Monroe Capital(MRCC) - 2025 Q2 - Quarterly Results

Merger Announcement & Overview This section outlines the definitive merger agreement, asset purchase, shareholder exchange, and management commentary on the strategic rationale Definitive Merger Agreement MRCC will merge into HRZN, with HRZN as the surviving public entity managed by HTFM and trading on NASDAQ - Monroe Capital Corporation (MRCC) and Horizon Technology Finance Corporation (HRZN) have entered into a definitive merger agreement[1] - HRZN will be the surviving public entity, managed by Horizon Technology Finance Management LLC (HTFM), and will continue to trade on NASDAQ under the symbol "HRZN"[1] Asset Purchase Agreement MCIP will acquire substantially all of MRCC's assets for cash, leaving MRCC with net cash proceeds before its merger into HRZN - Monroe Capital Income Plus Corporation (MCIP) will acquire substantially all of MRCC's assets at fair value for cash immediately prior to the Merger[2] - Following the Asset Sale, MRCC's only assets will be net cash proceeds after liabilities and transaction costs[2] Shareholder Exchange & Ownership MRCC shareholders will receive HRZN shares based on a NAV-for-NAV exchange, resulting in approximately 37% ownership of HRZN post-merger - MRCC shareholders will receive HRZN shares with a net asset value (NAV) equal to the NAV of their MRCC shares[3] - The merger transaction is structured as a NAV-for-NAV exchange of shares[3] - Former MRCC shareholders are expected to own approximately 37% of HRZN upon closing[3] Management Commentary Management expects the transaction to unlock MRCC shareholder value, position HRZN for strategic growth, and be accretive to both shareholder bases - Theodore L. Koenig (Monroe Capital CEO) believes the transaction unlocks MRCC shareholder value and positions HRZN better for strategic initiatives[4] - The transaction is expected to be accretive to both MRCC and HRZN shareholders, offering compelling synergies and cost-savings[4] - Michael P. Balkin (Horizon Technology Finance CEO) states the transaction provides HRZN with significant incremental leverageable capital and a larger shareholder base, enhancing earnings power and expanding investment opportunities[5] Key Transaction Highlights This section details the anticipated benefits of the merger, including enhanced scale, financial accretion, and tax implications Enhanced Scale & Operational Efficiency The merger is expected to significantly increase HRZN's scale, reduce per-share operating expenses, and improve trading liquidity - The Merger will increase the size and scale of HRZN[6] Projected Financial Impact of Merger | Metric | Value (Millions USD) | | :-------------------------------- | :------------------- | | Additional Equity Capital | ~$165 | | Current Combined NAV (June 30, 2025) | ~$446 | - Expected reduction in per-share operating expenses for HRZN shareholders on a pro forma basis[6] - Shareholders of the combined company are expected to benefit from improved trading liquidity[6] Financial Accretion & Capital Access The merger is projected to be NII neutral initially, then accretive over time, providing HRZN with incremental capital and enhanced debt access - The Merger is expected to be neutral to net investment income (NII) for the combined company during the first year post-closing, and accretive over time[6] - Accretion driven by operational savings, portfolio mix optimization, and cost savings from capital structure improvements[6] - The Merger will provide HRZN with incremental capital to execute its current investment strategy and broaden its platform to public small-cap growth companies[6] - The Merger should enable HRZN to better access a wider array of debt funding solutions, including potential borrowing cost reductions[6] Tax & Advisory Fee Implications The merger is structured as a tax-free reorganization for MRCC shareholders, with HTFM waiving $4 million in fees to support the transaction - The Merger is structured as a tax-free reorganization under Section 368(a) for MRCC shareholders[6] - The Asset Sale will be treated as a taxable transaction, but MRCC is not expected to incur any tax liability from realized gains[6] - HTFM has agreed to waive an aggregate of $4 million of base management fees and incentive fees over the first four full fiscal quarters following the closing[6] Transaction Mechanics & Approvals This section covers board approvals, the anticipated closing timeline, exchange ratio details, and other key transaction provisions Board Approvals & Recommendations The Boards of MRCC, HRZN, and MCIP have unanimously approved the transactions and recommend shareholder votes in favor - The Boards of Directors of MRCC, HRZN, and MCIP unanimously approved the Merger and/or Asset Sale[7] - MRCC's Board will recommend shareholders vote in favor of the Merger and Asset Sale[7] - HRZN's Board will recommend shareholders vote in favor of the issuance of HRZN common stock in connection with the Merger[7] Closing Timeline & Conditions The transactions are anticipated to close in Q4 2025, subject to regulatory and shareholder approvals, and mutual consummation - The transactions are expected to close in the fourth quarter of 2025[8] - Closing is subject to customary regulatory approvals, MRCC and HRZN shareholder approvals, and other closing conditions[8] - The Asset Sale and the Merger are conditioned upon the substantially concurrent consummation of the other[8] Exchange Ratio & Distributions MRCC shareholders will receive HRZN common stock based on a NAV-for-NAV exchange ratio determined prior to closing, with regular distributions expected - MRCC shareholders will receive newly issued HRZN common stock based on an Exchange Ratio[9] - The Exchange Ratio is calculated as MRCC NAV per share divided by HRZN NAV per share, determined shortly before closing[9] - Prior to closing, HRZN and MRCC expect to declare and make regular distributions[10] - MRCC will declare a distribution to its shareholders equal to any undistributed net investment income remaining as of the closing[10] Other Transaction Details The agreements include termination fee provisions, HRZN's stock repurchase program will remain, and HRZN's post-merger board composition is outlined - The Merger Agreement and Asset Purchase Agreement require payment of a termination fee if agreements are terminated under certain circumstances[11] - HRZN's existing stock repurchase program, authorizing repurchases of up to 2% of outstanding shares when trading below 90% of NAV, will remain in place[12] - Upon closing, HRZN's board will consist of two independent HRZN members, one independent MRCC member (subject to HRZN shareholder approval), and HRZN's CEO[13] Advisors & Corporate Information This section lists the financial and legal advisors involved, conference call details, and background information on HRZN and MRCC Transaction Advisors This section lists the financial and legal advisors for MRCC, MCIP, and HRZN Special Committees, and legal counsel for the BDC investment advisers - Houlihan Lokey is financial advisor and Nelson Mullins Riley & Scarborough LLP is legal counsel to MRCC's Special Committee[14] - Keefe, Bruyette & Woods is financial advisor and Eversheds Sutherland is legal counsel to MCIP's Special Committee[14] - Oppenheimer & Co. is financial advisor and Blank Rome LLP is legal counsel to HRZN's Special Committee[15] - Dechert LLP is legal counsel to each BDC's investment adviser[16] Conference Call Details A joint conference call is scheduled for August 7, 2025, at 5:00 PM ET to discuss the transaction, with an accompanying investor presentation - Joint conference call to discuss the transaction on Thursday, August 7, 2025, at 5:00 PM ET[17] - Dial-in numbers: (877) 407-9716 (domestic) or (201) 493-6779 (international), Conference ID: 13754326[17] - An investor presentation will be available at https://ir.horizontechfinance.com[17](index=17&type=chunk) About Horizon Technology Finance Corporation (HRZN) HRZN is a specialty finance company providing secured loans to venture capital and private equity-backed companies across various sectors - Horizon Technology Finance Corporation (NASDAQ: HRZN) is a leading specialty finance company[18] - Provides secured loans to venture capital and private equity-backed companies and publicly traded companies in technology, life science, healthcare, and sustainability industries[18] - Investment objective: maximize investment portfolio's return by generating current income from debt and capital appreciation from warrants[18] About Monroe Capital Corporation (MRCC) MRCC is a publicly-traded specialty finance company primarily investing in secured debt and equity in middle-market companies - Monroe Capital Corporation is a publicly-traded specialty finance company[19] - Principally invests in senior, unitranche, and junior secured debt, and to a lesser extent, unsecured debt and equity investments in middle-market companies[19] - Investment objective: maximize total return to stockholders in the form of current income and capital appreciation[19] Legal & Regulatory Disclosures This section provides important legal disclaimers regarding forward-looking statements, additional information, and the nature of the press release Forward-Looking Statements This section warns that the press release contains forward-looking statements subject to risks and uncertainties, with no obligation to update - The press release contains forward-looking statements related to future events, performance, or financial condition of MRCC, HRZN, MCIP, and the proposed transactions[20] - Forward-looking statements are based on current plans, estimates, and expectations, subject to risks, uncertainties, and assumptions[20] - Actual events and results may vary materially from those indicated or anticipated due to various factors, including timing of closing, synergies, regulatory approvals, and economic changes[20] - MRCC, HRZN, and MCIP assume no obligation to update forward-looking statements; readers are advised to consult SEC filings for additional disclosures[20] Additional Information & Solicitation Participants HRZN and MRCC will file a joint proxy statement and registration statement with the SEC, urging shareholders to review these documents - HRZN and MRCC plan to file a joint proxy statement (Schedule 14A), and HRZN plans to file a registration statement (Form N-14) with the SEC[21] - These documents will contain important information about HRZN, MRCC, the Merger, the Asset Sale, and related matters[21] - Shareholders of HRZN and MRCC are urged to read these documents carefully when they become available[21] - Information about participants in the solicitation of proxies will be contained in the Joint Proxy Statement[23] No Offer or Solicitation This press release is explicitly not an offer to sell or a solicitation of an offer to purchase any securities - This press release is not an offer to sell or a solicitation of an offer to purchase any securities in MRCC, HRZN, MCIP, or any fund managed by Monroe Capital or its affiliates[24] Contacts This section provides investor relations contacts for HRZN and MRCC, and media relations contact for Monroe Capital Corporation - Contact information for Investor Relations for Horizon Technology Finance Corporation: Dan Trolio (EVP & CFO) and ICR (Garrett Edson)[25] - Contact information for Investor Relations for Monroe Capital Corporation: Mick Solimene (CFO & CIO)[25] - Contact information for Media Relations for Monroe Capital Corporation: BackBay Communications (Daniel Abramson)[25]