Q2 2024 MidCap Financial Investment Corp Earnings Call

August 8, 2024

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Speaker Change: Good morning, and welcome to the earnings Conference call for the period ended June 30th 2024, four mid cap financial investment Corporation.

Unidentified: ....

Operator: Good morning, and welcome to the earnings conference call for the period ended June 30th, 2024 for MidCap Financial Investment Corporation. At this time, all participants have been placed in listen-only mode. The call will be open for a question and answer session following the speaker's prepared remarks. If you would like to ask a question at that time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press star 2. I will now turn the call over to Elizabeth Besen, Investor Relations Manager for MidCamp Financial Investment Corporation.

Operator: At this time, all participants have been placed in listen-only mode. The call will be open for a question and answer session following the speaker's prepared remarks.

Speaker Change: At this time, all participants have been placed in listen only mode.

Operator: The call will be open for a question-and-answer session following the speaker's prepared remarks. If you would like to ask a question at that time, simply press star one on your telephone keypad. If you would like to withdraw your question, press the star two.

Speaker Change: The call will be opened for a question and answer session. Following the Speakers' prepared remarks, if you would like to ask a question at that time simply press star one on your telephone keypad. If you would like to withdraw your question press the star two.

Elizabeth Besen: I will now turn the call over to Elizabeth Besen, Investor Relations Manager for Mid Cap Financial Investment Corporation. Thank you, operator, and thank you, everyone, for joining us today. Speaking on today's call are Tanner Powell, Chief Executive Officer; Ted McNulty, President; and Greg Hunt, Chief Financial Officer. Howard Widra, Executive Chairman, as well as additional members of the management team, are on the call and available for the Q&A portion of today's call. I'd like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of Mid Cap Financial Investment Corporation and that any unauthorized broadcast in any form is strictly prohibited.

Speaker Change: Now I'll turn the call over to Elizabeth Besen Investor Relations manager for mid cap financial investment Corporation.

Elizabeth Besen: Thank you operator, and thank you everyone for joining us today speaking on today's call are Tanner Powell, Chief Executive Officer, Ted Mcnulty, President and Greg Hunt, Chief Financial Officer, Howard Weil.

Speaker: Thank you, Operator, and thank you, everyone, for joining us today. Speaking on today's call are Tanner Powell, Chief Executive Officer, Ted McNulty, President, and Greg Hunt, Chief Financial Officer. Howard Widra, Executive Chairman, as well as additional members of the management team, are on the call and available for the Q&A portion of today's call. I'd like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of MidCap Financial Investment Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our press release.

Speaker: Higher level question, with Howard moving over to Apollo and taking on what seems to be building out the direct origination effort.

Elizabeth Besen: Thank you, Operator, and thank you, everyone, for joining us today. Speaking on today's call are Tanner Powell, Chief Executive Officer, Ted McNulty, President, and Greg Hunt, Chief Financial Officer. Howard Widra, Executive Chairman, as well as additional members of the management team, are on the call and available for the Q&A portion of today's call. I'd like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of MidCap Financial Investment Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our press release.

Speaker: And then when a deal comes in, you know, there are sort of two strategies which overlap, which I think is the most relevant part of the question. So one is if there is a core middle market deal, say 50 million, $40, $50 million of EBITDA being done at five times, that is being executed by midcaps. And often, you know, portions of the Apollo ecosystem will take some of that long, especially because, in the 40 Act, you want to be part of transactions as they grow. So they may take a little.

Speaker: We're all integrated, and because I'm responsible for the sponsor origination, you know, we see and have access to everything. And we know which deals, not only that we bought with CEF loans, but which we have options on. So it actually goes back to what Melissa said. How do we know that we can generate flow? It's not only all of these MidCap assets, but we also pick off certain of the larger assets that we decide that they fit whatever, you know, you know, whatever criteria we may have.

Speaker: So, um, you know, I think for the shareholders of MidCap, you know, they should view our strategy, me and Claire Baillet, who's responsible for, you know, the MidCap sponsor lead, or sort of leading that effort across Apollo.

Elizabeth Besen: Chairman as well as additional members of the management team are on the call and available for the Q&A portion of today's call I'd like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of Midcap financial investment Corporation and that any unauthorized broadcast in any form is strictly prohibited.

Elizabeth Besen: I'd also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking information. Today's conference call and webcast may include forward-looking statements. You should refer to our most recent filings with the SEC for risks that apply to our business and that may adversely affect any forward-looking statements we make. We do not undertake to update our forward-looking statements or projections unless required by law.

Speaker: and I guess...

Elizabeth Besen: Information about the audio replay of this call is available on our press release.

Elizabeth Besen: Information about the audio replay of this call is available in our press release I'd also like to call your attention to the customary safe Harbor disclosure in our press release regarding forward looking information.

Speaker: I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call and webcast may include forward-looking statements. You should refer to our most recent filings with the SEC for risks that apply to our business and that may adversely affect any forward-looking statements we make. We do not undertake to update our forward-looking statements or projections unless required by law.

Elizabeth Besen: I'd also like to call your attention to the customary safe harbor disclosure and our press release regarding forward-looking information. Today's conference call and webcast may include forward-looking statements. You should refer to our most recent filings with the SEC for risks that apply to our business and then may adversely affect any forward-looking statements we make. We do not undertake to update our forward looking statements or projections, the less required by law to obtain copies of our SEC filings. Please visit either the SEC website at www.sec.gov or our website at www.micapfinancialic.com.

Speaker: Well, just to, I'm going to channel Mark Brown for a second, which is he sort of says like, the size of the BDC is not the goal, it's the reward for doing the business the right way. So we are, you know, we're focused on and our expectation is we will continue to sort of generate appealing risk adjusted returns. So our, you know, there will be an ability to grow, you know, in the normal course, meaning, you know, hopefully trading well, you know, in sort of the, you know, trading well on an absolute basis in order sort of people to want to invest more. So that's like the core focus, continue to execute, and we will be rewarded. And, and we will be able to grow, you know, with regard to sort of other sort of

Elizabeth Besen: Today's conference call and webcast May include forward looking statements you should refer to our most recent filings with the SEC for risks that apply to our business.

Elizabeth Besen: Hershey affect any forward looking statements, we make we do not undertake to update our forward looking statements or projections unless required by law to obtain copies of our SEC filings. Please visit either the SEC website at Www Dot as you see that Gov or our website at www dot mid cap financial IC Dot com.

Elizabeth Besen: To obtain copies of our SEC filings, please visit either the SEC website at www.sec.gov or our website at www.midcapfinancialic.com. I'd also like to remind everyone that we posted a supplemental information package on our website which contains information about the portfolio as well as the company's financial performance. Throughout today's call, we will refer to MidCap Financial Investment Corporation as either MFIC or the BDC, and we will use MidCap Financial to refer to the lender headquartered in Bethesda, Maryland. At this time, I'd like to turn the call over to Tanner Powell, MFIC's Chief Executive Officer.

Speaker: To obtain copies of our SEC filings, please visit either the SEC website at www.sec.gov or our website at www.midcapfinancialic.com. I'd also like to remind everyone that we've posted a supplemental information package on our website which contains information about the portfolio as well as the company's financial performance. Throughout today's call, we will refer to MidCap Financial Investment Corporation as either MFIC or the BDC, and we will use MidCap Financial to refer to the lender headquartered in Bethesda, Maryland. At this time, I'd like to turn the call over to Tanner Powell, MFIC's Chief Executive Officer.

Elizabeth Besen: I'd also like to remind everyone that we posted a supplemental information package on our website, which contains information about the portfolio as well as the company's financial performance. Throughout today's call, we will refer to mid cap financial investment corporation as either MFIC or the BDC. And we will use Mid Cap Financial to refer to the lender headquartered in Bethesda, Maryland.

Speaker Change: I'd also like to remind everyone that we've posted a supplemental information package on our website, which contains information about the portfolio as well as the company's finance.

Speaker Change: Actual performance throughout today's call, we will refer to Midcap financial investment Corporation as either M S IC or the BDC and we all use.

Denair Pal: Financial to refer to the lender headquartered in Bethesda, Maryland at this time I would like to turn the call over to dinner Pal emphasize some of Ice's Chief Executive Officer.

Tanner Powell: Greg will then review our financial results in greater detail, and we'll also review some of the accounting aspects. Second, the mergers are expected to enhance MFIC's portfolio diversification and improve certain portfolio metrics. Third, we expect to be able to realize operational synergies from the elimination of certain duplicative expenses from the merger. As a reminder, Apollo provided significant financial support for these mergers by reimbursing all merger-related expenses for all three funds and by making a one-time special cash payment to the CEF shareholders.

Speaker: Thank you.

Tanner Powell: At this time, I'd like to turn the call over to Tanner Powell, MFIC's Chief Executive Officer. Thank you, Elizabeth, and thank you to everyone who has joined today's call, especially those of you who may be newer to MFIC. I will begin today's call with an update on the successful completion of our mergers with our previously affiliated funds, Apollo's Senior Floating Rights Fund Inc., and Apollo Tactical Income Fund Inc., which we refer to as AFT and AIF, or the CES, throughout today's call. I will then provide an overview of MFIC's second quarter results, and we'll also provide our perspective on the current environment.

Tanner Powell: As a result of the mergers, MFIC's net assets have increased by approximately 44 percent. With $1.45 billion in net assets, MFIC has a significant investment. As a result of this deleveraging, MFIC is well-positioned to deploy capital into true first-lane, senior-secured loans sourced by MidCap Financial, a leading middle-market lender managed by Apple. Moving to our results for the June quarter, as previously announced when the mergers closed, MFIC's net investment income per share for the June quarter was $45,000. Auction activity has seen a meaningful pickup in the latter part of Q2 and into Q3, and we expect to see an increase in new deployment opportunities for direct lenders in the back half of the year.

Operator: We'll take our next question from Mark Hughes of Truist.

Tanner Powell: Thank you, Elizabeth, and thank you to everyone who has joined today's call, especially those of you who may be newer to MFIC. I will begin today's call with an update on the successful completion of our mergers with our previously affiliated funds, Apollo Senior Floating Rate Fund, Inc., and Apollo Tactical Income Fund, Inc., which we refer to as AFT and AIF, or the CEFs, throughout today's call I will then provide an overview of MFIC's second-quarter results, and we'll also provide our perspective on the current environment.

Dino: Thank you Elizabeth and thank you to everyone, who has joined today's call, especially those of you who may be newer to M. S. I see I'll begin today's call with an update on the successful completion of our mergers with our previously affiliated funds Apollo's senior floating rate Fund, Inc, and Apollo Tactical income Fund, Inc, which will be referred to as a F T in Aif or the C.

Tanner Powell: Ted will then discuss our investment activity and provide an update on the investment portfolio. He will also review the assets that we acquired in connection with the murder. Greg will then review our financial results in greater detail, and we'll also discuss some of the accounting aspects.

Speaker Change: Yes through throughout today's call I will then provide an overview of <unk> second quarter results and will also provide our perspective on the current environment.

Ted McNulty: Ted will then discuss our investment activity and provide an update on the investment portfolio. He will also review the assets that we acquired in the connection with the mergers. Greg will then review our financial results in greater detail, and we'll also review some of the accounting aspects of the mergers.

Speaker Change: Ed will then discuss our investment activity and provide an update on the investment portfolio. He will also review the assets that we acquired in connection with the mergers Greg will then review our financial results in greater detail and will also review some of the accounting aspects of the mergers.

Tanner Powell: Beginning with the mergers, we are pleased to announce that on July 22nd, MFIC successfully closed its mergers with AFT and AIF, two listed closed-end funds managed by Apollo. We believe these mergers mark an important step in MFIC's evolution to becoming a leading pure-play middle-market BDC. We remain enthusiastic about realizing the potential benefits that we highlighted when we announced the mergers last November. Let me remind you of some of these... First, we expect these mergers will be both ROE and NII per share accretive for all shareholders as we rotate the CEF's lower yielding investments in the ordinary course into higher yielding directly originated loans that align with MFIC's investments. Second, the mergers are expected to enhance MFIC's portfolio diversification and improve certain portfolio metrics. Third, we expect to be able to realize operational synergies from the elimination of certain duplicative expenses from the merger.

Speaker Change: Beginning with the mergers we are pleased to announce that on July 22nd and if I see successfully closed its mergers with a F T and Aif two listed closed end funds managed by Apollo. We believe these margin mergers mark an important step in <unk> evolution to becoming a leading pure play middle market B D C.

Tanner Powell: PDC. We remain enthusiastic about realizing the potential benefits that we highlighted when we announced the mergers last November. Let me remind you of some of these key benefits. First, we expect these mergers will be both ROE and NII per share of creative for all shareholders, as we rotate the CEF's lower yielding investments in the ordinary course and to higher yielding directly originated loans that align with MFIC's investment strategy. Second, the mergers are expected to enhance MFIC's portfolio diversification and improve certain portfolio metrics. Third, we expect to be able to realize operational synergies from the elimination of certain duplicative expenses from the mergers.

Speaker Change: We remain enthusiastic about realizing the potential benefits that we highlighted when we announced the merger last November let me remind you of some of these key benefits first we expect these mergers will be both our O N.

Speaker Change: NII per share accretive for all shareholders as we rotate the CFS lower yielding investments in the ordinary course into higher yielding directly originated loans that align with MFS investment strategy.

Speaker Change: Second the mergers are expected to enhance <unk> portfolio diversification and improved certain portfolio metrics.

Speaker Change: Third we expect to be able to realize operational synergies from the elimination of certain duplicative expenses from the mergers.

Tanner Powell: And lastly, we believe that the larger market capitalization for the combined company may broaden the universe of potential investors, which could result in greater stock liquidity. As Ted will discuss, we are currently focused on deploying the capital and rotating certain assets acquired in the mergers and have already made good progress on that. As a reminder, Apollo provided significant financial support for these mergers by reimbursing all merger-related expenses for all three funds and by making a one-time special cash payment to the CEF shareholders.

Tanner Powell: Lastly, we believe that the larger market capitalization for the combined company may broaden the universal potential investors, which could result in greater stock liquidity. As Ted will discuss, we are currently focused on deploying the capital and rotating certain assets acquired in the mergers, and have already made good progress in that regard. As a reminder, Apollo provided significant financial support for these mergers by reimbursing all merger-related expenses for all three funds and by making a one-time special cash payment to the CEF shareholders. As a result of the mergers, MFIC's net assets have increased by approximately 44%.

Speaker Change: And lastly, we believe that the larger market capitalization for the combined company would be broaden the universe of potential investors, which could result in greater stock liquidity.

Speaker Change: As Ted will discuss we are currently focused on deploying the capital in rotating certain assets acquired in the mergers and have already made good progress in that regard.

Ted: As a reminder, Apollo provided significant financial support for these mergers by reimbursing all merger related expenses for all three funds and by making a one time special cash payment to the shareholders.

Speaker Change: As a result of the mergers <unk> net assets have increased by approximately 44% with 1.45 billion in net assets M. S. I C has significant investment capacity as a result of this deleveraging unless I see us well positioned to deploy capital into true first lien senior secured loans sourced by the.

Tanner Powell: As a result of the mergers, MFIC's net assets have increased by approximately 44 percent. With $1.45 billion in net assets, MFIC has a significant investment. As a result of this deleveraging, MFIC is well-positioned to deploy capital into true first-lane, senior-secured loans sourced by MidCap Financial, a leading middle-market lender managed by Apollo. Moving to our results for the June quarter, as previously announced when the mergers closed, MFIC's net investment income per share for the June quarter was $456,000, which corresponds to an annualized return on equity or ROE of 11.

Tanner Powell: With 1.45 billion in net assets, MFIC has significant investment capacity. As a result of this deal averaging, MFIC is well-positioned to deploy capital into true, first-lane, senior-scored loans sourced by mid-cap financial, a leading middle-market lender metas by Apollo. Moving to our results for the June quarter, as previously announced when the mergers closed, MFIC's net investment income per share for the June quarter was 45 cents, which corresponds to an annualized return on equity, or ROE, of 11.8%. Results for the quarter reflect solid, recurring interest income from our predominantly floating rate portfolio and strong fee and prepayment income.

Speaker Change: Midcap financial a leading middle market lender managed by Apollo.

Speaker Change: Moving to our results for the June quarter, as previously announced when the merger's close and if I see as net investment income per share for the June quarter was 45, which corresponds to an annualized return on equity or ROE of <unk>.

Tanner Powell: Results for the quarter reflect solid recurring interest income from our predominantly floating rate portfolio and strong fee and prepayment. Gap EPS for the June quarter was $0.35. NAF for share was $15.38 at the end of June, down $0.04 from the end of March. Beginning with the macro environment regarding rates, Apollo's chief economist believes that the Fed will cut rates by 25 basis points in September but still expects a soft landing. He notes a continuing strength in a broad set of weekly indicators, such as TSA data for air travel, restaurant bookings, retail sales, and hotel occupancy rates that suggest the economy will be able to avoid recession.

Speaker Change: Seven 8%.

Speaker Change: Results for the quarter reflect solid recurring interest income from our predominantly floating rate portfolio and strong fee and prepayment income.

Tanner Powell: Gap EPS for the June quarter was 35 cents. MFIC share was $15.38 at the end of June, down 4 cents from the end of March.

Speaker Change: GAAP EPS for the June quarter was 35 cents NAV for share was $15.38 at the end of June down four cents from the end of March.

Tanner Powell: Beginning with the macro-environment regarding rates, Apollo's chief and economist believes that the Fed will cut raised by 25 basis points in September, but still expects a soft landing. He notes a continuing strength in a broad set of number of weekly indicators such as PSA data for air travel, restaurant bookings, retail sales, and hotel occupancy rates that suggest the economy will be able to avoid recession. With regard to markets, the credit market continue to be very strong and well bid throughout Q2 and into the start of Q3 2024. M&A and LVO activity increased in Q2 from very low levels, though has lagged expectations, and thus issuers and sponsors have taken advantage of limited new supply, tapping the market for dividends and repricings.

Speaker Change: Beginning with the macro environment regarding rates Apollo's Chief economist believes that the fed will cut rates by 25 basis points in September, but still expects a soft landing he notes of continuing strength in a broad set of number of weekly indicators such as TSA data for air travel restaurant bookings retail sales.

Speaker Change: And hotel occupancy rates that suggest the economy will be able to avoid recession with regard to markets. The credit markets continue to be very strong and well bid throughout Q2 and into the start of Q3 2020 for M&A and LBO activity increased in Q2 from very low levels, though has lagged expectations and thus issuers and <unk>.

Tanner Powell: With regard to markets, the credit market continued to be very strong and well bid throughout Q2 and into the start of Q3. M&A and LBO activity increased in Q2 from very low levels, though it has lagged expectations, and thus issuers and sponsors have taken advantage of limited new supply tapping the market for dividends and repricing. Auction activity has seen a meaningful pickup in the latter part of Q2 and into Q3, and we expect to see an increase in new deployment opportunities for direct lenders in the back half of the year.

Speaker Change: Sponsors have taken advantage of limited new supply tapping the market for dividends and repricing.

Tanner Powell: Auction activity has seen a meaningful pickup in the latter part of Q2 and into Q3, and we expect to see an increase in new deployment opportunities for direct lenders in the back half of the year.

Speaker Change: Auction activity has seen a meaningful pick up in the latter part of Q2 and into Q3, and we expect to see an increase in new deployment opportunities for direct lenders in the back half of the year.

Tanner Powell: As you know, MFIC is squarely focused on investing in first lien loans to middle-market companies sourced by mid-cap financials. A leading middle-market lender with one of the largest direct landing teams in the U.S. with close to 200 and professors. Mid-cap Financial was founded in 2009 as a long track record which includes closing on over 118 billion of lending commitments since 2013. This origination track record provides us with a very large data set of middle-market company financial information across all industries, and we believe makes Mid-cap Financial one of the most informed and experienced middle-market lenders in the market.

Speaker: As you know, MFIC is squarely focused on investing in first-lien loans to middle-market companies sourced by MidCap Finance. MidCap Financial was founded in 2009, and has a long track record, which includes closing on over $118 billion of lending commitments since 2011. This origination track record provides us with a very large data set of middle market company financial information across all industries, and we believe it makes MidCap Financial one of the most informed and experienced middle market lenders in the market. Apollo Global's affiliation with MidCap Financial provides MFIC and the broader Apollo platform with significant deal flow.

Tanner Powell: As you know, MFIC is squarely focused on investing in first lien loans to middle market companies sourced by MidCap Finance, a leading middle market lender with one of the largest direct lending teams in the US with close to 200 investment professionals. MidCap Financial was founded in 2009, and has a long track record, which includes closing on over $118 billion of lending commitments since 2009. This origination track record provides us with a very large data set of middle market company financial information across all industries, and we believe it makes MidCap Financial one of the most informed and experienced middle market lenders in the market.

Speaker Change: As you know if I see is squarely focused on investing in first lien loans to middle market companies sourced by mid cap financials.

Speaker Change: A leading middle market lender with one of the largest direct lending teams in the U S with close to 200 investment professionals.

Speaker Change: Financial was founded in 2009 has a long track record, which includes closing on over 118 billion of lending commitments. Since 2013. This origination track record provides us with a very large data set of middle market company financial information across all industries, and we believe makes mid cap financial one of the most informed.

Speaker Change: An experienced middle market lenders in the market.

Tanner Powell: Apollo Global's affiliation with Mid-cap Financial provides MFIC and the broader Apollo platform with significant deal flow. In short, we believe the core middle market offers attractive investment opportunities across cycles and does not compete directly with either the broadly syndicated loan market or the high yield market. Despite the high level competition, where please report that Mid-cap financial was active during the June quarter, closing approximately 4.4 billion in new commitments or 9.6 billion in the first half of 2024.

Speaker Change: Apollo Global's affiliation with Midcap financial providing that's M F I see in the broader Apollo platform with significant deal flow in.

Tanner Powell: Apollo Global's affiliation with MidCap Financial provides MFIC and the broader Apollo platform with significant deal flow. In short, we believe the core middle market offers attractive investment opportunities across cycles and does not compete directly with either the broadly syndicated loan market or the high yield market.

Speaker Change: In short we believe the core middle market offers attractive investment opportunities across cycles and does not compete directly with either the broadly syndicated loan market or the high yield market.

Tanner Powell: Despite the heightened level of competition, we are pleased to report that MidCap Financial was active during the June quarter, closing approximately $4.4 billion in new commitments or $9.6 billion in the first half of 2024. Next, let's turn to dividends. First, as previously announced, in connection with the mergers on July 21, our Board of Directors declared a one-time special cash distribution of $0.20 per share to shareholders of record as of August 5th, 2024, payable on August 15th, 2020.

Speaker Change: The heightened level of competition. We're pleased to report that mid cap financial was active during the June quarter closing approximately $4 4 billion in new commitments of $9 6 billion in the first half of 2024.

Speaker: Next, let's turn to dividends. First, as previously announced, in connection with the mergers, on July 21, our Board of Directors declared a one-time special cash distribution of 20 cents per share to shareholders of record as of August 5th, 2024, payable on August 15th, 2020. As a reminder, this special $0.20 dividend is being paid to all shareholders as of a record date, including former AFT and AIF shareholders. In addition, on August 6, 2024, our board declared a quarterly dividend of $0.38 per share consistent with our prior quarterly dividend to shareholders of record as of September 10, 2024, payable on September 26. With that, I will now turn the call over to you.

Tanner Powell: Next, let's start a dividends. First, as previously announced, in connection with the mergers on July 21st, our Board of Directors declared a one-time special cash distribution of 20 cents per share to shareholders of record as of August 5th, 2024, payable on August 15th, 2024. As a reminder, this special 20-cent dividend is being paid to all shareholders as of a record date, including former AFT and AIF shareholders. In addition, on August 6th, 2024, our Board declared a quarterly dividend of 38 cents per share, consistent with our prior quarterly dividend to shareholders of record as of September 10th, 2024, payable on September 26th, 2024.

Speaker Change: Let's turn to dividends.

Speaker Change: First as previously announced in connection with the mergers on July 21, our board of directors declared a one time special cash distribution of <unk> 20.

Speaker Change: Per share to shareholders of record as of August 2024 payable on August 15 2024.

Tanner Powell: As a reminder, this special 20 cent dividend is being paid to all shareholders as of a record date, including former AFT and AIF shareholders. In addition, on August 6, 2024, our board declared a quarterly dividend of 38 cents per share consistent with our prior quarterly dividend to shareholders of record as of September 10, 2024 payable on September 26. With that, I will now turn the call over to Mr.

Speaker Change: As a reminder, this special 20 cent dividend has been paid to all shareholders as of the record date, including former a F. T. N. Aif shareholders. In addition on August six 2024, our board declared a quarterly dividend of <unk> 38 per share consistent with our prior quarterly dividend to shareholders of <unk>.

Speaker Change: As of September 10, 2024 payable on September 26, 2024 with that I will now turn the call over to Ted.

Ted McNulty: Thank you, Tanner. Good morning, everyone.

Ted McNulty: With that, I will now turn the call over to Tech. Thank you, Tanner. Good morning, everyone. I'll spend a few minutes reviewing our second quarter investment activity and our investment portfolio. I will then review the investments we acquired via the mergers with the closed-end funds. During the June quarter, MFIC's new investment commitments totaled 285 million across 28 different borrowers for an average period to existing portfolio companies. Despite spread compression, we believe the risk-return profile in these new commitments remains compelling. The weighted average spread on our new commitments in the June quarter was 559 basis points.

Ted McNulty: I'll spend a few minutes reviewing our second quarter investment activity and our investment portfolio. I will then discuss the investments we acquired via the mergers with the closed end funds. During the June quarter, MFIC's new investment commitments totaled $285 million across 28 different borrowers, for an average new commitment of $10.2 million. As we continue to focus on diversification by borrower, 23% of new commitments were made to existing portfolio customers. Despite spread compression, we believe the risk-return profile of these new commitments remains compelling.

Ted: Thank you Tanner good morning, everyone I'll spend a few minutes reviewing our second quarter investment activity and our investment portfolio will then review the investments we acquired via the mergers with the closed end funds.

Speaker: During the June quarter, MFIC's new investment commitments totaled $285 million across 28 different borrowers, for an average new commitment of $10.2 million. As we continue to focus on diversification by borrower, 23% of new commitments were made to existing portfolio commitments. Net leverage on new commitments was 3.3 times, down from 3.9 times last quarter. The weighted average OID for new commitments was approximately 157 basis points.

Mark Hughes: Yeah, thank you. Good morning. Leverage of 3.3 versus 3.9 is down sequentially, and this quarter's activity is well below the overall portfolio net leverage. What are you seeing in the market? What are you kind of focusing on? I'm just very curious about those movements.

Ted McNulty: The weighted average spread on our new commitments in the June quarter was 559 basis points. Net leverage on new commitments was 3.3 times, down from 3.9 times last quarter. The weighted average OID for new commitments was approximately 157 basis points.

Ted: During the June quarter, and F. Ics, new investment commitments totaled $285 million across 28 different borrowers for an average new commitment of $10 2 million as we continue to focus on diversification by borrower, 23% of new commitments were made to existing portfolio companies. Despite spread compression. We believe the risk return profile in these new <unk>.

Ted: <unk> remains compelling the weighted average spread on our new commitments in the June quarter was 559 basis points net leverage on new commitments was three three times down from three nine times last quarter. The weighted average OID for new commitments was approximately 157 basis points. This spread in OID translates into very attractive unlevered.

Ted McNulty: Net leverage on new commitments was 3.3 times, down from 3.9 times last quarter. The weighted average OID for new commitments was approximately 157 basis points. This spread and OID translates into a very attractive, unlearned asset yield of over 11%, assuming a 5% face rate. In terms of funded investment activity for the quarter, gross fundings for the corporate lending portfolio, excluding revolvers, totaled 214 million. Sales and repayments totaled 131 million. Net corporate lending revolver fundings were positive $10 million, and we received a $3 million paid out for Merx. In aggregate, net fundings for the quarter totaled $90 million.

Ted McNulty: This spread in OID translates into a very attractive unlevered asset yield of over 11%, assuming a 5% base rate. In terms of funded investment activity for the quarter, gross funding for the Corporate Lending Portfolio, excluding revolvers, totaled $214 million. Sales and repayments totaled $131 million. Net corporate lending revolver fundings were positive $10 million, and we received a $3 million pay-down from Merck. In aggregate, net funding for the quarter totaled $90 million.

Ted: Asset yield of over 11%, assuming a 5% base rate.

Ted: In terms of funded investment activity for the quarter gross fundings for the corporate lending portfolio, excluding revolvers totaled $214 million sales and repayments totaled $131 million net corporate lending revolver fundings were positive $10 million and we received a $3 million paydown for merck's in aggregate net fundings for the quarter totaled $90 million.

Ted: Turning to our investment portfolio, we built what we believe is a well diversified senior corporate lending book at the end of June prior to the close of the merger with the closed end funds.

Ted McNulty: Turning to our investment portfolio, we did build what we believe is a well-diversified senior corporate lending book. At the end of June, prior to the close of the mergers with the closed end funds, our portfolio had a fair value of 2.4 billion and was invested in 165 companies across 23 different corporate lending and other represented over 92% of the total portfolio, and Marks accounted for less than 8% of total portfolio on a fair value basis. The weighted average yield at cost of our corporate lending portfolio was 12% on average for the June quarter, down slightly from 12.1% in the March quarter.

Ted McNulty: Turning to our investment portfolio, we built what we believe is a well-diversified senior corporate lending book at the end of June prior to the close of the mergers with the closed end funds. Our portfolio had a fair value of $2.4 billion and was invested in 165 companies across 23 different industries. Corporate lending and other represented over 92% of the total portfolio, and Merck's accounted for less than 8% of the total portfolio on a fair value basis.

Speaker: Turning to our investment portfolio, we built what we believe is a well-diversified senior corporate lending book at the end of June prior to the close of the mergers with a closed-end fund. The average funded corporate lending position was $14.1 million, or approximately 0.6% of the total corporate and other lending portfolios. We are closely monitoring these situations and believe they are manageable as the companies have strong current liquidity and good underlying businesses. We think this performance data shows how well the strategy is working.

Speaker: It will be.

Speaker: you know, are essentially eliminated at this closed-end fund.

Ted: Our portfolio had a fair value of $2 4 billion and was invested in 165 companies across 23 different industries corporate lending and other represented over 92% of the total portfolio and merck's accounted for less than 8% of total portfolio on a fair value basis, 97% of corporate lending portfolio was first lien.

Ted McNulty: 97% of the corporate lending portfolio was first lien, and over 99% of our corporate lending debt portfolio had one or more financial covenants, and 88% of our corporate lending portfolio is backed by financial sponsors who we know well and with whom MidCap has longstanding financial relations. The average funded corporate lending position was $14.1 million, or approximately 0.6% of the total corporate and other lending portfolio. The weighted average yield at cost of our corporate lending portfolio was 12% on average for the June quarter, down slightly from 12.1% in the March quarter. At the end of June, the weighted average spread on the corporate lending portfolio was 601 basis points, down 20 basis points compared to the end of March.

Ted: And over 99% of our corporate lending that portfolio had one or more financial covenants and 88% of our corporate lending portfolio is backed by financial sponsors, who we know well and with whom Midcap has long standing financial relationships. The average funded corporate lending position was $14 1 million or approximately 0.6% of the total court.

Ted: But unless other lending portfolio.

Ted: The weighted average yield at cost of our corporate lending portfolio was 12% on average for the June quarter down slightly from 12, 1% in the March quarter at the end of June the weighted average spread on the corporate lending portfolio was 601 basis points down 20 basis points compared to the end of March.

Ted McNulty: At the end of June, the weighted average spread on the corporate lending portfolio was 601 basis points, down 20 basis points compared to the end of March. Turning to credit quality, our focus on true first lien top of the capital structure, middle market loans, has resulted in what we consider to be stable credit quality. Overall, we feel good about the health and quality of our corporate lending portfolio, as our underlying borrowers have largely been able to handle higher borrowing costs. We have not seen a significant increase in the amendment requests, and the requests we have seen are generally accompanied with good spots or support.

Ted: Turning to credit quality, our focus on true first lien top of the capital structure Middle market loans has resulted in what we consider to be stable credit quality overall, we feel good about the health and quality of our corporate lending portfolio.

Ted McNulty: Turning to credit quality, our focus on true first lien, top of the capital structure, middle market loans has resulted in what we consider to be stable credit quality. Overall, we feel good about the health and quality of our corporate lending portfolio, as our underlying borrowers have largely been able to handle higher borrowing. We have not seen a significant increase in the amendment requests, and the requests we have seen are generally accompanied by good sponsors. Portfolio companies are generally maintaining, continuing the trend of solid fundamentals demonstrated in 2023 and into early 2020.

Ted: Underlying borrowers have largely been able to handle higher borrowing costs, we have not seen a significant increase in the amendment requests and their request. We have seen are generally accompanied with good sponsor support.

Ted: Our portfolio of companies are generally maintaining performance continuing the trend of solid fundamentals demonstrated in 2023 and into early 2024 on a median basis for the March quarter portfolio company revenue and EBITDA, both increased by mid single digits year over year. This has been achieved despite a downturn at acquisition.

Ted McNulty: Portfolio companies are generally maintaining performance, continuing the trend of solid fundamentals demonstrated in 2023 and into early 2024. On a median basis for the March quarter, portfolio company revenue and EBITDA both increased by mid-single digits year over year. This has been achieved despite a downturn in acquisition activity, indicating that much of the growth demonstrated has been organic. At the end of June, the weighted average net leverage of our corporate lending portfolio was 5.38 times, up very slightly from 5.36 times last quarter. At the end of June, the weighted average interest coverage ratio remained 1.9 times, unchanged quarter over quarter, with four companies below one times.

Ted McNulty: On a median basis for the March quarter, portfolio company revenue and EBITDA both increased by mid-single digits year-over-year. This has been achieved despite a downturn in acquisition activity, indicating that much of the growth demonstrated has been organic. At the end of June, the weighted average net leverage of our corporate lending portfolio was 5.38 times, up very slightly from 5.36 times last quarter. Additionally, at the end of June, the weighted average interest coverage ratio remained 1.9 times, unchanged quarter over quarter, with four companies below one time.

Ted: Activity, indicating that much of the growth demonstrated this has been organic.

Ted: At the end of June the weighted average net leverage of our corporate lending portfolio was 538 times up very slightly from $5 three six times last quarter.

Ted: At the end of June the weighted average interest coverage ratio remained one nine times unchanged quarter over quarter with four companies below one times.

Ted McNulty: We are closely monitoring these situations and believe they are manageable as the companies have strong current liquidity, good underlying business performance, or have strong financial sponsor support. The median EBITDA of the MFIC's corporate lending portfolio companies was approximately 46 million. Our underwriting on mid cap source loans has proven to be sound based on data since mid 2016, which is the approximate data upon which we began utilizing our co-investment order. Our annualized net realized and unrealized loss is around three basis points on loan sourced by mid cap financial. We think this performance data shows how well the strategy has performed.

Ted McNulty: We are closely monitoring these situations and believe they are manageable as the companies have strong current liquidity, good underlying business, or have strong financial sponsors. The median EBITDA of the MFIC's corporate lending portfolio was approximately 46. Our underwriting on mid-cap source loans has proven to be sound, based on data since mid-2016, which is the approximate date upon which we began utilizing our co-investment. Our annualized, not realized, and unrealized loss is around 3 basis points on loans sourced by MidCap Financial. We think this performance data shows how well the strategy is working.

Ted: We are closely monitoring these situations and believe they're manageable as the companies have strong current liquidity good underlying business performance or have strong financial sponsor support.

Ted: The median EBITDA of MF Icd's corporate lending portfolio company.

Ted: Companies was approximately $46 million.

Ted: Our underwriting on mid cap source loans has proven to be sound based on data since mid 2016, which is the approximate date upon which we began utilizing our co investment order our annualized net realized and unrealized loss is around three basis points on loan sourced by Midcap financial we think this performance data shows how well the strategy has performed.

Ted McNulty: As of the closing of the mergers, investments on non-accrual over 1.8% of the total portfolio at fair value, or 2.3% at amortized cost across 11 names, including six companies acquired from the closed-in fund portfolio, two of which we have exited near cost in the secondary market.

Ted: As of the closing of the mergers investments on non accrual were one 8% of the total portfolio at fair value or two 3% at amortized cost across 11 names, including six companies acquired from the closed end fund portfolio two of which we have exited near cost in the secondary market.

Speaker: As of the closing of the mergers, investments in Nonik Rule were 1.8% of the total portfolio at fair value or 2.3% at amortized cost across 11 names, including six companies acquired from the closed-end fund portfolio, two of which we have exited near cost in the secondary market. We wanted to take a few minutes to highlight some metrics that we think can provide insight into how we assess the risk of the portfolios of BDSM.

Ted McNulty: As of the closing of the mergers, investments in Nonik Rule were 1.8% of the total portfolio at fair value or 2.3% at amortized cost across 11 names, including six companies acquired from the closed-end fund portfolio, two of which we have exited near cost in the secondary market. We wanted to take a few minutes to highlight some metrics that we think can provide insight into how we assess the risk of the portfolios of BDSM. Lenders have a number of ways they can mask the liquidity challenges of their underlying borrowers. First, lenders increase the use of pick, whether at origination or as part of the restructuring process. Thank you very much.

Ted McNulty: We wanted to take a few minutes to highlight some metrics that we think can provide insight into how we assess the risk of the portfolios of BDCs. Lenders have a number of ways they can mask liquidity challenges that they're underlying borrowers. First, lenders increase the use of pick interest, whether at origination or as part of the restructuring. Pick income is a proxy for borrowers who cannot currently service their debt. In this regard, MFIC's pick income remains very low compared to the BDC industry app. Second, lenders allow a revolving loan senior to their cash flow term debt while still categorizing their cash flow loans as first lien.

Speaker Change: We wanted to take a few minutes to highlight some metrics that we think can provide insight into how we assess the risk of the portfolios of bdcs lenders have a number of ways. They can mask liquidity challenges that their underlying borrowers first lenders increase the use of pik interest whether at origination or as part of the restructuring Pik income as a proxy for <unk>.

Speaker: First, lenders increase the use of pick, whether at origination or as part of the restructuring, of structures lenders can use to achieve these results. We generally do not advance credit to borrowers to cover, which helps identify and address issues early.

Ted: Our hours, who cannot currently service their debt in this regard MFC as Pik income remains very low compared to the BDC industry average second lenders allow revolving loan senior to their cash flow term debt, while still categorizing their cash flow loans first lien we focus on what we often refer to as true first lien or top of the capital structure.

Ted McNulty: Second, lenders allow revolving loans senior to their cash flow term debt while still categorizing their cash flow loan as first lien. We focus on what we often refer to as true first lien or top of the capital structure, meaning there's no debt senior to our position, as evidenced by our attachment point of 0.04 times. Some lenders provide covenant light loans where even draws on the revolvers do not entail a covenant, effectively making the whole revolver available for payment of interest regardless of the state of the company.

Ted McNulty: We focus on what we often refer to as true first lien or top of the capital structure, meaning there's no debt senior to our position as evidenced by our attachment point of 0.04 times. As a reminder, over 99% of the MFIC's corporate lending portfolio has at least one fitting in financial covenant, and any covenant light loans we may hold would have a spring covenant when the revolvers are drawn above certain levels. And fourth, some lenders have added structures where they increase their debt to pay their own interest, sometimes referred to as synthetic pick, although hard to account for the myriad structures of lenders of structures lenders can use to achieve these results, which generally do not advance credit to borrowers to cover interest.

Ted: There's no doubt senior to our position as evidenced by our attachment 0.0 0.04 times.

Ted: Third.

Ted: Some lenders provide covenant light loans, where even draws on our revolvers do not springing covenant effectively making the whole revolver available for payment of interest regardless of the state of the company.

Ted McNulty: As a reminder, over 99% of the MFIC's corporate lending portfolio has at least one financial covenant, and any covenant light loans we may hold would have a spring covenant when the revolver is drawn above certain levels. Fourth, some lenders have added structures where they increase their debt to pay their own interest, sometimes referred to as synthetic PIC, although hard to account for the myriad structures of lenders, of structures lenders can use to achieve these results. We generally do not advance credit to borrowers to cover.

Ted: As a reminder, over 99% of the MF Ice's corporate lending portfolio has at least one thing again financial covenant and any covenant light loans. We may hold would have a springing covenant when the revolver is drawn above certain levels.

Ted: Fourth some lenders have added structures, where they increase their debt to pay their own interest sometimes referred to as synthetic pig, although hard to account for the myriad structures of lenders.

Speaker Change: Of structures lenders can use to achieve these results, we generally do not advance credit to borrowers to cover interest.

Ted McNulty: Fortunately, MFIC benefits from a mid cap financials large dedicated portfolio management team, which helps identify and address issues early. It's also important to note that mid cap financial leads and serves as administrative agent on the vast majority of our deals, which provides meaningful downside protection. As agent, we are in active dialogue with the borrower and have enhanced information flow, which allows us to be proactive in resolving problem credits.

Ted McNulty: Importantly, MFIC benefits from MidCap Financial's large, dedicated portfolio management, which helps identify and address issues early. It's also important to note that MidCap Financial leads and serves as the administrative agent on the vast majority of our deals, which provides meaningful downside protection. As the agent, we are in active dialogue with the borrower and have enhanced information flow, which allows us to be proactive in resolving problems.

Speaker Change: Certainly F I see benefits from midcap financials large dedicated portfolio management team, which helps to identify and address issues. Early it's also important to note the mid cap financial leads and tours as administrative agent on the vast majority of our deals which provides meaningful downside protection.

Speaker: It's also important to note that MidCap Financial leads and serves as the administrative agent on the vast majority of our deals, which provides meaningful downside protection. Moving on to Merck. As we've discussed in the past, we're focused on reducing our investment in our aircraft leasing and service businesses. During the June quarter, Marks paid MFIC $4.7 million, including $1.7 million of interest and a $3 million return of capital. At the end of June, MFIC's investment in Merck's decreased to approximately 5.8% of the total portfolio due to a combination of the growth in the portfolio from the mergers as well as an additional $7.5 million paydown from Merck which occurred in July, increasing the size of MFIC's portfolio to approximately $3.1 billion as of the closing day.

Speaker Change: As agent we're in active dialogue with the borrower and have enhanced the information flow, which allows us to be proactive in resolving problem credits.

Speaker Change: Moving on to Merck's as we've discussed in the past, we're focused on reducing our investment in our aircraft leasing and servicing business. While we don't expect paydowns to occur evenly we believe aircraft sales and servicing income should allow for the pay down of third party debt and M. S. Ics investment in Merck's overtime.

Ted McNulty: Moving on to Merx, as we've discussed in the past, we're focused on reducing our investment in our aircraft leasing and servicing business. While we don't expect paid-outs to occur evenly, we believe the aircraft sales and servicing income should allow for the paid-out of third party debt and the MFIC's investment in Merx over time. The blended yield across our total investment in Merx is less than 4%, and the continued rotation of capital from Merx has the potential to have a meaningful beneficial impact on income. As of June 30, 2024, our investment in Merx totaled 187 million, representing 7.7% of the total portfolio at fair value.

Ted McNulty: Moving on to Merck's. As we've discussed in the past, we're focused on reducing our investment in our aircraft leasing and service business. While we don't expect paydowns to occur evenly, we believe aircraft sales and servicing income should allow for the paydown of third-party debt and the MFIC's investment in Merck over time. The blended yield across our total investment in Merck's is less than 4%, and the continued rotation of capital from Merck has the potential to have a meaningful beneficial impact on income.

Speaker Change: The blended yield across our total investment in merck's, there's less than 4% and the continued rotation of capital from Merck's has the potential to have a meaningful beneficial impact on income.

Ted McNulty: As of June 30, 2024, our investment in Merck totaled $187 million, representing 7.7% of the total portfolio at fair value. During the June quarter, Marks paid MFIC $4.7 million, including $1.7 million of interest and a $3 million return of capital. At the end of June, MFIC's investment in Merck's decreased to approximately 5.8% of the total portfolio due to a combination of the growth in the portfolio from the mergers as well as an additional $7.5 million paydown from Merck which occurred in July.

Speaker Change: As of June 32020 for our investment in Merck's totaled $187 million, representing seven 7% of the total portfolio at fair value.

Ted McNulty: During the June quarter, Merx paid MFIC 4.7 million, including 1.7 million of interest and a $3 million return of capital. Since the end of June, MFIC's investment in Merx has decreased to approximately 5.8% of the total portfolio due to a combination of the growth in the portfolio from the mergers, as well as an additional 7.5 million paid out from Merx, which occurred in July.

Speaker Change: During the June quarter, Merck's paid M F I see $4 7 million, including $1 7 million of interest and a $3 million return of capital.

Speaker Change: Since the end of June and my five CS investment in Merck's has decreased to approximately five 8% of the total portfolio due to a combination of the growth in the portfolio from the mergers as well as an additional $7 5 million Paydown from Merck's, which occurred in July.

Ted McNulty: Turning to the mergers with AFT and AIF, to echo Tanner's comments, we're excited about the long-term benefits that we believe this transaction will create. I'd like to take a few minutes to discuss the assets we acquired as part of our mergers with AFT and AIF. We onboarded approximately 596 million of investments from the closed-end funds, increasing the size of MFIC's portfolio to approximately 3.1 billion as of the closing date. Of the 596 million of onboarded assets, approximately 207 million, or 35% of these assets, were directly originated loans across 37 obligores, with a weighted average spread of 564 basis points.

Speaker Change: Turning to the mergers with F T and a half.

Ted McNulty: Turning to the mergers with AFT and AIF, to echo Tanner's comments, we're excited about the long-term benefits that we believe this transaction will create. I'd like to take a few minutes to discuss the assets we acquired as part of our mergers with AFT and AIF. We onboarded approximately $596 million of investments from the Closed End Fund, increasing the size of MFIC's portfolio to approximately $3.1 billion as of the closing date. Of the $596 million of onboarded assets, approximately $207 million, or 35% of these assets, were directly originated loans across 37 obligors, with a weighted average spread of 564 basis points.

Speaker Change: To Echo Tenors comments, we're excited about the long term benefits that we believe this transaction will create I'd like to take a few minutes to discuss the assets, we acquired as part of our mergers with F E N a S.

Ted McNulty: The remaining $389 million of these assets consists of broadly syndicated loans, high-yield bonds, and structured credit positions. As Tanner mentioned, we are currently in the process of selling the non-directly originated assets and redeploying those assets, redeploying those proceeds into assets that are more consistent with MFIC's investment strategy. The good news is that these non-directly originated assets are held throughout the Apollo platform, which facilitates risk monitoring while on our books, as well as the selling process.

Operator: Please stand by, your program is about to begin. If you need assistance on today's program, please press star zero.

Speaker Change: We on boarded approximately $596 million of investments from the closed end funds, increasing the size of MF ice's portfolio to approximately $3 1 billion as of the closing date.

Speaker Change: Of the $596 million of Onboarding assets, approximately $207 million or 35% of these assets were directly originated loans across 37, oblak worse with a weighted average spread of 564 basis points. The remaining $389 million of these assets consists of broadly syndicated loans high yield bonds.

Operator: The call will be open for a question and answer session following the speaker's prepared remarks. If you would like to ask a question at that time, simply press star one on your telephone keypad. If you would like to withdraw your question, press the star two.

Ted McNulty: The remaining 389 million of these assets consists of broadly syndicated loans, high yield bonds, and structured credits. As Tanner mentioned, we are currently in the process of selling the non-directly originated assets and redeploying those assets, redeploying those proceeds into assets that are more consistent with MFIC's investment strategy. The good news is that these non-directly originated assets are held throughout the Apollo platform, which facilitates risk monitoring while on our books as well as the selling process. Since the closing of the mergers on June 22nd and three yesterday, we have sold approximately 125 million of these assets near our cost basis.

Speaker: The remaining $389 million of these assets consists of broadly syndicated loans, high yield bonds, and structured credit positions. The good news is that these non-directly originated assets are held throughout the Apollo platform, which facilitates risk monitoring while on our books, as well as the selling process. Taking into account the $389 million of non-directly-originated assets that we intend to sell, plus the $386 million of additional investment capacity, we have approximately $775 million of capital to deploy.

Speaker Change: And structured credit positions are standard mentioned, we're currently in the process of selling the non directly originated assets and redeploying those assets redeploying those proceeds into assets that are more consistent with M. F I seize investment strategy.

Elizabeth Besen: I will now turn the call over to Elizabeth Besen, investor relations manager for mid cap financial investment corporation. Thank you operator and thank you everyone for joining us today. Speaking on today's call are Tanner Powell, Chief Executive Officer, Ted McNulty, President and Greg Hunt, Chief Financial Officer. Howard Widra, Executive Chairman as well as additional members of the management team are on the call and available for the Q&A portion of today's call.

Speaker Change: The good news is that these non directly originated assets are held throughout the Apollo platform, which facilitates risk monitoring while on our books as well as the selling process.

Speaker Change: Since the closing of the mergers on June 22nd and through yesterday, we have sold approximately $125 million of these assets near our cost basis, we're very much on track with our plan to sell these assets, which we expect to complete over the next few quarters. In addition, the mergers where a significant deleveraging event for MFC and created investment capacity.

Ted McNulty: Since the closing of the mergers on June 22nd and through yesterday, we have sold approximately 125 million of these assets near their cost base. We are very much on track with our plan to sell these assets, which we expect to complete over the next few quarters. In addition, the mergers were a significant deleveraging event for MFIC and created investment capacity of approximately $386 million, assuming a net leverage ratio of 1.4 times.

Ted McNulty: We are very much on track with our plan to sell these assets, which we expect to complete over the next few quarters. In addition, the mergers were a significant de-leveraging event for MFIC and created investment capacity of approximately 386 million, assuming in that leverage ratio of 1.4 times. Taking into account the 389 million of non-directly originated assets that we intend to sell, plus the 386 million of additional investment capacity, we have approximately 775 million of capital to deploy. Given the significant deal flow generated by MFIC, we are confident that we can deploy this capital and attract of opportunities.

Elizabeth Besen: I'd like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of mid cap financial investment corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available on our press release. I'd also like to call your attention to the customary safe harbor disclosure and our press release regarding forward looking information. Today's conference call and webcast may include forward looking statement.

Speaker Change: <unk> of approximately 386 million, assuming a net leverage ratio of 1.4 times taking into account the 389 million of non directly originated assets that we intend to sell plus the $386 million of additional investment capacity, we have approximately $775 million of capital to deploy.

Ted McNulty: Taking into account the $389 million of non-directly originated assets that we intend to sell plus the $386 million of additional investment capacity, we have approximately $775 million of capital to deploy. Given the significant deal flow generated by MidCap, we're confident that we can deploy this capital in attractive opportunities. As Tanner mentioned earlier, MidCop closed on $9.6 billion of commitments in the first half of 2024. We expect to reach our target leverage in the next two to three quarters and see no impediment to doing so.

Elizabeth Besen: You should refer to our most recent filings with the SEC for risks that apply to our business and then may adversely affect any forward looking statements we make. We do not undertake to update our forward looking statements or projections, the less required by law to obtain copies of our SEC filings. Please visit either the SEC website at www.sec.gov or our website at www.micapfinancialic.com. I'd also like to remind everyone that we posted a supplemental information package on our website, which contains information about the portfolio as well as the company's financial performance. Throughout today's call, we will refer to mid cap financial investment corporation as either MFIC or the BDC. And we will use mid cap financial to refer to the lender headquartered in Bethesda, Maryland.

Speaker Change: Given the significant deal flow generated by mid cap. We are confident that we can deploy this capital in attractive opportunities as Sandra mentioned earlier midcap closed on $9 6 billion of commitments in the first half of 2024, we expect to reach our target leverage in the next two to three quarters and see no impediment to doing so we want to emphasize.

Ted McNulty: As Tanner mentioned earlier, MFIC closed a 9.6 billion of commitments in the first half of 2024. We expect to reach our target leverage in the next two to three quarters and see no impediment to doing so. We want to emphasize that we will remain committed to our disciplined approach to portfolio construction, as well as the capital.

Speaker: We expect to reach our target leverage in the next two to three quarters and see no impediment to doing so. We want to emphasize that we will remain committed to our disciplined approach to portfolio construction as we deploy this capital.

Ted McNulty: We want to emphasize that we will remain committed to our disciplined approach to portfolio construction as we deploy this capital. With that said, I will now turn the call over to Greg to discuss our financial results in detail.

Speaker Change: We will remain committed to our disciplined approach to portfolio construction as we deploy this capital.

Gregory Hunt: With that, I will now turn the call over to Greg to discuss our financial results in detail. Thank you, Ted, and good morning, everyone. Beginning with our financial results, net investment income per share to the June quarter was 45 cents, which reflects solid recurring interest income, as well as strong sea and pre-payment income. For the quarter, pre-payment income was 3.2 million in fee income, was approximately 900,000. Pick income remains low, representing approximately 3.6% of total investment income for the quarter. Gap net income per share for the quarter was 35 cents. Results for the quarter correspond to an annualized return on equity, or ROE based on net investment income of 11.8%, in an annualized ROE based on an income of 9%.

Speaker Change: That I will now I will turn the call over to Greg to discuss our financial results in detail.

Greg Hunt: Thank you, Ted, and good morning, everyone. Beginning with our financial results, net investment income per share for the June quarter was $0.45, which reflects solid recurring interest income as well as strong fee and prepayment income. For the quarter, prepayment income was $3.2 million, and fee income was approximately $900,000. Tick income remains low, representing approximately 3.6% of total investment income for the quarter.

Greg: Thank you Ted and good morning, everyone, beginning with our financial results net investment income per share for the June quarter was 45.

Tanner Powell: At this time, I'd like to turn the call over to Tanner Powell, MFIC's Chief Executive Officer. Thank you, Elizabeth, and thank you to everyone who has joined today's call, especially those of you who may be newer to MFIC. I will begin today's call with an update on the successful completion of our mergers with our previously affiliated funds, Apollo's Senior Floating Rights Fund Inc, and Apollo Tactical Income Fund Inc, which we refer to as AFT and AIF, or the CES, throughout today's call.

Greg: Which reflects solid recurring interest income as well as strong fee and prepayment income for the quarter prepayment income was $3 2 million in fee income was approximately 900000 Pik income remains low representing approximately three 6% of total investment income for the quarter.

Speaker: For the quarter, prepayment income was $3.2 million, and fee income was approximately $900,000. Tick income remains low, representing approximately 3.6% of total investment income for the quarter. Gap net income per share for the quarter was $0.35. MFIC's NAB per share at the end of June was $15, which reflected net investment income of $0.45, which is $0.07 above the $0.38 distribution, and an $0.11 per share net loss in the portfolio. As Ted mentioned, the vast majority of our corporate lending portfolio continues to have strong fundamental performance.

Tanner Powell: I will then provide an overview of MFIC's second quarter results, and we'll also provide our perspective on the current environment. Ted will then discuss our investment activity and provide an update on the investment portfolio. He will also review the assets that we acquired in the connection with the mergers. Greg will then review our financial results in greater detail, and we'll also review some of the accounting aspects of the mergers. Beginning with the mergers, we are pleased to announce that on July 22nd, MFIC successfully closed its mergers with AFT and AIF, two listed closed-in funds managed by Apollo.

Greg Hunt: Gap net income per share for the quarter was $0.35. Results for the quarter correspond to an annualized return on equity, or ROE, based on net investment income of 11.8% and an annualized ROE based on an income of 9%. Results for the latest 12-month period correspond to an annualized ROE based on net investment income of 11.6% and an annualized ROE based on net income of 11.1%. MFIC's NAB per share at the end of June was $15.8, down 4 cents quarter over quarter, which reflected net investment income of $0.45, which is $0.07 above the $0.38 distribution, and an $0.11 per share net loss in the portfolio. As Ted mentioned, the vast majority of our corporate lending portfolio continues to have strong fundamental performance.

Speaker Change: GAAP net income per share for the quarter was 35.

Speaker Change: Results for the quarter correspond to an annualized return on equity or ROE based on net investment income of 11, 8% and an annualized ROE based on net income of 9%.

Gregory Hunt: Results for the latest 12-month period correspond to an annualized ROE based on net investment income of 11.6% in an annualized ROE based on net income of 11.1%. MFIC's NAB per share at the end of June was $15.38, down 4 cents quarter over quarter, which reflected net investment income of 45 cents, which is 7 cents above the 38 cents distribution, and an 11 cents per share net loss on the portfolio. As Ted mentioned, the vast majority of our corporate lending portfolio continues to have strong fundamental performance. MFIC's net assets increased by 450 million from the mergers, both the NAB per share of $15.38 and the 450 million increase in net assets exclusive impact of the one-time special distribution of 20 cents for 18.20 million made...

Speaker Change: The results for the latest 12 month period correspond to an annualized ROE based on net investment income of 11, 6%.

Speaker Change: Annualized ROE based on net income of 11, 1%.

Speaker Change: <unk> NAV per share at the end of June was 15.

Tanner Powell: We believe these mergers mark an important step in MFIC's evolution to becoming a leading pure play middle market. PDC. We remain enthusiastic about realizing the potential benefits that we highlighted when we announced the mergers last November. Let me remind you of some of these key benefits. First, we expect these mergers will be both ROE and NII per share of creative for all shareholders, as we rotate the CEF's lower yielding investments in the ordinary course and to higher yielding directly originated loans that align with MFIC's investment strategy.

Speaker Change: Dollars and 38 cents down four cents quarter over quarter.

Speaker Change: Which reflected net investment income of 45, which is seven cents above the 38 cents.

Tanner Powell: Second, the mergers are expected to enhance MFIC's portfolio diversification and improve certain portfolio metrics. Third, we expect to be able to realize operational synergies from the elimination of certain duplicative expenses from the mergers. Lastly, we believe that the larger market capitalization for the combined company may broaden the universal potential investors which could result in greater stock liquidity. As Ted will discuss, we are currently focused on deploying the capital and rotating certain assets acquired in the mergers and have already made good progress in that regard.

Speaker Change: And then the 11 cents per share net loss in the portfolio as Ted mentioned.

Speaker Change: Vast majority of our corporate lending portfolio continues to have strong fundamental performance <unk> net assets increased by $450 million.

Greg Hunt: MFIC's net assets increased by $450 million from the mergers. Both the NAB per share of $15.38 and the $450 million increase in net assets exclude the impact of the one-time special distribution of $0.20 or $18.8 million made in connection with the merger. Net expenses for the quarter were $39.6 million, down slightly compared to the prior quarter, primarily due to lower incentive fees and lower administrative expenses, offset by higher interest expense given the increase in the size of the portfolio. The weighted average interest rate on our debt for the quarter was approximately 7%. We intend to continue to evaluate and monitor capital raising transactions going forward.

Speaker Change: From the mergers both the NAV per share of $15 38, and the $450 million increase in net assets exclude the impact of the one time special distribution of <unk> 20, or $18 8 million made in connection with the merger.

Gregory Hunt: and connection with Emeritus. Ted expenses for the quarter for $39.6 million, down slightly compared to the prior quarter, primarily due to lower incentives and lower administrative expenses, offset by higher interest expense given the increase in the size of the portfolio. The weighted average interest rate on our debt for the quarter was approximately 7%. As a reminder, MFIC's base management fee was reduced to 1.75% on equity and is one of the only listed BDCs to charge management fees on equity, which we believe provides greater shareholder alignment and focus on net asset value. Incentive fee is total 5.6 million for the June quarter.

Speaker Change: Net expenses for the quarter were $39 6 million down slightly compared to the prior quarter, primarily due to lower incentive fees and lower administrative expenses.

Speaker Change: Offset by higher interest expense given the increase in the size of the portfolio.

Speaker Change: Our weighted average interest rate on our debt for the quarter was approximately 7% we.

Tanner Powell: As a reminder, Apollo provided significant financial support for these mergers by reimbursing all merger-related expenses for all three funds and by making a one-time special cash payment to the CEF shareholders. As a result of the mergers, MFIC's net assets have increased by approximately 44%. With 1.45 billion in net assets, MFIC has significant investment capacity. As a result of this deal averaging, MFIC is well-positioned to deploy capital into true, first-lane, senior-scored loans sourced by mid-cap financial, a leading middle-market lender metas by Apollo.

Speaker Change: We intend to continue to evaluate and monitor capital raising transactions going forward.

Speaker: Management fees totaled $4.4 million for the June quarter, essentially flat compared to the prior quarter. As a reminder, MFIC's base management fee was reduced to 1.75% on equity times at the end of June, compared to 1.35 times at the end of March, reflecting the $90 million of net fundings during the quarter. MFIC's net leverage as of the closing of the mergers was 1.13. $1.5 million of MFIC was distributed to the closed-end fund shareholders, resulting in $93.8 million of MFIC outstanding shares following the merger, to its current cap.

Greg Hunt: Management fees totaled $4.4 million for the June quarter, essentially flat compared to the prior quarter. As a reminder, MFIC's base management fee was reduced to 1.75% of equity and is one of the only listed BDCs to charge management fees on equity, which we believe provides greater shareholder alignment and focus on net asset value. Incentive fees totaled $5.6 million for the June quarter. As a reminder, our incentive fee on income is 17.5% and includes a total return hurdle with a rolling 12 quarter look back. The effective incentive fee rate for the June quarter was 15.9%, impacted by the net loss recorded during the quarter and the impact of the look back.

Speaker Change: Management fees totaled $4 4 million for the June quarter, essentially flat compared to the prior quarter as a reminder, M. F. Ics base management fee was reduced to 175% on equity.

Speaker Change: And as one of the only listed Bdcs to charge management fees on equity, which we believe provides greater shareholder alignment and focus on net asset value.

Speaker Change: Incentive fees totaled $5 6 million for the June quarter as a reminder, our incentive incentive fee on income is 17, 5% and include the total return hurdle with a rolling 12 quarter look back.

Gregory Hunt: As a reminder, our incentive fee on income is 17.5%, and includes the total return hurdle with a rolling 12-quarter look back. The effective incentive fee rate for the June quarter was 15.9%, impacted by the net loss recorded during the quarter and the impact of the look back feature. Moving to our balance sheet, MFIC's net leverage was 1.45 times at the end of June compared to 1.35 times at the end of March, reflecting the 90 million of net fundings during the quarter. MFIC's net leverage as of the closing of the mergers was 1.13 times.

Tanner Powell: Moving to our results for the June quarter as previously announced when the mergers closed, MFIC's net investment income per share for the June quarter was 45 cents, which corresponds to an annualized return on equity or ROE of 11.8%. Results for the quarter reflect solid, recurring interest income from our predominantly floating rate portfolio and strong fee and prepayment income. Gap EPS for the June quarter was 35 cents. MFIC share was $15.38 at the end of June down 4 cents from the end of March.

Speaker Change: Effective incentive fee rate for the June quarter was 15 nine.

Speaker Change: 9% impacted by the net loss recorded during the quarter.

Speaker Change: And the impact of the look back feature.

Speaker Change: Moving to our balance sheet <unk> net leverage was 145.

Greg Hunt: Moving to our balance sheet, MFIC's net leverage was $1.45 times at the end of June, compared to 1.35 times at the end of March, reflecting the $90 million of net funding during the quarter. MFIC's net leverage as of the closing of the mergers was 1.13. I'd like to take a few minutes to cover some of the accounting aspects of the merger. Mergers are being accounted for in accordance with the Asset Acquisition Method of Accounting under ASC 805-50.

Speaker Change: Times at the end of June compared to 1.35 times at the end of March reflecting.

Tanner Powell: Beginning with the macro-environment regarding rates, Apollo's chief and economist believes that the Fed will cut raised by 25 basis points in September, but still expects a soft landing. He notes a continuing strength in a broad set of number of weekly indicators such as PSA data for air travel, restaurant bookings, retail sales and hotel occupancy rates that suggest the economy will be able to avoid recession. With regard to markets, the credit market continue to be very strong and well bid throughout Q2 and into the start of Q3 2024.

Speaker Change: The $90 million of net fundings during the quarter <unk> net leverage as of closing of the merger was 113 times.

Gregory Hunt: I'd like to take a few minutes to cover some of the accounting aspects of the mergers. Mergers are being accounted for in accordance with the asset acquisition method of accounting under ASC 805-50. As a reminder, AFT and AIF merged into MFIC in stock for stock transactions, which shares being exchanged on a nav for nav basis. The exchange ratios for the mergers were based on the fund's NAV per share as of July 19, 2024. Accordingly, MFIC issued 0.9547 shares of its common stock for each AFT share and 0.9441 shares of its common stock for each AIF share.

Speaker Change: I'd like to take a few minutes to cover some of the accounting aspects of the merger.

Speaker Change: Mergers are being are being accounted for in accordance with the asset acquisition method of accounting under a S. C 805 50 <unk>.

Greg Hunt: As a reminder, AFT and AIF merge into MFIC in Stock-for-Stock Transactions, with shares being exchanged on a NAV for NAV basis. The exchange ratios for the mergers were based on the funds NAV per share as of July 19, 2024. Accordingly, MFIC issued 0.9547 shares of its common stock for each AFT share and 0.9441 shares of its common stock for each AIF share. In total, MFIC issued approximately 28... $1.5 million shares of its common stock to the closed-end fund shareholders, resulting in $93.8 million of MFIC outstanding shares following the merger.

Speaker Change: As a reminder, a F T and Aif merged into M. F I see.

Tanner Powell: M&A and LVO activity increased in Q2 from very low levels, though has lagged expectations, and thus issuers and sponsors have taken advantage of limited new supply tapping the market for dividends and repricings. Auction activity has seen a meaningful pickup in the latter part of Q2 and into Q3, and we expect to see an increase in new deployment opportunities for direct lenders in the back half of the year. As you know, MFIC is squarely focused on investing in first lean loans to middle-market companies sourced by mid-cap financials.

Speaker Change: And stock for stock transactions with shares being exchanged I mean, NAV for NAV basis, the exchange ratios for the mergers where based on the funds NAV per share as of July 19, 2024, Accordingly, <unk> issued 90 547 shares of its common.

Speaker Change: Stock for each F T share and <unk> 94 for one shares of its common stock for each Aif share in total <unk> issued approximately 28.

Gregory Hunt: In total, MFIC issued approximately 28.5 million shares of MFIC to the closed-end fund shareholders, resulting in 93.8 million MFIC outstanding shares following the merger. At the time of the merger, MFIC was trading at a slight discount to its current NAV. In connection with the merger, an affiliate of Apollo made a 25 cents per share special cash payment to each AFT and AIF shareholder for a total payment of $7.5 million. Guidance, a portion of this cash payment was deemed to be merger consideration, which resulted in the fair value of the consideration paid to both AFT and AIF shareholders being equal to the fair value of the assets acquired, resulting in no purchase, discount, or premium.

Tanner Powell: A leading middle-market lender with one of the largest direct landing teams in the U.S, with close to 200 and Professors. Mid-cap financial was founded in 2009 as a long track record which includes closing on over 118 billion of lending commitments since 2013. This origination track record provides us with a very large data set of middle-market company financial information across all industries and we believe makes Mid-cap financial one of the most informed and experienced middle-market lenders in the market.

Speaker Change: <unk> 5 million shares of MFC to the closed end fund shareholders, resulting in $93 8 million <unk> outstanding shares following the merger at.

Greg Hunt: At the time of the merger, MFIC was trading at a slight discount to its current market value. In connection with the merger, an affiliate of Apollo made a $0.25 per share special cash payment to each AFT and AIF shareholder for a total payment of $7.5 million. This was deemed to be merger consideration, which resulted in the fair value of the consideration paid to both AFT and AIF shareholders being equal to the fair value of the assets acquired, resulting in no purchase discount or premium.

Speaker Change: At the time of the merger <unk> was trading at a slight discount.

Speaker: In connection with the merger, an affiliate of Apollo made a $0.25 per share special cash payment to each AFT and AIF shareholder for a total payment to both AFT and AIF shareholders being equal to the fair value of the assets acquired, resulting in no purchase discount or premium.

Speaker Change: It's currently.

Speaker Change: In connection with the merger an affiliate of Apollo made a 25 cents per share special cash payment to each ft, and Aif shareholder for a total payment.

Tanner Powell: Apollo Global's affiliation with Mid-cap financial provides MFIC and the broader Apollo platform with significant deal flow. In short, we believe the core middle market offers attractive investment opportunities across cycles and does not compete directly with either the broadly syndicated loan market or the high yield market. Despite the high level competition where please report that Mid-cap financial was active during the June quarter closing approximately 4.4 billion in new commitments or 9.6 billion in the first half of 2024.

Speaker Change: Of $7 $5 million in accordance with the accounting guidance a portion of this cash payment was.

Speaker Change: Deemed to be merger consideration.

Speaker Change: Resulting in the fair value of the consideration paid to both <unk> Aif shareholders being equal to the fair value of the assets acquired resulting in no purchase discount or premium.

Gregory Hunt: As a result, there will be no impact on the cost basis of the acquired assets, and therefore no impact on our financial status. Fair value of the closed and fund assets at close became MFIC's cost basis in these assets without any adjustment.

Speaker Change: As a result.

Speaker Change: Be no impact on the cost basis of the acquired assets and therefore, no impact on our financial statements.

Tanner Powell: Next, let's start a dividends. First, as previously announced, in connection with the mergers on July 21st, our Board of Directors declared a one-time special cash distribution of 20 cents per share to shareholders of record as of August 5th, 2024, payable on August 15th, 2024. As a reminder, this special 20 cent dividend is being paid to all shareholders as of a record date including former AFT and AIF shareholders. In addition, on August 6th, 2024, our Board declared a quarterly dividend of 38 cents per share consistent with our prior quarterly dividend to shareholders of record as of September 10th, 2024, payable on September 26th, 2024.

Speaker Change: Fair value of the closed end fund assets at close.

Speaker Change: <unk> cost basis in these assets without any adjustment.

Speaker Change: This concludes our prepared remarks, operator, please open the call to questions.

Operator: This concludes our prepared remarks. Operator, please open the call to questions. At this time, if you would like to ask a question, please press star one now. On your telephone keypad, to withdraw yourself from the queue, you may press star two. Again, to ask a question that is star one now on your telephone keypad, one moment while we queue. We'll take our first question from Kenneth Lee of RBC Capital Markets.

Greg Hunt: As a result, there will be no impact on the cost basis of the acquired assets, and therefore no impact on our financial... The fair value of the closed-end fund assets it closed became MFIC's cost basis in these assets without any adjustment. This concludes our prepared remarks. Operator, please open the call.

Operator: At this time, if you would like to ask a question, please press star 1 now on your telephone keypad. To withdraw yourself from the queue, you may press star 2. Again, to ask a question, that is star 1 on your telephone keypad. One moment while we queue. We'll take our first question from Kenneth Lee of RBC Capital Markets.

Speaker Change: At this time, if you would like to ask a question. Please press star one now on your telephone keypad to withdraw yourself from the queue. You May Press Star two again to ask a question that is star one now on your telephone keypad, one moment, while we queue.

Speaker Change: We will take our first question from Kenneth Lee of RBC capital markets.

Operator: We'll take our first question from Kenneth Lee of RBC Capital Markets.

Kenneth Lee: Hey, good morning. Thanks for taking my question. Just in terms of the portfolio rotation of the next few quarters, the non-directly-originating assets being sold, I assume you talk about the BSL, the structured credit and the high yield bonds from the closed end funds. Granted, the BSL markets are fairly liquid, but just want to get a better understanding of any kind of key constraints around the pace of sales, for example, like the structured credit, the high yield bonds.

Kenneth Lee: Hey, good morning, Thanks for taking my question just in terms of the portfolio rotation over the next few quarters.

Kenneth Lee: Hey, good morning. Thanks for taking my question. Just in terms of the portfolio rotation over the next few quarters,

Ted McNulty: With that, I will now turn the call over to tech. Thank you, Tanner.

Kenneth Lee: The Non-Directly Originated Assets being sold, I assume you're talking about the BSL, the Structured Credit, and the High Yield Bonds from the Closed End Funds. Granted, the BSL market is fairly liquid, but I just wanted to get a better understanding of any kind of key constraints around the pace of sales, for example, like the Structured Credit and the High Yield Bonds.

Ted McNulty: Good morning, everyone. I'll spend a few minutes reviewing our second quarter investment activity and our investment portfolio. I will then review the investments we acquired via the mergers with the closed end funds. During the June quarter, MFIC's new investment commitments totaled 285 million across 28 different borrowers for an average period to existing portfolio companies. Despite spread compression, we believe the risk return profile in these new commitments remains compelling. The weighted average spread on our new commitments in the June quarter was 559 basis points.

Speaker Change: Not directly originate assets being sold I assume you're talking about the beer sales are structured and the high yield bonds from closed end funds.

Speaker Change: Granted the BSL market is fairly liquid, but just wanted to get a better understand of any kind of key constraints around the pace of cells. For example, like the structured credit the high yield bonds. Thanks.

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Ted McNulty: Thanks. Yeah, thanks, Ken, and thanks for the question. I think, so first of all, as we mentioned in the prepared remarks, we've already, even since closing the mergers on July 22nd, made some good progress and sold, you know, erased roughly 125 million of proceeds, so some really good progress out of the gate. And I think your question is alluding to a very important piece of how we are going to proceed from here, and that being, if you look across the roughly 400 million that's in those three respective buckets of type of investment, there's going to be a number of securities or loans that are not as liquid.

Speaker Change: Yeah, Thanks, Ken and thanks for the question.

Ted McNulty: Yeah, thanks, Ken, and thanks for the question. I think, first of all, as we mentioned in the prepared remarks, we've already, even since closing the mergers on July 22nd, made some good progress and sold, you know, raised roughly $125 million in proceeds. So, some really good progress out of the gate.

Speaker: Yeah, thanks, Ken. And thanks for the question. I think, I think. So first of all, as we mentioned in the prepared remarks, we've already, even since closing the mergers on July 22, made some good progress and sold, you know, raised roughly 125 million in proceeds.

Speaker Change: I think I think so first of all as we mentioned in the prepared remarks, we've already even since closing the merger on July 20, <unk> made some good progress and sold our raised roughly 125 million of proceeds. So some really good progress out of the gate and I think your question is is alluding.

Ted McNulty: Net leverage on new commitments was 3.3 times, down from 3.9 times last quarter. The weighted average OID for new commitments was approximately 157 basis points. This spread and OID translates into very attractive, unlearned asset yield of over 11%, assuming a 5% face rate. In terms of funded investment activity for the quarter, gross fundings for the corporate lending portfolio, excluding revolvers, totaled 214 million. Sales and repayments totaled 131 million. Net corporate lending revolver fundings were positive 10 million, and we received a $3 million paid out for Merx. In aggregate, net fundings for the quarter totaled 90 million.

Ted McNulty: And I think your question is alluding to a very important piece of how we are going to proceed from here, and that is, if you look across the roughly $400 million that's in those three respective buckets of type of investment, there's going to be a number of securities or loans that are not as liquid. And so, we would look at this program and this rotation strategy as not contingent on selling every last broadly syndicated loan or high-yield bond.

Speaker Change: Two a very important piece of how we are going to proceed from here and that being if you look across the roughly 400 million that's in those three respective buckets.

Speaker Change: This investment there's going to be a number of securities or loans that are not as liquid and so we would look at this program and this rotation strategy is not contingent on selling every last a broadly syndicated loan or.

Kenneth Lee: And so we would look at this program and this rotation strategy as not contingent on selling every last broadly syndicated loan or high yield bond, and obviously certain of those securities or loans don't have the same liquidity; would require us to take a discount to fair market value, which we would, you know, not want to take. And as a result, you should see us continue to make progress in reducing that, but by no means should expect us to sell out of all 400 million. Importantly, consider reinvestment yield and the type of discount one might have to take in order to transact on those bonds and loans.

Ted McNulty: Turning to our investment portfolio, we did build what we believe is well diversified senior corporate lending book. At the end of June, prior to the close of the mergers with the closed end funds, our portfolio had a fair value of 2.4 billion and was invested in 165 companies across 23 different corporate lending and other represented over 92% of the total portfolio and Marks accounted for less than 8% of total portfolio on a fair value basis.

Speaker Change: Or high yield bond and.

Ted McNulty: And obviously, certain of those securities or loans don't have the same liquidity, and would require us to take a discount to fair market value, which we would not want to take. And as a result, you should see us continue to make progress in reducing that, but by no means should you expect us to sell all $400 million. And importantly, consider reinvestment yield and the type of discount one might have to take in order to transact on those bonds.

Speaker Change: Obviously certain of those securities or loans don't have the same liquidity would we would require us to take a discount to a fair market value, which we would.

Speaker Change: Not not want to take and as a result, you should see us continue to make progress.

Speaker Change: In reducing that but by no means I should expect us to sell out of all $400 million and importantly, consider reinvestment yield and the type of discount one might have to take in order to transact on those bonds and loans.

Melissa Wedel: Great, very helpful there. And just want to follow up if I may.

Speaker Change: Great very helpful. There.

Ted McNulty: Great. Very helpful there. And just one follow-up question, if I may, any updated outlook on potential ROE or ROE accretion just going forward? Thanks.

Kenneth Lee: Great. Very helpful there. And just one follow-up question, if I may, any updated outlook on potential ROE or ROE accretion just going forward? Thanks.

Speaker Change: And just one follow up if I may.

Ted McNulty: Any updated outlook on potential ROE or ROE accretion just going forward. Thanks. No, we are not going to update that guidance.

Speaker Change: Any updated outlook on potential ROA or ROE accretion just going forward. Thanks.

Ted McNulty: The weighted average yield at cost of our corporate lending portfolio was 12% on average for the June quarter, down slightly from 12.1% in the March quarter. At the end of June, the weighted average spread on the corporate lending portfolio was 601 basis points, down 20 basis points compared to the end of March. Turning to credit quality, our focus on true first lean top of the capital structure, middle market loans, has resulted in what we consider to be stable credit quality.

Ted McNulty: No, we are not going to update that guidance. Obviously, we're looking at the potential for lower base rates. But as we outlined in our prepared remarks, as well as in the materials referenced in our November materials, we see significant synergies to improve both ROI, ROE, and NII.

Speaker: No, we are not going to update that guidance. Obviously, we're looking at the potential for lower base rates. But as we outlined in our prepared remarks, as well as in the materials referenced in our November materials, we see significant synergies to improve both ROE and NII.

Melissa Wedel: Obviously, we're looking at the potential for lower base rates, but as we outlined in our prepared remarks, as well as in which reference are November materials, we see significant synergies to improve both ROI, ROI, and NII. Gotcha, very helpful.

Speaker Change: Our our November materials.

Speaker Change: We see significant synergies to to improve.

Speaker Change: Both ROI Roe and NII.

Ted McNulty: Overall, we feel good about the health and quality of our corporate lending portfolio as our underlying borrowers have largely been able to handle higher borrowing costs. We have not seen a significant increase in the amendment requests and the requests we have seen are generally accompanied with good spots or support. Portfolio companies are generally maintaining performance, continuing the trend of solid fundamentals demonstrated in 2023 and into early 2024. On a median basis for the March quarter, portfolio company revenue and EBITDA both increased by mid single digits year over year.

Speaker Change: Got you very helpful. Thanks again.

Ted McNulty: Gotcha. Very helpful. Thanks again.

Melissa Wedel: We'll take our next question from Melissa Wedel of JP Morgan. Good morning. Thanks for taking my questions.

Speaker Change: We'll take our next question from Melissa Wedel of J P. Morgan.

Operator: We'll take our next question from Melissa Wedel of J.P. Morgan.

Melissa Wedel: Good morning, Thanks for taking my question.

Melissa Wedel: Good morning. Thanks for taking my questions. I'm trying to sort of reconcile the math around the rotation strategy that you described and also growing leverage or building leverage in the portfolio back up to target levels. It seems like there's a lot of rotation and just sort of organic churn that we should be expecting in the portfolio, but also, it seems like a pretty short timeframe within two quarters or so to get back to target. Hoping you can help walk us through that a little bit, but also just confirm, you know, the target range that you're thinking about in this environment. Thank you. Yes, sure.

Melissa Wedel: I'm trying to sort of reconcile the math around the rotation strategy that you described and also building leverage in the portfolio back up to target levels. It seems like there's a lot of rotation and just sort of organic churn that we should be expecting in the portfolio, but also it seems like a pretty short time frame within two quarters or so to get back to the target. Hoping you can help walk us through that a little bit, but also just confirm the target range that you're thinking about in this environment. Thank you. Yes, sure. Thanks, Melissa.

Melissa Wedel: Im trying to sort of reconcile the math.

Brown: Brown the rotation strategy that you described.

Speaker Change: And also and growing.

Speaker Change: Growing leverage.

Speaker Change: Building leverage in the portfolio back to target levels.

Ted McNulty: This has been achieved despite a downturn in acquisition activity, indicating that much of the growth demonstrated has been organic. At the end of June, the weighted average net leverage of our corporate lending portfolio was 5.38 times, up very slightly from 5.36 times last quarter. At the end of June, the weighted average interest coverage ratio remained 1.9 times unchanged quarter over quarter, with four companies below one times. We are closely monitoring these situations and believe they are manageable as the companies have strong current liquidity, good underlying business performance, or have strong financial sponsor support.

It seems like Theres, a lot of rotation and just sort of organic churn that we should be expecting in the portfolio, but also it seems like a pretty short timeframe within two quarters or so to get back to the target, hoping you can help walk us through that a little bit but also just reconfirm the target range that youre thinking about.

Speaker Change: This environment.

Speaker Change: Yes.

Speaker Change: Yeah sure. Thanks, Melissa so.

Ted McNulty: Yeah, sure. Thanks, Melissa.

Ted McNulty: So if we start with the lower end of our guided leverage range of 1.4 and the proforma leverage that we reported or that we disclosed in the prepared remarks of 1.13 times, if you just took up leverage, if you just got to that 1.4, that would be investment capacity of nearly $400 million, $386 million to be more exact. And obviously, that's growth, net of any sell-offs you have there. And then this will reference my answer to Ken's question, which is if you look at the broadly syndicated, and I did allow for the fact that the goal is not necessarily to sell every last bond and loan and to be discriminating in how we sell and ensure that we're not sacrificing FMV to move that risk.

Ted McNulty: So if we start with the lower end of our guided leverage range of 1.4 and the pro forma leverage that we reported or we disclosed in a prepared remarks of 1.13 times, if you just took up leverage, if you just got to that 1.4, that would be investment capacity of nearly 400 million, 386 to be more exact. And obviously that's growth, net of any sell-offs you have there. And then this will reference my answer to Ken's question. If you look at the broadly syndicated, and I did allow for the fact that the goal is not necessarily to sell every last bond and loan, and to be discriminating in how we sell and ensure that we're not sacrificing F&D to move that risk.

Speaker Change: So if we start with the lower end of our guided leverage range of $1 four and the pro forma leverage that we reported.

Ted McNulty: The median EBITDA of the MFIC's corporate lending portfolio companies was approximately 46 million. Our underwriting on mid cap source loans has proven to be sound based on data since mid 2016, which is the approximate data upon which we began utilizing our co-investment order. Our annualized net realized and unrealized loss is around three basis points on loan sourced by mid cap financial. We think this performance data shows how well the strategy is performed.

We disclosed in the prepared remarks of 1.13 times. If you just if you just took up leverage if you just got to that one four that would be investment capacity of nearly 400 million 386 two.

Speaker Change: To be to be more exact and obviously that's growth net of any any any selloffs you have there and then you know this all referenced at my answer to Ken's question is if you look at the broadly syndicated and I and I did allow for the fact that the goal is not necessarily to sell every last bond and loan.

Speaker Change: And to be discriminating in and how we sell them and ensure that we're not sacrificing F N b to move that risk, but just for argument's sake. If you were to.

Ted McNulty: But just for argument's sake, if you were to rotate out of all that 389 million of non-directly originated assets that came over with the mergers, it brings us to total investment capacity of roughly 775 million. So if you think about this from two perspectives, Melissa, on one hand, we have the 389 to sell, of which we've sold 125 million, and caveat that the goal is not necessarily to sell all 389. That's one piece of it, and that will be market dependent over the next couple quarters.

Speaker Change: Eight out of all of that 389 million of non directly originated loan.

Speaker Change: Assets that came over with the mergers it brings us to a total investment capacity of roughly $775 million and and so that's so if you think about this from two two perspectives Melissa.

Ted McNulty: But just for argument's sake, if you were to rotate out all that $389 million of non-directly originated assets that came over with the mergers, it brings us to total investment capacity of roughly $775 million. So, if you think about this from two perspectives, Melissa, on the one hand, we have the $389 to sell, of which we've sold $125 million, and caveat that the goal is not necessarily to sell all $389. That's one piece of it, and that will be market-dependent over the next couple of quarters.

Speaker Change: On one hand, we have the 389 to sell of which we've sold $125 million and caveat that the goal is not necessarily to sell all 389, that's one piece of it and that will be market dependent over the next couple of quarters Importantly, and I think this has been a really important piece of our strategy.

Ted McNulty: Second, Lenders allow a revolving loan senior to their cash flow term debt while still categorizing their cash flow loans as first lien. We focus on what we often refer to as true first lien or top of the capital structure, meaning there's no debt senior to our position as evidence by our attachment point of 0.04 times. As a reminder, over 99% of the MFIC's corporate lending portfolio has at least one fitting in financial covenant and any covenant light loans we may hold would have a spring covenant when the revolvers drawn above certain levels.

Ted McNulty: Importantly, and I think this has been a really important piece of our strategy, of our story for quite some time, and thus it's worth emphasizing, is on the other side in terms of deployment, we're extremely lucky to be now just over 3 billion of assets, which itself is roughly only one tenth of the assets within the mid cap financial ecosystem. That's an excess of a $30 billion business. And so, from a deployment standpoint, we have never had an issue with deployment or access to assets, and with this incremental capital, whether it's playing an increased number of deals or increased a roughly higher average size of deals, that piece of the equation, i.e., the redeployment itself, is very much provided for by the breadth of the mid cap financial origination platform that we're very lucky to have access to.

Speaker Change: Our of our story for quite some time and thus it's worth emphasizing is on the other side in terms of deployment, we're extremely lucky to be now just over 3 billion of assets, which itself is roughly only 110th of the assets within the mid cap financial ecosystem. That's it.

Speaker Change: In excess of 30 billion dollar business and so from a deployment standpoint, we've we have never had an issue with deployment or access to assets and with this incremental capital whether it's playing an increased number of deals are increased.

Ted McNulty: And fourth, some lenders have added structures where they increase their debt to pay their own interest, sometimes referred to as synthetic pick, although hard to account for the myriad structures of lenders of structures lenders can use to achieve these results which generally do not advance credit to borrowers to cover interest. Fortunately, MFIC benefits from mid cap financials large dedicated portfolio management team, which helps identify and address issues early. It's also important to note that mid cap financial leads and serves as administrative agent on the vast majority of our deals, which provides meaningful downside protection. As agent, we are an active dialogue with the borrower and have enhanced information flow, which allows us to be proactive in resolving problem credits.

Ted McNulty: And with this incremental capital, whether it's playing an increased number of deals or increasing a roughly higher average size of deal, that piece of the equation, i.e. the redeployment itself, is very much provided for by the breadth of the mid-cap financial origination platform that we're very lucky to have access to. Thank you. We'll take our next question from Finian O'Shea of Wells Fargo Securities.

Speaker Change: Roughly higher average size of deal that piece of the equation I E. The redeployment itself is a very much provided for by the breadth of the midcap financial origination platform that we're very lucky to have access to.

Speaker Change: Thank you.

Phineon O'Shea: We'll take our next question from Phineon O'Shea of Wells Fargo Securities. Hey everyone, good morning. Higher level question with Howard moving over to Apollo and taking on what seems to be building out the direct origination effort and marrying that with mid caps.

Speaker: We'll take our next question from Finian O'shea of Wells Fargo Securities.

Speaker Change: Yes.

Kenneth Lee: Gotcha. Very helpful. Thanks again.

Operator: And there are no further questions at this time. I'd be happy to return the call to our hosts for any concluding remarks.

Finian O'shea: Hey, everyone. Good morning.

Operator: Hey, everyone. Good morning.

Ted McNulty: Moving on to Merx, as we've discussed in the past, we're focused on reducing our investment in our aircraft leasing and servicing business. While we don't expect paid-outs to occur evenly, we believe the aircraft sales and servicing income should allow for the paid-out of third party debt and the MFIC's investment in Merx over time. The blended yield across our total investment in Merx is less than 4% and the continued rotation of capital from Merx has the potential to have a meaningful beneficial impact on income.

Speaker Change: Higher level question with with Howard moving over to Apollo and taking on what seems to be building out the direct origination effort.

Howard Widra: Higher-level question, with Howard moving over to Apollo and taking on what seems to be building out the direct origination effort and marrying that with MidCap. Can you outline the sort of firm-wide direct lending setup, such as how do you collaborate and maybe compete? Do you split up sponsors? Do you go by deal size?

Speaker Change: And marrying that with mid caps can you outline the sort of firm wide direct lending setup as.

Howard Widra: Can you outline the sort of firm-wide direct lending setup, such as how do you collaborate and maybe compete? Do you split up sponsors? Do you go by deal size on who leads anything that you think would be important for the mid cap investor? Thank you.

Speaker Change: As such it is how do you collaborate maybe compete do you split up sponsors can grow by deal size on who needs anything that you think will be important.

Ted McNulty: As of June 30, 2024, our investment in Merx totaled 187 million, representing 7.7% of the total portfolio at fair value. During the June quarter, Merx paid MFIC 4.7 million, including 1.7 million of interest and a $3 million return of capital. Since the end of June, MFIC's investment in Merx has decreased to approximately 5.8% of the total portfolio due to a combination of the growth in the portfolio from the Mergers, as well as an additional 7.5 million paid-out from Merx, which occurred in July.

Speaker Change: For the mid cap investor. Thank you.

Howard Widra: Yeah, I can. I can take that. That's Howard. So, again, to the market, we have one offering, which is, you know, the combined Apollo MidCap menu of direct lending options. So, we, you know, there is a calling effort to sponsors, which combines resources at Apollo and MidCap, which I'm responsible for, which basically goes to market and says, we're available for your capital needs. Those capital needs are these direct lending loans, which you see go into sort of the large market Apollo effort and the MidCap effort.

Howard Widra: Yeah, I can take that then, Howard. So I get like, you know, to the market, we have one offering, which is, you know, the combined Apollo Mid Cap, you know, menu of direct lending options. So we, you know, there's a calling effort to sponsors, which combines resources that Apollo and mid cap, which I'm responsible for, which basically goes to market and says, we're available for your capital needs. Those capital needs are these direct lending loans, which you see go into sort of build the large market Apollo effort and the mid cap effort. There's also other things we provide, you know, sponsors, which could be nav loans or GP capital generally, or, you know, rediscount loans when they have fines.

Speaker Change: Yeah, I can I can take that.

Operator: Howard.

Operator: So.

Operator: I guess, Mike you know to the market, we have one offering which as you know the combined Apollo midcap.

Speaker Change: Menu of direct lending options. So we.

Speaker Change: There is a calling effort to sponsors which combines resources at Apollo and mid cap.

Speaker Change: I'm responsible for which which which basically goes to market and says we are available for your capital needs capital needs are these direct lending loans, which you see go into sort of built the large market Apollo effort and the big cap effort. There's also other things we provide.

Ted McNulty: Turning to the Mergers with AFT and AIF, to echo Tanner's comments, we're excited about the long-term benefits that we believe this transaction will create. I'd like to take a few minutes to discuss the assets we acquired as part of our Mergers with AFT and AIF. We onboarded approximately 596 million of investments from the closed end funds, increasing the size of MFIC's portfolio to approximately 3.1 billion as of the closing date. Of the 596 million of onboarded assets, approximately 207 million or 35% of these assets were directly originated loans across 37 obligores, with a weighted average spread of 564 basis points.

Howard Widra: There are also other things we provide, you know, sponsors, which could be NAV loans or GP capital generally, or, you know, re-discount loans when they have finance capacity, equipment loans, whatever, you know, the case. So we go to the market, and we say, here is our, you know, here is our catalog of capability, and then when a deal comes in, you know, there are sort of two strategies which overlap, which I think is the most relevant part of the question.

Speaker Change: Sponsors, which could be NAV loans, or GP capital generally or or.

Speaker Change: Rediscount loans when they have finance.

Howard Widra: You know, you can finance capacity equipment loans, whatever, you know, the case may be. So we are going to the market and we are saying here is our, you know, is here is our catalog of capabilities.

Speaker Change: Capacity equipment loves what whatever the case may be so we are going to the market and we are saying here is ours.

Speaker Change: Here's our catalog of capabilities and then when a deal comes in.

Howard Widra: And then when a deal comes in, you know, there are sort of two strategies, which overlap, which I think is the most relevant part of the question. So one is if there is a core middle market deal, say 50 million, 40, 50 million dollars of EBITDA being done at five times, that is being executed by mid cap. And often, you know, portions of the Apollo ecosystem, you know, we'll take some of that loan, especially because in the 40 actually want to be part of transactions that they grow. So they may take a little bit on the other side of the spectrum 300 million dollar, you know, EBITDA company that's doing, you know, whatever, billion five private credit deal, three parties, 500 million dollars.

Ted McNulty: The remaining 389 million of these assets consists of broadly syndicated loans, high yield bonds, and structure credits, as Tanner mentioned, we are currently in the process of selling the non-directly originated assets and redeploying those assets, redeploying those proceeds into assets that are more consistent with MFIC's investment strategy. The good news is that these non-directly originated assets are held throughout the Apollo platform, which facilitates risk monitoring while on our books as well as the selling process.

Operator: No.

Speaker Change: There are sort of two strategies, which overlap, which I think is the most relevant part of the question. So one is if there is a core middle market deal say 50 billion 40 $50 million of EBITDA being kind of a five times that is being executed by mid <unk>.

Howard Widra: So one example is if there's a core middle market deal, say 50 million, $40, $50 million of EBITDA being done at five times, that is being executed by midcaps. And often, you know, portions of the Apollo ecosystem will take some of that long, especially because, in the 40 Act, you want to be part of transactions as they grow. So they may take a little. On the other side of the spectrum, $300 million, you know, EBITDA company that's doing, you know, whatever, a billion and five private credit deal, three parties, $500 million.

Operator: Pat.

Speaker Change: And often you know portions of the Apollo ecosystem.

Speaker Change: We'll take some of that will especially be causing a 40 act do you want to be part of transactions that they grow so they may take a little bit.

Ted McNulty: Since the closing of the mergers on June 22nd and three yesterday, we have sold approximately 125 million of these assets near our cost basis. We are very much on track with our plan to sell these assets, which we expect to complete over the next few quarters. In addition, the mergers were a significant de-leveraging event for MFIC, and created investment capacity of approximately 386 million, assuming in that leverage ratio of 1.4 times.

Speaker Change: On the other side of the spectrum 300 million dollar you know ebay.

Speaker Change: EBITDA company that's doing.

Operator: Whatever.

Operator: <unk> private credit deal.

Speaker Change: Three parties $500 million, let's say apollo's taking down.

Howard Widra: Let's say Apollo is taking down that; that will be by and large, that will be done by sort of the, the ABS PDC and other satellite entities. And, you know, we have the option, meaning MFIC has the option to take part of the in those, but generally won't; might, you know, occasionally generally won't. And in fact, the closed-end funds were part of that ADS ecosystem and more recently had some pieces of some of those loans. Some of the loans that came over as part of the CES are in sort of are in those loans and are now classified in our corporate portfolio.

Howard Widra: Let's say Apollo's taking down that, or that will be done by sort of the ABS, CDC, and other satellite entities. And, you know, we have the option, meaning MFIC has the option to take part in those, but generally won't. Might, you know, occasionally and generally won't.

Speaker Change: That will be by and large that where that will be done by sort of the a.

Ted McNulty: Taking into account the 389 million of non-directly originated assets that we intend to sell, plus the 386 million of additional investment capacity, we have approximately 775 million of capital to deploy. Given the significant deal flow generated by MFIC, we are confident that we can deploy this capital and attract of opportunities. As Tanner mentioned earlier, MFIC closed a 9.6 billion of commitments in the first half of 2024. We expect to reach our target leverage in the next two to three quarters and see no impediment to doing so. We want to emphasize that we will remain committed to our disciplined approach to portfolio construction, as well as the capital.

Speaker Change: At CDC and others.

Speaker Change: Satellite entities.

Operator: And.

Speaker Change: We have the option meeting MFC has the option to take part of that in those but generally what might you know occasionally and generally well and in fact, the closed end funds were part of that avs ecosystem and more recently had some pieces of some of those loans. So some of them.

Howard Widra: And in fact, the closed-end funds were part of that ADS ecosystem and, more recently, had some pieces of some of those loans. So some of the loans that came over as part of the CEFs are in sort of— are in those loans and are now classified in our corporate portfolio. So things that were not going to rotate out, with regard to, you know, how that risk in particular and how MFIC is making choices, you know, because, We're all integrated, and because I'm responsible for the sponsor origination, you know, we see and have access to everything, and we know which deals, not only that we bought with CEF loans, but which we have options on. So it actually goes back to what Melissa said. How do we know that we can generate flow?

Speaker Change: Loans that came over as part of the C. Yes, we are in sort of are in those loans and are now classified in our corporate portfolio. So things that were not going to rotate out of them.

Howard Widra: So things that we're not going to rotate out of the, with regard to like how, you know, that risk in particular and how MFIC is making choices, you know, because we're all integrated. And because I'm responsible for the sponsor origination, you know, we see and have access to everything, and we know which deals not only that we bought the CES loans, but which we have options to. So it actually goes back to what Melissa said, how do we know that we can generate flow. It's not only all of this mid cap assets, but it's also from time to time picking off certain of the larger assets that we decide that they fit whatever, you know, you know, whatever criteria we may have.

Gregory Hunt: With that, I will now turn the call over to the Greg to discuss our financial results in detail. Thank you, Ted, and good morning, everyone. Beginning with our financial results, net investment income per share to the June quarter was 45 cents, which reflects solid recurring interest income, as well as strong sea and pre-payment income. For the quarter, pre-payment income was 3.2 million in fee income, was approximately 900,000. Pick income remains low, representing approximately 3.6% of total investment income for the quarter.

Operator:

Speaker Change: With regard to like how that risk in particular, and how I see us making choices.

Gregory Hunt: Gap net income per share for the quarter was 35 cents. Results for the quarter correspond to an annualized return on equity, or ROE based on net investment income of 11.8% in an annualized ROE based on an income of 9%. Results for the latest 12-month period correspond to an annualized ROE based on net investment income of 11.6% in an annualized ROE based on net income of 11.1%. MFIC's NAB per share at the end of June was $15.38, down 4 cents, quarter over quarter, which reflected net investment income of 45 cents, which is 7 cents above the 38 cents distribution, and an 11 cents per share net loss on the portfolio.

Operator: Because.

Speaker Change: We're all integrated and because I'm responsible for the sponsor origination we see and have access to everything and we know which deal not only that we bought we see yeah.

Akshay: Loans, but which we have akshay. So it actually goes back to what Melissa said, how do we know that we can generate flow. It's not only all of this mid cap assets, but it's also from time to time picking off certain of the larger assets that we decide that they fit whatever you know whatever criteria. We may have so.

Howard Widra: It's not only all of these mid-cap assets, but we also pick off certain of the larger assets that we decide that they fit whatever, you know, whatever criteria we may have. So, you know, I think for the shareholders of these mid-cap companies, they should view our strategy, we say, you know, $20 million to $100 million of EBITDA. But, you know, tied into a sort of a global platform that provides a lot of sponsors, so we have a lot of relevance to them, with lots of flow that's available on the periphery of that.

Howard Widra: So, you know, I think for the shareholders of mid cap, you know, they should view our strategy for middle market. We say, you know, 20,000,000,000,000 of EBITDA, but, but, you know, tied into a sort of a global platform that provides a lot of sponsors, so with a lot of relevance to them, with lots of flow that's available on the periphery of that. And then sort of most importantly, I think our strategy being sort of one of the centerpieces that Apollo's taking to market as part of their whole value proposition, as indicated, you know, most, you know, most relevantly in that, you know, you know, the mid cap sponsor we are sort of leading that effort across Apollo.

Speaker Change: You know I think for the for the shareholders of mid cap.

Speaker Change: Should view our strategy core middle market, we say.

Speaker Change: $20 million to 100 million of EBITDA, but.

Speaker Change: Tied into a sort of a global platform that provides a lot of sponsors. So we have a lot of relevance to them with lots of flow that's available on the periphery.

Howard Widra: And then, sort of most importantly, I think, our strategy being sort of one of the centerpieces that Apollo is taking to market as part of their whole value proposition, as indicated, you know, most, you know, most relevantly in that, you know, you know, you know, me and Claire Baillet, who's responsible for, you know, the MidCap sponsor lead, or sort of leading that effort across Apollo.

Speaker Change: And then sort of most importantly, I think our strategy being sort of one of the centerpieces that Apollo is taking to market as part of their whole value proposition.

Operator: As indicated.

Speaker Change: Most most relevantly in that you know.

Gregory Hunt: As Ted mentioned, the vast majority of our corporate lending portfolio continues to have strong fundamental performance. MFIC's net assets increased by 450 million from the mergers, both the NAB per share of $15.38, and the 450 million increase in net assets exclusive impact of the one-time special distribution of 20 cents for 18.20 million made.., and Connection with Emeritus. Ted expenses for the quarter for $39.6 million down slightly compared to the prior quarter, primarily due to lower incentives and lower administrative expenses offset by higher interest expense given the increase in the size of the portfolio.

Speaker Change: Uh huh.

Operator: Yes.

Operator: Yeah.

Speaker Change: <unk> cleared by who is responsible for the mid cap sponsor, we are sort of leading that accurate across the power.

Howard Widra: Awesome. A lot of color, and we appreciate that.

Speaker Change: Awesome color I really appreciate that.

Howard Widra: Awesome. There is a lot of color, and I really appreciate that.

Operator: Yes.

Howard Widra: I guess there's another high level follow up with the murders complete, and congratulations on that. What's your, you know, I assume you probably want to be one of these $5 billion BDCs, maybe, maybe not. What would the sort of path forward be, you know, some of your peers do large private to public. There's a lot of those going on. And some are going in public secondary style growth. Like, how do you look at all that? And I guess what is the anything in the immediate future?

Howard Widra: I guess just another high-level follow-up, with the murders complete and congratulations on that. What's your, you know? I assume you probably want to be one of these $5 billion BDCs? Maybe, maybe not.

Speaker Change: I guess, just another high level follow up.

Speaker Change: With the merger is complete and congratulations on that.

Speaker Change: Whats your.

Speaker Change: I assume you probably want to be one of these.

Howard Widra: What would the sort of path forward be? You know, some, some, some of your peers do large private to public transitions. There's a lot of those going on. Some are going public, secondary style growth, like how do you look at all that? Um, and I guess, what is the immediate future?

Speaker Change: $5 billion Bdcs, maybe maybe not.

Speaker Change: What would the sort of path forward be.

Speaker Change: So some of your peers do.

Speaker Change: Private to public so theres a lot of those going on.

Speaker Change: Some are going.

Operator: And.

Gregory Hunt: The weighted average interest rate on our debt for the quarter was approximately 7%. As a reminder, MFIC's base management fee was reduced to 1.75% on equity, and is one of the only listed BDCs to charge management fees on equity, which we believe provides greater shareholder alignment and focus on net asset value. Incentive fee is total 5.6 million for the June quarter. As a reminder, our incentive fee on income is 17.5%, and include the total return hurdle with a rolling 12 quarter look back.

Operator: Publix.

Speaker Change: Secondary style growth like how do you look at all of that.

Speaker Change: And I guess what.

Operator: What is there anything in the immediate future.

Operator: Yes.

Howard Widra: Well, just a, I'm going to channel Mark, Mark for a second, which is he sort of says like the size of the BDC is not the goal, with the reward for doing the business the right way. So we are, you know, we're focused on, and our expectation is we will continue to sort of generate appealing lift-adjusted returns. So our, you know, there will be an ability to grow. So, you know, in the normal course meeting, you know, hopefully trading well, you know, in sort of the, you know, trading well on an absolute basis in order sort of people to want to invest more.

Howard Widra: Well, just to channel Mark Brown for a second, which is he sort of says like, the size of the BDC is not the goal, it's the reward for doing the business the right way. So, we are, you know, we're focused on, and our expectation is that we will continue to generate appealing risk-adjusted returns. So, there will be an ability to grow, you know, in the normal course, meaning, you know, hopefully, trading well, you know, in sort of the, you know, trading well on an absolute basis, in order for people to want to invest more.

Mark Hughes: Well just to I'm Gonna channel Mark.

Operator: Mark brought in for a second which is he sort of sounds like the size of the BDC is not the goal with the reward for doing business the right way.

Speaker Change: So we we are you know we're focused on and our expectation is we will continue to sort of generate appealing risk adjusted returns so are.

Operator: There will be an ability to grow.

Operator: Hi.

Speaker Change: In the normal course meeting.

Speaker Change: Hopefully trading well.

Speaker Change: And sort of the.

Speaker Change: Trading well on an absolute basis in order to sort of people to want to invest more so that's like the core focus continue to execute and we will be rewarded.

Gregory Hunt: The effective incentive fee rate for the June quarter was 15.9% impacted by the net loss recorded during the quarter and the impact of the look back feature. Moving to our balance sheet, MFIC's net leverage was 1.45 times at the end of June compared to 1.35 times at the end of March, reflecting the 90 million of net fundings during the quarter. MFIC's net leverage as of closing of the mergers was 1.13 times.

Howard Widra: So that's like the core focus; continue to execute, and we will be rewarded. And, and we will be able to grow, you know, with regard to sort of other sort of less, you know, less tactical growth opportunities. I think what, you know, generally our view has been everything we, and this almost goes to the other thing, everything we do, we want to be a creative to our shareholders. You know, so in other words, like, you know, we don't want to, we don't want to grow at the expense of that, give it. And so, you know, we'll, you know, we'll look at everything that could be, you know, like which, as you know, we haven't seen in our industry. Like everybody would love to, you know, merge in another BDC and take in another contract and grow.

Operator: Hi.

Howard Widra: So, that's like the core focus; continue to execute, and we will be rewarded, and we will be able to grow. You know, with regard to sort of other sort of less, you know, less tactical growth opportunities. I think what, you know, generally our view has been... everything we do, and this almost goes to the other thing, everything we do, we want to be acquisitive to our shareholders. So, in other words, we don't want to grow at the expense of that, and so we'll look at everything, like, which, as you know, we haven't seen in our industry, like, everybody would love to, you know, merge with another BDC and take in another contract and grow if they think they could deploy the capital well. But that stuff hasn't really happened.

Operator: And we will be able to grow.

Speaker Change: With regard to sort of other sort of lag.

Speaker Change: Less tactical growth.

Speaker Change: Opportunities I think.

Speaker Change: Generally our view has been everything we almost got to the only thing everything we do we want to be accretive to our shareholders.

Operator: Hi.

Speaker Change: So in other words, we don't want to we don't want to grow at the expense of that and so you know.

Speaker Change: We will look at everything that could be.

Howard Widra: So it's hard to predict that. But like any, any of the any, any ways to sort of access capital that are accretive to our current shareholder base, we'll consider. I'll stop there. I don't know, Greg or Tanner, do you have anything to add?

Speaker Change: Like which as you know we haven't seen in our industry like everybody would love to merge into another BDC and taken another contract and grow if you think you could deploy the capital well that stuff hasn't really happened. So it's hard to predict that but like any any update any.

Gregory Hunt: Accordingly, MFIC issued 0.9547 shares of its common stock for each AFT share and 0.9441 shares of its common stock for each AIF share. In total, MFIC issued approximately 28.5 million shares of MFIC to the closed end fund shareholders, resulting in 93.8 million MFIC outstanding shares following the merger. At the time of the merger, MFIC was trading at a slight discount to its current nav.

Howard Widra: So if you think you could deploy the capital well, that stuff hasn't really happened, so it's hard to predict that. But like any, any of the, any, any ways to sort of access capital that are created to our current shareholder base will consider.

Speaker Change: Any ways to sort of access capital that are accretive to our current shareholder base will consider.

Howard Widra: I'll stop there. I'm a greater tenor given anything to add.

Speaker Change: I'll stop there I don't know, Greg or 10, or do you have anything to add.

Operator: <unk>.

Speaker Change: Hi, there.

Howard Widra: and Eric Newton during.

Howard Widra: Thank you, and I think that's all.

Operator: No no.

Operator: I think thats all.

Operator: Well stated.

Operator: All right, thanks so much, everybody. And once again, to ask a question, please press star one now on your telephone keypad. One moment will be cute.

Speaker Change: Alright, thanks, so much everybody.

Operator: All right, thanks so much, everybody.

Operator: Yes.

Operator: And once again, to ask a question, please press star 1 now on your telephone keypad. One moment while we queue. We'll take our next question from Mark Hughes of Truist.

Speaker Change: And once again to ask a question. Please press star one now on your telephone keypad, one moment, while we queue.

Mark Hughes: We'll take our next question from Mark Hughes of Trillist. Yeah, thank you. Good morning.

Operator: We'll take our next question from Mark Hughes of Truest.

Speaker Change: Yes, Thank you and good morning.

Mark Hughes: Yeah, thank you. Good morning. I wonder if you could talk a little bit about the commitment activity in the quarter. Your average borrower exposure continues to move down a little bit. Leverage of 3.3 versus 3.9 is down sequentially in this quarter's activity, well below the overall portfolio net leverage. What are you seeing in the market? What are you kind of focusing on? I'm just very curious about those movements.

Ted McNulty: I wonder if you can talk a little bit about the commitment activity in the quarter. Your average bar exposure continues to move down a little bit. The leverage of 3.3 versus 3.9 is down sequentially in this quarter's activity, well below the overall portfolio net leverage. What do you see in the market? What are you kind of focusing on just to be curious with those movements? Yeah, sure, Mark.

Speaker Change: I Wonder if you could talk a little bit about the commitment of activity in the quarter.

Speaker Change: Your average borrower exposure.

Gregory Hunt: In connections with the merger in affiliate of Apollo made a 25 cents per share special cash payment to each AFT and AIF shareholder for a total payment of $7.5 million. Guidance, a portion of this cash payment was deemed to be merger consideration, which resulted in the fair value of the consideration paid to both AFT and AIF shareholders being equal to the fair value of the assets acquired, resulting in no purchase, discount or premium.

Speaker Change: To move down a little bit.

Operator: The.

Operator: Yeah.

Speaker Change: Leverage of three three versus $3 nine.

Operator: The sequentially in this quarter's activity well below the overall portfolio net leverage.

Speaker Change: What are you seeing in the market.

Speaker Change: What are you.

Speaker Change: Kind of focusing on.

Speaker Change: Curious with those.

Speaker Change: Those movements.

Mark Hughes: Yes sure Mark.

Ted McNulty: Yeah, sure, Mark. Hi, it's Ted.

Ted McNulty: Hi, it's Ted. The, you know, in the first half of the year, you know, broadly speaking, M&A was down. And, but as we kind of moved through the second quarter, you know, in the marketplace, we saw the pipeline building as private equity firms were starting to line up more LBO activity. That, you know, may not have shown itself in all of the stats that are more backward-looking. But I think certainly, and you probably heard this from others, as we look at our pipeline, you know, going forward, you know, it's building very nicely. And in terms of deployment, you know, in the second quarter, we did, we did, you know, some of which were, you know, based on the common sea, but then part of that was, as we look to accelerate, ahead of the merger, we knew where that was coming out.

Operator: Deep.

Operator: In the first half of the year.

Speaker Change: Broadly speaking M&A was down.

Gregory Hunt: As a result, there will be no impact on the cost basis of the acquired assets and therefore no impact on our financial status. Fair value of the closed and fund assets at close became MFIC's cost basis in these assets without any adjustment.

Operator: And but as we kind of move through the second quarter.

Ted McNulty: In the first half of the year, broadly speaking, M&A was down. But as we kind of moved through the second quarter, in the marketplace, we saw the pipeline building as private equity firms were starting to line up more LBO activity. That may not have shown itself in all of the stats that are more backward looking.

Speaker Change: In the marketplace. We saw the pipeline building is private equity firms are starting to line up more LBO activity.

Speaker Change: You may not have shown itself in all of the stats that are more backward looking.

Speaker Change: But I think certainly and you probably heard this from others as we look at our pipeline.

Operator: This concludes our prepared remarks, operator, please open the call to questions. At this time, if you would like to ask a question, please press star one now on your telephone keypad to withdraw yourself from the queue you may press star two.

Ted McNulty: But I think certainly, and you probably heard this from others, as we look at our pipeline, you know, going forward, it's building very nicely. And in terms of deployment, you know, in the second quarter, we did, you know, some of which were, you know, based on incumbency. But then part of that was, as we looked to accelerate ahead of the merger, we knew where that was coming out. So we did accelerate, you know, our deployment.

Speaker Change: Going forward. It is building very nicely and in terms of deployment in the second quarter. We did have we did.

Speaker Change: Some of which were based on our competency.

Ted McNulty: Again, to ask a question that is star one now on your telephone keypad, one moment while we queue, we'll take our first question from Kenneth Lee of RBC Capital Markets. Hey, good morning, thanks for taking my question. Just in terms of the portfolio rotation of the next few quarters, the non-directly-originary assets being sold, I assume you talk about the BSL, the structured credit and the high yield bonds from the closed end funds.

Speaker Change: But then part of that was as we look to accelerate how did the merger.

Speaker Change: We knew where that was coming out so we did accelerate.

Ted McNulty: So we did accelerate, you know, our deployment. So we finished at 1.45 times, still in the low end of the range, but, you know, certainly was, and was in anticipation of the merger closing and then, and then deleveraging down, you know, post that closing.

Ted McNulty: So we finished at 1.45 times, still on the low end of the range, but, you know, certainly in anticipation of the merger closing and then deleveraging down, you know, post that closing. So, you know, in terms of activity, like again, what are we focusing on? You know, we focus on the same thing quarter after quarter, which is, you know, middle market loans, top of the capital structure, cash pay, floating rate, and we continue to try to build and stay diverse across, you know, sectors and sponsors.

Speaker Change: Our deployment. So we finished at 145 times still on the low end of the range but.

Operator: Certainly.

Speaker Change: It was in anticipation of the merger closing and then deleveraging down.

Operator: Post.

Speaker Change: Closing so.

Ted McNulty: So, you know, in terms of activity, like again, what are we focusing on? You know, we focus on the same thing quarter after quarter, which is, you know, middle market loans, top of the capital structure, cash pay, floating rate, and, you know, continue to try to build and state averse across, you know, sectors and sponsors. I had one thing your specific question around commitment amount, and I'll actually alluded to a comment that Howard made is that, you know, given the limitations from a 40-act standpoint, it behooves us to participate at the time the deal is originally originated, Mark, such that we'll have the opportunity to do follow-on.

Speaker Change: In terms of activity like again, what are we focusing on.

Ted McNulty: Granted, the BSL Markets are fairly liquid, but just want to get a better understanding of any kind of key constraints around the pace of sales, for example, like the structured credit, the high yield bonds. Thanks. Yeah, thanks, Ken, and thanks for the question. I think, so first of all, as we mentioned in the prepared remarks, we've already even since closing the mergers on July 22nd, made some good progress and sold, you know, erased roughly 125 million of proceeds, so some really good progress out of the gate.

Speaker Change: We focus on the same thing quarter after quarter, which as you know middle market loans are top of the capital structure.

Speaker Change: Cash pay floating rate and.

Speaker Change: Continuing to try to build an end state averse across sectors and sponsors.

Ted McNulty: And I think your question is alluding to a very important piece of how we are going to proceed from here, and that being, if you look across the roughly 400 million that's in those three respective buckets of type of investment, there's going to be a number of securities or loans that are not as liquid. And so we would look at this program and this rotation strategy as not contingent on selling every last broadly syndicated loan or high yield bond, and obviously certain of those securities or loans don't have the same liquidity would require us to take a discount to fair market value, which we would, you know, not want to take.

Ted McNulty: And as a result, you should see us continue to make progress in reducing that, but by no means should expect us to sell out of all 400 million and importantly consider reinvestment yield and the type of discount one might have to take in order to transact on those bonds and loans.

Ted McNulty: I'd add one thing, your specific question around commitment amounts, and I'll actually allude to a comment that Howard made, is that given the limitations from a 40 Act standpoint, it behooves us to participate at the time the deal is originated, Mark, such that we'll have the opportunity to do follow-ons. To the extent that we don't participate, we're necessarily crowded out, so you'll see that

Speaker Change: Add one thing your specific question around commitment amount and I'll actually alluded to a comment that Howard made is that.

Speaker Change: Given that the the limitations about 40 act standpoint, it behooves us to participate at the time. The deal is originally originated mark such that we'll have the opportunity to do follow ons to the extent that we don't participate where you're necessarily crowded out so youll see that and then also with regard to the commitment size.

Ted McNulty: To the extent that we don't participate, we're necessarily crowded out. So, you'll see that, and then also with regard to commitment size and TED alluded to this, but just to maybe dig another level deeper, is ultimately, you know, a lot comes from, you know, in currency, as he said, and ultimately, that will have a lot to do with how big of an acquisition that particular company's doing, and that would, with influence our commitment size. And so I think I wouldn't read too much into it; it's going to ebb and flow based on that.

Ted McNulty: And then also with regard to commitment size, and Ted alluded to this, but just to maybe dig another level deeper, ultimately, a lot comes from incumbency, as he said, and ultimately, that will have a lot to do with how big of an acquisition that particular company is doing. And that would... would influence our commitment size. And so I think I wouldn't read too much into it. It's going to ebb and flow based on that.

Operator: And Ted Ted alluded to this but just to maybe dig another level deeper is ultimately you know a lot of a lot comes from <unk>.

Speaker Change: Incumbency as he said and ultimately that will have a lot to do with how big of an acquisition that particular company is doing and that would.

Speaker Change: Would that influence our commitment size and so I think I wouldn't read too much into it it's going to ebb and flow based on that but for emphasis you're one of the real I'll go back to this point about our access to the mid cap origination. If you look at mid cap there is roughly 500 borrowers.

Ted McNulty: But for emphasis, you know, one of the real, you know, I'll go back to this point about our access to the mid cap origination. If you look at mid cap, there's just roughly 500 borrowers pro forma for the merger. We obviously have a significantly number of obligors. And over time, you know, we hope to be able to, though, you know, roughly a billion four in net assets, be able to run a really, really diversified portfolio and show obligors well in excess of 200 to stress. The benefit of our platform has a access to very, very diverse deal flow and be reflected in the diversification of our portfolio.

Ted McNulty: But for emphasis, you know, one of the real points, I'll go back to this point about our access to the MidCap origination. If you look at MidCap, there are roughly 500 borrowers. Proforma for the merger, we obviously have a significantly number of obligors. And over time, you know, we hope to be able to, though roughly a billion dollars in net assets, be able to run a really, really diversified portfolio and show obligors well in excess of 200 to stress the benefit our platform has of access to very, very diverse deal flow, which will be reflected in the diversification of our portfolio.

Speaker Change: Pro forma for the merger, we obviously have significantly number of obligor ours and over time, we hope to be able to though.

Speaker Change: Roughly one.

Speaker Change: $1 four in net assets be able to run a really really diversified portfolio and show obligor is well in excess of 200.

Speaker Change: To stress the benefit of our platform has a lot of access to a very very diverse.

Ted McNulty: Great, very helpful there. And just want to follow up if I may. Any updated outlook on potential ROE or ROE accretion just going forward. Thanks.

Speaker Change: Our deal flow and be reflected in the diversification of our portfolio.

Mark Hughes: Thank you for that.

Speaker Change: Okay. Thank you for that and then the.

Ted McNulty: Thank you for that. And then the expense synergies associated with the merger. Have you talked about timing on that? A potential impact on returns or NII. It will.

Mark Hughes: And then the expense synergies associated with the merger.

Speaker Change: Expense synergies associated with the merger have you talked about timing on that.

Gregory Hunt: If you talked about timing on that and potential impact on returns or NIL. It will be the expense are when you kind of looked at the consolidated group right with the close and funds and MFC. So the expenses, you know, essentially are eliminated at this close and funds. And very little increase in expenses at MFC; you'll have some valuation increases.

Ted McNulty: No, we are not going to update that guidance. Obviously, we're looking at the potential for lower base rates, but as we outlined in our prepared remarks as well as in which reference are November materials, we see significant synergies to improve both ROI, ROI and NII. Gotcha, very helpful. Thanks again.

Operator: A potential impact on returns.

Speaker Change: Yeah, well the the expense.

Ted McNulty: Yeah, well, the expenses are when you kind of look at the consolidated group, right, with the closed-end funds and MFIC. So, the expenses, you know, essentially are eliminated at this closed-end fund, and there is very little increase in expenses at MFIC. You'll have some valuation increases. So it has already happened. Okay. So I was really looking at that consolidated expense level. It was about three, a little bit over $3 million of expenses taken out of the closed-end funds. And so the MFIC will stay relatively the same from an SG&A perspective.

Speaker Change: When you kind of looked at the consolidated group rate with the closed end funds and <unk>.

Speaker Change: So the expenses.

Operator: Essentially.

Speaker Change: <unk> eliminated at this closed end funds.

Speaker Change: And very little increase in expenses at MFC, you'll have some valuation.

Speaker Change: Increases so it's already happened.

Gregory Hunt: So it's already happened. Okay. So it was really looking at that consolidated expense level was about three, a little bit over $3 million of expenses taken out of the closed and funds. But it didn't, and so the MFC will stay relatively the same from an SGNA basis.

Melissa Wedel: We'll take our next question from Melissa Wedel of JP Morgan. Good morning. Thanks for taking my questions. I'm trying to sort of reconcile the math around the rotation strategy that you described and also building leverage in the portfolio back up to target levels. It seems like there's a lot of rotation and just sort of organic churn that we should be expecting in the portfolio, but also it seems like a pretty short time frame within two quarters or so to get back to the target. Hoping you can help walk us through that a little bit but also just confirm the target range that you're thinking about in this environment. Thank you.

Speaker Change: So it was really looking at that consolidated expense level was about three <unk>.

Speaker Change: Over $3 million of expenses taken out of the closed end funds.

Operator: But.

Speaker Change: And so the MFC will stay relatively the same from an SG&A basis.

Operator: Thank you. And there are no further questions at this time.

Speaker Change: Thank you.

Operator: And there are no further questions at this time I'd be happy to return the call to our hosts for any concluding remarks.

Operator: And there are no further questions at this time. I'd be happy to return the call to our hosts for any concluding remarks. Thank you, operator. Thank you, everyone, for listening to today's call on behalf of the entire team.

Elizabeth Besen: I'd be happy to return the call to our hosts for any concluding remarks. Thank you, operator. Thank you, everyone, for listening to today's call on behalf of the entire team. We thank you for your time today. Please feel free to reach out to us if you have any other questions. Have a good day.

Speaker Change: Thank you operator, thank you everyone for listening to today's call on behalf of the entire team. We thank you for your time today. Please feel free to reach out to us. If you have any other questions have a good day.

Speaker: Yes, sure.

Speaker: Thank you, operator. Thank you, everyone, for listening to today's call on behalf of the entire team. We thank you for your time today. Please feel free to reach out to us if you have any other questions.

Speaker: Yeah.

Operator: This does conclude the mid cap investment corporation for the period ended June 30th, 2024 earnings call. You may now disconnect your lines, and everyone have a great day. Thank you. A.C.

Speaker Change: This does conclude the mid cap investment Corporation for the period ended June 30th 2024 earnings call. You May now disconnect your lines and everyone have a great day.

Ted McNulty: Yes, sure. Thanks, Melissa. So if we start with the lower end of our guided leverage range of 1.4 and the pro forma leverage that we reported or we disclosed in a prepared remarks of 1.13 times, if you just took up leverage, if you just got to that 1.4, that would be investment capacity of nearly 400 million, 386 to be more exact. And obviously that's growth, net of any sell-offs you have there.

Speaker: [music].

Ted McNulty: And then this will reference my answer to Ken's question is if you look at the broadly syndicated and I did allow for the fact that the goal is not necessarily to sell every last bond and loan and to be discriminating in how we sell and ensure that we're not sacrificing F&D to move that risk. But just for argument's sake, if you were to rotate out of all that 389 million of non-directly originated assets that came over with the mergers, it brings us to total investment capacity of roughly 775 million.

Speaker: Hum.

Speaker: [music].

Ted McNulty: So if you think about this from two perspectives, Melissa, on one hand, we have the 389 to sell, of which we've sold 125 million and caveat that the goal is not necessarily to sell all 389, that's one piece of it and that will be market dependent over the next couple quarters.

Ted McNulty: Importantly, and I think this has been a really important piece of our strategy, of our story for quite some time and thus it's worth emphasizing is on the other side in terms of deployment, we're extremely lucky to be now just over 3 billion of assets, which itself is roughly only one tenth of the assets within the mid cap financial ecosystem. That's an excess of a $30 billion business. And so from a deployment standpoint, we have never had an issue with deployment or access to assets and with this incremental capital, whether it's playing an increased number of deals or increased a roughly higher average size of deals, that piece of the equation, i.e., the redeployment itself is very much provided for by the breadth of the mid cap financial origination platform that we're very lucky to have access to.

Tanner Powell: Can you outline the sort of firm-wide direct lending setup such as how do you collaborate and maybe compete? Do you split up sponsors? Do you go by deal size on who leads anything that you think would be important for the mid cap investor? Thank you. Yeah, I can take that then, Howard. So I get like, you know, to the market, we have one offering, which is, you know, the combined Apollo mid cap, you know, menu of direct lending options.

Tanner Powell: So we, you know, there's a calling effort to sponsors, which combines resources that Apollo and mid cap, which I'm responsible for, which basically goes to market and says, we're available for your capital needs. Those capital needs are these direct lending loans, which you see go into sort of build the large market Apollo effort and the mid cap effort. There's also other things we provide, you know, sponsors, which could be nav loans or GP capital generally, or, you know, rediscount loans when they have fines.

Tanner Powell: You know, you can finance capacity equipment loans, whatever, you know, the case may be. So we are going to the market and we are saying here is our, you know, is here is our catalog of capabilities. And then when a deal comes in, you know, there are sort of two strategies, which overlap, which I think is the most relevant part of the question. So one is if there is a core middle market deal, say 50 million, 40, 50 million dollars of EBITDA being done at five times, that is being executed by mid cap.

Tanner Powell: And often, you know, portions of the Apollo ecosystem, you know, we'll take some of that loan, especially because in the 40 actually want to be part of transactions that they grow. So they may take a little bit on the other side of the spectrum 300 million dollar, you know, EBITDA company that's doing, you know, whatever, billion five private credit deal, three parties, 500 million dollars. Let's say Apollo is taking down that, that will be by and large, that will be done by sort of the, the ABS PDC and other satellite entities.

Tanner Powell: And, you know, we have the option, meaning MFIC has the option to take part of the in those, but generally won't might, you know, occasionally generally won't. And in fact, the closed end funds were part of that ADS ecosystem and more recently had some pieces of some of those loans. Some of the loans that came over as part of the CES are in sort of are in those loans and are now classified in our corporate portfolio.

Tanner Powell: So things that we're not going to rotate out of the, with regard to like how, you know, that risk in particular and how MFIC is making choices, you know, because we're all integrated. And because I'm responsible for the sponsor origination, you know, we see and have access to everything and we know which deals not only that we bought the CES loans, but which we have options to so it actually goes back to what Melissa said, how do we know that we can generate flow.

Tanner Powell: It's not only all of this mid cap assets, but it's also from time to time picking off certain of the larger assets that we decide that they fit whatever, you know, you know, whatever criteria we may have. So, you know, I think for the for the shareholders of mid cap, you know, they should view our strategy for middle market. We say, you know, 20,000,000,000,000 of EBITDA, but, but, you know, tied into a sort of a global platform that provides a lot of sponsors, so with a lot of relevance to them, with lots of flow that's available on the periphery of that.

Tanner Powell: And then sort of most importantly, I think our strategy being sort of one of the centerpieces that Apollo's taking to market as part of their whole value proposition as indicated, you know, most, you know, most relevantly in that, you know, you know, the mid cap sponsor we are sort of leading that effort across Apollo. Awesome. A lot of color and we appreciate that.

Tanner Powell: I guess there's another high level follow up with the murders complete and congratulations on that. What's your, you know, I assume you probably want to be one of these $5 billion BDCs, maybe, maybe not. What would the sort of path forward be, you know, some of your peers do large private to public. There's a lot of those going on. And some are going in public secondary style growth. Like, how do you look at all that?

Tanner Powell: And I guess what is the anything in the immediate future? Well, just a, I'm going to channel Mark, Mark for a second, which is he sort of says like the size of the BDC is not the goal with the reward for doing the business the right way. So we are, you know, we're focused on and our expectation is we will continue to sort of generate appealing lift adjusted returns. So our, you know, there will be an ability to grow.

Tanner Powell: So, you know, in the normal course meeting, you know, hopefully trading well, you know, in sort of the, you know, trading well on an absolute basis in order sort of people to want to invest more. So that's like the core focus, continue to execute and we will be rewarded. And, and we will be able to grow, you know, with regard to sort of other sort of less, you know, less tactical growth opportunities.

Tanner Powell: I think what, you know, generally our view has been everything we, and this almost goes to the other thing, everything we do, we want to be a creative to our shareholders. You know, so in other words, like, you know, we don't want to, we don't want to grow at the expense of that, give it. And so, you know, we'll, you know, we'll look at everything that could be, you know, like which, as you know, we haven't seen in our industry, like everybody would love to, you know, merge in another BDC and take in another contract and grow.

Tanner Powell: So if you think you could deploy the capital well, that stuff hasn't really happened, so it's hard to predict that. But like any, any of the, any, any ways to sort of access capital that are created to our current shareholder base will consider. I'll stop there. I'm a greater tenor given anything to add. All right, thanks so much everybody. And once again to ask a question, please press star one now on your telephone keypad. One moment will be cute.

Mark Hughes: We'll take our next question from Mark Hughes of Trillist. Yeah, thank you. Good morning.

Ted McNulty: I wonder if you can talk a little bit about the commitment activity in the quarter. Your average bar exposure continues to move down a little bit. The leverage of 3.3 versus 3.9 is down sequentially in this quarter's activity well below the overall portfolio net leverage. What do you see in the market? What are you kind of focusing on just to be curious with those movements? Yeah, sure, Mark. Hi, it's Ted. The, you know, in the first half of the year, you know, broadly speaking, M&A was down.

Ted McNulty: And, but as we kind of moved through the second quarter, you know, in the marketplace, we saw the pipeline building as private equity firms were starting to line up more LBO activity. That, you know, may not have shown itself in all of the stats that are more backward looking. But I think certainly, and you probably heard this from others, as we look at our pipeline, you know, going forward, you know, it's building very nicely.

Ted McNulty: And in terms of deployment, you know, in the second quarter, we did, we did, you know, some of which were, you know, based on the common sea, but then part of that was, as we look to accelerate, ahead of the merger, we knew where that was coming out. So we did accelerate, you know, our deployment. So we finished at 1.45 times, still in the low end of the range, but, you know, certainly was, and was in anticipation of the merger closing and then, and then deleverging down, you know, post that closing.

Ted McNulty: So, you know, in terms of activity, like again, what are we focusing on? You know, we focus on the same thing quarter after quarter, which is, you know, middle market loans, top of the capital structure, cash pay, floating rate, and, you know, continue to try to build and state averse across, you know, sectors and sponsors. I had one thing your specific question around commitment amount, and I'll actually alluded to a comment that Howard made is that, you know, given the limitations from a 40-act standpoint, it behooves us to participate at the time the deal is originally originated mark, such that we'll have the opportunity to do follow-on.

Ted McNulty: And so I think I wouldn't read too much into it, it's going to ebb and flow based on that. But for emphasis, you know, one of the real, you know, I'll go back to this point about our access to the mid cap origination. If you look at mid cap, there's just roughly 500 borrowers pro forma for the merger. We obviously have a significantly number of obligors. And over time, you know, we hope to be able to though, you know, roughly a billion four in net assets, be able to run a really, really diversified portfolio and show obligors well in excess of 200 to stress. The benefit of our platform has a access to very, very diverse deal flow and be reflected in the diversification of our portfolio. Thank you for that.

Ted McNulty: And then the expense synergies associated with the merger. If you talked about timing on that and potential impact on returns or NIL. It will be the expense are when you kind of looked at the consolidated group right with the close and funds and MFC. So the expenses, you know, essentially are eliminated at this close and funds. And very little increase in expenses at MFC, you'll have some valuation increases. So it's already happened.

Ted McNulty: Okay. So it was really looking at that consolidated expense level was about three a little bit over $3 million of expenses taken out of the closed and funds. But it didn't and so the MFC will stay relatively the same from an SGNA basis. Thank you.

Operator: And there are no further questions at this time. I'd be happy to return the call to our hosts for any concluding remarks. Thank you operator. Thank you everyone for listening to today's call on behalf of the entire team. We thank you for your time today. Please feel free to reach out to us if you have any other questions. Have a good day.

Operator: This does conclude the mid cap investment corporation for the period ended June 30th, 2024 earnings call. You may now disconnect your lines and everyone have a great day. Thank you. A.C.

Q2 2024 MidCap Financial Investment Corp Earnings Call

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