Investment Portfolio Composition - As of September 30, 2024, the portfolio included approximately 79.2% senior secured loans, 0.8% unitranche secured loans, 6.4% junior secured loans, and 13.6% equity securities, compared to December 31, 2023, when the portfolio included approximately 79.6% senior secured loans, 2.8% unitranche secured loans, 5.5% junior secured loans, and 12.1% equity securities [218]. - The portfolio composition remained consistent, with senior secured loans representing 79.2% of total investments as of September 30, 2024, compared to 79.6% as of December 31, 2023 [232]. - The healthcare and pharmaceuticals sector represented 16.2% of total investments at fair value as of September 30, 2024, up from 14.2% as of December 31, 2023 [234]. - The company continues to focus on industries and geographies similar to those in which it may invest directly, indicating a strategic alignment in investment focus [289]. Investment Activity - During the three months ended September 30, 2024, the company invested 14.7 million in 30 existing portfolio companies, resulting in a net decrease in investments of 27.6 million in six new portfolio companies and 14.6 million for the period [226]. - The company has a commitment to MacQueen Equipment, LLC with a total principal of 2,075,000, with an interest rate of 10.86% [299]. Investment Performance - The total weighted average annualized effective yield on portfolio investments was 11.0% as of September 30, 2024, down from 12.1% as of December 31, 2023 [231]. - The investment performance risk rating distribution shows 81.2% of investments rated Grade 2, while 14.6% are rated Grade 3, indicating a slight increase in risk compared to December 31, 2023 [241]. - Nine borrowers had loans or preferred equity investments on non-accrual status totaling 7.5 million or 1.5% as of December 31, 2023 [242]. - The company continues to monitor investment performance closely, with a focus on maintaining risk ratings and compliance with debt covenants [235][239]. Financial Performance - Total investment income for the three months ended September 30, 2024, was 15,643,000 for the same period in 2023 [244]. - Net investment income before income taxes increased to 5,515,000 in the prior year [244]. - The company reported a net increase in net assets resulting from operations of (236,000) in the prior year [244]. - Net investment income for the nine months ended September 30, 2024, was 17,971,000 in 2023 [246]. - Total operating expenses for the nine months ended September 30, 2024, were 30,328,000 in 2023 [250]. Debt and Financing - As of September 30, 2024, the company had 169.0 million in total debt outstanding [267]. - The asset coverage ratio as of September 30, 2024, was 167%, consistent with the ratio as of December 31, 2023 [268]. - The company has a 400.0 million under certain conditions [274]. - As of September 30, 2024, the outstanding borrowings under the revolving credit facility had a weighted average interest rate of 7.6% [278]. Market and Economic Conditions - The target market for the company includes small and middle-market companies in the U.S. with annual revenues between 2.5 billion, which are seen as significant growth segments [314]. - The company anticipates that increased M&A activity, supported by recent Federal Reserve rate cuts, will drive deal flow in the middle market [319]. - Inflation is showing signs of acceleration in the U.S. and globally, which may affect the profit margins of the company's portfolio companies [349]. Valuation and Risk Management - The fair value of the investment portfolio was determined in good faith by the Valuation Designee in accordance with GAAP and valuation procedures [332]. - The income approach is generally used to determine fair value for loans, considering factors such as current interest rates, borrower financial condition, and economic conditions [328]. - The company is subject to various financial market risks, including valuation risk, interest rate risk, and currency risk, which may affect the prices of securities held [342]. - The company may hedge against interest rate fluctuations using standard instruments such as futures, options, and forward contracts [347]. Legal and Compliance - The company is subject to legal proceedings in the ordinary course of business, but does not expect these to materially affect its financial condition or results of operations [353]. - The company's disclosure controls and procedures were evaluated as effective, providing reasonable assurance for timely reporting of required information [350]. - No changes occurred in the internal control over financial reporting during the three months ended September 30, 2024, that materially affected the company's reporting [351].
Monroe Capital(MRCC) - 2024 Q3 - Quarterly Report