MidCap Financial Investment Corp

INVESTMENT CORPORATION

Risk Factor Summary

The following is only a summary of the principal risks that may materially adversely affect our business, financial condition, results of operations and cash flows. The following should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth in the section titled “Item 1A. Risk Factors” in this report.

Risk Relating to the Current Environment

•

Capital markets may experience periods of disruption and instability. Such market conditions may materially and adversely affect the debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations.

•

Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, a misappropriation of funds, and/or damage to our business relationships, all of which could negatively impact our financial results.

•

We are exposed to risks associated with changes in interest rates.

•

Inflation and supply chain risks have had and may continue to have an adverse impact on our business, results of operations and financial condition of our portfolio companies.

•

The ongoing armed conflicts as a result of the Russian invasion of Ukraine and the conflict in the Middle East may have a material adverse impact on us and our portfolio companies.

•

Price declines and illiquidity in the corporate debt markets have adversely affected, and may in the future adversely affect, the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.

•

The current state of the economy and volatility in the global financial markets could have a material adverse effect on our business, financial condition and results of operations.

•

Uncertainty with respect to the financial stability of the United States and several countries in the EU could have a significant adverse effect on our business, financial condition, and results of operations.

•

We may form one or more Collateralized Loan Obligations (“CLOs”), which may subject us to certain structured financing risks.

•

Changes in existing laws or regulations, the interpretations thereof or newly enacted laws or regulations may negatively impact our business.

•

The continued uncertainty relating to the U.S. and global economy could have a negative impact on our business.

•

Changes to U.S. federal income tax laws could materially and adversely affect us and our stockholders.

Risks Relating to our Business and Structure

•

We may suffer credit losses.

•

We are dependent upon Apollo Investment Management’s key personnel for our future success and upon their access to Apollo Global Management, L.P.'s investment professionals and partners.

•

Our financial condition and results of operations depend on our ability to manage future growth effectively.

•

We operate in a highly competitive market for investment opportunities.

•

Any failure on our part to maintain our status as a business development company ("BDC") would reduce our operating flexibility.

•

We will be subject to corporate-level income tax if we are unable to maintain our status as a regulated investment company ("RIC").

•

We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

•

Regulations governing our operation as a BDC affect our ability to raise, and the way in which we raise, additional capital.

•

Our business requires a substantial amount of capital to grow because we must distribute most of our income.

•

As required by the Investment Company Act of 1940 (the “1940 Act”), a significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith and, as a result, there is and will be uncertainty as to the value of our portfolio investments.

•

The lack of liquidity in our investments may adversely affect our business.

•

We may experience fluctuations in our periodic results.

•

Our ability to enter into transactions with our affiliates is restricted.

•

There are potential conflicts of interest which could adversely affect our investment returns.

Risks Relating to our Investments

•

Our investments in portfolio companies are risky, and we could lose all or part of our investment.

•

Economic recessions or downturns could impair our portfolio companies and harm our operating results.

•

Our portfolio companies may be highly leveraged and a covenant breach by our portfolio companies may harm our operating results.

•

There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to, among other things, lender liability or fraudulent conveyance claims.

•

If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to our current business strategy.

•

Our portfolio contains a limited number of portfolio companies, which subjects us to a greater risk of significant loss if any of these companies defaults on its obligations under any of its debt securities.

•

An investment strategy focused primarily on privately-held companies presents certain challenges, including the lack of available information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns.

Risks Relating to our Debt Instruments

•

The trading market or market value of our debt securities may fluctuate.

•

Terms relating to redemption may materially adversely affect your return on any debt securities that we may issue.

•

Our credit ratings may not reflect all risks of an investment in our debt securities.

Risks Relating to an Investment in our Common Stock

•

Investing in our securities involves a high degree of risk and is highly speculative.

•

There is a risk that investors in our equity securities may not receive distributions or that our distributions may not grow over time and that investors in our debt securities may not receive all of the interest income to which they are entitled.

•

We may be unable to invest the net proceeds raised from offerings on acceptable terms, which would harm our financial condition and operating results.

•

Sales of substantial amounts of our securities may have an adverse effect on the market price of our securities.

PART I