MidCap Financial Investment (MFIC) - 2026 Q2 - Quarterly Report

Investment Activity - As of September 30, 2025, the company made investments totaling $400.4 million in the three months ended September 30, 2025, compared to $911.9 million in the same period of 2024[515]. - The company reported net investment activity of $(148.0) million for the three months ended September 30, 2025, down from $584.6 million in the same period of 2024[515]. - Total invested capital since the initial public offering in April 2004 reached $26.6 billion across 837 portfolio companies by September 30, 2025[519]. - As of September 30, 2025, $3.13 billion or 98.2% of the Company's investments were classified as Level 3, indicating a high proportion of private investments relative to total investments[527]. Portfolio Composition - The portfolio composition as of September 30, 2025, included 95% in first lien secured debt, up from 92% as of December 31, 2024[517]. - The weighted average yield on first lien secured debt decreased to 10.2% as of September 30, 2025, from 10.8% at the end of 2024[517]. - The average debt yielding portfolio increased from $2.76 billion to $2.94 billion, while the average yield for the total debt portfolio decreased from 11.5% to 10.3%[538]. - As of September 30, 2025, the majority of the company's debt portfolio investments bore interest at variable rates, which are generally SOFR-based and typically reset every one to six months[568]. Income and Expenses - Total investment income for the three months ended September 30, 2025 was $82.6 million, consistent with $82.1 million for the same period in 2024[536]. - For the nine months ended September 30, 2025, total investment income increased by $22.9 million, primarily driven by an increase in interest income due to a higher income-bearing investment portfolio[540]. - Net expenses for the three months ended September 30, 2025 increased by $3.3 million, primarily due to an increase in management and performance-based incentive fees of $2.9 million[541]. - For the nine months ended September 30, 2025, net expenses increased by $13.1 million, primarily driven by an increase in interest and other debt expenses of $10 million[542]. Realized and Unrealized Gains/Losses - For the three months ended September 30, 2025, the company recognized net realized losses of $19.2 million, primarily due to the write-off of Ambrosia Buyer Corp. and the restructure of New Era Technology, Inc.[543]. - For the nine months ended September 30, 2025, the company reported net realized losses of $33.3 million, driven by the restructure of Renovo, Mitel Networks, and New Era Technology, along with a partial write-off of Ambrosia Buyer Corp.[546]. - The company recognized gross unrealized gains of $44.7 million and gross unrealized losses of $33.4 million for the three months ended September 30, 2025, resulting in a net change in unrealized gains of $11.3 million[548]. - For the nine months ended September 30, 2025, the company reported gross unrealized gains of $66.8 million and gross unrealized losses of $63.6 million, leading to a net change in unrealized losses of $3.2 million[549]. Distributions and Stockholder Information - Distributions paid to stockholders during the three months ended September 30, 2025 totaled $35.5 million ($0.38 per share), compared to $54.4 million ($0.58 per share) in the same period of 2024[558]. - The company maintains an "opt out" dividend reinvestment plan for common stockholders, allowing them to receive cash dividends unless they opt out[560]. - The company may face limitations on distributions due to asset coverage tests applicable to BDCs and potential defaults under its revolving credit facility[561]. Management and Operational Changes - The company appointed Joseph Durkin as Chief Accounting Officer effective September 4, 2025[521]. - The company expects general and administrative operating expenses to increase moderately in dollar terms, particularly during periods of asset growth[514]. Financial Position and Risk Management - The company has $1.66 billion in aggregate lender commitments under the Senior Secured Facility, with $575.1 million of unused capacity as of September 30, 2025[555]. - The company anticipates that its current cash and cash equivalents, along with available borrowing capacity, will be adequate to meet cash needs for daily operations for at least the next twelve months[553]. - A 150 basis point increase in interest rates is estimated to increase net investment income by $14.7 million, while a 150 basis point decrease is estimated to decrease net investment income by $14.0 million[570]. - The company regularly measures exposure to interest rate risk and assesses whether hedging transactions are necessary to mitigate this exposure[569]. - The company may hedge against interest rate fluctuations using standard hedging instruments, but this may limit participation in benefits from lower interest rates[571]. Tax and Compliance - To maintain RIC status, the company must distribute at least 90% of ordinary income and realized net short-term capital gains, but currently expects to generate cumulative net capital gains in the foreseeable future due to substantial net capital loss carryforwards[559]. - Income from origination, structuring, closing, commitment, and other upfront fees associated with investments in portfolio companies is treated as taxable income and distributed to stockholders[562]. - The fair value of investments may fluctuate significantly due to the lack of readily available market values, impacting the realized gains or losses[566].