Nuveen Churchill Direct Lending (NCDL) risk factors, FY2024 10-K

Other

1. 01We are subject to risks related to our business and structure
2. 02We are subject to risks related to our operations
3. 03We are subject to risks related to an investment in our common stock
4. 04We are subject to risks relating to an investment in our unsecured notes

Risks Related to our Business and Structure

1. 05We are currently operating in a period of significant market disruption and economic uncertainty, which may have a negative impact on our business, financial condition and operations. An extended disruption in the capital markets and the credit markets could negatively affect our business
2. 06Our financial condition and results of operations depend on our ability to manage our business effectively
3. 07We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses
4. 08Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies, which may, in turn, impact the valuation of such portfolio companies
5. 09We are exposed to risks associated with changes in interest rates
6. 10We are exposed to risks associated with hedging transactions
7. 11We may experience fluctuations in our quarterly operating results
8. 12The effect of global climate change may impact the operations and valuation of our portfolio companies
9. 13Environmental, social and governance factors may adversely affect our business or cause us to alter our business strategy
10. 14The data we use to make ESG-related determinations may not guarantee that our investments satisfy applicable ESG criteria
11. 15Downgrades of the U.S. credit rating, impending automatic spending cuts or government shutdowns could negatively impact our liquidity, financial condition and earnings
12. 16Global economic, political and market conditions may adversely affect our business or cause us to alter our business strategy
13. 17New or modified laws or regulations governing our operations could adversely affect our business
14. 18We cannot predict how new tax legislation will affect us, our Advisers, our investments, or our shareholders, and any such legislation could adversely affect our business
15. 19Changes to U.S. tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, negatively impact us
16. 20The Board may change our investment objective, operating policies and strategies without prior notice or shareholder approval, the effects of which may be adverse
17. 21Terrorist attacks, acts of war, global health emergencies or natural disasters may affect any market for our shares, impact the businesses in which we invest and harm our business, operating results and financial condition
18. 22In addition, the recent outbreak of hostilities in the Middle East and escalating tensions in the region may create volatility and disruption of global markets
19. 23The failure of cybersecurity protection systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning, could impair our ability to conduct business effectively
20. 24Our business is dependent on bank relationships and recent strain on the banking system may adversely impact us
21. 25If the Advisers or the Administrator are unable to maintain the availability of their electronic data systems and safeguard the security of their data, their and our ability to conduct business may be compromised, which could impair liquidity, disrupt business, damage their and our reputation and cause losses
22. 26We may incur lender liability as a result of our lending activities
23. 27We may incur liability as a result of providing managerial assistance to our portfolio companies
24. 28Churchill may not be able to achieve the same or similar returns as those achieved by our senior management and investment personnel while they were employed at prior positions
25. 29Soft dollars and research received and conducted on our behalf will be shared by others
26. 30There are significant financial and other resources necessary to comply with the requirements of being an SEC reporting entity, and non-compliance may adversely affect us

Risks Related to Our Operations and Investments

1. 31Economic recessions or downturns could impair our portfolio companies and harm our operating results
2. 32Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing our investments and harm our operating results
3. 33Market conditions have materially and adversely affected debt and equity capital markets in the United States and around the world
4. 34Our investments in leveraged portfolio companies may be risky, and we could lose all or part of our investment
5. 35We typically invest in middle market, privately owned companies, which may present a greater risk of loss than loans to larger companies
6. 36We are subject to risks associated with our investments in senior loans
7. 37We are subject to risks associated with our investments and trading of liquid assets, including broadly syndicated loans
8. 38We are subject to risks associated with our investments in junior or subordinated debt securities
9. 39We are subject to risks associated with our investments in unitranche secured loans and securities
10. 40We are subject to risks associated with “covenant-lite” loans
11. 41We are subject to risks associated with syndicated loans
12. 42We may be subject to risks associated with our investments in equity-related securities
13. 43The loans we make in portfolio companies may become non-performing
14. 44The lack of liquidity in our investments may adversely affect our business
15. 45Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our NAV through increased net unrealized depreciation
16. 46Our portfolio companies may prepay loans, which may reduce stated yields if capital returned cannot be invested in transactions with equal or greater expected yields
17. 47We are subject to risks associated with our investments in special situation companies
18. 48We may be subject to risks associated with our investments in the business services industry
19. 49Our investments in the healthcare sector face considerable uncertainties
20. 50Any investments in life sciences-related companies may be subject to extensive government regulation, litigation risk and certain other risks particular to that industry
21. 51Our investment strategy focuses on technology-related companies, which are subject to many risks, including volatility, intense competition, shortened product life cycles, changes in regulatory and governmental programs and periodic downturns
22. 52We are exposed to risks associated with any OID income and PIK interest required to be included in taxable and accounting income prior to receipt of cash representing such income
23. 53We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited by the 1940 Act with respect to the proportion of our assets that may be invested in securities of a single issuer
24. 54We may hold the debt securities of leveraged companies that may, due to the significant volatility of such companies, enter into bankruptcy proceedings
25. 55Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio
26. 56We may not be able to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies, which could decrease the value of our investments
27. 57Defaults by our portfolio companies will harm our operating results
28. 58Our portfolio companies may incur debt that ranks equally with, or senior to, the loans and other investments we make in such portfolio companies
29. 59The disposition of our investments in private companies may result in contingent liabilities
30. 60We may be unsuccessful in syndicating our co-investments, which may cause us to have more exposure to an investment than was originally intended

Risks Related to our Advisers and Their Affiliates

1. 61The recommendations that Churchill gives to us may differ from those rendered to its other clients
2. 62Each investment team or each Investment Committee may, from time to time, possess material nonpublic information, limiting our investment discretion
3. 63Our management and incentive fee structure may create incentives for Churchill and certain of its investment professionals that are not fully aligned with the interests of our shareholders
4. 64In addition, certain investment professionals share directly in the management fee. Such professionals would face similar conflicts when considering investments for and making decisions on behalf of us
5. 65Our incentive fee may induce Churchill to make certain investments, including speculative investments
6. 66TIAA has made a significant investment in us, which may present certain conflicts of interest
7. 67Our ability to enter into transactions with our affiliates is restricted, which may limit the scope of investments available to us
8. 68Each Adviser and Nuveen Asset Management can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations
9. 69Our access to confidential information may restrict our ability to take action with respect to some of our investments, which, in turn, may negatively affect our results of operations

Risks Related to Business Development Companies

1. 70Our ability to enter into transactions involving derivatives and unfunded commitment transactions may be limited
2. 71If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would have a material adverse effect on our business, financial condition and results of operations
3. 72Many of our portfolio investments will be recorded at fair value as determined in good faith by the Adviser, as the valuation designee, subject to the oversight of the Board, and, as a result, there may be uncertainty as to the value of our portfolio investments
4. 73We will be subject to U.S. federal income tax imposed at corporate rates on our earnings if we are unable to qualify or maintain qualification as a RIC under Subchapter M of the Code
5. 74We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income
6. 75interest that has been accrued but not yet received, and if that portfolio company defaults on such a loan, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible
7. 76Regulations governing our operation as a BDC affect our ability to and the way in which we raise additional capital
8. 77If we are not treated as a “publicly offered regulated investment company,” certain shareholders will be treated as having received certain income and their allocable share of expenses, which may not be deductible

Risks Related to Our Existing and Future Indebtedness

1. 78When we use leverage, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us. Leverage also may adversely affect the return on our assets, reduce cash available for distribution to our shareholders, and result in losses
2. 79A period of capital markets disruption and economic uncertainty may make it difficult to raise additional capital and any failure to do so could have a material adverse effect on our business, financial condition or results of operations
3. 80Our asset coverage requirement was reduced from 200% to 150%, which could increase the risk of investing in the Company
4. 81Provisions in our credit facilities may limit our investment discretion
5. 82Any defaults under a credit facility could adversely affect our business
6. 83We are subject to risks associated with our debt securitizations
7. 84The Notes and membership interests that we hold that were issued in our debt securitizations are subordinated obligations of the respective CLO and we could be prevented from receiving cash from such CLO
8. 85We may be subject to conflicts of interest caused by our role as a collateral manager in CLO transactions

Risks Related to an Investment in our Common Stock

1. 86We cannot assure you that the market price of our common stock will not decline below our NAV. The market value of our common stock may be volatile and fluctuate significantly
2. 87Our shareholders may experience dilution
3. 88Purchases of our shares of common stock by us under the Company 10b5-1 Plan may result in the price of our shares of common stock being higher than the price that otherwise might exist in the open market
4. 89Purchases of our shares of common stock by us under the Company 10b5-1 Plan may result in dilution to our NAV per share
5. 90Investors in our common stock may not receive distributions consistent with historical levels or at all or that our distributions may not grow over time and a portion of our distributions may be a return of capital
6. 91We are not required to make any distributions to shareholders other than in connection with our election to be treated as a RIC under Subchapter M of the Code, the requirements of which are described above
7. 92We may choose to pay a portion of our dividends in our own shares, in which case you may be required to pay U.S. federal income taxes in excess of the cash you receive
8. 93Investing in our shares may involve an above-average degree of risk
9. 94Provisions of the MGCL and our Charter and Bylaws could deter takeover attempts and have an adverse effect on the price of our shares
10. 95Our Bylaws include an exclusive forum selection provision, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other agents

Risks Related to an Investment in our Unsecured Notes

1. 96The March 2030 Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future
2. 97The March 2030 Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries
3. 98The optional redemption provision may materially adversely affect your return on the March 2030 Notes
4. 99If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the March 2030 Notes
5. 100We may not be able to repurchase the March 2030 Notes upon a Change of Control Repurchase Event
6. 101While a trading market developed after issuing the March 2030 Notes, we cannot assure you that an active trading market for the March 2030 Notes will be maintained