Financial Performance and Expenses - Administrative expenses for the fiscal year ended December 31, 2024, were 5.6 million in 2023 and an increase from 970.1 million of outstanding borrowings under its senior secured credit facility and a total of 200 for every $100 of net assets[168][178]. - If the asset coverage ratio declines below 150%, the company may be required to sell investments at disadvantageous prices[168]. - The company may seek to securitize loans to generate cash for new investments, but failure to do so could limit growth and adversely affect earnings[172]. Market and Economic Conditions - The current capital market environment is characterized by volatility, which may adversely affect the company's ability to raise or access debt capital[107]. - Significant disruptions in capital markets could negatively affect the valuations of the company's investments, potentially leading to liquidity challenges[109]. - Inflation and supply chain risks have negatively impacted the business and financial condition of portfolio companies, particularly in emerging economies[122]. - The ongoing armed conflicts, including the Russian invasion of Ukraine, may disrupt global markets and adversely affect investment performance[125]. - Economic downturns could impair portfolio companies' ability to repay loans, leading to increased non-performing assets and decreased portfolio value[238]. Interest Rate Risks - The company has experienced higher rates for debt capital raised over the last year due to the prevailing interest rate environment, impacting future financing costs[108]. - Changes in interest rates pose financial market risks, potentially impacting investment income and the credit quality of borrowers[118]. - An increase in interest rates could decrease the value of fixed interest investments and increase interest expenses, negatively impacting net income[119]. - Rising interest rates may increase the cost of debt for underlying portfolio companies, adversely impacting their financial performance[121]. - Interest rate fluctuations may negatively impact the value of the Company's portfolio investments, potentially affecting its financial condition and results of operations[140]. Regulatory and Compliance Issues - The company is subject to the Sarbanes-Oxley Act, which requires ongoing compliance monitoring and review of policies and procedures[103]. - Changes in U.S. federal income tax laws could materially affect the Company and its stockholders[147]. - The company is subject to changing regulations that could significantly affect operations and profitability[216]. - AGM has established information barriers to manage conflicts of interest, but these barriers may restrict advantageous investment opportunities[201]. - Cybersecurity risks pose a threat to the company's operations and those of its portfolio companies, potentially leading to operational disruptions[222]. Investment Strategy and Risks - The company primarily invests in privately-held companies, which presents challenges such as limited available information and reliance on key personnel[250]. - The company intends to invest primarily in senior debt securities, but portfolio companies may incur debt that ranks equally or senior to its investments, increasing risk[252]. - The incentive fee structure may encourage the company to make riskier investments, potentially leading to higher investment losses during economic downturns[254]. - The company may invest in foreign securities, exposing it to additional risks such as political instability and less available information compared to U.S. investments[258]. - The company faces competition from various entities, including public and private funds, which may have greater financial resources and lower costs of funds[157]. Cybersecurity and Technology Risks - Cybersecurity risks are increasing, with potential adverse effects on operations and financial results due to unauthorized access or data breaches[111]. - The Company is subject to risks associated with artificial intelligence, particularly regarding the use of machine learning technology by third-party service providers[149]. - The company's operations are heavily reliant on information systems, and any failure could adversely affect business performance and stock price[227]. - Cyber security has become a regulatory priority, and non-compliance could result in financial losses and reputational damage[224]. - The company faces significant risks from cyber security failures, which could lead to financial losses and operational disruptions[224]. Portfolio Management and Investment Opportunities - The allocation of investment opportunities among Apollo-advised funds may not always favor the company, potentially limiting desired portfolio structuring[205]. - The company may face challenges in making follow-on investments, which could impair the value of its portfolio[246]. - The company is restricted from entering into certain transactions with affiliates without prior approval, which may limit investment opportunities[197]. - The performance of the CLO Issuers will depend on the analytical and managerial expertise of the Company's investment professionals, with limited prior experience managing CLOs[289]. - The company may incur losses if required to dispose of a portion of the CLO Issuers' portfolio at inopportune times to satisfy obligations of the holders of the CLO Notes[291].
MidCap Financial Investment (MFIC) - 2024 Q4 - Annual Report