ThZeal - The Zeal

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 2023

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

Commission File Number: 814-01405

Onex Falcon Direct Lending BDC Fund

(Exact Name of Registrant as Specified in its Charter)

Delaware

(State of Incorporation)

21 Custom House Street, 10th Floor

Boston, MA 02110

(Address of principal executive offices)

(617) 412-2700

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol	Name of each exchange on which registered

None	None	None

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

Common shares of beneficial interest, par value $0.001 per share

(Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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, anon-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.


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 ☒

The issuer had 12,278,934 common shares, $0.001 par value per share, outstanding as of May 10, 2023.

TABLE OF CONTENTS


			Page

PART I	FINANCIAL INFORMATION		3

	Item 1.	Consolidated Financial Statements	3

		Consolidated Statements of Assets and Liabilities as of March 31, 2023 and December 31, 2022 (Unaudited)	3

		Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (Unaudited)	4

		Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2023 and 2022 (Unaudited)	5

		Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (Unaudited)	6

		Consolidated Schedules of Investments as of March 31, 2023 and December 31, 2022 (Unaudited).	7

		Notes to Consolidated Financial Statements (Unaudited)	15

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

	Item 4.	Controls and Procedures	46

PART II	OTHER INFORMATION		47

	Item 1.	Legal Proceedings	47

	Item 1A.	Risk Factors	47

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

	Item 3.	Defaults Upon Senior Securities	47

	Item 4.	Mine Safety Disclosures	47

	Item 5.	Other Information	47

	Item 6.	Exhibits	47

Signatures			49

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements that involve substantial known and unknown risks, uncertainties and other factors. Undue reliance should not be placed on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:

•

our future operating results;

•

our business prospects and the prospects of the companies in which we may invest;

•

the impact of the investments that we expect to make;

•

our ability to raise sufficient capital to execute our investment strategy;

•

the impact of geo-political conditions, including revolution, insurgency, terrorism or war, including those arising out of the ongoing conflict between Russia and Ukraine;

•

general economic, logistical and political trends and other external factors, including inflation and recent supply chain and labor market disruptions;

•

the impact of the elimination of the London Interbank Offered Rate (“LIBOR”) and implementation of alternatives to LIBOR on our operating results;

•

turmoil in Ukraine and Russia and the potential for volatility in energy prices and its impact on the industries in which we invest;

•

the ability of our portfolio companies to achieve their objectives;

•

our current and expected financing arrangements and investments;

•

changes in the general interest rate environment;

•

the adequacy of our cash resources, financing sources and working capital;

•

the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;

•

our contractual arrangements and relationships with third parties;

•

actual and potential conflicts of interest with Onex Falcon Investment Advisors, LLC (the “Adviser” or “Onex Falcon”) and its affiliates, and its senior investment team;

•

the elevating levels of inflation, and its impact on our portfolio companies and on the industries in which we may invest;

•

the dependence of our future success on the general economy and its effect on the industries in which we may invest;

•

our use of financial leverage, including the use of borrowed money to finance a portion of our investments;

•

the ability of the Adviser to locate suitable investments for us and to monitor and administer our investments;

•

the impact of any future acquisitions or divestitures;

•

the ability of the Adviser or its affiliates to attract and retain highly talented professionals;

•

our ability to qualify and maintain our qualification as a business development company (“BDC”) and as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”);

•

the effect of changes to tax legislation and our tax position;

•

the tax status of the enterprises in which we may invest; and

•

other risks, uncertainties, and other factors we identify elsewhere in this Quarterly Report and under “Item 1A. Risk Factors” in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 16, 2023, and in our other filings with the SEC that we make from time to time.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of the assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. We have based the forward-looking statements included in this report on information available to us on the date of this report, 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 SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

Onex Falcon Direct Lending BDC Fund

Consolidated Statements of Assets and Liabilities

(Unaudited)


	March 31, 2023			December 31, 2022
Assets:
Non-controlled/non-affiliated investments, at fair value (amortized cost of $533,412,766 and $510,803,850, respectively)	$	526,177,088		$	504,942,593
Cash and cash equivalents		27,042,779			6,395,756
Restricted cash		494,149			35,323
Interest and other receivables		6,114,305			10,168,492
Deferred financing costs (net of $1,206,380 and $928,463 in amortized expenses, respectively)		1,676,764			1,954,681
Prepaid expenses		125,298			175,075
Total Assets		561,630,383			523,671,920
Liabilities:
Credit facility (Note 5)		255,000,000			211,000,000
Management fee payable (Note 3)		1,646,178			1,629,663
Incentive fee payable (Note 3)		1,429,914			1,725,588
Administration fee payable (Note 3)		658,707			1,300,016
Interest payable		2,293,853			1,666,977
Accrued expenses and other liabilities		603,375			436,897
Total Liabilities		261,632,027			217,759,141
Commitments and Contingencies (Note 10)		—			—
Net Assets	$	299,998,356		$	305,912,779
Net Assets:
Common shares, $0.001 par value (unlimited shares authorized, 12,260,748 and 12,455,723 shares issued and outstanding, respectively)	$	12,261		$	12,456
Additional paid-in capital		306,830,297			311,618,675
Accumulated distributable earnings (losses)		(6,844,202	)		(5,718,352	)
Net Assets	$	299,998,356		$	305,912,779
Net Asset Value Per Share	$	24.47		$	24.56

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

Onex Falcon Direct Lending BDC Fund

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Investment Income
Non-controlled, non-affiliated investments:
Interest income	$	15,212,889		$	6,009,083
Other income		346,240			—
Total Investment Income		15,559,129			6,009,083
Expenses:
Management fee		1,646,178			1,102,855
Incentive fee		2,329,914			—
Administration fee		278,000			148,000
Organizational and offering costs (Note 2)		—			31,698
Professional fees		336,487			288,125
Trustees’ fees		43,000			45,000
Interest and credit facility expense		4,404,196			598,745
Other general and administrative expense		221,329			284,148
Total Expenses		9,259,104			2,498,571
Incentive fee waiver		(900,000	)		—
Net Expenses		8,359,104			2,498,571
Net Investment Income (Loss)		7,200,025			3,510,512
Realized and unrealized gain (loss)
Net realized gains (losses) on investments:
Non-controlled, non-affiliated investments		56,032			20,020
Net change in unrealized appreciation/(depreciation) on investments:
Non-controlled, non-affiliated investments		(1,374,421	)		(562,028	)
Net realized and unrealized gain (loss)		(1,318,389	)		(542,008	)
Net Increase (Decrease) in Net Assets Resulting from Operations	$	5,881,636		$	2,968,504
Net investment income (loss) per common share —Basic and Diluted	$	0.59		$	0.35
Net increase (decrease) in net assets resulting from operations per common share—Basic and Diluted	$	0.48		$	0.29
Weighted Average Common Shares Outstanding—Basic and Diluted (Note 7)		12,300,303			10,083,146

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

Onex Falcon Direct Lending BDC Fund

Consolidated Statements of Changes in Net Assets

(Unaudited)


	Common Shares
Three Months Ended March 31, 2023	Number of Shares			Par Value			Capital in Excess of Par			Total Distributable Earnings (Losses)			Total Net Assets
Balance as of December 31, 2022		12,455,723		$	12,456		$	311,618,675		$	(5,718,352	)	$	305,912,779
Net investment income (loss)											7,200,025			7,200,025
Net realized gain (loss) on investments											56,032			56,032
Net change in unrealized appreciation (depreciation) on investments											(1,374,421	)		(1,374,421	)
Issuance of common shares		44,339			44			1,088,921						1,088,965
Redemption of common shares		(418,189	)		(418	)		(10,270,295	)					(10,270,713	)
Distributions to shareholders											(7,007,486	)		(7,007,486	)
Shares issued in connection with distribution reinvestment plan		178,875			179			4,392,996						4,393,175
Balance as of March 31, 2023		12,260,748		$	12,261		$	306,830,297		$	(6,844,202	)	$	299,998,356

Three Months Ended March 31, 2022
Balance as of December 31, 2021		7,772,200		$	7,772		$	194,861,143		$	(237,373	)	$	194,631,542
Net investment income (loss)											3,510,512			3,510,512
Net realized gain (loss) on investments											20,020			20,020
Net change in unrealized appreciation (depreciation) on investments											(562,028	)		(562,028	)
Issuance of common shares		2,514,909			2,515			62,970,803						62,973,318
Distributions to shareholders											(3,497,617	)		(3,497,617	)
Shares issued in connection with distribution reinvestment plan		—			—			—						—
Balance as of March 31, 2022		10,287,109		$	10,287		$	257,831,946		$	(766,486	)	$	257,075,747

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

Onex Falcon Direct Lending BDC Fund

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Cash Flows from Operating Activities:
Net increase (decrease) in net assets resulting from operations	$	5,881,636		$	2,968,504
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized (gains)/losses on investments		(56,032	)		(20,020	)
Net change in unrealized (appreciation) depreciation on investments		1,374,421			562,028
Net accretion of discount on investments		(633,295	)		(670,762	)
Amortization of deferred financing costs		277,917			—
Amortization of deferred offering costs		—			31,698
Payment-in-kind interest income		(340,667	)		—
Purchases and drawdowns of investments		(24,846,991	)		(114,746,073	)
Sales and repayments of investments		3,268,069			4,152,204
(Increase) decrease in operating assets:
Interest and other receivables		4,054,187			(2,911,301	)
Deferred offering costs		—			(110,940	)
Prepaid expenses		49,777			52,903
Increase (decrease) in operating liabilities:
Management fee payable		16,515			341,222
Incentive fee payable		(295,674	)		—
Administration fee payable		(641,309	)		(1,075,968	)
Interest payable		626,876			144,551
Payable for investments purchased		—			(14,893,750	)
Accrued expenses and other liabilities		166,478			(80,550	)
Net cash provided by (used in) operating activities		(11,098,092	)		(126,256,254	)
Cash Flows from Financing Activities:
Proceeds from issuance of common shares		1,088,965			62,973,318
Redemption of common shares		(10,270,713	)		—
Distributions to shareholders		(2,614,311	)		—
Borrowings on credit facility		44,000,000			110,000,000
Payments on credit facility		—			(103,000,000	)
Net cash provided by (used in) financing activities		32,203,941			69,973,318
Net increase (decrease) in cash and cash equivalents		21,105,849			(56,282,936	)
Cash and cash equivalents and restricted cash, beginning of period		6,431,079			85,376,644
Cash and cash equivalents and restricted cash, end of period	$	27,536,928		$	29,093,708

Supplemental and Non-Cash Information
Cash paid for interest	$	3,499,403		$	335,791
Reinvestments of distributions	$	4,393,175		$	—

Reconciliation of Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents	$	27,042,779		$	28,481,199
Restricted cash		494,149			612,509
Total cash and cash equivalents and restricted cash	$	27,536,928		$	29,093,708

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

Onex Falcon Direct Lending BDC Fund

Consolidated Schedule of Investments

March 31, 2023

(Unaudited)


Portfolio Company (1)	Investment Type	Reference Rate and Spread (2)	Floor			Interest Rate (2)			Initial Acquisition Date	Maturity Date	Par/Shares		Amortized Cost (3)			Fair Value (4)			% of Net Assets			Footnotes
Non-controlled/Non-affiliated investments
Debt Investments
Automotive
Crash Champions Intermediate, LLC	Initial Term Loan	1M SOFR + 7.00%		0.75	%		11.81	%	8/8/2022	8/1/2029		6,340,698	$	6,223,824		$	6,229,735			2.1	%
Crash Champions Intermediate, LLC	2022 Term Loan	1M SOFR + 7.00%		0.75	%		11.81	%	8/8/2022	8/1/2029		10,000,000		9,617,564			9,825,000			3.3	%
Crash Champions Intermediate, LLC	Delayed Draw Term Loan	1M SOFR + 7.00%		0.75	%		11.81	%	8/8/2022	8/1/2029		2,706,395		2,656,668			2,659,033			0.9	%
Crash Champions Intermediate, LLC	Revolving Credit Loan	PRIME + 5.25%		0.75	%		13.25	%	8/8/2022	8/1/2028		255,814		239,219			239,535			0.1	%	(7) (8) (13)
Total Automotive														18,737,275			18,953,303			6.3	%
Business Services
BCP V Everise Acquisition LLC	Initial Term Loan	3M SOFR + 6.25%		0.75	%		11.14	%	5/12/2022	5/3/2027		23,779,762		23,271,104			23,323,190			7.8	%	(5) (12)
KeyData Associates Inc.	Closing Date Term Loan	3M CDOR + 7.00%		1.00	%		12.03	%	10/1/2021	7/16/2026	CAD 14,036,250			10,812,120			10,205,250			3.4	%	(5) (10)
Milestone Technologies, Inc.	Term Loan (First Lien)	3M SOFR + 6.50%		1.00	%		11.55	%	12/7/2022	12/7/2028		13,414,655		13,162,503			13,233,557			4.4	%
Milestone Technologies, Inc.	Revolving Loan	3M SOFR + 6.50%		1.00	%		11.55	%	12/7/2022	12/8/2028		517,241		487,835			496,293			0.2	%	(13)
Montana Buyer Inc.	Initial Term Loan	6M SOFR + 5.75%		0.75	%		10.57	%	7/22/2022	7/22/2029		21,645,750		21,245,181			21,215,000			7.1	%
Montana Buyer Inc.	Revolving Loan	6M SOFR + 5.75%		0.75	%		—		7/22/2022	7/22/2028		—		(43,342	)		(48,755	)		0.0	%	(7) (8) (11) (13)
Total Business Services														68,935,401			68,424,535			22.8	%
Chemicals, Plastics & Rubber
Atlas Intermediate III, L.L.C.	2022 Incremental Term Loan	3M LIBOR + 5.75%		1.00	%		10.74	%	3/1/2022	4/29/2025		6,512,000		6,423,784			6,251,520			2.1	%	(5)
Total Chemicals, Plastics & Rubber														6,423,784			6,251,520			2.1	%
Construction & Building
Steele Solutions, Inc.	Initial Term Loan	3M SOFR + 6.50%		0.50	%		11.35	%	3/18/2022	3/18/2027		13,987,742		13,756,246			13,987,742			4.7	%	(5)
Steele Solutions, Inc.	Delayed Draw Term Loan	3M SOFR + 6.50%		0.50	%		—		3/18/2022	3/18/2027		—		(12,864	)		—			0.0	%	(7) (8) (11) (13)
Steele Solutions, Inc.	Revolving Loan	3M SOFR + 6.50%		0.50	%		—		3/18/2022	3/18/2027		—		(30,675	)		—			0.0	%	(7) (8) (11) (13)
Total Construction & Building														13,712,707			13,987,742			4.7	%
Consumer Goods: Durable
BCDI Meteor Acquisition, LLC	Initial Term Loan	3M SOFR + 7.00%		1.00	%		11.91	%	12/29/2022	10/29/2028		25,000,000		24,405,837			24,490,000			8.2	%
Hy Cite Enterprises, LLC	Term Loan	3M LIBOR + 8.00%		1.50	%		13.03	%	11/12/2021	11/12/2026		27,936,362		27,303,028			27,344,111			9.1	%	(5)
Total Consumer Goods: Durable														51,708,865			51,834,111			17.3	%
Consumer Goods: Non-durable
Connect America.com, LLC	Term Facility	6M SOFR + 7.00%		1.00	%		12.04	%	10/1/2021	6/30/2026		21,041,793		20,741,256			20,515,748			6.8	%	(5)
Connect America.com, LLC	Incremental Term Facility	6M SOFR + 7.00%		1.00	%		11.23	%	4/6/2022	6/30/2026		1,243,331		1,214,053			1,212,247			0.4	%	(5)
Wellful Inc.	Initial Term Loan (First Lien)	6M LIBOR + 6.25%		0.75	%		11.17	%	11/16/2021	4/21/2027		14,437,500		14,429,231			12,752,644			4.3	%	(5) (12)
Wellful Inc.	Amendment No. 1 Incremental Term Loan	3M SOFR + 6.25%		0.75	%		11.17	%	11/16/2021	4/21/2027		4,937,500		4,735,936			4,361,294			1.5	%	(5) (12)
Total Consumer Goods: Non-durable														41,120,476			38,841,933			12.9	%
Consumer Services
Zips Car Wash, LLC	Delayed Draw Term Loan	1M SOFR + 7.25%		1.00	%		12.07	%	7/13/2022	3/1/2024		9,729,906		9,605,442			9,293,031			3.1	%	(8) (9) (13)
Total Consumer Services														9,605,442			9,293,031			3.1	%
Forest Products & Paper
Jackson Paper Manufacturing Company	Initial Term Loan	3M LIBOR + 7.00%		1.00	%		11.76	%	10/1/2021	8/26/2026		12,063,333		11,865,289			11,767,782			3.9	%	(5)


Portfolio Company (1)	Investment Type	Reference Rate and Spread (2)	Floor			Interest Rate (2)			Initial Acquisition Date	Maturity Date	Par/Shares		Amortized Cost (3)			Fair Value (4)			% of Net Assets			Footnotes
Jackson Paper Manufacturing Company	Revolving Loan	3M LIBOR + 7.00%		1.00	%		—		10/1/2021	8/26/2026		—		(20,832	)		(32,667	)		0.0	%	(7) (8) (11) (13)
Total Forest Products & Paper														11,844,457			11,735,115			3.9	%
Healthcare & Pharmaceuticals
Amplity Parent, Inc.	Restatement Date Term Loan (First Lien)	1M LIBOR + 6.00%		1.00	%		10.81	%	2/4/2022	1/31/2027		22,488,306		22,187,546			21,431,356			7.1	%
Amplity Parent, Inc.	Revolving Credit Facility	1M LIBOR + 6.00%		1.00	%		10.81	%	2/4/2022	1/31/2027		1,113,516		1,083,725			1,008,846			0.3	%	(8) (13)
APT Opco, LLC	Senior Secured Term Loan	3M LIBOR + 6.25%		1.00	%		11.64	%	12/28/2021	12/28/2026		19,985,119		19,677,258			19,515,469			6.5	%	(5)
APT Opco, LLC	Delayed Draw Term Loan	3M LIBOR + 6.25%		1.00	%		11.80	%	12/28/2021	12/28/2026		1,547,619		1,500,110			1,435,714			0.5	%	(7) (8) (13)
Celerion Buyer, Inc.	Term Loan (First Lien)	3M SOFR +6.50%		0.75	%		11.18	%	11/7/2022	11/3/2029		14,510,946		14,169,084			14,242,494			4.7	%
Celerion Buyer, Inc.	Delayed Draw Term Loan	3M SOFR +6.50%		0.75	%		—		11/7/2022	11/3/2029		—		(53,804	)		(42,583	)		0.0	%	(7) (8) (11) (13)
Celerion Buyer, Inc.	Revolving Loan	3M SOFR +6.50%		0.75	%		—		11/7/2022	11/3/2028		—		(26,866	)		(21,292	)		0.0	%	(7) (8) (11) (13)
MMS Bidco LLC	Term Loan (First Lien)	3M SOFR + 6.50%		1.00	%		11.20	%	6/30/2022	6/30/2027		24,875,000		24,436,066			24,743,163			8.2	%
Spark DSO, LLC	First Lien Term Loan	1M LIBOR + 6.25%		1.00	%		11.24	%	2/9/2022	4/19/2026		16,400,645		16,284,149			16,207,118			5.4	%
Spark DSO, LLC	Revolver	1M LIBOR + 6.25%		1.00	%		11.32	%	2/9/2022	4/19/2026		562,500		544,320			533,000			0.2	%	(7) (8) (13)
Total Healthcare & Pharmaceuticals														99,801,588			99,053,285			33.0	%
High Tech Industries
Apryse Software Corp (fka PDFTron US Acquisition Corp.)	2022-1 Incremental Term Loan	1M SOFR + 5.50%		1.00	%		10.31	%	3/23/2022	7/15/2027		12,944,442		12,730,898			12,890,075			4.3	%	(5) (10)
Apryse Software Corp (fka PDFTron US Acquisition Corp.)	2023-1 Incremental Term Loan	1M SOFR + 6.00%		1.00	%		10.81	%	3/21/2023	7/15/2027		3,375,000		3,307,924			3,360,825			1.1	%	(10)
Apryse Software Corp (fka PDFTron US Acquisition Corp.)	2023-1 Incremental Delayed Draw Term Loan	1M SOFR + 6.00%		1.00	%		—		3/21/2023	3/21/2025		—		(16,136	)		(6,825	)		0.0	%	(10)
Bullhorn, Inc.	Amendment No. 1 Term Loan	3M LIBOR + 5.75%		1.00	%		10.91	%	11/10/2021	9/30/2026		14,829,597		14,796,020			14,664,989			4.9	%	(5) (10)
GS AcquisitionCo, Inc.	Initial Term Loan	3M LIBOR + 5.75%		1.00	%		10.80	%	11/3/2021	5/25/2026		12,345,158		12,317,608			11,945,175			4.0	%	(5) (8)
Medallia, Inc.	Initial Term Loan	1M LIBOR + 6.50%		0.75	%	10.91% (50% PIK)			10/29/2021	10/29/2028		24,672,340		24,328,219			24,139,417			8.0	%	(5) (9)
SailPoint Technologies Holdings Inc.	Initial Term Loan	1M SOFR + 6.25%		0.75	%		10.99	%	8/16/2022	8/16/2029		23,123,123		22,703,352			22,563,544			7.5	%
SailPoint Technologies Holdings Inc.	Revolving Loan	1M SOFR + 6.25%		0.75	%		—		8/16/2022	8/16/2028		—		(33,618	)		(45,420	)		0.0	%	(7) (8) (11) (13)
Total High Tech Industries														90,134,267			89,511,780			29.8	%
Insurance
Foundation Risk Partners, Corp.	Term Loan	3M SOFR + 6.75%		0.75	%		11.75	%	3/8/2023	10/29/2028		19,943,182		19,348,659			19,344,886			6.4	%	(15)
Foundation Risk Partners, Corp.	Delayed Draw Term Loan	3M SOFR + 6.75%		0.75	%		—		3/8/2023	10/29/2028		—		(130,562	)		(279,205	)		-0.1	%	(7) (8) (11) (13) (15)
Total Insurance														19,218,097			19,065,681			6.4	%
Sovereign & Public Finance
IEC Corporation	Term Loan	3M LIBOR + 7.50%		1.00	%		12.66	%	12/17/2021	12/26/2026		26,247,069		25,726,102			25,748,375			8.6	%	(5)
Pansophic Learning Ltd.	Senior Secured Term Loan	1M LIBOR + 7.25%		1.00	%		11.92	%	3/25/2022	3/25/2027		13,000,000		12,889,887			13,000,000			4.3	%	(5)
S4T Holdings Corp.	Term Loan (First Lien)	1M SOFR + 6.00%		1.00	%		10.92	%	12/27/2021	12/27/2026		15,261,364		15,058,107			15,261,364			5.1	%	(5)
S4T Holdings Corp.	Delayed Draw Term Loan	1M SOFR + 6.00%		1.00	%		—		12/27/2021	12/27/2026		—		(25,508	)		—			0.0	%	(7) (8) (11) (13)
Total Sovereign & Public Finance														53,648,588			54,009,739			18.0	%
Transportation: Cargo
Keystone Purchaser, LLC	Term Loan	3M LIBOR + 5.50%		1.00	%		10.62	%	2/1/2022	5/7/2027		21,246,422		20,925,446			20,889,482			7.0	%	(5) (9)
Total Transportation: Cargo														20,925,446			20,889,482			7.0	%
Wholesale
WSP Midco LLC	Initial Term Loan	1M LIBOR + 6.25%		1.00	%		11.09	%	10/1/2021	4/27/2027		18,714,832		18,429,788			17,404,794			5.8	%	(5)
WSP Midco LLC	Delayed Draw Term Loan	1M LIBOR + 6.25%		1.00	%		—		10/1/2021	4/27/2027		—		(3,126	)		(238,102	)		-0.1	%	(7) (8) (11) (13)
WSP Midco LLC	Revolving Loan	1M LIBOR + 6.25%		1.00	%		—		10/1/2021	4/27/2027		—		(12,434	)		(59,526	)		0.0	%	(7) (8) (11) (13)


Portfolio Company (1)	Investment Type	Reference Rate and Spread (2)	Floor	Interest Rate (2)	Initial Acquisition Date	Maturity Date	Par/Shares		Amortized Cost (3)		Fair Value (4)			% of Net Assets			Footnotes
Total Wholesale										18,414,228		17,107,166			5.7	%
Total Debt Investments										524,230,621		518,958,423			173.0	%
Equity
Business Services
Milestone Technologies, Inc. (Maverick Acquisition Holdings, LP)	Common Equity				12/7/2022	N/A		1,500,000		1,500,000		1,650,900			0.6	%
KeyData Associates Inc.	Common Equity				10/1/2021	N/A		1,250,000		979,662		906,056			0.3	%	(10)
Total Business Services										2,479,662		2,556,956			0.9	%
Consumer Goods: Non-durable
Connect America.com, LLC	Common Equity				12/15/2022	N/A		23,825		3,102,483		2,728,430			0.9	%	(14)
Total Consumer Goods: Non-durable										3,102,483		2,728,430			0.9	%
Sovereign & Public Finance
S4T Holdings Corp. (Vistria ESS Holdings, LLC)	Equity Units				12/27/2021	N/A		200		200,000		286,829			0.1	%
Total Sovereign & Public Finance										200,000		286,829			0.1	%
Wholesale
Wholesale Supplies Plus Holdings, LLC	Class A Common Units				10/1/2021	N/A		3,400		3,400,000		1,646,450			0.5	%	(6)
Total Wholesale										3,400,000		1,646,450			0.5	%
Total Equity										9,182,145		7,218,665			2.4	%
Total Non-controlled/Non-affiliated investments									$	533,412,766		526,177,088			175.4	%
Liabilities in Excess of Other Assets												(226,178,732	)		-75.4	%
Total Net Assets											$	299,998,356			100.0	%

(1)

All of the Company’s investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”), unless otherwise noted. All of the Company’s investments are issued by U.S. portfolio companies unless otherwise noted as Canadian dollar ("CAD").

(2)

Represents the interest rate in effect as of the reporting date and may be subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”) or Secured Overnight Financing Rate (“SOFR” or “S”) or Canadian Dollar Offered Rate (“CDOR” or “C”) or alternative base rate (commonly known as the U.S. Prime Rate (“Prime” or “P”), unless otherwise noted), which reset periodically based on the terms of the loan agreement. As of March 31, 2023, the 1-Month LIBOR or “1M LIBOR” was 4.86%, the 3-Month LIBOR or “3M LIBOR” was 5.19%, the 6-Month LIBOR or “6M LIBOR” was 5.31%, the 1-Month SOFR or “1M SOFR” was 4.80%, the 3-Month SOFR or “3M SOFR” was 4.91%, the 6-Month SOFR or “6M SOFR” was 4.90%, the 1-Month CDOR or "1M CDOR" was 4.95% and the Prime was 8.00%.

(3)

The amortized cost represents the initial cost adjusted for the accretion of discount or amortization of premium, as applicable, using the effective interest method.

(4)

Unless otherwise noted, the fair value of the Company’s investments is determined using significant unobservable inputs (classified as Level 3 within the fair value hierarchy) by the Adviser in its role as "valuation designee" in accordance with Rule 2a-5 under the 1940 Act, pursuant to valuation policies and procedures that have been approved by the Company's board of trustees (the "Board"). Although the Board designated the Adviser as "valuation designee," the Board ultimately is responsible for fair value determinations under the 1940 Act. (See Note 2 to the consolidated financial statements)

(5)

Security, or a portion thereof, is held through Onex Falcon Direct Lending BDC SPV LLC, a wholly-owned subsidiary and a bankruptcy remote special purpose entity, and is pledged as collateral supporting the amounts outstanding under the Société Générale debt facility.

(6)

Security is held through Onex Falcon Direct Lending BDC Blocker LLC, a wholly-owned blocker subsidiary.

(7)

The maturity date disclosed represents the commitment period of the unfunded term loan or revolver.

(8)

The undrawn portion of these committed revolvers and delayed draw term loans includes a commitment and/or unused fee rate.

(9)

The stated interest rate represents the weighted average interest rate of all contracts.

(10)

This portfolio company is not a qualifying asset under Section 55(a) of the 1940 Act. The status of these assets under the 1940 Act is subject to change. The Company monitors the status of these assets on an ongoing basis. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of total assets. Non-qualifying assets represented 7.5% of total assets as of March 31, 2023.

(11)

The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value is the result of the capitalized discount on the loan.

(12)

Level 2 investment.

(13)

As of March 31, 2023, the Company had the following commitments to fund various revolving and delayed draw term loans. Such commitments are subject to certain conditions set forth in the documents governing these loans and there can be no assurance that such conditions will be satisfied.


Portfolio Company	Type	Total Commitment		Funded Commitment		Expired Commitment		Unfunded Commitment
Amplity Parent, Inc.	Revolver	$	2,227,032	$	1,113,516	$	—	$	1,113,516
Apryse Software Corp (fka PDFTron US Acquisition Corp.)	Delayed Draw Term Loan		1,625,000		—		—		1,625,000
APT Opco, LLC	Delayed Draw Term Loan		4,761,905		1,547,619		—		3,214,286
Celerion Buyer Inc.	Delayed Draw Term Loan		2,301,790		—		—		2,301,790
Celerion Buyer Inc.	Revolver		1,150,895		—		—		1,150,895
Crash Champions Intermediate, LLC	Revolver		930,233		255,814		—		674,419
Foundation Risk Partners, Corp.	Delayed Draw Term Loan		9,306,818		—		—		9,306,818
Jackson Paper Manufacturing Company	Revolver		1,333,333		—		—		1,333,333
Milestone Technologies, Inc.	Revolver		1,551,724		517,241		—		1,034,483
Montana Buyer Inc.	Revolver		2,450,000		—		—		2,450,000
S4T Holdings Corp.	Delayed Draw Term Loan		4,545,455		—		—		4,545,455
SailPoint Technologies Holdings Inc.	Revolver		1,876,877		—		—		1,876,877
Spark DSO, LLC	Revolver		2,500,000		562,500		—		1,937,500
Steele Solutions, Inc.	Revolver		1,935,484		—		—		1,935,484
Steele Solutions, Inc.	Delayed Draw Term Loan		3,225,806		—		1,612,903		1,612,903
WSP Midco LLC	Delayed Draw Term Loan		3,401,460		—		—		3,401,460
WSP Midco LLC	Revolver		850,365		—		—		850,365
Zips Car Wash, LLC	Delayed Draw Term Loan		25,000,000		9,765,625		—		15,234,375
		$	70,974,177	$	13,762,315	$	1,612,903	$	55,598,959

(14)

Security is held through Connect America OFDL BDC Holdings, LLC, a wholly-owned subsidiary.

(15)

Represents co-investment made with the Company’s affiliates in accordance with the terms of the exemptive relief that the Company received from the SEC. See “Note 3. Related Party Transactions.”

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

Onex Falcon Direct Lending BDC Fund

Consolidated Schedule of Investments

December 31, 2022


Portfolio Company (1)	Investment Type	Reference Rate and Spread (2)	Floor			Interest Rate (2)			Initial Acquisition Date	Maturity Date	Par/Shares		Amortized Cost (3)			Fair Value (4)			% of Net Assets			Footnotes
Non-controlled/Non-affiliated investments
Debt Investments
Automotive
Crash Champions Intermediate, LLC	Initial Term Loan	1M SOFR + 7.00%		0.75	%		11.32	%	8/8/2022	8/1/2029		6,356,589	$	6,233,650		$	6,220,558			2.0	%
Crash Champions Intermediate, LLC	2022 Term Loan	1M SOFR + 7.00%		0.75	%		11.32	%	11/11/2022	8/1/2029		10,000,000		9,603,648			9,786,000			3.2	%
Crash Champions Intermediate, LLC	Delayed Draw Term Loan	1M SOFR + 7.00%		0.75	%		11.32	%	8/8/2022	8/1/2029		2,713,178		2,660,848			2,655,116			0.9	%
Crash Champions Intermediate, LLC	Revolving Credit Loan	PRIME + 5.25%		0.75	%		—		8/8/2022	8/1/2029		—		(17,362	)		(19,907	)		0.0	%	(7) (8) (11) (13)
Total Automotive														18,480,784			18,641,767			6.1	%
Business Services
BCP V Everise Acquisition LLC	Initial Term Loan	3M SOFR + 6.25%		0.75	%		10.83	%	5/12/2022	5/3/2027		24,687,500		24,126,447			24,132,031			7.9	%	(5)
KeyData Associates Inc.	Closing Date Term Loan	3M CDOR + 7.00%		1.00	%		11.94	%	10/1/2021	7/16/2026	CAD 14,036,250			10,826,798			10,200,462			3.3	%	(5) (10)
Milestone Technologies, Inc.	Term Loan (First Lien)	3M SOFR + 6.50%		1.00	%		11.10	%	12/7/2022	12/7/2028		13,448,276		13,182,843			13,179,310			4.3	%
Milestone Technologies, Inc.	Revolving Loan	3M SOFR + 6.50%		1.00	%		11.12	%	12/7/2022	12/8/2028		724,138		693,457			693,103			0.2	%	(9) (13)
Montana Buyer Inc.	Initial Term Loan	6M SOFR + 5.75%		0.75	%		8.69	%	7/22/2022	7/22/2029		21,700,000		21,278,109			21,266,000			7.0	%
Montana Buyer Inc.	Revolving Loan	6M SOFR + 5.75%		0.75	%		—		7/22/2022	7/22/2028		—		(45,355	)		(49,000	)		0.0	%	(7) (8) (11) (13)
Total Business Services														70,062,299			69,421,906			22.7	%
Chemicals, Plastics & Rubber
Atlas Intermediate III, L.L.C.	2022 Incremental Term Loan	3M LIBOR + 5.75%		1.00	%		10.48	%	3/1/2022	4/29/2025		6,528,444		6,429,265			6,299,949			2.1	%	(5)
Total Chemicals, Plastics & Rubber														6,429,265			6,299,949			2.1	%
Construction & Building
Steele Solutions, Inc.	Initial Term Loan	3M SOFR + 6.50%		0.50	%		10.32	%	3/18/2022	3/18/2027		14,023,065		13,775,204			13,917,892			4.5	%	(5)
Steele Solutions, Inc.	Delayed Draw Term Loan	3M SOFR + 6.50%		0.50	%		—		3/18/2022	3/18/2027		—		(13,693	)		(12,097	)		0.0	%	(7) (8) (11) (13)
Steele Solutions, Inc.	Revolving Loan	3M SOFR + 6.50%		0.50	%		—		3/18/2022	3/18/2027		—		(32,583	)		(14,516	)		0.0	%	(7) (8) (11) (13)
Total Construction & Building														13,728,928			13,891,279			4.5	%
Consumer Goods: Durable
BCDI Meteor Acquisition, LLC	Initial Term Loan	3M SOFR + 7.00%		1.00	%		11.66	%	12/29/2022	10/29/2028		25,000,000		24,376,008			24,437,500			8.0	%
Hy Cite Enterprises, LLC	Term Loan	3M LIBOR + 8.00%		1.50	%		12.49	%	11/12/2021	11/12/2026		28,772,673		28,072,712			28,090,761			9.2	%	(5)
Total Consumer Goods: Durable														52,448,720			52,528,261			17.2	%
Consumer Goods: Non-durable
Connect America.com, LLC	Term Facility	6M SOFR + 7.00%		1.00	%		12.04	%	10/1/2021	6/30/2026		21,091,913		20,763,795			20,511,886			6.7	%	(5)
Connect America.com, LLC	Incremental Term Facility	6M SOFR + 7.00%		1.00	%		11.23	%	4/6/2022	6/30/2026		1,246,292		1,214,662			1,212,019			0.4	%	(5)
Wellful Inc.	Initial Term Loan (First Lien)	6M LIBOR + 6.25%		0.75	%		10.42	%	11/16/2021	4/21/2027		14,531,250		14,521,258			13,214,719			4.3	%	(5) (12)
Wellful Inc.	Amendment No. 1 Incremental Term Loan	3M SOFR + 6.25%		0.75	%		10.50	%	11/16/2021	4/21/2027		4,968,750		4,756,000			4,518,581			1.5	%	(5) (12)
Total Consumer Goods: Non-durable														41,255,715			39,457,205			12.9	%
Consumer Services
Zips Car Wash, LLC	Delayed Draw Term Loan	1M SOFR + 7.25%		1.00	%		11.58	%	7/13/2022	3/1/2024		9,754,320		9,592,303			9,694,347			3.2	%	(8) (9) (13)
Total Consumer Services														9,592,303			9,694,347			3.2	%
Forest Products & Paper
Jackson Paper Manufacturing Company	Initial Term Loan	3M LIBOR + 7.00%		1.00	%		10.75	%	10/1/2021	8/26/2026		12,126,667		11,911,102			11,725,274			3.8	%	(5)
Jackson Paper Manufacturing Company	Revolving Loan	3M LIBOR + 7.00%		1.00	%		—		10/1/2021	8/26/2026		—		(22,341	)		(44,133	)		0.0	%	(7) (8) (11) (13)
Total Forest Products & Paper														11,888,761			11,681,141			3.8	%


Portfolio Company (1)	Investment Type	Reference Rate and Spread (2)	Floor			Interest Rate (2)			Initial Acquisition Date	Maturity Date	Par/Shares		Amortized Cost (3)			Fair Value (4)			% of Net Assets			Footnotes
Healthcare & Pharmaceuticals
Amplity Parent, Inc.	Restatement Date Term Loan (First Lien)	1M LIBOR + 6.00%		1.00	%		10.38	%	2/4/2022	1/31/2027		22,545,238		22,218,926			21,844,081			7.1	%
Amplity Parent, Inc.	Revolving Credit Facility	1M LIBOR + 6.00%		1.00	%		10.39	%	2/4/2022	1/31/2027		1,410,454		1,378,699			1,341,193			0.4	%	(8) (9) 13)
APT Opco, LLC	Senior Secured Term Loan	3M LIBOR + 6.25%		1.00	%		10.97	%	12/28/2021	12/28/2026		20,035,714		19,703,269			19,390,564			6.3	%	(5)
APT Opco, LLC	Delayed Draw Term Loan	3M LIBOR + 6.25%		1.00	%		—		12/28/2021	12/28/2026		—		(37,996	)		(153,333	)		-0.1	%	(7) (8) (11) (13)
Celerion Buyer, Inc.	Term Loan (First Lien)	3M SOFR +6.50%		0.75	%		10.64	%	11/7/2022	11/3/2029		14,547,315		14,188,364			14,183,632			4.6	%
Celerion Buyer, Inc.	Delayed Draw Term Loan	3M SOFR +6.50%		0.75	%		—		11/7/2022	11/3/2029		—		(56,126	)		(57,545	)		0.0	%	(7) (8) (11) (13)
Celerion Buyer, Inc.	Revolving Loan	3M SOFR +6.50%		0.75	%		—		11/7/2022	11/3/2028		—		(28,049	)		(28,772	)		0.0	%	(7) (8) (11) (13)
MMS Bidco LLC	Term Loan (First Lien)	3M SOFR + 6.50%		1.00	%		11.20	%	6/30/2022	6/30/2027		24,937,500		24,469,446			24,555,956			8.0	%
Spark DSO, LLC	First Lien Term Loan	1M LIBOR + 6.25%		1.00	%		9.99	%	2/9/2022	4/19/2026		16,446,560		16,315,383			16,249,201			5.3	%
Spark DSO, LLC	Revolver	1M LIBOR + 6.25%		1.00	%		—		2/9/2022	4/19/2026		—		(19,656	)		(30,000	)		0.0	%	(7) (8) (11) (13)
Total Healthcare & Pharmaceuticals														98,132,260			97,294,977			31.8	%
High Tech Industries
Bullhorn, Inc.	Amendment No. 1 Term Loan	3M LIBOR + 5.75%		1.00	%		10.48	%	11/10/2021	9/30/2026		14,868,303		14,827,375			14,573,910			4.8	%	(5) (10)
GS AcquisitionCo, Inc.	Initial Term Loan	3M LIBOR + 5.75%		1.00	%		9.92	%	11/3/2021	5/25/2026		12,376,985		12,346,485			11,897,996			3.9	%	(5) (8) (9)
Medallia, Inc.	Initial Term Loan	1M LIBOR + 6.50%		0.75	%	10.46% (50% PIK)			10/29/2021	10/29/2028		24,331,673		23,967,363			23,845,040			7.8	%	(5) (9)
PDFTron US Acquisition Corp.	Initial Term Loan	1M SOFR + 5.50%		1.00	%		9.82	%	3/23/2022	7/15/2027		12,977,047		12,745,286			12,934,223			4.2	%	(5) (10)
SailPoint Technologies Holdings Inc.	Initial Term Loan	1M SOFR + 6.25%		0.75	%		10.58	%	8/16/2022	8/16/2029		23,123,123		22,679,369			22,223,634			7.3	%
SailPoint Technologies Holdings Inc.	Revolving Loan	1M SOFR + 6.25%		0.75	%		—		8/16/2022	8/16/2028		—		(35,158	)		(73,011	)		0.0	%	(7) (8) (11) (13)
Total High Tech Industries														86,530,720			85,401,792			27.9	%
Sovereign & Public Finance
IEC Corporation	Term Loan	3M LIBOR + 7.50%		1.00	%		12.23	%	12/17/2021	12/26/2026		26,317,069		25,765,089			25,593,350			8.4	%	(5)
Pansophic Learning Ltd.	Senior Secured Term Loan	1M LIBOR + 7.25%		1.00	%		11.42	%	3/25/2022	3/25/2027		13,000,000		12,862,785			13,033,800			4.3	%	(5)
S4T Holdings Corp.	Term Loan (First Lien)	1M SOFR + 6.00%		1.00	%		10.44	%	12/27/2021	12/27/2026		15,300,000		15,079,411			15,130,170			4.9	%	(5)
S4T Holdings Corp.	Delayed Draw Term Loan	1M SOFR + 6.00%		1.00	%		—		12/27/2021	12/27/2026		—		(27,187	)		(50,455	)		0.0	%	(7) (8) (11) (13)
Total Sovereign & Public Finance														53,680,098			53,706,865			17.6	%
Transportation: Cargo
Keystone Purchaser, LLC	Term Loan	3M LIBOR + 5.50%		1.00	%		9.70	%	2/1/2022	5/7/2027		21,300,404		20,963,123			20,953,208			6.8	%	(5) (9)
Total Transportation: Cargo														20,963,123			20,953,208			6.8	%
Wholesale
WSP Midco LLC	Initial Term Loan	1M LIBOR + 6.25%		1.00	%		10.63	%	10/1/2021	4/27/2027		18,762,453		18,455,841			17,636,705			5.8	%	(5)
WSP Midco LLC	Delayed Draw Term Loan	1M LIBOR + 6.25%		1.00	%		—		10/1/2021	4/27/2027		—		(13,925	)		(204,088	)		-0.1	%	(7) (8) (11) (13)
WSP Midco LLC	Revolving Loan	1M LIBOR + 6.25%		1.00	%		—		10/1/2021	4/27/2027		—		(13,187	)		(51,021	)		0.0	%	(7) (8) (11) (13)
Total Wholesale														18,428,729			17,381,596			5.7	%
Total Debt Investments														501,621,705			496,354,293			162.3	%
Equity
Business Services
Milestone Technologies, Inc. (Maverick Acquisition Holdings, LP)	Common Equity								12/7/2022	N/A		1,500,000		1,500,000			1,500,000			0.5	%
KeyData Associates Inc.	Common Equity								10/1/2021	N/A		1,250,000		979,662			942,799			0.3	%	(10)
Total Business Services														2,479,662			2,442,799			0.8	%
Consumer Goods: Non-durable
Connect America.com, LLC	Common Equity								12/15/2022	N/A		23,825		3,102,483			2,929,515			1.0	%	(14)
Total Consumer Goods: Non-durable														3,102,483			2,929,515			1.0	%
Sovereign & Public Finance


Portfolio Company (1)	Investment Type	Reference Rate and Spread (2)	Floor	Interest Rate (2)	Initial Acquisition Date	Maturity Date	Par/Shares		Amortized Cost (3)		Fair Value (4)			% of Net Assets			Footnotes
S4T Holdings Corp. (Vistria ESS Holdings, LLC)	Equity Units				12/27/2021	N/A		200		200,000		241,836			0.1	%
Total Sovereign & Public Finance										200,000		241,836			0.1	%
Wholesale
Wholesale Supplies Plus Holdings, LLC	Class A Common Units				10/1/2021	N/A		3,400		3,400,000		2,974,150			1.0	%	(6)
Total Wholesale										3,400,000		2,974,150			1.0	%
Total Equity										9,182,145		8,588,300			2.8	%
Total Non-controlled/Non-affiliated investments									$	510,803,850		504,942,593			165.1	%	(15)
Liabilities in Excess of Other Assets												(199,029,814	)		-65.1	%
Total Net Assets											$	305,912,779			100.0	%

(1)

All of the Company’s investments are issued by eligible portfolio companies, as defined in the 1940 Act, unless otherwise noted. All of the Company’s investments are issued by U.S. portfolio companies unless otherwise noted as Canadian dollar ("CAD").

(2)

Represents the interest rate in effect as of the reporting date and may be subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”) or Secured Overnight Financing Rate (“SOFR” or “S”) or Canadian Dollar Offered Rate (“CDOR” or “C”) or alternative base rate (commonly known as the U.S. Prime Rate (“Prime” or “P”), unless otherwise noted), which reset periodically based on the terms of the loan agreement. As of December 31, 2022, the 1-Month LIBOR or “1M LIBOR” was 4.39%, the 3-Month LIBOR or “3M LIBOR” was 4.77%, the 6-Month LIBOR or “6M LIBOR” was 5.14%, the 1-Month SOFR or “1M SOFR” was 4.36%, the 3-Month SOFR or “3M SOFR” was 4.59%, the 6-Month SOFR or “6M SOFR” was 4.78%, the 1-Month CDOR or "1M CDOR" was 4.74% and the Prime was 7.50%.

(3)

The amortized cost represents the initial cost adjusted for the accretion of discount or amortization of premium, as applicable, using the effective interest method.

(4)

Unless otherwise noted, the fair value of the Company’s investments is determined using significant unobservable inputs (classified as Level 3 within the fair value hierarchy) by the Adviser in its role as "valuation designee" in accordance with Rule 2a-5 under the 1940 Act, pursuant to valuation policies and procedures that have been approved by the Board. Although the Board designated the Adviser as "valuation designee," the Board ultimately is responsible for fair value determinations under the 1940 Act. (See Note 2 to the consolidated financial statements)

(5)

(6)

Security is held through Onex Falcon Direct Lending BDC Blocker LLC, a wholly-owned blocker subsidiary.

(7)

The maturity date disclosed represents the commitment period of the unfunded term loan or revolver.

(8)

The undrawn portion of these committed revolvers and delayed draw term loans includes a commitment and/or unused fee rate.

(9)

The stated interest rate represents the weighted average interest rate of all contracts.

(10)

(11)

(12)

Level 2 investment.

(13)

As of December 31, 2022, the Company had the following commitments to fund various revolving and delayed draw term loans. Such commitments are subject to certain conditions set forth in the documents governing these loans and there can be no assurance that such conditions will be satisfied.


Portfolio Company	Type	Total Commitment		Funded Commitment		Expired Commitment		Unfunded Commitment
Amplity Parent, Inc.	Revolver	$	2,227,032	$	1,410,454	$	—	$	816,578
APT Opco, LLC	Delayed Draw Term Loan		4,761,905		—		—		4,761,905
Celerion Buyer Inc.	Delayed Draw Term Loan		2,301,790		—		—		2,301,790
Celerion Buyer Inc.	Revolver		1,150,895		—		—		1,150,895
Crash Champions Intermediate, LLC	Revolver		930,233		—		—		930,233
Jackson Paper Manufacturing Company	Revolver		1,333,333		—		—		1,333,333
Milestone Technologies, Inc.	Revolver		1,551,724		724,138		—		827,586


Montana Buyer Inc.	Revolver		2,450,000		—		—		2,450,000
S4T Holdings Corp.	Delayed Draw Term Loan		4,545,455		—		—		4,545,455
SailPoint Technologies Holdings Inc.	Revolver		1,876,877		—		—		1,876,877
Spark DSO, LLC	Revolver		2,500,000		—		—		2,500,000
Steele Solutions, Inc.	Revolver		1,935,484		—		—		1,935,484
Steele Solutions, Inc.	Delayed Draw Term Loan		3,225,806		—		1,612,903		1,612,903
WSP Midco LLC	Delayed Draw Term Loan		3,401,460		—		—		3,401,460
WSP Midco LLC	Revolver		850,365		—		—		850,365
Zips Car Wash, LLC	Delayed Draw Term Loan		25,000,000		9,765,625		—		15,234,375
		$	60,042,359	$	11,900,217	$	1,612,903	$	46,529,239

(14)

Security is held through Connect America OFDL BDC Holdings, LLC, a wholly-owned subsidiary.

(15)

As of December 31, 2022, the estimated cost basis of investments for U.S. federal tax purposes was $510,803,850, resulting in gross unrealized appreciation and depreciation of $1,070,929 and $6,932,186, respectively.

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

Onex Falcon Direct Lending BDC Fund

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Organization

Onex Falcon Direct Lending BDC Fund (the “Company”), a Delaware statutory trust formed on April 27, 2021, is a non-diversified, closed-end management investment company that has elected to be treated as a business development company (“BDC”) under the 1940 Act. The Company also elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

The Company commenced operations on October 1, 2021.

On August 25, 2021, the Company formed a wholly-owned blocker entity, Onex Falcon Direct Lending BDC Blocker LLC (the “OFDL Blocker”), which holds certain of the Company’s portfolio equity investments. On September 21, 2021, the Company formed a wholly-owned, special-purpose, bankruptcy-remote subsidiary, Onex Falcon Direct Lending BDC SPV, LLC (the “OFDL SPV”), which holds certain of the Company’s portfolio loan investments that are used as collateral for the debt financing facility provided by Société Générale. On December 13, 2022, the Company formed a wholly-owned entity, Connect America OFDL BDC Holdings, LLC (the “OFDL Holdings”), which holds certain of the Company's portfolio equity investments.

The Company is managed by Onex Falcon Investment Advisors, LLC, (the “Adviser”). The Adviser, subject to the overall supervision of the Board provides investment advisory services to the Company. The Adviser also provides administrative services necessary for the Company to operate.

The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns.

The Company invests primarily in senior and subordinated debt and, to a lesser extent, equity including warrants, options, and convertible instruments, of middle market companies.

The Company’s fiscal year ends on December 31.

Note 2. Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. These unaudited consolidated financial statements (“consolidated financial statements”) reflect adjustments that in the opinion of the Company are necessary for the fair presentation of the financial position and results of operations as of and for the periods presented herein and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto in the Company's Form 10-K for the year ended December 31, 2022, as filed with the SEC. The Company is considered an investment company under U.S. GAAP and therefore applies the accounting and reporting guidance applicable to investment companies.

Certain comparative figures have been reclassified to conform to the current year’s presentation, specifically:

Income statement reclassifications:

•

“Deferred financing costs” were combined with “Interest and credit facility expense”; and

•

“Administration fee” was broken out from “Other general and administration expenses”.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates, and such differences could be material.

Consolidation

In accordance with U.S. GAAP guidance on consolidation, the Company will generally not consolidate its investment in a portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of

providing services to the Company. Accordingly, the Company consolidated the accounts of the Company’s wholly-owned subsidiaries, OFDL SPV, OFDL Blocker and OFDL Holdings, in its consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.

Segments

In accordance with U.S. GAAP guidance on segment reporting, the Company has determined that its operations comprise a single reporting segment.

Cash and Cash Equivalents and Restricted Cash

Cash consists of deposits held at a custodian bank. Cash equivalents consists of money market investments. Restricted cash consists of deposits pledged as collateral. Cash, cash equivalents and restricted cash are held at major financial institutions and, at times, may exceed the insured limits under applicable law.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses on investments are calculated using the specific identification method as the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation when gains or losses are recognized.

Valuation Procedures

The Board has designated the Adviser as its “valuation designee” pursuant to Rule 2a-5 under the 1940 Act, and in that role the Adviser is responsible for performing fair value determinations relating to all of the Company’s investments, including periodically assessing and managing any material valuation risks and establishing and applying fair value methodologies, in accordance with valuation policies and procedures that have been approved by the Board. Although the Board designated the Adviser as “valuation designee,” the Board ultimately is responsible for fair value determinations under the 1940 Act.

Investments for which market quotations are readily available are valued at such market quotations, which are generally obtained from independent pricing services, broker-dealers or market makers. To validate market quotations, the Company will utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities for which market quotations are not readily available or are deemed not to represent fair value, are valued at fair value as determined in good faith by the Adviser, in accordance with a valuation policy approved by the Board and a consistently applied valuation process. Accordingly, such investments go through the Company’s multi-step valuation process as described below. Investments purchased within the quarter before the valuation date and debt investments with remaining maturities of 60 days or less may each be valued at cost with interest accrued or discount accreted/premium amortized to the date of maturity (although they are typically valued at available market quotations), unless such valuation, in the judgment of the Adviser, does not represent fair value.

The Adviser undertakes a multi-step valuation process, which includes, among other procedures, the following:

•

The valuation process begins with each portfolio company or investment being initially valued using certain inputs, among others, provided by the Adviser's investment professionals that are responsible for the portfolio investment;

•

Preliminary valuation conclusions are then documented and discussed with the Adviser's senior investment team;

•

At least once annually, the valuation for each portfolio investment is reviewed by an independent valuation firm. In each case, the Company’s independent third party valuation firm considers observable market inputs together with significant unobservable inputs in arriving at their valuation recommendations for such investments; and

•

The Adviser then reviews the valuations and determines the fair value of each investment.

As part of the valuation process, the Adviser may consider other information and may use valuation methods including but not limited to (i) market quotations for similar investments, (ii) recent trading activity, (iii) discounting forecasted cash flows of the investment, (iv) models that consider the implied yields from comparable debt, (v) third party appraisals, (vi) sale negotiations and purchase offers received from independent parties and (vii) estimated value of underlying assets to be received in any liquidation or restructuring.

market value, the fair value of the Company’s investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences 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 gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.

Financial Accounting Standards Board Accounting Standards Codification Topic 820: Fair Value Measurements and Disclosures (“ASC 820”) specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. ASC 820 also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings and provides for enhanced disclosures determined by the level of information used in the valuation.

The Company classifies the inputs used to measure fair values into the following hierarchy:

•

Level 1—Valuations are based on quoted prices in active markets for identical assets or liabilities that are accessible to the Company at the measurement date.

•

Level 2—Valuations are based on similar assets or liabilities in active markets, or quoted prices identical or similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly and model-based valuation techniques for which all significant inputs are observable.

•

Level 3—Valuations are based on inputs that are unobservable and significant to the overall fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models incorporating significant unobservable inputs, such as discounted cash flow models and other similar valuation techniques. The valuation of Level 3 assets and liabilities generally requires significant management judgment due to the inability to observe inputs to valuation.

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 observable input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and it considers factors specific to the investment.

Transfers between levels, if any, are recognized at the beginning of the period in which the transfer occurs. In addition to using the above inputs in investment valuations, the Company applies the valuation policy approved by its Board that is consistent with ASC 820. Consistent with the valuation policy, the Company evaluates the source of inputs, including any markets in which its investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When a security is valued based on prices provided by reputable dealers or pricing services (that is, broker quotes), the Company subjects those prices to various additional criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment. For example, the Company reviews pricing provided by dealers or pricing services in order to determine if observable market information is being used, versus unobservable inputs. Some additional factors considered include the number of prices obtained as well as an assessment as to their quality, such as the depth of the relevant market relative to the size of the Company’s position.

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. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.

In addition, changes in the market environment, including the impact of changes in broader market indices and credit spreads, and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.

Revenue Recognition

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.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. Accrued interest is generally reversed when a loan is placed on non-accrual status. Payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability of the outstanding principal and interest. Non-accrual loans may be restored to accrual status when past due principal and interest is paid current and are likely to remain current based on management’s judgment.

Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.

Loan origination fees, original issue discount and market discount are capitalized, and the Company amortizes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.

Payment-in-Kind Interest

Payment-in-kind (“PIK”) interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and recorded as interest income and generally becomes due at maturity. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to shareholders in the form of distributions, even though the Company has not yet collected the cash.

Deferred Financing Costs

Origination and other expenses related to the Company’s revolving credit facility are recorded as deferred financing costs and amortized as part of interest expense using the straight-line method over the stated life of the debt instrument.

Organization and Offering Costs

Organization costs include, among other things, the cost of incorporating, including the cost of legal services, printing, consulting services and other fees pertaining to the Company’s organization. Costs associated with the organization of the Company are expensed as incurred. Offering costs include legal expenses related to the preparation of the Company’s private placement memorandum in connection with the Company's offering of common shares. Offering costs are capitalized as deferred offering expenses and are amortized over twelve months from incurrence.

Earnings per Share

Basic earnings per share is calculated by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated in the same manner, with further adjustments to reflect the dilutive effect of common share equivalents outstanding.

Income Taxes

The Company has elected to be regulated as a BDC under the 1940 Act. The Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income or excise taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as distributions. Rather, any tax liability related to income earned and distributed would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.

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. Tax

positions not deemed to meet the “more likely than not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof.

To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source of income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of its “investment company taxable income” for that year, which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses.

In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (1) 98% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of capital gains in excess of capital losses (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. For this purpose, however, any net ordinary income or capital gains retained by the Company that is subject to corporate income tax is considered to have been distributed. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% nondeductible U.S. federal excise tax on this income.

The Company has analyzed the tax positions taken on federal and state income tax returns for all open tax years and has concluded that no provision for income tax for uncertain tax positions is required in the Company’s consolidated financial statements. The Company’s major tax jurisdictions are U.S. federal, New York State, and foreign jurisdictions where the Company makes significant investments. The Company’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Distributions to Common Shareholders

Distributions to the Company’s shareholders are recorded on the record date. The amount to be paid out as a distribution is determined by the Board and is generally based upon earnings estimated by the Adviser. Net realized capital gains, if any, would generally be distributed at least annually, although the Company may decide to retain such capital gains.

The Company has adopted an “opt out” distribution reinvestment plan (“DRP”) for its shareholders. As a result, if the Company makes a cash distribution, its shareholders will have their cash distributions reinvested in additional shares of the Company including fractional shares as necessary, unless they specifically “opt out” of the DRP to receive the distribution in cash. Under the DRP, cash distributions to participating shareholders will be reinvested in additional shares of the Company at a purchase price equal to the net asset value per share as of the last day of the calendar quarter immediately preceding the date such distribution was declared.

The Company may distribute taxable distributions that are payable in cash or shares at the election of each shareholder. Under certain applicable provisions of the Code and the U.S. Treasury regulations, distributions payable in cash or in common shares at the election of shareholders are treated as taxable distributions. As a result, a U.S. shareholder may be required to pay tax with respect to such distributions in excess of any cash received. If a U.S. shareholder sells the shares it receives in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of the Company’s shares at the time of the sale. Furthermore, with respect to non-U.S. shareholders, the Company may be required to withhold U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in shares.

Foreign Currency Translation

Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (1) all assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates effective on the date of valuation; and (2) purchases and sales of investments, borrowings and repayments of such borrowings, and income and expense items denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on the transaction dates. The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.

Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

Note 3. Related Party Transactions

Administration Agreement

Pursuant to an agreement between the Company and the Adviser effective September 16, 2021 (the “Administration Agreement”), the Adviser performs, oversees, or arranges for, the performance of administrative and compliance services necessary for the operations of the Company, which includes office facilities, equipment, bookkeeping and recordkeeping services and such other services as the Adviser, subject to review by the Board, shall from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. Under the Administration Agreement, the Adviser also provides managerial assistance on the Company’s behalf to those companies that have accepted the Company’s offer to provide such assistance.

In addition, pursuant to the Administration Agreement, the Adviser may pay third-party providers of goods or services and the Company will pay or reimburse the Adviser for certain expenses incurred by any such third parties for work done on its behalf.

The Company reimburses the Adviser for the allocable portion of the Adviser’s overhead and other expenses incurred by the Adviser and requested to be reimbursed by the Adviser in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of the Company’s Chief Compliance Officer and Chief Financial Officer and their respective staffs. In addition, if requested to provide significant managerial assistance to our portfolio companies, the Adviser is paid an additional amount based on the services provided, which shall not exceed the amount the Company receives from such companies for providing this assistance. No person who is an officer, trustee or employee of the Adviser or its affiliates and who serves as a trustee of the Company receives any compensation from the Company for his or her services as a trustee.

For the three months ended March 31, 2023 and 2022, the Company incurred administrative fees of $0.3 million and $0.1 million, respectively.

Investment Advisory Agreement

The Adviser serves as the Company’s investment adviser pursuant to an investment advisory agreement between the Company and the Adviser effective September 16, 2021 (the “Investment Advisory Agreement”). Pursuant to the Investment Advisory Agreement, the Adviser provides overall investment advisory services for the Company and in accordance with the terms of the Investment Advisory Agreement and the Company’s investment objective, policies and restrictions as in effect from time to time: determines the composition of the Company’s portfolio, the nature and timing of the changes to, the portfolio and the manner of implementing such changes; identifies investment opportunities and makes investment decisions for the Company; monitors investments; performs due diligence on prospective portfolio companies; exercises voting rights in respect of portfolio securities and other investments; serve on, and exercise observer rights for, boards of directors and similar committees of the Company’s portfolio companies; negotiates, obtains and manages financing facilities and other forms of leverage; and provides the Company with such other investment advisory and related services as the Fund may, from time to time, reasonably require for the investment of capital.

The Investment Advisory Agreement will be in effect for a period of two years from its effective date and will remain in effect from year-to-year thereafter if approved annually by (i) the vote of the Board, or by the vote of a majority of the outstanding voting securities of the Company, and (ii) the vote of a majority of the Company’s Board who are not parties to the Investment Advisory Agreement or “interested persons” of the Company, of the Adviser or of any of their respective affiliates, as defined in the 1940 Act. The Investment Advisory Agreement may be terminated at any time, without the payment of any penalty, upon 60 days’ written notice and, in certain circumstances, upon 120 days’ written notice, by the vote of a majority of the outstanding voting shares of the Company or by the vote of the Board or by the Adviser.

Under the terms of the Investment Advisory Agreement, the Company will pay the Adviser a base management fee and a performance-based incentive fee.

The base management fee is payable quarterly in arrears at an annual rate of 1.25% of the Company’s total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter.

For the three months ended March 31, 2023 and 2022, management fees were $1.6 million and $1.1 million, respectively.

The incentive fee consists of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on the Company’s income (such fee referred to herein as the “Subordinated Incentive Fee on Income”) and a portion is based on the Company’s capital gains (such fee referred to herein as the “Incentive Fee on Capital Gains”), each as described below.

(1)

Subordinated Incentive Fee on Income

The Subordinated Incentive Fee on Income will be determined and paid quarterly in arrears based on the amount by which (x) the “Pre-Incentive Fee Net Investment Income” (as defined below) in respect of the current calendar quarter and the eleven preceding calendar quarters beginning with the calendar quarter that commences on or after July 1, 2021, as the case may be (or the appropriate portion thereof in the case of any of the Company’s first eleven calendar quarters that commences on or after July 1, 2021) (in either case, the “Trailing Twelve Quarters”) exceeds (y) the Preferred Return Amount (as defined below) in respect of the Trailing Twelve Quarters. The Preferred Return Amount will be determined on a quarterly basis, and will be calculated by multiplying 1.75% by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The Preferred Return Amount will be calculated after making appropriate adjustments to the Company’s NAV at the beginning of each applicable calendar quarter for Company subscriptions and distributions during the applicable calendar quarter. The amount of the Subordinated Incentive Fee on Income that will be paid to the Adviser for a particular quarter will equal the excess of the Subordinated Incentive Fee on Income so calculated less the aggregate Subordinated Incentive Fees on Income that were paid to the Adviser and/or earned, but waived, by the Adviser, in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters.

For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including, without limitation, any accrued income that the Company has not yet received in cash and any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) (the “Ordinary Income”) accrued during the calendar quarter, minus the Company’s operating expenses accrued during the calendar quarter (including, without limitation, the Management Fee, administration expenses and any interest expense and distributions paid on any issued and outstanding preferred shares, but excluding the Subordinated Incentive Fee on Income and the Incentive Fee on Capital Gains). For the avoidance of doubt, Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.

The calculation of the Subordinated Incentive Fee on Income for each quarter is as follows:

(A)

No Subordinated Incentive Fee on Income shall be payable to the Adviser in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income for the Trailing Twelve Quarters does not exceed the Preferred Return Amount;

(B)

100% of the Company’s Pre-Incentive Fee Net Investment Income for the Trailing Twelve Quarters, if any, that exceeds the Preferred Return Amount but is less than or equal to an amount (the “Catch-Up Amount”) determined on a quarterly basis by multiplying 2.0588% by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The Catch-Up Amount is intended to provide the Adviser with an incentive fee of 15% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches 2.0588% per quarter during the Trailing Twelve Quarters; and

(C)

For any quarter in which the Company’s Pre-Incentive Fee Net Investment Income for the Trailing Twelve Quarters exceeds the Catch-Up Amount, the Subordinated Incentive Fee on Income shall equal 15.0% of the amount of the Company’s Pre-Incentive Fee Net Investment Income for such Trailing Twelve Quarters, as the Preferred Return Amount and Catch-Up Amount will have been achieved.

The Subordinated Incentive Fee on Income is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap in any quarter is an amount equal to (a) 15.0% of the Cumulative Pre-Incentive Fee Net Return (as defined below) during the relevant Trailing Twelve Quarters less (b) the aggregate Subordinated Incentive Fees on Income that were paid to the Adviser and/or earned, but waived, by the Adviser in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters. For this purpose, “Cumulative Pre-Incentive Fee Net Return” during the relevant Trailing Twelve Quarters means (x) Pre-Incentive Fee Net Investment Income in respect of the Trailing Twelve Quarters less (y) any Net Capital Loss, if any, in respect of the Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company shall pay no Subordinated Incentive Fee on Income to the Adviser in that quarter. If, in any quarter, the Incentive Fee Cap is a positive value but is less than the Subordinated Incentive Fee on Income calculated in accordance with Section 4(b)(i) above, the Company shall pay the Adviser the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap is equal to or greater than the Subordinated Incentive Fee on Income

calculated in accordance with Section 4(b)(i) above, the Company shall pay the Adviser the Subordinated Incentive Fee on Income for such quarter.

(2)

Incentive Fee on Capital Gains

The Incentive Fee on Capital Gains shall be determined and payable in arrears as of the end of each calendar year (or upon termination of this Agreement). This fee shall equal 15.0% of the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any Incentive Fees on Capital Gains previously paid to the Adviser. The aggregate unrealized capital depreciation of the Company shall be calculated as the sum of the differences, if negative, between (a) the valuation of each investment in the Company’s portfolio as of the applicable calculation date and (b) the accreted or amortized cost basis of such investment.

For accounting purposes only, the Company accrues, but does not pay, a capital gains incentive fee with respect to unrealized capital appreciation. The accrual of this theoretical capital gains incentive fee assumes all unrealized capital appreciation is realized in order to reflect a theoretical capital gains incentive fee that would be payable to the Investment Adviser at each measurement date. It should be noted that a fee so calculated and accrued would not be payable under the Investment Advisers Act of 1940 (the “Advisers Act”) or the Investment Advisory Agreement, and would not be paid based upon such computation of capital gains incentive fees in subsequent periods. Amounts actually paid to the Adviser will be consistent with the Advisers Act and formula reflected in the Investment Advisory Agreement which specifically excludes consideration of unrealized capital gain.

For the three months ended March 31, 2023 and 2022, incentive fees were $2.3 million and $0.0, respectively, of which the Adviser voluntarily waived $0.9 million for the three months ended March 31, 2023.

Revolving Loan Agreement

On September 8, 2022, the Company entered into an unsecured revolving loan agreement (the “Revolving Onex Loan”) with Onex Credit Finance Corporation, a subsidiary of the ultimate parent entity of the Adviser (the “Onex Entity”), whereby the Onex Entity may advance amounts to the Company (each such amount, an “Onex Loan”) with a maximum outstanding principal amount of $80.0 million and a maturity date with respect to each Onex Loan of the day falling two years after the funding of such Onex Loan. The Company is required to meet certain criteria, including a leverage ratio threshold, before the Onex Entity is obligated to make a loan to the Company. The Revolving Onex Loan is intended to provide the Company with the ability to fund investments, related costs and expenses, and general corporate purposes. Amounts drawn under an Onex Loan will bear interest at the secured overnight financing rate (“SOFR”) plus a spread of 2.60%.

Co-investment Exemptive Relief

As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term. On March 29, 2022, the SEC issued an order granting the Company's application for exemptive relief to co-invest in portfolio companies with certain other funds managed by the Adviser or its affiliates (“Affiliated Funds”) and, subject to satisfaction of certain conditions, proprietary accounts of the Adviser or its affiliates (“Proprietary Accounts”) in a manner consistent with the Company’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, the Company is permitted to co-invest with Affiliated Funds and/or Proprietary Accounts if, among other things, a “required majority” (as defined in Section 57(o) of the 1940 Act) of its independent trustees make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to the Company and its shareholders and do not involve overreaching of the Company or its shareholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s shareholders and is consistent with its investment objective and strategies.

Organization and Offering Costs

Under the Investment Advisory Agreement and the Administrative Agreement, the Company, either directly or through reimbursements to the Adviser or its affiliates, is responsible for its organization and offering costs. Prior to the Company’s commencement of operations, the Adviser funded the Company’s organization and offering costs in the amount of $0.8 million, which has been reimbursed by the Company or offset against the Expense Payment due from the Adviser in connection with the Expense Support Agreement (described below).

Expense Support Agreement

On September 15, 2021, the Company entered into the Expense Support Agreement with the Adviser.

Commencing with the fourth quarter of 2021 and on a quarterly basis thereafter, the Adviser may elect to pay certain expenses of the Company from time to time, which the Company will be obligated to reimburse to the Adviser at a later date if certain conditions are met. Any payment so required to be made by the Adviser is referred to herein as an “Expense Payment.”

The Adviser’s obligation to make an Expense Payment becomes a liability of the Adviser, and the right to such Expense Payment becomes an asset of the Company, no later than the last business day of the applicable calendar quarter. The Expense Payment for any calendar quarter shall, as promptly as possible, be: (i) paid by the Adviser to the Company in any combination of cash or other immediately available funds, and/or (ii) offset against amounts due from the Company to the Adviser.

Pursuant to the Expense Support Agreement, “Available Operating Funds” means the sum of (i) the Company’s net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) the Company’s net capital gains (including the excess of net long-term capital gains over net short-term capital losses), and (iii) dividends and other distributions paid to or otherwise earned by the Company on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above.)

Following any calendar quarter in which Available Operating Funds exceed the cumulative distributions paid to the Company’s shareholders in such calendar quarter (the amount of such excess being hereinafter referred to as “Excess Operating funds”), the Company shall pay such Excess Operating Funds, or a portion thereof in accordance with the stipulation below, as applicable, to the Adviser until such time as all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar quarter have been reimbursed or waived. Any payments required to be made by the Company pursuant to the preceding sentence are referred to herein as a “Reimbursement Payment.”

The amount of the Reimbursement Payment for any calendar quarter will be equal to the lesser of (i) the Excess Operating Funds in such calendar quarter, and (ii) the aggregate amount of all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by the Company to the Adviser. No Reimbursement Payment shall be made if: (1) the Effective Rate of Distributions Per Share declared by the Company at the time of such proposed Reimbursement Payment is less than the Effective Rate of Distributions Per Share (defined below) at the time the Expense Payment was made to which such Reimbursement Payment relates, or (2) the Company’s Operating Expense Ratio at the time of such proposed Reimbursement Payment is greater than the Operating Expense Ratio at the time the Expense Payment was made to which such Reimbursement Payment relates. For purposes of the Expense Support Agreement, “Effective Rate of Distributions Per Share” means the annualized rate (based on a 365 day year) of regular cash distributions per share exclusive of returns of capital, distribution rate reductions due to distribution and shareholder fees, and declared special dividends or special distributions, if any. The “Operating Expense Ratio” is calculated by dividing Operating Expenses, less organizational and offering expenses, base management and incentive fees owed to the Adviser, and interest expense, by the Company’s net assets.

The Company’s obligation to make a Reimbursement Payment becomes a liability to the Company, and the right to such Reimbursement Payment becomes an asset of the Adviser, no later than the last business day of the applicable calendar quarter. The Reimbursement Payment for any calendar quarter shall, as promptly as possible, be paid by the Company to the Adviser in any combination of cash or other immediately available funds. Any Reimbursement Payments shall be deemed to have reimbursed the Adviser for Expense Payments in chronological order beginning with the oldest Expense Payment eligible for reimbursement.

The Expense Support Agreement may be terminated at any time, without penalty, by the Company or the Adviser, with or without notice. The Expense Support Agreement automatically terminates in the event of (a) the termination by the Company of the Investment Advisory Agreement, or (b) the Board determines to dissolve or liquidate the Company.

The Company may or may not reimburse remaining expense support in the future. Management believes that the Reimbursement Payments by the Company to the Adviser are not probable under the terms of the Expense Support Agreement as of March 31, 2023. The following table summarizes the Expense Payments that may be subject to reimbursement pursuant to the Expense Support Agreement:


Quarter Ended	Expense Payment Received from the Adviser		Reimbursement Payment made to Adviser		Unreimbursed Expense Payment		Eligible for Reimbursement Through
December 31, 2021	$	2,858,000	$	1,459,766	$	1,398,234	December 31, 2024

Shares held by Affiliated Accounts

As of March 31, 2023, certain entities affiliated with the Company held shares of the Company. Onex Falcon Investment Advisors, LLC held 67 shares, approximately 0.001% of the Company’s outstanding shares.

Potential Conflicts of Interest

The members of the senior management and investment teams of the Adviser serve or may serve as officers, trustees or principals of entities that operate in the same, related or an unrelated line of business as the Company does. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may or may not be in the Company’s best interests or in the best interest of the Company’s shareholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles.

Note 4. Investments and Fair Value Measurements

The following table summarizes the composition of the Company’s investment portfolio at amortized cost and fair value as of March 31, 2023 and December 31, 2022:


	March 31, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Senior Secured Loans	$	524,230,621	$	518,958,423	$	501,621,705	$	496,354,293
Equity		9,182,145		7,218,665		9,182,145		8,588,300
Total Investments	$	533,412,766	$	526,177,088	$	510,803,850	$	504,942,593

Generally, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or it had the power to exercise control over the management or policies of such portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities. As of March 31, 2023 and December 31, 2022, the Company did not “control” and was not an “affiliated person” of any of its portfolio companies, each as defined in the 1940 Act.

The following tables summarize the industry and geographic composition of the Company’s investment portfolio based on fair value as of March 31, 2023 and December 31, 2022:


	March 31, 2023					December 31, 2022
	Fair Value		Percentage			Fair Value		Percentage
Automotive	$	18,953,303		3.6	%	$	18,641,767		3.7	%
Business Services		70,981,491		13.5	%		71,864,705		14.2	%
Chemicals, Plastics & Rubber		6,251,520		1.2	%		6,299,949		1.2	%
Construction & Building		13,987,742		2.7	%		13,891,279		2.8	%
Consumer Goods: Durable		51,834,111		9.9	%		52,528,261		10.4	%
Consumer Goods: Non-durable		41,570,363		7.9	%		42,386,720		8.4	%
Consumer Services		9,293,031		1.8	%		9,694,347		1.9	%
Forest Products & Paper		11,735,115		2.2	%		11,681,141		2.3	%
Healthcare & Pharmaceuticals		99,053,285		18.8	%		97,294,977		19.4	%
High Tech Industries		89,511,780		16.9	%		85,401,792		16.9	%
Insurance		19,065,681		3.6	%		—		—	%
Sovereign & Public Finance		54,296,568		10.3	%		53,948,701		10.7	%
Transportation: Cargo		20,889,482		4.0	%		20,953,208		4.1	%
Wholesale		18,753,616		3.6	%		20,355,746		4.0	%
Total Investments	$	526,177,088		100.0	%	$	504,942,593		100.0	%


	March 31, 2023					December 31, 2022
	Fair Value		Percentage			Fair Value		Percentage
United States	$	515,065,782		97.9	%	$	493,799,332		97.8	%
Canada		11,111,306		2.1	%		11,143,261		2.2	%
Total Investments	$	526,177,088		100.0	%	$	504,942,593		100.0	%

The following table summarizes the fair value hierarchy of the Company’s investment portfolio as of March 31, 2023:


	Level 1		Level 2		Level 3		Total
Senior Secured Loans	$	—	$	40,437,128	$	478,521,295	$	518,958,423
Equity		—		—		7,218,665		7,218,665
Total Investments	$	—	$	40,437,128	$	485,739,960	$	526,177,088

The following table summarizes the fair value hierarchy of the Company’s investment portfolio as of December 31, 2022:


	Level 1		Level 2		Level 3		Total
Senior Secured Loans	$	—	$	17,733,300	$	478,620,993	$	496,354,293
Equity		—		—		8,588,300		8,588,300
Total Investments	$	—	$	17,733,300	$	487,209,293	$	504,942,593

The following table presents changes in the fair value of investments for which Level 3 inputs were used to determine the fair value for the three months ended March 31, 2023:


	Senior Secured Loans			Equity			Total
Balance as of January 1, 2023	$	478,620,993		$	8,588,300		$	487,209,293
Purchases of investments		24,846,991			—			24,846,991
Proceeds from principal pre-payments and sales of investments		(2,235,331	)		—			(2,235,331	)
Payment-in-kind		340,667			—			340,667
Net accretion of discount on investments		584,139			—			584,139
Net change in unrealized appreciation (depreciation) on investments		455,984			(1,369,635	)		(913,651	)
Net realized gain (loss) on investments		39,883			—			39,883
Transfers into Level 3 (1)		—			—			—
Transfers out of Level 3 (1)		(24,132,031	)		—			(24,132,031	)
Balance as of March 31, 2023	$	478,521,295		$	7,218,665		$	485,739,960
Net change in unrealized appreciation (depreciation) on Level 3 investments still held	$	455,984		$	(1,369,635	)	$	(913,651	)

(1)

Transfers into Level 3, if any, are due to a decrease in the quantity and reliability of broker quotes obtained and transfers out of Level 3, if any, are due to an increase in the quantity and reliability of broker quotes obtained as assessed by the Adviser. Transfers between levels, if any, are recognized at the beginning of the period in which the transfer occurs.

The following table presents changes in the fair value of investments for which Level 3 inputs were used to determine the fair value for the three months ended March 31, 2022:


	Senior Secured Loans			Equity			Total
Balance as of January 1, 2022	$	221,562,845		$	4,585,750		$	226,148,595
Purchases of investments (1)		114,698,455			—			114,698,455
Proceeds from principal pre-payments and sales of investments (1)		(4,058,453	)		—			(4,058,453	)
Net accretion of discount on investments		716,198			—			716,198
Net change in unrealized appreciation (depreciation) on investments		(461,316	)		(54,014	)		(515,330	)
Net realized gain (loss) on investments		20,783			—			20,783
Transfers into Level 3		—			—			—
Transfers out of Level 3		—			—			—
Balance as of March 31, 2022	$	332,478,512		$	4,531,736		$	337,010,248
Net change in unrealized appreciation (depreciation) on Level 3 investments still held	$	(461,316	)	$	(54,014	)	$	(515,330	)

(1)

In connection with the preparation of the Company’s interim consolidated financial statements for the three months ended March 31, 2023, the reported subtotal amounts in the “Total” column for the three months ended March 31, 2022 were revised to correct the prior disclosures, as they were not properly summating to the correct subtotal.

The valuation techniques and significant unobservable inputs used in the valuation of Level 3 investments as of March 31, 2023 were as follows:

Investment type

Fair Value

Valuation Technique

Unobservable
Input

Range (Weighted Average)

Impact to Valuation from an Increase in Input

Senior Secured Loans

373,037,078

Discounted cash flow

Discount rate

7.1% - 13.3% (9.7%)

Decrease

86,418,535

Yield analysis

Market yield

10.8% - 12.5% (12.0%)

Decrease

19,065,682

Recent transactions

Transaction price

97.0 (97.0)

N/A

Equity

7,218,665

Enterprise value waterfall

EBITDA multiple

8.9x - 15.0x (12.7x)

Increase

485,739,960

The valuation techniques and significant unobservable inputs used in the valuation of Level 3 investments as of December 31, 2022 were as follows:

Investment type

Fair Value

Valuation Technique

Unobservable
Input

Range (Weighted Average)

Impact to Valuation from an Increase in Input

Senior Secured Loans

280,648,742

Discounted cash flow

Discount rate

6.9% - 12.0% (9.5%)

Decrease

145,565,023

Yield analysis

Market yield

10.2% - 12.3% (11.4%)

Decrease

52,407,228

Recent transactions

Transaction price

97.5 - 98.0 (97.75)

N/A

Equity

7,088,300

Enterprise value waterfall

EBITDA multiple

13.5x - 16.2x (15.3x)

Increase

1,500,000

Recent transactions

Transaction price

100.0 (100.0)

N/A

487,209,293

Note 5. Debt

On October 4, 2021, the OFDL SPV, as borrower, and the Company, solely in its capacities as equity holder and collateral manager, entered into a Loan and Servicing Agreement with Société Générale, as initial lender and agent, and certain financial institutions (the “Lenders”), and U.S. Bank National Association as collateral agent and collateral custodian (the “SPV Facility”), as amended on December 27, 2021, as further amended on March 31, 2022, July 14, 2022 and on April 4, 2023, pursuant to which the amount made available to OFDL SPV was increased from $100.0 million to $340.0 million. Borrowings under the SPV Facility will bear interest at SOFR plus a spread of 1.75% or 2.40% based on certain conditions (or an alternative rate of interest for certain loans denominated in Canadian Dollars, Euros or Sterling). OFDL SPV will also pay an unused commitment fee at rate of (1) 1.00% if the amount drawn under the SPV Facility is less than the minimum commitment usage (the “Minimum Commitment Usage”) and (2) 0.40% if the amount drawn under the SPV Revolver is greater than or equal to the Minimum Commitment Usage. The Minimum Commitment Usage is equal to (1) 0.0% for the first six months ended April 4, 2022; (2) 37.5% for the period from April 5, 2022 through June 27, 2022; (3) 75% for the period from June 28, 2022 through July 13, 2022; (4) $150.0 million for the period from July 14, 2022 through January 13, 2023; and (5) $255.0 million thereafter. The Company also pays a fee of 0.20% per annum on the outstanding balance under the SPV Facility beginning on July 14, 2022. The SPV Facility terminates on October 2, 2026.

In connection with the SPV Facility, on October 4, 2021, the Company entered into a sale and contribution agreement with the OFDL SPV, which provides for the sale and contribution of certain loans to the OFDL SPV and for future sales from the Company to the OFDL SPV on an ongoing basis. Such loans sold and contributed to OFDL SPV constitute part of the initial portfolio of assets securing the SPV Facility.

The SPV Facility includes customary covenants, including certain financial maintenance covenants, limitation on the activities of OFDL SPV, including limitations on incurrence of incremental indebtedness, and customary events of default. The SPV Facility is secured by a lien on assets held by the OFDL SPV and on any payments received by OFDL SPV in respect of those assets.

Further, as discussed in Note 3 above, on September 8, 2022, the Company entered into the Revolving Onex Loan with the Onex Entity.

Debt obligations consisted of the following as of March 31, 2023 and December 31, 2022:


	March 31, 2023				December 31, 2022
	Total Borrowing Capacity		Principal Outstanding		Total Borrowing Capacity		Principal Outstanding
SPV Facility	$	340,000,000	$	255,000,000	$	340,000,000	$	211,000,000
Revolving Onex Loan		80,000,000		—		80,000,000		—
	$	420,000,000	$	255,000,000	$	420,000,000	$	211,000,000

Due to the short-term nature of the SPV Facility, the outstanding principal balance approximates fair value. The fair value of the credit facility would be categorized as Level 3.

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


	Three Months Ended March 31,
	2023			2022
Interest expense	$	4,126,279		$	480,342
Amortization of deferred financing costs		277,917			118,403
Total interest expense	$	4,404,196		$	598,745
Average debt outstanding	$	220,901,099		$	52,766,667
Weighted average interest rate		6.4	%		2.7	%

Note 6. Share Transactions

The Company is authorized to issue an unlimited number of common shares at $0.001 par value per share.

The following table summarizes the total shares issued and proceeds received during the three months ended March 31, 2023:


Period Ended	Shares Issued		Proceeds Received
March 31, 2023		44,339	$	1,088,965
		44,339	$	1,088,965

The following table summarizes the total shares issued and proceeds received during the three months ended March 31, 2022:


Period Ended	Shares Issued		Proceeds Received
March 31, 2022		2,514,909	$	62,973,318
		2,514,909	$	62,973,318

Distributions

The Company may fund its cash distributions to shareholders from any sources of funds available to it, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies and fee and expense reimbursement waivers from the Adviser or the Administrator, if any. The Company has not established limits on the amount of funds it may use from available sources to make distributions. During certain periods, the Company’s distributions may exceed its taxable earnings. As a result, it is possible that a portion of the distributions the Company makes may represent a return of capital. A return of capital generally is a return of a shareholder’s investment rather than a return of earnings or gains derived from the Company’s investment activities.

With respect to distributions, the Company has adopted an “opt out” distribution reinvestment plan (“DRP”) for common shareholders. As a result, in the event of a declared distribution, each shareholder that has not “opted out” of the DRP will have their distributions automatically reinvested in additional common shares rather than receiving cash distributions. Shareholders who receive

distributions in the form of common shares will be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions.

The following table summarizes the distribution declarations and common shares issued pursuant to the distribution reinvestment plan for the three months ended March 31, 2023:


Date Declared	Record Date	Payment Date	Amount Per Share		Distribution Declared		DRP Shares Issued
March 2, 2023	March 2, 2023	March 23, 2023	$	0.58	$	7,007,486		178,875
			$	0.58	$	7,007,486		178,875

The following table summarizes the distribution declarations and common shares issued pursuant to the distribution reinvestment plan for the three months ended March 31, 2022:


Date Declared	Record Date	Payment Date	Amount Per Share		Distribution Declared		DRP Shares Issued
March 29, 2022	March 29, 2022	April 29, 2022	$	0.34	$	3,497,617		—
			$	0.34	$	3,497,617		—

Note 7. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
Net increase in net assets resulting from operations	$	5,881,636	$	2,968,504
Weighted average common shares outstanding—basic and diluted		12,300,303		10,083,146
Net increase in net assets resulting from operations per common share—basic and diluted	$	0.48	$	0.29

Note 8. Income Taxes

The Company has elected to be treated as a RIC under the Code, and intends to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to its shareholders as a distribution. The Company’s quarterly distributions, if any, are determined by the Board. The Company anticipates distributing substantially all of its taxable income and gains, within the Subchapter M rules, and thus the Company anticipates that it will not incur any federal or state income tax at the RIC level. As a RIC, the Company is also subject to a federal excise tax based on distributive requirements of its taxable income on a calendar year basis. Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income, to the extent required.

Taxable Subsidiaries

Certain of the Company's subsidiaries are subject to U.S. federal and state corporate-level income taxes. As of March 31, 2023, there was deferred tax assets of $0.4 million, offset by valuation allowances of $0.4 million, for taxable subsidiaries. The cumulative deferred tax asset has been fully offset by a valuation allowance due to uncertainty about the Company's ability to utilize these net operating losses in future years.

Note 9. Financial Highlights

The following is a schedule of financial highlights for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023			2022
Per share data:
Net asset value, beginning of period	$	24.56		$	25.04
Results of operations:
Net investment income (loss) (1)		0.59			0.35
Net realized and unrealized gain (loss) (6)		(0.10	)		(0.06	)
Net increase (decrease) in net assets resulting from operations (1)		0.49			0.29
Shareholder distributions: (2)
Distributions from net investment income		(0.58	)		(0.34	)
Net decrease in net assets resulting from shareholder distributions		(0.58	)		(0.34	)
Net asset value, end of period	$	24.47		$	24.99
Shares outstanding, end of period		12,260,748			10,287,109
Total return based on net asset value (3)		1.99	%		1.16	%
Ratio/Supplemental Data:
Net assets, end of period	$	299,998,356		$	257,075,747
Ratio of net investment income (loss) to average net assets (4)		11.03	%		6.35	%
Ratio of total expenses to average net assets (4)		10.00	%		4.44	%
Ratio of net expenses to average net assets (4)		9.70	%		4.44	%
Average debt outstanding	$	220,901,099		$	52,766,667
Portfolio turnover		1	%		1	%
Total amount of senior securities outstanding	$	255,000,000		$	124,000,000
Asset coverage per unit (5)	$	2,176		$	3,073

(1)

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

(2)

The per share data for distributions reflects the actual amount of distributions paid during the period.

(3)

Total return based on net asset value is calculated as the change in net asset value per share during the period, and reflects reinvestment of any distributions to common shareholders. Total return is not annualized.

(4)

The computation of average net assets during the period is based on averaging net assets for the period reported. Ratio, excluding incentive fees, and nonrecurring expenses, such as organization and offering costs, is annualized.

(5)

Asset coverage per unit is the ratio of the carrying value of the Company’s consolidated total assets, less liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness and is calculated on a consolidated basis.

(6)

The amount shown at this caption is the balancing figure derived from the other figures in the schedule. The amount shown at this caption is derived from total change in net asset value during the period and differs from the amount calculated using average shares because of the timing of issuances of the Company’s shares in relation to changes in net asset value during the period.

Note 10. Commitments and Contingencies

In the normal course of its business, the Company may enter into contracts that require it to make certain representations and warranties and which provide for general indemnifications. Given that these would involve future claims against the Company that have not yet been made, the Company’s potential exposure under these arrangements is unknown. Based upon past experience, management expects the risk of loss under these indemnification provisions to be remote.

From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. As of March 31, 2023, the Company is not aware of any pending or threatened litigation.

See Note 3 for a discussion of the Company's conditional reimbursement to the Adviser under the Expense Support Agreement.

The Company may, from time to time, enter into commitments to fund investments. As of March 31, 2023 and December 31, 2022, the Company had the following outstanding commitments to fund investments in current portfolio companies:


	March 31, 2023		December 31, 2022
Unfunded delayed draw term loan commitments	$	41,242,087	$	31,857,888
Unfunded revolver obligations		14,356,872		14,671,351
	$	55,598,959	$	46,529,239

The Company maintains sufficient capacity to cover outstanding unfunded portfolio company commitments that the Company may be required to fund.

Note 11. Subsequent Events

Management has evaluated subsequent events through the date of issuance of these financial statements and has determined that there are no subsequent events outside the ordinary scope of business that require adjustment to, or disclosure in, the financial statements other than those disclosed below.

On April 3, 2023, the Company issued, in connection with its private placement of its common shares, 18,186 common shares for an aggregate amount of $0.4 million.

On May 5, 2023, the Company terminated the Revolving Onex Loan and entered into an unsecured revolving loan agreement with Onex Credit Finance II Corporation (“OCF II”) (the “Revolving OCF II Loan”), a subsidiary of the ultimate parent entity of the Adviser, whereby OCF II may advance amounts to the Company (each such amount, an “Onex Loan II”) with a maximum outstanding principal amount of $80.0 million and a maturity date with respect to each Onex Loan II of the day falling two years after the funding of such Onex Loan II. The Company is required to meet certain criteria, including a leverage ratio threshold, before OCF II is obligated to make a loan to the Company. The Revolving OCF II Loan is intended to provide the Company with the ability to fund investments, related costs and expenses, and general corporate purposes. Amounts drawn under an Onex Loan II will bear interest at SOFR plus a spread of 2.60%.

On May 11, 2023, the Adviser agreed to permanently waive a portion of the base management fee payable by the Company under the Investment Advisory Agreement pursuant to a fee waiver letter (the “Fee Waiver Letter”). Pursuant to the Fee Waiver Letter, beginning on July 1, 2023, the Adviser has agreed to waive the base management fee in excess of 1.25% of the Company’s net assets as of the end of the most recently completed calendar quarter; provided that the base management fee shall not be greater than 1.25% of the Company’s total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter.

Also on May 11, 2023, the Board declared a quarterly dividend of $0.60 per share for the Company’s shareholders of record as of May 16, 2023, payable on June 22, 2023.

Also on May 11, 2023, the Board appointed Zachary Drozd, born in 1985, as Deputy General Counsel of the Company, effective May 11, 2023.

Zachary Drozd is Deputy General Counsel and Chief Compliance Officer of Onex Credit Partners, LLC (“Onex Credit”) and Chief Compliance Officer of the Company. Prior to joining Onex Credit, Mr. Drozd practiced corporate law at Proskauer Rose LLP, with an emphasis on the representation of private investment fund sponsors. Mr. Drozd holds a J.D. from Columbia Law School and a Bachelor of Arts degree from Rutgers College.

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

The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto in this Quarterly Report. This discussion includes forward-looking statements that involve numerous risks and uncertainties and should be read in conjunction with the “Cautionary Statement Regarding Forward-Looking Statements” set forth on page 1 of this Quarterly Report. Actual results could differ materially from those implied or expressed in any forward-looking statements. Except as otherwise indicated, the terms “we,” “us,” “our,” and the “Company” refer to Onex Falcon Direct Lending BDC Fund.

Overview

We are a Delaware statutory trust structured as a non-diversified, closed-end management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes, we elected to be treated as a RIC under Subchapter M of the Code. To qualify as a RIC, we must, among other things, invest at least 70% of our total assets in “qualifying assets”, meet certain source-of-income and asset diversification requirements, and timely distribute to our shareholders generally at least 90% of our investment company taxable income for each year. As of March 31, 2023 and December 31, 2022, the total amount of non-qualifying assets to total assets was approximately 7.5% and 7.4%, respectively.

Our investment objective is to generate current income and, to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns.

We invest primarily in senior and subordinated debt and, to a lesser extent, equity including warrants, options, and convertible instruments, of middle market companies.

On August 25, 2021, we formed a wholly-owned blocker entity, Onex Falcon Direct Lending BDC Blocker LLC, which holds certain of our portfolio equity investments. On September 21, 2021, we formed a wholly-owned, special-purpose, bankruptcy-remote subsidiary, Onex Falcon Direct Lending BDC SPV, LLC, which holds certain of our portfolio loan investments that are used as collateral for the debt financing facility with Société Générale. On December 13, 2022, we formed a wholly-owned entity, Connect America OFDL BDC Holdings, LLC, which holds certain of our portfolio equity investments.

On October 1, 2021, we closed on our initial private offering and commenced operations. We conduct private offerings of our common shares to accredited investors and non-U.S. persons pursuant to a subscription agreement entered into with us.

We are externally managed by the Adviser, a subsidiary of Onex Corporation, as investment adviser. The Adviser also serves as our administrator and provides administrative services necessary for us to operate.

Key Components of Our 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 and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, the amount of capital we have available to us and the competitive environment for the type of investments we make.

Revenues

The principal measure of our financial performance is the net increase or decrease in net assets resulting from operations, which includes net investment income or loss and net realized and unrealized gain or loss on investments. Net investment income or loss is the difference between our income from interest, distributions, fees, and other investment income and our operating expenses, including interest expense. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for any non-U.S. dollar denominated investment transactions. Net change in unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized appreciation or depreciation on foreign currency for any non-U.S. dollar denominated investments.

We primarily generate revenue in the form of interest income from our investments in debt investments that consist primarily of senior and junior secured loans. Our debt investments are spread across multiple industries and geographic locations and, as such, we are broadly exposed to market conditions and business environments. As a result, although our investments are exposed to market risks, we continuously seek to limit concentration of exposure in any particular sector or issuer. Our debt investments typically have a

term of five to 10 years, but the expected average life of such securities is generally between three and five years. The loans in which we invest will generally bear interest at a floating rate usually determined on the basis of a benchmark, such as LIBOR, SOFR, or an alternate base rate. In addition, some of our investments may provide for PIK interest. Such amounts of accrued PIK interest are added to the cost of the investment on the respective capitalization dates and generally become due at maturity of the investment or upon the investment being called by the issuer. To a lesser extent, we may also generate revenues in the form of dividends and other distributions on the equity or other securities we anticipate holding. In addition, we may generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. Any such fees generated in connection with our investments will be recognized when earned.

Expenses

Our primary operating expenses include the payment of management and incentive fees, if any, and other expenses under the Investment Advisory Agreement, interest expense from financing arrangements, and other expenses necessary for our operations. The management and incentive fees will compensate the Adviser for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.

We reimburse the Administrator for expenses necessary to perform services related to our administration and operations, including the Adviser’s portion of the compensation and related expenses for certain personnel who provide administrative services. Such services include, among other things, clerical, bookkeeping and recordkeeping services, investor relations, performing or overseeing the performance of our corporate operations (which includes being responsible for the financial records that we are required to maintain and preparing reports for our shareholders and reports filed with the SEC), assisting us in calculating the net asset value per share, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our shareholders, compliance monitoring and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.

We will also bear all other costs and expenses of our operations, administration and transactions, including but not limited to:

•

the cost of our organization and the offering;

•

the cost of calculating our net asset value, including the cost of any third-party valuation services;

•

the cost of effecting any sales and repurchases of our common shares and other securities;

•

fees and expenses payable under any dealer manager or placement agent agreements, if any;

•

administration fees payable under the Administration Agreement and any sub-administration agreements, including related expenses, such as our allocable portion of compensation, overhead and other expenses incurred by the Administrator in performing its administrative obligations;

•

debt service and other costs of borrowings or other financing arrangements;

•

costs of hedging;

•

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

•

transfer agent and custodial fees;

•

fees and expenses associated with marketing efforts;

•

federal and state registration fees, any stock exchange listing fees and fees payable to rating agencies;

•

federal, state and local taxes;

•

independent trustees’ fees and expenses including certain travel expenses;

•

costs of preparing financial statements and maintaining books and records and 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 of the foregoing;

•

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

•

commissions and other compensation payable to brokers or dealers;

•

research and market data;

•

fidelity bond, trustees’ and officers’ errors and omissions liability insurance and other insurance premiums;

•

direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;

•

fees and expenses associated with independent audits, outside legal and consulting costs;

•

costs of winding up our affairs;

•

costs incurred by either the Administrator or us in connection with administering our business, including payments under the Administration Agreement;

•

extraordinary expenses (such as litigation or indemnification); and

•

costs associated with reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws.

We are obligated to reimburse the Adviser for expense payments made by the Adviser to us in connection with the Expense Support Agreement following any calendar quarter in which we have available operating funds. The amount of the reimbursement payment for any calendar quarter will be equal to the lesser of (i) the excess operating funds in such calendar quarter, and (ii) the aggregate amount of all expense payments made by the Adviser to us within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by us to the Adviser.

In addition, we and our Administrator have contracted with U.S. Bank N.A. to provide custodial and various accounting and administrative services, including but not limited to, preparing preliminary financial information for review by the Adviser, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing in respect to RIC compliance.

We expect that our general and administrative expenses will increase in dollar terms during periods of asset growth, but will decline as a percentage of total assets during such periods.

Leverage

The amount of leverage we intend to use in any period depends on a number of factors, including cash on-hand available for investing, the cost of financing, general economic and market conditions. We are permitted to incur indebtedness as long as immediately after such incurrence we have an asset coverage ratio of at least 150%.

Portfolio and Investment Activity

As of March 31, 2023 we had investments in 29 portfolio companies with an aggregate fair value of $526.2 million. As of March 31, 2023 and December 31, 2022, the total amount of non-qualifying assets to total assets was approximately 7.5% and 7.4%, respectively.

Our investment activity for the three months ended March 31, 2023 and 2022 was as follows:


	Three Months Ended March 31,
	2023			2022
Investments made in portfolio companies	$	24,846,991		$	114,746,073
Investments sold		—			—
Investments repayments		(3,268,069	)		(4,152,204	)
Net investment activity	$	21,578,922		$	110,593,869
Portfolio companies at beginning of year or period		28			14
Number of investments in new portfolio companies		1			7
Number of exited portfolio companies		—			—
Portfolio companies at end of year or period		29			21
Percentage of investment commitments at floating rates		100.0	%		100.0	%
Percentage of investment commitments at fixed rates		—			—
Weighted average contractual interest rate of investments based on par		11.43	%		7.30	%

The following table summarizes our top ten portfolio companies and industries based on fair value as of March 31, 2023:


Portfolio Company	% of Portfolio	Industry	% of Portfolio
Hy Cite Enterprises, LLC	5.2%	Healthcare & Pharmaceuticals	18.8%
IEC Corporation	4.9%	High Tech Industries	17.0%
MMS Bidco LLC	4.7%	Business Services	13.5%
BCDI Meteor Acquisition, LLC	4.7%	Sovereign & Public Finance	10.3%
Connect America.com, LLC	4.6%	Consumer Goods: Durable	9.9%
Medallia, Inc.	4.6%	Consumer Goods: Non-durable	7.9%
BCP V Everise Acquisition LLC	4.4%	Transportation: Cargo	4.0%
SailPoint Technologies Holdings Inc.	4.3%	Insurance	3.6%
Amplity Parent, Inc.	4.3%	Wholesale	3.6%
APT Opco, LLC	4.0%	Automotive	3.6%

The following table summarizes our top ten portfolio companies and industries based on fair value as of December 31, 2022:


Portfolio Company	% of Portfolio	Industry	% of Portfolio
Hy Cite Enterprises, LLC	5.6%	Healthcare & Pharmaceuticals	19.3%
IEC Corporation	5.1%	High Tech Industries	16.9%
Connect America.com, LLC	4.9%	Business Services	14.2%
MMS Bidco LLC	4.9%	Sovereign & Public Finance	10.7%
BCDI Meteor Acquisition, LLC	4.8%	Consumer Goods: Durable	10.4%
BCP V Everise Acquisition LLC	4.8%	Consumer Goods: Non-durable	8.4%
Medallia, Inc.	4.7%	Transportation: Cargo	4.1%
Amplity Parent, Inc.	4.6%	Wholesale	4.0%
SailPoint Technologies Holdings, Inc.	4.4%	Automotive	3.7%
Montana Buyer Inc. (ApexAnalytix)	4.2%	Construction & Building	2.8%

The industry composition of our portfolio at fair value at March 31, 2023 and December 31, 2022 was as follows:


	March 31, 2023			December 31, 2022
Automotive		3.6	%		3.7	%
Business Services		13.5	%		14.2	%
Chemicals, Plastics & Rubber		1.2	%		1.2	%
Construction & Building		2.7	%		2.8	%
Consumer Goods: Durable		9.9	%		10.4	%
Consumer Goods: Non-durable		7.9	%		8.4	%
Consumer Services		1.8	%		1.9	%
Forest Products & Paper		2.2	%		2.3	%
Healthcare & Pharmaceuticals		18.8	%		19.4	%
High Tech Industries		16.9	%		16.9	%
Insurance		3.6	%		—	%
Sovereign & Public Finance		10.3	%		10.7	%
Transportation: Cargo		4.0	%		4.1	%
Wholesale		3.6	%		4.0	%
Total Investments		100.0	%		100.0	%

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


	March 31, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Senior Secured Loans	$	524,230,621	$	518,958,423	$	501,621,705	$	496,354,293
Equity		9,182,145		7,218,665		9,182,145		8,588,300
Total Investments	$	533,412,766	$	526,177,088	$	510,803,850	$	504,942,593

The following table shows the fair value of our performing and non-accrual investments as of March 31, 2023 and December 31, 2022:


	March 31, 2023					December 31, 2022
	Fair Value		Percentage			Fair Value		Percentage
Performing	$	526,177,088		100.0	%	$	504,942,593		100.0	%
Non-accrual		—		0.0	%		—		0.0	%
Total Investments	$	526,177,088		100.0	%	$	504,942,593		100.0	%

Results of Operations

Our operating results for the three months ended March 31, 2023 and 2022 were as follows:


	Three Months Ended March 31,
	2023			2022
Total investment income	$	15,559,129		$	6,009,083
Net expenses		8,359,104			2,498,571
Net investment income		7,200,025			3,510,512
Net realized and unrealized gain (loss)		(1,318,389	)		(542,008	)
Net increase in net assets resulting from operations	$	5,881,636		$	2,968,504
Net investment income per common share—basic and diluted	$	0.59		$	0.35
Net increase in net assets resulting from operations per common share—basic and diluted	$	0.48		$	0.29

Net income can vary substantially from period-to-period due to various factors, including the level of new investment commitments, the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, comparisons of net increase in net assets resulting from operations may not be meaningful.

Investment Income

Investment income is primarily dependent on the composition and credit quality of our investment portfolio. Generally, we expect our debt investments to generate predictable, recurring interest income in accordance with the contractual terms of each loan. Corporate equity securities may pay a dividend and may increase in value for which a gain may be recognized; generally, such dividend payments and gains are less predictable than interest income on our loan portfolio.

Investment income for the three months ended March 31, 2023 and 2022 were as follows:


	Three Months Ended March 31,
	2023			2022
Interest income	$	15,212,889		$	6,009,083
Other income		346,240			—
Total investment income	$	15,559,129		$	6,009,083
Weighted average contractual interest rate on performing interest bearing investments		11.43	%		7.30	%
Weighted average contractual interest rate on all interest bearing investments		11.43	%		7.30	%

For the three months ended March 31, 2023 and 2022, we have generated interest income of $15.2 million and $6.0 million, respectively. Such revenues represent cash interest earned as well as non-cash income consisting of accretion of original issue discounts and PIK. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized. The level of interest income we receive is generally related to the principal balance of income-producing investments, multiplied by the contractual interest rates of our investments. Interest income increased primarily as a result of the increase in the size of our portfolio and increase in the weighted average yield of our portfolio. The size of our portfolio and weighted average yield of our portfolio at par for the three months ended March 31, 2023 and 2022 were as follows:


	Three Months Ended March 31,
	2023			2022
Average size of portfolio (in millions)	$	14.1		$	16.8
Weighted average contractual interest rate of investments based on par		11.43	%		7.30	%

Fee income is transaction based, and typically consists of amendment and consent fees, prepayment fees, structuring fees and other non-recurring fees. As such, fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees. Any such fees generated will be recognized as earned. We expect the dollar amount of interest and any dividend income that we earn to increase as the size of our investment portfolio increases.

Expenses

Expenses for the three months ended March 31, 2023 and 2022 were as follows:


	Three Months Ended March 31,
	2023			2022
Management fee	$	1,646,178		$	1,102,855
Incentive fee		2,329,914			—
Administration fee		278,000			148,000
Organizational and offering costs		—			31,698
Professional fees		336,487			288,125
Trustees’ fees		43,000			45,000
Interest and credit facility expense		4,404,196			598,745
Other general and administrative expense		221,329			284,148
Total Expenses		9,259,104			2,498,571
Incentive fee waiver		(900,000	)		—
Net Expenses	$	8,359,104		$	2,498,571

Total expenses were $9.3 million and $2.5 million for the three months ended March 31, 2023 and 2022, respectively. We pay our Adviser a management fee quarterly in arrears at an annual rate of 1.25% of our total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter. We also pay our Adviser an incentive fee that consists of two components that are independent of each other, with the result that one component may be payable even if the other is not. The income component of the incentive fee will be the amount, if positive, equal to 15% of the aggregate net investment income before incentive compensation earned for the most recent calendar quarter and the preceding eleven calendar quarters (or if shorter, the number of calendar quarters that have occurred since commencement of operations), less aggregate income incentive compensation previously paid and/or waived with respect to the first eleven calendar quarters (or the portion thereof) included in the relevant trailing twelve quarters. The income component of the incentive fee is subject to a 7.0% hurdle on our net assets at the beginning of each applicable calendar quarter and subject to a cap of 15% of the cumulative net return comprising the relevant trailing twelve quarters. The capital gains component of the incentive fee will be the amount, if positive, equal to 15.0% of the aggregate realized capital gains (computed net of realized capital losses and unrealized capital depreciation, if any) for the most recent calendar quarter and the preceding eleven calendar quarters (or if shorter, the number of calendar quarters that have occurred since commencement of the fund), less capital gains incentive compensation previously paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant trailing twelve quarters. We reimburse our Administrator for the allocable portion of the Adviser’s overhead and other expenses incurred by the Adviser and requested to be reimbursed by the Adviser in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our Chief Compliance Officer and Chief Financial Officer and their respective staffs. Interest expense under the SPV Facility is based on the average debt outstanding.

Organization costs include, among other things, the cost of incorporating, including the cost of legal services, printing, consulting services and other fees pertaining to our organization and are expensed as incurred. Offering costs include legal expenses related to the preparation of our registration statement in connection with our offering of common shares and are amortized over twelve months from incurrence.

Interest expense increased primarily due to the increase in average principal amount of debt outstanding and weighted average interest rate as a result of the increase in SOFR.

For the three months ended March 31, 2023, the Adviser voluntarily waived incentive fees totaling $0.9 million.

We expect our operating expenses related to our ongoing operations to increase in the next several quarters because of the anticipated growth in the size of our asset base. We expect operating expenses as a percentage of our total assets to decrease during periods of asset growth.

Net Realized Gains or Losses

Our investments are generally purchased at a discount to par. We received principal repayments of $3.3 million and $4.2 million during the three months ended March 31, 2023 and 2022, from which we realized net gains totaling $56,032 and $20,020, respectively. We recognized gains on partial principal repayments we received at par value. For the three months ended March 31, 2023 and 2022, the net change in unrealized appreciation (depreciation) on investments totaled $(1.4) million and $(0.6) million, respectively, which was primarily due to fair market value depreciation and the impact of currency translation.

The net realized gains (losses) from the sales, repayments or exits of investments for the three months ended March 31, 2023 and 2022 consisted of the following:


	Three Months Ended March 31,
	2023			2022
Sales, repayments or exits of investments	$	3,268,069		$	4,152,204
Net realized gains (losses) on investments:
Gross realized gains		57,035			20,020
Gross realized losses		(1,003	)		—
Net realized gains (losses) on investments	$	56,032		$	20,020

Net Unrealized Gains or Losses

We value our portfolio investments quarterly and the changes in value are recorded as unrealized gains or losses in our consolidated statements of operations. Net unrealized gains or losses on investments for the three months ended March 31, 2023 and 2022 consisted of the following:


	Three Months Ended March 31,
	2023			2022
Unrealized appreciation	$	2,125,233		$	359,566
Unrealized depreciation		(3,499,654	)		(921,594	)
Net unrealized gain (loss) on investments	$	(1,374,421	)	$	(562,028	)

For the three months ended March 31, 2023, the net unrealized loss on investments was primarily driven by a decrease in the fair value of one equity investment. For the three months ended March 31, 2022, the net unrealized losses on investments were primarily driven by volatility in part by rising rates and inflation, partially offset by continued spread tightening in the credit markets driven primarily by a strong recovery in economic activity.

The change in unrealized appreciation or depreciation on investments for the three months ended March 31, 2023 and 2022 consisted of the following:


	Three Months Ended March 31,
Portfolio Company	2023			2022
Ameritex Pipe & Products, LLC	$	—		$	(59,500	)
Amplity Parent, Inc.		(418,718	)		(22,220	)
Apryse Software Corp (fka PDFTron US Acquisition Corp.)		32,452			(717	)
APT Opco, LLC		201,857			(71,217	)
Atlas Intermediate III, L.L.C.		(42,948	)		(3,450	)
BCDI Meteor Acquisition, LLC		22,671			—
BCP V Everise Acquisition LLC		46,502			—
Bullhorn, Inc.		122,433			(4,757	)
Celerion Buyer, Inc.		97,079			—
Connect America.com, LLC		(173,846	)		(76,527	)
Crash Champions Intermediate, LLC		55,046			—
Foundation Risk Partners, Corp.		(152,415	)		—
GS AcquisitionCo, Inc.		76,056			(4,141	)
Hy Cite Enterprises, LLC		23,035			(4,626	)
IEC Corporation		194,012			(34,399	)
Jackson Paper Manufacturing Company		98,278			(16,309	)
KeyData Associates Inc.		(17,277	)		359,566
Keystone Purchaser, LLC		(26,049	)		(8,171	)
Medallia, Inc.		(66,478	)		(20,978	)
Milestone Technologies, Inc.		234,299			—
MMS Bidco LLC		220,586			—
Montana Buyer Inc.		(19,840	)		—
Pansophic Learning Ltd.		(60,902	)		(1,587	)
S4T Holdings Corp.		246,267			(18,496	)
SailPoint Technologies Holdings Inc.		341,976			—
Schumacher Electric Corporation		—			(20,890	)
Spark DSO, LLC		(11,825	)		(58,363	)
Steele Solutions, Inc.		112,684			(34,124	)
Wellful Inc.		(507,272	)		(46,699	)
WSP Midco LLC		(1,587,628	)		(414,423	)
Zips Car Wash, LLC		(414,456	)		—
Net unrealized gain (loss) on investments	$	(1,374,421	)	$	(562,028	)

During the three months ended March 31, 2023 and 2022, we recognized net unrealized gains (loss) on foreign currency of $32.7 thousand and $0.1 million, respectively.

Net Increase in Net Assets Resulting from Operations

For the three months ended March 31, 2023 and 2022, the net increase in net assets resulting from operations was $5.9 million and $3.0 million or $0.48 and $0.29 per share, respectively.

Financial Condition, Liquidity and Capital Resources

Our liquidity and capital resources are generated from the net proceeds received from the issuance of our common shares from private placement offerings, as well as from proceeds from principal repayments, income earned on investments and cash equivalents, and borrowings from the credit facilities. We intend to continue to generate cash primarily from future offerings of shares of our common shares, future borrowings and cash flows from operations. We may from time to time enter into additional debt facilities or increase the size of existing facilities to borrow funds to make investments, including before we have fully invested the net proceeds from our private placement offering, to the extent we determine that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced debt financing opportunities, or if our Board determines that leveraging our portfolio would be in our best interests and the best interests of our shareholders. In accordance with the 1940 Act, with certain limited exceptions, we are allowed to incur borrowings, issue debt securities or issue preferred shares if immediately after the borrowing or issuance our ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred shares, is at least 150%. As of March 31, 2023, our asset coverage ratio was 217.6%. We seek to carefully consider our unfunded commitments for the purpose of planning our capital resources and ongoing liquidity including our financial leverage. Further, we maintain sufficient borrowing capacity within the 150% asset coverage limitation under the 1940 Act and the asset coverage limitation under our credit facility to cover any outstanding unfunded commitments we are required to fund.

The primary uses of cash, including the net proceeds from our issuance and sale of our common shares, are for investments in portfolio companies, repayment of indebtedness, if any, cash distributions to our shareholders, and the cost of operations.

As of March 31, 2023 we had $27.0 million in cash and cash equivalents on hand, plus $85.0 million and $80.0 million available to us under our borrowing facilities with Société Générale and Onex Credit Finance Corporation, a subsidiary of the ultimate parent entity of the Adviser, respectively, which is expected to be sufficient for our investing activities and to conduct our operations in the foreseeable future. On May 5, 2023, the Company terminated the Revolving Onex Loan and entered into the Revolving OCF II Loan, with substantially the same terms as the existing Revolving Onex Loan. However, as the impact of current inflationary pressure on the economy and our business evolves, we will continue to assess our liquidity needs. A continued worldwide disruption due to inflationary pressures could materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, and capital investments. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

Equity

We are authorized to issue an unlimited number of common shares at $0.001 par value per share.

The following table summarizes the total shares issued and proceeds received related to the placement of our common shares for the three months ended March 31, 2023:


Period Ended	Shares Issued		Proceeds Received
March 31, 2023		44,339	$	1,088,965
		44,339	$	1,088,965

The following table summarizes the total shares issued and proceeds received related to the placement of our common shares for the three months ended March 31, 2022:


Period Ended	Shares Issued		Proceeds Received
March 31, 2022		2,514,909	$	62,973,318
		2,514,909	$	62,973,318

In the first quarter of 2023, we began offering, and on a quarterly basis, intend to continue offering, to repurchase common shares on such terms as may be determined by the Board in its discretion. The Board has complete discretion to determine whether we will engage in any share repurchase, and if so, the terms of such repurchase. At the discretion of the Board, we may use cash on hand, cash available from borrowings, and cash from the sale of investments as of the end of the applicable period to repurchase shares.

All shares purchased by us pursuant to the terms of each offer to repurchase will be retired and thereafter will be authorized and unissued shares.

Any periodic repurchase offers are subject in part to our available cash and compliance with the BDC and RIC qualification and diversification rules promulgated under the 1940 Act and the Code, respectively. While we intend to continue to conduct quarterly tender offers as described above, we are not required to do so and may suspend or terminate the share repurchase program at any time.

The results of our tender offer in the first quarter of 2023 are as follows:

Offer Date

Tender Offer Expiration

Tender Offer

Purchase Price per Share

Shares Repurchased

January 13, 2023

February 10, 2023

622,786

24.56

418,189

Distributions and Dividend Reinvestment

We intend to continue to make quarterly distributions to our shareholders. To maintain our RIC status and avoid certain excise taxes imposed on RICs, we generally endeavor to distribute during each calendar year an amount at least equal to the sum of:

•

98% of our ordinary net taxable income for the calendar year;

•

98.2% of our capital gains, if any, in excess of capital losses for the one-year period ending on October 31 of the calendar year; and

•

any net ordinary income and net capital gains for the preceding year that were not distributed during such year and on which we do not pay corporate tax.

We may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income, to the extent required.

The amount of our declared distributions, as evaluated by management and approved by our Board, is based primarily on our evaluation of our net investment income and distributable taxable income.

The following table reflects the distributions declared on common shares and common shares issued pursuant to our distribution reinvestment plan for the three months ended March 31, 2023:


Date Declared	Record Date	Payment Date	Amount Per Share		Distribution Declared		DRP Shares Issued
March 2, 2023	March 2, 2023	March 23, 2023	$	0.58	$	7,007,486		178,875
			$	0.58	$	7,007,486		178,875

The following table reflects the distributions declared on common shares and common shares issued pursuant to our distribution reinvestment plan for the three months ended March 31, 2022:


Date Declared	Record Date	Payment Date	Amount Per Share		Distribution Declared		DRP Shares Issued
March 29, 2022	March 29, 2022	April 29, 2022	$	0.34	$	3,497,617		—
			$	0.34	$	3,497,617		—

Borrowings

We use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our shareholders by reducing our overall cost of capital. As a BDC, we are limited in the amount of leverage we can incur under the 1940 Act. We are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing. As of March 31, 2023 and December 31, 2022, our asset coverage ratio was 217.6% and 245.0%, respectively.

We expect to maintain adequate liquidity and compliance with regulatory and contractual asset coverage requirements.

Contractual Obligations

The following table shows the contractual maturities of our outstanding debt obligations as of March 31, 2023:


	Payments due by Period
Contractual Obligations	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years
SPV Facility	$	255,000,000	$	—	$	—	$	255,000,000	$	—
Revolving Onex Loan		—		—		—		—		—
Total	$	255,000,000	$	—	$	—	$	255,000,000	$	—

The following table shows the contractual maturities of our outstanding debt obligations as of December 31, 2022:


	Payments due by Period
Contractual Obligations	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years
SPV Facility	$	211,000,000	$	—	$	—	$	211,000,000	$	—
Revolving Onex Loan		—		—		—		—		—
Total	$	211,000,000	$	—	$	—	$	211,000,000	$	—

The weighted average interest rate on the aggregate principal amount outstanding was 6.4% and 5.2% as of March 31, 2023 and December 31, 2022, respectively.

The ratio of total principal amount of debt outstanding to shareholders' equity as of March 31, 2023 was 0.85:1.00 compared to 0.69:1.00 as of December 31, 2022.

SPV Facility

We and our consolidated subsidiary, OFDL SPV, are party to the “SPV Facility” with Société Générale, as initial lender and agent, and certain financial institutions that allows OFDL SPV to borrow up to $340.0 million. Borrowings under the SPV Facility will bear interest at SOFR plus a spread of 1.75% or 2.40% based on certain conditions (or an alternative rate of interest for certain loans denominated in Canadian Dollars, Euros or Sterling). OFDL SPV will also pay an unused commitment fee on the unused commitment amount at rate of (1) 1.00% if the amount drawn under the SPV Facility is less than the minimum commitment usage (the “Minimum Commitment Usage”) and (2) 0.40% if the amount drawn under the SPV Facility is greater than or equal to the Minimum Commitment Usage. The Minimum Commitment Usage is equal to (1) 0.0% for the first six months ended April 4, 2022; (2) 37.5% for the period from April 5, 2022 through June 27, 2022; (3) 75% for the period from June 28, 2022 through July 13, 2022; (4) $150.0 million for the period from July 14, 2022 through January 13, 2023; and (5) $255.0 million thereafter. The Company also pays a fee of 0.20% per annum on the outstanding balance under the SPV Facility beginning on July 14, 2022. The SPV Facility is secured by a lien on assets held by the OFDL SPV and on any payments received by OFDL SPV in respect of those assets. The SPV Facility terminates on October 2, 2026.

Revolving Onex Loan

We entered into the Revolving Onex Loan with the Onex Entity, whereby the Onex Entity may advance an Onex Loan to us with a maximum aggregate outstanding principal amount of $80.0 million and a maturity date with respect to each Onex Loan of the day falling two years after the funding of such Onex Loan. We are required to meet certain criteria, including a leverage ratio threshold, before the Onex Entity is obligated to make a loan to us. The Revolving Onex Loan is intended to provide us with the ability to fund investments, pay related costs and expenses, and for general corporate purposes. Amounts drawn under an Onex Loan will bear interest at SOFR plus a spread of 2.60%.

Related Party Transactions

We have entered into certain contracts with affiliated or related parties. In particular, we entered into (1) an Investment Advisory Agreement with the Adviser to provide us with investment advisory services under which we pay our Adviser an annual base management fee based on our total assets, excluding cash and cash equivalents, and incentive fees based on our performance and (2) an administrative agreement with the Administrator to perform (or oversee, or arrange for, the performance of) the administrative services necessary to enable us to operate and under which we reimburse the Administrator for administrative expenses incurred on our behalf. See “Note 3. Related Party Transactions – Administration Agreement” and “– Investment Advisory Agreement” for a description of our obligations under these agreements. We also entered into an Expense Support Agreement with the Adviser, whereby the Adviser may elect to pay certain of our expenses from time to time, which we will be obligated to reimburse to the Adviser if certain conditions are met. We are obligated to reimburse the Adviser for expense payments made by the Adviser to us in connection with the Expense Support Agreement following any calendar quarter in which we have available operating funds. The amount of the reimbursement payment for any calendar quarter will be equal to the lesser of (i) the excess operating funds in such calendar quarter, and (ii) the aggregate amount of all expense payments made by the Adviser to us within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by us to the Adviser. We also entered into the Revolving Onex Loan with the Onex Entity, whereby the Onex Entity may advance amounts to us with a maximum aggregate outstanding principal amount of $80.0 million and a maturity date with respect to each Onex Loan of the day falling two years after the funding of such Onex Loan. We are required to meet certain criteria, including a leverage ratio threshold, before the Onex Entity is obligated to make a loan to us. The Revolving Onex Loan is intended to provide us with the ability to fund investments, pay related costs and expenses, and for general corporate purposes. Amounts drawn under the Onex Loan will bear interest at SOFR plus a spread of 2.60%.

Off-Balance Sheet Arrangements

From time-to-time we are a party to financial instruments with off-balance sheet risk in the normal course of business in order to meet the needs of our investment in portfolio companies. Such instruments include commitments to extend credit and may involve, in varying degrees, elements of credit risk in excess of amounts recognized on our balance sheet. Prior to extending such credit, we attempt to limit our credit risk by conducting extensive due diligence, obtaining collateral where necessary and negotiating appropriate financial covenants.

As of March 31, 2023 and December 31, 2022, the Company had the following outstanding commitments to fund investments in current portfolio companies:


	March 31, 2023		December 31, 2022
Unfunded delayed draw term loan commitments	$	41,242,087	$	31,857,888
Unfunded revolver obligations		14,356,872		14,671,351
	$	55,598,959	$	46,529,239

Recent Developments

On April 3, 2023, we issued, in connection with our private placement of our common shares, 18,186 common shares for an aggregate amount of $0.4 million.

On May 5, 2023, the Company terminated the Revolving Onex Loan and entered into the Revolving OCF II Loan with OCF II, whereby OCF II may advance an Onex Loan II to us with a maximum outstanding principal amount of $80.0 million and a maturity date with respect to each Onex Loan II of the day falling two years after the funding of such Onex Loan II. The Company is required to meet certain criteria, including a leverage ratio threshold, before OCF II is obligated to make a loan to the Company. The Revolving OCF II Loan is intended to provide the Company with the ability to fund investments, related costs and expenses, and general corporate purposes. Amounts drawn under an Onex Loan II will bear interest at SOFR plus a spread of 2.60%.

Also on May 11, 2023, the Board declared a quarterly dividend of $0.60 per share for the Company’s shareholders of record as of May 16, 2023, payable on June 22, 2023.

Also on May 11, 2023, the Board appointed Zachary Drozd, born in 1985, as Deputy General Counsel of the Company, effective May 11, 2023.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management’s most difficult, complex, or subjective judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. Our critical accounting policies are those applicable to the basis of presentation, valuation of investments, and certain revenue recognition matters as discussed below. See Note 2 to our consolidated financial statements, “Significant Accounting Policies—Investments”, contained elsewhere herein.

Valuation of Portfolio Investments

The most significant estimate inherent in the preparation of our consolidated financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded.

Value, as defined in Section 2(a)(41) of the 1940 Act, is (1) the market price for those securities for which a market quotation is readily available and (2) for all other securities and assets, fair value as determined in good faith by our Adviser, as “valuation designee,” pursuant to procedures approved by our Board. The Board has designated the Adviser as its “valuation designee” pursuant to Rule 2a-5 under the 1940 Act, and in that role the Adviser is responsible for performing fair value determinations relating to all of our investments, including periodically assessing and managing any material valuation risks and establishing and applying fair value

methodologies, in accordance with valuation policies and procedures that have been approved by the Board. Although the Board designated our Adviser as “valuation designee,” the Board ultimately is responsible for fair value determinations under the 1940 Act.

Our valuation policy is intended to provide a consistent basis for determining the fair value of the portfolio based on the nature of the security, the market for the security and other considerations including the financial performance and enterprise value of the portfolio company. Because of the inherent uncertainty of valuation, the Adviser determined values may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.

Pursuant to ASC 946: Financial Services—Investment Companies (“ASC 946”), we reflect our investments on our balance sheet at their determined fair value with unrealized gains and losses resulting from changes in fair value reflected as a component of unrealized gains or losses on our statements of operations. Fair value is the amount that would be received to sell the investments in an orderly transaction between market participants at the measurement date (i.e., the exit price).

See Note 2 to the consolidated financial statements for the additional information about the level of market observability associated with investments carried at fair value.

We follow the provisions of ASC 820, which among other matters, requires enhanced disclosures about investments that are measured and reported at fair value. This standard defines fair value and establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value and expands disclosures about assets and liabilities measured at fair value. ASC 820 defines “fair value” as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This fair value definition focuses on an exit price in the principle, or most advantageous market, and prioritizes, within a measurement of fair value, the use of market-based inputs (which may be weighted or adjusted for relevance, reliability and specific attributes relative to the subject investment) over entity-specific inputs. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. Subsequent to the adoption of ASC 820, the FASB has issued various staff positions clarifying the initial standard (see Note 2 to the consolidated financial statements: “Significant Accounting Policies—Investments”).

We classify the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:

•

Level 1—Valuations are based on quoted prices in active markets for identical assets or liabilities that are accessible to the Company at the measurement date.

•

The Adviser undertakes a multi-step valuation process, which includes, among other procedures, the following:

•

Preliminary valuation conclusions are then documented and discussed with the Adviser’s senior investment team;

•

At least once annually, the valuation for each portfolio investment is reviewed by an independent valuation firm. In each case, our independent third party valuation firm considers observable market inputs together with significant unobservable inputs in arriving at their valuation recommendations for such investments; and

•

The Adviser then reviews the valuations and determines the fair value of each investment.

A determination of fair value involves subjective judgments and estimates and depends on the facts and circumstances present at each valuation date. Due to the inherent uncertainty of determining fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If we were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.

Revenue Recognition

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, we will not accrue PIK interest if management determines that the PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount, and market discount are capitalized and then we amortize such amounts as interest income. Upon the prepayment of a loan or debt security, any unamortized loan origination fees are recorded as interest income. We further record prepayment premiums on loans and debt securities as interest income when we receive such amounts.

Income Taxes

We elected to be treated for U.S. federal income tax purposes, and to qualify annually, as a RIC under the Code. To qualify for and maintain qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements, and make certain minimum distributions to shareholders. We will be subject to a 4% nondeductible U.S. federal excise tax on undistributed income. See “Note 2. Significant Accounting Policies – Income Taxes.”

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our business activities contain elements of market risks. We consider our principal market risks to be fluctuations in interest rates and the valuations of our investment portfolio. Managing these risks is essential to our business. Accordingly, we have systems and procedures designed to identify and analyze our risks, to establish appropriate policies and thresholds and to continually monitor these risks and thresholds by means of administrative and information technology systems and other policies and processes.

Uncertainty with respect to the economic effects of rising interest rates in response to inflation, certain failures of financial institutions, the war in Russia and Ukraine and the ongoing COVID-19 pandemic and other geopolitical events has introduced significant volatility in the financial markets, and the effect of the volatility could materially impact our market risks, including those listed below. For additional information concerning these risks and their potential impact on our business and our operating results, see “Risk Factors—Risks Related to Our Business and Structure—General economic conditions could adversely affect the performance of our investments,” “Risk Factors—Risks Related to Our Business and Structure—The failure of major financial institutions, namely banks, or sustained financial market illiquidity, could adversely affect our and/or our portfolio companies’ businesses and results of operations” and “Risk Factors—Risks Related to Our Business and Structure—The Russian invasion of Ukraine may have a material adverse impact on us and our portfolio companies” in our annual report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023. We are subject to financial market risks, including interest rate risk and valuation risk. Accordingly, we have systems and procedures designed to identify and analyze our risks, to establish appropriate policies and thresholds and to continually monitor these risks and thresholds by means of administrative and information technology systems and other policies and processes.

Interest Rate Risk

Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest-bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio.

We intend to continue to fund portions of our investments with borrowings, and at such time, our net investment income will be affected by the difference between the rate at which we invest and the rate at which we borrow. Accordingly, we cannot assure you that a significant change in market interest rates will not have a material adverse effect on our net investment income. As of March 31, 2023 and December 31, 2022, 100% of the debt investments based on par value in our portfolio were at floating rates indexed to LIBOR or SOFR or CDOR or PRIME, as was our outstanding debt.

The following table shows the estimated annualized impact on net investment income based on hypothetical base rate changes in interest rates on our loan portfolio and outstanding debt as of March 31, 2023 (considering interest rate floors and ceilings for floating rate instruments and assuming no changes in our investment and borrowing structure).


Basis Point Change	Interest Income			Interest Expense			Net Investment Income
Up 300 Basis Points	$	15,293,290		$	7,650,000		$	7,643,290
Up 200 Basis Points		10,195,527			5,100,000			5,095,527
Up 100 Basis Points		5,097,763			2,550,000			2,547,763
Down 100 Basis Points		(5,297,195	)		(2,550,000	)		(2,747,195	)
Down 200 Basis Points		(10,594,390	)		(5,100,000	)		(5,494,390	)
Down 300 Basis points		(15,891,586	)		(7,650,000	)		(8,241,586	)

The following table shows the estimated annualized impact on net investment income based on hypothetical base rate changes in interest rates on our loan portfolio and outstanding debt as of December 31, 2022 (considering interest rate floors and ceilings for floating rate instruments and assuming no changes in our investment and borrowing structure).


Basis Point Change	Interest Income			Interest Expense			Net Investment Income
Up 300 Basis Points	$	15,309,265		$	6,330,000		$	8,979,265
Up 200 Basis Points		10,206,177			4,220,000			5,986,177
Up 100 Basis Points		5,103,088			2,110,000			2,993,088
Down 100 Basis Points		(5,103,088	)		(2,110,000	)		(2,993,088	)
Down 200 Basis Points		(10,206,177	)		(4,220,000	)		(5,986,177	)
Down 300 Basis points		(15,058,224	)		(6,330,000	)		(8,728,224	)

Although we believe that this analysis is indicative of our existing sensitivity to interest rate changes, it does not adjust for potential changes in credit market, credit quality, the size and composition of the assets in our portfolio and other business developments that could affect our net income. Accordingly, no assurances can be given that actual results would not differ materially from the analysis above.

Valuation Risk

We have invested, and plan to continue to invest, primarily in illiquid debt and equity securities of private companies. Most of our investments will not have a readily available market price, and we value these investments at fair value as determined in good faith by the Adviser under supervision of the Board in accordance with our valuation policy. There is no single standard for determining fair value. 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. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize amounts that are different from the amounts presented and such differences could be material.

Inflation Risk

Certain of our portfolio companies are in industries that have been impacted by inflation. Recent inflationary pressures have increased the costs of labor, energy and raw materials and have adversely affected consumer spending, economic growth and our portfolio companies’ operations. If such portfolio companies are unable to pass any increases in their costs of operations along to their customers, it could adversely affect their operating results and impact their ability to pay interest and principal on our loans, particularly if interest rates rise in response to inflation. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized or unrealized losses and therefore reduce our net assets resulting from operations. Additionally, the Federal Reserve has raised, and has indicated its intent to continue raising, certain benchmark interest rates in an effort to combat inflation.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

The Company’s management, under the supervision and with the participation of various members of management, including its Chief Executive Officer (“CEO”) and its Chief Financial Officer (“CFO”), has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Acts recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures as of the end of the period covered by this report.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the first quarter of 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.

We are not currently subject to any material legal proceedings, nor, to our knowledge, are any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, we do not expect that any such future proceedings will have a material effect upon our financial condition or results of operations.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

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

Refer to our Current Report on Form 8-K filed with the SEC on January 24, 2023 for information about unregistered sales of our equity securities during the quarter. Such issuances were part of a private offering pursuant to Section 4(a)(2) of the 1933 Act and Regulation D thereunder.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC (and are numbered in accordance with Item 601 of Regulation S-K):


3.1	Second Amended and Restated Declaration of Trust(1)

3.2	Bylaws(2)

10.1	Amendment No. 4 to Loan and Servicing Agreement, dated as of October 4, 2021, by and among, Onex Falcon Direct Lending BDC SPV, LLC, as Borrower, Onex Falcon Direct Lending BDC Fund, as equity holder and collateral manager, Société Générale, as agent and lender and U.S. Bank National Association as collateral agent and collateral custodian.*

10.2	Revolving Loan Agreement, dated May 5, 2023, by and between Onex Falcon Direct Lending BDC Fund and Onex Credit Finance II Corporation *

10.3	Fee Waiver Letter to Investment Advisory Agreement, dated May 11, 2023 *

31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

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

* Filed herewith.

(1)

Incorporated by reference to Amendment No. 1 on Form 10 filed on November 15, 2021.

(2)

Incorporated by reference to the Form 10 filed on September 17, 2021.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	ONEX FALCON DIRECT LENDING BDC FUND

May 11, 2023	By:	/s/ Sandeep Alva
	Name:	Sandeep Alva
	Title:	Chief Executive Officer

May 11, 2023	By:	/s/ Edward U. Gilpin
	Name:	Edward U. Gilpin
	Title:	Chief Financial Officer and Treasurer