AB 2020 Form 10-K

time when such sales may be disadvantageous. Also, any amounts that the Fund uses to service its indebtedness would not be available for distributions to its common stockholders. Furthermore, as a result of issuing senior securities, the Fund would also be exposed to typical risks associated with leverage, including an increased risk of loss. If the Fund issues preferred stock, the preferred stock would rank “senior” to common stock in the Fund’s capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of the Fund’s common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of the Fund’s common stock or otherwise be in your best interest. The Fund will not generally be able to issue and sell its common stock at a price below net asset value per share. The Fund may, however, sell its common stock, or warrants, options or rights to acquire its common stock, at a price below the then-current net asset value per share of its common stock if the Board determines that such sale is in the best interests of the Fund’s stockholders, and the Fund’s stockholders approve such sale. In any such case, the price at which the Fund’s securities are to be issued and sold may not be less than a price that, in the determination of the Board, closely approximates the market value of such securities (less any distributing commission or discount). If the Fund raises additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, its common stock, then the percentage ownership of its stockholders at that time will decrease, and you may experience dilution. The Fund may borrow money, which would magnify the potential for gain or loss on amounts invested and may increase the risk of investing in the Fund. The use of leverage magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in the Fund’s securities. The Fund may borrow from and issue senior debt securities to banks, insurance companies and other lenders in the future. Holders of these senior securities will have fixed dollar claims on the Fund’s assets that are superior to the claims of the Fund’s common stockholders, and the Fund would expect such lenders to seek recovery against its assets in the event of a default. If the value of the Fund’s assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had the Fund not leveraged. Similarly, any decrease in the Fund’s income would cause net income to decline more sharply than it would have had the Fund not borrowed. Such a decline could also negatively affect the Fund’s ability to make dividend payments on its common stock. Leverage is generally considered a speculative investment technique. The Fund’s ability to service any debt that it incurs will depend largely on its financial performance and will be subject to prevailing economic conditions and competitive pressures. In addition, the Fund’s common stockholders will bear the burden of any increase in its expenses as a result of leverage. Under the provisions of the 1940 Act, the Fund will generally be permitted, as a BDC, to issue senior securities in amounts such that its asset coverage ratio (as defined under the 1940 Act), equals at least 150% of its gross assets less all liabilities and indebtedness not represented by senior securities, immediately after each issuance of senior securities. If this ratio declines below 150%, the Fund may not be able to incur additional debt and could be required by law to sell a portion of its investments to repay some debt when it is disadvantageous to do so, which could have a material adverse effect on its operations, and it may not be able to make distributions. The amount of leverage that the Fund employs will depend on the Adviser’s and the Board’s assessment of market and other factors at the time of any proposed borrowing. The Fund cannot assure you that it will be able to obtain credit at all or on terms acceptable to the Fund. In addition, any debt facility into which the Fund may enter would likely impose financial and operating covenants that restrict its business activities, including limitations that could hinder its ability to finance additional loans and investments or to make the distributions required to maintain its qualification as a RIC. To the extent that the Fund borrows money, the potential for gain or loss on amounts invested in the Fund will be magnified and may increase the risk of investing in the Fund. Borrowed money may also adversely affect the return on the Fund’s assets, reduce cash available to service the Fund’s debt or for distribution to the Fund’s stockholders, and result in losses. The use of borrowings, also known as leverage, increases the volatility of investments by magnifying the potential for gain or loss on invested equity capital. Since the Fund uses leverage to partially finance its investments, through borrowing from banks and other lenders, you will experience increased risks of investing in the Fund’s securities. If the value of the Fund’s assets decreases, leveraging will cause its net asset value to decline more sharply than it otherwise would if it had not borrowed and employed leverage. Similarly, any decrease in the Fund’s income would cause its net income to decline more sharply than it would have if it had not borrowed and employed leverage. Such a decline could negatively affect the Fund’s ability to service its debt or make distributions to its stockholders. In addition, the Fund’s stockholders will bear the burden of any increase in its expenses as a result of its use of leverage, including interest expenses and any increase in the management or incentive fees payable to the Adviser. The amount of leverage that the Fund employs depends on the Adviser’s and the Board’s assessment of market and other factors at the time of any proposed borrowing. There can be no assurance that additional leveraged financing will be available to the Fund on 38