MidCap Financial Investment Corp
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
MFIC$10.26-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0000950170-24-054445
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000950170-24-092876
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 128 previous paragraphs and 131 current paragraphs.
96 unchanged; 15 reworded; 18 added; 17 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 7 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (18)
Current report
the ability to realize the anticipated benefits of the Mergers (as defined below);
Current report
the effects of disruption on our business from the Mergers; and
Current report
the combined company’s plans, expectations, objectives and intentions as a result of the Mergers.
Current report
AFT Mergers
Current report
On July 22, 2024, we completed our previously announced acquisition of AFT. Pursuant to the AFT Merger Agreement, AFT Merger Sub was first merged with and into AFT, with AFT continuing as the surviving company, and, following the effectiveness of the AFT First Merger, AFT was then merged with and into us, with us continuing as the surviving company. In accordance with the terms of the AFT Merger Agreement, at the effective time of the AFT First Merger, each outstanding share of common stock, par value $0.001 per share, of AFT was converted into the right to receive 0.9547 shares of our common stock, par value $0.001 per share. As a result, we issued an aggregate of approximately 14,868,092 shares of its common stock to AFT’s former stockholders, excluding the impact for cash paid in lieu of fractional shares.
Current report
The AFT Mergers were considered asset acquisitions under generally accepted accounting principles with us being the accounting survivor. The AFT Mergers were accounted for under the asset acquisition method of accounting by us in accordance with ASC 805-50. Under asset acquisition accounting, acquiring assets in groups not only requires ascertaining the cost of the asset (or net assets), but also allocating that cost to the individual assets (or individual assets and liabilities) that make up the group. Per ASC 805-50-30-1, assets are recognized based on their cost to the acquiring entity, which generally includes transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets’ carrying amounts on the acquiring entity’s records. ASC 805-50-30-2 provides that asset acquisitions in which the consideration given is cash are measured by the amount of cash paid. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on the cost to the acquiring entity or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measured.
Current report
The Company determined the fair value of the shares of the Company's common stock that were issued to former AFT shareholders pursuant to the AFT Merger Agreement plus transaction costs to be the consideration paid in connection with the AFT Mergers under ASC 805. The consideration paid to AFT shareholders was less than the aggregate fair values of the AFT assets acquired and liabilities assumed, which resulted in a purchase discount. The consideration paid was allocated to the individual AFT assets acquired and liabilities assumed based on the relative fair values of net identifiable assets acquired other than “non-qualifying” assets and liabilities (for example, cash) and did not give rise to goodwill. As a result, the purchase discount was allocated to the cost basis of the AFT investments acquired by the Company on a pro-rata basis based on their relative fair values as of the effective time of the AFT Mergers. Immediately following the AFT Mergers, the investments were marked to their respective fair values in accordance with ASC 820 which resulted in immediate recognition of net unrealized appreciation in the Consolidated Statement of Operations as a result of the AFT Mergers. The purchase discount allocated to the AFT debt investments acquired will amortize over the remaining life of each respective debt investment through interest income, with a corresponding adjustment recorded to unrealized appreciation or depreciation on such investment acquired through its ultimate disposition. The purchase discount allocated to AFT equity investments acquired will not amortize over the life of such investments through interest income and, assuming no subsequent change to the fair value of the equity investments acquired and disposition of such equity investments at fair value, the Company may recognize a realized gain or loss with a corresponding reversal of the unrealized appreciation on disposition of such equity investments acquired.
Current report
AIF Mergers
Current report
On July 22, 2024, we completed our previously announced acquisition of AIF. Pursuant to the AIF Merger Agreement, AIF Merger Sub was first merged with and into AIF, with AIF continuing as the surviving company, and, following the effectiveness of the AIF First Merger, AIF was then merged with and into us, with us continuing as the surviving company. In accordance with the terms of the AIF Merger Agreement, at the effective time of the AIF First Merger, each outstanding share of common stock, par value $0.001 per share, of AIF was converted into the right to receive 0.9441 shares of our common stock, par value $0.001 per share. As a result, we issued an aggregate of approximately 13,658,992 shares of its common stock to AIF’s former stockholders, excluding the impact for cash paid in lieu of fractional shares.
Current report
The AIF Mergers were considered asset acquisitions under generally accepted accounting principles with the Company being the accounting survivor. The AIF Mergers were accounted for under the asset acquisition method of accounting by the Company in accordance with ASC 805-50. Under asset acquisition accounting, acquiring assets in groups not only requires ascertaining the cost of the asset (or net assets), but also allocating that cost to the individual assets (or individual assets and liabilities) that make up the group. Per ASC 805-50-30-1, assets are recognized based on their cost to the acquiring entity, which generally includes transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets’ carrying amounts on the acquiring entity’s records. ASC 805-50-30-2 provides that asset acquisitions in which the consideration given is cash are measured by the amount of cash paid. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on the cost to the acquiring entity or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measured.
Current report
The Company determined the fair value of the shares of the Company's common stock that were issued to former AIF shareholders pursuant to the AIF Merger Agreement plus transaction costs to be the consideration paid in connection with the AIF Mergers under ASC 805. The consideration paid to AIF shareholders was less than the aggregate fair values of the AIF assets acquired and liabilities assumed, which resulted in a purchase discount. The consideration paid was allocated to the individual AIF assets acquired and liabilities assumed based on the relative fair values of net identifiable assets acquired other than “non-qualifying” assets and liabilities (for example, cash) and did not give rise to goodwill. As a result, the purchase discount was allocated to the cost basis of the AIF investments acquired by the Company on a pro-rata basis based on their relative fair values as of the effective time of the AIF Mergers. Immediately following the AIF Mergers, the investments were marked to their respective fair values in accordance with ASC 820 which resulted in immediate recognition of net unrealized appreciation in the Consolidated Statement of Operations as a result of the AIF Mergers. The purchase discount allocated to the AIF debt investments acquired will amortize over the remaining life of each respective debt investment through interest income, with a corresponding adjustment recorded to unrealized appreciation or depreciation on such investment acquired through its ultimate disposition. The purchase discount allocated to AIF equity investments acquired will not amortize over the life of such investments through interest income and, assuming no subsequent change to the fair value of the equity investments acquired and disposition of such equity investments at fair value, the Company may recognize a realized gain or loss with a corresponding reversal of the unrealized appreciation on disposition of such equity investments acquired.
Current report
Distribution Declarations
Current report
In connection with the Mergers, on July 21, 2024, our Board declared a special distribution of $0.20 per share of common stock, which will be paid on August 15, 2024 to stockholders of record as of August 5, 2024.
Current report
During the three months ended June 30, 2023, we recognized gross realized gains of $0.0 million and gross realized losses of $0.2 million, resulting in net realized losses of $0.2 million. There were no significant realized gains (losses) for the three months ended June 30, 2023.
Current report
During the six months ended June 30, 2024, we recognized gross realized gains of $0.6 million and gross realized losses of $24.3 million, resulting in net realized losses of $23.7 million. Net realized losses for the six months ended June 30, 2024 was primarily driven by the write off of the Company's investment in MSEA Tankers LLC and ViewRay. Significant realized gains (losses) for the six months ended June 30, 2024 are summarized below:
Current report
During the three months ended June 30, 2024, we recognized gross unrealized gains of $23.8 million and gross unrealized losses of $15.1 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $8.7 million. Net change in unrealized gains (losses) for the three months ended June 30, 2024 was primarily driven by the write off of MSEA Tankers LLC and the financial under-performance of US Auto, Renovo and PHS. Significant changes in unrealized gains (losses) for the three months ended June 30, 2024 are summarized below:
Current report
During the three months ended June 30, 2023, we recognized gross unrealized gains of $8.2 million and gross unrealized losses of $11.5 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $3.3 million. Net change in unrealized gains (losses) for the three months ended June 30, 2023 was primarily driven by the financial under-performance of Ambrosia Buyer Group and widening credit spreads. Significant changes in unrealized gains (losses) for the three months ended June 30, 2023 are summarized below:
Current report
During the six months ended June 30, 2023, we recognized gross unrealized gains of $14.2 million and gross unrealized losses of $16.0 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $1.8 million. Net change in unrealized gains (losses) for the six months ended June 30, 2023 was primarily driven by the financial under-performance of Ambrosia Buyer Group and Berner Foods and widening credit spreads. Significant changes in unrealized gains (losses) for the six months ended June 30, 2023 are summarized below:
Removed paragraphs (17)
Previous report
Pending Mergers with AFT and AIF
Previous report
AFT Merger. On November 7, 2023, the Company entered into an Agreement and Plan of Merger (the “AFT Merger Agreement”) with Apollo Senior Floating Rate Fund Inc., a Maryland corporation (“AFT”), AFT Merger Sub, Inc., a Maryland corporation and a direct wholly-owned subsidiary of the Company (“AFT Merger Sub”), and, solely for the limited purposes set forth therein, the Investment Adviser. The AFT Merger Agreement provides that, subject to the terms and conditions set forth in the AFT Merger Agreement, at the effective time of the merger (the “AFT Effective Time”), AFT Merger Sub will be merged with and into AFT (the “AFT First Merger”), with AFT continuing as the surviving company and as a wholly-owned subsidiary of the Company. Immediately after the effectiveness of the AFT First Merger, AFT will be merged with and into the Company, with the Company continuing as the surviving company (together with the AFT First Merger, the “AFT Merger”). Both the Company’s Board and AFT’s board of directors, including all of the respective independent directors, in each case, on the recommendation of special committees comprised solely of certain independent directors of the Company or AFT, as applicable, have approved the AFT Merger Agreement and the transactions contemplated thereby.
Previous report
Subject to the terms and conditions of the AFT Merger Agreement, at the AFT Effective Time, each share of AFT Common Stock issued and outstanding immediately prior to the AFT Effective Time (other than shares owned by the Company or any of its consolidated subsidiaries, including AFT Merger Sub (the “AFT Cancelled Shares”)) will be converted into the right to receive a number of shares of the Company’s Common Stock equal to the AFT Exchange Ratio (as defined below) (cash will be paid in lieu of fractional shares). AFT has no preferred stock outstanding, and no preferred stock will be issued by the Company as a result of the AFT Merger.
Previous report
Under the AFT Merger Agreement, as of a mutually agreed date no earlier than 48 hours (excluding Sundays and holidays) prior to the AFT Effective Time (such date, the “AFT Determination Date”), the Company and AFT will deliver to the other a calculation of its NAV as of such date (such calculation with respect to AFT, the “Closing AFT Net Asset Value” and such calculation with respect to the Company, the “Closing AFT Merger MFIC Net Asset Value”), in each case using the same set of assumptions, methodologies and adjustments as has been historically used in preparing such calculation. Based on such calculations, the parties will calculate: (1) the “AFT Per Share NAV,” which will be equal to (i) the Closing AFT Net Asset Value divided by (ii) the number of shares of AFT Common Stock issued and outstanding as of the AFT Determination Date (excluding any AFT Cancelled Shares) and (2) the “AFT Merger MFIC Per Share NAV,” which will be equal to (A) the Closing AFT Merger MFIC Net Asset Value divided by (B) the number of shares of the Company’s Common Stock issued and outstanding as of the AFT Determination Date. The “AFT Exchange Ratio” will be equal to the quotient (rounded to four decimal places) of (i) the AFT Per Share NAV divided by (ii) the AFT Merger MFIC Per Share NAV. Furthermore, promptly following closing of the AFT Merger, the Adviser or its affiliates will pay to holders of shares of AFT Common Stock that are issued and outstanding immediately prior to the AFT Effective Time a special payment equal to $0.25 per share of AFT Common Stock, subject to deduction for any applicable withholding tax.
Previous report
The AFT Merger Agreement contains representations and warranties by the Company, AFT Merger Sub, the Adviser and AFT, subject to specified exceptions and qualifications.
Previous report
Under the AFT Merger Agreement, immediately following the AFT Effective Time, the Company will repay or prepay any amounts outstanding under AFT’s existing credit facility as of the AFT Effective Time, subject to the conditions set forth in the Senior Secured Facility.
Previous report
Consummation of the AFT Merger, which is currently anticipated to occur in the first half of 2024, is subject to certain closing conditions, including requisite approvals of the Company’s and AFT’s stockholders and certain other closing conditions. Neither the closing of the AFT Merger nor the closing of the AIF Merger is contingent on the closing of the other merger.
Previous report
AIF Merger. On November 7, 2023, the Company entered into an Agreement and Plan of Merger (the “AIF Merger Agreement” and, together with the AFT Merger Agreement, the “Merger Agreements”) with Apollo Tactical Income Fund Inc., a Maryland corporation (“AIF”), AIF Merger Sub, Inc., a Maryland corporation and a direct wholly-owned subsidiary of the Company (“AIF Merger Sub”), and, solely for the limited purposes set forth therein, the Investment Adviser. The AIF Merger Agreement provides that, subject to the terms and conditions set forth in the AIF Merger Agreement, at the effective time of the merger (the “AIF Effective Time”), AIF Merger Sub will be merged with and into AIF (the “AIF First Merger”), with AIF continuing as the surviving company and as a wholly owned subsidiary of the Company. Immediately after the effectiveness of the AIF First Merger, AIF will be merged with and into the Company, with the Company continuing as the surviving company (together with the AIF First Merger, the “AIF Merger” and, together with the AFT Merger, the “Mergers”). Both the Company’s Board and AIF’s board of directors, including all of the respective independent directors, in each case, on the recommendation of special committees comprised solely of certain independent directors of the Company or AIF, as applicable, have approved the AIF Merger Agreement and the transactions contemplated thereby.
Previous report
Subject to the terms and conditions of the AIF Merger Agreement, at the AIF Effective Time, each share of AIF Common Stock issued and outstanding immediately prior to the AIF Effective Time (other than shares owned by the Company or any of its consolidated subsidiaries, including AIF Merger Sub (the “AIF Cancelled Shares”) will be converted into the right to receive a number of shares of the Company’s Common Stock equal to the AIF Exchange Ratio (as defined below) (cash will be paid in lieu of fractional shares). AIF has no preferred stock outstanding, and no preferred stock will be issued by the Company as a result of the AIF Merger.
Previous report
Under the AIF Merger Agreement, as of a mutually agreed date no earlier than 48 hours (excluding Sundays and holidays) prior to the AIF Effective Time (such date, the “AIF Determination Date”), each of the Company and AIF will deliver to the other a calculation of its NAV as of such date (such calculation with respect to AIF, the “Closing AIF Net Asset Value” and such calculation with respect to the Company, the “Closing AIF Merger MFIC Net Asset Value”), in each case using the same set of assumptions, methodologies and adjustments as has been historically used in preparing such calculation. Based on such calculations, the parties will calculate: (1) the “AIF Per Share NAV,” which will be equal to (i) the Closing AIF Net Asset Value divided by (ii) the number of shares of AIF Common Stock issued and outstanding as of the AIF Determination Date (excluding any AIF Cancelled Shares) and (2) the “AIF Merger MFIC Per Share NAV,” which will be equal to (A) the Closing AIF Merger MFIC Net Asset Value divided by (B) the number of shares of the Company’s Common Stock issued and outstanding as of the AIF Determination Date. The “AIF Exchange Ratio” will be equal to the quotient (rounded to four decimal places) of (i) the AIF Per Share NAV divided by (ii) the AIF Merger MFIC Per Share NAV. Furthermore, promptly following the closing of the AIF Merger, the Adviser or its affiliates will pay to holders of shares of AIF Common Stock that are issued and outstanding immediately prior to the AIF Effective Time a special payment equal to $0.25 per share of AIF Common Stock, subject to deduction for any applicable withholding tax.
Previous report
The AIF Merger Agreement contains representations and warranties by the Company, AIF Merger Sub, the Adviser and AIF, subject to specified exceptions and qualifications.
Previous report
Under the AIF Merger Agreement, immediately following the AIF Effective Time, the Company will repay or prepay any amounts outstanding under AIF’s existing credit facility as of the AIF Effective Time, subject to the conditions set forth in the Company’s Senior Secured Credit Facility.
Previous report
Consummation of the AIF Merger, which is currently anticipated to occur in the first half of 2024, is subject to certain closing conditions, including requisite approvals of the Company’s and AIF’s stockholders and certain other closing conditions. Neither the closing of the AIF Merger nor the closing of the AFT Merger (as defined below) is contingent on the closing of the other merger.
Previous report
Distribution after the Consummation of the Mergers. Following the consummation of the Mergers and subject to applicable law, the Company will distribute to holders of shares of the Company’s Common Stock as of a record date to be determined by the Company’s Board an amount in cash equal to $0.20 per share of the Company’s Common Stock.
Previous report
The foregoing descriptions of the Merger Agreements and the transactions contemplated thereby do not purport to be complete and are qualified in their entirety by reference to the full text of the Merger Agreements, which have been included as Exhibits 2.1 and 2.2 to the Company's Annual Report on Form 10-K for the twelve months ended December 31, 2023. The representations, warranties, covenants and agreements contained in each Merger Agreement were made only for purposes of such Merger Agreement and as of specific dates; were solely for the benefit of the parties to such Merger Agreement (except as may be expressly set forth in such Merger Agreement); may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to such Merger Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors and security holders should not rely on such representations, warranties, covenants or agreements, or any descriptions thereof, as characterizations of the actual state of facts or condition of any of the parties to the Merger Agreements or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, covenants and agreements may change after the date of each Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by the parties to such Merger Agreement. For more information, see the Company’s current report on Form 8-K filed with the SEC on November 7, 2023.
Previous report
The Company's registration statement that includes a preliminary joint proxy statement and a prospectus of the Company was declared effective by the SEC on April 3, 2024. The Company filed a definitive joint proxy statement/prospectus with the SEC on April 4, 2024.
Previous report
During the three months ended March 31, 2023, we recognized gross unrealized gains of $9.5 million and gross unrealized losses of $8.0 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $1.5 million. Significant changes in unrealized gains (losses) for the three months ended March 31, 2023 are summarized below:
Reworded paragraphs (15)
Previous wording
the adequacy of our cash resources and working capital; and
Current wording
the adequacy of our cash resources and working capital;
Previous wording
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). As of March 31, 2024, non-qualifying assets represented approximately 5.4% of the total assets of the Company.
Current wording
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). As of June 30, 2024, non-qualifying assets represented approximately 5.2% of the total assets of the Company.
Previous wording
Our portfolio and investment activity during the three months ended March 31, 2024 and 2023, was as follows:
Current wording
Our portfolio and investment activity during the three and six months ended June 30, 2024 and 2023, was as follows:
Previous wording
Since the initial public offering of MidCap Financial Investment Corporation in April 2004 and through March 31, 2024, invested capital totaled $24.1 billion in 634 portfolio companies. Over the same period, the Company completed transactions with more than 100 different financial sponsors.
Current wording
Since the initial public offering of the Company in April 2004 and through June 30, 2024, invested capital totaled $24.3 billion in 652 portfolio companies. Over the same period, the Company completed transactions with more than 100 different financial sponsors.
Previous wording
As of March 31, 2024, $2.34 billion or 99.6% of the Company’s investments were classified as Level 3. The high proportion of Level 3 investments relative to our total investments is directly related to our investment philosophy and target portfolio, which consists primarily of long-term secured debt, as well as unsecured and mezzanine positions of private middle-market companies. A fundamental difference exists between our investments and those of comparable publicly traded fixed income investments, namely high-yield bonds, and this difference affects the valuation of our private investments relative to comparable publicly traded instruments.
Current wording
As of June 30, 2024, $2.43 billion or 99.6% of the Company’s investments were classified as Level 3. The high proportion of Level 3 investments relative to our total investments is directly related to our investment philosophy and target portfolio, which consists primarily of long-term secured debt, as well as unsecured and mezzanine positions of private middle-market companies. A fundamental difference exists between our investments and those of comparable publicly traded fixed income investments, namely high-yield bonds, and this difference affects the valuation of our private investments relative to comparable publicly traded instruments.
Previous wording
Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, seniority of investment in the investee company’s capital structure, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, among other factors. When readily available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. During the three months ended March 31, 2024, there were no significant changes to the Company’s valuation techniques and related inputs considered in the valuation process.
Current wording
Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, seniority of investment in the investee company’s capital structure, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, among other factors. When readily available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. During the six months ended June 30, 2024, there were no significant changes to the Company’s valuation techniques and related inputs considered in the valuation process.
Previous wording
Operating results for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
Operating results for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous wording
The increase in total investment income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily driven by increase in interest income (including PIK) of $1.0 million. The increase in total interest income was due to an increase in the average yield for the total debt portfolio, from 11.2% for the three months ended March 31, 2023 to 12% for the three months ended March 31, 2024. The increase was partially offset by a decrease in prepayment fees and income recognized from the acceleration of discount, premium, or deferred fees on repaid investments, which totaled $2.6 million for the three months ended March 31, 2023 and $2.2 million for the three months ended March 31, 2024. Furthermore, the decrease in other income of $0.5 million was primarily due to decrease in structuring fees.
Current wording
The increase in total investment income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily driven by increase in interest income (including PIK) of $0.5 million. The increase in total interest income was due to an increase in the average yield for the total debt portfolio, from 11.6% for the three months ended June 30, 2023 to 11.9% for the three months ended June 30, 2024. Prepayment fees and income recognized from the acceleration of discount, premium, or deferred fees on repaid investments increased from $0.6 million for the three months ended June 30, 2023 to $3.2 million for the three months ended June 30, 2024.
Previous wording
The increase in net expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily driven by the increase in interest and other debt expenses of $1.7 million. The increase in interest and other debt expenses was attributed to an increase in the total annualized cost of debt, from 6.85% for the three months ended March 31, 2023 to 7.65% for the three months ended March 31, 2024 which was partially offset by decrease in average debt outstanding from $1.45 billion as of March 31, 2023 to $1.37 billion as of March 31, 2024. Further, the increase of $0.2 million in management and performance-based incentive fees (net of amounts waived) was primarily driven by the offset, which ended in February 2023.
Current wording
The increase in net expenses for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily driven by the increase in interest and other debt expenses of $2.7 million which was partially offset by the decrease in administrative services expense. The increase in interest and other debt expenses was attributed to an increase in the total annualized cost of debt, from 6.94% for the six months ended June 30, 2023 to 7.55% for the six months ended June 30, 2024 which was partially offset by decrease in average debt outstanding from $1.46 billion as of June 30, 2023 to $1.40 billion as of June 30, 2024.
Previous wording
During the three months ended March 31, 2024, we recognized gross realized gains of $0.6 million and gross realized losses of $8.7 million, resulting in net realized losses of $8.1 million. Net realized losses for the three months ended March 31, 2024 was primarily driven by the write off of the Company's investment in ViewRay. Significant realized gains (losses) for the three months ended March 31, 2024 are summarized below:
Current wording
During the three months ended June 30, 2024, we recognized gross realized gains of $0.1 million and gross realized losses of $15.7 million, resulting in net realized losses of $15.6 million. Net realized losses for the three months ended June 30, 2024 was primarily driven by the write off of the Company's investment in MSEA Tankers LLC. Significant realized gains (losses) for the three months ended June 30, 2024 are summarized below:
Previous wording
During the three months ended March 31, 2023, we recognized gross realized gains of $0.1 million and gross realized losses of $0.9 million, resulting in net realized losses of $0.8 million.
Current wording
During the six months ended June 30, 2023, we recognized gross realized gains of $0.1 million and gross realized losses of $1.1 million, resulting in net realized losses of $1.0 million. There were no significant realized gains (losses) for the six months ended June 30, 2023.
Previous wording
During the three months ended March 31, 2024, we recognized gross unrealized gains of $20.1 million and gross unrealized losses of $15.1 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $5.0 million. Net change in unrealized gains (losses) for the three months ended March 31, 2024 was primarily driven by the increase in cashflows and new lease extensions from Merx Aviation Finance, LLC., and underperformance of US Auto, International Cruise & Excursion Gallery, Naviga and ChyronHego. Significant changes in unrealized gains (losses) for the three months ended March 31, 2024 are summarized below:
Current wording
During the six months ended June 30, 2024, we recognized gross unrealized gains of $42.2 million and gross unrealized losses of $28.5 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $13.7 million. Net change in unrealized gains for the six months ended June 30, 2024 was primarily driven by write off of MSEA Tankers LLC and ViewRay, the increase in cashflows and new lease extensions from Merx Aviation Finance, partially offset by the underperformance of US Auto, International Cruise & Excursion Gallery and Naviga. Significant changes in unrealized gains (losses) for the six months ended June 30, 2024 are summarized below:
Previous wording
As of March 31, 2024, aggregate lender commitments under the Senior Secured Facility totaled $1.71 billion and $1062.6 million of unused capacity. As of March 31, 2024, there were $17.3 million of letters of credit issued under the Senior Secured Facility as shown as part of total commitments in Note 8 to the consolidated financial statements.
Current wording
As of June 30, 2024, aggregate lender commitments under the Senior Secured Facility totaled $1.71 billion and $957.8 million of unused capacity. As of June 30, 2024, there were $16.0 million of letters of credit issued under the Senior Secured Facility as shown as part of total commitments in Note 8 to the consolidated financial statements.
Previous wording
Distributions paid to stockholders during the three months ended March 31, 2024 and 2023 totaled $24.8 million ($0.38 per share) and $49.1 million ($0.75 per share), respectively. For income tax purposes, distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. Although the tax character of distributions paid to stockholders through March 31, 2024 may include return of capital, the exact amount cannot be determined at this point. The final determination of the tax character of distributions will not be made until we file our tax return for the tax year ended December 31, 2024. Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Our quarterly distributions, if any, will be determined by our Board.
Current wording
Distributions paid to stockholders during the three and six months ended June 30, 2024 totaled $24.8 million ($0.38 per share) and $49.6 million ($0.76 per share), respectively. Distributions paid to stockholders during the three and six months ended June 30, 2023 totaled $24.8 million ($0.38 per share) and $49.7 million ($0.76 per share), respectively. For income tax purposes, distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. Although the tax character of distributions paid to stockholders through June 30, 2024 may include return of capital, the exact amount cannot be determined at this point. The final determination of the tax character of distributions will not be made until we file our tax return for the tax year ended December 31, 2024. Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Our quarterly distributions, if any, will be determined by our Board.
Previous wording
For the three months ended March 31, 2024 and 2023, PIK income totaled $2.0 million and $0.8 million on total investment income of $68.3. million and $67.8 million, respectively. In order to maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders annually in the form of distributions, even though the Company has not yet collected the cash. See Note 5 to the consolidated financial statements for more information on the Company’s PIK income.
Current wording
For the three and six months ended June 30, 2024, PIK income totaled $2.5 million and $4.5 million on total investment income of $69.2 million and $137.5 million, respectively. For the three and six months ended June 30, 2023, PIK income totaled $0.8 million and $1.6 million on total investment income of $68.6 million and $136.4 million, respectively. In order to maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders annually in the form of distributions, even though the Company has not yet collected the cash. See Note 5 to the consolidated financial statements for more information on the Company’s PIK income.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The increase in total investment income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily driven by increase in interest income (including PIK) of $1.5 million. The increase in total interest income was due to an increase in the average yield for the total debt portfolio, from 11.3% for the six months ended June 30, 2023 to 12.0% for the six months ended June 30, 2024. Prepayment fees and income recognized from the acceleration of discount, premium, or deferred fees on repaid investments increased from $3.3 million for the six months ended June 30, 2023 to $5.3 million for the six months ended June 30, 2024.
Current report — wording carried from elsewhere
Net expenses decreased by $0.1 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in administrative services expense and decrease in management fee and performance-based incentive fee was partially offset by the increase in interest and other debt expenses of $1.1 million. The decrease of $0.5 million in management and performance-based incentive fees (net of amounts waived) was driven by lower incentive fee resulted from lower pre-incentive fee net investment income. Further, the increase in interest and other debt expenses was attributed to an increase in the total annualized cost of debt, from 7.04% for the three months ended June 30, 2023 to 7.49% for the three months ended June 30, 2024 which was partially offset by decrease in average debt outstanding from $1.47 billion as of June 30, 2023 to $1.44 billion as of June 30, 2024.