• Adjusted Net Investment Income: $6.7 million or $0.31 per share, up from $5.5 million or $0.25 per share in the previous quarter.
• Dividend Coverage: Adjusted net investment income covered the $0.25 per share dividend by nearly 1.25 times.
• Net Asset Value (NAV): $199.3 million or $9.20 per share as of June 30, 2024, down from $201.5 million or $9.30 per share as of March 31, 2024.
• Debt-to-Equity Leverage: Decreased from 1.6 times to 1.54 times during the quarter.
• Investment Portfolio: Totaled $485.8 million, a decrease from $500.9 million in the previous quarter.
• Total Borrowings: $307.8 million, with $177.8 million under a floating rate revolving credit facility and $130 million in fixed rate notes.
• Investment Income: $15.6 million for the second quarter, up from $15.2 million in the first quarter.
• Total Expenses: $9.1 million, down from $9.7 million in the previous quarter.
• Net Loss: $3.3 million, compared to a net loss of $2.3 million in the prior quarter.
• Effective Yield: Stable at 11.9% on the portfolio's debt and preferred equity investments.
• Nonaccrual Investments: Eight investments on nonaccrual status, representing 1.9% of the portfolio at fair market value.

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Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Monroe Capital Corp (NASDAQ:MRCC) reported its 17th consecutive quarter where adjusted net investment income covered the $0.25 per share dividend.
• The company achieved a total annualized dividend yield of 14% based on the August 6, 2024, closing share price.
• MRCC's debt-to-equity leverage decreased from 1.6 times to 1.54 times, indicating improved financial stability.
• The portfolio is predominantly comprised of first lien senior secured investments, which are historically resistant to challenging macroeconomic environments.
• MRCC's effective yield remained stable at nearly 12%, reflecting strong income generation from its portfolio.

Negative Points

• Net Asset Value (NAV) decreased slightly from $201.5 million to $199.3 million, primarily due to net unrealized losses.
• The investment portfolio decreased by $15.1 million, from $500.9 million to $485.8 million, indicating a reduction in invested assets.
• Eight investments are on nonaccrual status, representing 1.9% of the portfolio at fair market value, which could impact future income.
• The SLF (Senior Loan Fund) portfolio experienced a modest decrease in average mark, indicating potential valuation challenges.
• MRCC incurred a net loss of $3.3 million for the quarter, primarily due to unrealized mark-to-market losses on certain portfolio companies.

Q & A Highlights

Q: Is the SLF (Senior Loan Fund) in a runoff mode given the decrease in fair value? A: Mick Solimene, CFO, clarified that the SLF's fair market value was actually flat quarter over quarter. The focus has been on reducing leverage while maintaining dividends. The SLF represents about 6.8% of MRCC's portfolio, and they are evaluating market conditions to determine the right time to reenter the market.

Q: Why is there a discrepancy in the valuation of the second lien debt and preferred equity for Education Corporation of America? A: Mick Solimene explained that the difference is due to the recovery waterfall. The debt position is accruing fees and interest above cost, while the preferred equity is at the bottom of the recovery waterfall, resulting in a zero fair value.

Q: Will the third quarter EPS cover the dividend given the fee waiver expectations? A: Mick Solimene confirmed that they believe the third quarter EPS will cover the dividend.

Q: What is the status of nonaccruals in the portfolio, and is there potential for recovery? A: Mick Solimene stated that nonaccruals represent 1.9% of fair value and 4.8% of cost. They are actively managing these assets with a focus on maximizing long-term recovery. Alex Parmacek added that the nonaccruals are at different stages of turnaround, with some showing positive progress.

Q: How does MRCC plan to manage the competitive environment and maintain its dividend yield? A: Theodore Koenig, CEO, emphasized leveraging their experienced team and originations platform to support incumbent portfolio companies. MRCC aims to continue delivering stable dividends, supported by a predominantly first lien portfolio with an effective yield of nearly 12%.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.