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New words:
Arcserve, arising, began, Cayman, certainty, East, Europe, iii, interim, lose, military, Opco, outcome, progressed, thereto, Thrasio
Removed:
accelerated, accounted, Alongside, arbitrator, arisen, attached, Australian, award, banking, Bannockburn, Blackhawk, BLST, Britain, carrier, chapter, check, comprised, contractually, delay, depository, derive, dissolution, dissolved, divert, electronically, eligibility, eliminate, emerging, Employer, enduring, exceeded, exchangeable, exemptive, extended, extinguishment, facing, filer, filing, Forex, forgo, fully, governed, GP, Great, guaranteed, half, harm, hierarchal, Identification, IG, impairment, Incorporation, increasing, indenture, inhibit, insured, Interactive, Interbank, issuing, LBO, leveraging, LIBOR, linked, London, Luxury, mark, match, MCC, mechanism, Mine, modified, Offered, operational, Optical, partner, paying, prediction, premia, prevent, proceeding, protection, reached, receipt, Refinitiv, regime, relief, renewal, Republic, requisite, rest, restricted, restricting, resulted, retracting, revised, Rockdale, Safety, satisfaction, satisfied, SBA, SBCAA, SBIC, sharing, sharply, shell, shorter, Signature, Silicon, Similarly, speculative, submit, submitted, subsequently, Subtopic, surrender, susceptible, taxation, technique, threatened, Title, transact, transition, understanding, undistributed, Unfavorable, uninsured, Unregistered, Valley, variable, Vinci, voluntarily, waive, Washington, wholly, worth
Financial report summary
?Risks
- We depend upon MC Advisors’ senior management for our success, and upon its access to the investment professionals of Monroe Capital and its affiliates.
- Our business model depends to a significant extent upon strong referral relationships with financial institutions, sponsors and investment professionals. Any inability of MC Advisors to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
- Our financial condition and results of operations depend on our ability to manage our business effectively.
- There may be conflicts related to obligations that MC Advisors’ senior investment professionals and members of its investment committee have to other clients.
- MC Advisors or its investment committee may, from time to time, possess material nonpublic information, limiting our investment discretion.
- Our management and incentive fee structure may create incentives for MC Advisors that are not fully aligned with the interests of our stockholders.
- Our incentive fee may induce MC Advisors to make certain investments, including speculative investments.
- The Investment Advisory and Management Agreement with MC Advisors and the Administration Agreement with MC Management were not negotiated on an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third-party.
- Our ability to enter into transactions with our affiliates is restricted, which may limit the scope of investments available to us.
- We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
- We will be subject to U.S. federal income tax at corporate rates if we are unable to qualify or maintain qualification as a RIC under Subchapter M of the Code.
- An extended disruption in the capital markets and the credit markets could negatively affect us and our portfolio companies.
- We may need to raise additional capital to grow because we must distribute most of our income.
- We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income.
- The 1940 Act allows us to incur additional leverage, which could increase the risk of investing in us.
- Regulations governing our operation as a BDC affect our ability to and the way in which we raise additional capital.
- We maintain a revolving credit facility and use other borrowed funds to make investments or fund our business operations, which exposes us to risks typically associated with leverage and increases the risk of investing in us.
- We are subject to risks associated with our revolving credit facility and the terms of our revolving credit facility may contractually limit our ability to incur additional indebtedness.
- To the extent we continue to use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.
- We are subject to risks related to corporate social responsibility.
- We are exposed to risks associated with changes in interest rates.
- If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would have a material adverse effect on our business, financial condition and results of operations.
- Many of our portfolio investments are recorded at fair value as determined in good faith by our Valuation Designee and, as a result, there may be uncertainty as to the value of our portfolio investments.
- Legislative or regulatory tax changes could adversely affect investors.
- Our Board may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
- MC Advisors can resign on 60 days’ notice under the Investment Advisory and Management Agreement, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
- MC Management can resign on 60 days’ notice from its role as our administrator under the Administration Agreement, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
- We may incur lender liability as a result of our lending activities.
- We may incur liability as a result of providing managerial assistance to our portfolio companies.
- Economic recessions or downturns could impair our portfolio companies and harm our operating results.
- Market conditions have materially and adversely affected debt and equity capital markets in the United States and around the world.
- Our investments in leveraged portfolio companies may be risky, and we could lose all or part of our investment.
- Our portfolio companies consist of and will likely continue to consist primarily of lower middle-market, privately owned companies, which may present a greater risk of loss than loans to larger companies.
- We may be subject to risks associated with our investments in senior secured loans.
- We may be subject to risks associated with our investments in junior debt securities.
- We may be subject to risks associated with our investments in unitranche secured loans and securities.
- Loans may become nonperforming for a variety of reasons.
- The lack of liquidity in our investments may adversely affect our business.
- Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized losses.
- Our portfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactions with equal or greater expected yields.
- We may be subject to risks associated with real estate-related investments.
- We may be subject to risks associated with our investments in the technology industry.
- We may be subject to risks associated with our investments in the business services industry.
- We may be subject to risks associated with our investments in the insurance industry.
- We may be subject to risks associated with our investments in the finance industry.
- Our investments in the healthcare and pharmaceutical services industry sector are subject to extensive government regulation and certain other risks particular to that industry.
- To the extent original issue discount and payment-in-kind interest constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income.
- We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited by the 1940 Act with respect to the proportion of our assets that may be invested in securities of a single issuer.
- We may hold the debt securities of leveraged companies that may, due to the significant volatility of such companies, enter into bankruptcy proceedings.
- Because we do not hold controlling equity interests in the majority of our portfolio companies, we may not be able to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies, which could decrease the value of our investments.
- Defaults by our portfolio companies will harm our operating results.
- Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
- We may be subject to risks associated with syndicated loans.
- The disposition of our investments may result in contingent liabilities.
- We may be subject to additional risks if we engage in hedging transactions and/or invest in foreign securities.
- We may not realize gains from our equity investments.
- We may not be able to pay distributions, our distributions may not grow over time and/or a portion of our distributions may be a return of capital.
- We may choose to pay a portion of our dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive.
- If we sell common stock at a discount to our net asset value per share, stockholders who do not participate in such sale will experience immediate dilution in an amount that may be material.
- Investing in our common stock may involve an above-average degree of risk.
- Shares of closed-end investment companies, including BDCs, often trade at a discount to their net asset value, and our shares have not traded at or above net asset value since the second quarter of 2022.
- Provisions of the Maryland General Corporation Law and our charter and bylaws could deter takeover attempts and have an adverse effect on the price of our common stock.
- The market price of our securities fluctuates.
- The 4.75% Notes due 2026 (the “2026 Notes”) are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future.
- The 2026 Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
- The indenture under which the 2026 Notes are issued contains limited protection for holders of the 2026 Notes.
- The 2026 Notes may or may not have an established trading market. If a trading market in the 2026 Notes is developed, it may not be maintained.
- If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the 2026 Notes.
- We may choose to redeem the 2026 Notes when prevailing interest rates are relatively low.
- We may not be able to repurchase the 2026 Notes upon a Change of Control Repurchase Event.
- A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the 2026 Notes or change in the debt markets could cause the liquidity or market value of the 2026 Notes to decline significantly.
- We may experience fluctuations in our quarterly operating results.
- Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
- Efforts to comply with the Sarbanes-Oxley Act involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely affect us and the market price of our securities.
- Terrorist attacks, acts of war, global health emergencies or natural disasters may affect any market for our common stock, impact the businesses in which we invest and harm our business, operating results and financial condition.
- The failure in cybersecurity systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning, could impair our ability to conduct business effectively.
- A data breach could negatively impact our business and result in significant penalties.
Management Discussion
- (1)During the three months ended March 31, 2024 and 2023, the dividend income includes PIK dividends of $113 and $128, respectively.
- During the three months ended March 31, 2024 investment income decreased by $1.6 million, as compared to the three months ended March 31, 2023, primarily due to a decrease in interest income and fee income. The decrease in interest income is primarily resulting from a reduction in the average investment portfolio. This decrease was partially offset by an increase in base rates as a result of higher base interest rates during the current period.
- The composition of our interest and other debt financing expenses, average outstanding balances and average stated interest rates (i.e. the rate in effect plus spread) were as follows (in thousands):