DEF: Monroe Capital Corporation Seeks Stockholder Approval for Below NAV Share Sales

Monroe Capital Corporation is seeking stockholder approval to allow the company to sell shares of its common stock below net asset value (NAV) for the next 12 months, providing flexibility to raise capital in response to market conditions.

Summary

• Monroe Capital Corporation is holding its 2025 Annual Meeting of Stockholders virtually on June 17, 2025.
• The meeting will address the election of two Class I directors and a proposal to authorize the company to sell shares of its common stock below net asset value (NAV) under certain conditions.
• The proposal includes a condition that the number of shares sold on any given date does not exceed 25% dilution to current investors not participating in the offering.
• The Board of Directors recommends voting FOR the election of the director nominees and FOR the proposal to sell shares below NAV.
• Stockholders of record as of April 7, 2025, are entitled to vote.
• The company is seeking authorization to sell shares below NAV to maintain financial flexibility and take advantage of investment opportunities, especially during volatile market conditions.
• The company's common stock has recently traded at a discount to its NAV.
• The company paid MC Advisors a base management fee of approximately $8.1 million and incentive fees of approximately $2.4 million for the year ended December 31, 2024.
• Incentive fees during the year ended December 31, 2024 were limited by approximately $2.9 million due to the Incentive Fee Limitation.
• For the year ended December 31, 2024, $1.0 million of expenses were reimbursed to MC Management under the administration agreement.
• The company's Board of Directors has nominated Thomas J. Allison and Robert S. Rubin for election as Class I directors.

Sentiment

Score: 6

Explanation: The document is neutral in tone, presenting facts and proposals for stockholder consideration. While it acknowledges potential risks and dilution, it also emphasizes the benefits of financial flexibility. The sentiment is slightly positive due to the company's efforts to maintain access to capital and capitalize on investment opportunities.

Positives

• The proposal to sell shares below NAV aims to provide the company with financial flexibility to capitalize on investment opportunities during market volatility.
• The company maintains sources of liquidity through a credit facility and other means.
• The Board of Directors believes that having the flexibility to issue common stock below NAV per share in certain instances is in the best interests of stockholders.
• The Board of Directors believes that sales of common stock at less than NAV per share in the future could have a positive effect on the company's stock price depending on a variety of factors, including the company's use of the proceeds of such sales.

Negatives

• Selling shares below NAV would result in immediate dilution to existing stockholders.
• If current stockholders do not purchase shares to maintain their percentage interest, their voting power will be diluted.
• Sales of substantial amounts of common stock in the open market may adversely affect the market price of the common stock.
• The company's common stock has recently traded at a discount to its NAV.
• The incentive fee structure may create an incentive for MC Advisors to invest in certain types of securities that may have a high degree of risk.

Risks

• Turbulence in the U.S. credit markets could limit access to sufficient debt and equity capital.
• Continued volatility in the capital markets could negatively impact the company's asset valuations, stockholders' equity, and debt-to-equity ratio.
• Failure to comply with debt covenants could result in an event of default.
• The market price of shares may trade at a discount from NAV.
• The company may compete with other entities managed by MC Advisors and its affiliates for capital and investment opportunities.

Future Outlook

The company seeks to maintain financial flexibility to capitalize on investment opportunities and continue to pay steady distributions to stockholders.

Management Comments

• Theodore L. Koenig, Chairman and Chief Executive Officer, invites stockholders to participate in the Annual Meeting and report on the company's progress.
• The Board of Directors believes that having the flexibility to issue common stock below NAV per share in certain instances is in the best interests of stockholders.

Industry Context

The document highlights the challenges and opportunities within the business development company (BDC) sector, particularly regarding access to capital and navigating market volatility. The ability to sell shares below NAV is a tool that some BDCs seek to provide flexibility in capital raising.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards.
• However, it mentions that shares of business development companies may trade at a market price that is less than the value of the net assets attributable to those shares, regardless of the performance of the business development company's investments.
• The document also mentions that common stock offerings by business development companies are priced based on the market price of the currently outstanding shares of common stock, less a small discount of approximately 5%.

Related Party Transactions

• The company has entered into agreements with MC Advisors, in which senior management and members of MC Advisors' investment committee have ownership and financial interests.
• The company has entered into an administration agreement with Monroe Capital Management Advisors, LLC, or MC Management, to furnish office facilities and equipment and provide administrative services.
• The company has entered into 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

• Existing stockholders face potential dilution if shares are sold below NAV.
• The company's ability to grow and pay steady distributions could be affected if it cannot access capital markets.
• The market price of the company's common stock may be affected by sales of substantial amounts of common stock in the open market.

Next Steps

• Stockholders are requested to vote on the matters to be acted on at the Annual Meeting by following the instructions provided in the enclosed proxy card or voting instruction form.
• The company will file a Current Report on Form 8-K with the Securities and Exchange Commission within four business days after the Annual Meeting to publish the final voting results.

Key Dates

Keywords

proxy statement, annual meeting, below NAV, stockholders, directors, common stock, Monroe Capital, investment