MRCC.Monroe Capital CORP
10-Q: Monroe Capital Corporation Reports Third Quarter 2024 Results
Sentiment:
Quarterly Report
Monroe Capital Corporation's third quarter 2024 results show a net increase in net assets resulting from operations of $5.0 million, or $0.23 per share.
Worse than expectedThe company's net increase in net assets resulting from operations was $5.0 million, or $0.23 per share, for the third quarter of 2024, which is a decrease compared to the same period last year.The company's non-accrual rate of 3.1% of total investments at fair value as of September 30, 2024, is higher than the 1.5% rate as of December 31, 2023, which may indicate a deterioration in credit quality.
Summary
- Monroe Capital Corporation reported a net increase in net assets resulting from operations of $5.0 million, or $0.23 per share, for the third quarter of 2024.
- The company's net investment income for the quarter was $6.5 million, or $0.30 per share.
- Total investment income for the quarter was $15.7 million, while total operating expenses were $9.1 million.
- The company's portfolio included 79.2% senior secured loans, 0.8% unitranche secured loans, 6.4% junior secured loans and 13.6% equity securities as of September 30, 2024.
- The company had $4.1 million in cash and cash equivalents and $169.0 million of total debt outstanding on its revolving credit facility as of September 30, 2024.
- The company had $86.0 million available for additional borrowings on its revolving credit facility, subject to borrowing base availability.
- The company's asset coverage ratio based on aggregate borrowings outstanding was 167% as of September 30, 2024.
Sentiment
Score: 5
Explanation: The document presents mixed results with a decrease in net assets resulting from operations and an increase in non-accrual loans, but also highlights positive aspects such as available borrowing capacity and management's confidence in navigating the market. The overall sentiment is neutral to slightly negative.
Positives
- The company's net investment income for the quarter was $6.5 million, or $0.30 per share.
- The company had $86.0 million available for additional borrowings on its revolving credit facility, subject to borrowing base availability.
Negatives
- The company's net increase in net assets resulting from operations was $5.0 million, or $0.23 per share, for the third quarter of 2024, which is a decrease compared to the same period last year.
- The company's portfolio included 79.2% senior secured loans, 0.8% unitranche secured loans, 6.4% junior secured loans and 13.6% equity securities as of September 30, 2024, which indicates a shift in asset allocation compared to the previous year.
Risks
- The company's investments are subject to market risk, including valuation risk, interest rate risk, currency risk and inflation and supply chain risk.
- The company's investments may not have readily available market quotations, and those investments which do not have readily available market quotations are valued at fair value as determined in good faith by our Valuation Designee in accordance with our valuation policy.
- The company's portfolio companies may be affected by persistent inflationary pressures, which could affect their profit margins.
- The company's portfolio companies may be affected by the ongoing military conflict in the Middle East and Europe and general uncertainty surrounding the financial and political stability of the United States, the United Kingdom, the European Union and China.
Future Outlook
The company expects that private equity firms will seek to leverage their investments by combining equity capital with senior secured loans and mezzanine debt from other sources, such as us. We believe that current market conditions for our target market may continue to create favorable opportunities to invest at attractive risk-adjusted returns.
Management Comments
- Management believes that the company's available cash balances and/or ability to draw on the revolving credit facility provide sufficient funds to cover its unfunded commitments as of September 30, 2024.
- Management believes that the company's scale, product suite, diversification, and strong historical recovery rate track record will continue to allow it to find attractive investment opportunities and navigate this uncertain market environment while generating attractive risk-adjusted returns.
Industry Context
The company operates in the specialty finance sector, providing financing solutions primarily to lower middle-market companies in the United States and Canada. The company's performance is influenced by factors such as the demand for debt capital, competition from other lenders, and the overall economic environment.
Comparison to Industry Standards
- The company's portfolio includes a mix of senior secured, unitranche secured, and junior secured debt, as well as equity investments, which is typical for a BDC.
- The company's weighted average annualized contractual coupon yield on senior secured loans was 11.6% as of September 30, 2024, which is within the range of other BDCs focused on middle-market lending.
- The company's asset coverage ratio of 167% as of September 30, 2024, is above the minimum requirement of 150% for BDCs.
- The company's non-accrual rate of 3.1% of total investments at fair value as of September 30, 2024, is higher than the 1.5% rate as of December 31, 2023, which may indicate a deterioration in credit quality.
Related Party Transactions
- The company has an Investment Advisory and Management Agreement with MC Advisors, under which MC Advisors provides investment advisory services to the company and receives a base management fee and an incentive fee.
- The company has an Administration Agreement with MC Management, under which the company reimburses MC Management for its allocable portion of overhead and other expenses.
- SLF has an administration agreement with MC Management to provide SLF with certain loan servicing and administrative functions.
- Theodore L. Koenig, the company's Chief Executive Officer and Chairman of the Board, is also a manager of MC Advisors and the Chief Executive Officer of MC Management.
- Lewis W. Solimene, Jr., the company's Chief Financial Officer and Chief Investment Officer, is also a managing director of MC Management.
- The company has a license agreement with Monroe Capital LLC, under which Monroe Capital LLC has agreed to grant the company a non-exclusive, royalty-free license to use the name Monroe Capital for specified purposes in its business.
Stakeholder Impact
- Stockholders may be impacted by the company's performance, including the net increase in net assets resulting from operations and the level of distributions.
- The company's portfolio companies may be impacted by the company's investment decisions and monitoring activities.
- The company's lenders may be impacted by the company's ability to repay its debt obligations.
Next Steps
- The company will continue to monitor its portfolio companies and make investment decisions based on market conditions and credit quality.
- The company will continue to evaluate its capital structure and may seek additional financing opportunities.
- The company will continue to evaluate the impact of the strategic investment by Wendel Group.
Key Dates
| Date | Description |
|---|---|
| 2012-10-18 | Filing date of the Amended and Restated Articles of Incorporation of Monroe Capital Corporation |
| 2012-10-18 | Filing date of the Bylaws of Monroe Capital Corporation |
| 2015-09-03 | Date of original investment in Education Corporation of America |
| 2015-09-18 | Date of original investment in InMobi Pte, Ltd. |
| 2016-11-10 | Date of original investment in Liftforward SPV II, LLC |
| 2017-05-12 | Date of original at-the-market (ATM) equity distribution agreements |
| 2017-06-11 | Date of original investment in MC Asset Management (Corporate), LLC |
| 2017-07-22 | Date of original investment in American Community Homes, Inc. |
| 2017-08-10 | Date of original investment in American Community Homes, Inc. |
| 2017-10-20 | Date of original investment in HFZ Capital Group LLC |
| 2017-10-31 | Date of original investment in MRCC Senior Loan Fund I, LLC |
| 2017-12-22 | Date of original investment in Burroughs, Inc. |
| 2018-04-24 | Date of original investment in Hastings Manufacturing Company |
| 2018-06-18 | Date of original investment in Valudor Products LLC |
| 2018-08-10 | Date of original investment in American Community Homes, Inc. |
| 2018-10-05 | Date of original investment in VPS Holdings, LLC |
| 2018-11-02 | Date of original investment in Mnine Holdings, Inc. |
| 2018-12-28 | Date of original investment in Planful, Inc. |
| 2019-01-04 | Date of original investment in Attom Intermediate Holdco, LLC |
| 2019-01-28 | Date of original investment in XanEdu Publishing, Inc. |
| 2019-02-15 | Date of original investment in Mindbody, Inc. |
| 2019-02-28 | Date of original investment in Crownpeak Technology, Inc. |
| 2019-03-29 | Date of original investment in American Community Homes, Inc. |
| 2019-04-19 | Date of original investment in TCFIII OWL Buyer LLC |
| 2019-06-25 | Date of original investment in NECB Collections, LLC |
| 2019-07-09 | Date of original investment in HS4 Acquisitionco, Inc. |
| 2019-09-30 | Date of original investment in American Community Homes, Inc. |
| 2019-12-20 | Date of original investment in Panda Acquisition, LLC |
| 2019-12-30 | Date of original investment in American Community Homes, Inc. |
| 2020-03-30 | Date of original investment in American Community Homes, Inc. |
| 2020-08-28 | Date of original investment in BLST Operating Company, LLC |
| 2020-10-19 | Date of original investment in Quest Resource Management Group, LLC |
| 2020-12-24 | Date of original investment in J2 BWA Funding LLC |
| 2020-12-31 | Date of original investment in Seran BioScience, LLC |
| 2021-01-12 | Date of original investment in StarCompliance MidCo, LLC |
| 2021-01-26 | Date of original investment in MC Asset Management (Corporate), LLC |
| 2021-02-12 | Date of original investment in Brickell Bay Acquisition Corp. |
| 2021-02-16 | Date of original investment in TigerConnect, Inc. |
| 2021-03-16 | Date of original investment in Arcstor Midco, LLC |
| 2021-03-25 | Date of original investment in MoneyLion, Inc. |
| 2021-04-13 | Date of original investment in Aras Corporation |
| 2021-04-16 | Date of original investment in Calabrio, Inc. |
| 2021-05-14 | Date of original investment in The Kyjen Company, LLC |
| 2021-05-25 | Date of original investment in ASG II, LLC |
| 2021-06-10 | Date of original investment in LVF Holdings, Inc. |
| 2021-06-21 | Date of original investment in BTR Opco LLC (fka Born to Run, LLC) |
| 2021-06-30 | Date of original investment in Dorado Acquisition, Inc. |
| 2021-06-30 | Date of original investment in INH Buyer, Inc. |
| 2021-07-02 | Date of original investment in Witkoff/Monroe 700 JV LLC |
| 2021-07-29 | Date of original investment in MV Receivables II, LLC |
| 2021-08-02 | Date of original investment in Lifted Trucks Holdings, LLC |
| 2021-08-03 | Date of original investment in Independence Buyer, Inc. |
| 2021-08-04 | Date of original investment in Recycled Plastics Industries, LLC |
| 2021-08-06 | Date of original investment in SFR Holdco, LLC |
| 2021-08-09 | Date of original investment in Florida East Coast Industries, LLC |
| 2021-08-11 | Date of original investment in Second Avenue SFR Holdings II LLC |
| 2021-08-20 | Date of original investment in NationsBenefits, LLC |
| 2021-09-08 | Date of original investment in Bonterra, LLC |
| 2021-09-22 | Date of original investment in Mindbody, Inc. |
| 2021-12-17 | Date of original investment in TCFIII OWL Buyer LLC |
| 2021-12-22 | Date of original investment in Spherix Global Inc. |
| 2021-12-31 | Date of original investment in Chess.com, LLC |
| 2022-02-16 | Date of original investment in TigerConnect, Inc. |
| 2022-02-28 | Date of original investment in Kar Wash Holdings, LLC |
| 2022-03-25 | Date of original investment in MoneyLion, Inc. |
| 2022-05-03 | Date of original investment in Centaur (Palm Beach) Owner LLC and Panther National Golf Club LLC |
| 2022-05-25 | Date of original investment in ASG II, LLC |
| 2022-06-03 | Date of original investment in Whistler Parent Holdings III, Inc. |
| 2022-06-10 | Date of original investment in American Broadband and Telecommunications Company LLC |
| 2022-06-17 | Date of original investment in Security Services Acquisition Sub Corp. |
| 2022-06-21 | Date of original investment in Destination Media, Inc. |
| 2022-06-30 | Date of original investment in MEI Buyer LLC |
| 2022-07-14 | Date of original investment in Express Wash Acquisition Company, LLC |
| 2022-07-27 | Date of original investment in Mnine Holdings, Inc. |
| 2022-08-19 | Date of original investment in GC Champion Acquisition LLC |
| 2022-08-20 | Date of original investment in NationsBenefits, LLC |
| 2022-08-21 | Date of original investment in Seran BioScience, LLC |
| 2022-08-27 | Date of original investment in Douglas Holdings, Inc. |
| 2022-09-09 | Date of original investment in CGI Automated Manufacturing, LLC |
| 2022-09-12 | Date of original investment in Planful, Inc. |
| 2022-09-27 | Date of original investment in Crownpeak Technology, Inc. |
| 2022-10-04 | Date of original investment in NQ PE Project Colosseum Midco Inc. |
| 2022-10-19 | Date of original investment in Avalara, Inc. |
| 2022-10-24 | Date of original investment in iCIMS, Inc. |
| 2022-11-03 | Date of original investment in Sports Operating Holdings II, LLC |
| 2022-11-27 | Date of original investment in Dorado Acquisition, Inc. |
| 2022-12-08 | Date of original investment in Prototek LLC |
| 2022-12-09 | Date of original investment in Kingsley Gate Partners, LLC |
| 2022-12-18 | Date of original investment in Hastings Manufacturing Company |
| 2022-12-21 | Date of original investment in Amelia Holding II, LLC |
| 2023-01-12 | Date of original investment in V10 Entertainment, Inc. |
| 2023-01-31 | Date of original investment in KL Moon Acquisition, LLC (fka Spectrum Science Communications, LLC) |
| 2023-02-15 | Date of original investment in Vice Acquisition Holdco, LLC |
| 2023-03-29 | Date of original investment in Hastings Manufacturing Company |
| 2023-06-30 | Date of original investment in MEI Buyer LLC |
| 2023-07-17 | Date of original investment in Bluesight, Inc. |
| 2023-08-01 | Date of original investment in GC Champion Acquisition LLC |
| 2023-08-19 | Date of original investment in Forest Buyer, LLC |
| 2023-09-28 | Date of original investment in Bonterra, LLC |
| 2023-12-29 | Date of original investment in Vero Biotech Inc. |
| 2024-01-09 | Date of original investment in MEI Buyer LLC |
| 2024-01-25 | Date of original investment in SoundHound AI, Inc. (fka Amelia Holding II, LLC) |
| 2024-02-06 | Date of original investment in KL Moon Acquisition, LLC (fka Spectrum Science Communications, LLC) |
| 2024-03-15 | Date of original investment in Forest Buyer, LLC |
| 2024-03-18 | Date of original investment in Epika Fleet Services, Inc. |
| 2024-05-16 | Date of original investment in Brickell Bay Acquisition Corp. |
| 2024-05-28 | Date of original investment in Whistler Parent Holdings III, Inc. |
| 2024-06-10 | Date of original investment in Spherix Global Inc. |
| 2024-06-18 | Date of original investment in Thrasio, LLC |
| 2024-06-28 | Date of original investment in Recorded Future, Inc. |
| 2024-07-18 | Date of original investment in Cdata Software, Inc. |
| 2024-08-16 | Date of original investment in Northeast Contracting Company, LLC |
| 2024-08-19 | Date of original investment in Forest Buyer, LLC |
| 2024-08-27 | Date of original investment in Douglas Holdings, Inc. |
| 2024-09-09 | Date of original investment in Relevate Health Group, LLC |
Keywords
Monroe Capital Corporation, business development company, BDC, investment income, senior secured loans, junior secured loans, unitranche secured loans, equity investments, net asset value, financial results, portfolio companies, credit facility, debt financing
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