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EX-32.1 - EXHIBIT 32.1 - Monroe Capital Income Plus Corptm2111700d1_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - Monroe Capital Income Plus Corptm2111700d1_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Monroe Capital Income Plus Corptm2111700d1_ex31-1.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION  

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One) 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 814-01301

 

MONROE CAPITAL INCOME PLUS CORPORATION  

(Exact Name of Registrant as Specified in its Charter)

 

Maryland   83-0711022
(State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)
     
311 South Wacker Drive, Suite 6400
Chicago, Illinois
  60606
(Address of Principal Executive Office)   (Zip Code)

 

(312) 258-8300 

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which
Registered
None   N/A   N/A

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and, (2) has been subject to such filing requirements for the past 90 days. Yes       No  

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
       
Non-accelerated filer Smaller reporting company
       
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes       No  

 

As of May 11, 2021, the registrant had 19,206,910 shares of common stock, $0.001 par value, outstanding. 

 

 

TABLE OF CONTENTS

 

    Page
PART I. FINANCIAL INFORMATION 3
     
Item 1. Consolidated Financial Statements 3
     
  Consolidated Statements of Assets and Liabilities as of March 31, 2021 (unaudited) and December 31, 2020 3
     
  Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited) 4
     
  Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2021 and 2020 (unaudited) 5
     
  Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited) 6
     
  Consolidated Schedules of Investments as of March 31, 2021 (unaudited) and December 31, 2020 7
     
  Notes to Consolidated Financial Statements (unaudited) 21
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 43
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 59
     
Item 4. Controls and Procedures 60
     
PART II. OTHER INFORMATION 61
     
Item 1. Legal Proceedings 61
     
Item 1A. Risk Factors 61
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 64
     
Item 3. Defaults Upon Senior Securities 64
     
Item 4. Mine Safety Disclosures 64
     
Item 5. Other Information 64
     
Item 6. Exhibits 65
     
Signatures   66

2

 

Part I. Financial Information

Item 1. Consolidated Financial Statements

 

MONROE CAPITAL INCOME PLUS CORPORATION
 
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except per share data)

 

   March 31, 2021   December 31, 2020 
   (unaudited)     
ASSETS       
Investments at fair value (amortized cost of $222,820 and $190,144, respectively)  $225,534   $190,136 
Cash   3,487    2,443 
Restricted cash   12,435    3,677 
Interest receivable   1,360    899 
Unrealized gain on foreign currency forward contracts   13     
Other assets   55    191 
Total assets   242,884    197,346 
           
LIABILITIES          
Debt:          
   Revolving credit facility   42,300    58,900 
   Less: Unamortized deferred financing costs   (1,117)   (939)
    Total debt, less unamortized deferred financing costs   41,183    57,961 
Interest payable   574    426 
Unrealized loss on foreign currency forward contracts       157 
Payable for unsettled trades   6,410     
Management fees payable       93 
Incentive fees payable   418     
Accounts payable and accrued expenses   992    1,196 
Directors’ fees payable   15     
Total liabilities   49,592    59,833 
Net assets  $193,292   $137,513 
           
Commitments and contingencies (See Note 10)          
           
ANALYSIS OF NET ASSETS          
Common stock, $0.001 par value, 100,000 shares authorized, 19,207 and 13,828 shares issued and outstanding, respectively  $19   $14 
Capital in excess of par value   188,041    135,636 
Accumulated undistributed (overdistributed) earnings   5,232    1,863 
Total net assets  $193,292   $137,513 
           
Net asset value per share  $10.06   $9.94 

 

See Notes to Consolidated Financial Statements. 

3

 

MONROE CAPITAL INCOME PLUS CORPORATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

 

   Three months ended March 31, 
   2021   2020 
Investment income:          
Interest and dividend income  $4,655   $2,689 
Total investment income   4,655    2,689 
           
Operating expenses:          
Interest and other debt financing expenses   699    545 
Base management fees   814    497 
Incentive fees   961    109 
Professional fees   89    82 
Administrative service fees   111    82 
General and administrative expenses   80    84 
Directors’ fees   15    15 
Expenses before fee waivers   2,769    1,414 
Base management fee waiver   (814)   (260)
Incentive fee waiver   (543)   (241)
Total expenses, net of fee waivers   1,412    913 
Net investment income before income taxes   3,243    1,776 
Income taxes, including excise taxes       12 
Net investment income   3,243    1,764 
           
Net gain (loss):          
Net realized gain (loss):          
Investments   43     
Foreign currency forward contracts   (3)    
Foreign currency and other transactions   (40)    
  Net realized gain (loss)        
           
Net change in unrealized gain (loss):          
Investments   2,722    (6,324)
Foreign currency forward contracts   170     
  Net change in unrealized gain (loss)   2,892    (6,324)
           
Net gain (loss)   2,892    (6,324)
           
Net increase (decrease) in net assets resulting from operations  $6,135   $(4,560)
           
Per common share data:          
Net investment income per share - basic and diluted  $0.22   $0.20 
Net increase (decrease) in net assets resulting from operations per share - basic and diluted  $0.41   $(0.51)
Weighted average common shares outstanding - basic and diluted   14,786    8,872 

 

See Notes to Consolidated Financial Statements.

4

 

MONROE CAPITAL INCOME PLUS CORPORATION

 

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(unaudited)

(in thousands)

 

   Common Stock       Accumulated
undistributed
     
   Number of shares   Par
value
   Capital in excess
of par value
   (overdistributed)
earnings
   Total
net assets
 
Balances at December 31, 2019   6,875   $7   $68,718   $20   $68,745 
Net investment income               1,764    1,764 
Net change in unrealized gain (loss)               (6,324)   (6,324)
Issuance of common stock   2,036    2    20,367        20,369 
Distributions declared to stockholders                    
Stock issued in connection with dividend reinvestment plan   36        357        357 
Balances at March 31, 2020   8,947   $9   $89,442   $(4,540)  $84,911 
                          
Balances at December 31, 2020   13,828   $14   $135,636   $1,863   $137,513 
Net investment income               3,243    3,243 
Net change in unrealized gain (loss)               2,892    2,892 
Issuance of common stock   5,302    5    51,634        51,639 
Distributions declared to stockholders               (2,766)   (2,766)
Stock issued in connection with dividend reinvestment plan   77        771        771 
Balances at March 31, 2021   19,207   $19   $188,041   $5,232   $193,292 

 

See Notes to Consolidated Financial Statements.

5

 
MONROE CAPITAL INCOME PLUS CORPORATION
   
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(unaudited)
(in thousands)

 

   Three months ended March 31, 
   2021   2020 
Cash flows from operating activities:          
Net increase (decrease) in net assets resulting from operations  $6,135   $(4,560)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:          
Net realized (gain) loss on investments   (43)    
Net realized (gain) loss on foreign currency forward contracts   3     
Net realized (gain) loss on foreign currency and other transactions   40     
Net change in unrealized (gain) loss on investments   (2,722)   6,324 
Net change in unrealized (gain) loss on foreign currency forward contracts   (170)    
Payment-in-kind interest income   (176)   (29)
Net accretion of discounts and amortization of premiums   (189)   (125)
Purchases of investments   (51,050)   (62,374)
Proceeds from principal payments and sale of investments   18,779    2,371 
Amortization of deferred financing costs   125    88 
Changes in operating assets and liabilities:          
Interest receivable   (461)   (404)
Other assets   136    (70)
Interest payable   148    161 
Payable for unsettled trades   6,410    (90)
Management fees payable   (93)   (65)
Incentive fees payable   418    (132)
Accounts payable and accrued expenses   (204)   138 
Directors’ fees payable   15    15 
Net cash provided by (used in) operating activities   (22,899)   (58,752)
           
Cash flows from financing activities:          
Borrowings on revolving credit facility   50,900    60,400 
Repayments of revolving credit facility   (67,500)   (19,600)
Payments of deferred financing costs   (303)   (4)
Proceeds from issuance of common shares   51,639    20,369 
Stockholder distributions paid, net of stock issued under the dividend reinvestment plan of $771 and $357, respectively   (1,995)   (1,030)
Net cash provided by (used in) financing activities   32,741    60,135 
           
Net increase (decrease) in Cash and Restricted cash   9,842    1,383 
Effect of foreign currency exchange rates   (40)    
Cash and Restricted cash, beginning of period   6,120    4,064 
Cash and Restricted cash, end of period  $15,922   $5,447 
           
Supplemental disclosure of cash flow information:          
Cash interest paid during the period  $426   $296 
Cash paid for income taxes, including excise taxes, during the period  $66   $25 

 

 

The following tables provide a reconciliation of cash and restricted cash reported on the Consolidated Statements of Assets and Liabilities that sum to the total of the same such amounts on the Consolidated Statements of Cash Flows:

 

   March 31, 2021   December 31, 2020 
Cash  $3,487   $2,443 
Restricted cash   12,435    3,677 
Total cash and restricted cash shown on the Consolidated Statements of Cash Flows  $15,922   $6,120 

 

   March 31, 2020   December 31, 2019 
Cash  $3,217   $2,223 
Restricted cash   2,230    1,841 
Total cash and restricted cash shown on the Consolidated Statements of Cash Flows  $5,447   $4,064 

  

See Notes to Consolidated Financial Statements.

6

 
MONROE CAPITAL INCOME PLUS CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
(unaudited)
March 31, 2021
(in thousands, except for shares and units)
                                 

Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
Investments:                                 
Senior Secured Loans                                 
Aerospace & Defense                                 
API Holdings III Corp. (g)  L+4.25%  4.36%  5/2/2019  5/8/2026   1,670   $1,664   $1,647    0.9%
Guidehouse LLP (g)  L+4.00%  4.11%  3/23/2021  5/1/2025   1,200    1,202    1,202    0.6%
SI Holdings, Inc. (Integrated Polymer Solutions) (g)   L+5.75%  6.75%  12/24/2019  7/25/2025   1,028    1,012    1,030    0.5%
SI Holdings, Inc. (Integrated Polymer Solutions) (g)   L+5.75%  6.75%  7/25/2019  7/25/2025   1,970    1,939    1,974    1.0%
SI Holdings, Inc. (Integrated Polymer Solutions) (g)   L+5.75%  6.75%  2/17/2021  7/25/2025   1,778    1,742    1,781    0.9%
SI Holdings, Inc. (Integrated Polymer Solutions) (Revolver) (h)  L+5.75%  6.75%  7/25/2019  7/25/2024   316    79    79    0.1%
                 7,962    7,638    7,713    4.0%
Automotive                                 
Truck-Lite Co., LLC (g)   L+6.25%  7.25%  3/11/2020  12/14/2026   3,444    3,414    3,440    1.8%
Truck-Lite Co., LLC (g)   L+6.25%  7.25%  3/11/2020  12/14/2026   510    510    510    0.3%
Wheel Pros, Inc.  L+5.25%  6.25%  2/12/2021  11/10/2027   2,584    2,572    2,584    1.3%
                 6,538    6,496    6,534    3.4%
Banking, Finance, Insurance & Real Estate                                 
300 N. Michigan Mezz, LLC (Delayed Draw) (g) (h) (i) (j)  L+14.50%  16.00% PIK   7/15/2020  7/15/2024   1,000    829    829    0.4%
Avison Young (USA), Inc. (g) (j) (k)  L+5.00%  5.20%  4/26/2019  1/30/2026   1,960    1,945    1,958    1.0%
InsideRE Holdings, LLC and InsideRE, LLC (g)  L+5.50%  6.50%  9/9/2019  9/9/2024   2,955    2,913    2,985    1.5%
InsideRE Holdings, LLC and InsideRE, LLC (Revolver) (h)  L+5.50%  6.50%  9/9/2019  9/9/2024   429            0.0%
J2 BWA Funding, LLC (Delayed Draw) (h) (i) (j)  n/a  9.00%  12/24/2020  12/24/2026   2,850    277    274    0.1%
NCBP Property, LLC (j)  L+9.50%  10.50%  12/18/2020  12/16/2022   2,500    2,479    2,490    1.3%
Oceana Australian Fixed Income Trust (j) (k) (l)  n/a  11.50%  2/25/2021  2/25/2026   8,165    8,460    8,165    4.2%
StarCompliance MidCo, LLC (g)  L+6.75%  7.75%  1/12/2021  1/11/2027   3,000    2,942    2,996    1.6%
StarCompliance MidCo, LLC (Revolver) (h)  L+6.75%  7.75%  1/12/2021  1/11/2027   484            0.0%
US Claims Litigation Funding, LLC (Revolver) (h) (j)  L+8.75%  9.75%  11/30/2020  11/29/2024   1,500    1,200    1,190    0.6%
W3 Monroe RE Debt LLC (j)  n/a  10.00%  2/5/2021  2/4/2028   1,650    1,650    1,650    0.9%
                 26,493    22,695    22,537    11.6%
Beverage, Food & Tobacco                                 
Huff Hispanic Food Holdings, LLC (g)  L+5.50%  6.50%  10/18/2019  10/18/2024   5,910    5,823    5,836    3.0%
Huff Hispanic Food Holdings, LLC  L+5.50%  6.50%  10/18/2019  10/18/2024   333    333    329    0.2%
Huff Hispanic Food Holdings, LLC (Revolver) (h)  L+5.50%  6.50%  10/18/2019  10/18/2024   1,286    514    508    0.3%
LX/JT Intermediate Holdings, Inc. (g)  L+6.00%  7.50%  3/11/2020  3/11/2025   5,786    5,692    5,635    2.9%
LX/JT Intermediate Holdings, Inc. (Revolver) (h)  L+6.00%  7.50%  3/11/2020  3/11/2025   500            0.0%
                 13,815    12,362    12,308    6.4%
Capital Equipment                                 
MCP Shaw Acquisitionco, LLC (g)  L+6.50%  7.50%  2/28/2020  11/28/2025   7,919    7,789    7,840    4.1%
MCP Shaw Acquisitionco, LLC (Revolver) (h)  L+6.50%  7.50%  2/28/2020  11/28/2025   1,427            0.0%
                 9,346    7,789    7,840    4.1%

 

7

 
MONROE CAPITAL INCOME PLUS CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
(unaudited)
March 31, 2021
(in thousands, except for shares and units)
                                 
Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
Construction & Building                                 
Premier Roofing, LLC (g)  L+6.50%  7.50%  8/31/2020  8/29/2025          3,491   $ 3,429   $3,488    1.8%
Premier Roofing, LLC (Revolver) (h)  L+6.50%  7.50%  8/31/2020  8/29/2025   1,199            0.0%
                 4,690    3,429    3,488    1.8%
Consumer Goods: Non-Durable                                 
Thrasio, LLC (g)  L+7.00%  8.00%  12/18/2020  12/18/2026   2,993    2,921    2,996    1.6%
Thrasio, LLC (Delayed Draw) (h) (i)  L+7.00%  8.00%  12/18/2020  12/18/2026   1,980            0.0%
                 4,973    2,921    2,996    1.6%
Containers, Packaging & Glass                                 
Polychem Acquisition, LLC (g)  L+5.00%  5.11%  4/8/2019  3/17/2025   1,960    1,954    1,957    1.0%
Port Townsend Holdings Company, Inc. and Crown Corrugated Company (Delayed Draw) (h) (i)  L+7.75% 

5.75% Cash/

3.00% PIK

   10/16/2020  12/30/2021   165    83    75    0.1%
                 2,125    2,037    2,032    1.1%
Energy: Oil & Gas                                 
BW Gas & Convenience Holdings, LLC (g)   L+6.25%  6.36%  11/15/2019  11/18/2024   1,593    1,543    1,611    0.8%
Fieldwood Energy, LLC (g)   P+4.25%  7.50%(m) 1/11/2020  4/11/2022   1,000    901    396    0.2%
Liquid Tech Solutions Holdings, LLC (g)  L+4.75%  5.50%  3/18/2021  3/19/2028   2,283    2,271    2,280    1.2%
Par Petroleum, LLC (g)  L+6.75%  6.99%  1/27/2020  1/12/2026   947    954    944    0.5%
                 5,823    5,669    5,231    2.7%
Environmental Industries                                 
Quest Resource Management Group, LLC (g)   L+8.50%  9.75%  10/19/2020  10/20/2025   998    931    1,027    0.5%
Quest Resource Management Group, LLC (Delayed Draw) (h) (i)  L+8.50%  9.75%  10/19/2020  10/20/2025   1,087            0.0%
                 2,085    931    1,027    0.5%
Healthcare & Pharmaceuticals                                 
Apotheco, LLC (g)  L+8.50% 

6.50% Cash/

3.00% PIK

   4/8/2019  4/8/2024   1,784    1,761    1,656    0.9%
Apotheco, LLC (Revolver)  L+8.50% 

6.50% Cash/

3.00% PIK

   4/8/2019  4/8/2024   467    467    434    0.2%
Ascent Midco, LLC (g)  L+5.50%  6.50%  2/5/2020  2/5/2025   2,469    2,430    2,493    1.3%
Ascent Midco, LLC (Delayed Draw) (h) (i)  L+5.50%  6.50%  2/5/2020  2/5/2025   1,014            0.0%
Ascent Midco, LLC (Revolver) (h)  L+5.50%  6.50%  2/5/2020  2/5/2025   403            0.0%
Brickell Bay Acquisition Corp. (g)  L+7.00%  8.00%  2/12/2021  2/12/2026   6,000    5,883    5,970    3.1%
Brickell Bay Acquisition Corp. (Delayed Draw) (h) (i)  L+7.00%  8.00%  2/12/2021  2/12/2026   1,200            0.0%
ERC Finance, LLC (g)  L+4.50%  5.50%  4/23/2019  9/20/2024   1,960    1,936    1,940    1.0%
QF Holdings, Inc. (g)  L+6.50%  7.50%  9/19/2019  9/19/2024   4,550    4,485    4,532    2.3%
QF Holdings, Inc. (g)  L+6.50%  7.50%  9/19/2019  9/19/2024   910    910    906    0.5%
QF Holdings, Inc. (Delayed Draw) (h) (i)  L+7.50%  8.50%  8/21/2020  9/19/2024   910            0.0%
QF Holdings, Inc. (Revolver) (h)  L+7.00%  8.00%  9/19/2019  9/19/2024   546            0.0%
Seran BioScience, LLC (g)  L+7.25%  8.25%  12/31/2020  12/31/2025   2,000    1,962    1,998    1.0%
Seran BioScience, LLC (Revolver) (h)  L+7.25%  8.25%  12/31/2020  12/31/2025   356            0.0%
WebPT, Inc. (g)   L+6.75%  7.75%  8/28/2019  8/28/2024   5,000    4,927    5,039    2.6%
WebPT, Inc. (Delayed Draw) (h) (i)   L+6.75%  7.75%  8/28/2019  8/28/2024   625            0.0%
WebPT, Inc. (Revolver) (h)  L+6.75%  7.75%  8/28/2019  8/28/2024   521    156    156    0.1%
                 30,715    24,917    25,124    13.0%

 

8

 
MONROE CAPITAL INCOME PLUS CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
(unaudited)
March 31, 2021
(in thousands, except for shares and units)
                                 
Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
High Tech Industries                                 
Acquia, Inc. (g)  L+7.00%  8.00%  11/1/2019  10/31/2025         5,429   $5,343   $5,511    2.9%
Acquia, Inc. (Revolver) (h)  L+7.00%  8.00%  11/1/2019  10/31/2025   588    47    47    0.0%
Arcstor Midco, LLC (g)  L+7.00%  8.00%  3/16/2021  3/16/2027   12,000    11,761    12,000    6.2%
Instructure, Inc. (g)  L+7.00%  8.00%  12/22/2020  3/24/2026   765    740    765    0.4%
Instructure, Inc. (g)  L+7.00%  8.00%  3/24/2020  3/24/2026   8,405    8,322    8,401    4.3%
Instructure, Inc. (Revolver) (h)  L+7.00%  8.00%  3/24/2020  3/24/2026   697            0.0%
MarkLogic Corporation (g)  L+8.00%  9.00%  10/20/2020  10/20/2025   5,237    5,116    5,342    2.8%
MarkLogic Corporation (Revolver) (h)  L+6.00%  7.00%  10/20/2020  10/20/2025   404            0.0%
Mindbody, Inc. (g)  L+8.50% 

8.00% Cash/

1.50% PIK

   2/15/2019  2/14/2025   1,832    1,807    1,772    0.9%
Mindbody, Inc. (Revolver) (h)  L+8.00%  9.00%  2/15/2019  2/14/2025   190            0.0%
Mockingbird Acquisitionco, Inc. (g)  L+7.00%  8.00%  10/1/2020  10/1/2025   3,000    2,946    2,993    1.6%
Mockingbird Acquisitionco, Inc. (Revolver) (h)  L+7.00%  8.00%  10/1/2020  10/1/2025   600            0.0%
Recorded Future, Inc. (g)  L+6.00%  7.00%  7/3/2019  7/3/2025   3,667    3,612    3,740    1.9%
Recorded Future, Inc. (g)  L+6.00%  7.00%  3/26/2021  7/3/2025   5,893    5,817    6,011    3.1%
Recorded Future, Inc. (Revolver) (h)  L+6.00%  7.00%  7/3/2019  7/3/2025   440            0.0%
Transact Holdings, Inc. (g)   L+4.75%  4.86%  4/18/2019  4/30/2026   739    729    733    0.4%
                 49,886    46,240    47,315    24.5%
Hotels, Gaming & Leisure                                 
Equine Network, LLC (g)  L+8.00%  9.00%  12/31/2020  12/31/2025   1,500    1,468    1,504    0.8%
Equine Network, LLC (g)  L+8.00%  9.00%  1/29/2021  12/31/2025   680    667    682    0.3%
Equine Network, LLC (Delayed Draw) (h) (i)  L+8.00%  9.00%  12/31/2020  12/31/2025   366            0.0%
Equine Network, LLC (Revolver) (h)  L+8.00%  9.00%  12/31/2020  12/31/2025   146            0.0%
                 2,692    2,135    2,186    1.1%
Media: Advertising, Printing & Publishing                                 
Digital Room Holdings, Inc. (g)  L+5.00%  5.20%  5/9/2019  5/21/2026   2,176    2,155    2,142    1.1%
North Haven USHC Acquisition, Inc. (g)  L+6.50%  7.50%  10/30/2020  10/30/2025   2,494    2,449    2,519    1.3%
North Haven USHC Acquisition, Inc. (Delayed Draw) (h) (i)  L+6.50%  7.50%  3/12/2021  10/30/2025   721            0.0%
North Haven USHC Acquisition, Inc. (Revolver) (h)  L+6.50%  7.50%  10/30/2020  10/30/2025   240            0.0%
NTM Acquisition Corp. (g)  L+7.25% 

7.25% Cash/

1.00% PIK

   4/18/2019  6/7/2024   4,717    4,707    4,599    2.4%
Relevate Health Group, LLC (g)  L+6.25%  7.25%  11/20/2020  11/20/2025   2,000    1,963    2,040    1.1%
Relevate Health Group, LLC (Delayed Draw) (h) (i)  L+6.25%  7.25%  11/20/2020  11/20/2025   1,053    895    913    0.4%
Relevate Health Group, LLC (Revolver) (h)  L+6.25%  7.25%  11/20/2020  11/20/2025   421            0.0%
XanEdu Publishing, Inc. (g)  L+6.50%  7.50%  1/28/2020  1/28/2025   2,475    2,436    2,485    1.3%
XanEdu Publishing, Inc. (Revolver) (h)  L+6.50%  7.50%  1/28/2020  1/28/2025   651            0.0%
                 16,948    14,605    14,698    7.6%
Media: Broadcasting & Subscription                                 
Vice Group Holding, Inc.  L+12.00% 

5.50% Cash/

8.00% PIK

   11/4/2019  11/2/2022   207    207    207    0.1%
Vice Group Holding, Inc.  L+12.00% 

5.50% Cash/

8.00% PIK

   5/2/2019  11/2/2022   1,078    1,074    1,078    0.5%
Vice Group Holding, Inc.  L+12.00% 

5.50% Cash/

8.00% PIK

   5/2/2019  11/2/2022   338    338    338    0.2%
Vice Group Holding, Inc.   L+12.00% 

5.50% Cash/

8.00% PIK

   5/2/2019  11/2/2022   127    127    127    0.1%
                 1,750    1,746    1,750    0.9%
Media: Diversified & Production                                 
Crownpeak Technology, Inc. (g)  L+6.25%  7.25%  2/28/2019  2/28/2024   1,000    988    1,000    0.5%
Crownpeak Technology, Inc. (g)  L+6.25%  7.25%  2/28/2019  2/28/2024   15    15    15    0.0%
Crownpeak Technology, Inc. (Revolver) (h)  L+6.25%  7.25%  2/28/2019  2/28/2024   42            0.0%
Streamland Media MidCo, LLC (g)  L+7.75% 

7.75% Cash/

1.00% PIK

   8/26/2019  8/31/2023   1,996    1,971    1,944    1.0%
                 3,053    2,974    2,959    1.5%
Metals & Mining                                 
Alpha Metallurgical Resources, Inc. (fka Contura Energy, Inc.) (g)  L+7.00%  9.00%  1/15/2020  6/14/2024   987    853    811    0.4%
                 987    853    811    0.4%

 

9

 
MONROE CAPITAL INCOME PLUS CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
(unaudited)
March 31, 2021
(in thousands, except for shares and units)
                                 
Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
Services: Business                                 
Certify, Inc. (g)  L+5.75%  6.75%  2/28/2019  2/28/2024           1,000   $991   $1,000    0.5%
Certify, Inc. (g)  L+5.75%  6.75%  2/28/2019  2/28/2024   136    136    136    0.1%
Certify, Inc. (Revolver) (h)  L+5.75%  6.75%  2/28/2019  2/28/2024   46    11    11    0.0%
Governmentjobs.com, Inc. (g)  L+6.50%  7.50%  2/5/2020  2/5/2026   7,000    6,884    6,934    3.5%
Governmentjobs.com, Inc. (Revolver) (h)  L+6.50%  7.50%  2/5/2020  2/5/2026   933    70    69    0.0%
HS4 Acquistionco, Inc. (g)  L+6.75%  7.75%  7/9/2019  7/9/2025   4,000    3,939    3,960    2.0%
HS4 Acquistionco, Inc. (Revolver) (h)  L+6.75%  7.75%  7/9/2019  7/9/2025   325            0.0%
Kaseya, Inc. (n)  L+7.00% 

5.00% Cash/

3.00% PIK

   5/3/2019  5/2/2025   2,865    2,824    2,880    1.5%
Kaseya, Inc. (g)  L+7.00% 

5.00% Cash/

3.00% PIK

   5/3/2019  5/2/2025   304    304    305    0.2%
Kaseya, Inc. (Delayed Draw) (h) (i)  L+7.00% 

5.00% Cash/

3.00% PIK

   3/4/2020  3/4/2022   274    110    110    0.1%
Kaseya, Inc. (Revolver) (h)  L+6.50%  7.50%  5/3/2019  5/2/2025   211    103    103    0.1%
Software Luxembourg Acquisition S.A.R.L (g) (j) (k)  L+7.50%  8.50%  8/3/2020  12/27/2024   385    374    395    0.2%
                 17,479    15,746    15,903    8.2%
Services: Consumer                                 
Express Wash Acquisition Company, LLC (g)  L+6.50%  7.50%  12/28/2020  12/26/2025   2,800    2,754    2,800    1.4%
Express Wash Acquisition Company, LLC (Revolver) (h)  L+6.50%  7.50%  12/28/2020  12/26/2025   1,120    168    168    0.1%
IDIG Parent, LLC (g)  L+6.50%  7.50%  12/15/2020  12/15/2026   4,359    4,276    4,365    2.3%
IDIG Parent, LLC (Delayed Draw) (h) (i)  L+6.50%  7.50%  12/15/2020  12/15/2026   720            0.0%
IDIG Parent, LLC (Revolver) (h)  L+6.50%  7.50%  12/15/2020  12/15/2026   336            0.0%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  8/1/2019  1/2/2024   1,203    1,191    1,199    0.6%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/1/2019  1/2/2024   228    226    227    0.1%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/1/2019  1/2/2024   434    430    433    0.2%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/6/2019  1/2/2024   119    119    118    0.1%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/6/2019  1/2/2024   1,268    1,268    1,263    0.7%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  2/12/2020  1/2/2024   62    61    62    0.0%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/31/2020  1/2/2024   263    259    262    0.1%
Light Wave Dental Management, LLC  L+6.00%  8.00%  12/6/2019  1/2/2024   354    350    352    0.2%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  8/1/2019  1/2/2024   239    239    238    0.1%
Light Wave Dental Management, LLC (Revolver)  L+6.00%  8.00%  8/1/2019  1/2/2024   128    128    128    0.1%
                 13,633    11,469    11,615    6.0%
Telecommunications                                 
DataOnline Corp. (g)  L+6.25%  7.25%  11/13/2019  11/13/2025   6,435    6,322    6,213    3.2%
DataOnline Corp. (Revolver) (h)  L+6.25%  7.25%  11/13/2019  11/13/2025   844    718    693    0.4%
Sandvine Corporation (g)  L+4.50%  4.61%  3/8/2021  10/31/2025   1,200    1,200    1,188    0.6%
                 8,479    8,240    8,094    4.2%

 

10

 
MONROE CAPITAL INCOME PLUS CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
(unaudited)
March 31, 2021
(in thousands, except for shares and units)
                                 

Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
Transportation: Cargo                                 
Complete Innovations, Inc. (j) (k) (o)  C+6.75%  7.75%  12/16/2020  12/16/2025           8,757   $8,470   $8,853    4.6%
Complete Innovations, Inc. (Delayed Draw) (h) (i) (j) (k) (o)  C+6.75%  7.75%  12/16/2020  12/16/2025   1,282            0.0%
Pasha Group (g)   L+8.00%  9.00%  2/25/2020  1/26/2023   1,428    1,432    1,418    0.7%
                 11,467    9,902    10,271    5.3%
Wholesale                                 
S&S Holdings (g)  L+5.00%  5.50%  3/10/2021  3/10/2028   3,000    2,910    2,929    1.5%
                 3,000    2,910    2,929    1.5%
Total Senior Secured Loans                243,939    213,704    215,361    111.4%
                                  
Unitranche Secured Loans (p)                                 
Telecommunications                                 
VB E1, LLC (Delayed Draw) (g) (h) (i)  L+8.50%  9.00%  11/18/2020  11/18/2026   3,000    1,466    1,469    0.8%
                 3,000    1,466    1,469    0.8%
Total Unitranche Secured Loans                3,000    1,466    1,469    0.8%
                                  
Junior Secured Loans                                 
Capital Equipment                                 
ALTA Enterprises, LLC (g) (j)  L+8.00%  9.80%  2/14/2020  8/13/2025   3,783    3,672    3,934    2.0%
                 3,783    3,672    3,934    2.0%
Services: Business                                 
Software Luxembourg Acquisition S.A.R.L (g) (j) (k)  L+7.50%  8.50%  1/28/2020  4/25/2025   447    319    447    0.3%
                 447    319    447    0.3%
Total Junior Secured Loans                4,230    3,991    4,381    2.3%
                                  
Equity Securities (q) (r)                                  
Banking, Finance, Insurance & Real Estate                                 
InsideRE Holdings, LLC and InsideRE, LLC (267,963 Class A common units) (v)    (s)  9/9/2019         268    312    0.1%
J2 BWA Funding, LLC (0.7% profit sharing) (j) (v)    (s)  12/24/2020                 0.0%
                      268    312    0.1%
Beverage, Food & Tobacco                                 
Huff Hispanic Food Holdings, LLC (171,429 Class A interests)    (s)  10/18/2019         171    114    0.1%
                      171    114    0.1%
Capital Equipment                                 
MCP Shaw Acquisitionco, LLC (95,125 Class A-2 units) (v)    (s)  2/28/2020         95    125    0.1%
                      95    125    0.1%
Environmental Industries                                 
Quest Resource Holding Corporation (warrant to purchase up to 0.2% of the equity)    (s)  10/19/2020  3/19/2028       67    122    0.1%
                      67    122    0.1%
Healthcare & Pharmaceuticals                                 
Ascent Midco, LLC (725,806 Class A units) (v)  n/a  8.00% PIK   2/5/2020         726    1,172    0.6%
Seran BioScience, LLC (26,666 units) (v)    (s)  12/31/2020         267    308    0.1%
                      993    1,480    0.7%
High Tech Industries                                 
Recorded Future, Inc. (40,243 Class A units) (t)    (s)  7/3/2019         40    79    0.0%
MarkLogic Corporation (435,358 Class A units)    (s)  10/20/2020         435    698    0.4%
                      475    777    0.4%
Hotels, Gaming & Leisure                                 
Equine Network, LLC (85 Class A units) (v)  n/a  10.00% PIK   12/31/2020         85    87    0.0%
                      85    87    0.0%
Media: Advertising, Printing & Publishing                                 
Relevate Health Group, LLC (53 Preferred units)  n/a  12.00% PIK   11/20/2020         53    53    0.0%
Relevate Health Group, LLC (53 Class B common units)    (s)  11/20/2020             3    0.0%
XanEdu Publishing, Inc. (65,104 Class A units)  n/a  8.00% PIK   1/28/2020         65    103    0.1%
                      118    159    0.1%
Services: Business                                 
Software Luxembourg Acquisition S.A.R.L (4,187 Class A shares) (g) (j) (k)    (s)  1/28/2020         1,080    796    0.4%
                      1,080    796    0.4%
Services: Consumer                                 
IDIG Parent, LLC (192,908 shares of common stock) (u) (v)    (s)  1/4/2021         195    210    0.1%
Express Wash Acquisition Company, LLC (112,000 Class A units) (v)  n/a  8.00% PIK   12/28/2020         112    141    0.1%
                      307    351    0.2%
Total Equity Securities                     3,659    4,323    2.2%
                                  
TOTAL INVESTMENTS                    $222,820   $225,534    116.7%

 

11

 
MONROE CAPITAL INCOME PLUS CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
(unaudited)
March 31, 2021
(in thousands, except for shares and units)
                                 

Derivative Instruments

 

Foreign currency forward contracts

                  
   Notional Amount   Notional Amount        Unrealized Gain 
Description  to be Purchased   to be Sold  Counterparty  Settlement Date  (Loss) 
Foreign currency forward contract  $51    CAD      65  Bannockburn Global Forex, LLC  4/19/2021  $(1)
Foreign currency forward contract  $54    CAD      70  Bannockburn Global Forex, LLC  5/19/2021   (2)
Foreign currency forward contract  $49    CAD      63  Bannockburn Global Forex, LLC  6/17/2021   (1)
Foreign currency forward contract  $51    CAD      65  Bannockburn Global Forex, LLC  7/19/2021   (1)
Foreign currency forward contract  $54    CAD      70  Bannockburn Global Forex, LLC  8/18/2021   (2)
Foreign currency forward contract  $51    CAD      65  Bannockburn Global Forex, LLC  9/17/2021   (1)
Foreign currency forward contract  $51    CAD      65  Bannockburn Global Forex, LLC  10/19/2021   (1)
Foreign currency forward contract  $52    CAD      68  Bannockburn Global Forex, LLC  11/17/2021   (2)
Foreign currency forward contract  $51    CAD      66  Bannockburn Global Forex, LLC  12/17/2021   (1)
Foreign currency forward contract  $51    CAD      66  Bannockburn Global Forex, LLC  1/18/2022   (2)
Foreign currency forward contract  $54    CAD     70  Bannockburn Global Forex, LLC  2/17/2022   (2)
Foreign currency forward contract  $47    CAD      61  Bannockburn Global Forex, LLC  3/17/2022   (1)
Foreign currency forward contract  $52    CAD      68  Bannockburn Global Forex, LLC  4/19/2022   (2)
Foreign currency forward contract  $52    CAD      68  Bannockburn Global Forex, LLC  5/18/2022   (2)
Foreign currency forward contract  $51    CAD      66  Bannockburn Global Forex, LLC  6/17/2022   (1)
Foreign currency forward contract  $51    CAD      66  Bannockburn Global Forex, LLC  7/19/2022   (1)
Foreign currency forward contract  $52    CAD      68  Bannockburn Global Forex, LLC  8/17/2022   (2)
Foreign currency forward contract  $52    CAD      68  Bannockburn Global Forex, LLC  9/19/2022   (2)
Foreign currency forward contract  $54    CAD      70  Bannockburn Global Forex, LLC  10/19/2022   (2)
Foreign currency forward contract  $49    CAD      63  Bannockburn Global Forex, LLC  11/17/2022   (1)
Foreign currency forward contract  $51    CAD      66  Bannockburn Global Forex, LLC  12/19/2022   (1)
Foreign currency forward contract  $8,507    CAD    11,000  Bannockburn Global Forex, LLC  12/19/2022   (249)
Foreign currency forward contract  $137    AUD     173  Bannockburn Global Forex, LLC  4/20/2021   5 
Foreign currency forward contract  $75    AUD      95  Bannockburn Global Forex, LLC  5/18/2021   3 
Foreign currency forward contract  $86    AUD     108  Bannockburn Global Forex, LLC  6/17/2021   3 
Foreign currency forward contract  $77    AUD      98  Bannockburn Global Forex, LLC  7/16/2021   3 
Foreign currency forward contract  $80    AUD      101  Bannockburn Global Forex, LLC  8/17/2021   3 
Foreign currency forward contract  $85    AUD      108  Bannockburn Global Forex, LLC  9/16/2021   3 
Foreign currency forward contract  $83    AUD     105  Bannockburn Global Forex, LLC  10/19/2021   3 
Foreign currency forward contract  $75    AUD      95  Bannockburn Global Forex, LLC  11/16/2021   3 
Foreign currency forward contract  $85    AUD     108  Bannockburn Global Forex, LLC  12/16/2021   3 
Foreign currency forward contract  $91    AUD     115  Bannockburn Global Forex, LLC  1/19/2022   3 
Foreign currency forward contract  $75    AUD      95  Bannockburn Global Forex, LLC  2/16/2022   3 
Foreign currency forward contract  $75    AUD      95  Bannockburn Global Forex, LLC  3/16/2022   3 
Foreign currency forward contract  $82    AUD     105  Bannockburn Global Forex, LLC  4/19/2022   3 
Foreign currency forward contract  $77    AUD      98  Bannockburn Global Forex, LLC  5/17/2022   3 
Foreign currency forward contract  $88    AUD      112  Bannockburn Global Forex, LLC  6/17/2022   3 
Foreign currency forward contract  $77    AUD      98  Bannockburn Global Forex, LLC  7/18/2022   2 
Foreign currency forward contract  $77    AUD      98  Bannockburn Global Forex, LLC  8/16/2022   2 
Foreign currency forward contract  $88    AUD     112  Bannockburn Global Forex, LLC  9/16/2022   3 
Foreign currency forward contract  $88    AUD     112  Bannockburn Global Forex, LLC  10/19/2022   3 
Foreign currency forward contract  $74    AUD      95  Bannockburn Global Forex, LLC  11/16/2022   2 
Foreign currency forward contract  $80    AUD      101  Bannockburn Global Forex, LLC  12/16/2022   2 
Foreign currency forward contract  $87    AUD      112  Bannockburn Global Forex, LLC  1/18/2023   3 
Foreign currency forward contract  $77    AUD      98  Bannockburn Global Forex, LLC  2/16/2023   2 
Foreign currency forward contract  $74    AUD      95  Bannockburn Global Forex, LLC  3/16/2023   2 
Foreign currency forward contract  $93    AUD     118  Bannockburn Global Forex, LLC  4/20/2023   3 
Foreign currency forward contract  $63    AUD      81  Bannockburn Global Forex, LLC  5/16/2023   2 
Foreign currency forward contract  $90    AUD     115  Bannockburn Global Forex, LLC  6/19/2023   2 
Foreign currency forward contract  $77    AUD      98  Bannockburn Global Forex, LLC  7/18/2023   2 
Foreign currency forward contract  $82    AUD      105  Bannockburn Global Forex, LLC  8/16/2023   2 
Foreign currency forward contract  $82    AUD     105  Bannockburn Global Forex, LLC  9/18/2023   2 
Foreign currency forward contract  $84    AUD     108  Bannockburn Global Forex, LLC  10/18/2023   2 
Foreign currency forward contract  $77    AUD      98  Bannockburn Global Forex, LLC  11/16/2023   2 
Foreign currency forward contract  $79    AUD     101  Bannockburn Global Forex, LLC  12/18/2023   2 
Foreign currency forward contract  $84    AUD     108  Bannockburn Global Forex, LLC  1/17/2024   2 
Foreign currency forward contract  $79    AUD     101  Bannockburn Global Forex, LLC  2/16/2024   2 
Foreign currency forward contract  $76    AUD      98  Bannockburn Global Forex, LLC  3/18/2024   2 
Foreign currency forward contract  $8,365    AUD    10,746  Bannockburn Global Forex, LLC  3/18/2024   200 
                 $13 

12

 
MONROE CAPITAL INCOME PLUS CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
(unaudited)
March 31, 2021
(in thousands, except for shares and units)
                                 
 

(a) All of the Company’s investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940 (the “1940 Act”), unless otherwise noted. All of the Company’s investments are issued by U.S. portfolio companies unless otherwise noted.
(b) All investments are non-controlled/non-affiliated investments as defined by the 1940 Act. The 1940 Act classifies the Company’s control of or affiliation with investments based on the level of control that the Company maintains in each portfolio company. 
(c) The majority of the investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”), Canadian dollar Offered rate (“CDOR” or “C”), or (“Prime” or “P”), each of which resets daily, monthly, quarterly, or semiannually. For each such investment, the Company has provided the spread over LIBOR, CDOR or Prime and the current contractual interest rate in effect at March 31, 2021. Certain investments are subject to a LIBOR, CDOR or Prime interest rate floor or interest rate cap. Certain investments contain a payment-in-kind (“PIK”) provision.
(d) Except as otherwise noted, all of the Company’s portfolio company investments, which as of March 31, 2021 represented 116.7% of the Company’s net assets or 92.9% of the Company’s total assets, are subject to legal restrictions on sales.
(e) Because there is no readily available market value for these investments, the fair value of each of these investments is determined in good faith using significant unobservable inputs by the Company’s board of directors as required by the 1940 Act. (See Note 4 in the accompanying notes to the consolidated financial statements.)
(f) Percentages are based on net assets of $193,292 as of March 31, 2021.
(g) This security was held in MC Income Plus Financing SPV LLC (the “SPV”) as collateral for the Company’s secured revolving credit facility (the “Credit Facility”) with KeyBank National Association. (See Note 6 in the accompanying notes to the consolidated financial statements).
(h) All or a portion of this commitment was unfunded at March 31, 2021. As such, interest is earned only on the funded portion of this commitment.
(i) This delayed draw loan requires that certain financial covenants be met by the portfolio company prior to any fundings by the Company.
(j) This investment is treated as a non-qualifying investment under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of March 31, 2021, non-qualifying assets totaled 12.8% of the Company’s total assets.
(k) This is an international company.
(l) This loan is denominated in Australian dollars and is translated into U.S. dollars as of the valuation date.
(m) This position was on non-accrual status as of March 31, 2021, meaning that the Company has ceased accruing interest income on the position. See Note 2 in the accompanying notes to the consolidated financial statements for additional information on the Company’s accounting policies.
(n) A portion of this loan (principal of $2,680) is held in the SPV as collateral for the Credit Facility.
(o) This loan is denominated in Canadian dollars and is translated into U.S. dollars as of the valuation date.
(p) The Company structures its unitranche secured loans as senior secured loans. The Company obtains security interests in the assets of these portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take the form of first-priority liens on the assets of a portfolio company. Generally, the Company syndicates a “first out” portion of the loan to an investor and retains a “last out” portion of the loan, in which case the “first out” portion of the loan will generally receive priority with respect to payments of principal, interest and any other amounts due thereunder. Unitranche structures combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and the Company’s unitranche secured loans will expose the Company to the risks associated with second lien and subordinated loans and may limit the Company’s recourse or ability to recover collateral upon a portfolio company’s bankruptcy. Unitranche secured loans typically provide for moderate loan amortization in the initial years of the facility, with the majority of the amortization deferred until loan maturity. Unitranche secured loans generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. In many cases the Company, together with its affiliates, are the sole or majority lender of these unitranche secured loans, which can afford the Company additional influence with a borrower in terms of monitoring and, if necessary, remediation in the event of underperformance.
(q) Represents less than 5% ownership of the portfolio company’s voting securities.
(r) Ownership of certain equity investments may occur through a holding company or partnership.
(s) Represents a non-income producing security. 
(t) As of March 31, 2021, the Company was party to a subscription agreement with a commitment to fund an additional equity investment of $8.
(u) As of March 31, 2021, the Company was party to a subscription agreement with a commitment to fund an additional equity investment of $34.
(v) Investment is held by a taxable subsidiary of the Company. See Note 2 in the accompanying notes to the consolidated financial statements for additional information on the Company’s wholly-owned taxable subsidiaries.
n/a - not applicable
 
See Notes to Consolidated Financial Statements.

13

 

MONROE CAPITAL INCOME PLUS CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2020

(in thousands, except for shares and units)

 

Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
Investments:                                 
Senior Secured Loans                                 
Aerospace & Defense                                 
API Holdings III Corp. (g)  L+4.25%  4.40%  5/2/2019  5/8/2026   1,675   $1,668   $1,603    1.2%
SI Holdings, Inc. (Integrated Polymer Solutions) (g)   L+5.75%  6.75%  12/24/2019  7/25/2025   1,031    1,013    1,031    0.7%
SI Holdings, Inc. (Integrated Polymer Solutions) (g)   L+5.75%  6.75%  7/25/2019  7/25/2025   1,975    1,942    1,976    1.4%
SI Holdings, Inc. (Integrated Polymer Solutions) (Revolver) (h)  L+5.75%  6.75%  7/25/2019  7/25/2024   316    79    79    0.1%
                 4,997    4,702    4,689    3.4%
Automotive                                 
Truck-Lite Co., LLC (g)   L+6.25%  7.25%  3/11/2020  12/14/2026   3,452    3,421    3,432    2.5%
Truck-Lite Co., LLC  L+6.25%  7.25%  3/11/2020  12/14/2026   512    512    508    0.4%
                 3,964    3,933    3,940    2.9%
Banking, Finance, Insurance & Real Estate                                 
300 N. Michigan Mezz, LLC (Delayed Draw) (g) (h) (i) (j)  L+14.50%  16.00% PIK   7/15/2020  7/15/2024   1,000    464    471    0.3%
777 SPV I, LLC (j)  L+8.50%  10.25%  4/15/2019  4/14/2023   1,555    1,543    1,587    1.2%
Avison Young (USA), Inc. (g) (j) (k)  L+5.00%  5.25%  4/26/2019  1/30/2026   1,965    1,949    1,868    1.3%
InsideRE Holdings, LLC and InsideRE, LLC (g)  L+6.00%  7.00%  9/9/2019  9/9/2024   2,963    2,917    2,992    2.2%
InsideRE Holdings, LLC and InsideRE, LLC (Revolver) (h)  L+6.00%  7.00%  9/9/2019  9/9/2024   429            0.0%
J2 BWA Funding, LLC (Delayed Draw) (h) (i) (j)  n/a  10.00%  12/24/2020  12/24/2026   2,850            0.0%
NCBP Property, LLC (j)  L+9.50%  10.50%  12/18/2020  12/16/2022   2,500    2,475    2,475    1.8%
US Claims Litigation Funding, LLC (Revolver) (h) (j)  L+8.75%  9.75%  11/30/2020  11/29/2024   1,500    850    850    0.6%
                 14,762    10,198    10,243    7.4%
Beverage, Food & Tobacco                                 
Huff Hispanic Food Holdings, LLC (g)  L+5.50%  6.50%  10/18/2019  10/18/2024   5,925    5,832    5,842    4.2%
Huff Hispanic Food Holdings, LLC  L+5.50%  6.50%  10/18/2019  10/18/2024   333    333    329    0.2%
Huff Hispanic Food Holdings, LLC (Revolver) (h)  L+5.50%  6.50%  10/18/2019  10/18/2024   1,286    429    423    0.3%
LX/JT Intermediate Holdings, Inc. (g)  L+6.00%  7.50%  3/11/2020  3/11/2025   5,839    5,738    5,740    4.2%
LX/JT Intermediate Holdings, Inc. (Revolver) (h)  L+6.00%  7.50%  3/11/2020  3/11/2025   500            0.0%
                 13,883    12,332    12,334    8.9%
Capital Equipment                                 
MCP Shaw Acquisitionco, LLC (g)  L+6.50%  7.50%  2/28/2020  11/28/2025   7,939    7,802    7,777    5.7%
MCP Shaw Acquisitionco, LLC (Revolver) (h)  L+6.50%  7.50%  2/28/2020  11/28/2025   1,427            0.0%
                 9,366    7,802    7,777    5.7%
Construction & Building                                 
Premier Roofing, LLC (g)  L+6.50%  7.50%  8/31/2020  8/29/2025   3,500    3,434    3,495    2.5%
Premier Roofing, LLC (Revolver) (h)  L+6.50%  7.50%  8/31/2020  8/29/2025   1,199            0.0%
                 4,699    3,434    3,495    2.5%
Consumer Goods: Durable                                 
Franchise Group Intermediate Holdco, LLC (g)  L+8.00%  9.50%  2/24/2020  2/14/2025   3,852    3,787    3,805    2.8%
                 3,852   3,787    3,805    2.8%

14

 

MONROE CAPITAL INCOME PLUS CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)

December 31, 2020

(in thousands, except for shares and units)

 

Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
Consumer Goods: Non-Durable                                 
Thrasio, LLC (g)  L+7.00%  8.00%  12/18/2020  12/18/2026   3,000   $2,925   $2,925    2.1%
Thrasio, LLC (Delayed Draw) (h) (i)  L+7.00%  8.00%  12/18/2020  12/18/2026   1,980            0.0%
                 4,980    2,925    2,925    2.1%
Containers, Packaging & Glass                                 
Polychem Acquisition, LLC (g)  L+5.00%  5.15%  4/8/2019  3/17/2025   1,965    1,957    1,965    1.4%
Port Townsend Holdings Company, Inc. and Crown Corrugated Company (Delayed Draw) (h) (i)  L+7.75%  5.75% Cash/
3.00% PIK
   10/16/2020  12/30/2021   165            0.0%
                 2,130    1,957    1,965    1.4%
Energy: Oil & Gas                                 
BW Gas & Convenience Holdings, LLC (g)   L+6.25%  6.40%  11/15/2019  11/18/2024   1,593    1,540    1,603    1.1%
Fieldwood Energy, LLC (g)   P+4.25%  7.50% (l)  1/11/2020  4/11/2022   1,000    901    234    0.2%
Par Petroleum, LLC (g)  L+6.75%  6.98%  1/27/2020  1/12/2026   961    967    917    0.7%
                 3,554    3,408    2,754    2.0%
Environmental Industries                                 
Quest Resource Management Group, LLC (g)   L+8.50%  9.75%  10/19/2020  10/20/2025   1,000    933    979    0.7%
Quest Resource Management Group, LLC (Delayed Draw) (h) (i)  L+8.50%  9.75%  10/19/2020  10/20/2025   1,087            0.0%
                 2,087    933    979    0.7%
Healthcare & Pharmaceuticals                                 
Apotheco, LLC (g)  L+8.50%  6.50% Cash/
3.00% PIK
   4/8/2019  4/8/2024   1,770    1,746    1,658    1.2%
Apotheco, LLC (Revolver)  L+8.50%  6.50% Cash/
3.00% PIK
   4/8/2019  4/8/2024   463    463    434    0.3%
Ascent Midco, LLC (g)  L+5.50%  6.50%  2/5/2020  2/5/2025   2,475    2,433    2,499    1.8%
Ascent Midco, LLC (Delayed Draw) (h) (i)  L+5.50%  6.50%  2/5/2020  2/5/2025   1,014            0.0%
Ascent Midco, LLC (Revolver) (h)  L+5.50%  6.50%  2/5/2020  2/5/2025   403            0.0%
ERC Finance, LLC (g)  L+4.50%  5.50%  4/23/2019  9/20/2024   1,965    1,940    1,916    1.4%
nThrive, Inc. (g)  L+4.50%  5.50%  5/3/2019  10/20/2022   2,455    2,422    2,445    1.8%
QF Holdings, Inc. (g)  L+6.50%  7.50%  9/19/2019  9/19/2024   4,550    4,479    4,527    3.3%
QF Holdings, Inc.  L+6.50%  7.50%  9/19/2019  9/19/2024   910    910    905    0.7%
QF Holdings, Inc. (Delayed Draw) (h) (i)  L+6.50%  7.50%  8/21/2020  9/19/2024   910            0.0%
QF Holdings, Inc. (Revolver) (h)  L+6.50%  7.50%  9/19/2019  9/19/2024   546            0.0%
Seran BioScience, LLC (g)  L+7.25%  8.25%  12/31/2020  12/31/2025   2,000    1,960    1,960    1.4%
Seran BioScience, LLC (Revolver) (h)  L+7.25%  8.25%  12/31/2020  12/31/2025   356            0.0%
WebPT, Inc. (g)   L+6.75%  7.75%  8/28/2019  8/28/2024   5,000    4,922    5,029    3.7%
WebPT, Inc. (Delayed Draw) (h) (i)   L+6.75%  7.75%  8/28/2019  8/28/2024   625            0.0%
WebPT, Inc. (Revolver) (h)  L+6.75%  7.75%  8/28/2019  8/28/2024   521    156    156    0.1%
                 25,963    21,431    21,529    15.7%
High Tech Industries                                 
Acquia, Inc. (g)  L+7.00%  8.00%  11/1/2019  10/31/2025   5,429    5,338    5,511    4.0%
Acquia, Inc. (Revolver) (h)  L+7.00%  8.00%  11/1/2019  10/31/2025   588            0.0%
Instructure, Inc. (g)  L+7.00%  8.00%  12/22/2020  3/24/2026   813    785    816    0.6%
Instructure, Inc. (g)  L+7.00%  8.00%  3/24/2020  3/24/2026   8,933    8,838    8,968    6.5%
Instructure, Inc. (Revolver) (h)  L+7.00%  8.00%  3/24/2020  3/24/2026   697            0.0%
MarkLogic Corporation (g)  L+8.00%  9.00%  10/20/2020  10/20/2025   5,250    5,122    5,316    3.9%
MarkLogic Corporation (Revolver) (h)  L+8.00%  9.00%  10/20/2020  10/20/2025   404            0.0%
Mindbody, Inc. (g)  L+8.50%  8.00% Cash/
1.50% PIK
   2/15/2019  2/14/2025   1,825    1,798    1,755    1.3%

15

 

 

MONROE CAPITAL INCOME PLUS CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)

December 31, 2020

(in thousands, except for shares and units)

 

Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
Mindbody, Inc. (Revolver) (h)  L+8.00%  9.00%  2/15/2019  2/14/2025   190   $   $    0.0%
Mockingbird Acquisitionco, Inc. (g)  L+7.00%  8.00%  10/1/2020  10/1/2025   3,000    2,942    2,985    2.2%
Mockingbird Acquisitionco, Inc. (Revolver) (h)  L+7.00%  8.00%  10/1/2020  10/1/2025   600            0.0%
Recorded Future, Inc. (g)  L+6.25%  7.25%  7/3/2019  7/3/2025   3,667    3,608    3,740    2.7%
Recorded Future, Inc. (Delayed Draw) (h) (i)  L+6.25%  7.25%  7/3/2019  7/3/2025   293            0.0%
Recorded Future, Inc. (Revolver) (h)  L+6.25%  7.25%  7/3/2019  7/3/2025   440    293    293    0.2%
Transact Holdings, Inc. (g)   L+4.75%  4.90%  4/18/2019  4/30/2026   741    730    724    0.5%
                 32,870    29,454    30,108    21.9%
Hotels, Gaming & Leisure                                 
Equine Network, LLC (g)  L+8.00%  9.00%  12/31/2020  12/31/2025   1,500    1,466    1,466    1.1%
Equine Network, LLC (Delayed Draw) (h) (i)  L+8.00%  9.00%  12/31/2020  12/31/2025   366            0.0%
Equine Network, LLC (Revolver) (h)  L+8.00%  9.00%  12/31/2020  12/31/2025   146            0.0%
                 2,012    1,466    1,466    1.1%
Media: Advertising, Printing & Publishing                                 
Digital Room Holdings, Inc. (g)  L+5.00%  5.27%  5/9/2019  5/21/2026   2,181    2,158    2,067    1.5%
North Haven USHC Acquisition, Inc. (g)  L+6.50%  7.50%  10/30/2020  10/30/2025   2,500    2,451    2,525    1.8%
North Haven USHC Acquisition, Inc. (Revolver) (h)  L+6.50%  7.50%  10/30/2020  10/30/2025   240            0.0%
NTM Acquisition Corp. (g)  L+7.25%  7.25% Cash/
1.00% PIK
   4/18/2019  6/7/2024   4,741    4,728    4,267    3.1%
Relevate Health Group, LLC (g)  L+6.25%  7.25%  11/20/2020  11/20/2025   2,000    1,961    2,007    1.5%
Relevate Health Group, LLC (Delayed Draw) (h) (i)  L+6.25%  7.25%  11/20/2020  11/20/2025   1,053    895    898    0.7%
Relevate Health Group, LLC (Revolver) (h)  L+6.25%  7.25%  11/20/2020  11/20/2025   421            0.0%
XanEdu Publishing, Inc. (g)  L+6.50%  7.50%  1/28/2020  1/28/2025   2,481    2,440    2,487    1.8%
XanEdu Publishing, Inc. (Revolver) (h)  L+6.50%  7.50%  1/28/2020  1/28/2025   651    259    259    0.2%
                 16,268    14,892    14,510    10.6%
Media: Broadcasting & Subscription                                 
Vice Group Holding, Inc.  L+12.00%  5.50% Cash/
8.00% PIK
   11/4/2019  11/2/2022   195    195    198    0.1%
Vice Group Holding, Inc.  L+12.00%  5.50% Cash/
8.00% PIK
   5/2/2019  11/2/2022   1,016    1,011    1,029    0.8%
Vice Group Holding, Inc.  L+12.00%  5.50% Cash/
8.00% PIK
   5/2/2019  11/2/2022   319    319    323    0.2%
Vice Group Holding, Inc.  L+12.00%  5.50% Cash/
8.00% PIK
   5/2/2019  11/2/2022   120    120    122    0.1%
                 1,650    1,645    1,672    1.2%
Media: Diversified & Production                                 
Crownpeak Technology, Inc. (g)  L+6.25%  7.25%  2/28/2019  2/28/2024   1,000    987    990    0.7%
Crownpeak Technology, Inc.  L+6.25%  7.25%  2/28/2019  2/28/2024   15    15    15    0.0%
Crownpeak Technology, Inc. (Revolver) (h)  L+6.25%  7.25%  2/28/2019  2/28/2024   42            0.0%
Streamland Media MidCo, LLC (fka Picture Head Midco, LLC) (g)  L+7.25%  7.75% Cash/
0.50% PIK
   8/26/2019  8/31/2023   1,998    1,970    1,897    1.4%
                 3,055    2,972    2,902    2.1%
Metals & Mining                                 
Contura Energy, Inc. (g)  L+7.00%  9.00%  1/15/2020  6/14/2024   990    846    679    0.5%
                 990    846    679    0.5%
Services: Business                                 
Arcserve (USA), LLC (g)  L+6.00%  7.00%  5/1/2019  5/1/2024   1,390    1,370    1,393    1.0%
Certify, Inc. (g)  L+5.75%  6.75%  2/28/2019  2/28/2024   1,000    990    1,000    0.7%
Certify, Inc.  L+5.75%  6.75%  2/28/2019  2/28/2024   136    136    136    0.1%
Certify, Inc. (Revolver) (h)  L+5.75%  6.75%  2/28/2019  2/28/2024   46    11    11    0.0%
Governmentjobs.com, Inc. (g)  L+6.50%  7.50%  2/5/2020  2/5/2026   7,000    6,877    6,885    5.0%

16

 

MONROE CAPITAL INCOME PLUS CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)

December 31, 2020

(in thousands, except for shares and units)

 

Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
Governmentjobs.com, Inc. (Revolver) (h)  L+6.50%  7.50%  2/5/2020  2/5/2026   933   $70   $69    0.1%
HS4 Acquistionco, Inc. (g)  L+6.75%  7.75%  7/9/2019  7/9/2025   4,000    3,935    3,952    2.8%
HS4 Acquistionco, Inc. (Revolver) (h)  L+6.75%  7.75%  7/9/2019  7/9/2025   325            0.0%
Kaseya, Inc. (m)  L+7.00%  5.00% Cash/
3.00% PIK
   5/3/2019  5/2/2025   2,843    2,800    2,872    2.1%
Kaseya, Inc.  L+7.00%  5.00% Cash/
3.00% PIK
   5/3/2019  5/2/2025   302    302    305    0.2%
Kaseya, Inc. (Delayed Draw) (h) (i)  L+7.00%  5.00% Cash/
3.00% PIK
   3/4/2020  3/4/2022   274            0.0%
Kaseya, Inc. (Revolver) (h)  L+6.50%  7.50%  5/3/2019  5/2/2025   211    103    103    0.1%
Software Luxembourg Acquisition S.A.R.L (g) (j) (k)  L+7.50%  8.50%  8/3/2020  12/27/2024   385    373    394    0.3%
                 18,845    16,967    17,120    12.4%
Services: Consumer                                 
Express Wash Acquisition Company, LLC (g)  L+6.50%  7.50%  12/28/2020  12/26/2025   2,800    2,751    2,751    2.0%
Express Wash Acquisition Company, LLC (Revolver) (h)  L+6.50%  7.50%  12/28/2020  12/26/2025   1,120            0.0%
IDIG Parent, LLC (g) (n)  L+6.50%  7.50%  12/15/2020  12/15/2026   8,000    7,841    7,840    5.7%
IDIG Parent, LLC (Delayed Draw) (h) (i)  L+6.50%  7.50%  12/15/2020  12/15/2026   1,321            0.0%
IDIG Parent, LLC (Revolver) (h)  L+6.50%  7.50%  12/15/2020  12/15/2026   567            0.0%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  8/1/2019  1/2/2024   1,227    1,213    1,223    0.9%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/1/2019  1/2/2024   233    230    232    0.2%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/1/2019  1/2/2024   443    438    442    0.3%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/6/2019  1/2/2024   121    121    121    0.1%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/6/2019  1/2/2024   1,292    1,292    1,288    0.9%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  2/12/2020  1/2/2024   63    63    63    0.0%
Light Wave Dental Management, LLC (g)  L+6.00%  8.00%  12/31/2020  1/2/2024   263    259    262    0.2%
Light Wave Dental Management, LLC  L+6.00%  8.00%  12/6/2019  1/2/2024   361    356    360    0.3%
Light Wave Dental Management, LLC  L+6.00%  8.00%  8/1/2019  1/2/2024   244    244    243    0.2%
Light Wave Dental Management, LLC (Revolver)  L+6.00%  8.00%  8/1/2019  1/2/2024   128    128    128    0.1%
                 18,183    14,936    14,953    10.9%
Telecommunications                                 
DataOnline Corp. (g)  L+6.25%  7.25%  11/13/2019  11/13/2025   6,435    6,316    6,171    4.5%
DataOnline Corp. (Revolver) (h)  L+6.25%  7.25%  11/13/2019  11/13/2025   844    718    688    0.5%
                 7,279    7,034    6,859    5.0%

17

 

MONROE CAPITAL INCOME PLUS CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)

December 31, 2020

(in thousands, except for shares and units)

 

Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
Transportation: Cargo                                 
Complete Innovations, Inc. (j) (k) (o)  C+6.75%  7.75%  12/16/2020  12/16/2025   8,645   $8,460   $8,472    6.2%
Complete Innovations, Inc. (Delayed Draw) (h) (i) (j) (k) (o)  C+6.75%  7.75%  12/16/2020  12/16/2025   1,265            0.0%
Pasha Group (g)   L+8.00%  9.00%  2/25/2020  1/26/2023   1,535    1,539    1,408    1.0%
                 11,445    9,999    9,880    7.2%
Total Senior Secured Loans                206,834    177,053    176,584    128.4%
                                  
Unitranche Secured Loans (u)                                 
Banking, Finance, Insurance & Real Estate                                 
Kudu Investment Holdings, LLC (j) (p)  L+5.75%  6.75%  12/23/2019  12/23/2025   3,966    3,924    3,986    2.9%
Kudu Investment Holdings, LLC (Delayed Draw) (h) (i) (j)  L+5.75%  6.75%  12/23/2019  12/23/2025   1,179    224    225    0.2%
                 5,145    4,148    4,211    3.1%
Telecommunications                                 
VB E1, LLC (Delayed Draw) (g) (h) (i)  L+8.50%  9.00%  11/18/2020  11/18/2026   3,000    1,466    1,466    1.1%
                 3,000    1,466    1,466    1.1%
Total Unitranche Secured Loans (u)                8,145    5,614    5,677    4.2%
                                  
Junior Secured Loans                                 
Capital Equipment                                 
ALTA Enterprises, LLC (g) (j)  L+8.00%  9.80%  2/14/2020  8/13/2025   3,850    3,732    3,886    2.9%
                 3,850    3,732    3,886    2.9%
Services: Business                                 
Software Luxembourg Acquisition S.A.R.L (fka Evergreen Skills LUX S.A.R.L) (g) (j) (k)  L+7.50%  8.50%  1/28/2020  4/25/2025   447    314    448    0.3%
                 447    314    448    0.3%
Total Junior Secured Loans                4,297    4,046    4,334    3.2%
                                  
Equity Securities (q) (r)                                  
Banking, Finance, Insurance & Real Estate                                 
InsideRE Holdings, LLC and InsideRE, LLC (267,963 Class A common units)    (s)  9/9/2019         268    308    0.2%
J2 BWA Funding, LLC (0.7% profit sharing) (j)    (s)  12/24/2020                 0.0%
                      268    308    0.2%
Beverage, Food & Tobacco                                 
Huff Hispanic Food Holdings, LLC (171,429 Class A interests)    (s)  10/18/2019         171    118    0.1%
                      171    118    0.1%
Capital Equipment                                 
MCP Shaw Acquisitionco, LLC (95,125 Class A-2 units)    (s)  2/28/2020         95    114    0.1%
                      95    114    0.1%
Environmental Industries                                 
Quest Resource Holding Corporation (warrant to purchase up to 0.2% of the equity)    (s)  10/19/2020  3/19/2028       67    87    0.1%
                      67    87    0.1%
Healthcare & Pharmaceuticals                                 
Ascent Midco, LLC (725,806 Class A units)  n/a  8.00% PIK   2/5/2020         726    1,078    0.8%
Seran BioScience, LLC (26,666 units)    (s)  12/31/2020         267    267    0.2%
                      993    1,345    1.0%

18

 

MONROE CAPITAL INCOME PLUS CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)

December 31, 2020

(in thousands, except for shares and units)

 

Portfolio Company (a) (b)  Spread Above
 Index (c)
  Interest Rate   Acquisition Date (d)  Maturity   Principal   Amortized Cost   Fair Value (e)   % of
Net Assets (f)
 
High Tech Industries                                 
Recorded Future, Inc. (40,243 Class A units) (t)    (s)  7/3/2019        $40   $65    0.0%
MarkLogic Corporation (434,911 Class A units)    (s)  10/20/2020         435    428    0.3%
                      475    493    0.3%
Hotels, Gaming & Leisure                                 
Equine Network, LLC (52 Class A units)  n/a  10.00% PIK   12/31/2020         52    52    0.0%
                      52    52    0.0%
Media: Advertising, Printing & Publishing                                 
Relevate Health Group, LLC (53 Preferred units)  n/a  12.00% PIK   11/20/2020         53    53    0.0%
Relevate Health Group, LLC (53 Class B common units)    (s)  11/20/2020             2    0.0%
XanEdu Publishing, Inc. (65,104 Class A units)  n/a  8.00% PIK   1/28/2020         65    93    0.1%
                      118    148    0.1%
Services: Business                                 
Software Luxembourg Acquisition S.A.R.L. (fka Evergreen Skills LUX S.A.R.L.) (4,187 Class A shares) (g) (j) (k)    (s)  1/28/2020         1,080    764    0.5%
                      1,080    764    0.5%
Services: Consumer                                 
Express Wash Acquisition Company, LLC (112,000 Class A units)  n/a  8.00% PIK   12/28/2020         112    112    0.1%
                      112    112    0.1%
Total Equity Securities                     3,431    3,541    2.5%
                                  
TOTAL INVESTMENTS                    $190,144   $190,136    138.3%

 

Derivative Instruments

 

Foreign currency forward contracts

 

   Notional Amount   Notional Amount        Unrealized Gain 
Description  to be Purchased   to be Sold  Counterparty  Settlement Date  (Loss) 
Foreign currency forward contract  $51    CAD 65  Bannockburn Global Forex, LLC  1/19/2021  $(1)
Foreign currency forward contract  $52    CAD 68  Bannockburn Global Forex, LLC  2/17/2021   (1)
Foreign currency forward contract  $49    CAD 63  Bannockburn Global Forex, LLC  3/18/2021    
Foreign currency forward contract  $51    CAD 65  Bannockburn Global Forex, LLC  4/19/2021   (1)
Foreign currency forward contract  $54    CAD 70  Bannockburn Global Forex, LLC  5/19/2021   (1)
Foreign currency forward contract  $49    CAD 63  Bannockburn Global Forex, LLC  6/17/2021    
Foreign currency forward contract  $51    CAD 65  Bannockburn Global Forex, LLC  7/19/2021   (1)
Foreign currency forward contract  $54    CAD 70  Bannockburn Global Forex, LLC  8/18/2021   (1)
Foreign currency forward contract  $51    CAD 65  Bannockburn Global Forex, LLC  9/17/2021   (1)
Foreign currency forward contract  $51    CAD 65  Bannockburn Global Forex, LLC  10/19/2021   (1)
Foreign currency forward contract  $52    CAD 68  Bannockburn Global Forex, LLC  11/17/2021   (1)
Foreign currency forward contract  $51    CAD 66  Bannockburn Global Forex, LLC  12/17/2021   (1)
Foreign currency forward contract  $51    CAD 66  Bannockburn Global Forex, LLC  1/18/2022   (1)
Foreign currency forward contract  $54    CAD 70  Bannockburn Global Forex, LLC  2/17/2022   (1)
Foreign currency forward contract  $47    CAD 61  Bannockburn Global Forex, LLC  3/17/2022    
Foreign currency forward contract  $52    CAD 68  Bannockburn Global Forex, LLC  4/19/2022   (1)
Foreign currency forward contract  $52    CAD 68  Bannockburn Global Forex, LLC  5/18/2022   (1)
Foreign currency forward contract  $51    CAD 66  Bannockburn Global Forex, LLC  6/17/2022   (1)
Foreign currency forward contract  $51    CAD 66  Bannockburn Global Forex, LLC  7/19/2022   (1)
Foreign currency forward contract  $52    CAD 68  Bannockburn Global Forex, LLC  8/17/2022   (1)
Foreign currency forward contract  $52    CAD 68  Bannockburn Global Forex, LLC  9/19/2022   (1)
Foreign currency forward contract  $54    CAD 70  Bannockburn Global Forex, LLC  10/19/2022   (1)
Foreign currency forward contract  $49    CAD 63  Bannockburn Global Forex, LLC  11/17/2022    
Foreign currency forward contract  $51    CAD 66  Bannockburn Global Forex, LLC  12/19/2022   (1)
Foreign currency forward contract  $8,507    CAD 11,000  Bannockburn Global Forex, LLC  12/19/2022   (137)
                 $(157)

19

 

MONROE CAPITAL INCOME PLUS CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)

December 31, 2020

(in thousands, except for shares and units)

 

(a) All of the Company’s investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940 (the “1940 Act”), unless otherwise noted. All of the Company’s investments are issued by U.S. portfolio companies unless otherwise noted.
(b) All investments are non-controlled/non-affiliated investments as defined by the 1940 Act. The 1940 Act classifies investments based on the level of control that the Company maintains in a particular portfolio company.
(c) The majority of the investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”), Canadian dollar Offered Rate (“CDOR” or “C”), or Prime Rate (“Prime” or “P”) which resets daily, monthly, quarterly, or semiannually. For each such investment, the Company has provided the spread over LIBOR, CDOR or Prime and the current contractual interest rate in effect at December 31, 2020. Certain investments are subject to a LIBOR, CDOR or Prime interest rate floor or interest rate cap.
(d) Except as otherwise noted, all of the Company’s portfolio company investments, which as of December 31, 2020 represented 138.3% of the Company’s net assets or 96.3% of the Company’s total assets, are subject to legal restrictions on sales.
(e) Because there is no readily available market value for these investments, the fair value of each of these investments is determined in good faith using significant unobservable inputs by the Company’s board of directors as required by the 1940 Act. (See Note 4 in the accompanying notes to the consolidated financial statements.)
(f) Percentages are based on net assets of $137,513 as of December 31, 2020.
(g) This security was held in MC Income Plus Financing SPV LLC (the “SPV”) as collateral for the Company’s secured revolving credit facility (the “Credit Facility”) with KeyBank National Association. (See Note 6 in the accompanying notes to the consolidated financial statements).
(h) All or a portion of this commitment was unfunded at December 31, 2020. As such, interest is earned only on the funded portion of this commitment.
(i) This delayed draw loan requires that certain financial covenants be met by the portfolio company prior to any fundings by the Company.
(j) This investment is treated as a non-qualifying investment under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2020, non-qualifying assets totaled 12.9% of the Company’s total assets.
(k) This is an international company.
(l) This position was on non-accrual status as of December 31, 2020, meaning that the Company has ceased accruing interest income on the position. See Note 2 in the accompanying notes to the consolidated financial statements for additional information on the Company’s accounting policies.
(m) A portion of this loan (principal of $2,659) is held in the SPV as collateral for the Credit Facility.
(n) As of December 31, 2020, the Company was party to a subscription agreement with a commitment to fund an equity investment of $227.
(o) This loan is denominated in Canadian dollars and is translated into U.S. dollars as of the valuation date.
(p) A portion of this loan (principal of $2,750) is held in the SPV as collateral for the Credit Facility.
(q) Represents less than 5% ownership of the portfolio company’s voting securities.
(r) Ownership of certain equity investments may occur through a holding company or partnership.
(s) Represents a non-income producing security.
(t) As of December 31, 2020, the Company was party to a subscription agreement with a commitment to fund an additional equity investment of $8.
(u) The Company structures its unitranche secured loans as senior secured loans. The Company obtains security interests in the assets of these portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take the form of first-priority liens on the assets of a portfolio company. Generally, the Company syndicates a “first out” portion of the loan to an investor and retains a “last out” portion of the loan, in which case the “first out” portion of the loan will generally receive priority with respect to payments of principal, interest and any other amounts due thereunder. Unitranche structures combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and the Company’s unitranche secured loans will expose the Company to the risks associated with second lien and subordinated loans and may limit the Company’s recourse or ability to recover collateral upon a portfolio company’s bankruptcy. Unitranche secured loans typically provide for moderate loan amortization in the initial years of the facility, with the majority of the amortization deferred until loan maturity. Unitranche secured loans generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. In many cases the Company, together with its affiliates, are the sole or majority lender of these unitranche secured loans, which can afford the Company additional influence with a borrower in terms of monitoring and, if necessary, remediation in the event of underperformance.
n/a - not applicable

 

See Notes to Consolidated Financial Statements.

20

 

MONROE CAPITAL INCOME PLUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(unaudited) 

(in thousands, except share and per share data)

 

Note 1. Organization and Principal Business

 

Monroe Capital Income Plus Corporation (together with its subsidiaries, the “Company”) is a Maryland corporation that was formed to act as an externally managed, closed-end, non-diversified investment company. The Company is a specialty finance company organized to maximize the total return to the Company’s stockholders in the form of current income and capital appreciation through a variety of investments. The Company is managed by Monroe Capital BDC Advisors, LLC (“MC Advisors”). The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. federal income tax purposes, the Company elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company currently qualifies and intends to qualify annually to be treated as a RIC for U.S. federal income tax purposes.

 

The Company may conduct private offerings, subject to approval by the Company’s board of directors (the “Board”). The Company is conducting its second best efforts, continuous private offering of its common stock to accredited investors in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). At each closing, an investor purchases shares of the Company’s common stock pursuant to a subscription agreement entered into with the Company. See Note 9 for additional information on the Company’s share activity.

 

On March 12, 2019, the Company created a wholly-owned subsidiary, MC Income Plus Financing SPV LLC (the “SPV”), for purposes of entering into a senior secured revolving credit facility (the “Credit Facility”) with KeyBank National Association. See Note 6 for additional information on the Credit Facility.

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The accompanying consolidated financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. The Company has determined it meets the definition of an investment company and follows the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 — Financial Services — Investment Companies (“ASC Topic 946”).

 

As an emerging growth company, the Company intends to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Consolidation

 

As permitted under ASC Topic 946, the Company will generally not consolidate its investment in a portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of its wholly-owned subsidiaries, including the SPV and the Company’s wholly owned taxable subsidiaries (the “Taxable Subsidiaries”) in its consolidated financial statements. The purpose of the Taxable Subsidiaries is to permit the Company to hold equity investments in portfolio companies that are taxed as partnerships for U.S. federal income tax purposes while complying with the “source of income” requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are not consolidated with the Company for U.S. federal corporate income tax purposes, and each Taxable Subsidiary is subject to U.S. federal corporate income tax on its taxable income. All intercompany balances and transactions have been eliminated.

21

 

Fair Value of Financial Instruments

 

The Company applies fair value to substantially all of its financial instruments in accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework used to measure fair value, and requires disclosures for fair value measurements, including the categorization of financial instruments into a three-level hierarchy based on the transparency of valuation inputs. See Note 4 for further discussion regarding the fair value measurements and hierarchy.

 

ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts of its other financial instruments such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such instruments.

 

Revenue Recognition

 

The Company’s revenue recognition policies are as follows:

 

Investments and related investment income: Interest and dividend income is recorded on the accrual basis to the extent that the Company expects to collect such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. The Company records fees on loans based on the determination of whether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associated with a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interest method if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no cost basis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service, the fee is deemed earned and recognized as fee income in the period during which the service has been completed.

 

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies. Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the applicable distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment. For the three months ended March 31, 2021 and 2020, the Company did not receive any return of capital distributions from its equity investments.

 

The Company has certain investments in its portfolio that contain a payment-in-kind (“PIK”) provision, which represents contractual interest or dividends that are added to the principal balance and recorded as income. The Company stops accruing PIK interest or PIK dividends when it is determined that PIK interest or PIK dividends are no longer collectible. To maintain RIC tax treatment, and to avoid incurring corporate U.S. federal income tax, substantially all of this income must be paid out to stockholders in the form of distributions, even though the Company has not yet collected the cash.

 

Loan origination fees, original issue discount and market discount or premiums are capitalized, and the Company then amortizes such amounts using the effective interest method as interest income over the life of the investment. Unamortized discounts and loan origination fees totaled $3,467 and $3,250 as of March 31, 2021 and December 31, 2020, respectively. Upfront loan origination and closing fees received for the three months ended March 31, 2021 and 2020 totaled $588 and $1,672, respectively. Upon the prepayment of a loan or debt security, any unamortized premium or discount or loan origination fees are recorded as interest income.

22

 

The components of the Company’s investment income were as follows:

 

   Three months ended March 31, 
   2021   2020 
Interest income  $3,813   $2,470 
PIK interest income   176    29 
Dividend income (1)   21    10 
Fee income   278     
Prepayment gain (loss)   178    55 
Accretion of discounts and amortization of premium   189    125 
Total investment income  $4,655   $2,689 

 

 

(1) Includes PIK dividends of $21 and $10, respectively.

 

Investment transactions are recorded on a trade-date basis. Realized gains or losses on portfolio investments are calculated based upon the difference between the net proceeds from the disposition and the amortized cost basis of the investment, without regard to unrealized gains or losses previously recognized. Realized gains and losses are recorded within net realized gain (loss) on investments on the consolidated statements of operations. Changes in the fair value of investments from the prior period, as determined by the Board through the application of the Company’s valuation policy, are included within net change in unrealized gain (loss) on investments on the consolidated statements of operations.

 

Non-accrual: Loans or preferred equity securities are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal, interest, or dividends are paid, and, in management’s judgment are likely to remain current. The fair value of the Company’s investments on non-accrual status totaled $396 and $234 as of March 31, 2021 and December 31, 2020, respectively.

 

Distributions

 

Distributions to common stockholders are recorded on the applicable record date. The amount, if any, to be distributed to common stockholders is determined by the Board at least quarterly and is generally based upon the Company’s earnings estimated by management. Net realized capital gains, if any, are generally distributed at least annually.

 

The determination of the tax attributes for the Company’s distributions is made annually, based upon its taxable income for the full year and distributions paid for the full year. Ordinary dividend distributions from a RIC do not qualify for the preferential tax rate on qualified dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital.

 

The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for the reinvestment of dividends and other distributions on behalf of its stockholders that elect to participate in such plan. When the Company declares a dividend or distribution, the Company’s stockholders’ cash distributions will only be reinvested in additional shares of the Company’s common stock if a stockholder specifically “opts in” to the DRIP at least ten (10) days prior to the record date fixed by the Board. Shares issued under the DRIP will be issued at a price per share equal to the net asset value (“NAV”) per share as of the last day of the Company’s fiscal quarter immediately preceding the date that the distribution was declared. See Note 8 for additional information on the Company’s distributions.

23

 

Segments

 

In accordance with ASC Topic 280 — Segment Reporting, the Company has determined that it has a single reporting segment and operating unit structure.

 

Cash

 

The Company deposits its cash in a financial institution, and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limits.

 

Restricted Cash

 

Restricted cash includes amounts held within the SPV. Cash held within the SPV is generally restricted to use for the originations of new investments, the repayment of outstanding debt under the Credit Facility and the related payment of interest expense and the quarterly release of earnings to the Company.

 

Unamortized Deferred Financing Costs

 

Deferred financing costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. As of March 31, 2021 and December 31, 2020, the Company had unamortized deferred financing costs of $1,117 and $939, respectively, presented as a direct reduction of the carrying amount of debt on the consolidated statements of assets and liabilities. These amounts are amortized and included in interest and other debt financing expenses on the consolidated statements of operations over the estimated average life of the borrowings. Amortization of deferred financing costs for the three months ended March 31, 2021 and 2020 was $125 and $88, respectively.

 

Investments Denominated in Foreign Currency

 

At each balance sheet date, portfolio company investments denominated in foreign currencies are translated into U.S. dollars using the spot exchange rate on the last business day of the period. Purchases and sales of foreign portfolio company investments, and any income from such investments, are translated into U.S. dollars using the rates of exchange prevailing on the respective dates of such transactions.

 

Although the fair values of foreign portfolio company investments and the fluctuation in such fair values are translated into U.S. dollars using the applicable foreign exchange rates described above, the Company does not isolate the portion of the change in fair value resulting from foreign currency exchange rates fluctuations from the change in fair value of the underlying investment. All fluctuations in fair value are included in net change in unrealized gain (loss) on investments on the Company’s consolidated statements of operations.

 

24

 

  

Investments denominated in foreign currencies and foreign currency transactions may involve certain consideration and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. dollar.

 

Derivative Instruments

 

The Company has entered and may continue to enter into foreign currency forward contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations. In a foreign currency forward contract, the Company agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. Foreign currency forward contracts are marked-to-market based on the difference between the forward rate and the exchange rate at the current period end. Unrealized gain (loss) on foreign currency forward contracts are recorded on the Company’s consolidated statements of assets and liabilities by counterparty on a net basis.

 

The Company does not utilize hedge accounting and as such values its foreign currency forward contracts at fair value with the change in unrealized gain or loss recorded in net change in unrealized gain (loss) on foreign currency forward contracts and the realized gain or loss recorded in net realized gain (loss) on foreign currency forward contracts on the Company’s consolidated statements of operations.

 

Income Taxes

 

The Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner as to qualify for the tax treatment available to RICs. As long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders. Rather, any tax liability related to income earned by the Company represents an obligation of the Company’s stockholders and will not be reflected in the consolidated financial statements of the Company.

 

To qualify as a RIC under Subchapter M of the Code, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its stockholders, for each taxable year, at least 90% of its “investment company taxable income” for that year, which is generally its ordinary income plus the excess of its realized net short-term capital gains over its realized net long-term capital losses. In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income. For the three months ended March 31, 2021 and 2020, the Company recorded a net expense on the consolidated statements of operations of zero and $12, respectively, for U.S. federal excise tax. As of March 31, 2021 and December 31, 2020, the Company recorded an accrual for U.S. federal excise taxes of $1 and $67, respectively, which were included in accounts payable and accrued expenses on the consolidated statements of assets and liabilities.

25

 

The Company’s consolidated Taxable Subsidiaries may be subject to U.S. federal and state corporate-level income taxes. For each of the three months ended March 31, 2021 and 2020, the Company recorded a net tax expense of zero on the consolidated statements of operations for these Taxable Subsidiaries. As of March 31, 2021 and December 31, 2020, no payables for corporate-level income taxes were accrued.

 

The Company accounts for income taxes in conformity with ASC Topic 740 — Income Taxes (“ASC Topic 740”). ASC Topic 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. The Company did not take any material uncertain income tax positions through March 31, 2021. The 2018 through 2020 tax years remain subject to examination by U.S. federal and state tax authorities.

 

Subsequent Events

 

The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the consolidated financial statements were issued. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the three months ended March 31, 2021, except as disclosed in Note 12.

 

Recent Accounting Pronouncements

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact of the optional guidance on the Company’s consolidated financial statements and disclosures. The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the three months ended March 31, 2021.

 

 Note 3. Investments

 

The following tables show the composition of the Company’s investment portfolio, at amortized cost and fair value (with corresponding percentage of total portfolio investments):

 

   March 31, 2021   December 31, 2020 
Amortized Cost:                    
Senior secured loans  $213,704    95.9%  $177,053    93.1%
Unitranche secured loans   1,466    0.7    5,614    3.0 
Junior secured loans   3,991    1.8    4,046    2.1 
Equity securities   3,659    1.6    3,431    1.8 
Total  $222,820    100.0%  $190,144    100.0%

 

   March 31, 2021   December 31, 2020 
Fair Value:                
Senior secured loans  $215,361    95.5%  $176,584    92.9%
Unitranche secured loans   1,469    0.7    5,677    3.0 
Junior secured loans   4,381    1.9    4,334    2.3 
Equity securities   4,323    1.9    3,541    1.8 
Total  $225,534    100.0%  $190,136    100.0%

26

 

The following tables show the composition of the Company’s investment portfolio by geographic region, at amortized cost and fair value (with corresponding percentage of total portfolio investments). The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s business:

 

   March 31, 2021   December 31, 2020 
Amortized Cost:                    
International  $20,648    9.3%  $12,176    6.3%
Midwest   45,740    20.5    31,172    16.4 
Northeast   49,100    22.0    40,429    21.3 
Southeast   31,383    14.1    38,547    20.3 
Southwest   16,039    7.2    9,464    5.0 
West   59,910    26.9    58,356    30.7 
Total  $222,820    100.0%  $190,144    100.0%

 

   March 31, 2021   December 31, 2020 
Fair Value:                
International  $20,614    9.1%  $11,946    6.3%
Midwest   46,431    20.6    31,509    16.6 
Northeast   49,465    21.9    40,109    21.1 
Southeast   31,622    14.0    38,612    20.3 
Southwest   15,927    7.1    8,920    4.7 
West   61,475    27.3    59,040    31.0 
Total  $225,534    100.0%  $190,136    100.0%

 

The following tables show the composition of the Company’s investment portfolio by industry, at amortized cost and fair value (with corresponding percentage of total portfolio investments):

 

   March 31, 2021   December 31, 2020 
Amortized Cost:                    
Aerospace & Defense  $7,638    3.4%  $4,702    2.5%
Automotive   6,496    2.9    3,933    2.1 
Banking, Finance, Insurance & Real Estate   22,963    10.3    14,614    7.7 
Beverage, Food & Tobacco   12,533    5.6    12,503    6.6 
Capital Equipment   11,556    5.2    11,629    6.1 
Construction & Building   3,429    1.6    3,434    1.8 
Consumer Goods: Durable           3,787    2.0 
Consumer Goods: Non-Durable   2,921    1.3    2,925    1.5 
Containers, Packaging & Glass   2,037    0.9    1,957    1.0 
Energy: Oil & Gas   5,669    2.5    3,408    1.8 
Environmental Industries   998    0.5    1,000    0.5 
Healthcare & Pharmaceuticals   25,910    11.6    22,424    11.8 
High Tech Industries   46,715    21.0    29,929    15.7 
Hotels, Gaming & Leisure   2,220    1.0    1,518    0.8 
Media: Advertising, Printing & Publishing   14,723    6.6    15,010    7.9 
Media: Broadcasting & Subscription   1,746    0.8    1,645    0.9 
Media: Diversified & Production   2,974    1.3    2,972    1.6 
Metals & Mining   853    0.4    846    0.4 
Services: Business   17,145    7.7    18,361    9.6 
Services: Consumer   11,776    5.3    15,048    7.9 
Telecommunications   9,706    4.4    8,500    4.5 
Transportation: Cargo   9,902    4.4    9,999    5.3 
Wholesale   2,910    1.3         
Total  $222,820    100.0%  $190,144    100.0%

27

 

 

 

  March 31, 2021   December 31, 2020 
Fair Value:                
Aerospace & Defense  $7,713    3.4%  $4,689    2.5%
Automotive   6,534    2.9    3,940    2.1 
Banking, Finance, Insurance & Real Estate   22,849    10.1    14,762    7.8 
Beverage, Food & Tobacco   12,422    5.5    12,452    6.6 
Capital Equipment   11,899    5.3    11,777    6.2 
Construction & Building   3,488    1.6    3,495    1.8 
Consumer Goods: Durable           3,805    2.0 
Consumer Goods: Non-Durable   2,996    1.3    2,925    1.5 
Containers, Packaging & Glass   2,032    0.9    1,965    1.0 
Energy: Oil & Gas   5,231    2.3    2,754    1.4 
Environmental Industries   1,149    0.5    1,066    0.6 
Healthcare & Pharmaceuticals   26,604    11.8    22,874    12.0 
High Tech Industries   48,092    21.3    30,601    16.1 
Hotels, Gaming & Leisure   2,273    1.0    1,518    0.8 
Media: Advertising, Printing & Publishing   14,857    6.6    14,658    7.7 
Media: Broadcasting & Subscription   1,750    0.8    1,672    0.9 
Media: Diversified & Production   2,959    1.3    2,902    1.5 
Metals & Mining   811    0.4    679    0.4 
Services: Business   17,146    7.6    18,332    9.6 
Services: Consumer   11,966    5.3    15,065    7.9 
Telecommunications   9,563    4.2    8,325    4.4 
Transportation: Cargo   10,271    4.6    9,880    5.2 
Wholesale   2,929    1.3         
Total  $225,534    100.0%  $190,136    100.0%

 

Note 4. Fair Value Measurements

 

Investments

 

The Company values all investments in accordance with ASC Topic 820. ASC Topic 820 requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. As defined in ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation models involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the assets or liabilities or market and the assets’ or liabilities’ complexity.

 

ASC Topic 820 establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

 

Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:

 

  Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
     
  Level 2 — Valuations based on inputs other than quoted prices in active markets, including quoted prices for similar assets or liabilities, which are either directly or indirectly observable.

28

 
  Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. This includes situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value are based upon the best information available and may require significant management judgment or estimation.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or liability’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. All investments as of March 31, 2021 and December 31, 2020, were categorized as Level 3 investments.

 

With respect to investments for which market quotations are not readily available, the Company’s Board undertakes a multi-step valuation process each quarter, as described below:

 

  the quarterly valuation process begins with each portfolio company or investment being initially evaluated and rated by the investment professionals of MC Advisors responsible for the credit monitoring of the portfolio investment;
     
  the Board engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of investments for which market quotations are not readily available. The Company will consult with independent valuation firm(s) relative to each portfolio company at least once in every calendar year, but the independent appraisals are generally received quarterly for each investment;
     
  to the extent an independent valuation firm is not engaged to conduct an investment appraisal on an investment for which market quotations are not readily available, the investment will be valued by the MC Advisors investment professional responsible for the credit monitoring;
     
  preliminary valuation conclusions are then documented and discussed with the investment committee of MC Advisors;
     
  the audit committee of the Board reviews the preliminary valuations of MC Advisors and of the independent valuation firm(s) and MC Advisors adjusts or further supplements the valuation recommendations to reflect any comments provided by the audit committee; and
     
  the Board discusses these valuations and determines the fair value of each investment in the portfolio in good faith, based on the input of MC Advisors, the independent valuation firm(s) and the audit committee.

 

The accompanying consolidated schedules of investments held by the Company consist primarily of private debt instruments (“Level 3 debt”). The Company generally uses the income approach to determine fair value for Level 3 debt where market quotations are not readily available, as long as the use of the income approach is appropriate. If there is deterioration in credit quality or a debt investment is in workout status, the Company may consider other factors in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. This liquidation analysis may include probability weighting of alternative outcomes. The Company generally considers its Level 3 debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner; the loan is in covenant compliance or is otherwise not deemed to be impaired. In determining the fair value of the performing Level 3 debt, the Company considers fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions and other relevant factors, both qualitative and quantitative. In the event that a Level 3 debt instrument is not performing, as defined above, the Company will evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the Level 3 debt instrument.

 

Under the income approach, discounted cash flow models are utilized to determine the present value of the future cash flow streams of its debt investments, based on future interest and principal payments as set forth in the associated loan agreements. In determining fair value under the income approach, the Company also considers the following factors: applicable market yields and leverage levels, credit quality, prepayment penalties, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, and changes in the interest rate environment and the credit markets that generally may affect the price at which similar investments may be made.

29

 

Under the market approach, the enterprise value methodology is typically utilized to determine the fair value of an investment. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is generally best expressed as a range of values, from which the Company derives a single estimate of enterprise value. In estimating the enterprise value of a portfolio company, the Company analyzes various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio company’s historical and projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public. Typically, the enterprise values of private companies are based on multiples of earnings before interest, income taxes, depreciation and amortization (“EBITDA”), cash flows, net income, revenues, or in limited cases, book value.

 

In addition, for certain debt investments, the Company may base its valuation on indicative bid and ask prices provided by an independent third-party pricing service. Bid prices reflect the highest price that the Company and others may be willing to pay. Ask prices represent the lowest price that the Company and others may be willing to accept. The Company generally uses the midpoint of the bid/ask range as its best estimate of fair value of such investment.

 

The Board determined, in good faith, the fair value of the Company’s investment portfolio at March 31, 2021 in accordance with GAAP and the Company’s valuation procedures based on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that time. Due to the overall volatility that the COVID-19 pandemic has caused, any valuations conducted in the future in conformity with GAAP could result in a lower fair value of the Company’s portfolio. The potential impact of COVID-19 on the Company’s results going forward will depend to a large extent on future developments or new information that may emerge regarding the full duration and severity of COVID-19, including the actions taken by governments and other entities to contain COVID-19 or treat its impact, all of which are beyond the Company’s control. Accordingly, the Company cannot predict the extent to which its financial condition and results of operations will be affected at this time.

 

Foreign Currency Forward Contracts

 

The valuation for the Company’s foreign currency forward contracts is based on the difference between the exchange rate associated with the forward contract and the exchange rate at the current period end. Foreign currency forward contracts are categorized as Level 2 in the fair value hierarchy.

 

Fair Value Disclosures

 

The following tables present fair value measurements of investments and foreign currency forward contracts, by major class according to the fair value hierarchy:

 

   Fair Value Measurements 
March 31, 2021  Level 1   Level 2   Level 3   Total 
Senior secured loans  $   $   $215,361   $215,361 
Unitranche secured loans           1,469    1,469 
Junior secured loans           4,381    4,381 
Equity securities           4,323    4,323 
Total investments  $   $   $225,534   $225,534 
Foreign currency forward contracts asset (liability)  $   $13   $   $13 

30

 
   Fair Value Measurements 
December 31, 2020  Level 1   Level 2   Level 3   Total 
Senior secured loans  $   $   $176,584   $176,584 
Unitranche secured loans           5,677    5,677 
Junior secured loans           4,334    4,334 
Equity securities           3,541    3,541 
Total investments  $   $   $190,136   $190,136 
Foreign currency forward contracts asset (liability)  $   $(157)  $   $(157)

  

Senior secured loans, unitranche secured loans and junior secured loans are collateralized by tangible and intangible assets of the borrowers. These investments include loans to entities that have some level of challenge in obtaining financing from other, more conventional institutions, such as a bank. Interest rates on these loans are either fixed or floating and are based on current market conditions and credit ratings of the borrower. Excluding loans on non-accrual, the contractual interest rates on the loans ranged from 4.11% to 16.00% at March 31, 2021 and 4.40% to 16.00% at December 31, 2020. The maturity dates on the loans outstanding at March 31, 2021 range between December 2021 and March 2028.

 

The following tables provide a reconciliation of the beginning and ending balances for investments at fair value that use Level 3 inputs for the three months ended March 31, 2021 and 2020:

 

    Investments  
    Senior
secured loans
    Unitranche
secured
loans
    Junior
secured loans
    Equity
securities
    Total
investments
 
Balance as of December 31, 2020   $ 176,584     $ 5,677     $ 4,334     $ 3,541     $ 190,136  
Net realized gain (loss) on investments     43                         43  
Net change in unrealized gain (loss) on investments     2,126       (60     102       554       2,722  
Purchases of investments and other adjustments to cost (1)     51,077       99       11       228       51,415  
Proceeds from principal payments and sales of investments (2)     (14,469 )     (4,247     (66 )           (18,782 )
Balance as of March 31, 2021   $ 215,361     $ 1,469     $ 4,381     $ 4,323     $ 225,534  

 

        Investments          
    Senior
secured loans
    Unitranche
secured
loans
    Junior
secured loans
    Equity
securities
    Total
investments
 
Balance as of December 31, 2019   $ 99,334     $ 1,001     $     $ 472     $ 100,807  
Net realized gain (loss) on investments                              
Net change in unrealized gain (loss) on investments     (6,262 )     (15     26       (73     (6,324 )
Purchases of investments and other adjustments to cost (1)     57,779             3,863       886       62,528  
Proceeds from principal payments and sales of investments (2)     (2,368 )     (3                 (2,371 )
Balance as of March 31, 2020   $ 148,483     $ 983     $ 3,889     $ 1,285     $ 154,640  

 

 

(1) Includes purchases of new investments, effects of refinancing and restructurings, premium and discount accretion and amortization and PIK interest.
(2) Represents net proceeds from investments sold and principal paydowns received.

 

31 

 

 

The total net change in unrealized gain (loss) on investments included on the consolidated statements of operations for the three months ended March 31, 2021 and 2020, attributable to Level 3 investments still held at March 31, 2021 and 2020, was $2,893 and ($6,286), respectively. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of Level 3 as of the beginning of the period in which the reclassifications occur. There were no transfers among Levels 1, 2 and 3 during the three months ended March 31, 2021 and 2020.

 

Significant Unobservable Inputs

 

ASC Topic 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as Level 3 within the fair value hierarchy. Disclosure of this information is not required in circumstances where a valuation (unadjusted) is obtained from a third-party pricing service and the information regarding the unobservable inputs is not reasonably available to the Company and as such, the disclosures provided below exclude those investments valued in that manner. The tables below are not intended to be all-inclusive, but rather to provide information on significant unobservable inputs and valuation techniques used by the Company.

 

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets and liabilities as of March 31, 2021 were as follows:

 

              Unobservable   Weighted
Average
    Range  
    Fair Value     Valuation Technique   Input   Mean     Minimum     Maximum  
Assets:                                
Senior secured loans   $ 115,624     Discounted cash flow   EBITDA multiples     9.4 x     5.3 x     20.0 x
                Market yields     8.4 %     4.1 %     17.6 %
Senior secured loans     72,086     Discounted cash flow   Revenue multiples     7.0 x     0.5 x     12.3 x
                Market yields     8.2 %     6.5 %     13.2 %
Unitranche secured loans     1,469     Discounted cash flow   Market yields     9.3 %     9.3 %     9.3 %
Junior secured loans     3,934     Discounted cash flow   Market yields     9.8 %     9.8 %     9.8 %
Equity securities     3,327     Enterprise value   EBITDA multiples     10.7 x     7.8 x     20.0 x
Equity securities     122     Option pricing model   Volatility     65.0 %     65.0 %     65.0 %
Equity securities     79     Enterprise value   Revenue multiples     12.0 x     12.0 x     12.0 x
Total Level 3 Assets   $ 196,641 (1)                                 

 

 

(1) Excludes loans of $28,893 at fair value where valuation (unadjusted) is obtained from a third-party pricing service for which such disclosure is not required.

32

 

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets and liabilities as of December 31, 2020 were as follows:

 

              Unobservable   Weighted
Average
    Range  
    Fair Value     Valuation Technique   Input   Mean     Minimum     Maximum  
Assets:                                
Senior secured loans   $ 93,198     Discounted cash flow   EBITDA multiples     9.7 x     5.3 x     21.3 x
                Market yields     8.2 %     5.5 %     16.3 %
Senior secured loans     63,260     Discounted cash flow   Revenue multiples     6.3 x     0.5 x     11.0 x
                Market yields     8.3 %     6.4 %     13.6 %
Unitranche secured loans     5,677     Discounted cash flow   EBITDA multiples     9.3 x     12.5 x     12.5 x
                Market yields     8.2 %     8.0 %     8.8 %
Junior secured loans     3,886     Discounted cash flow   Market yields     10.0 %     10.0 %     10.0 %
Equity securities     2,625     Enterprise value   EBITDA multiples     10.6 x     7.8 x     21.3 x
Equity securities     87     Option pricing model   Volatility     70.0 %     70.0 %     70.0 %
Equity securities     65     Enterprise value   Revenue multiples     11.0 x     11.0 x     11.0 x
Total Level 3 Assets   $ 168,798 (1)                                

 

 

(1) Excludes loans of $21,338 at fair value where valuation (unadjusted) is obtained from a third-party pricing service for which such disclosure is not required.

 

The significant unobservable input used in the income approach of fair value measurement of the Company’s investments is the discount rate used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. Increases (decreases) in the discount rate would result in a decrease (increase) in the fair value estimate of the investment. Included in the consideration and selection of discount rates are the following factors: risk of default, rating of the investment and comparable investments, and call provisions.

 

The significant unobservable inputs used in the market approach of fair value measurement of the Company’s investments are the market multiples of EBITDA or revenue of the comparable guideline public companies. The Company selects a population of public companies for each investment with similar operations and attributes of the portfolio company. Using these guideline public companies’ data, a range of multiples of enterprise value to EBITDA or revenue is calculated. The Company selects percentages from the range of multiples for purposes of determining the portfolio company’s estimated enterprise value based on said multiple and generally the latest twelve months EBITDA or revenue of the portfolio company (or other meaningful measure). Increases (decreases) in the multiple will result in an increase (decrease) in enterprise value, resulting in an increase (decrease) in the fair value estimate of the investment.

 

Other Financial Assets and Liabilities

 

ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts of its other financial instruments such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such instruments. Fair value of the Company’s Credit Facility is estimated by discounting remaining payments using applicable market rates or market quotes for similar instruments at the measurement date, if applicable. As of March 31, 2021 and December 31, 2020, the Company believes that the carrying value of its Credit Facility approximates fair value.

 

Note 5. Transactions with Related Parties

 

The Company has entered into an investment advisory agreement with MC Advisors (the “Investment Advisory Agreement”), under which MC Advisors, subject to the overall supervision of the Board, provides investment advisory services to the Company. The Company pays MC Advisors a fee for its services under the Investment Advisory Agreement consisting of two components – a base management fee and an incentive fee. The cost of both the base management fee and the incentive fee are borne by the Company’s stockholders, unless such fees are waived by MC Advisors.

33

 

Prior to any future quotation or listing of the Company’s securities on a national securities exchange (an “Exchange Listing”) or any future quotation or listing of its securities on any other public trading market, the base management fee is calculated at an annual rate of 1.50% of average total assets, which includes assets financed using leverage. Following an Exchange Listing, the base management fee will be calculated at an annual rate of 1.75% of average invested assets (calculated as total assets excluding cash). The base management fee is payable quarterly in arrears. Base management fees for the three months ended March 31, 2021 and 2020 were $814 and $497, respectively. MC Advisors elected to voluntarily waive $814 and $260 of such base management fees for the three months ended March 31, 2021 and 2020, respectively. There is no guarantee that MC Advisors will waive base management fees in the future.

 

The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the preceding quarter. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee), any expenses payable under the administration agreement (the “Administration Agreement”) between the Company and Monroe Capital Management Advisors, LLC (“MC Management”) and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee. Pre-incentive fee net investment income will include, in the case of investments with a deferred interest feature such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero-coupon securities, accrued income that the Company has not yet received in cash. MC Advisors is not under any obligation to reimburse the Company for any part of the incentive fee it receives that was based on accrued interest that the Company never actually receives.

 

Pre-incentive fee net investment income does not include any realized capital gains or losses or unrealized capital gains or losses. If any distributions from portfolio companies are characterized as a return of capital, such returns of capital would affect the capital gains incentive fee to the extent a gain or loss is realized. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter where it incurs a loss. For example, if the Company receives pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, the Company will pay the applicable incentive fee even if it has incurred a loss in that quarter due to realized and unrealized capital losses.

 

Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed “hurdle rate” of 1.50% per quarter (6% annually).

 

The Company pays MC Advisors an incentive fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows:

 

  no incentive fee in any calendar quarter in which the pre-incentive fee net investment income does not exceed the hurdle rate of 1.50% (6% annually);
     
  100% of the Company’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.76% in any calendar quarter prior to an Exchange Listing or 1.88% in any calendar quarter following an Exchange Listing. The Company refers to this portion of the Company’s pre-incentive fee net investment income as the “catch-up” provision. Prior to an Exchange Listing, the catch-up is meant to provide MC Advisors with 15% of the pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 1.76% in any calendar quarter, and following an Exchange Listing, the catch-up is meant to provide MC Advisors with 20% of the pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 1.88% in any calendar quarter; and

34

 
     
  prior to an Exchange Listing, 15% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 1.76% in any calendar quarter, and following an Exchange Listing, 20% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 1.88% in any calendar quarter.

 

These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.

 

The second part of the incentive fee is a capital gains incentive fee that is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 15% of the Company’s realized capital gains as of the end of the fiscal year. In determining the capital gains incentive fee payable to MC Advisors, the Company calculates the cumulative aggregate realized capital gains and cumulative aggregate realized capital losses since the Company’s inception, and the aggregate unrealized capital depreciation as of the date of the calculation, as applicable, with respect to each of the investments in the Company’s portfolio. For this purpose, cumulative aggregate realized capital gains, if any, equals the sum of the differences between the net sales price of each investment, when sold, and the amortized cost of such investment. Cumulative aggregate realized capital losses equals the sum of the amounts by which the net sales price of each investment, when sold, is less than the amortized cost of such investment since the Company’s inception. Aggregate unrealized capital depreciation equals the sum of the difference, if negative, between the valuation of each investment as of the applicable calculation date and the amortized cost of such investment. At the end of the applicable year, the amount of capital gains that will serve as the basis for the calculation of the capital gains incentive fee equals the cumulative aggregate realized capital gains less cumulative aggregate realized capital losses, less aggregate unrealized capital depreciation, with respect to the Company’s portfolio of investments. If this number is positive at the end of such year, then the capital gains incentive fee for such year equals 15% of such amount, less the aggregate amount of any capital gains incentive fees paid in respect of the Company’s portfolio in all prior years.

 

While the Investment Advisory Agreement with MC Advisors neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of an American Institute for Certified Public Accountants Technical Practice Aid for investment companies, the Company includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to MC Advisors if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though MC Advisors is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

 

The composition of the Company’s incentive fees was as follows:

 

   Three months ended March 31, 
   2021    2020 
Part one incentive fees (1)  $543   $241 
Part two incentive fees (2)   418    (132)
Incentive fees, excluding the impact of the incentive fee waiver   961    109 
Incentive fee waiver (3)   (543)   (241)
Total incentive fees, net of incentive fee waiver  $418   $(132)

 

 

(1) Based on pre-incentive fee net investment income.
(2) Based upon net realized and unrealized gains and losses, or capital gains. The Company accrues, but does not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. If, on a cumulative basis, the sum of net realized gain (loss) plus net unrealized gain (loss) decreases during a period, the Company will reverse any excess capital gains incentive fee previously accrued such that the amount of capital gains incentive fee accrued is no more than 15% of the sum of net realized gain (loss) plus net unrealized gain (loss).
(3) Represents part one incentive fees voluntarily waived by MC Advisors. There is no guarantee that MC Advisors will waive any incentive fees in the future.

35

 

The Company has entered into the Administration Agreement with MC Management, under which the Company reimburses MC Management, subject to the review and approval of the Board, for its allocable portion of overhead and other expenses, including the costs of furnishing the Company with office facilities and equipment and providing clerical, bookkeeping, record-keeping and other administrative services at such facilities, and the Company’s allocable portion of the cost of the chief financial officer and chief compliance officer and their respective staffs. To the extent that MC Management outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis, without incremental profit, to MC Management. For the three months ended March 31, 2021 and 2020, the Company incurred $280 and $248, respectively, in administrative expenses (included within Professional fees, Administrative service fees and General and administrative expenses on the consolidated statements of operations) under the Administration Agreement, of which $111 and $82, respectively, was related to MC Management overhead and salary allocation and paid directly to MC Management. As of March 31, 2021 and December 31, 2020, $111 and $91, respectively, of expenses were due to MC Management under the Administration Agreement and are included in accounts payable and accrued expenses on the consolidated statements of assets and liabilities.

 

The Company has entered into a license agreement with Monroe Capital LLC under which Monroe Capital LLC has agreed to grant the Company a non-exclusive, royalty-free license to use the name “Monroe Capital” for specified purposes in its business. Under this agreement, the Company has the right to use the “Monroe Capital” name at no cost, subject to certain conditions, for so long as MC Advisors or one of its affiliates remains its investment adviser. Other than with respect to this limited license, the Company has no legal right to the “Monroe Capital” name or logo.

 

Note 6. Borrowings

 

In accordance with the 1940 Act, the Company is permitted to borrow amounts such that its asset coverage ratio, as defined in the 1940 Act, is at least 150% after such borrowing. As of March 31, 2021 and December 31, 2020, the Company’s asset coverage ratio based on aggregate borrowings outstanding was 557% and 333%, respectively.

 

The Company has a Credit Facility with KeyBank National Association through the Company’s wholly-owned subsidiary, the SPV. On January 15, 2021, the Company amended the Credit Facility to, among other things, expand the loan eligibility parameters under the Credit Facility to include foreign currency loans and foreign obligors. On January 19, 2021, the Company increased the size of the current commitments under the Credit Facility to $125,000 from $100,000.

 

The Company’s ability to borrow under the Credit Facility is subject to certain financial and restrictive covenants as well as availability under the borrowing base, which permits the Company to borrow up to 72% of the principal balance of its portfolio company investments depending on the type of investment. Under the terms of the Credit Facility, the SPV is allowed to reinvest available cash and make new borrowings under the Credit Facility through May 1, 2023. The maturity date of the Credit Facility is May 1, 2025. Distributions from the SPV to the Company are limited by the terms of the Credit Facility, which generally allows for the distribution of net interest income pursuant to a waterfall quarterly during the reinvestment period. As of March 31, 2021 and December 31, 2020, the fair value of investments of the Company that were held in the SPV as collateral for the Credit Facility was $190,686 and $164,328, respectively, and these investments are identified on the consolidated schedules of investments. As of March 31, 2021 and December 31, 2020, the Company had outstanding borrowings under the Credit Facility of $42,300 and $58,900, respectively.

 

During the reinvestment period, borrowings under the Credit Facility bear interest at an annual rate of LIBOR (one or three month, at the SPV’s option and subject to a LIBOR minimum of 0.50%) plus a margin ranging from 2.75% to a maximum of 3.00%, depending on the level of utilization of the facility and the number of obligors of eligible loans pledged as collateral in the SPV. After the reinvestment period, borrowings under the Credit Facility bear interest at an annual rate of LIBOR plus 3.25%. In addition to the stated interest rate on borrowings, the SPV is required to pay an unused commitment fee of (i) 0.75% per annum on any unused portion of the Credit Facility when the outstanding borrowings are less than or equal to 30% of the facility amount, (ii) 0.55% per annum on any unused portion of the Credit Facility when the outstanding borrowings are greater than 30% of the facility amount but less than or equal to 50% of the facility amount, and (iii) 0.35% per annum on any unused portion of the Credit Facility when the outstanding borrowings are greater than 50% of the facility amount. As of March 31, 2021 and December 31, 2020, the outstanding borrowings were accruing at a weighted average interest rate of 3.5% and 3.5%, respectively.

36

 

The composition of the Company’s interest and other debt financing expenses and average outstanding balances were as follows:

 

   Three months ended March 31, 
   2021   2020 
Interest expense  $521   $401 
Unused commitment fees   53    56 
Amortization of deferred financing costs   125    88 
Total interest and other debt financing expenses  $699   $545 
Average debt outstanding  $59,564   $34,610 

 

Note 7. Derivative Instruments

 

The Company enters into foreign currency forward contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on future principal and interest cash flows from the Company’s investments denominated in foreign currencies. As of March 31, 2021 and December 31, 2020, the counterparty to these foreign currency forward contracts was Bannockburn Global Forex, LLC.

37

 

Certain information related to the Company’s foreign currency forward contracts is presented below as of March 31, 2021 and December 31, 2020.

 

    As of March 31, 2021
   

Notional 

Amount to be
Sold 

   

Settlement  

Date 

 

Gross
Amount of  

Unrealized
Gain 

   

Gross  

Amount of 

Unrealized  

Loss 

    Balance Sheet location of Net Amounts  
Foreign currency forward contract   CAD 65     4/19/2021   $     $  (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 70     5/19/2021            (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 63     6/17/2021            (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 65     7/19/2021            (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 70     8/18/2021           (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 65     9/17/2021            (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 65     10/19/2021            (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 68     11/17/2021            (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 66     12/17/2021            (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 66     1/18/2022            (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 70     2/17/2022            (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 61     3/17/2022            (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 68     4/19/2022           (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 68     5/18/2022            (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 66     6/17/2022            (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 66     7/19/2022            (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 68     8/17/2022            (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 68     9/19/2022            (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 70     10/19/2022            (2 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 63     11/17/2022           (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 66     12/19/2022           (1 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   CAD 11,000     12/19/2022           (249 )   Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 173     4/20/2021     5           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 95     5/18/2021     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 108     6/17/2021     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 98     7/16/2021     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 101     8/17/2021     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 108     9/16/2021     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 105     10/19/2021     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 95     11/16/2021     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 108     12/16/2021     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 115     1/19/2022     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 95     2/16/2022     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 95     3/16/2022     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 105     4/19/2022     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 98     5/17/2022     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 112     6/17/2022     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 98     7/18/2022     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 98     8/16/2022     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 112     9/16/2022     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 112     10/19/2022     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 95     11/16/2022     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 101     12/16/2022     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 112     1/18/2023     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 98     2/16/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 95     3/16/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 118     4/20/2023     3           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 81     5/16/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 115     6/19/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 98     7/18/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 105     8/16/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 105     9/18/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 108     10/18/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 98     11/16/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 101     12/18/2023     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 108     1/17/2024     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 101     2/16/2024     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 98     3/18/2024     2           Unrealized gain on foreign currency forward contracts  
Foreign currency forward contract   AUD 10,746     3/18/2024     200           Unrealized gain on foreign currency forward contracts  
Total               $ 293     $ (280 )      

38

 
    As of December 31, 2020
   

Notional 

Amount to be
Sold 

   

Settlement 

Date 

 

Gross
Amount of 

Unrealized
Gain 

   

Gross 

Amount of 

Unrealized  

Loss 

    Balance Sheet location of Net Amounts  
Foreign currency forward contract   CAD  65     1/19/2021    $      $ (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 68     2/17/2021            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  63     3/18/2021               Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  65     4/19/2021           (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 70     5/19/2021            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  63     6/17/2021               Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  65     7/19/2021            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  70     8/18/2021            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 65     9/17/2021            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 65     10/19/2021            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  68     11/17/2021            (1   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  66     12/17/2021            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  66     1/18/2022            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 70     2/17/2022            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 61     3/17/2022               Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  68     4/19/2022            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 68     5/18/2022            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 66     6/17/2022            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 66     7/19/2022            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 68     8/17/2022            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD 68     9/19/2022           (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  70     10/19/2022            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  63     11/17/2022               Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  66     12/19/2022            (1 )   Unrealized loss on foreign currency forward contracts  
Foreign currency forward contract   CAD  11,000     12/19/2022            (137 )   Unrealized loss on foreign currency forward contracts  
Total           $     $ (157 )      

39

 

For the three months ended March 31, 2021 and 2020, the Company recognized net change in unrealized gain (loss) on foreign currency forward contracts of $170 and zero, respectively. For the three months ended March 31, 2021 and 2020, the Company recognized net realized gain (loss) on foreign currency forward contracts of ($3) and zero, respectively.

 

Note 8. Distributions

 

The Company’s distributions to common stockholders are recorded on the applicable record date. The following table summarizes the distributions declared during the three months ended March 31, 2021. There were no distributions declared during the three months ended March 31, 2020.

 

 Date
Declared
  Record
Date
  Payment
Date (1)
  Amount
Per Share (2)
  


Distribution

Declared

 
Three months ended March 31, 2021:                
March 4, 2021  March 8, 2021  March 12, 2021  $0.20   $2,766 
Total distributions declared        $0.20   $2,766 

 

 

(1) The portion of the Company’s distribution that is to be reinvested pursuant to the DRIP is issued to the Company’s stockholders on the payment date.
(2) The payment amount approved by the Board was equal to the net investment income earned by the Company as determined in accordance with GAAP.

 

The following tables summarize the Company’s distributions reinvested during the three months ended March 31, 2021 and 2020, respectively:

 

Payment Date   Date
Declared
  Record
Date
  NAV
Per Share
    DRIP Shares
Issued
    DRIP Shares
Value
 
                                 
Three months ended March 31, 2021:                          
March 12, 2021   March 4, 2021   March 8, 2021   $ 9.94       77,598     $ 771  
Total proceeds                     77,598     $ 771  

 

Payment Date   Date
Declared
  Record
Date
  NAV
Per Share
    DRIP Shares
Issued
    DRIP Shares
Value
 
                                 
Three months ended March 31, 2020:                          
March 17, 2020   December 13, 2019   December 20, 2019   $ 10.00       35,717     $ 357  
Total proceeds                     35,717     $ 357  

40

 

Note 9. Stock Issuances

 

As of March 31, 2021, the total number of shares of all classes of capital stock that the Company has the authority to issue was 100,000,000 shares of common stock, par value $0.001 per share.

 

The following table summarizes the issuance of shares during the three months ended March 31, 2021:

 

Date   Price Per
Share
    Shares Issued     Proceeds  
Three months ended March 31, 2021:                        
March 15, 2021   $ 9.74       5,301,797     $ 51,639  
Total             5,301,797     $ 51,639  

 

The following table summarizes the issuance of shares during the three months ended March 31, 2020:

 

Date   Price Per
Share
    Shares Issued     Proceeds  
Three months ended March 31, 2020:                        
January 2, 2020   $ 10.00       2,036,841     $ 20,369  
Total             2,036,841     $ 20,369  

 

During the three months ended March 31, 2021 and 2020, the Company also issued 77,598 and 35,717 shares, with an aggregate value of $771 and $357, respectively, under the DRIP as disclosed in Note 8.

 

Note 10. Commitments and Contingencies

 

Commitments: As of March 31, 2021 and December 31, 2020, the Company had $28,763 and $29,547, respectively, in outstanding commitments to fund investments. Management believes that the Company’s available cash balances and/or ability to draw on the Credit Facility provide sufficient funds to cover its unfunded commitments as of March 31, 2021.

 

Indemnifications: In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide general indemnification. The Company’s maximum exposure under these agreements is unknown, as these involve future claims that may be made against the Company but that have not occurred. The Company expects the risk of any future obligations under these indemnification provisions to be remote.

 

Concentration of credit and counterparty risk: Credit risk arises primarily from the potential inability of counterparties to perform in accordance with the terms of the contract. In the event that the counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparties or issuers of the instruments. It is the Company’s policy to review, as necessary, the credit standing of each counterparty.

 

Market risk: The Company’s investments and borrowings are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments and borrowings are traded.

 

Legal proceedings: In the normal course of business, the Company may be subject to legal and regulatory proceedings that are generally incidental to its ongoing operations. While there can be no assurance of the ultimate disposition of any such proceedings, the Company is not currently aware of any such proceedings or disposition that would have a material adverse effect on the Company’s consolidated financial statements.

41

 

Note 11. Financial Highlights

 

The following is a schedule of financial highlights for the three months ended March 31, 2021 and 2020:

 

   March 31,
2021
   March 31,
2020
 
Per share data:          
Net asset value at beginning of period  $9.94   $10.00 
Net investment income (loss) (1)   0.22    0.20 
Net gain (loss) (1)   0.19    (0.71)
Net increase (decrease) in net assets resulting from operations (1)   0.41    (0.51)
Stockholder distributions declared (2)   (0.20)    
Other (3)   (0.09)    
Net asset value at end of period  $10.06   $9.49 
Net assets at end of period  $193,292   $84,911 
Shares outstanding at end of period   19,206,910    8,947,090 
Total return based on average net asset value (4)   3.71%   (5.93)%
Ratio/Supplemental data:          
Ratio of total investment income to average net assets (5)   11.41%   14.08%
Ratio of expenses to average net assets without waivers (5)   5.01%   7.04%
Ratio of expenses to average net assets with waivers (5)   2.69%   5.36%
Ratio of net investment income (loss) to average net assets without waivers (5)   6.40%   7.04%
Ratio of net investment income (loss) to average net assets with waivers (5)   8.72%   8.71%
Portfolio turnover (6)   9.04%   1.86%

 

 

(1)   The per share data was derived by using the weighted average shares outstanding during the periods presented.
(2) The per share data for distributions reflects the actual amount of distributions declared during the period. Management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent the Company’s taxable earnings fall below the total amount of the Company’s distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to the Company’s stockholders. The tax character of distributions will be determined at the end of the fiscal year. However, if the character of such distributions were determined as of March 31, 2021 and 2020, none of the distributions would have been characterized as a tax return of capital to the Company’s stockholders; this tax return of capital may differ from the return of capital calculated with reference to net investment income for financial reporting purposes.
(3) Includes the effect of share issuances above (below) net asset value and the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of a period end or transaction date.
(4) Total return based on average net asset value is calculated by dividing the net increase (decrease) in net assets resulting from operations by the average net asset value. Return calculations are not annualized.
(5) Ratios are annualized. To the extent incentive fees are included within the ratio, they are not annualized.
(6) Ratio is not annualized.

 

Note 12. Subsequent Events

 

The Company has evaluated subsequent events through May 12, 2021, the date on which the consolidated financial statements were issued.

 

On April 23, 2021, the Company increased the size of the current commitments under the Credit Facility to $150,000 from $125,000.

 

On May 6, 2021, the Board declared a distribution of $0.20 per share payable on May 13, 2021 to holders of record on May 6, 2021.

 

On May 6, 2021, the Board declared a distribution of $0.1334 per share payable on June 30, 2021 to holders of record on May 14, 2021.

 

On May 6, 2021, the Board declared a distribution of $0.0666 per share payable on June 30, 2021 to holders of record on June 1, 2021.

42

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Except as otherwise specified, references to “we,” “us” and “our” refer to Monroe Capital Income Plus Corporation and its consolidated subsidiaries; MC Advisors refers to Monroe Capital BDC Advisors, LLC, our investment adviser and a Delaware limited liability company; MC Management refers to Monroe Capital Management Advisors, LLC, our administrator and a Delaware limited liability company; and Monroe Capital refers to Monroe Capital LLC, a Delaware limited liability company, and its subsidiaries and affiliates. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing in our annual report on Form 10-K (the “Annual Report”) for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 10, 2021. The information contained in this section should also be read in conjunction with our unaudited consolidated financial statements and related notes and other financial information appearing elsewhere in this quarterly report on Form 10-Q (the “Quarterly Report”).

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements, which relate to future events or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our industry, our beliefs and our assumptions. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties, including statements as to:

 

  our future operating results;

 

  our business prospects and the prospects of our portfolio companies;

 

  the dependence of our future success on the general economy and its impact on the industries in which we invest;

 

  the impact of global health epidemics, such as the current novel coronavirus (“COVID-19”) pandemic, on our or our portfolio companies’ business and the global economy;

 

  the impact of a protracted decline in the liquidity of credit markets on our business;

 

  the impact of changes in London Interbank Offered Rate (“LIBOR”) on our operating results;

 

  the impact of increased competition;

 

  the impact of fluctuations in interest rates on our business and our portfolio companies;

 

  our contractual arrangements and relationships with third parties;

 

  the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

 

  actual and potential conflicts of interest with MC Advisors, MC Management and other affiliates of Monroe Capital;

 

  the ability of our portfolio companies to achieve their objectives;

 

  the use of borrowed money to finance a portion of our investments;

 

  the adequacy of our financing sources and working capital;

43

 
  the timing of cash flows, if any, from the operations of our portfolio companies;

 

  the ability of MC Advisors to locate suitable investments for us and to monitor and administer our investments;

 

  the ability of MC Advisors or its affiliates to attract and retain highly talented professionals;

 

  our ability to qualify and maintain our qualification as a regulated investment company and as a business development company; and

 

  the impact of future legislation and regulation on our business and our portfolio companies.

 

We use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks,” “plans,” “estimates,” “targets” and similar expressions to identify forward-looking statements. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Part I—Item 1A. Risk Factors” in our Annual Report and “Part II—Item 1A. Risk Factors” in this Quarterly Report.

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statements in this Quarterly Report should not be regarded as a representation by us that our plans and objectives will be achieved.

 

We have based the forward-looking statements included in this Quarterly Report on information available to us on the date of this Quarterly Report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements in this Quarterly Report, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we may file in the future with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

 

Overview

 

Monroe Capital Income Plus Corporation is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. federal income tax purposes we have elected to be treated as a regulated investment company (“RIC”) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). We currently qualify and intend to qualify annually to be treated as a RIC for U.S. federal income tax purposes.

 

As an emerging growth company, we intend to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards.

 

We are a specialty finance company that is focused on providing financing solutions primarily to lower middle-market companies in the United States and Canada. We seek to provide investors with attractive risk-adjusted returns and downside protection associated with investing in asset based and secured corporate private credit opportunities in a manner that is decoupled from public markets’ volatility. We seek to provide attractive risk-adjusted returns and downside protection by investing primarily in secured private credit transactions and assets, targeting investments that have significant downside protection through a focus on asset coverage. We expect to invest primarily in: (i) senior secured and junior secured and unsecured loans, notes, bonds, preferred equity (including preferred partnership equity), convertible debt and other securities; (ii) unitranche secured loans (a combination of senior secured and junior secured debt in the same facility in which we syndicate a “first out” portion of the loan to an investor and retain a “last out” portion of the loan) and securities; (iii) asset-based loans and securities; (iv) small business loans and leases; (v) structured debt and structured equity; (vi) syndicated loans; (vii) securitized debt and subordinated notes of collateralized loan obligations facilities, asset-backed securities and other securitized products and warehouse loan facilities; (viii) opportunities to acquire illiquid investments from other third-party funds as a result of liquidity constraints resulting from investor redemptions and market dislocations; and (ix) capital investments in the secondary markets. As of March 31, 2021, our portfolio included approximately 95.5% senior secured loans, 0.7% unitranche secured loans, 1.9% junior secured loans and 1.9% equity securities, compared to December 31, 2020, when our portfolio included approximately 92.9% senior secured loans, 3.0% unitranche secured loans, 2.3% junior secured loans and 1.8% equity securities. We expect that the companies in which we invest may be leveraged, often as a result of leveraged buy-outs or other recapitalization transactions, and, in certain cases, will not be rated by national ratings agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poor’s system) from the national rating agencies.

44

 

We use Monroe Capital’s extensive leveraged finance origination infrastructure and broad expertise in sourcing loans to invest in senior secured, unitranche secured and junior secured debt of middle-market companies. Our investment size will vary proportionately with the size of our capital base. We believe that our focus on lending to lower middle-market companies offers several advantages as compared to lending to larger companies, including more attractive economics, lower leverage, more comprehensive and restrictive covenants, more expansive events of default, relatively small debt facilities that provide us with enhanced influence over our borrowers, direct access to borrower management and improved information flow.

 

We are conducting our second best efforts, continuous private offering of our common stock to “accredited investors” in reliance on an exemption from the registration requirements of the Securities Act (the “Second Private Offering”). At each closing an investor purchases shares of our common stock pursuant to a subscription agreement entered into with us. At each closing, investors are required to fund their full subscription to purchase shares of our common stock.

 

The following table summarizes the issuance of shares of our common stock pursuant to the Second Private Offering (in thousands except shares and per share data):

 

Date   Price Per
Share
    Shares Issued     Proceeds  
Three months ended March 31, 2021:                      
March 15, 2021   $ 9.74       5,301,797     $ 51,639  
Total             5,301,797     $ 51,639  

 

Investment income

 

We generate interest income on the debt investments in portfolio company investments that we originate or acquire. Our debt investments, whether in the form of senior secured, unitranche secured or junior secured debt, typically have an initial term of three to seven years and bear interest at a fixed or floating rate. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. In some cases, our investments provide for deferred interest of payment-in-kind (“PIK”) interest. In addition, we may generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts as interest income. We record prepayment premiums and prepayment gains (losses) on loans as interest income. As the frequency or volume of the repayments that trigger these prepayment premiums and prepayment gains (losses) may fluctuate significantly from period to period, the associated interest income recorded may also fluctuate significantly from period to period. Interest and fee income is recorded on the accrual basis to the extent we expect to collect such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. We record fees on loans based on the determination of whether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associated with a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interest method if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no cost basis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service, the fee is deemed earned and recognized as fee income in the period during which the service has been completed.

45

 

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies. Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment. The frequency and volume of the distributions on common equity securities and LLC and LP investments may fluctuate significantly from period to period.

 

Expenses

 

Our primary operating expenses include the payment of base management and incentive fees to MC Advisors under the investment advisory agreement entered into on December 5, 2018 (the “Investment Advisory Agreement”), the payment of fees to MC Management for our allocable portion of overhead and other expenses under the administration agreement entered into on December 5, 2018 (the “Administration Agreement”), and other operating costs. See Note 5 to our consolidated financial statements and “Related Party Transactions” below for additional information on our Investment Advisory Agreement and Administration Agreement. Our expenses also include interest expense on indebtedness. We bear all other out-of-pocket costs and expenses of our operations and transactions.

 

Net gain (loss)

 

We recognize realized gains or losses on investments based on the difference between the net proceeds from the disposition and the cost basis of the investment without regard to unrealized gains or losses previously recognized. We record current period changes in fair value of investments, foreign currency forward contracts, foreign currency and other transactions within net change in unrealized gain (loss) on the consolidated statements of operations.

 

Portfolio and Investment Activity

 

During the three months ended March 31, 2021, we invested $40.9 million in 10 new portfolio companies, and $10.2 million in 15 existing portfolio companies, and had $18.8 million in aggregate amount of sales and principal repayments, resulting in net investments of $32.3 million for the period.

 

During the three months ended March 31, 2020, we invested $55.2 million in 14 new portfolio companies, and $7.2 million in 17 existing portfolio companies, and had $2.4 million in aggregate amount of sales and principal repayments, resulting in net investments of $60.0 million for the period.

 

The following table shows portfolio yield by security type:

 

    March 31, 2021     December 31, 2020  
    Weighted Average
Annualized
Contractual
Coupon
Yield (1)
    Weighted
Average
Annualized
Effective
Yield (2)
    Weighted Average
Annualized
Contractual
Coupon
Yield (1)
    Weighted
Average
Annualized
Effective
Yield (2)
 
Senior secured loans     7.7 %     7.7 %     7.7 %     7.7 %
Unitranche secured loans     9.0       9.0       7.3       7.4  
Junior secured loans     9.7       9.7       9.7       9.7  
Equity securities     8.4       8.4       8.3       8.3  
Total     7.7 %     7.7 %     7.7 %     7.7 %

 

 

(1) The weighted average annualized contractual coupon yield at period end is computed by dividing (a) the interest income on our debt investments and preferred equity investments (with a stated coupon rate) at the period end contractual coupon rate for each investment by (b) the par value of our debt investments and the cost basis of our preferred equity investments.
(2) The weighted average annualized effective yield on portfolio investments at period end is computed by dividing (a) interest income on our debt investments and preferred equity investments (with a stated coupon rate) at the period end effective rate for each investment by (b) the par value of our debt investments and the cost basis of our preferred equity investments. The weighted average annualized effective yield on portfolio investments is a metric on the investment portfolio alone and does not represent a return to stockholders. This metric is not inclusive of our fees and expenses, the impact of leverage on the investment portfolio or sales load that may be paid by stockholders.

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The following table shows the composition of our investment portfolio (in thousands):

 

    March 31, 2021     December 31, 2020  
Fair Value:                        
Senior secured loans   $  215,361       95.5 %   $ 176,584       92.9 %
Unitranche secured loans      1,469       0.7       5,677       3.0  
Junior secured loans      4,381       1.9       4,334       2.3  
Equity securities      4,323       1.9       3,541       1.8  
Total   $ 225,534       100.0 %   $ 190,136       100.0 %

 

Our portfolio composition and contractual and effective yield remained relatively consistent with December 31, 2020.

 

The following table shows our portfolio composition by industry (in thousands):

 

    March 31, 2021     December 31, 2020  
Fair Value:                        
Aerospace & Defense   $  7,713       3.4 %   $  4,689       2.5 %
Automotive      6,534       2.9        3,940       2.1  
Banking, Finance, Insurance & Real Estate     22,849       10.1        14,762       7.8  
Beverage, Food & Tobacco      12,422       5.5        12,452       6.6  
Capital Equipment      11,899       5.3        11,777       6.2  
Construction & Building      3,488       1.6        3,495       1.8  
Consumer Goods: Durable                 3,805       2.0  
Consumer Goods: Non-Durable      2,996       1.3        2,925       1.5  
Containers, Packaging & Glass     2,032       0.9       1,965       1.0  
Energy: Oil & Gas     5,231       2.3       2,754       1.4  
Environmental Industries     1,149       0.5       1,066       0.6  
Healthcare & Pharmaceuticals      26,604       11.8        22,874       12.0  
High Tech Industries     48,092       21.3        30,601       16.1  
Hotels, Gaming & Leisure     2,273       1.0       1,518       0.8  
Media: Advertising, Printing & Publishing     14,857       6.6        14,658       7.7  
Media: Broadcasting & Subscription     1,750       0.8       1,672       0.9  
Media: Diversified & Production     2,959       1.3        2,902       1.5  
Metals & Mining      811       0.4        679       0.4  
Services: Business     17,146       7.6       18,332       9.6  
Services: Consumer     11,966       5.3        15,065       7.9  
Telecommunications     9,563       4.2       8,325       4.4  
Transportation: Cargo     10,271       4.6       9,880       5.2  
Wholesale     2,929       1.3              
Total   $ 225,534       100.0 %   $ 190,136       100.0 %

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Portfolio Asset Quality

 

MC Advisors’ portfolio management staff closely monitors all credits, with senior portfolio managers covering agented and more complex investments. MC Advisors segregates our capital markets investments by industry. The MC Advisors’ monitoring process and projections developed by Monroe Capital both have daily, weekly, monthly and quarterly components and related reports, each to evaluate performance against historical, budget and underwriting expectations. MC Advisors’ analysts will monitor performance using standard industry software tools to provide consistent disclosure of performance. When necessary, MC Advisors will update our internal risk ratings, borrowing base criteria and covenant compliance reports.

 

As part of the monitoring process, MC Advisors regularly assesses the risk profile of each of our investments and rates each of them based on an internal proprietary system that uses the categories listed below, which we refer to as MC Advisors’ investment performance rating. For any investment rated in grades 3, 4 or 5, MC Advisors, through its internal Portfolio Management Group (“PMG”), will increase its monitoring intensity and prepare regular updates for the investment committee, summarizing current operating results and material impending events and suggesting recommended actions. The PMG is responsible for oversight and management of any investments rated in grades 3, 4, or 5. MC Advisors monitors and, when appropriate, changes the investment ratings assigned to each investment in our portfolio. In connection with our valuation process, MC Advisors reviews these investment ratings on a quarterly basis. The investment performance rating system is described as follows:

 

Investment
Performance
Risk Rating
  Summary Description
Grade 1   Includes investments exhibiting the least amount of risk in our portfolio. The issuer is performing above expectations or the issuer’s operating trends and risk factors are generally positive.
     
Grade 2   Includes investments exhibiting an acceptable level of risk that is similar to the risk at the time of origination. The issuer is generally performing as expected or the risk factors are neutral to positive.
     
Grade 3   Includes investments performing below expectations and indicates that the investment’s risk has increased somewhat since origination. The issuer may be out of compliance with debt covenants; however, scheduled loan payments are generally not past due.
     
Grade 4   Includes an issuer performing materially below expectations and indicates that the issuer’s risk has increased materially since origination. In addition to the issuer being generally out of compliance with debt covenants, scheduled loan payments may be past due (but generally not more than six months past due).

 

Grade 5   Indicates that the issuer is performing substantially below expectations and the investment risk has substantially increased since origination. Most or all of the debt covenants are out of compliance or payments are substantially delinquent. Investments graded 5 are not anticipated to be repaid in full.

 

Our investment performance risk ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or reflect or represent any third-party assessment of any of our investments.

 

In the event of a delinquency or a decision to rate an investment Grade 4 or Grade 5, the PMG, in consultation with the investment committee, will develop an action plan. Such a plan may require a meeting with the borrower’s management or the lender group to discuss reasons for the default and the steps management is undertaking to address the under-performance, as well as amendments and waivers that may be required. In the event of a dramatic deterioration of a credit, MC Advisors and the PMG will form a team or engage outside advisors to analyze, evaluate and take further steps to preserve our value in the credit. In this regard, we would expect to explore all options, including in a private equity sponsored investment, assuming certain responsibilities for the private equity sponsor or a formal sale of the business with oversight of the sale process by us. The PMG and the investment committee have extensive experience in running debt work-out transactions and bankruptcies.

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The following table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of March 31, 2021 (in thousands):

 

Investment Performance Risk Rating   Investments at
Fair Value
    Percentage of
Total Investments
 
1   $       %
2     214,792       95.2  
3     10,346       4.6  
4     396       0.2  
5            
Total   $ 225,534       100.0 %

 

The following table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of December 31, 2020 (in thousands):

 

Investment Performance Risk Rating   Investments at
Fair Value
    Percentage of
Total Investments
 
1   $       %
2      177,595       93.4  
3      12,307       6.5  
4      234       0.1  
5            
Total   $ 190,136       100.0 %

 

As of March 31, 2021, we had one borrower with a loan on non-accrual status (Fieldwood Energy, LLC) totaling $0.4 million in fair value, or 0.2% of our total investments at fair value. As of December 31, 2020, we had one borrower with a loan on non-accrual status (Fieldwood Energy, LLC) totaling $0.2 million in fair value, or 0.1% of our total investments at fair value.

 

Results of Operations

 

Operating results were as follows (in thousands):

 

   Three months ended March 31, 
   2021   2020 
Total investment income  $4,655   $2,689 
Total expenses, net of fee waivers   1,412    913 
Net investment income before income taxes   3,243    1,776 
Income taxes, including excise taxes       12 
    Net investment income   3,243    1,764 
Net realized gain (loss) on investments   43     
Net realized gain (loss) on foreign currency forward contracts   (3)    
Net realized gain (loss) on foreign currency and other transactions   (40)    
    Net realized gain (loss)        
Net change in unrealized gain (loss) on investments   2,722    (6,324)
Net change in unrealized gain (loss) on foreign currency forward contracts   170     
   Net change in unrealized gain (loss)   2,892    (6,324)
   Net increase (decrease) in net assets resulting from operations  $6,135   $(4,560)

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Investment Income

 

The composition of our investment income was as follows (in thousands):

 

   Three months ended March 31, 
   2021   2020 
Interest income  $3,813   $2,470 
PIK interest income   176    29 
Dividend income (1)   21    10 
Fee income   278     
Prepayment gain (loss)   178    55 
Accretion of discounts and amortization of premium   189    125 
Total investment income  $4,655   $2,689 
           

 

(1) Includes PIK dividends of $21 and $10, respectively.

 

The increase in investment income of $2.0 million during the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, is primarily due to growth of the size of our investment portfolio and an increase in fee income and prepayment gain.

 

Operating Expenses

 

The composition of our operating expenses was as follows (in thousands):

 

   Three months ended March 31, 
   2021   2020 
Interest and other debt financing expenses  $699   $545 
Base management fees, net of base management fee waiver (1)       237 
Incentive fees, net of incentive fee waiver (2)   418    (132)
Professional fees   89    82 
Administrative service fees   111    82 
General and administrative expenses   80    84 
Directors’ fees   15    15 
Expenses, net of fee waivers  $1,412   $913 

 

 

(1) Base management fees for the three months ended March 31, 2021 and 2020 were $814 and $497, respectively. MC Advisors elected to voluntarily waive $814 and $260 of such base management fees for the three months ended March 31, 2021 and 2020, respectively. There is no guarantee that MC Advisors will waive any base management fees in the future.
(2) Incentive fees for the three months ended March 31, 2021 were $961, comprised of part one incentive fees of $543 and part two capital gains incentive fees of $418. MC Advisors elected to voluntarily waive the part one incentive fees of $543 during the three months ended March 31, 2021. Incentive fees for the three months ended March 31, 2020 were $109, comprised of part one incentive fees of $241 and a return of part two capital gains incentive fees previously accrued of ($132). MC Advisors elected to voluntarily waive the part one incentive fees of $241 during the three months ended March 31, 2020. See Note 5 to our consolidated financial statements and “Capital Gains Incentive Fee” below for additional information.

 

The composition of our interest and other debt financing expenses and average outstanding balances were as follows (in thousands):

 

   Three months ended March 31, 
   2021   2020 
Interest expense  $521   $401 
Unused commitment fees   53    56 
Amortization of deferred financing costs   125    88 
Total interest and other debt financing expenses  $699   $545 
Average debt outstanding  $59,564   $34,610 

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The increase in total expenses of $0.5 million during the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, is primarily the result of an increase in incentive fees, net of wavier and interest expense, partially offset by a decrease in base management fees, net of waiver.

 

Income Taxes, Including Excise Taxes

 

We have elected to be treated, currently qualify, and intend to qualify annually as a RIC under Subchapter M of the Code and operate in a manner so as to qualify for the U.S. federal income tax treatment available to RICs. To maintain qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements and distribute to stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses.

 

Depending on the level of taxable income earned in a tax year, we may choose to carry forward such taxable income in excess of current year dividend distributions from such current year taxable income into the next year and pay a 4% excise tax on such income, as required. To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year dividend distributions, we accrue excise tax, if any, on estimated excess taxable income as such taxable income is earned. For the three months ended March 31, 2021 and 2020, we recorded a net expense on the consolidated statements of operations of zero and $12 thousand, respectively, for U.S. federal excise tax.

 

Certain of our consolidated subsidiaries are subject to U.S. federal and state corporate-level income taxes. For both the three months ended March 31, 2021 and 2020, we recorded a net tax expense of zero on the consolidated statements of operations for these subsidiaries.

 

Net Realized Gain (Loss)

 

During the three months ended March 31, 2021 and 2020, we had sales of investments of $3.6 million and zero, respectively, resulting in $43 thousand and zero of net realized gain (loss) on investments, respectively.

 

We have entered and may continue to enter into foreign currency forward contracts to reduce our exposure to foreign currency exchange rate fluctuations. During the three months ended March 31, 2021 and 2020, we had ($3) thousand and zero of net realized gain (loss) on foreign currency forward contracts, respectively. During the three months ended March 31, 2021 and 2020, we had ($40) thousand and zero of net realized gain (loss) on foreign currency and other transactions, respectively.

 

Net Change in Unrealized Gain (Loss)

 

For the three months ended March 31, 2021 and 2020, our investments had $2.7 million and ($6.3) million of net change in unrealized gain (loss), respectively. The net change in unrealized gain (loss) includes both unrealized gain on investments in our portfolio with mark-to-market gains during the period and unrealized loss on investments in our portfolio with mark-to-market losses during the period.

 

We estimate approximately $3.2 million of the net unrealized gain on investments during the three months ended March 31, 2021 was attributable to broad market movements and tightening of credit spreads in the loan markets. These increases in value were offset by ($0.5) million in net unrealized losses attributable to specific credit or fundamental performance of the underlying portfolio companies, a significant portion of which is as a result of the impact of the COVID-19 pandemic on individual credit performance. The fair value of our portfolio investments may be further negatively impacted after March 31, 2021 by circumstances and events that are not yet known.

 

We estimate approximately $4.0 million of the net unrealized loss on investments during the three months ended March 31, 2020 was attributable to broad market movements and widening of credit spreads in the loan markets as loan market participants expected a higher yield on similar investments given the significant market volatility generated by the COVID-19 pandemic. Additionally, we estimate the remaining approximately $2.3 million of the net unrealized losses were attributable to specific credit or fundamental performance of the underlying portfolio companies, a significant portion of which is as a result of the impact of the COVID-19 pandemic on individual credit performance.

 

For the three months ended March 31, 2021 and 2020, our foreign currency forward contracts had $0.2 million and zero of net change in unrealized gain (loss), respectively.

51

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

For the three months ended March 31, 2021 and 2020, the net increase (decrease) in net assets resulting from operations was $6.1 million and ($4.6) million, respectively. Based on the weighted average shares of common stock outstanding for the three months ended March 31, 2021 and 2020, our per share net increase (decrease) in net assets resulting from operations was $0.41 and ($0.51), respectively. The $10.7 million increase during the three months ended March 31, 2021, as compared to March 31, 2020, is primarily the result of an increase in mark-to-market gains on investments in the portfolio during the three months ended March 31, 2021, as during the three months ended March 31, 2020, investment in the portfolio experienced significant net unrealized mark-to-market losses primarily as a result of market volatility and deterioration of fundamental performance on certain portfolio companies related to the COVID-19 pandemic.

 

Liquidity and Capital Resources

 

We generate cash primarily from (i) the net proceeds of private offerings, (ii) cash flows from our operations, and (iii) borrowings under our existing credit facility and any financing arrangements we may enter into in the future. These financings may come in the form of borrowings from banks and issuances of senior securities. Our primary uses of cash are for (i) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (ii) the cost of operations (including paying MC Advisors and reimbursements to MC Management), (iii) debt service of any borrowings and (iv) cash distributions to our stockholders.

 

As of March 31, 2021, we had $3.5 million in cash, $12.4 million in restricted cash at the SPV, and $42.3 million debt outstanding on our revolving credit facility. We had $82.7 million available for additional borrowings on our revolving credit facility, subject to borrowing base availability. See “Borrowings” below for additional information.

 

In accordance with the 1940 Act, we are permitted to borrow amounts such that our asset coverage ratio, as defined in the 1940 Act, is at least 150% after such borrowing. As of March 31, 2021 and December 31, 2020, our asset coverage ratio based on aggregate borrowings outstanding was 557% and 333%, respectively.

 

Cash Flows

 

For the three months ended March 31, 2021 and 2020, we experienced a net increase in cash and restricted cash of $9.8 million and $1.4 million, respectively. For the three months ended March 31, 2021, operating activities used $22.9 million of cash, primarily as a result of purchases of portfolio investments, partially offset by principal payments and sale of portfolio investments. For the three months ended March 31, 2020, operating activities used $58.8 million of cash, primarily as a result of purchases of portfolio investments. For the three months ended March 31, 2021, we generated $32.7 million from financing activities, primarily as a result of proceeds from the issuance of common stock, partially offset by net repayments on our revolving credit facility. For the three months ended March 31, 2020, we generated $60.1 million from financing activities, primarily as a result of proceeds from the issuance of common stock and proceeds from net borrowings on our revolving credit facility.

 

Capital Resources

 

As a BDC, we distribute substantially all of our net income to our stockholders and have an ongoing need to raise additional capital for investment purposes. We intend to generate additional cash primarily from future offerings of securities, including our current Second Private Offering and any subsequent offerings, future borrowings and cash flows from operations, including income earned from investments in our portfolio companies. On both a short-term and long-term basis, our primary use of funds will be to invest in portfolio companies and make cash distributions to our stockholders. We may also use available funds to repay outstanding borrowings.

 

As a BDC, we are generally not permitted to issue and sell our common stock at a price below net asset value (“NAV”) per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV per share of our common stock if our board of directors (the “Board”), including our independent directors, determines that such sale is in the best interests of us and our stockholders, and if our stockholders have approved such sales. As of March 31, 2021 and December 31, 2020, we had 19,206,910 and 13,827,515 shares outstanding, respectively.

 

52

 

Borrowings

 

We have a senior secured revolving credit facility (the “Credit Facility”) with KeyBank National Association through our wholly owned subsidiary, the SPV. On January 15, 2021, we amended the Credit Facility to, among other things, expand the loan eligibility parameters under the Credit Facility to include foreign currency loans and foreign obligors. On January 19, 2021, we increased the size of the current commitments under the Credit Facility to $125.0 million from $100.0 million.

 

Our ability to borrow under the Credit Facility is subject to certain financial and restrictive covenants as well as availability under the borrowing base, which permits us to borrow up to 72% of the principal balance of our portfolio company investments depending on the type of investment. Under the terms of the Credit Facility, the SPV is permitted to reinvest available cash and make new borrowings under the Credit Facility through May 1, 2023. The maturity date of the Credit Facility is May 1, 2025. Distributions from the SPV to us are limited by the terms of the Credit Facility, which generally allows for the distribution of net interest income pursuant to a waterfall quarterly during the reinvestment period. As of March 31, 2021 and December 31, 2020, the fair value of our investments held in the SPV as collateral for the Credit Facility was $190.7 million and $164.3 million, respectively, and these investments are identified on the accompanying consolidated schedules of investments. As of March 31, 2021 and December 31, 2020, we had outstanding borrowings under the Credit Facility of $42.3 million and $58.9 million, respectively. 

 

During the reinvestment period, borrowings under the Credit Facility bear interest at an annual rate of LIBOR (one or three month, at the SPV’s option and subject to a LIBOR minimum of 0.50%) plus a margin ranging from 2.75% to a maximum of 3.00%, depending on the level of utilization of the facility and the number of obligors of eligible loans pledged as collateral in the SPV. After the reinvestment period, borrowings under the Credit Facility bear interest at an annual rate of LIBOR plus 3.25%. In addition to the stated interest rate on borrowings, the SPV is required to pay an unused commitment fee of (i) 0.75% per annum on any unused portion of the Credit Facility when the outstanding borrowings are less than or equal to 30% of the facility amount, (ii) 0.55% per annum on any unused portion of the Credit Facility when the outstanding borrowings are greater than 30% of the facility amount but less than or equal to 50% of the facility amount, and (iii) 0.35% per annum on any unused portion of the Credit Facility when the outstanding borrowings are greater than 50% of the facility amount. As of March 31, 2021 and December 31, 2020, the outstanding borrowings were accruing at a weighted average interest rate of 3.5% and 3.5%, respectively.

 

Distributions

 

Distributions to common stockholders are recorded on the applicable record date. The amount, if any, to be distributed to common stockholders is determined by our Board at least quarterly and is generally based upon the Company’s earnings estimated by management. Net realized capital gains, if any, are generally distributed at least annually.

 

The determination of the tax attributes for our distributions is made annually, based upon our taxable income for the full year and distributions paid for the full year. Ordinary dividend distributions from a RIC do not qualify for the preferential tax rate on qualified dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital. Distributions to stockholders for the three months ended March 31, 2021 and 2020 totaled $2.8 million ($0.20 per share) and zero, respectively. The tax character of such distributions is determined at the end of the fiscal year. However, if the character of such distributions were determined as of March 31, 2021, no portion of these distributions would have been characterized as a tax return of capital to stockholders.

 

We have adopted a DRIP that provides for the reinvestment of dividends and other distributions on behalf of its stockholders that elect to participate in such plan. As a result, if we declare a dividend or distribution, our stockholders’ cash distributions will only be reinvested in additional shares of our common stock if a stockholder specifically “opts in” to the DRIP at least ten (10) days prior to the record date fixed by our Board. Shares issued under the DRIP will be issued at a price per share equal to the NAV per share as of the last day of our fiscal quarter immediately preceding the date that the distribution was declared.

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Related Party Transactions

 

We have a number of business relationships with affiliated or related parties, including the following:

 

  We have an Investment Advisory Agreement with MC Advisors, an investment advisor registered with the SEC, to manage our investing activities. We pay MC Advisors a fee for its services under the Investment Advisory Agreement consisting of two components — a base management fee and an incentive fee. See Note 5 to our consolidated financial statements and “Significant Accounting Estimates and Critical Accounting Policies – Capital Gains Incentive Fee” for additional information.

 

  We have an Administration Agreement with MC Management to provide us with the office facilities and administrative services necessary to conduct our day-to-day operations. See Note 5 to our consolidated financial statements for additional information.

 

  Theodore L. Koenig, our Chief Executive Officer and Chairman of our Board, is also a manager of MC Advisors and the President and Chief Executive Officer of MC Management. Aaron D. Peck, our Chief Financial Officer and Chief Investment Officer, is also a managing director of MC Management.

 

  We have a license agreement with Monroe Capital LLC, under which Monroe Capital LLC has agreed to grant us a non-exclusive, royalty-free license to use the name “Monroe Capital” for specified purposes in our business.

 

In addition, we have adopted a formal code of ethics that governs the conduct of MC Advisors’ officers, directors and employees. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.

 

Commitments and Contingencies and Off-Balance Sheet Arrangements

 

Commitments and Contingencies

 

As of March 31, 2021 and December 31, 2020, we had outstanding commitments to fund investments under undrawn revolvers, capital expenditure loans, delayed draw commitments and subscription agreements, totaling $28.8 million and $29.5 million, respectively. Additionally, we have entered into certain contracts with other parties that contain a variety of indemnifications. Our maximum exposure under these arrangements is unknown. However, we have not experienced claims or losses pursuant to these contracts and believe the risk of loss related to such indemnifications to be remote.

 

Off-Balance Sheet Arrangements

 

Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any off-balance sheet financings or liabilities.

 

Market Trends

 

In late 2019 and early 2020, COVID-19 emerged in China and spread rapidly across the world, including to the United States. This outbreak has led to disruptions in local, regional, national and global markets and economies affected thereby and will continue to cause disruptions for an unknown and potentially significant amount of time. To date, cross border commercial activity and market sentiment have been negatively impacted by the outbreak and government and other measures seeking to contain its spread. The federal government and the Federal Reserve, as well as foreign governments and central banks, have implemented significant fiscal and monetary policies in response to these disruptions, and additional government and regulatory responses may be possible. It is currently impossible to determine the scope of this or any future outbreak, how long any such outbreak and market disruption, volatility or uncertainty may last, the effect any governmental actions and changes in base interest rates will have or the full potential impact on us, our industry and our portfolio companies.

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We have also identified the following general trends that may affect our business:

 

Target Market: We believe that small and middle-market companies in the United States with annual revenues between $10.0 million and $2.5 billion represent a significant growth segment of the U.S. economy and often require substantial capital investments to grow. Middle-market companies have generated a significant number of investment opportunities for investment funds managed or advised by Monroe Capital, and we believe that this market segment will continue to produce significant investment opportunities for us.

 

Specialized Lending Requirements: We believe that several factors render many U.S. financial institutions ill-suited to lend to U.S. middle-market companies. For example, based on the experience of our management team, lending to U.S. middle-market companies (1) is generally more labor intensive than lending to larger companies due to the smaller size of each investment and the fragmented nature of information for such companies, (2) requires due diligence and underwriting practices consistent with the demands and economic limitations of the middle-market and (3) may also require more extensive ongoing monitoring by the lender.

 

Demand for Debt Capital: We believe there is a large pool of uninvested private equity capital for middle-market companies. We expect private equity firms will seek to leverage their investments by combining equity capital with senior secured loans and mezzanine debt from other sources, such as us.

 

Competition from Other Lenders: We believe that many traditional bank lenders, in recent years, de-emphasized their service and product offerings to middle-market businesses in favor of lending to large corporate clients and managing capital market transactions. In addition, many commercial banks face significant balance sheet constraints as they seek to build capital and meet future regulatory capital requirements. These factors may result in opportunities for alternative funding sources to middle-market companies and therefore drive increased new investment opportunities for us. Conversely, there has been a significant amount of capital raised over the past several years dedicated to middle market lending, that has increased competitive pressure in the BDC and investment company marketplace for senior and subordinated debt which in turn could result in lower yields and weaker financial covenants for new assets.

 

Pricing and Deal Structures: We believe that the volatility in global markets over the last several years and current macroeconomic issues including changes in bank regulations for middle-market banks has reduced access to, and availability of, debt capital to middle-market companies, causing a reduction in competition and generally more favorable capital structures and deal terms. Recent capital raises in the BDC and investment company marketplace have created increased competition; however, we believe that current market conditions may continue to create favorable opportunities to invest at attractive risk-adjusted returns.

 

Recent Developments

 

On April 23, 2021, we increased the size of the current commitments under the Credit Facility to $150.0 million from $125.0 million.

 

On May 6, 2021, our Board declared a distribution of $0.20 per share payable on May 13, 2021 to holders of record on May 6, 2021.

 

On May 6, 2021, our Board declared a distribution of $0.1334 per share payable on June 30, 2021 to holders of record on May 14, 2021.

 

On May 6, 2021, our Board declared a distribution of $0.0666 per share payable on June 30, 2021 to holders of record on June 1, 2021.

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Significant Accounting Estimates and Critical Accounting Policies

 

Revenue Recognition

 

We record interest and fee income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, we do not accrue PIK interest if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount and market discount or premium are capitalized, and then we amortize such amounts using the effective interest method as interest income over the life of the investment. Upon the prepayment of a loan or debt security, any unamortized premium or discount or loan origination fees are recorded as interest income. We record prepayment premiums on loans and debt securities as interest income when we receive such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. We record fees on loans based on the determination of whether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associated with a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interest method if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no cost basis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service, the fee is deemed earned and recognized as fee income in the period during which the service has been completed.

 

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies. Each distribution received from LLC and LP investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.

 

Valuation of Portfolio Investments

 

As a BDC, we generally invest in illiquid securities including debt and, to a lesser extent, equity securities of middle-market companies. Under procedures established by our Board, we value investments for which market quotations are readily available and within a recent date at such market quotations. When doing so, we determine whether the quote obtained is sufficient in accordance with generally accepted accounting principles in the United States of America to determine the fair value of the security. Debt and equity securities that are not publicly traded or whose market prices are not readily available or whose market prices are not regularly updated are valued at fair value as determined in good faith by our Board. Such determination of fair values may involve subjective judgments and estimates. Investments purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.

 

Our Board is ultimately and solely responsible for determining the fair value of the portfolio investments that are not publicly traded, whose market prices are not readily available on a quarterly basis in good faith or in any other situation where portfolio investments require a fair value determination. Because we expect that there will not be a readily available market for many of the investments in our portfolio, we expect to value many of our portfolio investments at fair value as determined in good faith by our Board using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

 

With respect to investments for which market quotations are not readily available, our Board undertakes a multi-step valuation process each quarter, as described below:

 

  the quarterly valuation process begins with each portfolio company or investment being initially evaluated and rated by the investment professionals of MC Advisors responsible for the credit monitoring of the portfolio investment;

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  our Board engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of investments for which market quotations are not readily available. We will consult with independent valuation firm(s) relative to each portfolio company at least once in every calendar year, but the independent appraisals are generally received quarterly for each investment;

 

  to the extent an independent valuation firm is not engaged to conduct an investment appraisal on an investment for which market quotations are not readily available, the investment will be valued by the MC Advisors investment professional responsible for the credit monitoring;

 

  preliminary valuation conclusions are then documented and discussed with the investment committee of MC Advisors;

 

  the audit committee of our Board reviews the preliminary valuations of MC Advisors and of the independent valuation firm(s) and MC Advisors adjusts or further supplements the valuation recommendations to reflect any comments provided by the audit committee; and
     
  our Board discusses these valuations and determines the fair value of each investment in the portfolio in good faith, based on the input of MC Advisors, the independent valuation firm(s) and the audit committee.

  

We generally use the income approach to determine fair value for loans where market quotations are not readily available, as long as it is appropriate. If there is deterioration in credit quality or a debt investment is in workout status, we may consider other factors in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. This liquidation analysis may also include probability weighting of alternative outcomes. We generally consider our debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance and the loan is otherwise not deemed to be impaired. In determining the fair value of the performing debt, we consider fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions and other relevant factors, both qualitative and quantitative. In the event that a debt instrument is not performing, as defined above, we will evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the debt instrument.

 

Under the income approach, discounted cash flow models are utilized to determine the present value of the future cash flow streams of our debt investments, based on future interest and principal payments as set forth in the associated loan agreements. In determining fair value under the income approach, we also consider the following factors: applicable market yields and leverage levels, credit quality, prepayment penalties, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, and changes in the interest rate environment and the credit markets that generally may affect the price at which similar investments may be made.

 

Under the market approach, the enterprise value methodology is typically utilized to determine the fair value of an investment. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is generally best expressed as a range of values, from which we derive a single estimate of enterprise value. In estimating the enterprise value of a portfolio company, we analyze various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio company’s historical and projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public. Typically, the enterprise values of private companies are based on multiples of earnings before interest, income taxes, depreciation and amortization, cash flows, net income, revenues, or in limited cases, book value.

 

In addition, for certain debt investments, we may base our valuation on indicative bid and ask prices provided by an independent third-party pricing service. Bid prices reflect the highest price that we and others may be willing to pay. Ask prices represent the lowest price that we and others may be willing to accept. We generally use the midpoint of the bid/ask range as our best estimate of fair value of such investment.

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As of March 31, 2021, our Board determined, in good faith, the fair value of our investment portfolio in accordance with GAAP and our valuation procedures based on the facts and circumstances known by us at that time, or reasonably expected to be known at that time. Due to the overall volatility that the COVID-19 pandemic has caused, any valuations conducted in the future in conformity with GAAP could result in a lower fair value of our portfolio. The potential impact of COVID-19 on our results going forward will depend to a large extent on future developments or new information that may emerge regarding the full duration and severity of COVID-19 including the actions taken by governments and other entities to contain COVID-19 or treat its impact, all of which are beyond our control. Accordingly, we cannot predict the extent to which our financial condition and results of operations will be affected at this time.

 

Net Realized Gain or Loss and Net Change in Unrealized Gain or Loss

 

We measure realized gain or loss by the difference between the net proceeds from the sale and the amortized cost basis of the investment, without regard to unrealized gain or loss previously recognized. Net change in unrealized gain or loss reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gain or loss, when gain or loss is realized. Additionally, we do not isolate the change in fair value resulting from foreign currency exchange rate fluctuations from the changes in the fair values of the underlying investment. All fluctuations in fair value are included in net change in unrealized gain (loss) on investments on our consolidated statements of operations.

 

Capital Gains Incentive Fee

 

Pursuant to the terms of the Investment Advisory Agreement with MC Advisors, the incentive fee on capital gains earned on liquidated investments of our portfolio is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). This fee equals 15% of our incentive fee capital gains (i.e., our realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, net of all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On a quarterly basis, we accrue for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.

 

While the Investment Advisory Agreement with MC Advisors neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of an American Institute for Certified Public Accountants Technical Practice Aid for investment companies, we include unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to MC Advisors if our entire portfolio was liquidated at its fair value as of the balance sheet date even though MC Advisors is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

 

During the three months ended March 31, 2021, we accrued capital gains incentive fees of $418 thousand based on the performance of our portfolio, $9 thousand of which was payable to MC Advisors as a result of realized gains. The remaining $409 thousand was based on unrealized appreciation, none of which was payable to MC Advisors under the Investment Advisory Agreement. During the three months ended March 31, 2020, we reversed $132 thousand of previously accrued capital gains incentive fees based on the performance of our portfolio.

 

New Accounting Pronouncements

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact of the optional guidance on our consolidated financial statements and disclosures. We did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the three months ended March 31, 2021.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are subject to financial market risks, including changes in interest rates and the valuations of our investment portfolio. Uncertainty with respect to the economic effects of the COVID-19 pandemic has introduced significant volatility in the financial markets, and the effects of this volatility could materially impact our market risks. For additional information concerning the COVID-19 pandemic and its potential impact on our business and our operating results, see Part II – Other Information, Item 1A. Risk Factors, “Risk Factors – The COVID-19 pandemic has caused severe disruptions in the global economy, which has had, and may continue to have, a negative impact on our portfolio companies and our business and operations.”

 

The majority of the loans in our portfolio have floating interest rates and we expect that our loans in the future may also have floating interest rates. These loans are usually based on a floating LIBOR and typically have interest rate re-set provisions that adjust applicable interest rates under such loans to current market rates on a monthly or quarterly basis. The majority of the loans in our current portfolio have interest rate floors, which will effectively convert the loans to fixed rate loans in the event interest rates decrease. In addition, our Credit Facility has a floating interest rate provision and other credit facilities into which we may enter in the future may also have floating interest rate provisions.

 

On March 5, 2021, the United Kingdom's Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that (i) 24 LIBOR settings would cease to exist immediately after December 31, 2021 (all seven euro LIBOR settings; all seven Swiss franc LIBOR settings; the Spot Next, 1-week, 2-month, and 12-month Japanese yen LIBOR settings; the overnight, 1-week, 2-month, and 12-month sterling LIBOR settings; and the 1-week and 2-month US dollar LIBOR settings); (ii) the overnight and 12-month US LIBOR settings would cease to exist after June 30, 2023; and (iii) the FCA would consult on whether the remaining nine LIBOR settings should continue to be published on a synthetic basis for a certain period using the FCA's proposed new powers that the UK government is legislating to grant to them. At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be enacted. The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations. In addition, we may need to renegotiate agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate, in order to replace LIBOR with the new standard that is established, which may have an adverse effect on our overall financial condition or results of operations. Following the replacement of LIBOR, some or all of these agreements may bear interest a lower interest rate, which could have an adverse impact on our results of operations. Moreover, we may need to renegotiate certain terms of our credit facilities. If we are unable to do so, amounts drawn under our credit facilities may bear interest at a higher rate, which would increase the cost of our borrowings and, in turn, affect our results of operations. The COVID-19 pandemic may also adversely impact the timing of many firms’ LIBOR transition planning. We continue to assess the potential impact of the COVID-19 pandemic on our LIBOR transition plans.

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Assuming that the consolidated statement of assets and liabilities as of March 31, 2021 was to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates (in thousands):

 

    Increase
(decrease) in
    Increase
(decrease) in
    Net increase
(decrease) in
net
investment
 
Change in Interest Rates   interest income     interest expense     income  
Down 25 basis points   $ (20 )   $     $ (20 )
Up 100 basis points     381       259       122  
Up 200 basis points     2,370       682       1,688  
Up 300 basis points     4,465       1,105       3,360  

 

Although we believe that this analysis is indicative of our existing sensitivity to interest rate changes, it does not adjust for changes in the credit market, credit quality, the size and composition of the assets in our portfolio and other business developments, including borrowing under the Credit Facility or other borrowings that could affect net increase in net assets resulting from operations, or net income. Accordingly, we can offer no assurances that actual results would not differ materially from the analysis above.

 

We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts to the extent permitted under the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates or interest rate floors.

 

We may also have exposure to foreign currencies (currently Canadian dollars and Australian dollars) related to certain investments. Such investments are translated into U.S. dollars based on the spot rate at each balance sheet date, exposing us to movements in the exchange rate. We may also enter into foreign currency forward contracts to mitigate foreign currency exposure. As of March 31, 2021, we had foreign currency forward contracts in place for CAD 12.4 million and AUD 14.5 million associated with future principal and interest payments on certain investments.

 

ITEM 4. CONTROLS AND PROCEDURES

 

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that, at the end of the period covered by our Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

 

No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

 

OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Neither we, our subsidiaries nor our investment adviser are currently subject to any material legal proceedings.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 10, 2021, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. Other than as set forth below, there have been no material changes during the three months ended March 31, 2021 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.

  

The COVID-19 pandemic has caused severe disruptions in the global economy, which has had, and may continue to have, a negative impact on our portfolio companies and our business and operations.

 

In late 2019 and early 2020, COVID-19 emerged in China and spread rapidly to across the world, including to the United States. This outbreak has led and for an unknown period of time will continue to lead to disruptions in local, regional, national and global markets and economies affected thereby. With respect to the U.S. credit markets (in particular for middle market loans), this outbreak has resulted in, and until fully resolved is likely to continue to result in, the following among other things: (i) government imposition of various forms of “stay at home” orders and the closing of “non-essential” businesses, resulting in significant disruption to the businesses of many middle-market loan borrowers including supply chains, demand and practical aspects of their operations, as well as in lay-offs of employees, and, while these effects are hoped to be temporary, some effects could be persistent or even permanent; (ii) increased draws by borrowers on revolving lines of credit; (iii) increased requests by borrowers for amendments and waivers of their credit agreements to avoid default, increased defaults by such borrowers and/or increased difficulty in obtaining refinancing at the maturity dates of their loans; (iv) volatility and disruption of these markets including greater volatility in pricing and spreads and difficulty in valuing loans during periods of increased volatility, and liquidity issues; and (v) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general that will not necessarily adequately address the problems facing the loan market and middle market businesses. This outbreak is having, and any future outbreaks could have, an adverse impact on our portfolio companies and us and on the markets and the economy in general, and that impact could be material. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. It is impossible to determine the scope of the COVID-19 pandemic, or any future outbreaks, how long any such outbreak, market disruption or uncertainties may last, the effect any governmental actions will have or the full potential impact on us, MC Advisors and our portfolio companies.

 

The COVID-19 pandemic (including the preventative measures taken in response thereto) has to date (i) created significant business disruption issues for certain of our portfolio companies, and (ii) adversely impacted the value and performance of certain of our portfolio companies. The COVID-19 pandemic is continuing as of the filing date of this Quarterly Report, and its extended duration may have further adverse impacts on our portfolio companies after March 31, 2021, including for the reasons described below. As a result of this disruption and the pressures on their liquidity, certain of our portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed draw term loans made by us, subject to availability under the terms of such loans.

 

The effects described above on our portfolio companies have, for certain of our portfolio companies to date, impacted their ability to make payments on their loans on a timely basis and in some cases have required us to amend certain terms, including payment terms. In addition, an extended duration of the COVID-19 pandemic may impact the ability of our portfolio companies to continue making their loan payments on a timely basis or meeting their loan covenants. The inability of portfolio companies to make timely payments or meet loan covenants may in the future require us to undertake similar amendment actions with respect to other of our investments or to restructure our investments. The amendment or restructuring of our investments may include the need for us to make additional investments in our portfolio companies (including debt or equity investments) beyond any existing commitments, exchange debt for equity, or change the payment terms of our investments to permit a portfolio company to pay a portion of its interest through payment-in-kind, which would defer the cash collection of such interest and add it to the principal balance, which would generally be due upon repayment of the outstanding principal. 

 

If the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, loan non-accruals, problem assets, and bankruptcies may increase. In addition, collateral for our loans may decline in value, which could cause loan losses to increase and the net worth and liquidity of loan guarantors could decline, impairing their ability to honor commitments to us. An increase in loan delinquencies and non-accruals or a decrease in loan collateral and guarantor net worth could result in increased costs and reduced income, which would have a material adverse effect on our business, financial condition or results of operations. 

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The COVID-19 pandemic has adversely impacted the fair value of our investments as of March 31, 2021 and the values assigned as of this date may differ materially from the values that we may ultimately realize with respect to our investments. Our Board approved the fair value of our investment portfolio as of March 31, 2021 and these valuations were determined in good faith in accordance with our valuation policy based on information known or knowable as of the valuation date. As a result, the long term impacts of the COVID-19 pandemic may not yet be fully reflected in the valuation of our investments and the fair value of our portfolio investments may be further negatively impacted after March 31, 2021 by circumstances and events that are not yet known, including the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. In addition, write downs in the value of our investments have reduced, and any additional write downs may further reduce, our net asset value (and, as a result, our asset coverage calculation). Accordingly, we may continue to incur additional net unrealized losses or may incur realized losses after March 31, 2021, which could have a material adverse effect on our business, financial condition and results of operations.

 

The volatility and disruption to the global economy from the COVID-19 pandemic has affected, and may continue to affect, the pace of our investment activity, which may have a material adverse impact on our results of operations. Such volatility and disruption have also led to the increased credit spreads in the private debt capital markets.

 

Further, from an operational perspective, a majority of MC Advisors’ investment professionals are currently working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business. In addition, we are highly dependent on third party service providers for certain communication and information systems. As a result, we rely upon the successful implementation and execution of the business continuity planning of such providers in the current environment. If one or more of these third parties to whom we outsource certain critical business activities experience operational failures as a result of the impacts from the spread of COVID-19, or claim that they cannot perform due to a force majeure, it may have a material adverse effect on our business, financial condition, results of operations, liquidity and cash flows.

 

The 1940 Act allows us to incur leverage, which could increase the risk of investing in us.

 

The 1940 Act generally prohibits us from incurring indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 150% (i.e., the amount of our debt may not exceed 66.7% of the value of our total assets), if certain requirements are met, including approval by our Board and stockholders.

 

Our Board and MC Advisors, our initial stockholder, approved a proposal to adopt an asset coverage ratio of 150% in connection with our organization. Incurring additional indebtedness could increase the risk of investing in us.

 

Leverage is generally considered a speculative investment technique and may increase the risk of investing in our securities. Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partially finance our investments, you will experience increased risks of investing in our securities. If the value of our assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to pay distributions, scheduled debt payments or other payments related to our securities. The effects of leverage would cause any decrease in net asset value for any losses to be greater than any increase in net asset value for any corresponding gains. If we incur additional leverage, stockholders will experience increased risks of investing in our common stock.

 

We maintain a revolving credit facility and may use other borrowed funds to make investments or fund our business operations, which exposes us to risks typically associated with leverage and increases the risk of investing in us.

 

We maintain a revolving credit facility and may borrow money, which is generally considered a speculative investment technique. As a result:

 

  our common stock is exposed to an increased risk of loss because a decrease in the value of our investments would have a greater negative impact on the value of our common stock than if we did not use leverage;
     
  if we do not appropriately match the assets and liabilities of our business, adverse changes in interest rates could reduce or eliminate the incremental income we make with the proceeds of any leverage;
     
  our ability to pay distributions on our common stock may be restricted if our asset coverage ratio, as provided in the 1940 Act, is not at least 150% and any amounts used to service indebtedness would not be available for such distributions;
     
  any credit facility is subject to periodic renewal by its lenders, whose continued participation cannot be guaranteed;
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  our revolving credit facility with KeyBank National Association, as agent, is, and any other credit facility we may enter into would be, subject to various financial and operating covenants; and
     
  we bear the cost of issuing and paying interest on the revolving credit facility, which costs are entirely borne by our common stockholders.

 

The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below.

 

   

Assumed Return on Our Portfolio 

(Net of Expenses) (1) 

 
      -10%       -5%       0%       5%       10%  
Corresponding return to common stockholder (2)(3)     -15.87 %     -8.70 %     -1.52 %     5.65 %     12.83 %

 

 

(1) The assumed return on our portfolio is required by regulation of the SEC to assist investors in understanding the effects of leverage and is not a prediction of, and does not represent, our projected or actual performance.
(2) Assumes $197.3 million in total assets, $59.8 million in debt outstanding, of which $58.9 million is senior securities outstanding, $137.5 million in net assets and an average cost of funds of 3.50%, which was the weighted average interest rate of borrowings on our revolving credit facility as of December 31, 2020. The interest rate on our revolving credit facility is a variable rate. Actual interest payments may be different.  
(3) In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our December 31, 2020 total portfolio assets of at least 1.06%.

 

The interest rates of our revolving credit facility and term loans to our portfolio companies that extend beyond 2023 might be subject to change based on recent regulatory changes.

 

LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending transactions between banks on the London interbank market and has been widely used as a reference for setting the interest rate on loans globally. We typically use LIBOR as a reference rate in term loans we extend to portfolio companies such that the interest due to us pursuant to a term loan extended to a portfolio company is calculated using LIBOR. The terms of our debt investments generally include minimum interest rate floors that are calculated based on LIBOR. Amounts drawn under our revolving credit facility also currently bear interest at LIBOR plus a margin.

 

On March 5, 2021, the United Kingdom's Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that (i) 24 LIBOR settings would cease to exist immediately after December 31, 2021 (all seven euro LIBOR settings; all seven Swiss franc LIBOR settings; the Spot Next, 1-week, 2-month, and 12-month Japanese yen LIBOR settings; the overnight, 1-week, 2-month, and 12-month sterling LIBOR settings; and the 1-week and 2-month US dollar LIBOR settings); (ii) the overnight and 12-month US LIBOR settings would cease to exist after June 30, 2023; and (iii) the FCA would consult on whether the remaining nine LIBOR settings should continue to be published on a synthetic basis for a certain period using the FCA's proposed new powers that the UK government is legislating to grant to them.

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At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates, whether the COVID-19 pandemic will have further effect on LIBOR transition timelines or plans, or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere. The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR or alternative reference rates could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us. In addition, we may need to renegotiate our revolving credit facility and the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established, which may have an adverse effect on our overall financial condition or results of operations.

 

A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income. However, an increase in interest rates could decrease the value of any investments we hold that earn fixed interest rates, including subordinated loans, senior and junior secured and unsecured debt securities and loans and high yield bonds, and also could increase our interest expense, thereby decreasing our net income.

 

In periods of rising interest rates, to the extent we borrow money subject to a floating interest rate, our cost of funds would increase, which could reduce our net investment income. Further, rising interest rates could also adversely affect our performance if such increases cause our borrowing costs to rise at a rate in excess of the rate that our investments yield. Further, rising interest rates could also adversely affect our performance if we hold investments with floating interest rates, subject to specified minimum interest rates (such as a LIBOR floor), while at the same time engaging in borrowings subject to floating interest rates not subject to such minimums. In such a scenario, rising interest rates may increase our interest expense, even though our interest income from investments is not increasing in a corresponding manner as a result of such minimum interest rates.

 

If general interest rates rise, there is a risk that the portfolio companies in which we hold floating rate securities will be unable to pay escalating interest amounts, which could result in a default under their loan documents with us. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. In addition, rising interest rates may increase pressure on us to provide fixed rate loans to our portfolio companies, which could adversely affect our net investment income, as increases in our cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate investments.

 

We are subject to risks related to corporate social responsibility.

 

Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities. We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment processes. Adverse incidents with respect to ESG activities could impact the value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations. Additionally, new regulatory initiatives related to ESG could adversely affect our business.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On March 15, 2021, we issued 5,301,797 shares of our common stock, par value $0.001 per share, at a price of $9.74 per share for proceeds of $51,639,500.

 

The sale of shares of our common stock was made pursuant to subscription agreements entered into by us, on the one hand, and each of our investors, on the other hand. The issuance and sale of the shares of our common stock are exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) thereof and Regulation D or Regulation S thereunder, as applicable.

 

Except as previously reported by us in this Item 2 or on our current reports on Form 8-K, we did not sell any securities during the period covered by this Form 10-Q that were not registered under the Securities Act.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

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Item 6. Exhibits

 

Exhibit    
Number   Description of Document
3.1   Articles of Incorporation (1)
     
3.2   Articles of Amendment and Restatement (2)
     
3.3   Bylaws (1)
     
10.1   Second Amendment to the Amended and Restated Revolving Credit and Security Agreement among MC Income Plus Financing SPV LLC, as borrower; the Company, as collateral manager; the lenders from time to time parties thereto; KeyBank National Association, as administrative agent and lead arranger; and U.S. Bank National Association as collateral agent, collateral administrator and document custodian.(3)

 

10.2   Facility Amount Increase to the Amended and Restated Revolving Credit and Security Agreement among MC Income Plus Financing SPV LLC, as borrower; the Company, as collateral manager; the lenders from time to time parties thereto; KeyBank National Association, as administrative agent and lead arranger; and U.S. Bank National Association as collateral agent, collateral administrator and document custodian.(3)

 

10.3   Facility Amount Increase to the Amended and Restated Revolving Credit and Security Agreement among MC Income Plus Financing SPV LLC, as borrower; the Company, as collateral manager; the lenders from time to time parties thereto; KeyBank National Association, as administrative agent and lead arranger; and U.S. Bank National Association as collateral agent, collateral administrator and document custodian.(4)

 

31.1   Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
     
31.2   Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
     
32.1   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
     
(1)   Previously filed as an exhibit to amendment no. 1 to the registration Statement on Form 10 (File No. 000-55941) filed with the SEC on July 30, 2018.
     
(2)   Previously filed as an exhibit to the current report on Form 8-K filed with the SEC on December 7, 2018.

 

(3)  Previously filed as an exhibit to the current report on Form 8-K filed with the SEC on January 21, 2021.

 

(4)  Previously filed as an exhibit to the current report on Form 8-K filed with the SEC on April 27, 2021.
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: May 12, 2021 By /s/ Theodore L. Koenig
    Theodore L. Koenig
    Chairman, Chief Executive Officer and Director
    (Principal Executive Officer)
    Monroe Capital Income Plus Corporation
     
Date: May 12, 2021 By  /s/ Aaron D. Peck
    Aaron D. Peck
    Chief Financial Officer and Chief Investment Officer
    (Principal Financial and Accounting Officer)
    Monroe Capital Income Plus Corporation
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