has established an audit committee and a pricing committee of the Board of Trustees, and may establish

additional committees in the future. For the three month periods ended March 31, 2023 and March 31, 2022, the Company incurred $67 and $98, respectively, in fees and expenses associated with its Independent Trustees’ services on the Company's Board of Trustees and its committees. These fees are included in trustees’ fees and expenses in the accompanying Consolidated Statements of Operations. As of March 31, 2023 and December 31, 2022, no fees or expenses associated with the Board of Trustees were payable.

5. BORROWINGS

The Company and the SPV are party to the Credit Facilities as described below. In accordance with the Investment Company Act, the Company is currently only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 150% after such borrowing. As of March 31, 2023, asset coverage was 208.57%, and the Company and the SPV were in compliance with all covenants and other requirements under the Credit Facilities as of March 31, 2023. The Company did not have any borrowings outstanding as of March 31, 2022. Below is a summary of the borrowings and repayments under the Credit Facilities for the three months ended March 31, 2023.


	Three Months Ended March 31,
	2023
Outstanding borrowing, beginning of period	$	98,631
Borrowings	44,720
Repayments	(16,400)
Foreign currency translation	153
Outstanding borrowing, end of period	$	127,104

Subscription Facility

The Company entered into the Subscription Facility on April 22, 2022. The Subscription Facility provides for secured borrowings of $45 million. The maximum principal amount is subject to availability under the Subscription Facility, which is based on certain of the Company’s investor equity capital commitments and a percentage determined in the lender’s reasonable discretion to account for foreign exchange volatility. The Subscription Facility has a maturity date of April 22, 2024. The Company may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the Subscription Facility bear interest at a spread to the applicable benchmark rate of 2.30% to 2.55%. The Company also pays a fee of 0.30% per year on undrawn amounts under the Subscription Facility.

Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in the Company’s unfunded investor equity capital commitments. The Subscription Facility includes customary covenants, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

SPV Credit Facility

The SPV entered into the SPV Credit Facility with a lender on September 30, 2022, which was subsequently amended May 11, 2023. The SPV Credit Facility provides for secured borrowings of $150 million, subject to availability under the SPV Credit Facility and restrictions imposed on borrowings under the Investment Company Act. The SPV Credit Facility has a revolving period through September 30, 2025 and a maturity date of September 30, 2030, with one one-year extension option, at the SPV’s election. The SPV may borrow amounts in U.S. Dollars. Borrowings under the SPV Credit Facility bear interest initially at the annual rate of three month term SOFR (or, if applicable, a rate based on the prime rate or federal funds rate plus 0.50%) plus 2.85%. The SPV also pays a fee of 0.30% per year on undrawn amounts under the SPV Credit Facility. Payments under the SPV Credit Facility are made quarterly.

The SPV Credit Facility is secured by a first lien security interest on substantially all of the assets of the SPV. The SPV Credit Facility includes customary covenants, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

Summary of the Credit Facilities

The Credit Facilities consisted of the following as of March 31, 2023 and December 31, 2022:


	March 31, 2023
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	45,000	$	44,404	$	596	$	596
SPV Credit Facility	150,000		82,700		67,300		35,162

Total	$	195,000	$	127,104	$	67,896	$	35,758


	December 31, 2022
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	45,000	$	43,931	$	1,069	$	1,069
SPV Credit Facility	150,000		54,700		95,300		43,729
Total	$	195,000	$	98,631	$	96,369	$	44,798

(1)The unused portion is the amount upon which commitment fees are based.

(2)Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

For the three months ended March 31, 2023 and 2022, the components of interest expense and credit facility fees were as follows:


	Three Months Ended March 31,
	2023
Interest expense	$	2,184
Facility unused commitment fee	56
Amortization of deferred financing costs	165

Total interest expense and credit facility fees	$	2,405
Cash paid for interest expense	$	1,776

Average principal debt outstanding	$	121,011
Weighted average interest rate	7.23		%

As of March 31, 2023 and 2022, the components of interest and credit facility fees payable were as follows:


	As of
	March 31, 2023			December 31, 2022
Interest expense payable	$	1,246		$	652
Unused commitment fees payable	51			75
Total interest expense and credit facility fees payable	$	1,297		$	727
Weighted average interest rate (based on floating benchmark rates)	7.35		%	6.41		%

6. COMMITMENTS AND CONTINGENCIES

A summary of significant contractual payment obligations was as follows as of March 31, 2023 and December 31, 2022:


	Par Value as of
Payment Due by Period	March 31, 2023		December 31, 2022
Less than 1 year	$	—	$	—
1-3 years	44,404		43,931
3-5 years	—		—
More than 5 years	82,700		54,700
Total	$	127,104	$	98,631

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnification or warranties. Future events could occur that lead to the execution of these provisions against the Company. The Company believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the unaudited consolidated financial statements as of March 31, 2023 and December 31, 2022 for any such exposure.

As of March 31, 2023 and December 31, 2022, the Company had $296,361 and $277,898, respectively, in total capital commitments from shareholders, of which $161,381 and $168,237, respectively, was unfunded. As of March 31, 2023 and December 31, 2022, current officers had $500 in capital commitments to the Company.

The Company currently is and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments. The Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:


	Par/ Principal Amount as of
	March 31, 2023		December 31, 2022
Unfunded delayed draw commitments	$	73,527	$	84,892
Unfunded revolving loan commitments	15,646		15,177
Total unfunded commitments	$	89,173	$	100,069

7. NET ASSETS

In connection with its formation, the Company has the authority to issue an unlimited number of common shares of beneficial interest of the Company, par value $0.001 per share (“Shares”).

The following tables summarize capital activity for the three months ended March 31, 2023 and for three months ended March 31, 2022:


	Common Shares of Beneficial Interest			Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)		Accumulated Net Realized Gain (Loss)		Accumulated Net Unrealized Appreciation (Depreciation)		Total Net Assets
	Shares	Amount
Balance, beginning of period	5,568,950	$	6	$	110,873	$	955	$	—	$	(2,162)	$	109,672
Common shares of beneficial interest issued	1,269,130	1		25,318		—		—		—		25,319
Dividend reinvestment	68,233	—		1,351		—		—		—		1,351
Net investment income (loss)	—	—		—		3,603		—		—		3,603
Net realized gain (loss)	—	—		—		—		6		—		6
Net change in unrealized appreciation (depreciation) on investments	—	—		—		—				1,028		1,028
Net change in unrealized currency gains (losses) on non-investment assets and liabilities	—	—		—		—		—		(158)		(158)
Dividends declared	—	—		—		(2,819)		—		—		(2,819)

Balance, end of period	6,906,313	$	7	$	137,542	$	1,739	$	6	$	(1,292)	$	138,002



	Common Shares of Beneficial Interest			Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)		Accumulated Net Realized Gain (Loss)		Accumulated Net Unrealized Appreciation (Depreciation)		Total Net Assets
	Shares	Amount
Balance, beginning of period	5,000	$	0	$	100	$	(729)	$	—	$	1	$	(628)
Common Shares of Beneficial Interest issued	761,040	1		15,220		—		—		—		15,221

Net investment income (loss)	—	—		—		831		—		—		831

Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	—	—		—		—		—		(2)		(2)



Balance, end of period	766,040	$	1	$	15,320	$	102	$	—	$	(1)	$	15,422

The following table summarizes total Shares issued and proceeds related to capital activity during the three months ended March 31, 2023:


	Shares Issued	Proceeds
March 29, 2023	1,269,130	$	25,319




Total	1,269,130	$	25,319

The following table summarizes total Shares issued and proceeds related to capital activity for the year ended December 31, 2022:


	Shares Issued	Proceeds
March 31, 2022	761,040	$	15,221
June 30, 2022	1,528,780	30,545
September 28, 2022	1,066,889	21,188
December 14, 2022	2,145,380	42,607
Total	5,502,089	$	109,561

The Company has adopted a dividend reinvestment plan, pursuant to which the Company will reinvest all cash dividends declared by the Board of Trustees on behalf of the Company’s shareholders who do not elect to receive their dividends in cash. The following table summarizes the Shares issued under the dividend reinvestment plan during the three months ended March 31, 2023:


	Shares Issued	Share Value
January 20, 2023	68,233	$	1,351

Total	68,233	$	1,351

There were no dividends reinvested during the period during the three months ended March 31, 2022.

Capital transactions for March 31, 2023 were executed at an offering price at a premium to net asset value in order to effect a reallocation of previously incurred expenses to investors. There was no increase to net asset value per share resulting from such transactions.

Earnings Per Share

The Company computes earnings per Share in accordance with ASC 260, Earnings Per Share. Basic earnings per Share was calculated by dividing net increase (decrease) in net assets resulting from operations attributable to the Company by the weighted-average number of Shares outstanding for the period. Basic and diluted earnings per Share were as follows:


	For the three month periods ended
		March 31, 2023		March 31, 2022
Net increase (decrease) in net assets resulting from operations		$	4,479	$	829
Weighted-average Shares outstanding		5,665,083		13,400
Basic and diluted earnings per common Share		$	0.79	$	61.90

The following table summarizes the Company’s dividends declared since Commencement:


Date Declared	Record Date	Payment Date	Per Share Amount
2022
June 15, 2022	June 15, 2022	July 15, 2022	$	0.51
September 14, 2022	September 14, 2022	October 19, 2022	0.51
December 23, 2022	December 23, 2022	January 20, 2023	0.35
Total			$	1.37
2023
March 15, 2023	March 15, 2023	April 20, 2023	$	0.50
Total			$	0.50

8. CONSOLIDATED FINANCIAL HIGHLIGHTS

The following is a schedule of unaudited consolidated financial highlights for the three month periods ended March 31, 2023 and 2022:


	For the three month periods ended
	March 31, 2023			March 31, 2022
Per Share Data:
Net asset value per Share, beginning of period	$	19.69		$	(125.70)
Net investment income (loss) (1)	0.64			62.00
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	0.15			(0.10)
Net increase (decrease) in net assets resulting from operations	0.79			61.90
Dividends declared (2)	(0.50)			—
Effect of offering price of subscriptions(3)	—			83.93

Net asset value per Share, end of period	$	19.98		$	20.13
Number of Shares outstanding, end of period	6,906,313			766,040
Total return based on net asset value (4)	3.25		%	(116.01)		%
Net assets, end of period	$	138,002		$	15,422
Ratio to average net assets (5):
Expenses before incentive fees and waivers and reimbursements of expenses	2.48		%	5.54		%
Expenses before incentive fees, after waivers and reimbursements of expenses	2.01		%	5.54		%
Expenses after incentive fees, before waivers and reimbursements of expenses	3.10		%	5.54		%
Expenses after incentive fees and waivers and reimbursements of expenses	2.64		%	(10.61)		%
Net investment income (loss)	2.91		%	11.23		%
Interest expense and credit facility fees	1.94		%	—		%
Ratios/Supplemental Data:
Asset coverage, end of period	208.57		%	—		%
Portfolio turnover	0.73		%	0.99		%
Total committed capital, end of period	$	296,361		$	152,308
Ratio of total contributed capital to total committed capital, end of period	45.55		%	10.06		%
Weighted-average Shares outstanding	5,665,083			13,400

(1)Net investment income (loss) per Share was calculated as net investment income (loss) for the period divided by the weighted average number of Shares outstanding for the period.

(2)Dividends declared per Share was calculated as the sum of dividends declared during the period divided by the number of Shares outstanding at the date of the relevant transactions (refer to Note 7, Net Assets).

(3)Increase is due to the offering price of subscriptions during the period (See Note 7, Net Assets).

(4)Total return is based on the change in net asset value per Share during the year plus the declared dividends on Shares, assuming reinvestment of dividends in accordance with the dividend reinvestment plan, divided by the beginning net asset value for the year.

(5)These ratios to average net assets have not been annualized.

9. LITIGATION

The Company may become party to certain lawsuits in the ordinary course of business. The Company does not believe that the outcome of current matters, if any, will materially impact the Company or its unaudited consolidated financial statements. As of March 31, 2023 and December 31, 2022, the Company was not subject to any material legal proceedings, nor, to the Company’s knowledge, is any material legal proceeding threatened against the Company.

In addition, portfolio investments of the Company could be the subject of litigation or regulatory investigations in the ordinary course of business. The Company does not believe that the outcome of any current contingent liabilities of its portfolio investments, if any, will materially affect the Company or these unaudited consolidated financial statements.

10. TAX

The Company has not recorded a liability for any uncertain tax positions pursuant to the provisions of ASC 740, Income Taxes, as of March 31, 2023 and December 31, 2022.

In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax regulators. As of March 31, 2023 and December 31, 2022, the Company has not yet filed any tax returns and therefore is not yet subject to examination.

The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate. The estimated tax character of dividends declared on Shares for the three months ended March 31, 2023 was as follows:


	For the three months ended
	March 31, 2023
Ordinary income	$	2,819
Tax return of capital	$	—

11. SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date the unaudited consolidated financial statements were issued. There have been no subsequent events that require recognition or disclosure through the date the unaudited consolidated financial statements were issued, except as disclosed below and elsewhere in these unaudited consolidated financial statements.

On May 3, 2023, the Company closed on $5,150 of capital commitments.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

We have included or incorporated by reference in this Quarterly Report on Form 10-Q (“Form 10-Q”), and from time to time our management may make, “forward-looking statements”. These forward-looking statements are not historical facts, but instead relate to future events or the future performance or financial condition of Carlyle Secured Lending III (“we,” “us,” “our,” “CSL III” or the “Company”). These statements are based on current expectations, estimates and projections about us, our current or prospective portfolio investments, our industry, our beliefs, and our assumptions. The forward-looking statements contained in this Form 10-Q involve a number of risks and uncertainties, including statements concerning:

•our, or our portfolio companies’, future business, operations, operating results or prospects, including our and their ability to achieve our respective objectives, including as a result of large scale global events such as the COVID-19 pandemic;

•the return or impact of current and future investments;

•the general economy and its impact on the industries in which we invest;

•the impact of any protracted decline in the liquidity of credit markets on our business;

•the impact of fluctuations in interest rates on our business, including from the discontinuation of the London Interbank Offered Rate (“LIBOR”) and the implementation of alternatives to LIBOR;

•the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

•the impact of supply chain constraints on our portfolio companies and the global economy;

•the current inflationary environment, and its impact on our portfolio companies and on the industries in which we invest;

•the impact on our business of changes in laws, policies or regulations (including the interpretation thereof) affecting our operations or the operations of our portfolio companies;

•our ability to recover unrealized losses;

•market conditions and our ability to access alternative debt markets and additional debt and equity capital;

•our contractual arrangements and relationships with third parties;

•uncertainty surrounding the financial stability of the United States, Europe and China;

•uncertainty surrounding Russia’s military invasion of Ukraine and the impact of geopolitical tensions, such as between China and the United States;

•competition with other entities and our affiliates for investment opportunities;

•the speculative and illiquid nature of our investments;

•the use of borrowed money to finance a portion of our investments;

•our expected financings and investments;

•the adequacy of our cash resources and working capital;

•the timing, form and amount of any dividend distributions;

•the timing of cash flows, if any, from the operations of our portfolio companies;

•the ability to consummate acquisitions;

•the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks;

•the ability of CSL III Advisor, LLC (the “Investment Adviser”) to locate suitable investments for us and to monitor and administer our investments;

•currency fluctuations and the adverse effect such fluctuations could have on the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;

•the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks;

•the ability of The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”) to attract and retain highly talented professionals that can provide services to our Investment Adviser and Carlyle Global Credit Administration L.L.C. (the “Administrator”);

•our ability to maintain our status as a business development company (“BDC”); and

•our ability to satisfy the requirements of a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).

We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” “plans,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Part I, Item 1A of our annual report for the year ended December 31, 2022 ( our “2022 Form 10-K”).

We have based the forward-looking statements included in this Form 10-Q on information available to us on the date of this Form 10-Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

OVERVIEW

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1 of this Form 10-Q “Financial Statements.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in "Risk Factors" in Part I, Item 1A of our 2022 Form 10-K. Our actual results could differ materially from those anticipated by such forward-looking statements due to factors discussed under “Risk Factors” in our 2022 Form 10-K and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-Q.

Carlyle Secured Lending III, a Delaware statutory trust, is a specialty finance company that is a closed-end, externally managed, non-diversified management investment company. We have elected to be regulated as a BDC under the Investment Company Act and have operated our business as a BDC since we began our investment activities. For U.S. federal income tax purposes, we intend to elect to be treated as a RIC under Subchapter M of the Code. We were formed on February 8, 2021 and commenced our operations on May 28, 2021. We are conducting the private offering of our common shares of beneficial interest (“Shares”) to investors in reliance on exemptions from the registration requirements provided by Section 4(a)(2) of the Securities Act, Regulation D promulgated thereunder and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). Our principal executive offices are located at One Vanderbilt Avenue, Suite 3400, New York, New York 10017.

Our investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through assembling a portfolio of secured debt investments with favorable risk-adjusted returns that consider the risks described in Part I, Item 1A “Risk Factors - Risk Related to Our Investments” in our 2022 Form 10-K. Our investment strategy seeks to extract enhanced yield from a directly originated, and defensively constructed, portfolio of credit investments. The strategy’s core focus is U.S. middle market cash flow finance, principally in companies supported by financial sponsors. This core strategy is opportunistically supplemented with differentiated and complementary lending and investing strategies, which take advantage of the broad capabilities of Carlyle’s Global Credit platform while offering risk diversifying portfolio benefits. In describing our business, we use the term “middle market” to refer generally to companies with approximately $25 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”). We seek to achieve our investment objective primarily through a portfolio weighted towards first lien loans or unitranche loans (including last out portions of such loans), while a minority of our portfolio may also include, but not be limited to, assets such as second lien loans, unsecured debt, subordinated debt and select investments in preferred and common equities with loans that typically have a contractual maturity of six to seven years and typically do not preclude early repayment.

We invest primarily in loans to middle market companies whose debt is rated below investment grade, or would likely be rated below investment grade if it was rated. These securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.

We will seek to achieve the consummation of a Liquidity Event (as defined below) within four years following the February 24, 2022 (the “Initial Closing Date”). If we have not completed a Liquidity Event by August 24, 2030, as it may be extended by the Board of Trustees of the Company, the Board of Trustees will use commercially reasonable efforts to wind down, sell and/or liquidate and dissolve CSL III in an orderly manner. A “Liquidity Event” means (i) a quotation or listing of CSL III’s securities on a stock exchange, including through an initial public offering (an “Exchange Listing”), (ii) a transaction or series of transactions, including, but not limited to, by way of merger, division, consolidation, share exchange (including by way of an optional exchange of the Company’s shares for shares of a publicly traded BDC), recapitalization, reorganization, or sale of shares, in each case for consideration of either cash and/or publicly listed securities, or (iii) the sale of all or substantially all of CSL III’s assets to, or other liquidity event with, another entity. Potential transactions for purposes of clauses (ii) and (iii) of the definition of “Liquidity Event” could include counterparties, including but not limited to other BDCs, that are advised by the Investment Adviser or its affiliates.

We are externally managed by our Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Our Administrator provides the administrative services necessary for us to operate. Both our Investment Adviser and our Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of Carlyle. The Investment Committee is responsible for reviewing and approving our investment opportunities. The members of the Investment Committee include several of the most senior credit professionals within the Global Credit segment, with backgrounds and expertise across multiple asset classes with significant industry experience and tenure. As of March 31, 2023, our Investment Adviser’s investment team included a team of 210 investment professionals across the Carlyle Global Credit segment. The Investment Committee has delegated approval of certain amendments, follow-on investments with existing borrowers, investments below certain size thresholds (existing or new platforms), and other matters as determined by the Investment Committee to the Screening Committee. In addition, our Investment Adviser and its investment team are supported by a team of finance, operations and administrative professionals currently employed by Carlyle Employee Co., a wholly owned subsidiary of Carlyle. In conducting our investment activities, we believe that we benefit from the significant scale, relationships and resources of Carlyle, including our Investment Adviser and its affiliates.

KEY COMPONENTS OF OUR CONSOLIDATED RESULTS OF OPERATIONS

Investments

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt available to middle market companies, the general economic environment and the competitive environment for the type of investments we make.

Revenue

We generate revenue primarily in the form of interest income on debt investments we hold. In addition, we generate income from dividends on direct equity investments, capital gains on the sales of loans and debt and equity securities and various loan origination and other fees. Our debt investments generally have a stated term of five to eight years and generally bear interest at a floating rate usually determined on the basis of a benchmark such as LIBOR or SOFR. Interest on these debt investments is generally paid quarterly. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. We may also generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.

Expenses

Our primary operating expenses, subject to the terms of the Expense Support and Conditional Reimbursement Agreement with our Investment Adviser (the “Reimbursement Agreement”), include the payment of: (i) investment advisory fees, including management fees and incentive fees, to our Investment Adviser pursuant to the Investment Advisory Agreement between us and our Investment Adviser; (ii) costs and other expenses and our allocable portion of overhead incurred by our Administrator in performing its administrative obligations under the Administration Agreement between us and our Administrator; (iii) debt service and other costs of borrowings or other financing arrangements; and (iv) other operating expenses as detailed below:

•our Organizational and Offering Costs (the amount of Organizational and Offering Costs in excess of 0.15% of our total capital commitments to be paid by our Investment Adviser and the offering costs to be amortized over the 12 months beginning on May 28, 2021 (“Commencement”); to the extent the Company’s total capital commitments later increase, the Investment Adviser or its affiliates may be reimbursed by the Company for past payments of excess Organizational and Offering Costs made on the Company’s behalf provided that the total Organizational and Offering Costs borne by the Company do not exceed 0.15% of total capital commitments and provided further that the Investment Adviser or its affiliates may not be reimbursed for payment of excess Organizational and Offering Costs that were incurred more than three years prior to the proposed reimbursement);

•the costs associated with any offerings of our Shares incurred after the Final Closing Date;

•the costs associated with any offerings of our securities other than our Shares;

•calculating individual asset values and our net asset value (including the cost and expenses of any independent valuation firms);

•expenses, including travel expenses, incurred by our Investment Adviser, or members of our Investment Adviser’s investment team, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, expenses of enforcing our rights;

•the base management fee and any incentive fee;

•certain costs and expenses relating to distributions paid on our Shares;

•administration fees payable under our Administration Agreement and sub-administration agreements, including related expenses;

•the allocated costs incurred by our Investment Adviser in providing managerial assistance to those portfolio companies that request it;

•amounts payable to third parties relating to, or associated with, making or holding investments;

•the costs associated with subscriptions to data service, research-related subscriptions and expenses and quotation equipment and services used in making or holding investments;

•transfer agent and custodial fees;

•costs of hedging;

•commissions and other compensation payable to brokers or dealers;

•federal and state registration fees;

•any U.S. federal, state and local taxes, including any excise taxes;

•Independent Trustee fees and expenses;

•costs of preparing financial statements and maintaining books and records, costs of preparing tax returns, costs of Sarbanes-Oxley Act compliance and attestation and costs of filing reports or other documents with the SEC (or other regulatory bodies), and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation or review of the foregoing;

•the costs of any reports, proxy statements or other notices to our shareholders (including printing and mailing costs), the costs of any shareholders’ meetings and the compensation of investor relations personnel responsible for the preparation of the foregoing and related matters;

•the costs of specialty and custom software for monitoring risk, compliance and overall portfolio, including any development costs incurred;

•our fidelity bond;

•Trustees and officers/errors and omissions liability insurance, and any other insurance premiums;

•indemnification payments;

•direct fees and expenses associated with independent audits, agency, consulting and legal costs;

•the Company’s fees and expenses related to any Liquidity Event and/or Exchange Transaction; and

•all other expenses incurred by either our Administrator or us in connection with administering our business, including payments under the Administration Agreement for administrative services that will be equal to an amount that would

reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, and internal audit staff in their role of performing our Sarbanes-Oxley Act internal control assessment.

Our operating expenses are subject to the terms of the Reimbursement Agreement with the Investment Adviser. See Note 4, Related Party Transactions, to the unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the Reimbursement Agreement.

We expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset decline.

PORTFOLIO AND INVESTMENT ACTIVITY

Below is a summary of certain characteristics of our investment portfolio as of March 31, 2023 and December 31, 2022.


	As of
	March 31, 2023		December 31, 2022
Number of investments	72		68
Number of portfolio companies	60		57
Number of industries	22		23

Percentage of total investment fair value:


First Lien Debt	98.7	%	98.5	%
Second Lien Debt	—	%	—	%
Total secured debt	98.7	%	98.5	%
Equity investments	1.3	%	1.5	%
Percentage of debt investment fair value:
Floating rate (1)	100.0	%	100.0	%
Fixed interest rate	—	%	—	%

(1) Primarily subject to interest rate floors.

Our investment activity for the three month periods ended March 31, 2023 and 2022 is presented below (information presented herein is at amortized cost unless otherwise indicated):


	For the three month periods ended
	March 31, 2023			March 31, 2022
Investments:
Total investments, beginning of period	$	202,115		$	116
New investments purchased	37,718			15
Net accretion of discount on investments	246			0
Net realized gain (loss) on investments	9			—
Investments sold or repaid	(1,610)			(1)
Total Investments, end of period	$	238,478		$	130
Principal amount of investments funded:


First Lien Debt	$	29,827		$	16
Second Lien Debt	—			0
Equity Investments(1)	81			—
Total funded	$	29,908		$	16
Principal amount of investments sold or repaid:


First Lien Debt	$	6,668		$	(1)
Second Lien Debt	—			—
Equity Investments	—			—
Total sold or repaid	$	6,668		$	(1)
Number of new funded investments	6			5
Average amount of new funded investments	$	4,903		$	2
Percentage of new funded debt investments at floating interest rates	100		%	100		%
Percentage of new funded debt investments at fixed interest rates	—		%	—		%

(1) Based on cost/proceeds of equity activity. The prior period has been conformed to the current presentation.

As of March 31, 2023 and December 31, 2022, investments consisted of the following:


	March 31, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value


First Lien Debt	$	235,401	$	234,348	$	199,120	$	197,068
Second Lien Debt	16		16		16		15
Equity Investments	3,061		3,108		2,979		2,998
Total	$	238,478	$	237,472	$	202,115	$	200,081

The weighted average yields(1) for our first lien debt, second lien debt and income producing investments based on the amortized cost and fair value as of March 31, 2023 and December 31, 2022, were as follows:


	March 31, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value


First Lien Debt	12.0	%	12.1	%	11.5	%	11.6	%
Second Lien Debt	13.2	%	13.1	%	12.9	%	13.2	%
First and Second Lien Debt Total	12.0	%	12.1	%	11.5	%	11.6	%
Total Debt and Income Producing Investments(2)	12.0	%	12.1	%	11.5	%	11.7	%

(1)Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2023 and December 31, 2022. Weighted average yield on debt and income producing investments at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount (“OID”) and market discount earned, divided by (b) total fair value included in such securities. Weighted average yield on debt and income producing investments at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned,

divided by (b) total amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

(2)Income Producing Investments include income producing equity investments.

Total weighted average yields (which includes the effect of accretion of discount and amortization of premiums) of our total debt and income producing securities as measured on an amortized cost basis increased from 11.5% as of December 31, 2022 to 12.0% as of March 31, 2023 primarily due to the impact of benchmark interest rates.

As of March 31, 2023 and December 31, 2022, all of our first and second lien debt investments were performing and current on their interest payments. See the Schedule of Investments as of March 31, 2023 and December 31, 2022 in our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on these investments, including a list of companies and type and amount of investments.

As part of the monitoring process, our Investment Adviser has developed risk assessment policies pursuant to which it regularly assesses the risk profile of each of our debt investments and rates each of them based on the following categories, which we refer to as “Internal Risk Ratings”. Pursuant to these risk policies, an Internal Risk Rating of 1 – 5, which are defined below, is assigned to each debt investment in our portfolio. Key drivers of internal risk ratings include financial metrics, financial covenants, liquidity and enterprise value coverage.

Internal Risk Ratings Definitions


Rating						Definition
1						Borrower is operating above expectations, and the trends and risk factors are generally favorable.

2						Borrower is operating generally as expected or at an acceptable level of performance. The level of risk to our initial cost basis is similar to the risk to our initial cost basis at the time of origination. This is the initial risk rating assigned to all new borrowers.

3						Borrower is operating below expectations and level of risk to our cost basis has increased since the time of origination. The borrower may be out of compliance with debt covenants. Payments are generally current although there may be higher risk of payment default.

4						Borrower is operating materially below expectations and the loan’s risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due, but generally not by more than 120 days. It is anticipated that we may not recoup our initial cost basis and may realize a loss of our initial cost basis upon exit.

5						Borrower is operating substantially below expectations and the loan’s risk has increased substantially since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. It is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit.

Our Investment Adviser monitors and, when appropriate, changes the risk ratings assigned to each debt investment in our portfolio. Our Investment Adviser reviews our investment ratings in connection with our quarterly valuation process. The below table summarizes the Internal Risk Ratings as of March 31, 2023 and December 31, 2022.


	March 31, 2023				December 31, 2022
	Fair Value		% of Fair Value		Fair Value		% of Fair Value
Internal Risk Rating 1	$	—	—	%	$	—	—	%
Internal Risk Rating 2	234,319		100.0		197,041		100.0
Internal Risk Rating 3	45		—		41		—
Internal Risk Rating 4	—		—		—		—
Internal Risk Rating 5	—		—		—		—
Total	$	234,364	100.0	%	$	197,082	100.0	%

As of both March 31, 2023 and December 31, 2022, the weighted average Internal Risk Rating of our debt investment portfolio was 2.0, and none of our debt investments were assigned an Internal Risk Rating of 4-5.

See the Consolidated Schedules of Investments as of March 31, 2023 and December 31, 2022 in our unaudited consolidated financial statements in Part I, Item 1 of this Form 10-Q for more information on our investments, including a list of companies and type and amount of investments.

CONSOLIDATED RESULTS OF OPERATIONS

For the three month periods ended March 31, 2023 and 2022

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and losses and net change in unrealized appreciation and depreciation. As a result, quarterly comparisons may not be meaningful.

Net Investment Income

Net investment income after giving effect to any waivers or reimbursement of expenses for three month periods ended March 31, 2023 and 2022 was as follows:


	For the three month periods ended
		March 31, 2023		March 31, 2022
Total investment income		$	6,867	$	46
Total expenses (including Excise tax expense)		3,838		410
Less waivers and reimbursements of expenses (Note 4)		(574)		(1,195)
Expenses after waivers and reimbursements of expenses		3,264		(785)

Net investment income (loss)		$	3,603	$	831

Waivers and reimbursement of expenses represents the amounts reimbursed by the Investment Adviser pursuant to the Reimbursement Agreement. See Note 4, Related Party Transactions, to the unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the expense waivers and reimbursement of expenses.

Investment Income

Investment income for the three month periods ended March 31, 2023 and 2022 was as follows:


	For the three month periods ended
		March 31, 2023		March 31, 2022
Interest income		$	6,502	$	7
PIK income		139		—

Other income		226		39
Total investment income		$	6,867	$	46

Interest income on our first and second lien debt investments is dependent on the composition and credit quality of the portfolio. Generally, we expect the portfolio to generate predictable quarterly interest income based on the terms stated in each loan’s credit agreement. The increase in investment income for the three month period ended March 31, 2023 from the comparable period in 2022 was driven by an increase in investment balance during the ramp up of the Company and the increase in benchmark interest rates. As of March 31, 2023 and March 31, 2022, there were no first or second lien debt investments on non-accrual status.

Expenses

Expenses before and after giving effect to any waivers or reimbursement of expenses for the three month periods ended March 31, 2023 and 2022 comprised the following:


	For the three month periods ended
		March 31, 2023		March 31, 2022
Organizational expenses		$	10	$	2
Offering cost expenses		33		35

Net investment income incentive fees		769		—

Professional fees		245		151
Administrative service fees		140		—

Interest expense and credit facility fees		2,405		—

Trustees’ fees and expenses		67		98
Other general and administrative		160		124
Excise tax expense		9		—
Total expenses (including Excise tax expense)		$	3,838	$	410
Less waivers and reimbursements of expenses (Note 4)		(574)		(1,195)
Expenses after waivers and reimbursements of expenses		$	3,264	$	(785)

Organizational expenses and offering cost expenses include expenses incurred in the initial formation of the Company and in the offering of the Shares incurred on or prior to the Final Closing Date. Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of the Company. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff. Other general and administrative expenses include fees paid under the Sub-Administration Agreements, insurance, filing, research, subscriptions, and other costs. Waivers and reimbursements of expenses represents the amounts reimbursed by the Investment Adviser pursuant to the Reimbursement Agreement.

The increase in interest expense for the three month period ended March 31, 2023 from the comparable period in 2022 was driven by the Company and the SPV entering into the Subscription Facility and SPV Credit Facility, respectively.

The increase in net investment income incentive fees for the three months ended March 31, 2023 from the comparable period in 2022 was driven by the Company exceeding $150 million in gross assets for the first time during the fourth quarter of 2022, resulting in incentive fees for the period.

For the three month periods ended March 31, 2023 and 2022, we recorded no accrued capital gains incentive fees based upon our cumulative net realized and unrealized appreciation (depreciation) as of March 31, 2023 and 2022. The accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. See Note 4, Related Party Transactions, to the unaudited consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information on the incentive and management fees.

Net Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) on Investments

During the three months ended March 31, 2023, we recorded realized gain of approximately $9 on 1 investment and no realized loss. We recorded unrealized appreciation on 53 investments totaling approximately $1,563 and unrealized depreciation on 19 investments of approximately $535. During the three month period ended March 31, 2022, we recorded unrealized appreciation on 7 investments totaling approximately $0 and unrealized depreciation on 18 investments of approximately $2.

Net realized gain (loss) and net change in unrealized appreciation (depreciation) for the three month periods ended March 31, 2023 and 2022 were as follows:


	For the three month periods ended
		March 31, 2023		March 31, 2022
Net realized gain (loss) on investments		$	9	$	—
Net change in unrealized appreciation (depreciation) on investments		1,028		(2)
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments		$	1,037	$	(2)

Net realized gain (loss) and net change in unrealized appreciation (depreciation) by the type of investments three month periods ended March 31, 2023 and 2022 were as follows:



	March 31, 2023	March 31, 2022
		Net realized gain (loss)		Net change in unrealized appreciation (depreciation)		Net realized gain (loss)		Net change in unrealized appreciation (depreciation)
First Lien Debt		$	9	$	1,000	$	—	$	(1)
Second Lien Debt		—		0		—		(0)
Equity Investments		—		28		—		0
Total		$	9	$	1,028	$	—	$	(1)

Net change in unrealized appreciation (depreciation) in our investments for the three months ended March 31, 2023 from the comparable period in 2022 was driven by tighter market spreads.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We generate cash from the net proceeds of offerings of our Shares and through cash flows from operations, including investment sales and repayments as well as income earned on investments and cash equivalents. We may also fund a portion of our investments through borrowings under the Credit Facilities, as well as through securitization of a portion of our existing investments. The primary use of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our shareholders and for other general corporate purposes. We believe our current cash position, available capacity on our revolving credit facilities and net cash provided by operating activities, along with capital drawdowns from the private offering of our Shares and borrowings from financial institutions, will provide us with sufficient resources to meet our obligations and continue to support our investment objectives, including reserving for the capital needs which may arise at our portfolio companies.

Credit Facilities

We entered into the Subscription Facility on April 22, 2022. The Subscription Facility provides for secured borrowings of $45 million. The maximum principal amount is subject to availability under the Subscription Facility, which is based on certain of the Company’s investor equity capital commitments and a percentage determined in the lender’s reasonable discretion to account for foreign exchange volatility. The Subscription Facility has a maturity date of April 22, 2024. The Company may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the Subscription Facility bear interest at a spread to the applicable benchmark rate of 2.30% to 2.55%. The Company also pays a fee of 0.30% per year on undrawn amounts under the Subscription Facility. Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in the Company’s unfunded investor equity capital commitments.

The SPV entered into the SPV Credit Facility on September 30, 2022, which was subsequently amended May 11, 2023. The SPV Credit Facility provides for secured borrowings of $150 million, subject to availability under the SPV Credit Facility and restrictions imposed on borrowings under the Investment Company Act. The SPV Credit Facility has a revolving period through September 30, 2025 and a maturity date of September 30, 2030, with one one-year extension option, at the SPV’s election. The SPV may borrow amounts in U.S. Dollars. Borrowings under the SPV Credit Facility bear interest initially at the annual rate of three month SOFR (or, if applicable, a rate based on the prime rate or federal funds rate plus 0.50%) plus 2.85%. The SPV also pays a fee of 0.30% per year on undrawn amounts under the SPV Credit Facility. Payments under the SPV Credit Facility are made quarterly. The lender has a first lien security interest on substantially all of the assets of the SPV.

The Credit Facilities include customary covenants, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

Although we believe that we and the SPV will remain in compliance, there are no assurances that we and the SPV will continue to comply with the covenants in the Credit Facilities, as applicable. Failure to comply with these covenants could result in a default under the Subscription Facility and/or the SPV Credit Facility that, if we were unable to obtain a waiver from the applicable lenders, could result in the immediate acceleration of the amounts due under the respective facility, and thereby have a material adverse impact on our business, financial condition and results of operations. Moreover, to the extent that we cannot meet our financing obligations, we risk the loss of some or all of our assets to liquidation or sale to satisfy the obligations. In such an event, we may be forced to sell assets at significantly depressed prices due to market conditions or otherwise, which may result in losses.

For more information on the Credit Facilities, see Note 5, Borrowings, to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of March 31, 2023 and December 31, 2022, the Company had $27,379 and $6,761, respectively, in cash, cash equivalents and restricted cash. The Credit Facilities consisted of the following as of March 31, 2023 and December 31, 2022:


	March 31, 2023
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	45,000	$	44,404	$	596	$	596
SPV Credit Facility	150,000		82,700		67,300		35,162

Total	$	195,000	$	127,104	$	67,896	$	35,758



	December 31, 2022
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	45,000	$	43,931	$	1,069	$	1,069
SPV Credit Facility	150,000		54,700		95,300		43,729

Total	$	195,000	$	98,631	$	96,369	$	44,798

(1)The unused portion is the amount upon which commitment fees are based.

(2)Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

Equity Activity

Shares issued as of March 31, 2023 and December 31, 2022 were 6,906,313 and 5,568,950, respectively. The following table summarizes activity in the number of Shares outstanding during the three month periods ended March 31, 2023 and 2022:


	For the three month periods ended
	March 31, 2023	March 31, 2022
Shares outstanding, beginning of period	5,568,950	5,000
Common shares of beneficial interest issued	1,269,130	761,040
Dividends reinvested	68,233	—
Shares outstanding, end of period	6,906,313	766,040

Dividends

The following table summarizes our dividends declared since Commencement:


Date Declared	Record Date	Payment Date	Per Share Amount
2022
June 15, 2022	June 15, 2022	July 15, 2022	$	0.51
September 14, 2022	September 14, 2022	October 19, 2022	0.51
December 23, 2022	December 23, 2022	January 20, 2023	$	0.35
Total			$	1.37
2023
March 15, 2023	March 15, 2023	April 20, 2023	$	0.50
Total			$	0.50

OFF BALANCE SHEET ARRANGEMENTS

In the ordinary course of our business, we enter into contracts or agreements that contain indemnifications or warranties. Future events could occur which may give rise to liabilities arising from these provisions against us. We believe that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. As of March 31, 2023 and December 31, 2022, no accrual has been made for any such exposure in the unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We currently are and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments.

We had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of March 31, 2023 and December 31, 2022:


	Par/ Principal Amount as of
	March 31, 2023		December 31, 2022
Unfunded delayed draw commitments	$	73,527	$	84,892
Unfunded revolving commitments	15,646		15,177
Total unfunded commitments	$	89,173	$	100,069

ASSET COVERAGE

As a BDC, we are generally required to meet a minimum “asset coverage” ratio after each issuance of senior securities. “Asset coverage” generally refers to a company’s total assets, less all liabilities and indebtedness not represented by “senior securities”, as defined in the Investment Company Act, divided by total senior securities representing indebtedness and, if applicable, preferred stock. “Senior securities” for this purpose includes borrowings from banks or other lenders, debt securities and preferred stock. Section 61(a) of the Investment Company Act permits BDCs to reduce the minimum asset coverage ratio from 200% to 150%, subject to certain approval requirements (including either shareholder approval or approval of the “required majority”, as such term is defined in Section 57(o) of the Investment Company Act) and certain disclosure requirements.

Under the 200% minimum asset coverage ratio, BDCs are permitted to borrow up to one dollar for investment purposes for every one dollar of investor equity, and under the 150% minimum asset coverage ratio, BDCs are permitted to borrow up to two dollars for investment purposes for every one dollar of investor equity. In other words, Section 61(a) of the Investment Company Act, as amended, permits BDCs to potentially increase their debt-to-equity ratio from a maximum of 1 to 1 to a maximum of 2 to 1.

On June 21, 2021, our Board of Trustees, including a “required majority” (as such term is defined in Section 57(o) of the Investment Company Act), and our initial investment adviser (as our initial shareholder) approved the application to us of the 150% minimum asset coverage ratio set forth in Section 61(a)(2) of the Investment Company Act.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and judgments are based on historical information, information currently available to us and on various other assumptions management believes to be reasonable under the circumstances. Actual results could vary from those estimates and we may change our estimates and assumptions in future evaluations. Changes in these estimates and assumptions may have a material effect on our results of operations and financial condition. We believe the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of our consolidated financial statements and should be read in conjunction with our financial statements and related notes in Part II, Item 8, as well as with our “Risk Factors” in Part I, Item 1A of the Company’s annual report on Form 10-K for the year ended December 31, 2022.

Fair Value Measurements

The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. Effective September 8, 2022, the Investment Adviser, as the valuation designee pursuant to Rule 2a-5 under the Investment Company Act, determines in good faith the fair value of the Company’s investment portfolio for which market quotations are not readily available. The Investment Adviser values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Investment Adviser may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e. “consensus pricing”). When doing so, the Investment Adviser determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. The Investment Adviser may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

Securities/instruments that are illiquid, or for which the pricing source does not provide a valuation or methodology, or provides a valuation or methodology that, in the judgment of the Investment Adviser, does not represent fair value, shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments (i.e. illiquid securities/instruments), a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of personnel of the Investment Adviser; (iii) the Board of Trustees engages a third-party valuation firm to provide positive assurance on portions of first lien senior secured loans, “unitranche” loans, second lien senior secured loans and equity investments each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) if applicable, prior to September 8, 2022, the Audit Committee of the Board of Trustees (the “Audit Committee”) reviewed the assessments of the Investment Adviser and the third-party valuation firm; and (v) if applicable, prior to September 8, 2022, the Board of Trustees discussed the valuation recommendations of the Audit Committee and determined the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

•the nature and realizable value of any collateral;

•call features, put features and other relevant terms of debt;

•the portfolio company’s leverage and ability to make payments;

•the portfolio company’s public or private credit rating;

•the portfolio company’s actual and expected earnings and discounted cash flow;

•prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

•the markets in which the portfolio company does business and recent economic and/or market events; and

•comparisons to comparable transactions and publicly traded securities.

For further information on the fair value hierarchies, our framework for determining fair value and the composition of our portfolio, see Note 3, Fair Value Measurements, to the unaudited consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the unaudited Consolidated Statements of Operations in Part I, Item 1 of this Form 10-Q reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Revenue Recognition

Non-Accrual Income

Income Taxes

For federal income tax purposes, the Company intends to elect to be treated as a RIC under the Code, and intends to make the required distributions to its shareholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its shareholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year for distribution in the following year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

The Company 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. All penalties and interest associated with income taxes, if any, are included in income tax expense.

The SPV is a disregarded entity for tax purposes and is consolidated with the tax return of the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.

Valuation Risk

Our investments may not have a readily available market price. Our Investment Adviser, as the valuation designee pursuant to Rule 2a-5 under the Investment Company Act, values our investments for which market quotations are not readily available in good faith at fair value in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. In addition, because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is possible that the difference could be material.

Interest Rate Risk

As of March 31, 2023, on a fair value basis, all of our debt investments bear interest at a floating rate, which primarily are subject to interest rate floors. Interest rates on the investments held within our portfolio of investments are typically based on floating LIBOR or SOFR, with many of these investments also having a reference rate floor. Additionally, our Credit Facilities are also subject to floating interest rates and are currently paid based on floating SOFR rates.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. There can be no assurance that a significant change in market interest rates will not have a material adverse effect on our income in the future.

The following table estimates the potential changes in net cash flow generated from interest income, should interest rates increase or decrease by 100, 200 or 300 basis points. Interest income is calculated as revenue from interest generated from our settled portfolio of debt investments held as of March 31, 2023. These hypothetical interest income calculations are based on a model of the settled debt investments in our portfolio, held as of March 31, 2023, and are only adjusted for assumed changes in the underlying base interest rates and the impact of that change on interest income. Interest expense is calculated based on outstanding secured borrowings as of March 31, 2023 and based on the terms of our Credit Facilities.Interest expense on our Credit Facilities is calculated using the stated interest rate as of March 31, 2023, adjusted for the hypothetical changes in rates, as shown below. We intend to continue to finance a portion of our investments with borrowings and the interest rates paid on our borrowings may significantly impact our net interest income.

We regularly measure exposure to interest rate risk. We assess interest rate risk and manage interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.

Based on our Consolidated Statements of Assets and Liabilities as of March 31, 2023, the following table shows the annual impact on net investment income of base rate changes in interest rates for our settled debt investments (considering interest rate floors for variable rate instruments) and outstanding secured borrowings assuming no changes in our investment and borrowing structure:


	March 31, 2023
Basis Point Change	Interest Income		Interest Expense		Net Investment Income
Up 300 basis points	$	7,271	$	(3,805)	$	3,466
Up 200 basis points	$	4,848	$	(2,537)	$	2,311
Up 100 basis points	$	2,424	$	(1,268)	$	1,156
Down 100 basis points	$	(2,424)	$	1,268	$	(1,156)
Down 200 basis points	$	(4,847)	$	2,537	$	(2,310)
Down 300 basis points	$	(7,262)	$	3,798	$	(3,464)

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to the Company that is required to be disclosed by us in the reports we file or submit under the Exchange Act.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company may become party to certain lawsuits in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. The Company is not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against the Company. See also Note 9, Litigation, to the unaudited consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

In addition to the other information set forth within this Form 10-Q, consideration should be given to the information disclosed in “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Except as previously reported by the Company on a Current Report on Form 8-K filed by the Company on March 31, 2023, the Company did not sell any equity securities during the period covered in this report that were not registered under the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.


Exhibit No.						Exhibit



















10.1						Loan and Servicing Agreement, dated as of September 30, 2022 and Conformed through Amendment No. 1 dated as of May 11, 2023, among Carlyle Secured Lending III, as Holdings, Carlyle Secured Lending III SPV, L.L.C., as the Borrower, Massachusetts Mutual Life Insurance Company and the other Lenders from time to time party hereto, Wilmington Trust National Association, as the Administrative Agent, Massachusetts Mutual Life Insurance Company, as the Calculation Agent, Carlyle Secured Lending III, as the Portfolio Asset Servicer, Wilmington Trust, National Association, as the Collateral Custodian, and Wilmington Trust, National Association, as the Account Bank.*

31.1						Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*

31.2						Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*

32.1						Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2						Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document*

101.SCH						Inline XBRL Taxonomy Extension Schema Document*

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document*


Exhibit No.						Exhibit

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document*

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document*

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)*

* Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CARLYLE SECURED LENDING III

Dated: May 12, 2023	By	/s/ Thomas M. Hennigan
		Thomas M. Hennigan Chief Financial Officer (principal financial officer)