Q2 2024 Monroe Capital Corp Earnings Call

August 8, 2024

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Operator: 2024 earnings conference call. Before we begin, I'd like to take a moment to remind our listeners that remarks made during this call today may contain certain forward-looking statements, including statements regarding our goals, strategies, belief, future potential, operating results, and cash flows. Although we believe these statements are reasonable based on management estimates, assumptions, and projections as of today, August 8th, 2024, these statements are not guarantees of future performance.

Welcome to Monroe Capital Corporation's 2nd Quarter 2024 Earnings Conference Call. Before we begin, I'd like to take a moment to remind our listeners that remarks made during this call today may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs, and objectives.

Operator: for the earnings conference call. Before we begin, I'd like to take a moment to remind our listeners that remarks made during this call today may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs, and values. Future Potential, Operating Results, and Cash Flows. Although we believe these statements are reasonable based on management's estimates, assumptions, and projections as of today, August 8, 2024, these statements are not guarantees of future performance. Further, time-sensitive information may no longer be accurate at the time of any replay or listening.

Operator: To begin, I'd like to take a moment to remind our listeners that remarks made during this call today may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs, and values; Future Potential, Operating Results, and Cash Flows. Although we believe these statements are reasonable based on management's estimates, assumptions, and projections as of today, August 8, 2024, these statements are not guarantees of future performance. Further, time-sensitive information may no longer be accurate at the time of any replay or listening.

Operator: Future Potential, Operating Results, and Cash Flows Although we believe these statements are reasonable based on management's estimates, assumptions, and projections as of today, August 8, 2024, these statements are not guarantees of future performance.

Operator: Further, time-sensitive information may no longer be accurate as at the time of any replay or listening. Actual results may differ materially as a result of risks, uncertainty, or other factors, including but not limited to the risk factors described from time to time, and the company's filings for the SEC. Monroe Capital takes no obligation to date or revise these forward-looking statements.

Operator: Further, time-sensitive information may no longer be accurate as at the time of any replay or listening.

Operator: Actual results may differ materially as a result of risks, uncertainty, or other factors, including, but not limited to, the risk factors described from time to time and the company's filings with the SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements. I'll now turn the conference call over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation. Sir, please go ahead.

Operator: Monroe Capital takes no obligation to update or revise these forward-looking statements.

Theodore Koenig: I'll now turn the conference call over to Pay a Candid Chief Executive Officer of Monroe Capital Corporation. Sir, please go ahead.

Operator: I'll now turn the conference call over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation. Sir, please go ahead.

Theodore Koenig: Good morning, and thank you to everyone who has joined our call today.

Ted Koenig: Good morning, and thank you to everyone who has joined our call today. Welcome to our second quarter 2024 earnings call. I am here with Mick Solimene, our CFO and Chief Investment Officer, and Alex Parmacek, our Deputy Portfolio Manager. Last evening, we issued our second quarter 2024 earnings press release and filed our 10-Q with the SEC. On today's call, I'll begin by addressing our second quarter results and then share thoughts and insights into the macroeconomic environment and the current market conditions.

Theodore Koenig: Good morning, and thank you to everyone who has joined our call today. Welcome to our second quarter 2024 earnings call. I am here with Mick Solimene, our CFO and Chief Investment Officer, and Alex Parmacek, our Deputy Portfolio Manager. Last evening, we issued our second quarter 2024 earnings press release and filed our 10-Q with the SEC. On today's call, I'll begin by addressing our second quarter results and then share thoughts and insights into the macroeconomic environment and the current market conditions.

Theodore Koenig: I am pleased to report that for the 17th consecutive quarter, our adjusted net investment income covered our $0.25 per share dividend. MRCC delivered a total annualized dividend yield on our trading price of 14%, using our August 6, 2024 closing share price. We are proud of our track record of delivering stable and consistent dividends to our shareholders. In the second quarter of 2024, our adjusted net investment income was $6.7 million, or $0.31 per share, an increase from $5.5 million, or $0.25 per share, in the first quarter.

Theodore Koenig: Welcome to our second quarter, 2020 for earnings call. I am here with Mick Solimene, our CFO and Chief Investment Officer, and Alex Parmacek, our Deputy Portfolio Manager. Last evening, we issued our second quarter 2020 for earnings press release and filed our 10-Q with the SEC. On today's call, I'll begin by addressing our second quarter results and then share thoughts and insights into the macroeconomic environment and the current market conditions. I am pleased to report that, for the 17th consecutive quarter, our adjusted net investment income covered our 25 cents per share dividend. MRCC delivered a total annualized dividend yield on our trading price of 14% using our August 6, 2024, closing share price.

Ted Koenig: Good morning and thank you to everyone who has joined our call today. Welcome to our second quarter 2024 earnings call. I am here with Mick Solimene, our CFO and Chief Investment Officer, and Alex Parmacek, our Deputy Portfolio Manager.

Theodore Koenig: Our adjusted net investment income covered our $0.25 per share dividend by nearly 1.25 times. We reported NAV of $199.3 million, or $9.20 per share, as of June 30, 2024, compared with NAV of $2.3 million, or $201.5 billion, or $9.30 per share as of March 31, 2024.

Ted Koenig: Last evening we issued our second quarter 2024 earnings press release and filed our 10-Q with the SEC.

Theodore Koenig: The slight decline in NAV was primarily the result of net unrealized losses attributable to certain portfolio companies, partially offset by net investment income in excess of the dividend paid during the quarter. MRCC's debt-to-equity leverage decreased from 1.6 times as of March 31, 2024, to 1.54 times at June 30, 2024, driven by several payoffs that occurred late in the quarter. Our focus remains primarily on managing and supporting our investment portfolio companies with add-on lending opportunities and maintaining a highly selective and disciplined approach when redeploying capital into attractive investment opportunities with new portfolio company relationships.

Ted Koenig: On today's call, I'll begin by addressing our second quarter results and then share thoughts and insights into the macroeconomic environment and the current market conditions.

Ted Koenig: I am pleased to report that for the 17th consecutive quarter, our adjusted net investment income covered our $0.25 per share dividend. MRCC delivered a total annualized dividend yield on our trading price of 14%, using our August 6, 2024 closing share price. We are proud of our track record of delivering stable and consistent dividends to our shareholders. In the second quarter of 2024, our adjusted net investment income was $6.7 million, or $0.31 per share, an increase from $5.5 million, or $0.25 per share, in the first quarter.

Ted Koenig: I am pleased to report that for the 17th consecutive quarter, our adjusted net investment income covered our $0.25 per share dividend.

Ted Koenig: MRCC delivered a total annualized dividend yield on our trading price of 14% using our August 6, 2024 closing share price. We are proud of our track record.

Theodore Koenig: We are proud of our track record, up delivering stable and consistent dividends to our shareholders. In the second quarter of 2024, our adjusted net investment income was $6.7 million, or 31 cents per share, and increased from $5.5 million, or 25 cents per share, in the first quarter. Our adjusted net investment income covered our 25 cents per share dividend by nearly 1.25 times. We reported NAV of $199.3 million or $9.20 per share as of June 30, 2024, compared with NAV of $201.5 million or $90.30 per share as of March 31, 2024. The slight decline in NAV was primarily the result of net unrealized losses attributable to certain portfolio companies, partially offset by net investment income in excess of the dividend paid during the quarter.

Ted Koenig: of delivering stable and consistent dividends to our shareholders.

Ted Koenig: in the second quarter of two thousand and twenty four are adjusted that investment income was six point seven million dollars or thirty one cents per share an increase from five point five million dollars or twenty five cents per share in the first quarter

Ted Koenig: Our adjusted net investment income covered our $0.25 per share dividend by nearly 1.25 times. We reported NAV of $199.3 million, or $9.20 per share, as of June 30, 2024, compared with NAV of $2.5 million. $201.5 billion, or $9.30 per share, as of March 31, 2024. The slight decline in NAV was primarily the result of net unrealized losses attributable to certain portfolio companies, partially offset by net investment income in excess of the dividend paid during the quarter.

Ted Koenig: Our adjusted net investment income covered our $0.25 per share dividend by nearly 1.25 times.

Ted Koenig: We reported NAV of $199.3 million, or $9.20 per share, as of June 30, 2024, compared with NAV of $2.2 billion.

Ted Koenig: two hundred one point five billion dollars

Speaker Change: or ninety dollars in thirty cents per share as at march thirty one two thousand and twenty and four

Ted Koenig: The slight decline in NAV was primarily the result of net unrealized losses attributable to certain portfolio companies partially offset by net investment income in excess of the dividend paid during the quarter.

Ted Koenig: MRCC's debt-to-equity leverage decreased from 1.6 times as of March 31, 2024, to 1.54 times at June 30, 2024, driven by several payoffs that occurred late in the quarter. Our focus remains primarily on managing and supporting our investment portfolio companies with add-on lending opportunities and maintaining a highly selective and disciplined approach when redeploying capital into attractive investment opportunities with new portfolio company relationships. MRCC is predominantly comprised of first lien senior secured investments in companies operating in sectors that are historically resistant to inflationary pressures and a volatile economic climate. In the face of persistent inflationary pressures and a volatile economic climate, our portfolio companies have continued to demonstrate healthy revenue and EBITDA growth.

Theodore Koenig: MRCC's debt to equity leverage decreased from 1.6 times as of March 31, 2024, to 1.54 times at June 30, 2024, driven by several payoffs that occurred late in the quarter. Our focus remains primarily on managing and supporting our investment portfolio companies with add-on lending opportunities and maintaining a highly selective and disciplined approach when redeploying capital into attractive investment opportunities with new portfolio company relationships. MRCC is predominantly comprised of first-lane senior secured investments in companies operating in sectors that are historically resistant to challenging macroeconomic environments. In the face of persistent inflationary pressures and a volatile economic climate, our portfolio companies have continued to demonstrate healthy revenue in EBITDAG growth.

Ted Koenig: MRCC's debt-to-equity leverage decreased from 1.6 times as of March 31, 2024, to 1.54 times at June 30, 2024, driven by several payoffs that occurred late in the quarter.

Ted Koenig: Our focus remains primarily on managing and supporting our investment portfolio companies with add-on lending opportunities and maintaining a highly selective and disciplined approach when redeploying capital into attractive investment opportunities with new portfolio company relationships.

Theodore Koenig: MRCC is predominantly comprised of first lien senior secured investments in companies operating in sectors that are historically resistant to challenging macroeconomic environments. In the face of persistent inflationary pressures and a volatile economic climate, our portfolio companies have continued to demonstrate healthy revenue and EBITDA growth. The resiliency of our portfolio is further reflected in the stability of our risk rating distribution. Furthermore, despite enduring elevated borrowing costs, MRCC's portfolio companies generally have maintained a sound interest coverage ratio.

Ted Koenig: MRCC is predominantly comprised of first lien, senior secured investments in companies operating in sectors that are historically resistant.

Ted Koenig: to challenging macroeconomic environments. In the face of persistent inflationary pressures and a volatile economic climate, our portfolio companies have continued to demonstrate healthy revenue and EBITDA growth.

Theodore Koenig: The resiliency of our portfolio is further reflected in the stability of our risk-reading distribution. Further, despite enduring elevated borrowing costs, MRCC's portfolio companies generally have maintained a sound interest coverage ratio. Thus, MRCC is well positioned to navigate a higher-for-longer interest rate environment should have persist. The challenges we have seen in the portfolio have been, for the most part, due to idiosyncratic factors and are not indicative of broader fundamental stress within the portfolio. We will continue to leverage our deep roster of investor professionals, prove an underwriting and portfolio management playbook and experience to work through and turn around underperform any investments.

Ted Koenig: The resiliency of our portfolio is further reflected in the stability of our risk rating distribution. Furthermore, despite enduring elevated borrowing costs, MRCC's portfolio companies generally have maintained a sound interest coverage ratio. Thus, MRCC is well positioned to navigate a higher-for-longer interest rate environment should it persist. We will continue to leverage our deep roster of investment professionals, proven underwriting and portfolio management playbook, and experience to work through and turn around underperforming investments.

Ted Koenig: The resiliency of our portfolio is further reflected in the stability of our risk rating distribution.

Ted Koenig: Further, despite enduring elevated borrowing costs, MRCC's portfolio companies generally have maintained a sound interest coverage ratio.

Theodore Koenig: Thus MRCC is well positioned to navigate a higher for longer interest rate environment should it persist. The challenges we have seen in the portfolio have been, for the most part, due to idiosyncratic factors that are not indicative of broader fundamental stress within the portfolio.

Ted Koenig: Thus, MRCC is well positioned to navigate a higher-for-longer interest rate environment should it persist.

Ted Koenig: The challenges we have seen in the portfolio have been, for the most part, due to idiosyncratic factors that are not indicative of broader fundamental stress within the portfolio.

Theodore Koenig: We will continue to leverage our deep roster of investment professionals, proven underwriting and portfolio management playbook, and experience to work through and turn around underperforming investments. We have a 20-year track record of navigating various market and economic environments and remain confident that we can continue to maximize outcomes and deliver value for our shareholders. I will now turn to our view on the market environment. In the second quarter of 2024, we saw a rise in middle market loan volumes, driven by increased private equity sponsor activity. According to LSEG LPC's second quarter 2024 middle market analysis, middle market loan volumes increased 27% year over year.

Ted Koenig: We will continue to leverage our deep roster of investment professionals, proven underwriting and portfolio management playbook, and experience to work through and turn around underperforming investments.

Ted Koenig: We maintain a 20-year track record of navigating various market and economic environments and remain confident that we can continue to maximize outcomes and deliver value for our shareholders. In the second quarter of 2024, we saw a rise in middle market loan volumes driven by increased private equity sponsor activity. According to LSEG LPC's second quarter 2024 middle market analysis, middle market loan volumes increased 27% year over year. Middle market direct lending M&A volumes were up 71% compared to the prior year, and sponsored direct lending volumes were up over 90% from the prior year.

Theodore Koenig: I will now turn our view on the market environment. In the second quarter of 2024, we saw a rise in middle-market loan values, driven by increased private equity spots or activity. According to LSEG, LPC's second quarter 2024 middle-market analysis, middle-market loan values increased 27% year-over-year. Middle-market direct lending M&A values were about 71% compared to the prior year, and sponsor direct lending values were up over 90% from the prior year. Sponsored demand for capital support the growth of their portfolio companies and position those companies for exits has tightened the need for direct lending solutions that provide flexibility and low execution risk.

Theodore Koenig: Middle market direct lending M&A volumes were up 71% compared to the prior year, and sponsored direct lending volumes were up over 90% from the prior year. Sponsor demand for capital to support the growth of their portfolio companies and position those companies for exits has heightened the need for direct lending solutions that provide flexibility and low execution risk. While we did see a pickup in syndicated loan activity, direct lenders still accounted for 4.6 times the volume of syndicated and bank deals in the quarter.

Speaker Change: I will now turn our view on the market environment.

Ted Koenig: In the second quarter of 2024, we saw a rise in middle market loan values driven by increased private equity sponsor activity.

Ted Koenig: According to LSEG LPC second quarter 2024 middle market analysis, middle market loan volumes increased 27% year-over-year.

Ted Koenig: Middle Market Direct Lending M&A volumes were up 71% compared to prior year, and Sponsored Direct Lending volumes were up over 90% from the prior year.

Ted Koenig: Sponsor demand for capital to support the growth of their portfolio companies and position those companies for exits has heightened the need for direct lending solutions that provide flexibility and low execution risk. The intensifying competition in the credit markets that we noted in our call last quarter has carried on throughout the second quarter. In the face of a market where overall spreads have decreased and leverage has increased, we continue to focus on supporting our incumbent portfolio companies.

Ted Koenig: Sponsored demand for capital to support the growth of their portfolio companies and position those companies for exits has heightened the need for direct lending solutions that provide flexibility and low execution risk.

Theodore Koenig: While we did see a pickup in syndicated low activity, direct lenders still accounted for 4.6 times the volume of syndicated and bank deals in the quarter. Accelerated sponsor activity has presented us with compelling opportunities for encompassing lending to our existing portfolio companies, or historically we have been able to generate some of our most attractive risk-adjusted returns. The intensifying competition in the credit markets that we noted in our call last quarter has carried on throughout the second quarter. This has resulted in the tightening of spreads across the middle market, especially with a pickup in syndicated loan and repricing activity happening particularly in the upper middle market.

Ted Koenig: While we did see a pickup in syndicated loan activity, direct lenders still accounted for 4.6 times the volume of syndicated and bank deals in the quarter.

Theodore Koenig: The Accelerated Sponsor Activity has presented us with compelling opportunities for incumbency lending to our existing portfolio companies, where historically we have been able to generate some of our most attractive risk-adjusted returns. The intensifying competition in the credit markets that we noted in our call last quarter has carried on throughout the second quarter. This has resulted in the tightening of spreads across the middle market, especially with the pickup in syndicated loan and repricing activity happening, particularly in the upper middle market.

Ted Koenig: The Accelerated Sponsor Activity has presented us with compelling opportunities for incumbency lending to our existing portfolio companies where historically we have been able to generate some of our most attractive risk-adjusted returns.

Ted Koenig: The intensifying competition in the credit markets that we noted in our call last quarter has carried on throughout the second quarter.

Ted Koenig: This has resulted in the tightening of spreads across the middle market, especially with the pickup in syndicated loan and repricing activity happening particularly in the upper middle market.

Theodore Koenig: In currently, we saw leverage levels slightly increase across the middle market transactions in the second quarter. Monroe focuses on providing capital solutions to the lower middle market, which is experienced less spread of compression and leverage expansion than that of the upper middle market. As a result, MRCC's effective yield has remained stable and an attractive rate of nearly 12%, unheavily weighted firstly in senior secure portfolio. In the face of a market where overall spreads have decreased and leverage has increased, we continue to focus on supporting our incumbent portfolio companies. Our ability to consistently generate deal flow through existing portfolio is a lot easier to retain higher quality assets while maintaining a disciplined approach with our originations, underwriting, and deal execution.

Theodore Koenig: Concurrently, we saw leverage levels slightly increase across the middle market transactions in the second quarter. Monroe focuses on providing capital solutions to the lower middle market, which has experienced less spread compression and leverage expansion than that of the upper middle market.

Ted Koenig: Concurrently, we saw leverage levels slightly increase across the middle market transactions in the second quarter.

Ted Koenig: Monroe focuses on providing capital solutions to the lower middle market, which has experienced less spread compression and leverage expansion than that of the upper middle market.

Theodore Koenig: As a result, MRCC's effective yield has remained stable at an attractive rate of nearly 12% on its heavily weighted first-line senior secured portfolio. In the face of a market where overall spreads have decreased and leverage has increased, we continue to focus on supporting our incumbent portfolio companies. Our ability to consistently generate deal flow through our existing portfolio has allowed us to retain higher quality assets while maintaining a disciplined approach to our originations, underwriting, and deal execution.

Ted Koenig: As a result, MRCC's effective yield has remained stable at an attractive rate of nearly 12% on heavily weighted first-line senior secured portfolio.

Ted Koenig: in the face of the market where overall strereads have decreased and leverage has increased we continue to focus on supporting our incumbent portfolio companies

Ted Koenig: Our ability to consistently generate deal flow through our existing portfolio has allowed us to retain higher quality assets while maintaining a disciplined approach with our originations, underwriting, and deal execution. Though interest rate cuts by the Fed have become increasingly likely, we remain focused on our loan-to-value attachment points, which have remained stable throughout the first half of 2024. In this direct lending environment, we will execute on opportunities that meet our rigorous underwriting standards and then offer us the necessary structures and protections that align with our portfolio management playbook, supported by a deep team consisting of over 250 employees, including 110 dedicated investment professionals, as of July 1, 2024.

Theodore Koenig: Though interest rate cuts by the Fed have become increasingly likely, we remain focused on our loan-to-value attachment points, which have remained stable throughout the first half of 2024. This approach is consistent with other middle market direct lenders who are being increasingly cautious with overburdening portfolio companies with debt service obligations. In this direct lending environment, we will execute on opportunities that meet our rigorous underwriting standards and then offer us the necessary structures and protections that align with our portfolio management playbook.

Theodore Koenig: Though interest rate cuts by the Fed have become increasingly likely, we remain focused on our loan to value attachment points, which have remained stable throughout the first half of 2024. This approach is consistent with other middle market directors who are being increasingly cautious with overburdening portfolio companies with debt service obligations. In this direct lending environment, we will execute an opportunity that meets our rigorous underwriting standards and then offer us the necessary structures and protections that align with our portfolio management playbook. MRCC enjoys a strong strategic advantage in being affiliated with the best in class middle market private credit manager with approximately 20 billion dollars in assets and management supported by a team team consisting of over 250 employees, including 110 dedicated investment professionals as of July 1, 2024.

Ted Koenig: Though interest rate cuts by the Fed have become increasingly likely, we remain focused on our loan-to-value attachment points, which have remained stable throughout the first half of 2024.

Ted Koenig: This approach is consistent with other middle market direct lenders who are being increasingly cautious with overburdening portfolio companies with debt service obligations.

Ted Koenig: In this direct lending environment, we will execute on opportunities that meet our rigorous underwriting standards and that offer us the necessary structures and protections that align with our portfolio management playbook.

Theodore Koenig: MRCC enjoys a strong strategic advantage in being affiliated with a best-in-class middle-market private credit manager with approximately $20 billion in assets under management, supported by a deep team consisting of over 250 employees, including 110 dedicated investment professionals, as of July 1, 2024. We continue to focus on generating adjusted net investment income that meets or exceeds our dividend and achieving positive long-term NAV performance. I am now going to turn the call over to Mick, who is going to walk us through our financial results in greater detail.

Speaker Change: mr c c enjoys a strong strategic advantage ' being affiliated with the best -class middlemarket private credit manager with approximately twenty billion dollars in assets and our management

Ted Koenig: supported by a deep team consisting of over 250 employees including 110 dedicated investment professionals as of July 1, 2024.

Theodore Koenig: We continue to focus on generating adjusted net investment income that meets receipts are dividend and achieve positive long-term benefit performance.

Speaker Change: we continue to focus on generating adjusted net investment income that i meets or exceeds are dividend and achieving positive long term any v performance

Lewis Solimene: And now going to turn the call over to Mick, who was going to walk us through our financial results in greater detail. Thank you, Ted. At quarter end, our investment portfolio totaled $485.8 million, a $15.1 million decrease from $500.9 million at the end of last quarter. Our investment portfolio consisted of debt and equity investments in 94 portfolio companies compared to 98 portfolio companies at the prior quarter end. During the second quarter, we had revolver and delayed drop fundings and add-ons to existing portfolio companies with 21.7 million dollars. We received four full payoffs aggregating to $13.5 million and incurred partial and normal force pay-downs, totaling 22.4 million dollars.

Ted Koenig: And I'm now going to turn the call over to Mick, who is going to walk us through our financial results in greater detail.

Mick Solimene: At quarter end, our investment portfolio totaled $485.8 million, a $15.1 million decrease from $500.9 million at the end of the previous quarter. Our investment portfolio consisted of debt and equity investments in 94 portfolio companies compared to 98 portfolio companies at the prior quarter end.

Tess: Thank you, Tess.

Ted Koenig: At quarter end, our investment portfolio totaled $485.8 million, a $15.1 million decrease from $500.9 million at the end of last quarter.

Ted Koenig: Our investment portfolio consisted of debt and equity investments in 94 portfolio companies compared to 98 portfolio companies at the prior quarter end. During the second quarter, we had Revolver and Delay draw fundings and add-ons to existing portfolio companies of $21.7 million. We received four full payoffs aggregating to $13.5 million and incurred partial and normal force paydowns totaling $22.4 million as of June 30th, 2024. We have total borrowings of $307.8 million, including $177.8 million outstanding under our floating rate revolving credit facility and $130 million of our 4.75% fixed rate 2026 notes.

Ted Koenig: Our investment portfolio consisted of debt and equity investments in 94 portfolio companies, compared to 98 portfolio companies at the prior quarter end.

Mick Solimene: During the second quarter, we had Revolver and Delay draw fundings and add-ons to existing portfolio companies of $21.7 million. We received four full payoffs aggregating to $13.5 million and incurred partial and normal force paydowns totaling $22.4 million. As Ted noted earlier, these full payoffs occurred later in the second quarter, with two of those payoffs attributable to portfolio company sales and two of those payoffs attributable to refinancing. At June 30th, 2024, we had total borrowings of $307.8 million, including $177.8 million outstanding under our floating rate revolving credit facility and $130 million of our 4.75% fixed rate 2026 notes.

Ted Koenig: during the second quarter we had revolver in delay drop fundings and addons to existing portfolio companies for twenty one point seven million dollars

Ted Koenig: We received four full payoffs, aggregating to $13.5 million, and incurred partial and normal force paydowns totaling $22.4 million.

Lewis Solimene: As Ted noted earlier, these full payoffs occurred later in the second quarter, with two of those payoffs attributable to poor quality of company sales and two of those payoffs attributable to refinance. At June 30, 2024, we have total borrowings of $37.8 million, including $177.8 million under our floating rate revolving credit facility and $130 million of our 4.75% fixed rate, 2026 nodes.

Ted Koenig: As Ted noted earlier, these full payoffs occurred later in the second quarter, with two of those payoffs attributable to portfolio company sales and two of those payoffs attributable to refinancings.

Speaker Change: at june thirtieth two thousand and twenty four

Ted Koenig: We had total borrowings of $307.8 million, including $177.8 million outstanding under our floating rate revolving credit facility and $130 million of our 4.75% fixed rate 2026 notes.

Lewis Solimene: and Lewis. Total borrowings outstanding decreased by $13.9 million during the quarter as we utilize proceeds from various deal payoffs to pay down the revolving credit facility. At quarter end, the revolving credit facility had the $77.2 million of availability subject to borrowing-based capacity. Now, turning to our financial results, adjusted net investment income, a non-GAAP measure, was $6.7 million or $31 per share this quarter, compared to $5.5 million or $25 per share in the prior quarter. The increase in adjusted net investment income during the quarter was primarily driven by a $1 million Part 1 incentive fee limitation, with the balance of the increase being a result of higher average invested assets over the period.

Mick Solimene: Total borrowings outstanding decreased by $13.9 million during the quarter as we utilized proceeds from various deal payoffs to pay down the revolving credit facility. At quarter end, the revolving credit facility had $77.2 million of availability, subject to borrowing-based capacity.

Ted Koenig: Total borrowings outstanding decreased by $13.9 million during the quarter as we utilized proceeds from various deal payoffs to pay down the revolving credit facility.

Ted Koenig: At quarter end, the revolving credit facility had $77.2 million of availability, subject to borrowing-based capacity.

Ted Koenig: Now turning to our financial results. The increase in adjusted net investment income during the quarter was primarily driven by a $1 million Part 1 incentive fee limitation, with the balance of the increase being a result of higher average invested assets over the period. As of June 30, 2024, our NAV was $199.3 million, which decreased slightly from $201.5 million as of March 31, 2024. Our corresponding NAV per share decreased by $0.10 from $9.30 per share to $9.20 per share.

Mick Solimene: Now turning to our financial results. Adjusted net investment income, a non-GAAP measure, was $6.7 million or $0.31 per share this quarter compared to $5.5 million or $0.25 per share in the prior quarter. The increase in adjusted net investment income during the quarter was primarily driven by a $1 million Part 1 incentive fee limitation, with the balance of the increase being a result of higher average invested assets over the period. Excluding the shareholder-friendly incentive fee limitation in the quarter, pro forma adjusted net investment income would have been $0.26 per share, still in excess of our $0.25 per share dividend.

Ted Koenig: Now, turning to our financial results.

Ted Koenig: Adjusted net investment income, a non-GAAP measure, was $6.7 million, or $0.31 per share this quarter, compared to $5.5 million, or $0.25 per share in the prior quarter.

Ted Koenig: The increase in adjusted net investment income during the quarter was primarily driven by a $1 million Part 1 incentive fee limitation, with the balance of the increase being a result of higher average invested assets over the period.

Lewis Solimene: Excluding the shareholder-friendly incentive fee limitation in the quarter, pro-forma adjusted net investment income would have been $0.26 per share, still in excess of our 26-5%, 25-cent per share dividend. As a result of the total return requirement within MRCC's incentive decalculation, we expect limitations on our incentive fees to persist at varying levels over the next three quarters. Our effective yield on the portfolio's debt to preferred equity investments remained stable during the quarter at 11.9%. As of June 30th, 2024, our NAV was $199.3 million, which decreased slightly from $2001.5 million as of March 31st, 2024. Our core is funding NAV per share decreased by 10 cents from $9.30 per share to $9.20 per share.

Ted Koenig: excluding the shareholder-friendly incentive fee limitation in the quarter, pro forma adjusted net investment income would have been 26 cents per share, still in excess of our 25 cent per share dividend.

Mick Solimene: As a result of the total return requirement within MRCC's incentive fee calculation, we expect limitations on our incentive fees to persist at varying levels over the next three quarters. However, our effective yield on the portfolio's debt and preferred equity investments remained stable during the quarter at 11.9 percent.

Ted Koenig: As a result of the total return requirement within MRCC's incentive fee calculation, we expect limitations on our incentive fees to persist at varying levels over the next three quarters.

Ted Koenig: Our effective yield on the portfolio's debt and preferred equity investments remained stable during the quarter at 11.9%.

Mick Solimene: As of June 30, 2024, our NAV was $199.3 million, which decreased slightly from $201.5 million as of March 31, 2024. Our corresponding NAV per share decreased by $0.10 from $9.30 per share to $9.20 per share. The decline in NAV this quarter was primarily the result of net unrealized losses attributable to certain portfolio companies that have been mostly impacted by idiosyncratic factors. These mark-to-market unrealized losses were partially offset by net investment income in excess of the dividend paid during the quarter.

Ted Koenig: as of june thirtieth two thousand and twenty four our n a v was one hundred ninety nine point three million dollars which decreased slightly from two hundred one point five million dollars as of march thirty first two thousand and twenty four

Ted Koenig: Our corresponding NAV per share decreased by $0.10 from $9.30 per share to $9.20 per share.

Lewis Solimene: The decline in NAV this quarter was primarily the result of net unrealized losses, attributable to certain portfolio companies that have been mostly impacted by idiosyncratic factors. These market market unrealized losses were partially offset by net investment income in excess of the dividend paid during the quarter.

Ted Koenig: The decline in NAV, NAV this quarter, was primarily the result of net unrealized losses attributable to certain portfolio companies that have been mostly impacted by idiosyncratic factors.

Operator: 2024 earnings conference call. Before we begin, I'd like to take a moment to remind our listeners that remarks made during this call today may contain certain forward looking statements, including statements regarding our goals, strategies, belief, future potential, operating results, and cash flows. Although we believe these statements are reasonable based on management estimates, assumptions, and projections as of today, August 8th, and 2024, these statements are not guarantees of future performance.

Operator: Further, time-sensitive information may no longer be accurate as at the time of any replay or listening. Actual results may differ materially as a result of risks, uncertainty, or other factors, including but not limited to the risk factors described from time to time, and the company's filings for the SEC, Monroe Capital takes no obligation to date or revise these forward looking statements.

Ted Koenig: these marked market unrealized losses were partially offset by net investment income in excess of the dividend k during the quarter

Alex Parmacek: I will now turn the call over to Alex, who will provide more details on our second quarter operating performance. Thank you, Beck. Looking for a statement of operations, investment income total $15.6 million during the second quarter of 2024. A slight increase from $15.2 million in the first quarter of 2024. The $400,000 increase in investment income was primarily the result of higher average assets during the quarter, as well as an increase in other income as part of a portfolio company realization during the quarter.

Ted Koenig: I will now turn the call over to Alex, who will provide more details on our second quarter operating performance.

Vic: Thank you, Vic. Looking to our statement of operations, investment income totaled $15.6 million during the second quarter of 2024, a slight increase from $15.2 million in the first quarter of 2020. The $400,000 increase in investment income was primarily the result of higher averaged assets during the quarter, as well as an increase in other income as part of a portfolio company realization during the quarter. In the second quarter, we placed one new investment on non-accrual, with a fair market value of $1.6 million. As of June 30, 2024, we had eight investments on non-accrual status, representing 1.9% of the portfolio at fair market value, which is consistent with that of March 31, 2022. Now, shifting over to the expense side.

Mick Solimene: Thank you, Beck. Looking to our statement of operations, investment income totaled $15.6 million during the second quarter of 2024, a slight increase from $15.2 million in the first quarter of 2020. The $400,000 increase in investment income was primarily the result of higher averaged assets during the quarter, as well as an increase in other income as part of a portfolio company realization during the quarter. In the second quarter, we placed one new investment on non-accrual with a fair market value of $1.6 million.

Beck: Thank you, Beck. Looking to our statement of operations, investment income totaled $15.6 million during the second quarter of 2024, a slight increase from $15.2 million in the first quarter of 2024.

Vic: The $400,000 increase in investment income was primarily the result of higher averaged assets during the quarter, as well as an increase in other income as part of a portfolio company realization during the quarter.

Alex Parmacek: In the second quarter, we placed one new investment on a non-approval with a fair market value of $1.6 million. As of June 30, 2024, we had eight investments on non-approval status, representing 1.9% of the portfolio at fair market value, which is consistent with that of March 31, 2024.

Vic: In the second quarter, we placed one new investment on non-accrual, with a fair market value of $1.6 million. As of June 30, 2024, we had eight investments on non-accrual status, representing 1.9% of the portfolio at fair market value.

Mick Solimene: As of June 30, 2024, we had eight investments on non-accrual status, representing 1.9 percent of the portfolio at fair market value, which is consistent with that of March 31, 2020. Now, shifting over to the expense side. Total expenses for the second quarter of 2024 were $9.1 billion, compared to $9.7 billion of total expenses for the first quarter of 2024. Including the impact of the incentive fee limitation of $1 million, total expenses increased by $400,000 primarily due to an increase in interest and other debt financing expenses, driven by increases in our average debt outstanding and in excise taxes resulting from net investment income exceeding our dividend. Our net loss for the quarter was $3.3 million, compared to a net loss of $2.3 million for the prior quarter.

Theodore Koenig: I'll now turn the conference call over to pay a candid chief executive officer of Monroe Capital Corporation. Sir, please go ahead.

Alex Parmacek: Now shifting over to the expense side. Total expenses for the second quarter of 2024 were $9.1 million compared to $9.7 million of total expenses for the first quarter of 2024. excluding the impact of the incentive to the limitation of $1 million total expenses increased by $400,000 primarily due to an increase in interest and other debt financing expenses.

Vic: which is consistent with that of March 31st, 2024.

Theodore Koenig: Good morning and thank you to everyone who has joined our call today. Welcome to our second quarter, 2020 for earnings call. I am here with Mick Solimene, our CFO and Chief Investment Officer, and Alex Parmacek, our Deputy Portfolio Manager. Last evening, we issued our second quarter, 2020 for earnings press release and filed our 10Q with the SEC. On today's call, I'll begin by addressing our second quarter results and then share thoughts and insights into the macroeconomic environment and the current market conditions.

Vic: Now shifting over to the expense side, total expenses for the second quarter of 2024 were $9.1 billion, compared to $9.7 million of total expenses for the first quarter of 2024.

Vic: Excluding the impact of the incentive fee limitation of $1 million, total expenses increased by $400,000 primarily due to an increase in interest and other debt financing expenses, driven by increases in our average debt outstanding and in excise taxes resulting from net investment income exceeding our dividend. Our net loss for the quarter was $3.3 million, compared to a net loss of $2.3 million for the prior quarter. These advertising losses for the quarter ended June 30, 2024, were primarily attributable to unrealized mark-to-market losses on certain portfolio companies that have underlying credit performance concerns. These mark-to-market unrealized losses were partially offset by a net realized gain associated with the sale of an equity position in one of our portfolio companies.

Vic: Excluding the impact of the incentive fee limitation of $1 million, total expenses increased by $400,000, primarily due to an increase in interest and other debt financing expenses

Alex Parmacek: If you're going to increase it in our average, yet outstanding, and excite taxes resulting from that investment income exceeding our dividend. Our net loss for the quarter was $3.3 million compared to that loss of $2.3 million for the prior quarter. We've had losses for the quarter, and in June 30th, 2024, were primarily attributable to unrealized market losses and certain portfolio companies that have underlying credit performance concerns. These market market unrealized losses were partially offset by a net realized gain associated with the sale of an equity position one of our portfolio companies. The average mark on the portfolio decreased slightly by 0.9% from 95.3% across at March 31st, 2024, to 94.4% across at June 30th, 2024.

Vic: driven by increases in our average outstanding and in excise taxes resulting from net investment income exceeding our dividend.

Theodore Koenig: I am pleased to report that for the 17th consecutive quarter, our adjusted net investment income covered our 25 cents per share dividend. MRCC delivered a total annualized dividend yield on our trading price of 14% using our August 6, 2024 closing share price. We are proud of our track record, up delivering stable and consistent dividends to our shareholders. In the second quarter of 2024, our adjusted net investment income was $6.7 million or 31 cents per share and increased from $5.5 million or 25 cents per share in the first quarter.

Vic: Our net loss for the quarter was $3.3 million, compared to a net loss of $2.3 million for the prior quarter.

Mick Solimene: These advertising losses for the quarter ended June 30th, 2024 were primarily attributable to unrealized mark-to-market losses on certain portfolio companies that have underlying credit performance concerns. These mark-to-market unrealized losses were partially offset by a net realized gain associated with the sale of an equity position in one of our portfolio companies. The average mark on the portfolio decreased slightly by 0.9%, from 95.3% across at March 31st, 2024, to 94.4% across at June 30th, 2024.

Vic: These net losses for the quarter ended June 30, 2024, were primarily attributable to unrealized mark-to-market losses on certain portfolio companies that have underlying credit performance concerns.

Vic: these marks to market un realized losses were partially offset by a net realized gain associated with the slle of an equity position one of our portfolio companies

Alex Parmacek: The average mark on the portfolio decreased slightly by 0.9% from 95.3% across at March 31st, 2024 to 94.4% across at June 30th, 2024. Turning now to SLF, as of June 30, 2024, the SLF had investments in 39 different borrowers, aggregating to $109.7 million in fair value. The SLS underlying investments are loans to middle market borrowers that are generally larger and more sensitive to market spread movements than the rest of MRCC's portfolio, which is focused predominantly on lower middle market companies.

Alex Parmacek: The average mark on the portfolio decreased slightly by 0.9%, from 95.3% across at March 31, 2024, to 94.4% across at June 30, 2024.

Alex Parmacek: Turning now to SLS, as of June 30th, 2024, the SLS had investments in 39 different borrowers aggregating to $109.7 million of fair value. The SLS underlying investments are loans to middle market borrowers that are generally larger and more sensitive to market spread movements than the rest of MRCC's portfolio, which is focused predominantly at lower middle market companies. In the quarter, the average mark on the SLS portfolio decreased modestly by approximately 60 basis points from 88.9% of amortized costs as of March 31st, 2024, to 88.3% of amortized costs as of June 30th, 2024. Consisting with the prior quarter, MRCC received income distributions from SLS totaling $900,000.

Mick Solimene: Turning now to SLF, as of June 30, 2024, the SLF had investments in 39 different borrowers, aggregating to $109.7 million in fair value. The SLS underlying investments are loans to middle market borrowers that are generally larger and more sensitive to market spread movements than the rest of MRCC's portfolio, which is focused predominantly on lower middle market companies. In the quarter, the average mark on the SLOC portfolio decreased modestly by approximately 60 basis points, from 88.9% of amortized costs as of March 31, 2024, to 88.3% of amortized costs as of June 30, 2021

Theodore Koenig: Our adjusted net investment income covered our 25 cents per share dividend by nearly 1.25 times. We reported NAV of $199.3 million or $9.20 per share as of June 30, 2024 compared with NAV of $201.5 million or $90.30 per share as of March 31, 2024. The slight decline in NAV was primarily the result of net unrealized losses attributable to certain portfolio companies partially offset by net investment income in excess of the dividend paid during the quarter.

Alex Parmacek: Turning now to SLF. As of June 30, 2024, the SLF had investments in 39 different borrowers, aggregating to $109.7 million of fair value.

Alex Parmacek: The SLS underlying investments are loans to middle market borrowers that are generally larger and more sensitive to market spread movements than the rest of MRCC's portfolio, which is focused predominantly at lower middle market companies.

Alex Parmacek: In the quarter, the average mark on the SLOC portfolio decreased modestly by approximately 60 basis points, from 88.9% of amortized costs as of March 31, 2024, to 88.3% of amortized costs as of June 30, 2021. As of June 30, 2024, SLF had borrowings under its non-reforced credit facility of $50.8 million and $59.2 million of available capacity, subject to borrowing-based availability. At this point, I will turn the call back to the tag person's closing remarks before we open up the line for some questions. Thank you, Alex.

Mick Solimene: Consistent with the prior quarter, MRCC received income distributions from SLF totaling $900,000. As of June 30, 2024, SLF had borrowings under its non-reforced credit facility of $50.8 million and $59.2 million of available capacity, subject to borrowing-based availability. At this point, I will turn the call back to time for some closing remarks before we open up the line for some questions. Thank you, Alex.

Speaker Change: Consistent with the prior quarter, MRCC received income distributions from SLF totaling $900,000.

Alex Parmacek: As of June 30th, 2024, SLS had borrowings under its non-reinforced credit facility of $50.8 million and $59.2 million of available capacity, subject to borrowing base availability.

Theodore Koenig: MRCC's debt to equity leverage decreased from 1.6 times as of March 31, 2024 to 1.54 times at June 30, 2024 driven by several payoffs that occurred late in the quarter. Our focus remains primarily on managing and supporting our investment portfolio companies with add-on lending opportunities and maintaining a highly selective and disciplined approach when redeploying capital into attractive investment opportunities with new portfolio company relationships. MRCC is predominantly comprised of first-lane senior secured investments in companies operating in sectors that are historically resistant to challenging macroeconomic environments.

Alex Parmacek: As of June 30, 2024, SLF had borrowings under its non-reforced credit facility of $50.8 million and $59.2 million of available capacity, subject to borrowing-based availability.

Theodore Koenig: At this point, I will certainly call back to type person closing remarks before we open up the line for some questions. Thank you, Alex. In summary, we remain confident in the portfolio's ability to navigate an environment where there is an uncertain macroeconomic backdrop and elevated interest rates. Our focus continues to be on portfolio management, where we can leverage our deep and experienced team of investment professionals to execute our portfolio management playbook and maximize recoveries for our challenging investments. In today's more competitive environment, we will lean on the scale of our originations platform and opportunities to support our incumbent portfolio through incremental investments.

Alex Parmacek: At this point, I will turn the call back to Ted for some closing remarks before we open up the line for some questions.

Ted Koenig: Thank you, Alex. In summary, we remain confident in the portfolio's ability to navigate an environment where there is an uncertain macroeconomic backdrop and elevated interest rates. Our focus continues to be on portfolio management, where we can leverage our deep and experienced team of investment professionals to execute our portfolio management playbook and maximize recoveries for our challenging investments. In today's more competitive environment, we will lean on the scale of our Originations Platform and opportunities to support our incumbent portfolio through incremental investments.

Theodore Koenig: Thank you, Alex. In summary, we remain confident in the portfolio's ability to navigate an environment where there is an uncertain macroeconomic backdrop and elevated interest rates. Our focus continues to be on portfolio management, where we can leverage our deep and experienced team of investment professionals to execute our portfolio management playbook and maximize recoveries for our challenging investments. In today's more competitive environment, we will lean on the scale of our Originations Platform and opportunities to support our incumbent portfolio through incremental investments.

Ted Koenig: Thank you, Alex. In summary, we remain confident in the portfolio's ability to navigate an environment where there is uncertain macroeconomic backdrop and elevated interest rates.

Ted Koenig: Our focus continues to be on portfolio management, where we can leverage our deep and experienced team of investment professionals to execute our portfolio management playbook and maximize recoveries for our challenging investments.

Ted Koenig: In today's more competitive environment, we will lean on

Theodore Koenig: In the face of persistent inflationary pressures and a volatile economic climate, our portfolio companies have continued to demonstrate healthy revenue in EBITDAG growth. The resiliency of our portfolio is further reflected in the stability of our risk-reading distribution. Further, despite enduring elevated borrowing costs, MRCC's portfolio companies generally have maintained a sound interest coverage ratio. Thus, MRCC is well positioned to navigate a higher-for-longer interest rate environment should have persist. The challenges we have seen in the portfolio have been, for the most part, due to idiosyncratic factors and are not indicative of broader fundamental stress within the portfolio. We will continue to leverage our deep roster of investor professionals, prove an underwriting and portfolio management playbook and experience to work through and turn around underperform any investments.

Ted Koenig: The scale of our Originations Platform and opportunities to support our incumbent portfolio through incremental investments.

Ted Koenig: MRCC continues to offer stable and consistent dividends to our shareholders, as this quarter marked the 17th consecutive quarter where our adjusted net investment income has met or exceeded our 25 cents per share dividend yield. We believe that our predominantly first-lane portfolio, which carries an average effective yield of nearly 12%, positions us well to continue delivering an attractive risk-adjusted return to our investors, as highlighted by our current 14% dividend yield based on our August 6, 2024 closing share price.

Theodore Koenig: MRCC continues to offer stable and consistent dividends to our shareholders, as this quarter marked the 17th consecutive quarter where our adjusted net investment income has met or exceeded our 25 cents per share dividend yield. We believe that our predominantly first-lane portfolio, which carries an average effective yield of nearly 12%, positions us well to continue delivering an attractive risk-adjusted return to our investors, as highlighted by our current 14% dividend yield based on our August 6, 2024 closing share price.

Theodore Koenig: MRCC continues to offer stable and consistent dividends to our shareholders, as this quarter marked the 17th consecutive quarter where adjusted net investment income has met or exceeded our 25% per share of dividend yield. We believe that our predominantly first-lane portfolio, which carries an average effect of yield of nearly 12%, positions as well to continue delivering an attractive risk-adjusted return to our investors, as highlighted by our current 14% dividend yield based on our August 6, 2024 closing share price. We believe that Monroe Capital Corporation, which is affiliated with an award-winning best-in-class external private credit manager with nearly $20 billion in assets under management, continues to provide a very attractive investment opportunity to our shareholders and to other investors.

Ted Koenig: MRCC continues to offer stable and consistent dividends to our shareholders as this quarter marked the 17th consecutive quarter where our adjusted net investment income has met or exceeded our $0.25 per share dividend yield.

Ted Koenig: We believe that our predominantly first-lane portfolio, which carries an average effective yield of nearly 12 percent,

Ted Koenig: positions as well to continue delivering an attractive risk-adjusted return to our investors as highlighted by our current 14% dividend yield based on our August 6, 2024 closing share price.

Ted Koenig: We believe that Monroe Capital Corporation, which is affiliated with an award-winning, best-in-class external private credit manager with nearly $20 billion in assets under management, continues to provide a very attractive investment opportunity for our shareholders and to other investors. Thank you all for your time today, and this concludes our prepared remarks. I am going to ask the operator to open the call now for questions.

Theodore Koenig: We believe that Monroe Capital Corporation, which is affiliated with an award-winning, best-in-class external private credit manager with nearly $20 billion in assets under management, continues to provide a very attractive investment opportunity for our shareholders and to other investors. Thank you all for your time today, and this concludes our prepared remarks. I am going to ask the operator to open the call now for questions.

Ted Koenig: We believe that Monroe Capital Corporation, which is affiliated with an award-winning best-in-class external private credit manager with nearly $20 billion in assets under management, continues to provide a very attractive investment opportunity to our shareholders and to other investors.

Theodore Koenig: Thank you all for your time today, and this concludes our prepared remarks.

Theodore Koenig: We maintain a 20-year track record of navigating various market and economic environments and remain confident that we can continue to maximize outcomes and deliver value for our shareholders. I will now turn our view on the market environment. In the second quarter of 2024, we saw a rise in middle-market loan values, driven by increased private equity spots or activity. According to LSEG, LPC's second quarter, 2024, middle-market analysis, middle-market loan values increased 27% year-over-year.

Operator: I am going to ask the operator to open the call now for questions. Thank you. As a reminder, if you'd like to ask a question, please press star and the number one on your telephone keypad. And we will begin the question-and-answer session.

Ted Koenig: Thank you all for your time today, and this concludes our prepared remarks. I am going to ask the operator to open the call now for questions.

Operator: As a reminder, if you'd like to ask a question, please press star and the number 1 on your telephone keypad, and we will begin the question and answer session. The first question comes from the line of Christopher Nolan from Leidenberg-Baumann.

Christopher Nolan: Thank you.

Operator: As a reminder, if you'd like to ask a question, please press star and the number 1 on your telephone keypad.

Christopher Nolan: The first question comes from the line of Christopher Nolan from Leidenburg, Paul May. Line is open.

Operator: And we will begin the question and answer session.

Operator: The first question comes from the line of Christopher Nolan from Leidenberg-Bauman.

Christopher Nolan: Okay, guys.

Christopher Nolan: Hey guys, on the SLF, according to my calculations, the SLF fair value decreased by roughly 5 or 6 percent, quarter over quarter. Is this vehicle sort of in a runoff mode?

Christopher Nolan: On the SLS, of course, my calculations, the SLS fair value decrease by roughly five or six percent quarter over quarter is, is this vehicle for the runoff mode? So hi, Chris. Thank you. Thank you for that question. So if you look at the value or the fair market value, the vehicle quarter of reporter was actually flat. It was actually flat during the quarter in the context of a very modest decline in the average market of portfolio. We've been really conscious about bringing down our leverage in this portfolio while maintaining our $900,000 per quarter dividend to MRCC, with our joint venture partner receiving as well the $900,000 dividend.

Theodore Koenig: Middle-market direct lending M&A values were about 71% compared to prior year, and sponsor direct lending values were up over 90% from the prior year. Sponsored demand for capital support the growth of their portfolio companies and position those companies for exits has tightened the need for direct lending solutions that provide flexibility and low execution risk. While we did see a pickup in syndicated low activity, direct lenders still accounted for 4.6 times the volume of syndicated and bank deals in the quarter.

Speaker Change: Line is open.

Christopher Nolan: Okay guys, on the SLF, according to my calculations, the SLF fair value decreased by roughly 5 or 6 percent.

Speaker Change: Quarter over quarter is

Speaker Change: is this vehicle ser in a runoff mode

Mick Solimene: So, hi Chris. Thank you. Thank you for that question. So, if you look at the value, the fair market value of the vehicle, quarter over quarter, it was actually flat. It was actually flat during the quarter in the context of a very modest decline in the average market of the portfolio. We've been really conscious about bringing down our leverage in this portfolio while maintaining our $900,000 per quarter dividend to MRCC, with our joint venture partner receiving as well the $900,000 dividend.

Mick Solimene: So, hi Chris. Thank you. Thank you for that question. So, if you look at the value, the fair market value of the vehicle, quarter over quarter, it was actually flat, was actually flat during the quarter in the context of a very modest decline in the average market of the portfolio. We've been really conscious about bringing down our leverage in this portfolio while maintaining our $900,000 per quarter dividend to MRCC, with our joint venture partner receiving the $900,000 dividend as well.

Mick Solimene: So, hi Chris. Thank you for that question. So, if you look at the value, the fair market value of the vehicle, quarter over quarter, it was actually flat.

Mick Solimene: It was actually flat during the quarter in the context of a very modest decline in the average mark of the portfolio.

Mick Solimene: We've been really conscious about bringing down our leverage in this portfolio while maintaining our $900,000 per quarter dividend to MRCC, with our joint venture partner receiving as well a $900,000 dividend.

Theodore Koenig: Accelerated sponsor activity has presented us with compelling opportunities for encompassing lending to our existing portfolio companies, or historically we have been able to generate some of our most attractive risk-adjusted returns. The intensifying competition in the credit markets that we noted in our call last quarter has carried on throughout the second quarter. This has resulted in the tightening of spreads across the middle-market, especially with a pickup in syndicated loan and repricing activity happening particularly in the upper middle-market.

Christopher Nolan: We're evaluating how to be constructive in this market with this vehicle given where we are in the tight and rate environment, where we are in the economic cycle. But feel good about the dividend contribution that this vehicle provides. And also put this in perspective, SLS is about 6.8, 6.9 percent of the fair market value of MRCC portfolio, with the dividend representing a little under six percent of our investment income.

Mick Solimene: We're evaluating how to be constructive in this market with this vehicle given where we are in the tightened rate environment, where we are in the economic cycle, but feel good about the dividend contribution that this vehicle provides. And also, to put this in perspective, SLF is about 6.8, 6.9% of the fair market value of MRCC's portfolio, with the dividend representing a little under 6% of our investment income. So we're evaluating this, the right time to kind of reenter the market, and how to be constructive about the portfolio.

Mick Solimene: We're evaluating how to be constructive in this market with this vehicle given where we are in the tightened rate environment, where we are in the economic cycle.

Mick Solimene: But feel feel good about the dividend contribution that this vehicle provides

Mick Solimene: And also, to put this in perspective, SLF

Mick Solimene: is about six point eight six point nine percent

Lewis Solimene: [inaudible] and Lewis. Total borrowings outstanding decreased by $13.9 million during the quarter as we utilize proceeds from various deal payoffs to pay down the revolving credit facility. At quarter end, the revolving credit facility had the $77.2 million of availability subject to borrowing based capacity. Now, turning to our financial results, adjusted net investment income, a non-gab measure, was $6.7 million or $31 per share of this quarter, compared to $5.5 million or $25 per share in the prior quarter.

Mick Solimene: of the fair market value of MRC's portfolio.

Christopher Nolan: So we're evaluating this the right time to kind of re-enter the market and how to be constructive about the portfolio. Chris, in the quarter, we had a couple of payoffs, so that was the big driver there. As we noted, in the market, was pretty much stable. So we two payoffs, the size of the portfolio decreased from 41 to 39. The payoffs amounted to about 6.5 million of fair value. Yeah, okay.

Chris: with the dividend representing a little under 6% of our investment income. So we're evaluating this the right time to kind of re-enter the market and how to be constructive about the portfolio. Yeah, and Chris, in the quarter, you know, we had a couple payoffs. So that was the big driver there. As Mick noted, the market was pretty much stable. So we had, you know, two payoffs.

Mick Solimene: And Chris, in the quarter, we had a couple of payoffs. So that was the big driver there, as Mick noted, the market was pretty much stable. So we had two payoffs, the size of the portfolio decreased from 41 to 39, and the payoffs amounted to about $6.5 million.

Mick Solimene: Yeah. And Chris, in the quarter, we had a couple of payoffs. So that was the big driver there, as Mick noted, the market was pretty much stable. So we had two payoffs, the size of the portfolio decreased from 41 to 39, and the payoffs amounted to about $6.5 million. Yeah, okay. The issue is...

Speaker Change: The size of the portfolio decreased from 41 to 39. The payoffs amounted to about $6.5 million in fair value.

Mick Solimene: Yeah, okay. The issue is, for me, on the SLF, is the fact that the non-accruals seem to be a little high, particularly since it is for theoretically more stable companies. But effectively, MRCC has a subordinate position here because it's holding equity, not debt. So for the rest of your portfolio, you're doing a lot of first lien, senior secured, but for this, you're an equity

Christopher Nolan: The issue for me on the SLS is the fact that the non-accruals seem to be a little high, particularly since it is, you know, for theoretically more stable companies larger. But effectively, MRCC has a subordinate position here because it's holding equity, not the debt. So for the rest of your portfolio, you're doing a lot of first leans senior security, but for this, you're an equity holder.

Speaker Change: The issue is, for me on the SLF, is the non-accrual seems to be a little high.

Speaker Change: particularly since it is you know for theoretically more stable companies larger

Speaker Change: But effectively, MRCC has a subordinate position here because it's holding equity, not the debt. So for the rest of your portfolio, you're doing a lot first lien, senior secured, but for this, you're an equity holder.

Christopher Nolan: And I just want to make... Yeah, that's a really good point, Chris. This is a joint venture that we created where the SLS position in our portfolio represents the equity in this portfolio. So at the end of the day, the equity ultimately represents the net value to the roughly 39 portfolio companies in the business. It's not unlike a lot of the joint ventures that you see in other BDCs, but you are correct that this represents an equity interest in a portfolio of loans and a leverage vehicle.

Mick Solimene: Yeah, that's a really good point, Chris. I mean, this is a joint venture that we created where the SLF position in our portfolio represents the equity in this portfolio. So at the end of the day, the equity ultimately represents the net value of the roughly 39 portfolio companies in the business. It's not unlike a lot of the joint ventures that you're going to see that you see in other, you know, other BDCs. But you are correct that this represents an equity interest in a portfolio of loans in a levered vehicle.

Speaker Change: and I just want.

Speaker Change: yeah this is

Speaker Change: Yeah, that's a really good point, Chris. I mean, this is a joint venture that we created.

Mick Solimene: where the SLF position in our portfolio represents the equity.

Speaker Change: equity in this portfolio. So at the end of the day, the equity, you know, ultimately represents the net value.

Mick Solimene: to the roughly 39 portfolio companies in the business. It's not unlike a lot of the joint ventures that you see in other.

Mick Solimene: But you are correct that this represents an equity interest in a portfolio of loans in a levered vehicle.

Speaker Change: You know other BDCs but you are correct that this represents an equity interest in a portfolio of loans in a in a levered vehicle

Mick Solimene: Okay, switching over to Education Corp of America, and I know it's been here for a while, but I noticed going through the queue that it looked like the second lien debt position you guys have has a cost of $831,000 and a fair value of $2.3 million, while the preferred to the same company has a cost of $7.4 and a fair value of $0. So how can these, you know, junior secured loans be at a premium to cost and the preferred be? George.

Christopher Nolan: Okay. Switching over to Education Corporation of America, and I know it's been here for a while, but I notice going through the cube that it looked like the second lean debt position you guys have has a cost of 831,000 and a fair value of 2.3 million, while the junior secured loan being at a premium to cost, and the preferred being zilch. Yeah, so you are correct, Chris, that the fair value of the debt position is 2.3 million dollars, while a tip to an 800,000-ish dollar cost, and the value of the preferred on a fair market value basis is zero relative to a 7.4 million-dollar-ish cost basis.

Mick Solimene: Okay.

Speaker Change: Switching over to Education Corp of America, and I know it's been here for a while, but

Speaker Change: i notice going through the cue that

Speaker Change: It looks like the second lien debt position you guys have has a cost of $831,000 and a fair value of $2.3 million.

Mick Solimene: while the preferred to the same company has a cost of 7.4 and worth of zero.

Chris: So how can the junior secured loan be at a premium to cost and the preferred be zilch?

Mick Solimene: Yeah, so you are correct, Chris, that the fair value of the debt position is $2.3 million relative to an $800,000-ish cost, and the value of the preferred, on a fair market value basis, is zero relative to a $7.4 million-ish cost basis. This is really about the recovery waterfall on those two positions and the fact that, with respect to the debt position, we are getting fees and unaccrued interest above our costs.

Mick Solimene: Yeah, so you are correct, Chris, that the fair value of the

Speaker Change: The debt position is $2.3 million relative to an $800,000-ish dollar cost and the value of the preferred.

Speaker Change: On a fair market value basis is zero relative to a 7.4 million dollar ish

Christopher Nolan: This is really about the recovery waterfall on those two positions, and the fact that, with respect to the debt position, we are getting fees and unaccrued interest above our cost, and that's been ticking along here for, you know, a handful of quarters and years. So, as a result, that fair market value relative to the cost has eaked up relative to our recovery analysis, and with the preferred being at the bottom of the ECA waterfall, that's entitled to, you know, the last degree of proceeds over, you know, over and above, over and above, you know, principal repayment on the debt plus the accrued, but yet unpaid interest.

Speaker Change: cost cost basis this is really about the recovery waterfall on those two positions in the fact that with respect to the debt position we are getting a fees and un aaccrude interest above our cost

Mick Solimene: And that's been ticking along here for, you know, a handful of quarters and years. So as a result, that fair market value relative to the cost has eked up relative to our recovery now. And with the preferred being at the bottom of the ECA waterfall, it's entitled to, you know, the last degree of proceeds over, you know, over and above, over and above, you know, principal repayment on the debt plus the accrued but yet unpaid interest.

Speaker Change: and that's been ticking along here for you know a handful of quarters and years so as a result that that fair market value relative to the cost has has achaked up relative to our recovery analysis

Mick Solimene: And with the preferred being at the bottom of the ECA waterfall, it's entitled to the last degree of proceeds over and above principal repayment on the debt plus the accrued but yet unpaid interest.

Mick Solimene: And with the preferred being at the bottom of the ECA waterfall, that's entitled to the last degree of proceeds over and above principal repayment on the debt plus the accrued but yet unpaid interest.

Mick Solimene: Okay, thanks Mick. Final question: given

Christopher Nolan: Okay, thanks, Mike.

Christopher Nolan: Final question. Given the expectations for a limited, for the repeat of this fee waiver to one degree or another over the next couple quarters, can we say at this point that third quarter EPS will cover the dividend? Yes, the third quarter EPS, we believe, will cover the dividend.

Speaker Change: Okay, thanks, Mick. Final question. Given the...

Speaker Change: the expectations for a limited for the repeat of this fee wiveror to one degree another over thenext couple of quarters can we say this point the third quarter eps will cover the dividend

Christopher Nolan: That's it for me.

Christopher Nolan: Thanks, guys.

Speaker Change: Yes, third quarter EPS we believe will cover the dividend.

Speaker Change: That's it for me. Thanks, guys.

Operator: Thank you, Chris. Thank you.

Lewis Solimene: The increase in adjusted net investment income during the quarter was primarily driven by a $1 million part 1 incentive fee limitation, with the balance of the increase being a result of higher average invested assets over the period. Excluding the shareholder-friendly incentive fee limitation in the quarter, pro-forma adjusted net investment income would have been $0.26 per share, still in excess of our 26-5%, 25-cent per share dividend. As a result of the total return requirement within MRCC's incentive decalculation, we expect limitations on our incentive fees to persist at varying levels over the next three quarters.

Operator: Again, if you have a question or if you'd like to ask a question, please press star one on your telephone keypad.

Mick Solimene: 's crazy

Speaker Change: Yep, thank you. Again, if you have a question or if you'd like to ask a question, please press star 1 on your telephone keypad.

Robert Dodd: Our next question comes from the line of Robert Dodd from Raymond James. Hi guys, hi guys. I'm focusing on to your point to prepare marks. I mean, focus on maximizing recovery. You still got like what, four and a half percent of the portfolio at cost is on a call. What can you give us an update on there in terms of how far are you along your own various work at Parenthesis season. Do you think there's a possibility that some of those assets come back onto a clue or in this situation where it's worked out, recover capital, reinvest the capital and any income recovery from that capital, which is 1.9% of failure value.

Mick Solimene: Our next question comes from the line of Robert Dodd from Raymond James.

Ted Koenig: Hi guys, hi Ted. Focusing on, to your point prepared Mark, I mean you focus on maximizing recovery and you've still got, you know what, four and a half percent of the portfolio at cost is...

Speaker Change: or Monocore. Um, what?

Speaker Change: What can you give us an update on there in terms of like how far along you are on various workout plans this season and do you think there's a possibility that some of those

Speaker Change: Assets come back onto accrual or is this a situation where it's work it out, recover capital, reinvest the capital, and any income recovery from that capital which...

Robert Dodd: Any income recovery is going to be longer term post a prolonged workout process, or can some of these companies recover more short slash. of the community.

Lewis Solimene: Our effective yield on the portfolio's debt to preferred equity investments remained stable during the quarter at 11.9%. As of June 30th, 2024, our NAV was $199.3 million, which decreased slightly from $2001.5 million as of March 31st, 2024. Our core is funding NAV per share decreased by 10 cents from $9.30 per share to $9.20 per share. The decline in NAV this quarter was primarily the result of net unrealized losses, attributable to certain portfolio companies that have been mostly impacted by idiosyncratic factors. These market market unrealized losses were partially offset by net investment income in excess of the dividend paid during the quarter.

Speaker Change: one point nine percent of fa that any income ly is going to be longer-term post a prolonged workout process or or can some of these companies recover more short sflash weing

Robert Dodd: Yeah, thank you for that question, Chris. Our Robert, sorry, you know, our non-accruals do represent 1.9% of their market value, 4.8% of cost, represents eight assets in total, you know, across a range of industry with kind of no clear themes within those industries. ECA and NECB have been, you know, in the non-performing bucket for the longest amount of time or kind of working through those. And with all these cases, we are working with our internal workout team in maximizing recoveries and, you know, candidly getting them, you know, out of that non-accrual bucket and into recovery moment as quickly as we can.

Speaker Change: Yeah, thank you for that question, Chris, or Robert, sorry, you know, our non-accruals do represent 1.9% of fair market value, 4.8% of cost.

Mick Solimene: represent eight assets in total.

Speaker Change: across a range of industry with kind of no clear themes within those industries. ECA and NECB have been in the non-performing bucket for the longest amount of time, and we're kind of working through those.

Speaker Change: And with all these cases, we are working with our internal workout team.

Speaker Change: in maximizing recoveries and, you know, candidly getting them, you know, out of that non-accrual bucket and into recovery mode as quickly as we can.

Robert Dodd: Our ultimate goal with all of these is to maximize the long-term recovery on these assets, not necessarily short-term recovery, and doing the right thing with respect to, you know, maximizing value, maximizing value on these assets. So, we're confident in our ability to manage these assets; we're confident in our ability to reorient, to help the companies reorient their earnings profiles and continue to actively manage each and every one of them. And Robert, just to answer it directly as well, you know, I think when you look at the universe of these names, these eight names, they're all kind of in different phases and different stages of turnaround and exiting process.

Speaker Change: Our ultimate goal with all of these is to maximize the long-term recovery on these assets, not necessarily short-term recovery, and doing the right thing with respect to maximizing value on these assets. So we're confident.

Speaker Change: in our ability to manage these assets. We're confident in our ability to.

Speaker Change: to help the companies reorient their earnings profiles.

Alex Parmacek: In the second quarter, we placed one new investment on a non-approval with a fair market value of $1.6 million. As of June 30, 2024, we had eight investments on non-approval status representing 1.9% of the portfolio at fair market value, which is consistent with that of March 31, 2024.

Speaker Change: and continue to actively manage each and every one of them. And Robert, just to answer it directly as well, you know, I think when you look at the universe of these names, these eight names, they're all kind of in different phases and different stages of turnaround and exiting process.

Robert Dodd: And I look at that, you know, you have a couple that are trying to kind of a little bit more in the early stage with a little bit more, a little bit more time that it's going to take to get to where we want to go. Again, feel confident in getting there. We do have something that we feel are, you know, getting, starting to see the light at the end of the tunnel. We feel good about those as well. But when you look at them, it's pretty scattered over where they kind of are in their time and in the timeline.

Speaker Change: When I look at them, you know, you have a couple that are kind of a little bit more in the early stages, a little bit more

Alex Parmacek: Now shifting over to the expense side. Total expenses for the second quarter of 2024 were $9.1 million compared to $9.7 million of total expenses for the first quarter of 2024, excluding the impact of the incentive to the limitation of $1 million total expenses increased by $400,000 primarily due to an increase in interest and other debt financing expenses. If you're going to increase it in our average yet outstanding and an excite taxes resulting from that investment income exceeding our dividend.

Speaker Change: a little bit more time than it's going to take to get to where we want to go again, feel confident in getting there. We do have some that we feel are, you know, are getting, are starting to see the light at the end of the tunnel, and we feel good about those as well. But when you look at them, it's pretty scattered over where they kind of are in their time, in the timeline. But as Nick alluded to it, you know, we feel good about the prospects of a successful outcome for these names.

Robert Dodd: But, as Nick alluded to, you know, we feel good about the prospects of a successful outcome for these names.

Robert Dodd: Got it.

Robert Dodd: Thank you. Thank you, Robert.

Mick Solimene: so

Operator: Thank you.

Operator: Now, seeing as there are no more questions in the queue, that does conclude our question and answer this session. I will now turn the call back over to the overall capital team for closing remarks. We want to thank everyone for joining us on the call today. As always, to the extent you've got questions on an interim basis, please feel free to reach out to Mick and Alex. Otherwise, we will speak to you again next quarter. Have a good day. Thank you all.

Robert: Thank you, Robert.

Speaker Change: Thank you.

Speaker Change: now seeing as there are no more questions and the queube that does conclude our question-and answer session i will now turn the call back over to the roll capital team for closing remarks

Alex Parmacek: Our net loss for the quarter was $3.3 million compared to in that loss of $2.3 million for the prior quarter. We've had losses for the quarter and in June 30th, 2024 were primarily attributable to unrealized market losses and certain portfolio companies that have underlying credit performance concerns. These market market unrealized losses were partially offset by a net realized gain associated with the sale of an equity position one of our portfolio companies. The average mark on the portfolio decreased slightly by 0.9% from 95.3% across at March 31st, 2024 to 94.4% across at June 30th, 2024.

Speaker Change: I want to thank everyone for joining us on the call today. As always, to the extent you've got questions on an interim basis, please feel free to reach out to Mick and Alex. Otherwise, we will speak to you again next quarter. Have a good day. Thank you all.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining.

Operator: Have a pleasant day, and you may now disconnect.

Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining. Have a pleasant day and you may now disconnect.

Alex Parmacek: Turning now to SLS, as of June 30th, 2024, the SLS had investments in 39 different borrowers aggregating to $109.7 million of fair value. The SLS underlying investments are loans to middle market borrowers that are generally larger and more sensitive to market spread movements than the rest of MRCC's portfolio, which is focused predominantly at lower middle market companies. In the quarter, the average mark on the SLS portfolio decreased modestly by approximately 60 basis points from 88.9% of amortized costs as of March 31st, 2024 to 88.3% of amortized costs as of June 30th, 2024.

Alex Parmacek: Consisting with the prior quarter, MRCC received income distributions from SLS totaling $900,000. As of June 30th, 2024, SLS had borrowings under its non-reforced credit facility of $50.8 million and $59.2 million of available capacity, subject to borrowing base availability.

Theodore Koenig: At this point, I will certainly call back to type person closing remarks before we open up the line for some questions. Thank you, Alex. In summary, we remain confident in the portfolio's ability to navigate an environment where there is uncertain macroeconomic backdrop and elevated interest rates. Our focus continues to be on portfolio management, where we can leverage our deep and experienced team of investment professionals to execute our portfolio management playbook and maximize recoveries for our challenging investments.

Theodore Koenig: In today's more competitive environment, we will lean on the scale of our originations platform and opportunities to support our incumbent portfolio through incremental investments. MRCC continues to offer stable and consistent dividends to our shareholders, as this quarter marked the 17th consecutive quarter, where adjusted net investment income has met or exceeded our 25% per share of dividend yield. We believe that our predominantly first-lane portfolio, which carries an average effect of yield of nearly 12%, positions as well to continue delivering an attractive risk-adjusted return to our investors as highlighted by our current 14% dividend yield based on our August 6, 2024 closing share price.

Theodore Koenig: We believe that Monroe Capital Corporation, which is affiliated with an award-winning best and class external private credit manager with nearly $20 billion in assets under management continues to provide a very attractive investment opportunity to our shareholders and to other investors.

Theodore Koenig: Thank you all for your time today and this concludes our prepared remarks.

Christopher Nolan: The first question comes from the line of Christopher Nolan from Leidenburg, Paul May. Line is open. Okay, guys.

Lewis Solimene: On the SLS, of course, my calculations, the SLS fair value decrease by roughly five or six percent quarter over quarter is, is this vehicle for the runoff mode? So hi, Chris. Thank you. Thank you for that question. So if you look at the value or the fair market value, the vehicle quarter of reporter was actually flat. It was actually flat during the quarter in the context of a very modest decline in the average market of portfolio.

Lewis Solimene: We've been really conscious about bringing down our leverage in this portfolio while maintaining our $900,000 per quarter dividend to MRCC with our joint venture partner receiving as well the $900,000 dividend. We're evaluating how to be constructive in this market with this vehicle given where we are in the tight and rate environment, where we are in the economic cycle. But feel good about the dividend contribution that this vehicle provides. And also put this in perspective, SLS is about 6.8, 6.9 percent of the fair market value of MRCC portfolio with the dividend representing a little under six percent of our investment income.

Lewis Solimene: So we're evaluating this the right time to kind of re-enter the market and how to be constructive about the portfolio. Chris in the quarter, we had a couple of payoffs so that was the big driver there as we noted in the market was pretty much stable. So we two payoffs, the size of the portfolio decreased from 41 to 39. The payoffs amounted to about 6.5 million of fair value. Yeah, okay. The issue is for me on the SLS is the fact that the non-accruals seem to be a little high, particularly since it is, you know, for theoretically more stable companies larger.

Lewis Solimene: But effectively, MRCC has a subordinate position here because it's holding equity not the debt. So for the rest of your portfolio, you're doing a lot first leans senior security, but for this, you're an equity holder. And I just want to make... Yeah, that's a really good point, Chris. This is a joint venture that we created where the SLS position in our portfolio represents the equity in this portfolio. So at the end of the day, the equity ultimately represents the net value to the roughly 39 portfolio companies in the business. It's not unlike a lot of the joint ventures that you see in other BDCs, but you are correct that this represents an equity interest in a portfolio of loans and a and a leverage vehicle.

Lewis Solimene: Okay. Switching over to Education Corporation of America, and I know it's been here for a while, but I notice going through the cube that it looked like the second lean debt position you guys have has a cost of 831,000 and a fair value of 2.3 million, while the junior secured loan being at a premium to cost, and the preferred being Zilch. Yeah, so you are correct, Chris, that the fair value of the debt position is 2.3 million dollars, while a tip to an 800,000-ish dollar cost, and the value of the preferred on a fair market value basis is zero relative to a 7.4 million-dollar-ish cost basis.

Lewis Solimene: This is really about the recovery waterfall on those two positions, and the fact that with respect to the debt position, we are getting fees and unaccrued interest above our cost, and that's been ticking along here for, you know, a handful of quarters and years. So, as a result that fair market value relative to the cost has eaked up relative to our recovery analysis, and with the preferred being at the bottom of the ECA waterfall, that's entitled to, you know, the last degree of proceeds over, you know, over and above, over and above, you know, principal repayment on the debt plus the accrued, but yet on paid interest. Okay, thanks, Mike.

Lewis Solimene: Final question. Given the expectations for a limited, for the repeat of this fee waiver to one degree or another over the next couple quarters, can we say at this point that third quarter EPS will cover the dividend? Yes, the third quarter EPS, we believe will cover the dividend. That's it for me. Thanks, guys. Thank you, Chris. Thank you.

Operator: Again, if you have a question or if you'd like to ask a question, please press star one on your telephone keypad.

Robert Dodd: Do you think there's a possibility that some of those assets come back onto a clue or in this situation where it's worked out, recover capital, reinvest the capital and any income recovery from that capital, which is 1.9% of failure value. Any income recovery is going to be longer term post a prolonged workout process or can some of these companies recover more short slash, of the community.

Lewis Solimene: Yeah, thank you for that question, Chris. Our Robert, sorry, you know, our non-accruals do represent 1.9% of their market value, 4.8% of cost, represents eight assets in total, you know, across a range of industry with kind of no clear themes within those industries. ECA and NECB have been, you know, in the non-performing bucket for the longest amount of time or kind of working through those. And with all these cases, we are working with our internal workout team in maximizing recoveries and, you know, candidly getting them, you know, out of that non-accrual bucket and into recovery moment as quickly as we can.

Lewis Solimene: Our ultimate goal with all of these is to maximize the long-term recovery on these assets, not necessarily short-term recovery and doing the right thing with respect to, you know, maximizing value, maximizing value on these assets. So, we're confident in our ability to, to manage these assets, we're confident in our ability to reorient, to help the companies reorient their earnings profiles and continue to actively manage each and every one of them. And Robert, just to answer it directly as well, you know, I think when you look at the universe of these names, these eight names, they're all kind of in different phases and different stages of turnaround and exiting process.

Lewis Solimene: And I look at that, you know, you have a couple that are trying to kind of a little bit more in the early stage with a little bit more, a little bit more time that it's going to take to get to where we want to go. Again, feel confident in getting there. We do have something that we feel are, you know, getting, starting to see the light at the end of the tunnel, we feel good about those as well.

Lewis Solimene: But when you look at them, it's pretty scattered over where they kind of are in their time and in the timeline. But as, as Nick alluded to, you know, we feel good about the prospects of a successful outcome for these names. Got it. Thank you. Thank you, Robert. Thank you.

Operator: Now, seeing as there are no more questions in the queue that does conclude our question and answer this session, I will now turn the call back over to the overall capital team for closing remarks. We want to thank everyone for joining us on the call today. As always, to the extent you've got questions on an interim basis, please feel free to reach out to Mick and Alex. Otherwise, we will speak to you again next quarter. Have a good day. Thank you all.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. Have a pleasant day and you may now disconnect.

Q2 2024 Monroe Capital Corp Earnings Call

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