Monroe Capital(US:MRCC)2024-08-08 20:17Financial Data and Key Metrics Changes - For Q2 2024, adjusted net investment income was $6.7 million or $0.31 per share, an increase from $5.5 million or $0.25 per share in Q1 2024, covering the $0.25 per share dividend by nearly 1.25 times [4][13] - NAV as of June 30, 2024, was $199.3 million or $9.20 per share, down from $201.5 million or $9.30 per share as of March 31, 2024, primarily due to net unrealized losses [4][15] - Debt to equity leverage decreased from 1.6 times to 1.54 times during the quarter [4] Business Line Data and Key Metrics Changes - The investment portfolio totaled $485.8 million, a decrease of $15.1 million from the previous quarter, consisting of debt and equity investments in 94 portfolio companies [12] - Investment income for Q2 2024 was $15.6 million, slightly up from $15.2 million in Q1 2024, driven by higher average assets [16] Market Data and Key Metrics Changes - Middle-market loan volumes increased by 27% year-over-year, with direct lending M&A volumes up 71% and sponsored direct lending volumes up over 90% compared to the prior year [7] - Direct lenders accounted for 4.6 times the volume of syndicated and bank deals in the quarter, indicating a strong demand for direct lending solutions [8] Company Strategy and Development Direction - The company focuses on managing and supporting its investment portfolio companies with a selective approach to redeploying capital into attractive investment opportunities [5] - Monroe Capital aims to leverage its affiliation with a top-tier private credit manager to enhance its investment strategies and maintain a stable dividend yield [10][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's ability to navigate a challenging macroeconomic environment with elevated interest rates [19] - The company remains focused on maximizing recoveries from underperforming investments while maintaining a disciplined approach to underwriting and deal execution [6][19] Other Important Information - The effective yield on the portfolio's debt and preferred equity investments remained stable at 11.9% [14] - The company reported a net loss of $3.3 million for the quarter, primarily due to unrealized mark-to-market losses on certain portfolio companies [17] Q&A Session Summary Question: Is the SLF vehicle in a runoff mode? - Management clarified that the fair market value of the SLF was flat during the quarter, and they are focused on managing leverage while maintaining dividends [21][22] Question: Why does the second-lien debt position have a higher fair value than the preferred equity? - The difference is attributed to the recovery waterfall, where the debt position is generating fees and interest, while the preferred equity is at the bottom of the recovery hierarchy [25][26] Question: Will third quarter EPS cover the dividend? - Management confirmed that they believe third quarter EPS will cover the dividend [27]