Monroe Capital Income Plus Corp.
05/08/2026 | Press release | Distributed by Public on 05/08/2026 11:56
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except as otherwise specified, references to "we," "us" and "our" refer to Monroe Capital Income Plus Corporation and its consolidated subsidiaries; MC Advisors refers to Monroe Capital BDC Advisors, LLC, our investment adviser and a Delaware limited liability company; MC Management refers to Monroe Capital Management Advisors, LLC, our administrator and a Delaware limited liability company; and Monroe Capital refers to Monroe Capital LLC, a Delaware limited liability company, and its subsidiaries and affiliates. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing in our annual report on Form 10-K (the "Annual Report") for the year ended December 31, 2025, filed with the U.S. Securities and Exchange Commission ("SEC") on March 6, 2026. The information contained in this section should also be read in conjunction with our unaudited consolidated financial statements and related notes and other financial information appearing elsewhere in this quarterly report on Form 10-Q (the "Quarterly Report").
FORWARD-LOOKING STATEMENTS
This Quarterly Report, including Management's Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements, which relate to future events or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our industry, our beliefs and our assumptions. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties, including statements as to:
•our, or our portfolio companies', future business, operations, operating results or prospects;
•the dependence of our future success on the general economy and its impact on the industries in which we invest;
•political and regulatory conditions that contribute to uncertainty and market volatility including the impact of a U.S. government shutdown as well as the legislative, regulatory, trade (including tariffs) and other policies associated with the current U.S. administration;
•the impact of the ongoing military conflicts and general uncertainty surrounding the financial and political stability of the United States, the United Kingdom, the European Union, the Middle East and China;
•the impact of a protracted decline in the liquidity of credit markets on our business;
•our ability to recover unrealized losses;
•the impact of increased competition;
•the impact of changing interest rates and elevated inflation rates and the risk of recession on our business prospects and the prospects of our portfolio companies;
•the disruption of global shipping activities;
•our contractual arrangements and relationships with third parties;
•the valuation of our investments in portfolio companies, particularly those having no liquid trading market;
•actual and potential conflicts of interest with MC Advisors, MC Management and other affiliates of Monroe Capital;
•the financial condition of our current and prospective portfolio companies and their ability to achieve their objectives;
•the use of borrowed money to finance a portion of our investments;
•market conditions and our ability to access different debt markets and additional debt and equity capital and our ability to manage our capital resources effectively;
•the adequacy of our financing sources and working capital;
•the timing of cash flows, if any, from the operations of our portfolio companies;
•the ability of MC Advisors to locate suitable investments for us and to monitor and administer our investments;
•the ability of MC Advisors or its affiliates to attract and retain highly talented professionals;
•the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks;
•our ability to qualify and maintain our qualification as a regulated investment company and as a business development company; and
•the impact of future new and changing legislation and regulation on our business and our portfolio companies.
We use words such as "anticipates," "believes," "expects," "intends," "seeks," "plans," "estimates," "targets" and similar expressions to identify forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in "Part I-Item 1A. Risk Factors" in this Quarterly Report on Form 10-Q and in "Risk Factors" in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 6, 2026 and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statements in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved.
We have based the forward-looking statements included in this Quarterly Report on Form 10-Q on information available to us on the date of this Quarterly Report on Form 10-Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements in this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we may file in the future with the U.S. Securities and Exchange Commission (the "SEC"), including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Overview
Monroe Capital Income Plus Corporation is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). In addition, for U.S. federal income tax purposes we have elected to be treated as a regulated investment company ("RIC") under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the "Code"). We currently qualify and intend to continue to qualify annually to be treated as a RIC for U.S. federal income tax purposes.
As an emerging growth company, we intend to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act") for complying with new or revised accounting standards.
We are a specialty finance company that is focused on providing financing solutions primarily to lower middle-market companies in the United States and Canada. We seek to provide investors with attractive risk-adjusted returns and downside protection associated with investing in asset based and secured corporate private credit opportunities in a manner that is decoupled from public markets' volatility. We seek to provide attractive risk-adjusted returns and downside protection by investing primarily in secured private credit transactions and assets, targeting investments that have significant downside protection through a focus on asset coverage. We expect to invest primarily in: (i) senior secured and junior secured and unsecured loans, notes, bonds, preferred equity (including preferred partnership equity), convertible debt and other securities; (ii) unitranche secured loans (a combination of senior secured and junior secured debt in the same facility in which we syndicate a "first out" portion of the loan to an investor and retain a "last out" portion of the loan) and securities; (iii) asset-based loans and securities; (iv) small business loans and leases; (v) structured debt and structured equity; (vi) syndicated loans; (vii) securitized debt and subordinated notes of collateralized loan obligations facilities, asset-backed securities and other securitized products and warehouse loan facilities; (viii) opportunities to acquire illiquid investments from other third-party funds as a result of liquidity constraints resulting from investor redemptions and market dislocations; and (ix) capital investments in the secondary markets. As of March 31, 2026, our portfolio included approximately 86.6% senior secured loans, 0.3% unitranche secured loans, 5.6% junior secured loans and 7.5% equity investments, compared to December 31, 2025, when our portfolio included approximately 87.4% senior secured loans, 0.6% unitranche secured loans, 4.8% junior secured loans and 7.2% equity investments. The companies in which we invest may be leveraged, often as a result of leveraged buyouts or other recapitalization transactions, and, in certain cases, will not be rated by national ratings agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poor's system) from the national rating agencies.
We use Monroe Capital's extensive leveraged finance origination infrastructure and broad expertise in sourcing loans to invest in senior secured, unitranche secured and junior secured debt of middle-market companies. Our investment size will vary proportionately with the size of our capital base. We believe that our focus on lending to lower middle-market companies offers several advantages as compared to lending to larger companies, including more attractive economics, lower leverage, more comprehensive and restrictive covenants, more expansive events of default, relatively small debt facilities that provide us with enhanced influence over our borrowers, direct access to borrower management and improved information flow.
Asset Purchase Agreement: On August 7, 2025, we entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with Monroe Capital Corporation ("MRCC"; NASDAQ: MRCC), and MC Advisors, our and MRCC's investment adviser. Pursuant to the Asset Purchase Agreement on the Closing Date (as defined in the Asset Purchase Agreement) we agreed to acquire the investment assets of MRCC at fair value, as determined shortly before the Closing Date, for cash (the "Asset Purchase").
Following the Closing Date, MRCC will merge with and into Horizon Technology Finance Corporation ("HRZN"; NASDAQ: HRZN), subject to the receipt of certain shareholder approvals and the satisfaction of other closing conditions (the "Merger"). See Recent Developments for discussion on the Asset Purchase and Merger.
The Asset Purchase Agreement contains certain representations, warranties and covenants of the parties that are customary for agreements of its type. Consummation of the Asset Purchase was subject to certain closing conditions, including (1) requisite approvals of MRCC stockholders, (2) the absence of certain legal impediments to the consummation of the Asset Purchase, (3) subject to certain exceptions, the accuracy of the representations and warranties and compliance with the covenants of each party to the Asset Purchase Agreement, (4) required regulatory approvals (including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), and (5) the satisfaction or waiver of the closing conditions in the merger agreement between MRCC and HRZN (other than the condition precedent with respect to the Asset Purchase).
Both the Asset Purchase and Merger are structured to comply with the safe harbor provision of Rule 17a-8 of the Investment Company Act of 1940, as amended. Both our and MRCC's boards of directors, including each of their respective independent directors (in each case, on the recommendation of a special committee of each such board comprised solely of certain independent directors of the applicable board), have approved the Asset Purchase Agreement and the transactions contemplated therein.
Stock Issuances and Share Repurchase Program
Stock Issuances: We are currently conducting our second best efforts, continuous private offering of our common stock to "accredited investors" in reliance on an exemption from the registration requirements of the Securities Act (the "Second Private Offering"). At each closing an investor purchases shares of our common stock pursuant to a subscription agreement entered into with us. At each closing, investors are required to fund their full subscription to purchase shares of our common stock.
The following table summarizes the issuance of shares of our common stock pursuant to the Second Private Offering (in thousands except shares and per share data) during the three months ended March 31, 2026 and 2025:
| Date |
Price Per Share |
Shares Issued | Proceeds | |||||||||||||||||
| Three months ended March 31, 2026 | ||||||||||||||||||||
| January 2, 2026 | $ | 9.87 | 4,690,159 | $ | 46,292 | |||||||||||||||
| February 2, 2026 | $ | 9.87 | 2,597,869 | 25,641 | ||||||||||||||||
| March 2, 2026 | $ | 9.80 | 2,876,264 | 28,187 | ||||||||||||||||
| Total | 10,164,292 | $ | 100,120 | |||||||||||||||||
|
Date (1)
|
Price Per Share |
Shares Issued | Proceeds | |||||||||||||||||
| Three months ended March 31, 2025: | ||||||||||||||||||||
| March 20, 2025 | $ | 10.37 | 36,340,819 | $ | 376,854 | |||||||||||||||
| Total | 36,340,819 | $ | 376,854 | |||||||||||||||||
(1)We began monthly closings for our private offering in October 2025, and as a result, the 2025 period reflects the share issuances at that time.
We have adopted a dividend reinvestment plan ("DRIP") that provides for the reinvestment of dividends and other distributions on behalf of our stockholders that elect to participate in such plan. When we declare a dividend or distribution, our stockholders' cash distributions will only be reinvested in additional shares of our common stock if a stockholder specifically "opts in" to the DRIP at least ten (10) days prior to the record date fixed by the Board. Shares issued under the DRIP were issued at a price per share equal to the net asset value ("NAV") per share as of the last day of our fiscal quarter immediately preceding the date that the distribution was declared.
On November 4, 2025, the Board approved the second amended and restated dividend reinvestment plan (the "Second Amended and Restated DRIP"), which amended the price per share used for distributions reinvested to be the most recent NAV per share as of the most recent effective date on which shares are issued to our investors in a closing of a private offering immediately preceding the payment date of such distribution in order to better align with monthly share issuances.
Share Repurchase Program: During 2022, we commenced a quarterly share repurchase program pursuant to which we intend to repurchase, in each quarter, up to 5% of our shares of common stock outstanding as of the close of the previous calendar quarter (the "Share Repurchase Program"), subject to the discretion of our board of directors (the "Board") and the availability of cash to fund such repurchases. Our Board may amend, suspend or terminate the Share Repurchase Program if it deems such action to be in our best interest and the best interest of our stockholders.
The following table summarizes the total shares repurchased that were validly tendered and not withdrawn in tender offers under the Share Repurchase Program (in thousands except shares and per share data) three months ended March 31, 2026 and 2025:
| Date |
Price Per Share |
Shares Repurchased |
Total Cost | |||||||||||||||||
| Three months ended March 31, 2026 | ||||||||||||||||||||
| February 27, 2026 | $ | 9.87 | 15,199,220 | $ | 150,016 | |||||||||||||||
| Total | 15,199,220 | $ | 150,016 | |||||||||||||||||
| Date |
Price Per Share |
Shares Repurchased |
Total Cost | |||||||||||||||||
| Three months ended March 31, 2025 | ||||||||||||||||||||
| March 28, 2025 | $ | 10.37 | 774,968 | $ | 8,037 | |||||||||||||||
| Total | 774,968 | $ | 8,037 | |||||||||||||||||
Investment income
We generate interest income on the debt investments in portfolio company investments that we originate or acquire. Our debt investments, whether in the form of senior secured, unitranche secured or junior secured debt, typically have an initial term of three to seven years and bear interest at a fixed or floating rate. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. In some cases, our investments provide for deferred interest of payment-in-kind ("PIK") interest. In addition, we may generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts as interest income. We record prepayment premiums and prepayment gains (losses) on loans as interest income. As the frequency or volume of the repayments that trigger these prepayment premiums and prepayment gains (losses) may fluctuate significantly from period to period, the associated interest income recorded may also fluctuate significantly from period to period. Interest and fee income is recorded on the accrual basis to the extent we expect to collect such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. We record fees on loans based on the determination of whether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associated with a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interest method if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no cost basis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service, the fee is deemed earned and recorded as other income in the period the service is completed.
Dividend income on preferred equity investments is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies. Each distribution received from limited liability company ("LLC") and limited partnership ("LP") investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment. The frequency and volume of the distributions on common equity investments and LLC and LP investments may fluctuate significantly from period to period.
Expenses
Our primary operating expenses include the payment of base management and incentive fees to MC Advisors under the Amended and Restated Investment Advisory and Management Agreement entered into on March 31, 2025 (the "Amended Investment Advisory Agreement"), the payment of fees to MC Management for our allocable portion of overhead and other expenses under the administration agreement entered into on December 5, 2018 (the "Administration Agreement"), and other operating costs. See Note 6 to our consolidated financial statements and "Related Party Transactions" below for additional information on our Amended Investment Advisory Agreement and Administration Agreement. Our expenses also include interest expense on indebtedness. We bear all other out-of-pocket costs and expenses of our operations and transactions.
Net gain (loss)
We recognize realized gains or losses on investments, foreign currency forward contracts and foreign currency and other transactions based on the difference between the net proceeds from the disposition and the cost basis without regard to unrealized gains or losses previously recognized within net realized gain (loss) on the consolidated statements of operations. We record current period changes in fair value of investments, foreign currency forward contracts, foreign currency and other transactions within net change in unrealized gain (loss) on the consolidated statements of operations.
Portfolio and Investment Activity
During the three months ended March 31, 2026, we invested $151.6 million in 13 new portfolio companies, $230.3 million in 94 existing portfolio companies and had $376.9 million in aggregate amount of sales and principal repayments, resulting in a net increase in investments of $5.0 million for the period.
During the three ended March 31, 2025, we invested $419.7 million in 24 new portfolio companies, $299.0 million in 83 existing portfolio companies and had $211.4 million in aggregate amount of sales and principal repayments, resulting in a net increase in investments of $507.3 million for the period.
The following table shows portfolio yield by investment type as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
|
Weighted Average
Annualized
Contractual
Coupon
Yield (1)
|
Weighted
Average
Annualized
Effective
Yield (2)
|
Weighted Average
Annualized
Contractual
Coupon
Yield (1)
|
Weighted
Average
Annualized
Effective
Yield (2)
|
||||||||||||||||||||
| Senior secured loans | 9.1 | % | 9.1 | % | 9.4 | % | 9.4 | % | |||||||||||||||
| Unitranche secured loans | 10.4 | 11.8 | 9.8 | 10.9 | |||||||||||||||||||
| Junior secured loans | 10.0 | 10.0 | 10.1 | 10.1 | |||||||||||||||||||
| Equity investments | 8.9 | 8.9 | 8.8 | 8.8 | |||||||||||||||||||
| Total | 9.2 | % | 9.2 | % | 9.4 | % | 9.4 | % | |||||||||||||||
_________________________________________
(1)The weighted average annualized contractual coupon yield at period end is computed by dividing (a) the interest income on our debt investments and preferred equity investments (with a stated coupon rate) at the period end contractual coupon rate for each investment by (b) the par value of our debt investments and the cost basis of our preferred equity investments.
(2)The weighted average annualized effective yield on portfolio investments at period end is computed by dividing (a) interest income on our debt investments and preferred equity investments (with a stated coupon rate) at the period end effective rate for each investment by (b) the par value of our debt investments and the cost basis of our preferred equity investments. The weighted average annualized effective yield on portfolio investments is a metric on the investment portfolio alone and does not represent a return to stockholders. This metric is not inclusive of our fees and expenses, the impact of leverage on the investment portfolio or sales load that may be paid by stockholders.
The following table shows the composition of our investment portfolio at fair value and as percentage of our total investments at fair value (in thousands) as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Fair Value: | |||||||||||||||||||||||
| Senior secured loans | $ | 5,029,403 | 86.6 | % | $ | 5,090,861 | 87.4 | % | |||||||||||||||
| Unitranche secured loans | 18,159 | 0.3 | 35,414 | 0.6 | |||||||||||||||||||
| Junior secured loans | 320,109 | 5.6 | 277,025 | 4.8 | |||||||||||||||||||
| Equity investments | 436,886 | 7.5 | 416,455 | 7.2 | |||||||||||||||||||
| Total | $ | 5,804,557 | 100.0 | % | $ | 5,819,755 | 100.0 | % | |||||||||||||||
Our portfolio composition at March 31, 2026 remained relatively consistent with our portfolio at December 31, 2025, with changes resulting primarily from investments in new and existing portfolio companies, offset by sales and principal repayments. As of March 31, 2026, our yields decreased compared to December 31, 2025, primarily due to decreases in base rates on our loan portfolio.
The following table shows our portfolio composition by industry at fair value and as percentage of our total investments at fair value (in thousands) as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Fair Value: | |||||||||||||||||||||||
| Aerospace & Defense | $ | 37,596 | 0.6 | % | $40,434 | 0.7 | % | ||||||||||||||||
| Automotive | 52,590 | 0.9 | 61,039 | 1.0 | |||||||||||||||||||
| Banking | 40,681 | 0.7 | 40,681 | 0.7 | |||||||||||||||||||
| Beverage, Food & Tobacco | 146,773 | 2.5 | 145,549 | 2.5 | |||||||||||||||||||
| Capital Equipment | 201,387 | 3.5 | 272,138 | 4.7 | |||||||||||||||||||
| Chemicals, Plastics & Rubber | 54,436 | 0.9 | 53,692 | 0.9 | |||||||||||||||||||
| Construction & Building | 298,568 | 5.1 | 282,687 | 4.9 | |||||||||||||||||||
| Consumer Goods: Durable | 45,212 | 0.8 | 54,861 | 0.9 | |||||||||||||||||||
| Consumer Goods: Non-Durable | 77,918 | 1.3 | 80,235 | 1.4 | |||||||||||||||||||
| Containers, Packaging & Glass | 90,346 | 1.6 | 57,516 | 1.0 | |||||||||||||||||||
| Energy: Oil & Gas | 191 |
0.0 *
|
133 |
0.0 *
|
|||||||||||||||||||
| Environmental Industries | 102,477 | 1.8 | 100,594 | 1.7 | |||||||||||||||||||
| FIRE: Finance | 394,126 | 6.8 | 401,245 | 6.9 | |||||||||||||||||||
| FIRE: Real Estate | 171,319 | 3.0 | 173,367 | 3.0 | |||||||||||||||||||
| Healthcare & Pharmaceuticals | 851,618 | 14.7 | 822,082 | 14.1 | |||||||||||||||||||
| High Tech Industries | 767,067 | 13.2 | 768,219 | 13.2 | |||||||||||||||||||
| Hotels, Gaming & Leisure | 304 |
0.0 *
|
122 |
0.0 *
|
|||||||||||||||||||
| Media: Advertising, Printing & Publishing | 301,268 | 5.2 | 324,332 | 5.6 | |||||||||||||||||||
| Media: Broadcasting & Subscription | 474 |
0.0 *
|
523 |
0.0 *
|
|||||||||||||||||||
| Media: Diversified & Production | 85,965 | 1.5 | 88,577 | 1.5 | |||||||||||||||||||
| Retail | 14,976 | 0.3 | 14,624 | 0.3 | |||||||||||||||||||
| Services: Business | 1,331,015 | 22.9 | 1,299,308 | 22.3 | |||||||||||||||||||
| Services: Consumer | 361,145 | 6.2 | 338,841 | 5.8 | |||||||||||||||||||
| Telecommunications | 80,952 | 1.4 | 122,038 | 2.1 | |||||||||||||||||||
| Transportation: Cargo | 210,656 | 3.6 | 201,888 | 3.5 | |||||||||||||||||||
| Transportation: Consumer | 6,102 | 0.1 | - | - | |||||||||||||||||||
| Utilities: Electric | 37,999 | 0.7 | 36,030 | 0.6 | |||||||||||||||||||
| Wholesale | 41,396 | 0.7 | 39,000 | 0.7 | |||||||||||||||||||
| Total | $ | 5,804,557 | 100.0 | % | $ | 5,819,755 | 100.0 | % | |||||||||||||||
________________________________________________________
*Represents an amount less than 0.1%.
The following table presents certain selected information regarding our investment portfolio as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | |||||||||||||
|
Number of portfolio companies
|
282 | 284 | ||||||||||||
|
Weighted average EBITDA (1)(2)
|
$ | 32,817 | $ | 32,896 | ||||||||||
|
Median EBITDA (1)(2)
|
$ | 20,093 | $ | 19,100 | ||||||||||
|
Weighted average loan-to-value ("LTV") (3)(4)
|
37.5% | 38.0% | ||||||||||||
|
Weighted average leverage (2)(5)
|
4.22x | 4.23x | ||||||||||||
|
Weighted average interest coverage ratio ("ICR") (3)(6)
|
2.79x | 2.79x | ||||||||||||
|
Percentage of sponsored deals (3)(7)
|
89.5% | 90.0% | ||||||||||||
|
Portfolio companies with one or more covenant (8)(9)
|
99.0% | 99.2% | ||||||||||||
________________________________________________________
(1)EBITDA refers to adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA") in accordance with the underlying governing documents, over the last twelve months as reported by respective borrower at the time of investment closing. Weighted average EBITDA is weighted based on the fair value of the total applicable investments.
(2)Measure excludes (a) investments where EBITDA may not be the appropriate measure of credit risk, such as investments that are underwritten on recurring revenue and asset-based loans, and (b) syndicated loans which primarily represent more liquid loans we hold as part of our liquidity management strategy.
(3)Measure excludes syndicated loans we hold as part of our liquidity management strategy.
(4)LTV is calculated as net debt through each respective investment tranche in which we hold an investment divided by estimated enterprise value or value of the underlying collateral of the portfolio company as reported by the respective borrower at the time of investment closing. Weighted average LTV is weighted based on the fair value of the total applicable investments.
(5)For a particular portfolio company, we calculate the level of contractual indebtedness net of cash ("net debt") owed by the portfolio company and compare that amount to measures of cash flow available to service the net debt. To calculate net debt, we include debt that is both senior and pari passu to the tranche of debt owned by us but exclude debt that is legally and contractually subordinated in ranking to the debt owned by us. We believe this calculation method assists in describing the risk of our portfolio investments, as it takes into consideration contractual rights of repayment of the tranche of debt owned by us relative to other senior and junior creditors of a portfolio company. We typically calculate cash flow available for debt service at a portfolio company by taking EBITDA for the trailing twelve-month period at the time of investment closing. Weighted average net debt to EBITDA is weighted based on the fair value of the total applicable investments.
(6)ICR is estimated as the ratio as of the time of the investment closing of the trailing twelve-month period EBITDA to cash interest projected to be paid over a twelve-month period. EBITDA is calculated in accordance with the underlying governing documents, over the last twelve months as reported by respective borrowers at the time of investment closing.
(7)Represents the percentage of the number of investments in portfolio companies that are owned by a private equity firm, as a percentage of fair value of total applicable investments.
(8)Measure excludes syndicated loans we hold as a part of our liquidity management strategy and asset-based loans.
(9)Represents the percentage of the number of debt investments in portfolio companies which include one or more covenant in the credit agreement, as a percentage of fair value of total applicable investments.
Portfolio Asset Quality
MC Advisors' portfolio management staff closely monitors all credits, with senior portfolio managers covering agented and more complex investments. MC Advisors segregates our capital markets investments by industry. The MC Advisors' monitoring process and projections developed by Monroe Capital both have daily, weekly, monthly and quarterly components and related reports, each to evaluate performance against historical, budget and underwriting expectations. MC Advisors' analysts will monitor performance using standard industry software tools to provide consistent disclosure of performance. When necessary, MC Advisors will update our internal risk ratings, borrowing base criteria and covenant compliance reports.
As part of the monitoring process, MC Advisors regularly assesses the risk profile of each of our investments and rates each of them based on an internal proprietary system that uses the categories listed below, which we refer to as MC Advisors' investment performance risk rating. For any investment rated in Grades 3, 4 or 5, MC Advisors, through its internal Portfolio Management Group ("PMG"), will increase its monitoring intensity and prepare regular updates for the investment committee, summarizing current operating results and material impending events and suggesting recommended actions. The PMG is responsible for oversight and management of any investments rated in Grades 3, 4, or 5. MC Advisors monitors and, when appropriate, changes the investment ratings assigned to each investment in our portfolio. In connection with our valuation process, MC Advisors reviews these investment performance risk ratings on a quarterly basis. The investment performance risk rating system is described as follows:
|
Investment
Performance
Risk Rating
|
Summary Description | |||||||
| Grade 1 | Includes investments exhibiting the least amount of risk in our portfolio. The issuer is performing above expectations or the issuer's operating trends and risk factors are generally positive. | |||||||
| Grade 2 | Includes investments exhibiting an acceptable level of risk that is similar to the risk at the time of origination. The issuer is generally performing as expected or the risk factors are neutral to positive. | |||||||
| Grade 3 | Includes investments performing below expectations and indicates that the investment's risk has increased somewhat since origination. The issuer may be out of compliance with debt covenants; however, scheduled loan payments are generally not past due. | |||||||
| Grade 4 | Includes an issuer performing materially below expectations and indicates that the issuer's risk has increased materially since origination. In addition to the issuer being generally out of compliance with debt covenants, scheduled loan payments may be past due (but generally not more than six months past due). | |||||||
| Grade 5 | Indicates that the issuer is performing substantially below expectations and the investment risk has substantially increased since origination. Most or all of the debt covenants are out of compliance or payments are substantially delinquent. Investments graded 5 are not anticipated to be repaid in full. | |||||||
Our investment performance risk ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or reflect or represent any third-party assessment of any of our investments.
In the event of a delinquency or a decision to rate an investment Grade 4 or Grade 5, the PMG, in consultation with the investment committee, will develop an action plan. Such a plan may require a meeting with the borrower's management or the lender group to discuss reasons for the default and the steps management is undertaking to address the under-performance, as well as amendments and waivers that may be required. In the event of a dramatic deterioration of a credit, MC Advisors and the PMG will form a team or engage outside advisors to analyze, evaluate and take further steps to preserve our value in the credit. In this regard, we would expect to explore all options, including in a private equity sponsored investment, assuming certain responsibilities for the private equity sponsor or a formal sale of the business with oversight of the sale process by us. The PMG and the investment committee have extensive experience in running debt work-out transactions and bankruptcies.
The following table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of March 31, 2026 (in thousands):
| Investment Performance Risk Rating |
Investments at Fair Value |
Percentage of Total Investments |
||||||||||||
| 1 | $ | - | - | % | ||||||||||
| 2 | 5,385,307 | 92.8 | ||||||||||||
| 3 | 327,499 | 5.6 | ||||||||||||
| 4 | 88,310 | 1.5 | ||||||||||||
| 5 | 3,441 | 0.1 | ||||||||||||
| Total | $ | 5,804,557 | 100.0 | % | ||||||||||
The following table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of December 31, 2025 (in thousands):
| Investment Performance Risk Rating |
Investments at Fair Value |
Percentage of Total Investments |
||||||||||||
| 1 | $ | - | - | % | ||||||||||
| 2 | 5,421,533 | 93.2 | ||||||||||||
| 3 | 324,130 | 5.5 | ||||||||||||
| 4 | 73,569 | 1.3 | ||||||||||||
| 5 | 523 |
0.0 *
|
||||||||||||
| Total | $ | 5,819,755 | 100.0 | % | ||||||||||
________________________________________________________
*Represents an amount less than 0.1%.
As of March 31, 2026, there were 20 borrowers with debt or preferred equity investments on non-accrual status and these investments totaled $79.0 million at fair value, or 1.4% of our total investments at fair value at March 31, 2026. As of December 31, 2025, there were 17 borrowers with debt or preferred equity investments on non-accrual status and these investments totaled $67.7 million at fair value, or 1.2% of our total investments at fair value at December 31, 2025.
Results of Operations
Operating results for the three months ended March 31, 2026 and 2025 were as follows (in thousands):
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Total investment income | $ | 149,597 | $ | 113,430 | |||||||
|
Total operating expenses, net of fee waivers
|
82,278 | 62,633 | |||||||||
| Net investment income before income taxes | 67,319 | 50,797 | |||||||||
| Income taxes, including excise taxes | 27 | 375 | |||||||||
| Net investment income | 67,292 | 50,422 | |||||||||
| Net realized gain (loss) on investments | (11,734) | 118 | |||||||||
| Net realized gain (loss) on foreign currency forward contracts | (87) | 54 | |||||||||
| Net realized gain (loss) on foreign currency and other transactions | 76 | (46) | |||||||||
| Net realized gain (loss) | (11,745) | 126 | |||||||||
| Net change in unrealized gain (loss) on investments | (18,108) | (3,044) | |||||||||
| Net change in unrealized gain (loss) on foreign currency forward contracts | (176) | (747) | |||||||||
| Net unrealized gain (loss) on foreign currency and other transactions | 585 | (2,757) | |||||||||
| Net change in unrealized gain (loss) | (17,699) | (6,548) | |||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 37,848 | $ | 44,000 | |||||||
Investment Income
The composition of our investment income for the three months ended March 31, 2026 and 2025 was as follows (in thousands):
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Interest income | $ | 132,946 | $ | 103,899 | |||||||
| PIK interest income | 4,568 | 3,145 | |||||||||
|
Dividend income (1)
|
3,911 | 481 | |||||||||
|
Other income
|
2,576 | 455 | |||||||||
| Prepayment gain (loss) | 1,038 | 1,324 | |||||||||
| Accretion of discounts and amortization of premiums | 4,558 | 4,126 | |||||||||
| Total investment income | $ | 149,597 | $ | 113,430 | |||||||
_________________________________________
(1)During the three months ended March 31, 2026 and 2025, dividend income includes PIK dividends of $558 and $429, respectively.
Total investment income increased $36.2 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to an increase in interest income as a result of the increase in average invested assets. These increases in interest income as a result of the increases in average invested assets were partially offset by declines in effective rates driven primarily by the declines in base rates.
Operating Expenses
The composition of our operating expenses for the three months ended March 31, 2026 and 2025 was as follows (in thousands):
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Interest and other debt financing expenses | $ | 52,997 | $ | 39,593 | |||||||
|
Base management fees, net of base management fee waivers (1)
|
15,154 | 14,076 | |||||||||
|
Incentive fees (2)
|
9,613 | 6,286 | |||||||||
| Professional fees | 1,363 | 729 | |||||||||
| Administrative service fees | 1,548 | 962 | |||||||||
| General and administrative expenses | 1,565 | 949 | |||||||||
| Directors' fees | 38 | 38 | |||||||||
| Total operating expenses, net of fee waivers | $ | 82,278 | $ | 62,633 | |||||||
_________________________________________
(1)Base management fees for the three months ended March 31, 2026 and 2025 were $18,942 and $14,076, respectively. MC Advisors elected to voluntarily waive $3,788 and zero of such base management fees for the three months ended March 31, 2026 and 2025, respectively. Such waivers are not subject to recoupment by MC Advisors. There is no guarantee that MC Advisors will waive any base management fees in the future.
(2)Incentive fees for the three months ended March 31, 2026 and 2025 were $9,613 and $6,286, comprised of part one incentive fees of $9,613 and $7,089, and part two capital gains fees of zero and a reversal of previously accrued fees of $803, respectively. See Note 6 to our consolidated financial statements and Capital Gains Incentive Fee for additional information.
The composition of our interest and other debt financing expenses, average debt outstanding and average stated interest rate (i.e., the rate in effect plus spread) for the three months ended March 31, 2026 and 2025 were as follows (in thousands):
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Interest expense - Revolving Credit Facility | $ | 6,186 | $ | 7,596 | |||||||
| Interest expense - SPV Credit Facility | 3,155 | 3,915 | |||||||||
| Interest expense - SPV II Credit Facility | 9,313 | 3,118 | |||||||||
| Interest expense - SPV III Credit Facility | 2,308 | 1,563 | |||||||||
| Interest expense - SPV IV Credit Facility | 2,898 | 4,743 | |||||||||
| Interest expense - SPV V Credit Facility | 2,240 | 362 | |||||||||
| Interest expense - 2022 ABS | 2,311 | 3,010 | |||||||||
| Interest expense - 2023 ABS | 3,645 | 3,913 | |||||||||
| Interest expense - 2025 ABS | 6,689 | - | |||||||||
| Interest expense - July 2028 Notes | 651 | - | |||||||||
| Interest expense - November 2028 Notes | 2,355 | 2,355 | |||||||||
| Interest expense - December 2028 Notes | 2,355 | 2,355 | |||||||||
| Interest expense - July 2029 Notes | 2,913 | 2,914 | |||||||||
| Interest expense - September 2029 Notes | 896 | 896 | |||||||||
| Interest expense - July 2030 Notes | 2,644 | - | |||||||||
|
Amortization of debt issuance costs
|
2,438 | 2,853 | |||||||||
| Total interest and other debt financing expenses | $ | 52,997 | $ | 39,593 | |||||||
| Average debt outstanding | $ | 3,194,128 | $ | 2,128,049 | |||||||
| Average stated interest rate | 6.4% | 7.0% | |||||||||
Total operating expenses, net of fee waivers, increased by $19.6 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to an increase in interest and other debt financing expenses from higher average borrowings outstanding to support portfolio growth, partially offset by lower cost of debt primarily driven by a reduced interest rate environment. Additionally, increases in incentive fees, resulting from higher net investment income, contributed to the increase in operating expenses and base management fees from higher invested assets were partially offset by a voluntary base management fee waiver.
Income Taxes, Including Excise Taxes
We have elected to be treated, currently qualify and intend to continue to qualify annually, as a RIC under Subchapter M of the Code and operate in a manner so as to qualify for the U.S. federal income tax treatment available to RICs. To maintain qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements and distribute to stockholders, for each taxable year, at least 90% of our "investment company taxable income," which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses.
Depending on the level of taxable income earned in a tax year, we may choose to carry forward such taxable income in excess of current year dividend distributions from such current year taxable income into the next year and pay U.S. federal income tax at corporate rates and a 4% excise tax on such income, as required. To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year dividend distributions, we accrue excise tax, if any, on estimated excess taxable income as such taxable income is earned. For the three months ended March 31, 2026 and 2025, we recorded a net expense on the consolidated statements of operations of $0.1 million and $0.4 million, respectively, for U.S. federal excise tax.
Certain of our consolidated subsidiaries are subject to U.S. federal and state corporate-level income taxes. For the three months ended March 31, 2026 and 2025, we recorded a net tax expense of $(45) thousand and zero respectively, on the consolidated statements of operations for these subsidiaries.
Net Realized Gain (Loss)
During the three months ended March 31, 2026 and 2025, sales or dispositions of investments resulted in $(11.7) million and $0.1 million of net realized gain (loss) on investments, respectively.
We have entered and may continue to enter into foreign currency forward contracts to reduce our exposure to foreign currency exchange rate fluctuations. During the three months ended March 31, 2026 and 2025, we had $(0.1) million and $0.1 million of net realized gain (loss) on foreign currency forward contracts, respectively. During the three months ended March 31, 2026 and 2025, we had $0.1 million and $(46.0) thousand of net realized gain (loss) on foreign currency and other transactions, respectively.
Net Change in Unrealized Gain (Loss)
For the three months ended March 31, 2026 and 2025, our investments had $(18.1) million and $(3.0) million of net change in unrealized gain (loss), respectively. The net change in unrealized gain (loss) includes both unrealized gain on investments in our portfolio with mark-to-market gains during the periods and unrealized loss on investments in our portfolio with mark-to-market losses during the periods.
During the three months ended March 31, 2026, the net change in unrealized loss on investments was primarily driven by mark-to-market losses from certain portfolio companies that have underlying credit performance concerns resulting in a risk rating of Grade 3, 4 or 5 on our investment performance risk rating scale and net unrealized losses of $5.7MM on more liquid investments that were still held as of March 31, 2026. The net change in unrealized loss also included the impact of the reversal of prior period mark-to-market declines on certain more liquid investments that were realized upon sale during the period, resulting in the reversal of previously recorded unrealized losses. As a result, a portion of the $11.7 million of realized losses on investments recognized during the period relates to these liquid loan positions that had been previously marked down and does not represent new fair market value declines in the current period. Excluding the impact of these realizations, unrealized losses on certain more liquid investments were driven by broad market conditions. These declines in fair value were partially offset by net unrealized gains attributable to broad market movements and improvements in fundamental performance at our portfolio companies.
During the three months ended March 31, 2025, the net change in unrealized loss on investments was primarily driven by mark-to-market losses from certain portfolio companies that have underlying credit performance concerns resulting in a risk rating of Grade 3, 4 or 5 on our investment performance risk rating scale that were still held as of March 31, 2025. These declines in fair value were partially offset by net unrealized gains attributable to broad market movements and improvements in fundamental performance at our portfolio companies.
For the three months ended March 31, 2026 and 2025, our foreign currency forward contracts had $(0.2) million and $(0.7) million of net change in unrealized gain (loss), respectively.
For the three months ended March 31, 2026 and 2025, our foreign currency and other transactions had $0.6 million and $(2.8) million of net change in unrealized gain (loss), respectively. Net unrealized gains (losses) on foreign currency and other transactions primarily relate to our foreign currency borrowings.
Net Increase (Decrease) in Net Assets Resulting from Operations
For the three months ended March 31, 2026 and 2025, the net increase (decrease) in net assets resulting from operations was $37.8 million and $44.0 million, respectively. Based on the weighted average shares of common stock outstanding for the three months ended March 31, 2026 and 2025, our per share net increase (decrease) in net assets resulting from operations was $0.13 and $0.22, respectively.
Liquidity and Capital Resources
We generate cash primarily from (i) the net proceeds of private offerings, (ii) cash flows from our operations, and (iii) borrowings under our existing leverage facilities and any financing arrangements we may enter into in the future. These financings may come in the form of borrowings from banks and issuances of senior securities. Our primary uses of cash are for (i) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (ii) the cost of operations (including paying MC Advisors and reimbursements to MC Management), (iii) debt service of any borrowings, (iv) share repurchases under our share repurchase program and (v) cash distributions to our stockholders.
As of March 31, 2026, we had $50.1 million in cash and cash equivalents and $204.6 million in restricted cash and cash equivalents. Restricted cash and cash equivalents includes amounts held within our wholly-owned financing subsidiaries and is generally restricted to use for the origination of new investments, the repayment of outstanding debt and the related payment of interest expense and the quarterly release of our earnings. As of March 31, 2026, restricted cash and cash equivalents at each wholly-owned financing subsidiary and debt outstanding by facility consisted of the following:
| Restricted Cash and Cash Equivalents | Principal Amount of Debt Outstanding | |||||||||||||
| Revolving Credit Facility | n/a | $ | 314,751 | |||||||||||
| MC Income Plus Financing SPV LLC ("SPV") | $ | 22,091 | 275,000 | |||||||||||
| MC Income Plus Financing SPV II LLC ("SPV II") | 75,009 | 690,000 | ||||||||||||
| MC Income Plus Financing SPV III LLC ("SPV III") | 13,947 | 160,000 | ||||||||||||
| MC Income Plus Financing SPV IV LLC ("SPV IV") | 17,470 | 210,200 | ||||||||||||
| MC Income Plus Financing SPV V LLC ("SPV V") | 20,812 | 200,500 | ||||||||||||
| Monroe Capital Income Plus ABS Funding, LLC ("2022 Issuer") | 27,691 | 214,884 | ||||||||||||
| Monroe Capital Income Plus ABS Funding II, LLC ("2023 Issuer") | 11,293 | 209,100 | ||||||||||||
| Monroe Capital Income Plus ABS Funding III, LLC ("2025 Issuer") | 16,280 | 415,000 | ||||||||||||
| July 2028 Notes | n/a | 42,000 | ||||||||||||
| November 2028 Notes | n/a | 100,000 | ||||||||||||
| December 2028 Notes | n/a | 100,000 | ||||||||||||
| July 2029 Notes | n/a | 156,000 | ||||||||||||
| September 2029 Notes | n/a | 48,000 | ||||||||||||
| July 2030 Notes | n/a | 161,000 | ||||||||||||
| Total | $ | 204,593 | $ | 3,296,435 | ||||||||||
In accordance with the 1940 Act, we are permitted to borrow amounts such that our asset coverage ratio, as defined in the 1940 Act, is at least 150% after such borrowing. As of March 31, 2026 and December 31, 2025, our asset coverage ratio based on aggregate borrowings outstanding was 184% and 188%, respectively.
Cash Flows
For the three months ended March 31, 2026, we experienced a net increase (decrease) in cash and restricted cash and cash equivalents of $38.4 million. For the three months ended March 31, 2026, operating activities provided $58.3 million, primarily as a result of proceeds from principal payments and sale of investments and settlement of forward contracts and net investment income, partially offset by purchases of portfolio investments. For the three months ended March 31, 2026, financing activities used $19.9 million, primarily as a result of net repayments of debt, repurchases of common stock and distributions to stockholders, partially offset by the proceeds from issuances of common stock.
For the three months ended March 31, 2025, we experienced a net increase (decrease) in cash and restricted cash and cash equivalents of $3.6 million. For the three months ended March 31, 2025, operating activities used $426.6 million, primarily as a result of purchases of portfolio investments, partially offset by proceeds from principal payments and sale of investments and settlement of forward contracts and net investment income. For the three months ended March 31, 2025, financing activities provided $430.2 million, primarily as a result of net borrowings on our debt facilities and the proceeds from issuances of common stock, partially offset by distributions to stockholders and repurchases of common stock.
Capital Resources
As a BDC, we distribute substantially all of our net income to our stockholders and have an ongoing need to raise additional capital for investment purposes. We intend to generate additional cash primarily from future offerings of securities, including our current Second Private Offering and any subsequent offerings, future borrowings and cash flows from operations, including income earned from investments in our portfolio companies. On both a short-term and long-term basis, our primary use of funds will be to invest in portfolio companies, fund share repurchases under our share repurchase program and make cash distributions to our stockholders. We may also use available funds to repay outstanding borrowings.
As a BDC, we are generally not permitted to issue and sell our common stock at a price below net asset value ("NAV") per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV per share of our common stock if our Board, including our independent directors, determines that such sale is in the best interests of us and our stockholders, and if our stockholders have approved such sales. As of March 31, 2026 and December 31, 2025, we had 284,582,018 and 286,677,222 shares outstanding, respectively.
Distributions
Historically, distributions have been declared by the Board each calendar quarter. Beginning in October 2025, to the extent that we have taxable income available, and subject to approval by the Board, we intend to make monthly distributions to our stockholders. Distributions to stockholders are recorded on the record date. All distributions will be paid at the discretion of the Board and will depend on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time. As a result, our distribution rates and payment frequency may vary from time to time.
The determination of the tax attributes for our distributions is made annually, based upon our taxable income for the full year and distributions paid for the full year. Ordinary dividend distributions from a RIC do not qualify for the preferential tax rate on qualified dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital. Distributions to stockholders for the three months ended March 31, 2026 and 2025 totaled $64.1 million ($0.22 per share) and $53.7 million ($0.27 per share), respectively. The tax character of such distributions is determined at the end of the fiscal year. However, if the character of such distributions were determined as of March 31, 2026 and 2025, no portion of these distributions would have been characterized as a return of capital to stockholders.
We have adopted a dividend reinvestment plan (the "DRIP") that provides for the reinvestment of dividends and other distributions on behalf of its stockholders that elect to participate in such plan. As a result, if we declare a dividend or distribution, our stockholders' cash distributions will only be reinvested in additional shares of our common stock if a stockholder specifically "opts in" to the DRIP at least ten (10) days prior to the record date fixed by our Board. Shares issued under the DRIP were issued at a price per share equal to the NAV per share as of the last day of our fiscal quarter immediately preceding the date that the distribution was declared. On August 23, 2024, the Board approved the Amended and Restated Dividend Reinvestment Plan (the "Amended and Restated DRIP") solely to appoint a new transfer agent as the Plan Administrator (as defined in the Amended and Restated DRIP). The Amended and Restated DRIP became effective on November 1, 2024.
On November 4, 2025, the Board approved the second amended and restated dividend reinvestment plan (the "Second Amended and Restated DRIP"), which amended the price per share used for distributions reinvested to be the NAV per share as of the most recent effective date on which shares are issued to our investors in a closing of a private offering immediately preceding the payment date of such distribution in order to better align with monthly share issuances.
Borrowings
Our outstanding debt as of March 31, 2026 was as follows (in thousands):
| March 31, 2026 | |||||||||||||||||||||||
|
Aggregate
Principal
Amount
Committed (1)
|
Principal
Amount
Outstanding (2)
|
Carrying Value (3)
|
Unamortized Debt Issuance Costs | ||||||||||||||||||||
|
Revolving Credit Facility (4)
|
$ | 845,000 | $ | 314,751 | $ | 307,720 | $ | 7,031 | |||||||||||||||
| SPV Credit Facility | 575,000 | 275,000 | 269,996 | 5,004 | |||||||||||||||||||
| SPV II Credit Facility | 690,000 | 690,000 | 685,760 | 4,240 | |||||||||||||||||||
|
SPV III Credit Facility
|
200,000 | 160,000 | 158,724 | 1,276 | |||||||||||||||||||
| SPV IV Credit Facility | 400,000 | 210,200 | 205,440 | 4,760 | |||||||||||||||||||
| SPV V Credit Facility | 400,000 | 200,500 | 196,083 | 4,417 | |||||||||||||||||||
|
2022 ABS (5)
|
214,884 | 214,884 | 214,884 | - | |||||||||||||||||||
|
2023 ABS (6)
|
209,100 | 209,100 | 207,481 | 1,619 | |||||||||||||||||||
|
2025 ABS (7)
|
415,000 | 415,000 | 411,974 | 3,026 | |||||||||||||||||||
| July 2028 Notes | 42,000 | 42,000 | 41,524 | 476 | |||||||||||||||||||
| November 2028 Notes | 100,000 | 100,000 | 99,382 | 618 | |||||||||||||||||||
| December 2028 Notes | 100,000 | 100,000 | 99,382 | 618 | |||||||||||||||||||
| July 2029 Notes | 156,000 | 156,000 | 155,051 | 949 | |||||||||||||||||||
| September 2029 Notes | 48,000 | 48,000 | 47,708 | 292 | |||||||||||||||||||
| July 2030 Notes | 161,000 | 161,000 | 159,382 | 1,618 | |||||||||||||||||||
| Total | $ | 4,555,984 | $ | 3,296,435 | $ | 3,260,491 | $ | 35,944 | |||||||||||||||
_________________________________________
(1)Represents the total aggregate amount committed or outstanding, as applicable, under such instrument.
(2)As of March 31, 2026, we had unused availability across all borrowing facilities totaling $581.1 million.
(3)Represents the principal amount outstanding, less unamortized debt issuance costs.
(4)Principal amount outstanding includes borrowings denominated in foreign currencies converted at the period end exchange rate.
(5)As of March 31, 2026, the 2022 Class C Notes and 2022 Subordinated Notes (each as defined below) totaling $25.4 million and $82.9 million, respectively, are excluded from the total aggregate principal amount committed/outstanding amount as these notes are eliminated in consolidation.
(6)As of March 31, 2026, the 2023 Subordinated Notes (as defined below) totaling $45.9 million, are excluded from the total aggregate principal amount committed/outstanding amount as these notes are eliminated in consolidation.
(7)As of March 31, 2026, the 2025 Subordinated Notes (as defined below) totaling $85.0 million are excluded from the total aggregate principal amount committed/outstanding amount as these notes are eliminated in consolidation.
Our outstanding debt as of December 31, 2025 was as follows (in thousands):
| December 31, 2025 | ||||||||||||||||||||||||||
|
Aggregate
Principal
Amount
Committed (1)
|
Principal
Amount
Outstanding (2)
|
Carrying Value (3)
|
Unamortized Debt Issuance Costs | |||||||||||||||||||||||
|
Revolving Credit Facility (4)
|
$ | 845,000 | $ | 634,666 | $ | 627,266 | $ | 7,400 | ||||||||||||||||||
| SPV Credit Facility | 450,000 | 100,000 | 97,515 | 2,485 | ||||||||||||||||||||||
| SPV II Credit Facility | 690,000 | 573,000 | 568,316 | 4,684 | ||||||||||||||||||||||
|
SPV III Credit Facility
|
200,000 | 150,000 | 148,568 | 1,432 | ||||||||||||||||||||||
| SPV IV Credit Facility | 350,000 | 175,200 | 172,753 | 2,447 | ||||||||||||||||||||||
| SPV V Credit Facility | 250,000 | 125,500 | 123,361 | 2,139 | ||||||||||||||||||||||
|
2022 ABS (5)
|
234,697 | 234,697 | 234,697 | - | ||||||||||||||||||||||
|
2023 ABS (6)
|
209,100 | 209,100 | 207,239 | 1,861 | ||||||||||||||||||||||
|
2025 ABS (7)
|
415,000 | 415,000 | 411,711 | 3,289 | ||||||||||||||||||||||
| July 2028 Notes | 42,000 | 42,000 | 41,476 | 524 | ||||||||||||||||||||||
| November 2028 Notes | 100,000 | 100,000 | 99,324 | 676 | ||||||||||||||||||||||
| December 2028 Notes | 100,000 | 100,000 | 99,324 | 676 | ||||||||||||||||||||||
| July 2029 Notes | 156,000 | 156,000 | 154,981 | 1,019 | ||||||||||||||||||||||
| September 2029 Notes | 48,000 | 48,000 | 47,686 | 314 | ||||||||||||||||||||||
| July 2030 Notes | 161,000 | 161,000 | 159,290 | 1,710 | ||||||||||||||||||||||
| Total | $ | 4,250,797 | $ | 3,224,163 | $ | 3,193,507 | $ | 30,656 | ||||||||||||||||||
_________________________________________
(1)Represents the total aggregate amount committed or outstanding, as applicable, under such instrument.
(2)As of December 31, 2025, we had unused availability across all borrowing facilities totaling $441.8 million.
(3)Represents the principal amount outstanding, less unamortized debt issuance costs.
(4)Principal amount outstanding includes borrowings denominated in foreign currencies converted at the period end exchange rate.
(5)As of December 31, 2025, the 2022 Class C Notes and 2022 Subordinated Notes (each as defined below) totaling $27.7 million and $82.9 million, respectively, are excluded from the total aggregate principal amount committed/outstanding amount as these notes are eliminated in consolidation.
(6)As of December 31, 2025, the 2023 Subordinated Notes (as defined below) totaling $45.9 million are excluded from the total aggregate principal amount committed/outstanding amount as these notes are eliminated in consolidation.
(7)As of December 31, 2025, the 2025 Subordinated Notes (as defined below) totaling $85.0 million are excluded from the total aggregate principal amount committed/outstanding amount as these notes are eliminated in consolidation.
Credit Facilities
Revolving Credit Facility
On October 20, 2023, we entered into a senior secured revolving credit facility (the "Revolving Credit Facility") pursuant to a Senior Secured Revolving Credit Agreement (the "Revolving Credit Agreement"), as amended from time to time, with ING Capital, LLC, as administrative agent and joint lead arranger. The initial principal amount of the Revolving Credit Facility was $295.0 million, subject to availability under the borrowing base, which is based on our portfolio investments and other outstanding indebtedness, with an accordion provision permitting increases to the total facility amount up to $800.0 million, subject to the satisfaction of certain conditions. Through various amendments to the Revolving Credit Agreement, we have increased the facility amount multiple times under the accordion and more recently through an amendment to $845.0 million of aggregate commitments as of March 31, 2026.
On November 25, 2025, we amended the Revolving Credit Facility to, among other things, (i) extend the expiration of the revolver availability period from October 31, 2028 to November 25, 2029, (ii) extend the stated maturity date from October 31, 2029 to November 25, 2030, (iii) increase the total facility size to an aggregate amount of $845.0 million, (iv) increase the maximum total facility amount contemplated by the accordion provision to permit increases to a total facility amount of up to $1.1 billion, (v) reduce the applicable margin (a) with respect to any alternate base rate ("ABR") Loan (as described in the Revolving Credit agreement), from 1.25% to 1.00% per annum (b) with respect to any SOFR Loan, CORRA Loan, Eurocurrency Loan or Risk Free Rate ("RFR") Loan, from 2.25% to 2.00% per annum, (vi) remove the Rating Condition (as described in the Revolving Credit Agreement) on the applicable margin, (vii) increase the minimum obligors' net worth test, and (viii) reduced the unused commitment fee to (i) 0.50% per annum on any unused portion of the Revolving Credit Facility when the outstanding borrowings are less than or equal to 35% of the facility amount and (ii) 0.375% per annum on any unused portion of the Revolving Credit Facility when the outstanding borrowings are greater than 35% of the facility amount.
As of March 31, 2026 and December 31, 2025, we had outstanding U.S. dollar borrowings under the Revolving Credit Facility of $202.5 million and $521.8 million, respectively, and non-U.S. dollar borrowings denominated in Australian dollars of AUD 40.0 million ($27.6 million in U.S. dollars) and AUD 40.0 million ($26.7 million in U.S. dollars), respectively, and Great Britain pounds of £40.0 million ($52.9 million in U.S. dollars) and £40.0 million ($53.9 million in U.S. dollars), respectively, and Euros of €27.5 million ($31.7 million in U.S. dollars) and €27.5 million ($32.3 million in U.S. dollars), respectively. The borrowings denominated in a foreign currency may be positively or negatively affected by movements in the rate of exchange between the U.S. dollar and the respective foreign currency. These movements are beyond our control and cannot be predicted. The borrowings denominated in foreign currency are translated into U.S. dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign currency borrowings is included in net change in unrealized gain (loss) on foreign currency and other transactions on our consolidated statements of operations and totaled $0.6 million and $(2.8) million for the three months ended March 31, 2026 and 2025, respectively.
After the November 25, 2025 amendment, advances under the Revolving Credit Facility initially bear interest at a per annum rate equal to, (a) in the case of any U.S. dollar advances, (i) 1.00% per annum plus an ABR (as described in the Revolving Credit Agreement) or (ii) 2.00% per annum plus Term SOFR, (b) in the case of any foreign currency advances (other than Pounds Sterling), 2.00% per annum plus the applicable benchmark rate and (c) in the case of any Pounds Sterling advances, 2.00% per annum plus the Daily Simple Risk Free Rate, in each case, depending on the nature of the advances being requested under the Revolving Credit Facility. As of March 31, 2026 and December 31, 2025, the outstanding borrowings were accruing at a weighted average interest rate of 5.7% and 5.8%, respectively.
Advances under the Revolving Credit Facility are subject to compliance with borrowing base requirements, pursuant to which the amount of funds advanced varies depending upon the types of assets in our portfolio. Assets must meet certain criteria in order to be included in the borrowing base, and the borrowing base is subject to certain portfolio restrictions including investment size, sector concentrations and investment type.
Our ability to borrow under the Revolving Credit Facility is subject to availability under the borrowing base, which permits us to borrow up to 72.5% of the fair market value of its portfolio company investments depending on the type of investment we hold and whether the investment is quoted. Our ability to borrow is also subject to certain concentration limits, and continued compliance with the representations, warranties and covenants given by us under the Revolving Credit Facility. The Revolving Credit Facility contains certain financial covenants, including, but not limited to, our maintenance of: (1) minimum consolidated total net assets of the greater of (a) $500.0 million and (b) an amount equal to the sum of (i) $1.1 billion plus (ii) an amount equal to 65% of the difference of (x) the net proceeds to us from sales of our equity securities during each quarter following October 31, 2024 and (y) the amount paid or distributed to purchase or redeem our common stock in connection with a tender offer during such quarter; (2) a ratio of total assets (less total liabilities other than indebtedness) to total indebtedness of not less than 1.5 to 1; (3) a senior debt coverage ratio of at least 2 to 1; and (4) minimum net worth equal to or greater than $600.0 million. The Revolving Credit Facility also requires us to undertake customary indemnification obligations with respect to ING Capital LLC and other members of the lending group and to reimburse the lenders for expenses associated with entering into the Revolving Credit Facility. The Revolving Credit Facility also has customary provisions regarding events of default, including events of default for nonpayment, change in control transactions, failure to comply with financial and negative covenants, and failure to maintain our relationship with MC Advisors. If we incur an event of default under the Revolving Credit Facility and fail to remedy such default under any applicable grace period, if any, then the entire Revolving Credit Facility could become immediately due and payable, which would materially and adversely affect our liquidity, financial condition, results of operations and cash flows.
The Revolving Credit Facility also imposes certain conditions that may limit the amount of our distributions to stockholders. Distributions payable in our common stock under the DRIP are not limited by the Revolving Credit Facility. Distributions in cash or property other than common stock are generally limited to 115% of the amount of distributions required to maintain our status as a RIC.
The Revolving Credit Facility is guaranteed by certain subsidiary guarantors (primarily the Taxable Subsidiaries). Proceeds of the Revolving Credit Facility may be used for general corporate purposes, including, without limitation, making distributions, contributions and investments and for such other uses as permitted under the Revolving Credit Agreement.
The period during which we may borrow under the Revolving Credit Facility expires on November 25, 2029, and the Revolving Credit Facility will mature and all amounts outstanding thereunder must be repaid by November 25, 2030. The Revolving Credit Facility is secured by a perfected first-priority interest in substantially all of the portfolio investments held by us and the subsidiary guarantors, subject to certain exceptions.
As of March 31, 2026 and December 31, 2025, we were in compliance with all covenants and other requirements of the Revolving Credit Agreement.
SPV Credit Facilities
SPV Credit Facility
We have a $575.0 million senior secured revolving credit facility (the "SPV Credit Facility"), as amended from time to time, with KeyBank National Association, as agent, through our wholly-owned subsidiary, the SPV. Our ability to borrow under the SPV Credit Facility is subject to certain financial and restrictive covenants as well as availability under the borrowing base, which permits us to borrow up to 72% of the principal balance of our portfolio company investments depending on the type of investment, subject to a maximum advance rate on the portfolio of 67%. On February 10, 2026, we entered into an amendment to the SPV Credit Facility to, among other things, (i) increase the total facility amount from an aggregate amount of $450.0 million to an aggregate amount of $575.0 million; (ii) increase the maximum total facility amount contemplated by the accordion provision to permit increases to a total facility amount of up to $1.0 billion; (iii) reduce the applicable interest rate to borrowings under the agreement by 0.50% per annum; (iv) extend the reinvestment period to February 10, 2029; (v) extend the maturity date to February 10, 2031; and (vi) reduced the unused commitment fee to 0.35% per annum on any unused portion of the SPV Credit Facility.
Distributions from the SPV to us are limited by the terms of the SPV Credit Facility, which generally allows for the distribution of net interest income pursuant to a waterfall quarterly during the reinvestment period. As of March 31, 2026 and December 31, 2025, the fair value of our investments that were held in the SPV as collateral for the SPV Credit Facility was $654.8 million and $583.7 million, respectively, and these investments are identified on the accompanying consolidated schedules of investments.
After the February 10, 2026 amendment, and during the reinvestment period, borrowings under the SPV Credit Facility bear interest at an annual rate of SOFR (one or three month, at the SPV's option and subject to a SOFR minimum of 0.50%) plus a margin ranging from 1.90% to a maximum of 2.20%, depending on the level of utilization of the facility and the number of obligors of eligible loans pledged as collateral in the SPV. After the reinvestment period, borrowings under the SPV Credit Facility bear interest at an annual rate of SOFR plus 2.50%. In addition to the stated interest rate on borrowings, the SPV is required to pay an unused commitment fee of 0.35% per annum on any unused portion of the SPV Credit Facility. As of March 31, 2026 and December 31, 2025, the outstanding borrowings were accruing at a weighted average interest rate of 5.6% and 6.3%, respectively.
Borrowings under the SPV Credit Facility remain subject to the leverage restrictions contained in the 1940 Act.
As of March 31, 2026 and December 31, 2025, we and SPV were in compliance with all covenants and other requirements of the agreement governing the SPV Credit Facility.
SPV II Credit Facility
On December 20, 2022, we entered into a senior secured term credit facility (the "SPV II Credit Facility") with KeyBank National Association, as lead arranger and administrative agent, through a special purpose wholly-owned subsidiary, SPV II. The SPV II Credit Facility initially allowed SPV II to borrow an aggregate principal amount of $100.0 million, and included an accordion feature, which allowed us, under certain circumstances, to increase the total size of the facility upon request to the administrative agent and with the consent of one or more increasing or additional lenders. On August 6, 2025, we entered into an amendment (the "SPV II Amendment") to the SPV II Credit Facility. The SPV II Amendment amended the SPV II Credit Facility to, among other things, (i) increase the total facility amount to up to $690.0 million; (ii) add an unused fee rate of 0.35%; (iii) implement a reinvestment period through August 6, 2027; (iv) extend the maturity date to August 6, 2028; and (v) reduce the applicable interest rate from SOFR plus 2.40% to SOFR plus 2.05% per annum during the reinvestment period and SOFR plus 3.25% per annum after the reinvestment period. As of March 31, 2026 and December 31, 2025, the fair value of our investments held in SPV II as collateral for the SPV II Credit Facility was $979.9 million and $918.3 million, respectively, and these investments are identified on the accompanying consolidated schedules of investments.
Borrowings under the SPV II Credit Facility bear interest at Adjusted Term SOFR (subject to a SOFR minimum of 0.50%) plus an applicable margin rate of 2.05% per annum during the reinvestment period and 3.25% per annum after the reinvestment period. The SPV II Credit Facility matures on August 6, 2028, unless sooner terminated in accordance with its terms. As of March 31, 2026 and December 31, 2025, the outstanding borrowings were accruing at a weighted average interest rate of 5.7% and 5.9%, respectively.
Under the terms of the SPV II Credit Facility, pursuant to a monthly waterfall and subject to the satisfaction of certain coverage tests and portfolio quality tests, SPV II is permitted to reinvest principal proceeds during the reinvestment period. During the amortization period, pursuant to a monthly waterfall, principal proceeds must be applied to prepay the SPV II Credit Facility. The SPV II Credit Facility contains representations and warranties and affirmative and negative covenants customary for secured financings of this type. The SPV II Credit Facility also contains customary events of default (subject to certain grace periods, as applicable), including but not limited to the nonpayment of principal, interest or fees, breach of covenants, voluntary or involuntary bankruptcy proceedings and change of control of the borrower.
Borrowings under the SPV II Credit Facility remain subject to the leverage restrictions contained in the 1940 Act.
As of March 31, 2026 and December 31, 2025, we and SPV II were in compliance with all covenants and other requirements of the agreement governing the SPV II Credit Facility.
SPV III Credit Facility
On March 28, 2024, we entered into a senior secured revolving credit facility (the "SPV III Credit Facility") with Goldman Sachs Bank USA, as administrative agent, through a special purpose wholly-owned subsidiary, SPV III. The SPV III Credit Facility initially allowed SPV III to borrow an aggregate principal amount of $100.0 million, and includes an accordion feature which allows us, under certain circumstances, to increase the total size of the facility to $250.0 million upon request to the administrative agent and with consent of the lenders. On March 7, 2025, we amended the SPV III Credit Facility to increase the facility amount to $200.0 million. Our ability to borrow under the SPV III Credit Facility is subject to certain financial and restrictive covenants as well as availability under the borrowing base, which permits us to borrow up to 70% of the principal balance of its portfolio company investments depending on the type of investment. Under the terms of the SPV III Credit Facility, the SPV III is permitted to reinvest available cash and make new borrowings under the SPV III Credit Facility through April 5, 2027. The maturity date of the SPV III Credit Facility is April 5, 2029, unless sooner terminated in accordance with its terms. As of March 31, 2026 and December 31, 2025, the fair value of investments that were held in the SPV III as collateral for the SPV III Credit Facility was $353.0 million and $266.8 million, respectively, and these investments are identified on the accompanying consolidated schedules of investments.
Borrowings under the SPV III Credit Facility bear interest at Adjusted Term SOFR (subject to a SOFR minimum of 1.00%) plus an applicable margin rate of 1.95% per annum. In addition to the stated interest rate on borrowings, the SPV III is required to pay an unused commitment fee of (i) 0.75% per annum on any unused portion of the SPV III Credit Facility through September 5, 2024 and (ii) 0.50% per annum on any unused portion of the SPV III Credit Facility after September 5, 2024. As of March 31, 2026 and December 31, 2025, the outstanding borrowings were accruing at a weighted average interest rate of 5.6% and 5.7%, respectively.
Borrowings under the SPV III Credit Facility remain subject to the leverage restrictions contained in the 1940 Act.
As of March 31, 2026 and December 31, 2025, we and SPV III were in compliance with all covenants and other requirements of the agreement governing the SPV III Credit Facility.
SPV IV Credit Facility
On July 11, 2024, we entered into a senior secured revolving credit facility (the "SPV IV Credit Facility") with Capital One, National Association ("CONA") as administrative agent, as amended from time to time, through a special purpose wholly-owned subsidiary, SPV IV.
The SPV IV Credit Facility initially allowed us, through SPV IV, to borrow an aggregate principal amount of up to $350.0 million and included an accordion feature which allowed us, under certain circumstances, to increase the total size of the facility to $450.0 million upon request to the administrative agent and with consent of the lenders. On March 17, 2026, we entered into an amendment to the SPV IV Credit Facility to, among other things, (i) increase the total facility amount to up to $400.0 million; (ii) increase the maximum total facility amount contemplated by the accordion provision to permit increases to a total facility amount of up to $500.0 million; (iii) reduce the applicable interest rate to borrowings under the agreement by 0.30% per annum; (iv) extend the end date of the reinvestment period from July 11, 2027 to March 17, 2029; (v) and extend the maturity date from July 11, 2029 to March 17, 2031.
Under the terms of the SPV IV Credit Facility, as amended from time to time, SPV IV is permitted to reinvest available cash and make new borrowings under the SPV IV Credit Facility through March 17, 2029. The SPV IV Credit Facility matures on March 17, 2031, unless terminated earlier at our election, subject to the payment of a customary prepayment fee, or at the election of the administrative agent following the occurrence of an event of default thereunder. Borrowings under the SPV IV Credit Facility bear interest at SOFR plus an applicable margin rate of 1.85% per annum. Advances under the SPV IV Credit Facility are subject to availability governed by a borrowing base comprised of eligible loan assets, which receive advance rates under the SPV IV Credit Facility of up to 75%. Undrawn capacity under the SPV IV Credit Facility is subject to a non-usage fee of between 0.25% and 0.75% per annum on such undrawn capacity, depending on the level of usage of the SPV IV Credit Facility. As of March 31, 2026 and December 31, 2025, the fair value of investments of the Company that were held in the SPV IV as collateral for the SPV IV Credit Facility was $446.0 million and $399.5 million, respectively, and these investments are identified on the accompanying consolidated schedules of investments.
The SPV IV Credit Facility contains representations and warranties and affirmative and negative covenants customary for secured financings of this type. The SPV IV Credit Facility also contains customary events of default (subject to certain grace periods, as applicable), including but not limited to the nonpayment of principal, interest or fees; breach of covenants; voluntary or involuntary bankruptcy proceedings; and change of control of SPV IV. As of March 31, 2026 and December 31, 2025, the outstanding borrowings were accruing at a weighted average interest rate of 5.5% and 5.9%, respectively.
Borrowings under the SPV IV Credit Facility remain subject to the leverage restrictions contained in the 1940 Act.
As of March 31, 2026 and December 31, 2025, we and SPV IV were in compliance with all covenants and other requirements of the agreement governing the SPV IV Credit Facility.
SPV V Credit Facility
On February 21, 2025, we entered into a senior secured revolving credit facility (the "SPV V Credit Facility") with CONA, through a special purpose wholly-owned subsidiary, SPV V.
The SPV V Credit Facility initially allowed us, through SPV V, to borrow an aggregate principal amount of up to $250.0 million and included an accordion feature which allowed us, under certain circumstances, to increase the total size of the facility to $350.0 million upon request to the administrative agent and with consent of the lenders. On March 17, 2026, the Company entered into an amendment to the SPV V Credit Facility to, among other things, (i) increase the total facility amount to up to $400.0 million; (ii) increase the maximum total facility amount contemplated by the accordion provision to permit increases to a total facility amount of up to $500.0 million; (iii) reduce the applicable interest rate to borrowings under the agreement by 0.30% per annum; (iv) extend the end date of the reinvestment period from February 21, 2028 to March 17, 2029; (v) and extend the maturity date from February 21, 2030 to March 17, 2031.
Under the terms of the SPV V Credit Facility, as amended from time to time, SPV V is permitted to reinvest available cash and make new borrowings under the SPV V Credit Facility through March 17, 2029. The SPV V Credit Facility matures on March 17, 2031, unless terminated earlier at our election, subject to the payment of a customary prepayment fee, or at the election of CONA following the occurrence of an event of default thereunder. Borrowings under the SPV V Credit Facility bear interest at SOFR plus an applicable margin rate of 1.85% per annum. Advances under the SPV V Credit Facility are subject to availability governed by a borrowing base comprised of eligible loan assets, which receive advance rates under the SPV V Credit Facility of up to 75%. Undrawn capacity under the SPV V Credit Facility is subject to a non-usage fee of between 0.25% and 0.75% per annum on such undrawn capacity, depending on the level of usage of the SPV V Credit Facility. As of March 31, 2026 and December 31, 2025, the fair value of investments of the Company that were held in the SPV V as collateral for the SPV V Credit Facility was $385.7 million and $301.8 million, respectively, and these investments are identified on the accompanying consolidated schedules of investments.
The SPV V Credit Facility contains representations and warranties and affirmative and negative covenants customary for secured financings of this type. The SPV V Credit Facility also contains customary events of default (subject to certain grace periods, as applicable), including but not limited to the nonpayment of principal, interest or fees; breach of covenants; voluntary or involuntary bankruptcy proceedings; and change of control of SPV V. As of March 31, 2026 and December 31, 2025, the outstanding borrowings were accruing at a weighted average interest rate of 5.5% and 5.8%, respectively.
Borrowings under the SPV V Credit Facility remain subject to the leverage restrictions contained in the 1940 Act.
As of March 31, 2026 and December 31, 2025, we and SPV V were in compliance with all covenants and other requirements of the agreement governing the SPV V Credit Facility.
Asset Backed Securitizations
2022 Asset-Backed Securitization
On April 7, 2022, we completed a $425.0 million asset-backed securitization (the "2022 ABS"). The notes offered in the 2022 ABS were issued by the 2022 Issuer, a wholly-owned subsidiary, and are secured by a diversified portfolio of senior secured loans. The transaction was executed through a private placement of $261.4 million of Class A Senior Secured Notes, which bear interest at 4.05% (the "2022 Class A Notes"), $44.6 million of Class B Senior Secured Notes, which bear interest at 5.15% (the "2022 Class B Notes") and $36.1 million of Class C Senior Secured Notes, which bear interest at 7.75% (the "2022 Class C Notes" and collectively with the 2022 Class A Notes and the 2022 Class B Notes, the "2022 Secured Notes") and $82.9 million of Subordinated Notes, which do not bear interest (the "2022 Subordinated Notes" and, together with the 2022 Secured Notes, the "2022 Notes"). We retained all of the 2022 Class C Notes and the 2022 Subordinated Notes. The 2022 Class A Notes and the 2022 Class B Notes are included as debt on the accompanying consolidated statements of assets and liabilities. As of both March 31, 2026 and December 31, 2025, the 2022 Class C Notes and the 2022 Subordinated Notes were eliminated in consolidation.
Through April 22, 2024, the 2022 Issuer was permitted to use all principal collections received on the underlying collateral to purchase new collateral under the direction of MC Advisors, in its capacity as collateral manager of the 2022 Issuer, in accordance with our investment strategy and subject to customary conditions set forth in the documents governing the 2022 ABS, allowing us to maintain the initial leverage in the 2022 ABS. Subsequent to April 22, 2024, the 2022 ABS is required to use principal collections repay the 2022 Notes. The 2022 Notes are due on April 30, 2032.
As of March 31, 2026 and December 31, 2025, the fair value of our investments held in the 2022 Issuer as collateral was $286.3 million and $312.3 million, respectively, and these investments are identified on the accompanying consolidated schedule of investments. As of both March 31, 2026 and December 31, 2025, the 2022 Class A Notes were accruing at a weighted average interest rate of 4.1%. As of both March 31, 2026 and December 31, 2025, the 2022 Class B Notes were accruing at a weighted average interest rate of 5.2%.
Distributions from the 2022 Issuer to us are limited by the terms of the indenture governing the 2022 ABS, which generally allows for the payment of interest on the 2022 Secured Notes and the distribution of remaining net interest income to the holders of the 2022 Subordinated Notes pursuant to a waterfall quarterly during the reinvestment period.
As of March 31, 2026 and December 31, 2025, we and the 2022 Issuer were in compliance with covenants and requirements of the indenture and loan agreement governing the 2022 ABS.
2023 Asset-Backed Securitization
On September 15, 2023, we completed a $251.2 million asset-backed securitization (the "2023 ABS"). The notes offered in the 2023 ABS were executed through a private placement and were issued by the 2023 Issuer, a wholly-owned subsidiary, and were secured by a diversified portfolio of middle market loans and recurring revenue loans. Through November 20, 2024, the 2023 ABS consisted of $160.8 million of Class A Senior Secured Notes, which bore interest at Term SOFR plus 3.50% (the "2023 Class A Notes"), $25.1 million of Class B Senior Secured Notes, which bore interest at 11.16% (the "2023 Class B Notes" and collectively with the 2023 Class A Notes, the "2023 Secured Notes") and $65.3 million of Subordinated Notes, which do not bear interest (the "2023 Subordinated Notes" and, together with the 2023 Secured Notes, the "2023 Notes").
On November 21, 2024, we and the 2023 Issuer amended the 2023 ABS to, among other things, (a) refinance the issued 2023 Class A Notes by redeeming in full the $160.8 million of 2023 Class A Notes and issuing new Class A Senior Secured Notes in an aggregate principal amount of $163.2 million which bear interest at Term SOFR plus 2.35% (the "2023 Class A-R Notes"), (b) refinance the issued 2023 Class B Notes by redeeming in full the $25.1 million of 2023 Class B Notes and issuing new Class B Senior Secured Notes in an aggregate principal amount of $25.5 million which bear interest at 8.81% (the "2023 Class B-R Notes"), (c) issue new Class C Senior Secured Notes in an aggregate principal amount of $20.4 million which bear interest at 11.95% (the "2023 Class C-R Notes" and collectively with the 2023 Class A-R Notes and 2023 Class B-R Notes, the "2023-R Secured Notes"), (d) reduce the outstanding principal balance of the 2023 Subordinated Notes from $65.3 million to $45.9 million, and (e) extend the maturity dates of the 2023-R Secured Notes and the 2023 Subordinated Notes to November 22, 2035 (the Subordinated Notes, together with the 2023-R Secured Notes, the "2023-R Notes"). The 2023-R Secured Notes were issued through a private placement and we continued to retain all of the 2023 Subordinated Notes for the purpose of satisfying the risk retention requirements pursuant to a subordinated note purchase agreement entered into as of the original closing date. The 2023 Secured Notes and the 2023-R Secured Notes are included as debt on the consolidated statements of assets and liabilities. As of both March 31, 2026 and December 31, 2025, the 2023 Subordinated Notes were eliminated in consolidation.
As of March 31, 2026 and December 31, 2025, the 2023 Class A-R Notes were accruing at a weighted average interest rate of 6.0% and 6.2%, respectively. As of both March 31, 2026 and December 31, 2025, the 2023 Class B-R Notes were accruing at a weighted average interest rate of 8.8%. As of both March 31, 2026 and December 31, 2025, the 2023 Class C-R Notes were accruing at a weighted average interest rate of 12.0%.
Through November 21, 2026, the 2023 Issuer is permitted to use all principal collections received on the underlying collateral to purchase new collateral under the direction of MC Advisors, in its capacity as collateral manager of the 2023 Issuer, in accordance with our investment strategy and subject to customary conditions set forth in the documents governing the 2023 ABS, allowing us to maintain the initial leverage in the 2023 ABS. The 2023 Notes are due on November 22, 2035.
As of March 31, 2026 and December 31, 2025, the fair value of investments that were held in the 2023 Issuer as collateral was $251.0 million and $252.0 million, respectively, and these investments are identified on the consolidated schedule of investments.
Distributions from the 2023 Issuer to us are limited by the terms of the indenture governing the 2023 ABS, which generally allows for the payment of interest on the 2023 Secured Notes and the distribution of remaining net interest income to the holders of the 2023 Subordinated Notes pursuant to a waterfall quarterly during the reinvestment period.
As of March 31, 2026 and December 31, 2025, we and the 2023 Issuer were in compliance with all covenants and other requirements of the indenture and loan agreement governing the 2023 ABS.
2025 Asset-Backed Securitization
On December 18, 2025, we completed a $500.0 million asset-backed securitization (the "2025 ABS"). The notes offered in the 2025 ABS were executed through a private placement and were issued by the 2025 Issuer, a wholly-owned subsidiary, and were secured by a diversified portfolio of middle market loans and recurring revenue loans. The transaction was executed through a private placement of $320.0 million of Class A Senior Secured Notes, which bear interest at Term SOFR plus 2.00% (the "2025 Class A Notes"), $55.0 million of Class B Senior Secured Notes, which bear interest at Term SOFR plus 4.00% (the "2025 Class B Notes"), $40.0 million of Class C Senior Secured Notes, which bear interest at Term SOFR plus 7.00% (the "2025 Class C Notes" and collectively with the "2025 Class A Notes" and "2025 Class B Notes", the "2025 Secured Notes") and $85.0 million of Subordinated Notes, which do not bear interest (the "2025 Subordinated Notes" and, together with the 2025 Secured Notes, the "2025 Notes"). We retained all of the 2025 Subordinated Notes. The 2025 Notes were retained for the purpose of satisfying the risk retention requirements pursuant to a subordinated note purchase agreement entered into as of the Closing Date. The 2025 Secured Notes are included as debt on the accompanying consolidated statements of assets and liabilities. As of March 31, 2026 and December 31, 2025, the 2025 Subordinated Notes were eliminated in consolidation.
As of both March 31, 2026 and December 31, 2025, the 2025 Class A Notes were accruing at a weighted average interest rate of 5.7%. As of both March 31, 2026 and December 31, 2025, the 2025 Class B Notes were accruing at a weighted average interest rate of 7.7%. As of both March 31, 2026 and December 31, 2025, the 2025 Class C Notes were accruing at a weighted average interest rate of 10.7%.
Through December 18, 2027, the 2025 Issuer is permitted to use all principal collections received on the underlying collateral to purchase new collateral under the direction of MC Advisors, in its capacity as collateral manager of the 2025 Issuer, in accordance with our investment strategy and subject to customary conditions set forth in the documents governing the 2025 ABS, allowing us to maintain the initial leverage in the 2025 ABS. The 2025 Notes are due on December 18, 2035.
As of both March 31, 2026 and December 31, 2025, the fair value of investments of the Company that were held in the 2025 Issuer as collateral was $486.8 million, and these investments are identified on the consolidated schedule of investments.
Distributions from the 2025 Issuer to us are limited by the terms of the indenture governing the 2025 ABS, which generally allows for the payment of interest on the 2025 Secured Notes and the distribution of remaining net interest income to the holders of the 2025 Subordinated Notes pursuant to a waterfall quarterly during the reinvestment period.
As of March 31, 2026 and December 31, 2025, the Company and the 2025 Issuer were in compliance with all covenants and other requirements of the indenture and loan agreement governing the 2025 ABS.
Unsecured Notes
We issued unsecured notes, as further described below: July 2028 Notes, November 2028 Notes, December 2028 Notes, July 2029 Notes, September 2029 Notes and July 2030 Notes, (each as defined below), which are collectively referred to herein as the "Unsecured Notes."
As of March 31, 2026 and December 31, 2025, we were in compliance with all covenants and other requirements of the respective note purchase agreements governing each of the Unsecured Notes.
July 2028 Notes
On July 10, 2025, we entered into a Note Purchase Agreement (the "July 2028 Note Purchase Agreement") governing the issuance of $42.0 million in aggregate principal amount of unsecured notes (the "July 2028 Notes"), due July 10, 2028, with a fixed interest rate of 6.20% per year, to institutional accredited investors (as defined in Regulation D under the Securities Act) in a private placement. The closing for the July 2028 Notes occurred on July 10, 2025. The July 2028 Notes are guaranteed by our various subsidiaries.
Interest on the July 2028 Notes is due semiannually on May 15 and November 15 each year, beginning on November 15, 2025. The July 2028 Notes may be redeemed in whole or in part at any time or from time to time at our option, upon notice, in an amount not less than 10% of the aggregate principal amount of July 2028 Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, and the Prepayment Settlement Amount (as defined in the July 2028 Note Purchase Agreement) applicable to July 2028 Notes determined for the prepayment date with respect to such principal amount. In addition, we are obligated to offer to prepay 100% of the principal amount of July 2028 Notes, together with interest on such July 2028 Notes accrued to, but excluding, the date of prepayment. The July 2028 Notes are general unsecured obligations of ours that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us. As of both March 31, 2026 and December 31, 2025, the Company had $42.0 million in aggregate principal amount of July 2028 Notes outstanding.
The July 2028 Note Purchase Agreement contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our regulation as a business development company within the meaning of the 1940 Act and as a regulated investment company under the Code, a minimum net worth of the greater of (A) $500.0 million and (B) an amount equal to the sum of (i) $1.1 billion plus (ii) an amount equal to 65% of the difference, of (x) the aggregate net proceeds of all sales of Equity Interests (as defined in the July 2028 Note Purchase Agreement) by us and our subsidiaries during each quarter after October 29, 2024 (other than the proceeds of sales of Equity Interests by and among us and our subsidiaries) and (y) the amount paid or distributed by us to purchase or redeem its shares of common stock in connection with a tender offer during such quarter and a minimum asset coverage ratio of 1.50 to 1.00.
In addition, in the event that a Below Investment Grade Event (as defined in the July 2028 Note Purchase Agreement) occurs, the July 2028 Notes will bear interest at a fixed rate per annum which is 1.00% above the stated rate of the July 2028 Notes from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that a Secured Debt Ratio Event (as defined in the July 2028 Note Purchase Agreement) occurs, the July 2028 Notes will bear interest at a fixed rate per annum which is 1.50% above the stated rate of the July 2028 Notes from the date of the occurrence of the Secured Debt Ratio Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that both a Below Investment Grade Event and a Secured Debt Ratio Event have occurred and are continuing, the July 2028 Notes will bear interest at a fixed rate per annum which is 2.00% above the stated rate of the July 2028 Notes from the date of the occurrence of the later to occur of the Below Investment Grade Event and the Secured Debt Ratio Event to and until the date on which one of such events is no longer continuing.
The July 2028 Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, certain cross-defaults or cross-acceleration under our other indebtedness, certain judgments and orders and certain events of bankruptcy.
The July 2028 Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The July 2028 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
As of both March 31, 2026 and December 31, 2025, the July 2028 Notes were accruing at a weighted average interest rate of 6.2%.
November 2028 Notes
On November 15, 2023, we entered into a note purchase agreement (the "November 2028 Note Purchase Agreement") governing the issuance of $100.0 million in aggregate principal amount of unsecured notes (the "November 2028 Notes"), due November 15, 2028, with a fixed interest rate of 9.42% per year, to institutional accredited investors (as defined in Regulation D under the Securities Act of 1933, as amended (the "Securities Act") in a private placement. The closing for the November 2028 Notes occurred on November 15, 2023. The November 2028 Notes are guaranteed by our various subsidiaries.
Interest on the November 2028 Notes is due semiannually on May 15 and November 15 each year, beginning on May 15, 2024. The November 2028 Notes may be redeemed in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if applicable, a make-whole premium. In addition, we are obligated to offer to prepay the November 2028 Notes at par plus accrued and unpaid interest up to, but excluding, the date of prepayment, if certain change in control events occur. The November 2028 Notes are our general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us. As of both March 31, 2026 and December 31, 2025, we had $100.0 million in aggregate principal amount of November 2028 Notes outstanding.
The November 2028 Note Purchase Agreement contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our regulation as a business development company within the meaning of the 1940 Act and as a regulated investment company under the Code, as amended, a minimum net worth of $660.9 million and a minimum asset coverage ratio of 1.50 to 1.00.
In addition, in the event that a Below Investment Grade Event (as defined in the November 2028 Note Purchase Agreement) occurs, the November 2028 Notes will bear interest at a fixed rate per annum which is 1.00% above the stated rate of the November 2028 Notes from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that a Secured Debt Ratio Event (as defined in the November 2028 Note Purchase Agreement) occurs, the November 2028 Notes will bear interest at a fixed rate per annum which is 1.50% above the stated rate of the November 2028 Notes from the date of the occurrence of the Secured Debt Ratio Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that both a Below Investment Grade Event and a Secured Debt Ratio Event have occurred and are continuing, the November 2028 Notes will bear interest at a fixed rate per annum which is 2.00% above the stated rate of the November 2028 Notes from the date of the occurrence of the later to occur of the Below Investment Grade Event and the Secured Debt Ratio Event to and until the date on which one of such events is no longer continuing.
The November 2028 Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, certain cross-defaults or cross-acceleration under our other indebtedness, certain judgments and orders and certain events of bankruptcy.
The November 2028 Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The November 2028 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
As of both March 31, 2026 and December 31, 2025, the November 2028 Notes were accruing at a weighted average interest rate of 9.4%.
December 2028 Notes
On November 15, 2023, we entered into a note purchase agreement (the "December 2028 Note Purchase Agreement") governing the issuance of $100.0 million in aggregate principal amount of unsecured notes (the "December 2028 Notes"), due December 13, 2028, with a fixed interest rate of 9.42% per year, to institutional accredited investors (as defined in Regulation D under the Securities Act of 1933, as amended (the "Securities Act") in a private placement. The closing for the December 2028 Notes occurred on December 13, 2023. The December 2028 Notes are guaranteed by our various subsidiaries.
Interest on the December 2028 Notes is due semiannually on May 15 and November 15 each year, beginning on May 15, 2024. The December 2028 Notes may be redeemed in whole or in part at any time or from time to time at our option at par plus accrued interest to the prepayment date and, if applicable, a make-whole premium. In addition, we are obligated to offer to prepay the December 2028 Notes at par plus accrued and unpaid interest up to, but excluding, the date of prepayment, if certain change in control events occur. The December 2028 Notes are our general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us. As of both March 31, 2026 and December 31, 2025, we had $100.0 million in aggregate principal amount of December 2028 Notes outstanding.
The December 2028 Note Purchase Agreement contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our regulation as a business development company within the meaning of the 1940 Act and as a regulated investment company under the Code, as amended, a minimum net worth of $660.9 million and a minimum asset coverage ratio of 1.50 to 1.00.
In addition, in the event that a Below Investment Grade Event (as defined in the December 2028 Note Purchase Agreement) occurs, the December 2028 Notes will bear interest at a fixed rate per annum which is 1.00% above the stated rate of the December 2028 Notes from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that a Secured Debt Ratio Event (as defined in the December 2028 Note Purchase Agreement) occurs, the December 2028 Notes will bear interest at a fixed rate per annum which is 1.50% above the stated rate of the December 2028 Notes from the date of the occurrence of the Secured Debt Ratio Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that both a Below Investment Grade Event and a Secured Debt Ratio Event have occurred and are continuing, the December 2028 Notes will bear interest at a fixed rate per annum which is 2.00% above the stated rate of the December 2028 Notes from the date of the occurrence of the later to occur of the Below Investment Grade Event and the Secured Debt Ratio Event to and until the date on which one of such events is no longer continuing.
The December 2028 Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, certain cross-defaults or cross-acceleration under our other indebtedness, certain judgments and orders and certain events of bankruptcy.
The December 2028 Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The December 2028 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
As of both March 31, 2026 and December 31, 2025, the December 2028 Notes were accruing at a weighted average interest rate of 9.4%.
July 2029 Notes
On July 24, 2024, we entered into a note purchase agreement (the "July 2029 Note Purchase Agreement") governing the issuance of $156.0 million in aggregate principal amount of unsecured notes (the "July 2029 Notes"), due July 24, 2029, with a fixed interest rate of 7.47% per year, to institutional accredited investors (as defined in Regulation D under the Securities Act) in a private placement. The closing for the July 2029 Notes occurred on July 24, 2024. The July 2029 Notes are guaranteed by our various subsidiaries.
Interest on the July 2029 Notes is due semiannually on May 15 and November 15 each year, beginning on November 15, 2024. The July 2029 Notes may be redeemed in whole or in part at any time or from time to time at our option, upon notice, in an amount not less than 10% of the aggregate principal amount of July 2029 Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, and the Prepayment Settlement Amount (as defined in the July 2029 Note Purchase Agreement) applicable to July 2029 Notes determined for the prepayment date with respect to such principal amount. In addition, we are obligated to offer to prepay 100% of the principal amount of July 2029 Notes, together with interest on such July 2029 Notes accrued to, but excluding, the date of prepayment. The July 2029 Notes are general unsecured obligations of ours that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us. As of both March 31, 2026 and December 31, 2025, we had $156.0 million in aggregate principal amount of July 2029 Notes outstanding.
The July 2029 Note Purchase Agreement contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our regulation as a business development company within the meaning of the 1940 Act and as a regulated investment company under the Code, a minimum net worth of the greater of (A) $500.0 million and (B) an amount equal to the sum of (i) $660.9 million plus (ii) an amount equal to 65% of the difference, of (x) the aggregate net proceeds of all sales of Equity Interests (as defined in the July 2029 Note Purchase Agreement) by us and our subsidiaries during each quarter after October 20, 2023 (other than the proceeds of sales of Equity Interests by and among us and our subsidiaries) and (y) the amount paid or distributed by us to purchase or redeem its shares of common stock in connection with a tender offer during such quarter and a minimum asset coverage ratio of 1.50 to 1.00.
In addition, in the event that a Below Investment Grade Event (as defined in the July 2029 Note Purchase Agreement) occurs, the July 2029 Notes will bear interest at a fixed rate per annum which is 1.00% above the stated rate of the July 2029 Notes from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that a Secured Debt Ratio Event (as defined in the July 2029 Note Purchase Agreement) occurs, the July 2029 Notes will bear interest at the interest rate per annum which is 1.50% above the stated rate of the July 2029 Notes from the date of the occurrence of the Secured Debt Ratio Event to and until the date on which the Secured Debt Ratio Event is no longer continuing. In the event that a Below Investment Grade Event and a Secured Debt Ratio Event are both continuing at the same time, the July 2029 Notes will bear interest at a fixed rate per annum which is 2.00% above the stated rate of the July 2029 Notes from the date on which both such events first simultaneously existed until the date on which either or both events is no longer continuing.
The July 2029 Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, certain cross-defaults or cross-acceleration under our other indebtedness, certain judgments and orders and certain events of bankruptcy.
The July 2029 Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The July 2029 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
As of both March 31, 2026 and December 31, 2025, the July 2029 Notes were accruing at a weighted average interest rate of 7.5%.
September 2029 Notes
On July 24, 2024, we entered into a note purchase agreement (the "September 2029 Note Purchase Agreement") governing the issuance of $48.0 million in aggregate principal amount of unsecured notes (the "September 2029 Notes"), due September 18, 2029, with a fixed interest rate of 7.47% per year, to institutional accredited investors (as defined in Regulation D under the Securities Act) in a private placement. The closing for the September 2029 Notes occurred on September 18, 2024. The September 2029 Notes are guaranteed by our various subsidiaries.
Interest on the September 2029 Notes is due semiannually on May 15 and November 15 each year, beginning on November 15, 2024. The September 2029 Notes may be redeemed in whole or in part at any time or from time to time at our option, upon notice, in an amount not less than 10% of the aggregate principal amount of September 2029 Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, and the Prepayment Settlement Amount (as defined in the September 2029 Note Purchase Agreement) applicable to September 2029 Notes determined for the prepayment date with respect to such principal amount. In addition, we are obligated to offer to prepay 100% of the principal amount of September 2029 Notes, together with interest on such September 2029 Notes accrued to, but excluding, the date of prepayment. The September 2029 Notes are general unsecured obligations of ours that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us. As of both March 31, 2026 and December 31, 2025, we had $48.0 million in aggregate principal amount of September 2029 Notes outstanding.
The September 2029 Note Purchase Agreement contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our regulation as a business development company within the meaning of the 1940 Act and as a regulated investment company under the Code, a minimum net worth of the greater of (A) $500.0 million and (B) an amount equal to the sum of (i) $660.9 million plus (ii) an amount equal to 65% of the difference, of (x) the aggregate net proceeds of all sales of Equity Interests (as defined in the September 2029 Note Purchase Agreement) by us and our subsidiaries during each quarter after October 20, 2023 (other than the proceeds of sales of Equity Interests by and among us and our subsidiaries) and (y) the amount paid or distributed by us to purchase or redeem its shares of common stock in connection with a tender offer during such quarter and a minimum asset coverage ratio of 1.50 to 1.00.
In addition, in the event that a Below Investment Grade Event (as defined in the September 2029 Note Purchase Agreement) occurs, the September 2029 Notes will bear interest at a fixed rate per annum which is 1.00% above the stated rate of the September 2029 Notes from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that a Secured Debt Ratio Event (as defined in the September 2029 Note Purchase Agreement) occurs, the September 2029 Notes will bear interest at the interest rate per annum which is 1.50% above the stated rate of the September 2029 Notes from the date of the occurrence of the Secured Debt Ratio Event to and until the date on which the Secured Debt Ratio Event is no longer continuing. In the event that a Below Investment Grade Event and a Secured Debt Ratio Event are both continuing at the same time, the September 2029 Notes will bear interest at a fixed rate per annum which is 2.00% above the stated rate of the September 2029 Notes from the date on which both such events first simultaneously existed until the date on which either or both events is no longer continuing.
The September 2029 Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, certain cross-defaults or cross-acceleration under our other indebtedness, certain judgments and orders and certain events of bankruptcy.
The September 2029 Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The September 2029 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
As of both March 31, 2026 and December 31, 2025, the September 2029 Notes were accruing at a weighted average interest rate of 7.5%.
July 2030 Notes
On July 10, 2025, we entered into a Note Purchase Agreement (the "July 2030 Note Purchase Agreement") governing the issuance of $161.0 million aggregate principal amount of unsecured notes (the "July 2030 Notes"), due July 10, 2030, with a fixed interest rate of 6.57% per year, to institutional accredited investors (as defined in Regulation D under the Securities Act) in a private placement. The closing for the July 2030 Notes occurred on July 10, 2025. The July 2030 Notes are guaranteed by our various subsidiaries.
Interest on the July 2030 Notes is due semiannually on May 15 and November 15 each year, beginning on November 15, 2025. The July 2030 Notes may be redeemed in whole or in part at any time or from time to time at our option, upon notice, in an amount not less than 10% of the aggregate principal amount of 2030 Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, and the Prepayment Settlement Amount (as defined in the July 2030 Note Purchase Agreement) applicable to July 2030 Notes determined for the prepayment date with respect to such principal amount. In addition, we are obligated to offer to prepay 100% of the principal amount of July 2030 Notes, together with interest on such July 2030 Notes accrued to, but excluding, the date of prepayment. The July 2030 Notes are general unsecured obligations of ours that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us. As of both March 31, 2026 and December 31, 2025, the Company had $161.0 million in aggregate principal amount of July 2030 Notes outstanding.
The July 2030 Note Purchase Agreement contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our regulation as a business development company within the meaning of the 1940 Act and as a regulated investment company under the Code, a minimum net worth of the greater of (A) $500.0 million and (B) an amount equal to the sum of (i) $1.1 billion plus (ii) an amount equal to 65% of the difference, of (x) the aggregate net proceeds of all sales of Equity Interests (as defined in the July 2030 Note Purchase Agreement) by us and our subsidiaries during each quarter after October 29, 2024 (other than the proceeds of sales of Equity Interests by and among us and our subsidiaries) and (y) the amount paid or distributed by us to purchase or redeem its shares of common stock in connection with a tender offer during such quarter and a minimum asset coverage ratio of 1.50 to 1.00.
In addition, in the event that a Below Investment Grade Event (as defined in the July 2030 Note Purchase Agreement) occurs, the July 2030 Notes will bear interest at a fixed rate per annum which is 1.00% above the stated rate of the July 2030 Notes from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that a Secured Debt Ratio Event (as defined in the July 2030 Note Purchase Agreement) occurs, the July 2030 Notes will bear interest at a fixed rate per annum which is 1.50% above the stated rate of the July 2030 Notes from the date of the occurrence of the Secured Debt Ratio Event to and until the date on which the Below Investment Grade Event is no longer continuing. In the event that both a Below Investment Grade Event and a Secured Debt Ratio Event have occurred and are continuing, the July 2030 Notes will bear interest at a fixed rate per annum which is 2.00% above the stated rate of the July 2030 Notes from the date of the occurrence of the later to occur of the Below Investment Grade Event and the Secured Debt Ratio Event to and until the date on which one of such events is no longer continuing.
The July 2030 Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, certain cross-defaults or cross-acceleration under our other indebtedness, certain judgments and orders and certain events of bankruptcy.
The July 2030 Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The July 2030 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
As of both March 31, 2026 and December 31, 2025, the July 2030 Notes were accruing at a weighted average interest rate of 6.6%.
Related Party Transactions
We have a number of business relationships with affiliated or related parties, including the following:
•We have an Amended Investment Advisory Agreement with MC Advisors, an investment advisor registered with the SEC, to manage our investing activities. We pay MC Advisors a fee for its services under the Amended Investment Advisory Agreement consisting of two components - a base management fee and an incentive fee. See Note 6 to our consolidated financial statements and "Significant Accounting Estimates and Critical Accounting Policies - Capital Gains Incentive Fee" for additional information.
•We have an Administration Agreement with MC Management to provide us with the office facilities and administrative services necessary to conduct our day-to-day operations. See Note 6 to our consolidated financial statements for additional information.
•On August 7, 2025, we entered into an Asset Purchase Agreement with MRCC and MC Advisors. See "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" and "Recent Developments" for additional information about the Asset Purchase.
•Theodore L. Koenig, our Chief Executive Officer and Chairman of our Board, is also a manager of MC Advisors and the Chairman and Chief Executive Officer of MC Management. Lewis W. Solimene, Jr., our Chief Financial Officer and Chief Investment Officer, is also a managing director of MC Management.
•We have a license agreement with Monroe Capital LLC, under which Monroe Capital LLC has agreed to grant us a non-exclusive, royalty-free license to use the name "Monroe Capital" for specified purposes in our business.
In addition, we have adopted a formal code of ethics that governs the conduct of MC Advisors' officers, directors and employees. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.
Commitments and Contingencies and Off-Balance Sheet Arrangements
Commitments and Contingencies: As of March 31, 2026 and December 31, 2025, we had outstanding commitments to fund investments under undrawn revolvers, delayed draw commitments and subscription agreements totaling $1.1 billion and $1.2 billion, respectively. We believe that our available cash balances and/or ability to draw on existing credit facilities or raise additional leverage facilities provide sufficient funds to cover our unfunded commitments as of March 31, 2026. Additionally, we have entered into certain contracts with other parties that contain a variety of indemnification provisions. Our maximum exposure under these arrangements is unknown. However, as of March 31, 2026, we have not experienced claims or losses pursuant to these contracts and believe the risk of loss related to such indemnification provisions to be remote.
Off-Balance Sheet Arrangements: Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any off-balance sheet financings or liabilities.
Market Trends
We have identified the following general trends that may affect our business:
Target Market: We believe that small and middle-market companies in the United States with annual revenues between $10.0 million and $2.5 billion represent a significant growth segment of the U.S. economy and often require substantial capital investments to grow. Middle-market companies have generated a significant number of investment opportunities for investment funds managed or advised by Monroe Capital, and we believe that this market segment will continue to produce significant investment opportunities for us.
Specialized Lending Requirements: We believe that several factors render many U.S. financial institutions ill-suited to lend to U.S. middle-market companies. For example, based on the experience of our management team, lending to U.S. middle-market companies (1) is generally more labor intensive than lending to larger companies due to the smaller size of each investment and the fragmented nature of information for such companies, (2) requires due diligence and underwriting practices consistent with the demands and economic limitations of the middle-market and (3) may also require more extensive ongoing monitoring by the lender.
Demand for Debt Capital: We believe there is a large pool of uninvested private equity capital for middle-market companies. We expect 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.
Competition from Other Lenders: We believe that many traditional bank lenders, in past years, de-emphasized their service and product offerings to middle-market businesses in favor of lending to large corporate clients and managing capital market transactions. In addition, many commercial banks face significant balance sheet constraints as they seek to build capital and meet future regulatory capital requirements. These factors may result in opportunities for alternative funding sources to middle-market companies and therefore drive increased new investment opportunities for us. We believe the lower middle market - our core focus - remains more insulated from broader market conditions, given the greater complexity, smaller transaction sizes, and relationship-intensive underwriting requirements that continue to favor experienced non-bank lenders. In addition, there has been a significant amount of capital raised over the past several years dedicated to middle market lending which has increased competitive pressure in the BDC and investment company marketplace for senior and subordinated debt which in turn could result in lower yields and weaker financial covenants for new assets.
Pricing and Deal Structures: We believe that the volatility in global markets over the last several years and current macroeconomic issues including changes in bank regulations for middle-market banks has reduced access to, and availability of, debt capital to middle-market companies, causing a reduction in competition and generally more favorable capital structures and deal terms. Sizable recent capital raises in the private debt marketplace have created significantly increased competition over the last few years, reducing available pricing and creating less favorable capital structures; however, we believe that current market conditions for our target market may continue to create favorable opportunities to invest at attractive risk-adjusted returns.
Market Environment: We believe middle market investments are attractive in volatile market environments such as the current market environment where there is uncertainty around the overall direction of the economy and interest rates. Directly originated middle market loans have demonstrated the ability to outperform competing markets through varying economic cycles including downturns and prior periods of monetary policy tightening. Through the global financial crisis, the higher interest rate environment in 2005-2006, market bottom in 2008 and the subsequent recovery period, as well as throughout the COVID-19 pandemic, these investments have historically generated considerable yield premium with more favorable capital structures for lenders, resulting in higher returns when compared to the market for U.S. high yield bonds and U.S. traded loans. (1) Middle market direct lending also offers a natural hedge to higher interest rates with floating rate structures that benefit from higher interest rates, while providing broad diversification in an environment where there is a risk of increased default rate activity. We believe that direct lending volumes will continue outpacing syndicated loan transaction volumes due to capital requirements and liquidity constraints faced by banks. In 2025, the overall middle market experienced spread compression and leverage and loan-to-value attachments points have decreased nominally. Further, interest coverage ratios have increased well above 2024 levels, indicating that the earnings power of borrowers continue to sufficiently satisfy their debt service obligations with increased cushion. Direct lending volume increased in 2025 driven by significant growth in LBO activity and recapitalizations, which offset a double digit decrease in M&A activity over the same time period.(1) Deal activity declined year over year in the first quarter due to slower private equity M&A activity and macroeconomic uncertainty. However, underlying fundamentals continue to support an accelerated M&A environment which would result in increased loan portfolio activity. Average spreads in middle market direct lending were relatively flat in the first quarter, though core and lower middle market spreads showed signs of widening towards the end of the period.(2) Loan documentation and structures, more notably in the lower middle market, continue to be lender favorable due to market uncertainty stemming from recent market volatility, particularly in software and the lingering impact of the potential tariffs implemented by the current U.S. administration and general market headline sentiment. We believe this makes for an attractive opportunity for middle market direct lenders to selectively deploy capital in assets that have relatively attractive pricing and lower risk structures, resulting in an attractive vintage with strong risk-adjusted returns. That said, we note that a softening macroeconomic environment and lingering impact of inflationary pressures could result in increased default rates. If default rates become more prevalent, we would expect to experience decreased net interest income, lower yields and increased risk of credit loss. However, we believe that our portfolio is positioned well to navigate the potential risks noted above. Further, Monroe Capital's scale, product suite, diversification, and strong historical recovery rate track record will continue to allow us to find attractive investment opportunities and navigate this uncertain market environment.
In addition, certain semi-liquid private credit structures - including non-traded BDCs, interval funds, and non-traded closed-end funds - have recently experienced elevated repurchase and redemption requests, in some cases exceeding standard quarterly repurchase program limits and resulting in pro rata fulfillment of investor redemption requests. The convergence of elevated redemption activity represents a meaningful shift in the private credit competitive and market landscape from prior years and reinforces our belief that disciplined underwriting, portfolio diversification, and experienced credit management are critical differentiators in the current environment.
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(1)Private Credit total return performance measured by the Cliffwater Direct Lending Index total return, US high yield measured by the ICE BofA US High Yield Index, Leveraged Loans by Morningstar LSTA US Leveraged Loan Index - March 2026.
(2)LSEG LPC's 1Q26 Sponsored Middle Market Private Deals Analysis - April 2026.
Recent Developments
Stock Issuances: On April 1, 2026, we sold 2,014,437 shares for aggregate consideration of $19.7 million. On May 1, 2026, we received proceeds of $11.5 million related to an additional share issuance to bring the total consideration we have received for stock issuances subsequent to March 31, 2026 to $31.2 million.
Distributions: On April 20, 2026, the Board declared a distribution of $0.071 per share, which was paid on April 28, 2026 to stockholders of record as of April 21, 2026. The total distribution paid was $20.3 million, $8.9 million of which was reinvested pursuant to the Second Amended and Restated DRIP at a NAV per share of $9.78.
Share Repurchases: On April 30, 2026, we commenced our normal course quarterly tender offer pursuant to the Share Repurchase Program. We offered to purchase up to 14,229,101 shares of our issued and outstanding common stock. This amount represents approximately 5.0% of our common stock outstanding as of March 31, 2026. The tender offer is for a price per share equal to the net asset value per share of our common stock on April 30, 2026. The tender offer will expire at 11:59 P.M., Eastern Time, on May 29, 2026, unless otherwise extended.
We have fulfilled all repurchase requests since inception. We feel comfortable with our current state of liquidity and our liquidity management program. Subsequent to March 31, 2026 we have had net capital inflows totaling $40.1 million, comprised of (i) the issuance of shares in connection with our private offerings of $31.2 million and (ii) the issuances of shares under the DRIP of $8.9 million.
Asset Purchase: On April 14, 2026, we completed the previously announced purchase of the assets of MRCC. The Asset Purchase was completed pursuant to the terms of the Asset Purchase Agreement among us, MRCC and MC Advisors. Pursuant to the Asset Purchase Agreement, at the closing of the Asset Purchase, we delivered to MRCC an aggregate purchase price of approximately $335.3 million, equal to the fair value of the Purchased Assets (as defined in the Asset Purchase Agreement) as of April 11, 2026, at which time MRCC sold to us all of its investment assets and we assumed certain liabilities with respect to such assets.
The Asset Purchase was structured to comply with the safe harbor provision of Rule 17a-8 of the 1940 Act. The foregoing description of the Asset Purchase Agreement is a summary only and is qualified in its entirety by reference to the full text of the Asset Purchase Agreement, a copy of which was filed as Exhibit 2.1 to our Current Report on Form 8-K filed on August 8, 2025.
Significant Accounting Estimates and Critical Accounting Policies
Revenue Recognition
We record interest and fee income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest, we do not accrue PIK interest if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt investments if we have reason to doubt our ability to collect such interest. We may make exceptions to this policy and partially record interest if the loan has sufficient collateral value or is in process of collection and there is the expectation of collection of principal and a portion of the contractual interest. Loan origination fees, original issue discount and market discount or premium are capitalized, and then we amortize such amounts using the effective interest method as interest income over the life of the investment. Upon the prepayment of a loan or debt investment, any unamortized premium or discount or loan origination fees are recorded as interest income. We record prepayment premiums on loans and debt investments as interest income when we receive such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. We record fees on loans based on the determination of whether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associated with a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interest method if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no cost basis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service, the fee is deemed earned and recorded as other income in the period the service is completed.
Dividend income on preferred equity investments is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies. Each distribution received from LLC and LP investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
Valuation of Portfolio Investments
Pursuant to SEC Rule 2a-5 under the 1940 Act, the Board has designated MC Advisors as our valuation designee (the "Valuation Designee"). The Board is responsible for oversight of the Valuation Designee. The Valuation Designee has established a valuation committee to determine in good faith the fair value of our investments, based on input of the Valuation Designee's management and personnel and independent valuation firms which are engaged at the direction of the valuation committee to assist in the valuation of certain portfolio investments lacking a readily available market quotation. The valuation committee determines fair values pursuant to a valuation policy approved by the Board and pursuant to a consistently applied valuation process.
Under the valuation policy, the Valuation Designee values investments for which market quotations are readily available and within a recent date at such market quotations. When doing so, the Valuation Designee determines whether the quote obtained is sufficient in accordance with generally accepted accounting principles in the United States of America ("GAAP") to determine the fair value of the security. Debt and equity investments that are not publicly traded or whose market prices are not readily available or whose market prices are not regularly updated are valued at fair value as determined in good faith by the Valuation Designee. Because we expect that there will not be a readily available market for many of the investments in our portfolio, we expect to value many of our portfolio investments at fair value as determined in good faith by our Valuation Designee using a documented valuation policy and a consistently applied valuation process. Such determination of fair values may involve subjective judgments and estimates. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize amounts that are different from the amounts presented and such differences could be material.
With respect to investments for which market quotations are not readily available, the Valuation Designee undertakes a multi-step valuation process each quarter, as described below:
•the quarterly valuation process begins with each portfolio company or investment being initially evaluated and rated by the investment professionals of the Valuation Designee responsible for the credit monitoring of the portfolio investment;
•our Valuation Designee engages independent valuation firms to conduct independent appraisals of a selection of investments for which market quotations are not readily available. We will consult with an independent valuation firm relative to each portfolio company at least once in every calendar year, but the independent appraisals are generally received quarterly for each investment;
•to the extent an independent valuation firm is not engaged to conduct an investment appraisal on an investment for which market quotations are not readily available in a particular quarter, the investment will be valued by the Valuation Designee;
•preliminary valuation conclusions are then documented and discussed with the valuation committee of the Valuation Designee;
•the valuation conclusions are approved by the valuation committee of the Valuation Designee; and
•a report prepared by the Valuation Designee is presented to the Board quarterly to allow the Board to perform its oversight duties of the valuation process and the Valuation Designee.
The Valuation Designee generally uses the income approach to determine fair value for loans where market quotations are not readily available, as long as it is appropriate. If there is deterioration in credit quality or a debt investment is in workout status, the Valuation Designee may consider other factors in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. This liquidation analysis may also include probability weighting of alternative outcomes. The Valuation Designee generally considers our debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance and the loan is otherwise not deemed to be impaired. In determining the fair value of the performing debt, the Valuation Designee considers fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions and other relevant factors, both qualitative and quantitative. In the event that a debt instrument is not performing, as defined above, the Valuation Designee will evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the debt instrument.
Under the income approach, discounted cash flow models are utilized to determine the present value of the future cash flow streams of our debt investments, based on future interest and principal payments as set forth in the associated loan agreements. In determining fair value under the income approach, the Valuation Designee also considers the following factors: applicable market yields and leverage levels, recent transactions, credit quality, prepayment penalties, the nature and realizable value of any collateral, the portfolio company's ability to make payments, and changes in the interest rate environment and the credit markets that generally may affect the price at which similar investments may be made.
Under the market approach, the enterprise value methodology is typically utilized to determine the fair value of an investment. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is generally best expressed as a range of values, from which the Valuation Designee derives a single estimate of enterprise value. In estimating the enterprise value of a portfolio company, the Valuation Designee analyzes various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio company's historical and projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public. Typically, the enterprise values of private companies are based on multiples of earnings before interest, income taxes, depreciation and amortization ("EBITDA"), cash flows, net income, revenues, or in limited cases, book value.
In addition, for certain investments, the Valuation Designee may base its valuation on indicative bid and ask prices provided by an independent third-party pricing service. Bid prices reflect the highest price that we and others may be willing to pay. Ask prices represent the lowest price that we and others may be willing to accept. The Valuation Designee generally use the midpoint of the bid/ask range as our best estimate of fair value of such investment.
As of March 31, 2026, our Valuation Designee determined, in good faith, the fair value of our investment portfolio in accordance with GAAP and our valuation procedures based on the facts and circumstances known by us at that time, or reasonably expected to be known at that time.
Net Realized Gain or Loss and Net Change in Unrealized Gain or Loss
We measure realized gain or loss by the difference between the net proceeds from the sale and the amortized cost basis of the investment, without regard to unrealized gain or loss previously recognized. Net change in unrealized gain or loss reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gain or loss, when gain or loss is realized. Additionally, we do not isolate the change in fair value resulting from foreign currency exchange rate fluctuations from the changes in the fair values of the underlying investment. All fluctuations in fair value are included in net change in unrealized gain (loss) on investments on our consolidated statements of operations. The impact resulting from changes in foreign exchange rates on the Revolving Credit Facility borrowings is included in net change in unrealized gain (loss) on foreign currency and other transactions.
Capital Gains Incentive Fee
Pursuant to the terms of the Amended Investment Advisory Agreement with MC Advisors, the incentive fee on capital gains earned on liquidated investments of our portfolio is determined and payable in arrears as of the end of each calendar year (or upon termination of the Amended Investment Advisory Agreement). This fee equals 12.5% (reduced from 15.0% as a result of MC Advisors April 18, 2022 agreement to permanently waive a portion of the incentive fees starting on January 1, 2022) of our incentive fee capital gains (i.e., our realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, net of all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On a quarterly basis, we accrue for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.
While the Amended Investment Advisory Agreement with MC Advisors neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of an American Institute for Certified Public Accountants Technical Practice Aid for investment companies, we include unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to MC Advisors if our entire portfolio was liquidated at its fair value as of the balance sheet date even though MC Advisors is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.
During the three months ended March 31, 2026, there were zero accrued capital gains incentive fees on our portfolio during the period. There were no payables to MC Advisors for capital gains incentive fees for the three months ended March 31, 2026. During the three months ended March 31, 2025, we reversed previously accrued capital gains incentive fees of $0.8 million based on unrealized losses on our portfolio during the period. This reversal was partially offset by $16 thousand of accrued capital gains incentive fees payable to MC Advisors as a result of realized gains during the period.
New Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures ("ASU 2024-03"), which requires disaggregated disclosure of certain costs and expenses, including purchases of inventory, employee compensation, depreciation, amortization and depletion, within relevant income statement captions. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning with the first quarter ended March 31, 2028. Early adoption and retrospective application are permitted. We are currently evaluating the impact of adopting ASU 2024-03.
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