Key Highlights

• The revised terms allow for reimbursement of covered expenses over a defined period following quarter-end.

• A funding milestone triggers the fund’s obligation to begin reimbursing expenses starting September 16, 2027.

• The agreement concludes on September 30, 2027, with any remaining unreimbursed expenses still subject to payment.

The revised agreement, which took effect on June 29, 2026, outlines how the adviser may cover specific costs on behalf of the fund, with reimbursement linked to quarterly financial performance.

Expense Coverage Scope

Under the new terms, the adviser may cover certain expenses that fall outside standard categories such as management fees, incentive fees, and other excluded costs. The adviser has the option to pay these expenses directly or apply them as an offset against amounts owed by the fund, with settlement required within a set timeframe after formal commitment.

Reimbursement Mechanics

Once the adviser commits to covering an expense, the payment is recorded as an asset of the fund at the end of the relevant quarter. Reimbursement occurs when the fund’s available operating funds, calculated from net investment income and portfolio distributions, exceed the distributions declared to shareholders. The amount reimbursed is limited to the lesser of the excess funds or the unreimbursed expenses accumulated over a prior multi-year period.

Milestone Trigger

The fund’s obligation to reimburse expenses shifts to a formal liability once a specific funding threshold is met. This condition, along with a September 16, 2027, deadline, establishes the timeline for when the fund must begin reimbursing the adviser.

Quarterly Payment Terms

Reimbursements must be completed within a defined period after the end of each quarter, using cash or immediately available funds. The adviser may choose to postpone payments, though any deferred amounts remain eligible for future reimbursement under the same conditions.

Agreement Expiry

The expense support agreement is set to conclude on September 30, 2027. However, any expenses that remain unreimbursed at that time will still be subject to payment under the terms of the agreement. This structure is designed to balance the interests of the adviser and the fund while providing clarity in expense management.

Sector Implications

The updated terms align with practices observed across business development companies (BDCs), where expense support agreements are frequently used to help stabilize net asset values and support shareholder returns. As operational costs rise in the current economic environment, funds in the private credit sector are increasingly adopting such frameworks to better manage financial fluctuations. These agreements can provide a measure of predictability in expense planning while ensuring alignment between advisers and fund performance.

 

This article is for informational purposes only and does not constitute financial advice. Please consult a licensed financial adviser before making investment decisions.