Monroe Capital(US:MRCC)2023-11-09 19:00Financial Data and Key Metrics Changes - Adjusted net investment income was $5.5 million or $0.25 per share, down from $6.1 million or $0.28 per share in the prior quarter [10][28] - Net asset value (NAV) decreased to $207.6 million from $213.2 million, with NAV per share declining from $9.84 to $9.58 [12][47] - Debt-to-equity leverage increased from 1.54 times to 1.60 times, primarily due to the decrease in NAV [29][76] Business Line Data and Key Metrics Changes - The investment portfolio totaled $518.3 million, an increase of $2.9 million from $515.4 million [53] - Total investment income decreased to $15.6 million from $16.3 million in the previous quarter [56] - The portfolio had four investments on non-accrual status, representing 1.2% of the portfolio fair market value, a slight decrease from 1.3% [39] Market Data and Key Metrics Changes - Direct lending volumes in the sponsored middle market increased by 12% in the third quarter compared to the second quarter [49] - The average effective yield on the portfolio was approximately 12.5%, benefiting from the rising interest rate environment [60] Company Strategy and Development Direction - The company remains focused on capital preservation and emphasizes a defensive portfolio to navigate potential economic downturns [51][34] - The strategy includes maintaining a selective approach to new investment opportunities while capitalizing on attractive market fundamentals [48][50] Management's Comments on Operating Environment and Future Outlook - The management anticipates a combination of economic slowdown, higher long-term interest rates, and geopolitical uncertainty [7][30] - Despite challenges, the management expresses confidence in the portfolio's quality and its ability to adapt to economic headwinds [13][34] Other Important Information - The company reported a dividend yield of 14.3% as of November 7, 2023, marking the 14th consecutive quarter where net investment income met or exceeded the dividend [22][28] - The company has nominal exposure to highly cyclical industries, focusing predominantly on first lien senior secured loans [52][34] Q&A Session Summary Question: What is the outlook for the SLF given the decline in valuations? - Management expressed comfort with current leverage levels and does not anticipate the need for additional capital in the near term [62][75] Question: How has the rise in short-term interest rates affected fair value marks? - The rise in discount rates has affected yield calculations, but the impact this quarter was relatively flat due to considerable enterprise value coverage [76] Question: What is the timeframe for evaluating the IT Global receivable? - Management indicated that clarity around the IT Global receivable could emerge in the fourth quarter, potentially extending into the first quarter [66][78]