MidCap Financial Investment Corp
For the period ended Dec 31, 2024. Filed Feb 25, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 25, 2025
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-K
Period ended 2023-12-31; filed 2024-02-26.
0000950170-24-020118
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-25.
0000950170-25-026688
Item 7. 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 144 previous paragraphs and 121 current paragraphs.
93 unchanged; 19 reworded; 9 added; 29 removed; 3 previous and 0 current paragraphs rearranged.
Tables are not compared: 13 previous and 8 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 (9)
Current report
Totals may not foot due to rounding.
Current report
On October 17, 2024, the Company amended and restated its senior secured, multi-currency, revolving credit facility (the “Senior Secured Facility”), previously amended and restated as of April 19, 2023, December 22, 2020 and November 19, 2018. The amended and restated agreement extended the final maturity date through October 17, 2029. Lender commitments under the Senior Secured Facility will increase from $1,705,000 to $1,815,000 until December 22, 2024 and will decrease to $1,660,000 thereafter. The Senior Secured Facility includes an “accordion” feature that allows the Company to increase the size of the Facility to $2,722,500. The Senior Secured Facility is secured by substantially all of the assets in the Company’s portfolio, including cash and cash equivalents.
Current report
Our quarterly valuation process begins with independent valuation firms conducting independent appraisals and assessments for all the investments they have been engaged to review. If an independent valuation firm is not engaged during a particular quarter, the valuation may be conducted by the Investment Adviser.
Current report
Totals may not foot due to rounding.
Current report
During the year ended December 31, 2024, we recognized gross realized gains of $5.4 million and gross realized losses of $82.4 million, resulting in net realized losses of $(77.0) million. Significant realized gains (losses) for the year ended December 31, 2024 are summarized below:
Current report
Spotted Hawk, MSEA Tankers LLC, Pelican were exited and ViewRay was written off during the year 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 year ended December 31, 2024, we recognized gross unrealized gains of $106.6 million and gross unrealized losses of $64.1 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $42.5 million. Net change in unrealized gains (losses) for the year ended December 31, 2024 was primarily driven by Spotted Hawk, MSEA Tankers LLC, Pelican were exited and ViewRay was 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). Additional significant changes in unrealized gains (losses) for the year ended December 31, 2024 are summarized below:
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 8 "Stockholders’ Equity—Equity Issuances — At-the-market (“ATM”) Offering” to our consolidated financial statements included in this report.
Removed paragraphs (29)
Previous report
MFIC Bethesda CLO 1 LLC Debt Securitization
Previous report
On November 2, 2023, the Company completed a $402,360 term debt securitization (the “Bethesda CLO 1”), a form of secured financing incurred by MFIC Bethesda CLO 1 LLC (the “Bethesda CLO 1 Issuer”), an indirect wholly owned, consolidated subsidiary of the Company. The notes offered by the CLO Issuer in connection with the Bethesda CLO 1 consist of $232,000 of AAA(sf) Class A-1 Senior Secured Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 2.40%, $16,000 of AAA(sf) Class A-2 Senior Secured Floating Rate Notes due 2035, which bear interest at three-month SOFR plus 2.90% and $154,360 of Subordinated notes due 2135, which do not bear interest. The Bethesda CLO 1 is backed by a diversified portfolio of middle market commercial loans, which the CLO Issuer purchased from the Company pursuant to a loan sale agreement entered into on the closing date of the Bethesda CLO 1 using the proceeds of the Bethesda CLO 1. The Company retained all Class A-2 Notes and all Subordinated Notes and the proceeds from the CLO transaction were used to repay borrowings under the Company's Facility. The Company serves as collateral manager to the Bethesda CLO 1 Issuer, Deutsche Bank Securities Inc. acted as initial purchaser and Apollo Global Securities, LLC acted as placement agent.
Previous report
2028 Notes
Previous report
On December 13, 2023, the Company issued $80,000 aggregate principal amount of 8.00% Notes due 2028 (inclusive of $5,000 aggregate principal amount pursuant to the underwriters’ overallotment option to purchase additional Notes) (the “2028 Notes”). The 2028 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after December 15, 2025, at a redemption price of $25 per Note plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to, but excluding, the date fixed for redemption. As of December 31, 2023, the principal amount outstanding was $80,000. The 2028 Notes will mature on December 15, 2028.
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 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 of Directors 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 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 of Directors 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 of Directors 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 this Annual Report on Form 10-K. 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
Our quarterly valuation process begins with each portfolio company or investment being initially valued by using certain inputs provided, among others, by the investment professionals of our Investment Adviser who are responsible for the portfolio investment.
Previous report
For information regarding results of operations for the year ended March 31, 2022, see the Company's Transition Report on Form 10-KT for the nine months ended December 31, 2022.
Previous report
The increase in total investment income of $46.1 million for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 was primarily driven by the increase in total interest income of $46.2 million. The increase in total interest income was due to an increase in the yield for the total debt portfolio, from 9.4% for December 31, 2022 to 11.5% for December 31, 2023. This was partially offset by a decrease in prepayment fees and income recognized from the acceleration of discount, premium, or deferred fees on repaid investments, from $11.3 million for the twelve months ended December 31, 2022 to $7.3 million for the twelve months ended December 31, 2023.
Previous report
For the nine months ended December 31, 2023 as compared to the nine months ended December 31, 2023
Previous report
The increase in total investment income of $33.1 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022 was primarily driven by the increase in total interest income of $33.9 million. The increase in total interest income was due to an increase in the yield for the total debt portfolio, from 9.4% for nine months ending December 31, 2022 to 11.8% for nine months ending December 31, 2023. This was partially offset by a lower income-bearing investment portfolio and a decrease in prepayment fees and income recognized from the acceleration of discount, premium, or deferred fees on repaid investments, from $7.6 million for the nine months ended December 31, 2022 to $4.7 million for the nine months ended December 31, 2023. The increase in dividend income of $0.5 million was due to increase in dividend from structured product investments.
Previous report
The increase in net expenses of $20.7 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022 was primarily due to the increase in interest and other debt expenses of $19.9 million. The increase of interest and other debt expenses was primarily attributed to an increase in total cost of debt, from 5.05% for the nine months ended December 31, 2022 to 7.18% for the nine months ended December 31, 2023. Furthermore, the increase in net expenses was partially offset by the decrease in management and performance-based incentive fees (net of amounts waived) of $0.6 million due to change in fee structures.
Previous report
During the twelve months ended December 31, 2022, we recognized gross realized gains of $5.2 million and gross realized losses of $76.5 million, resulting in net realized losses of $71.3 million. Net realized losses for the twelve months ended December 31, 2022 was primarily driven by the write off of the Company's investment in Dynamic Product Tankers (Prime), LLC and Glacier Oil & Gas Corp. Significant realized gains (losses) for the twelve months ended December 31, 2022 are summarized below:
Previous report
During the nine months ended December 31, 2023, we recognized gross realized gains of $1.4 million and gross realized losses of $0.4 million, resulting in net realized gains of $1.0 million, which was primarily driven by the realized gain due to foreign currency translations from the exit of NFA Group. Significant realized gains (losses) for the nine months ended December 31, 2023 are summarized below:
Previous report
During the nine months ended December 31, 2022, we recognized gross realized gains of $3.2 million and gross realized losses of $72.4 million, resulting in net realized losses of $69.2 million. Net realized losses for the twelve months ended December 31, 2022 was primarily driven by the write off of the Company's investment in Dynamic Product Tankers (Prime), LLC and Glacier Oil & Gas Corp. Significant realized gains (losses) for the nine months ended December 31, 2022 are summarized below:
Previous report
During the twelve months ended December 31, 2022, we recognized gross unrealized gains of $114.4 million and gross unrealized losses of $117.0 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $2.6 million. Net change in unrealized gains (losses) for the twelve months ended December 31, 2022 was primarily driven by write off of Dynamic Product Tankers (Prime), LLC and Glacier Oil & Gas Corp., offset by the decrease in value of Merx Aviation Finance LLC due to various lease restructuring, aircraft sales and impacts from the Russian/Ukraine conflict and under-performance with bankruptcy procedures from K&N Parent, Inc. Additional significant changes in unrealized gains (losses) for the year ended December 31, 2022 are summarized below:
Previous report
During the nine months ended December 31, 2022, we recognized gross unrealized gains of $95.1 million and gross unrealized losses of $77.1 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $18.0 million. Net change in unrealized gains (losses) for the nine months ended December 31, 2022 was primarily driven by write off of Dynamic Product Tankers (Prime), LLC and Glacier Oil & Gas Corp., which was offset by the decrease in value of Merx Aviation Finance LLC due to various lease restructuring, aircraft sales and impacts from the Russian/Ukraine conflict and under-performance with bankruptcy procedures from K&N Parent, Inc. Additional significant changes in unrealized gains (losses) for the nine months ended December 31, 2022 are summarized below:
Reworded paragraphs (19)
Previous wording
MidCap 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 December 31, 2023, 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 December 31, 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
This Annual Report on Form 10-K covers the twelve-month period from January 1, 2023 to December 31, 2023 (the “Annual Report”). On November 3, 2022, the Company's Board changed the Company’s fiscal year end from March 31 to December 31, effective December 31, 2022. Prior to this Annual Report, we filed a Transition Report on Form 10-KT for the nine-month transition period ended December 31, 2022, which reflected our financial results for the nine-month period from April 1, 2022 through December 31, 2022 (the “Transition Period”). Prior to this Transition Report, our most recent Annual Report on Form 10-K covers the fiscal year ended March 31, 2022 and reflects financial results for the twelve-month period from April 1 to March 31.
Current wording
This Annual Report on Form 10-K covers the twelve-month period from January 1, 2024 to December 31, 2024 (the “Annual Report”). On November 3, 2022, the Company's Board changed the Company’s fiscal year end from March 31 to December 31, effective December 31, 2022. Prior to this Annual Report, we filed an Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Previous wording
Apollo Investment Management, L.P. (the “Investment Adviser” or “AIM”) is our investment adviser and an affiliate of Apollo Global Management, Inc. and its consolidated subsidiaries (“AGM”). The Investment Adviser, subject to the overall supervision of our Board of Directors, manages the day-to-day operations of, and provides investment advisory services to the Company. AGM and other affiliates manage other funds that may have investment mandates that are similar, in whole or in part, with ours. AIM and its affiliates may determine that an investment is appropriate both for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, AIM may determine that we should invest on a side-by-side basis with one or more other funds. We make all such investments subject to compliance with applicable regulations and interpretations, and our allocation procedures. Certain types of negotiated co-investments may be made only in accordance with the terms of the exemptive order (the “Order”) we received from the SEC permitting us to do so. Under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must be able to reach certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our Board of Directors’ approved criteria. In certain situations where co-investment with one or more funds managed by AIM or its affiliates is not covered by the Order, the personnel of AIM or its affiliates will need to decide which fund will proceed with the investment. Such personnel will make these determinations based on allocation policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable laws, rules and regulations. The Order is subject to certain terms and conditions so there can be no assurance that we will be permitted to co-invest with certain of our affiliates other than in the circumstances currently permitted by regulatory guidance and the Order.
Current wording
Apollo Investment Management, L.P. (the “Investment Adviser” or “AIM”) is our investment adviser and an affiliate of Apollo Global Management, Inc. and its consolidated subsidiaries (“AGM”). The Investment Adviser, subject to the overall supervision of the Company's Board of Directors (the “Board”), manages the day-to-day operations of, and provides investment advisory services to the Company. AGM and other affiliates manage other funds that may have investment mandates that are similar, in whole or in part, with ours. AIM and its affiliates may determine that an investment is appropriate both for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, AIM may determine that we should invest on a side-by-side basis with one or more other funds. We make all such investments subject to compliance with applicable regulations and interpretations, and our allocation procedures. Certain types of negotiated co-investments may be made only in accordance with the terms of the exemptive order (the “Order”) we received from the SEC permitting us to do so. Under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must be able to reach certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with the Board's approved criteria. In certain situations where co-investment with one or more funds managed by AIM or its affiliates is not covered by the Order, the personnel of AIM or its affiliates will need to decide which fund will proceed with the investment. Such personnel will make these determinations based on allocation policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable laws, rules and regulations. The Order is subject to certain terms and conditions so there can be no assurance that we will be permitted to co-invest with certain of our affiliates other than in the circumstances currently permitted by regulatory guidance and the Order.
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 December 31, 2023, non-qualifying assets represented approximately 5.5% 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 December 31, 2024, non-qualifying assets represented approximately 8.5% of the total assets of the Company.
Previous wording
Our portfolio and investment activity during the twelve months ended December 31, 2023 and 2022 were as follows:
Current wording
Our portfolio and investment activity during the years ended December 31, 2024 and 2023 were as follows:
Previous wording
Since the initial public offering of the Company in April 2004 and through December 31, 2023, invested capital totaled $23.9 billion in 627 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 December 31, 2024, invested capital totaled $25.5 billion in 794 portfolio companies. Over the same period, the Company completed transactions with more than 100 different financial sponsors.
Previous wording
As of December 31, 2023, $2.33 billion or 99.9% 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 December 31, 2024, $2.89 billion or 96.0% 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
The Board has designated the Investment Adviser as its “valuation designee” pursuant to Rule 2a-5 under the 1940 Act, and in that role the Investment Adviser is responsible for performing fair value determinations relating to all of the Company's investments, including periodically assessing and managing any material valuation risks and establishing and applying fair value methodologies, in accordance with valuation policies and procedures that have been approved by the Company's Board of Directors. Even though the Company's Board of Directors designated the Company's Investment Adviser as “valuation designee,” the Company's Board of Directors continues to be responsible for overseeing the process for determining fair valuation.
Current wording
The Board has designated the Investment Adviser as its “valuation designee” pursuant to Rule 2a-5 under the 1940 Act, and in that role the Investment Adviser is responsible for performing fair value determinations relating to all of the Company's investments, including periodically assessing and managing any material valuation risks and establishing and applying fair value methodologies, in accordance with valuation policies and procedures that have been approved by the Company's Board. Even though the Company's Board designated the Company's Investment Adviser as “valuation designee,” the Company's Board continues to be responsible for overseeing the process for determining fair valuation.
Previous wording
Investments determined by these valuation procedures which have a fair value of less than $1 million during the prior fiscal quarter may be valued based on inputs identified by the Investment Adviser without the necessity of obtaining valuation from an independent valuation firm, if once annually an independent valuation firm using the procedures described herein provides an independent assessment of value. 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 twelve months ended December 31, 2022, there were no significant changes to the Company’s valuation techniques and related inputs considered in the valuation process.
Current wording
Investments determined by these valuation procedures which have a fair value of less than $1 million during the prior fiscal quarter may be valued based on inputs identified by the Investment Adviser without the necessity of obtaining valuation from an independent valuation firm, if once annually an independent valuation firm using the procedures described herein provides an independent assessment of value. 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 year ended December 31, 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 twelve and nine months ended December 31, 2023 and 2022 were as follows:
Current wording
Operating results for the year ended December 31, 2024 and 2023 were as follows:
Previous wording
Pending Mergers with AFT and AIF
Current wording
The increase in total investment income of $25.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by the increase in total interest income of $25.6 million. The increase in total interest income was due to an increase in the average yield portfolio given the mergers with AFT and AIF on July 22, 2024.
Previous wording
The increase in net expenses of $31.2 million for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 was primarily due to the increase in interest and other debt expenses of $30.1 million. The increase of interest and other debt expenses was primarily attributed to an increase in total annualized cost of debt, from 4.68% for the twelve months ended December 31, 2022 to 7.10% for the twelve months ended December 31, 2023. The increase in net expenses was mainly due to excise tax which was partially offset by the decrease in management and performance-based incentive fees (net of amounts waived) of $0.4 million due to change in fee structures.
Current wording
The increase in net expenses of $8.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to the increase in interest and other debt expenses of $12.3 million. The increase of interest and other debt expenses was primarily attributed to an increase in average debt balance from $1.45 billion for year ended December 31, 2023 to $1.57 billion for year ended December 31, 2024. In addition, total annualized cost of debt increased from 7.10% for the year ended December 31, 2023 to 7.35% for the year ended December 31, 2024. The increase in net expenses was partially offset by the decrease in excise tax comparing to year ended December 31, 2023.
Previous wording
For the twelve months ended December 31, 2023 and December 31, 2022, the Company incurred $1.1 million and $- million, respectively, of U.S. federal excise tax. The excise tax is included in other general and administrative expenses for twelve months ended December 31, 2023.
Current wording
For the year ended December 31, 2024 and December 31, 2023, the Company incurred none and $1.1 million, respectively, of U.S. federal excise tax. The excise tax was included in other general and administrative expenses for the year ended December 31, 2023.
Previous wording
During the twelve months ended December 31, 2023, we recognized gross realized gains of $1.6 million and gross realized losses of $1.4 million, resulting in net realized gains of $0.2 million. Significant realized gains (losses) for the twelve months ended December 31, 2023 are summarized below:
Current wording
During the year ended December 31, 2023, we recognized gross realized gains of $1.6 million and gross realized losses of $1.4 million, resulting in net realized gain of $0.2 million. Significant realized gains (losses) for the year ended December 31, 2023 are summarized below:
Previous wording
During the twelve months ended December 31, 2023, we recognized gross unrealized gains of $29.7 million and gross unrealized losses of $27.2 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $2.6 million. Net change in unrealized gains (losses) for the twelve months ended December 31, 2023 was primarily driven by the increase in cash flows from Merx Aviation Finance, LLC, increase in fair value from securitization assets owned by US Auto, which was partially offset by the financial under-performance with ongoing bankruptcy procedures from ViewRay and widening credit spreads. Additional significant changes in unrealized gains (losses) for the year ended December 31, 2023 are summarized below:
Current wording
During the year ended December 31, 2023, we recognized gross unrealized gains of 29.7 million and gross unrealized losses of 27.2 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $2.6 million. Net change in unrealized gains (losses) for the year ended December 31, 2023 was primarily driven by the increase in cash flows from Merx Aviation Finance, LLC, increase in fair value from securitization assets owned by US Auto, which was partially offset by the financial under-performance with ongoing bankruptcy procedures from ViewRay and widening credit spreads. Additional significant changes in unrealized gains (losses) for the year ended December 31, 2023 are summarized below:
Previous wording
The Company’s liquidity and capital resources are generated and generally available through periodic follow-on equity and debt offerings, our Senior Secured Facility (as defined in Note 7 to the consolidated financial statements), our senior secured notes, our senior unsecured notes, investments in special purpose entities in which we hold and finance particular investments on a non-recourse basis, as well as from cash flows from operations, investment sales of liquid assets and repayments of senior and subordinated loans and income earned from investments. For liquidity and capital resources information for the year ended March 31, 2022, see the Company's Transition Report on Form 10-KT for the nine months ended December 31, 2022.
Current wording
The Company’s liquidity and capital resources are generated and generally available through periodic follow-on equity and debt offerings, our Senior Secured Facility (as defined in Note 7 to the consolidated financial statements), our senior secured notes, our senior unsecured notes, investments in special purpose entities in which we hold and finance particular investments on a non-recourse basis, as well as from cash flows from operations, investment sales of liquid assets and repayments of senior and subordinated loans and income earned from investments.
Previous wording
As of December 31, 2023, aggregate lender commitments under the Senior Secured Facility totaled $1.71 billion and have $1.00 billion of unused capacity. As of December 31, 2023, there were $17.3 million of letters of credit issued under the Senior Secured Facility as shown as part of total commitments in Note 7 to the consolidated financial statements.
Current wording
As of December 31, 2024, aggregate lender commitments under the Senior Secured Facility totaled $1.66 billion and have $0.68 billion of unused commitments. As of December 31, 2024, there were $7.8 million of letters of credit issued under the Senior Secured Facility as shown as part of total commitments in Note 7 to the consolidated financial statements.
Previous wording
Distributions paid to stockholders during the twelve months ended December 31, 2023 and nine months ended December 31, 2022 totaled $123.6 million ($1.89 per share) and $66.7 million ($1.04 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 December 31, 2023 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, 2023. 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 of Directors.
Current wording
Distributions paid to stockholders during the years ended December 31, 2024 and 2023 totaled $139.6 million ($1.72 per share) and $123.6 million ($1.89 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 December 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.
Previous wording
For the twelve months ended December 31, 2023 and nine months ended December 31, 2022, PIK income totaled $3.0 million and $2.7 million on total investment income of $276.5 million and $175.6 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 6 to the consolidated financial statements for additional information regarding the Company’s PIK income.
Current wording
For the years ended December 31, 2024 and 2023, PIK income totaled $12.2 million and $3.0 million on total investment income of $301.8 million and $276.5 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 6 to the consolidated financial statements for additional information regarding the Company’s PIK income.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Our portfolio and investment activity during the nine months ended December 31, 2023 and 2022 were as follows:
Previous report — wording carried elsewhere
For the nine months ended December 31, 2023 and December 31, 2022, the Company incurred $1.1 million and $- million, respectively, of U.S. federal excise tax. The excise tax is included in other general and administrative expenses for nine months ended December 31, 2023.
Previous report — wording carried elsewhere
During the nine months ended December 31, 2023, we recognized gross unrealized gains of $24.3 million and gross unrealized losses of $23.2 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized gains of $1.1 million. Net change in unrealized gains (losses) for the nine months ended December 31, 2023 was primarily driven by the increase in cash flows from Merx Aviation Finance, LLC, increase in fair value from securitization assets owned by US Auto, which was partially offset by the financial under-performance with ongoing bankruptcy procedures from ViewRay and widening credit spreads. Additional significant changes in unrealized gains (losses) for the year nine months December 31, 2023 are summarized below: