MidCap Financial Investment Corp
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
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.
Sep 30, 2024 · Filed Nov 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 2024-06-30; filed 2024-08-07.
0000950170-24-092876
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000950170-24-122744
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 131 previous paragraphs and 132 current paragraphs.
97 unchanged; 22 reworded; 13 added; 12 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 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 (13)
Current report
On July 22, 2024, the Company consummated the transactions contemplated by the (i) 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, and (ii) 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. In connection therewith, AFT and AIF merged with an into the Company, with the Company continuing as the surviving company. For more information on the Mergers, please see Note 10 "Mergers with AFT and AIF" to our consolidated financial statements included in this report.
Current report
Includes investments acquired from the Mergers.
Current report
On October 17, 2024, the Company amended and extended its senior secured, multi-currency, revolving credit facility (the "Amended Senior Secured Facility"). Lender commitments under the Amended Senior Secured Facility will increase from $1.705 billion to $1.815 billion until December 22, 2024 and will decrease to $1.660 billion thereafter. The Amended Senior Secured Facility includes an “accordion” feature that allows the Company to increase the size of the Facility to $2.723 billion.
Current report
The final maturity date under the Amended Senior Secured Facility for extending lenders was extended by over a year from April 19, 2028 to October 17, 2029. The covenants and representations and warranties the Company is required to comply with were also modified (including, among other things, that the minimum stockholders’ equity test was reset), but the remaining material business terms and conditions of the Amended Senior Secured Facility remain substantially the same. The Amended Senior Secured Facility continues to include usual and customary events of default for senior secured revolving credit facilities of this type.
Current report
Borrowings under the Amended Senior Secured Facility (and the incurrence of certain other permitted debt) continue to be subject to compliance with a Borrowing Base that applies different advance rates to different types of assets in the Company’s portfolio. The advance rate applicable to any specific type of asset in the Company’s portfolio depends on the relevant asset coverage ratio as of the date of determination. Borrowings under the Amended Senior Secured Facility continue to be subject to the leverage restrictions contained in the 1940 Act. Terms used in this disclosure have the meanings set forth in the Amended Senior Secured Facility.
Current report
During the three months ended September 30, 2024, we recognized gross realized gains of $1.3 million and gross realized losses of $0.8 million, resulting in net realized gains of $0.5 million. Net realized losses for the three months ended September 30, 2024 were due to a collection of minor individual losses from several portfolio companies and offset by realized gain from sale of Soliant. Significant realized gains (losses) for the three months ended September 30, 2024 are summarized below:
Current report
*Soliant was sold during the quarter and the realized gain was previously recorded as an unrealized gain.
Current report
*Soliant was sold during the quarter and the realized gain was previously recorded as an unrealized gain. MSEA Tankers LLC and ViewRay were written off during the period as no proceeds were expected to be realized. The realized gain(losses) on these investments were previously recorded as unrealized gain(losses).
Current report
During the three months ended September 30, 2024, we recognized gross unrealized gains of $11.6 million and gross unrealized losses of $23.5 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $11.9 million. Net change in unrealized gains (losses) for the three months ended September 30, 2024 was primarily driven by the conversion of the equity position to debt during the amendment for AVAD, LLC, underperformance of International Cruise & Excursion Gallery, Inc., and US Auto, and the sale of Soliant. The change in unrealized losses were partially offset by an increase in Merx equity. Significant changes in unrealized gains (losses) for the three months ended September 30, 2024 are summarized below:
Current report
*Soliant was sold during the quarter and the realized gain was previously recorded as an unrealized gain.
Current report
*Soliant was sold during the quarter and the realized gain was previously recorded as an unrealized gain. MSEA Tankers LLC and ViewRay were written off during the period as no proceeds were expected to be realized. The realized gain(losses) on these investments were previously recorded as unrealized gain(losses).
Current report
Equity Issuances
Current report
We may from time to time issue and sell shares of our common stock through public or at-the-market ("ATM”) offerings. On August 13, 2024, we entered into (i) an equity distribution agreement by and among us, the Investment Adviser, the Administrator and Truist Securities, Inc. (“Truist”) and (ii) an equity distribution agreement by and among us, the Investment Adviser, the Administrator and Jefferies LLC (“Jefferies,” and together with Truist, the “Sales Agents”). The equity distribution agreements with Sales Agents described in the preceding sentence are collectively referred to herein as the “Equity Distribution Agreements.” For further details regarding the Equity Distribution Agreements, see Note 7 "Stockholders’ Equity—Equity Issuances — At-the-market (“ATM”) Offering” to our consolidated financial statements included in this report.
Removed paragraphs (12)
Previous report
AFT Mergers
Previous 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.
Previous 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.
Previous 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.
Previous report
AIF Mergers
Previous 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.
Previous 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.
Previous 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.
Previous report
Distribution Declarations
Previous 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.
Previous report
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 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:
Reworded paragraphs (22)
Previous wording
MidCap Financial Investment Corporation (the “Company,” “MFIC,” “we,” “us,” or “our”) was incorporated under the Maryland General Corporation Law in February 2004. We have elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). As such, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, for federal income tax purposes we have elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Pursuant to this election and assuming we qualify as a RIC, we generally do not have to pay corporate-level federal income taxes on any income we distribute to our stockholders. We commenced operations on April 8, 2004 upon completion of our initial public offering that raised $870 million in net proceeds from selling 62 million shares of common stock at a price of $15.00 per share (20.7 million shares at a price of $45.00 per share adjusted for the one-for-three reverse stock split). Since then, and through June 30, 2024, we have raised approximately $2.24 billion in net proceeds from additional offerings of common stock and we have repurchased common stock for $248.1 million.
Current wording
MidCap Financial Investment Corporation (the “Company,” “MFIC,” “we,” “us,” or “our”) was incorporated under the Maryland General Corporation Law in February 2004. We have elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). As such, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, for federal income tax purposes we have elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Pursuant to this election and assuming we qualify as a RIC, we generally do not have to pay corporate-level federal income taxes on any income we distribute to our stockholders. We commenced operations on April 8, 2004 upon completion of our initial public offering that raised $870 million in net proceeds from selling 62 million shares of common stock at a price of $15.00 per share (20.7 million shares at a price of $45.00 per share adjusted for the one-for-three reverse stock split). Since then, and through September 30, 2024, we have raised approximately $2.68 billion in net proceeds from additional offerings of common stock and we have repurchased common stock for $248.1 million.
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 June 30, 2024, non-qualifying assets represented approximately 5.2% 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 September 30, 2024, non-qualifying assets represented approximately 8.3% of the total assets of the Company.
Previous wording
Our portfolio and investment activity during the three and six months ended June 30, 2024 and 2023, was as follows:
Current wording
Our portfolio and investment activity during the three and nine months ended September 30, 2024 and 2023, was as follows:
Previous wording
The interest rate type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status.
Current wording
The interest rate type information is calculated using the Company's corporate debt portfolio and excludes aviation and investments on non-accrual status.
Previous 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.
Current wording
Since the initial public offering of the Company in April 2004 and through September 30, 2024, invested capital totaled $25.2 billion in 783 portfolio companies. Over the same period, the Company completed transactions with more than 100 different financial sponsors.
Previous 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.
Current wording
As of September 30, 2024, $2.83 billion or 93.6% 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 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.
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 nine months ended September 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 and six months ended June 30, 2024 and 2023 were as follows:
Current wording
Operating results for the three and nine months ended September 30, 2024 and 2023 were as follows:
Previous wording
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 wording
The increase in total investment income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily driven by increase in interest income (including PIK) of $13.2 million. The increase in total interest income was due to a higher income-bearing investment portfolio, primarily related to the assets acquired in the mergers with AFT and AIF. This was partially offset by a decrease in the average yield for the total debt portfolio, from 12.0% for the three months ended September 30, 2023 to 11.5% for the three months ended September 30, 2024. Further, there was also an increase in other income of $0.7 million due to higher amendment fees.
Previous 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.
Current wording
The increase in total investment income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily driven by increase in interest income (including PIK) of $14.8 million. The increase in total interest income was due to a higher income-bearing investment portfolio, partially related to the assets acquired in the mergers with AFT and AIF. Additionally, prepayment fees and income recognized from the acceleration of discount, premium, or deferred fees on repaid investments increased from $3.8 million for the nine months ended September 30, 2023 to $6.2 million for the nine months ended September 30, 2024.
Previous 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.
Current wording
Net expenses increased by $3.7 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily driven by the increase in interest and other debt expenses of $5.9 million. The increase in interest and other debt expenses was attributed to an increase in average debt outstanding, from $1.44 billion for the three months ended September 30, 2023 to $1.72 billion for the three months ended September 30, 2024. Further, there was an increase in the total annualized cost of debt, from 7.16% for the three months ended September 30, 2023 to 7.35% for the three months ended September 30, 2024. This was partially offset by the decrease of $1.3 million in performance-based incentive fees.
Previous wording
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.
Current wording
Net expenses increased by $5.0 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily driven by the increase in interest and other debt expenses of $8.5 million. The increase in interest and other debt expenses was attributed to an increase in average debt outstanding, from $1.45 billion for the nine months ended September 30, 2023 to $1.51 billion for the nine months ended September 30, 2024. Further, there was an increase in the total annualized cost of debt, from 7.02% for the nine months ended September 30, 2023 to 7.47% for the nine months ended September 30, 2024. This was partially offset by the decrease of $1.6 million in management and performance-based incentive fees (net of amounts waived) due to a decrease in performance based incentive fees.
Previous wording
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 wording
During the three months ended September 30, 2023, we recognized gross realized gains of $0.1 million and gross realized losses of $0.3 million, resulting in net realized losses of $0.2 million. There were no significant realized gains (losses) for the three months ended September 30, 2023.
Previous wording
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 wording
During the nine months ended September 30, 2024, we recognized gross realized gains of $2.0 million and gross realized losses of $25.2 million, resulting in net realized losses of $23.2 million. Net realized losses for the nine months ended September 30, 2024 was primarily driven by the write off of the Company's investment in MSEA Tankers LLC and ViewRay and partially offset by the realized gain resulted from the sale of Soliant. Significant realized gains (losses) for the nine months ended September 30, 2024 are summarized below:
Previous 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.
Current wording
During the nine months ended September 30, 2023, we recognized gross realized gains of $0.2 million and gross realized losses of $1.4 million, resulting in net realized losses of $1.2 million. There were no significant realized gains (losses) for the nine months ended September 30, 2023.
Previous wording
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 wording
During the three months ended September 30, 2023, we recognized gross unrealized gains of $13.1 million and gross unrealized losses of $10.8 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $2.3 million. Net change in unrealized gains (losses) for the three months ended September 30, 2023 primarily driven by the increase in cashflows from Merx Aviation Finance, LLC, the financial under-performance of ViewRay and widening credit spreads. Significant changes in unrealized gains (losses) for the three months ended September 30, 2023 are summarized below:
Previous 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:
Current wording
During the nine months ended September 30, 2024, we recognized gross unrealized gains of $48.6 million and gross unrealized losses of $46.8 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $1.8 million. Net change in unrealized gains for the nine months ended September 30, 2024 was primarily driven by write off of MSEA Tankers LLC and ViewRay, an increase in Merx equity, partially offset by the underperformance of US Auto and International Cruise & Excursion Gallery. Significant changes in unrealized gains (losses) for the nine months ended September 30, 2024 are summarized below:
Previous wording
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:
Current wording
During the nine months ended September 30, 2023, we recognized gross unrealized gains of $19.7 million and gross unrealized losses of $19.2 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $0.5 million. Net change in unrealized gains (losses) for the nine months ended September 30, 2023 was primarily driven by the increase in cashflows from Merx Aviation Finance, LLC, the financial under-performance of ViewRay and widening credit spreads. Significant changes in unrealized gains (losses) for the nine months ended September 30, 2023 are summarized below:
Previous wording
The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of three months or less from the date of purchase would qualify, with limited exceptions. The Company deems that certain money market funds, U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents (See Note 2 to the consolidated financial statements) At the end of each fiscal quarter, we consider taking proactive steps utilizing cash equivalents with the objective of enhancing our investment flexibility during the following quarter, pursuant to Section 55 of the 1940 Act. More specifically, we may purchase U.S. Treasury bills from time-to-time on the last business day of the quarter and typically close out that position on the following business day, settling the sale transaction on a net cash basis with the purchase, subsequent to quarter end. The Company may also utilize repurchase agreements or other balance sheet transactions, including drawing down on our Senior Secured Facility, as we deem appropriate. The amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined.
Current wording
The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of three months or less from the date of purchase would qualify, with limited exceptions. The Company deems that certain money market funds, U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents (See Note 2 to the consolidated financial statements) At the end of each fiscal quarter, we consider taking proactive steps utilizing cash equivalents with the objective of enhancing our investment flexibility during the following quarter, pursuant to Section 55 of the 1940 Act. More specifically, we may purchase U.S. Treasury bills from time-to-time on the last business day of the quarter and typically close out that position on the following business day, settling the sale transaction on a net cash basis with the purchase, subsequent to quarter end. The Company may also utilize repurchase agreements or other balance sheet transactions, including drawing down on our Senior Secured Facility, as we deem appropriate.
Previous 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.
Current wording
As of September 30, 2024, aggregate lender commitments under the Senior Secured Facility totaled $1.71 billion and $697.3 million of unused capacity. As of September 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 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.
Current wording
Distributions paid to stockholders during the three and nine months ended September 30, 2024 totaled $54.4 million ($0.58 per share) and $104.0 million ($1.34 per share) which includes $18.8 million special distribution ($0.20 per share), respectively. Distributions paid to stockholders during the three and nine months ended September 30, 2023 totaled $24.8 million ($0.38 per share) and $74.5 million ($1.14 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 September 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 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.
Current wording
For the three and nine months ended September 30, 2024, PIK income totaled $3.0 million and $7.5 million on total investment income of $82.1 million and $219.6 million, respectively. For the three and nine months ended September 30, 2023, PIK income totaled $0.5 million and $2.1 million on total investment income of $68.2 million and $204.6 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.