Midcap Financial Investment Corporation · NASDAQ:MFIC
Midcap Financial Investment — Investor Presentation (May 2024)
61 slides from Midcap Financial Investment's investor presentation, May 2024
Slide 1: MidCap Financial Investment Corporation Investor Presentation May 2024
MidCap Financial Investment Corporation Investor Presentation May 2024 Unless otherwise noted, information as of March 31, 2024. Confidential and Proprietary - Not for distribution, in whole or in part, without the express written consent of Apollo Global Management, Inc. It should not be assumed th
Slide 2: Disclaimers, Definitions and Important Notes
Disclaimers, Definitions and Important Notes Forward-Looking Statements statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that they may make directly to you or through reports that MFIC, AFT, and/or AIF Some of the s
Slide 3: Disclaimers, Definitions and Important Notes
Disclaimers, Definitions and Important Notes “Assets Under Management”, or “AUM”, refers to the assets of the funds, partnerships and accounts to No Offer or Solicitation which Apollo provides investment management, advisory, or certain other investment-related services, This Presentation is not, an
Slide 4: Table of Contents
Introduction MFIC Investment Highlights Table of Contents MFIC Recent Accomplishments and Portfolio Review Proposed Mergers of MFIC, AFT, and AIF Conclusion Appendix 4
Slide 5: Introduction
APOLLO Introduction
Slide 6: MFIC Positioned to be a Pure Play Senior Secured Middle Market BDC
INTRODUCTION MidCap Financial Investment Corporation (“MFIC”) Positioned to be a Pure Play Senior Secured Middle Market BDC MFIC is a publicly traded (NASDAQ: MFIC) business development company Apollo is a high growth MidCap Financial1 is a global alternative asset (“BDC”) treated as a regulated inv
Slide 7: MFIC Snapshot
INTRODUCTION MFIC Snapshot General Corporate Information Investment Portfolio (at fair value) Ticker MFIC Investment Portfolio $2.35 billion Exchange NASDAQ Global Select # of Portfolio Companies 154 Net Assets $1.01 billion # of Industries 23 Kroll Bond Rating Agency 1 BBB- / Stable First Lien % 2
Slide 8: Apollo Today: Integrated Asset Management and Retirement Services Capabilities
NTRODUCTIO`N Apollo Today: Integrated Asset Management and Retirement Services Capabilities GL OBA L M A NA GEMENT $60B+ 4,900+ ASSET Market Employees RETIREMENT M A N AG E M E N T Capitalization Globally SERVICES A / A2 / A Rated by Fitch, Moody’s, S&P A SSET MA N A GEM ENT $671B A / A2 / A ~$23B A
Slide 9: MidCap Financial is a Leading Middle Market Lender
INTRODUCTION MidCap Financial1 is a Leading Middle Market Lender Key Members of Management Team Working Together 25+ Years Full-Service Finance Company Scaled Platform with Strong Credit Track Record • Founded in 2008 • Focused on senior debt solutions to middle • Well-established provider of senior
Slide 10: MFIC Investment Highlights
MFIC Investment Highlights 10
Slide 11: MFIC Investment Highlights
MFIC INVESTMENT HIGHLIGHTS MFIC Investment Highlights Bank retrenchment from lending expands opportunity set for non-bank lenders resulting in attractive environment for private credit 1 Secular Tailwinds origination Value proposition for direct lending in terms of flexibility and reliability ha
Slide 12: Bank Retrenchment from Middle Market Lending Expands Opportunity for Non-Bank Lenders
MFIC INVESTMENT HIGHLIGHTS: SECULAR TAILWINDS 1 Bank Continued Retrenchment from Middle Market Lending Expands the Opportunity for Non-Bank Lenders Total Number of U.S. Banks Continues to Decline 1 Banks’ Reduced Participation in Loan Market 2, 3 12,000 100% 50%+ decline since 2000 ~ 65%+ reduction
Slide 13: Strong Demand for Loans to Middle Market Companies
MFIC INVESTMENT HIGHLIGHTS: SECULAR TAILWINDS 1 Strong Demand for Loans to Middle Market Companies U.S. Middle Market is equivalent to the 5th largest global economy¹ Private Equity Dry Powder and Implied Loan Demand ($ in billions)2 $650 $650 Significant Significantdry powder dry powder There are n
Slide 14: How Private Credit Produces Better Outcomes for Lenders
MFIC INVESTMENT HIGHLIGHTS: SECULAR TAILWINDS 1 How Private Credit Produces Better Outcomes for Lenders Broadly Syndicated Direct Origination Loans Credit Documentation Control Due Diligence Access Partial Full Relationship with Borrower Limited Comprehensive Origination and Spread Economics Syndica
Slide 15: MidCap Financial's Strong Strategic Partnership with Apollo
MFIC INVESTMENT HIGHLIGHTS: ROBUST ORIGINATION CAPABILITIES 2 MidCap Financial’s1 Strong Strategic Partnership with Apollo Apollo Platforms Yield Origination MidCap Financial is Apollo’s primary direct origination Assets + Capabilities platform in private middle market credit Demand Full service f
Slide 16: MidCap Financial Offers a Broad Suite of Products
MFIC INVESTMENT HIGHLIGHTS: ROBUST ORIGINATION CAPABILITIES 2 MidCap Financial1 Offers a Broad Suite of Products, Providing Solutions to Nearly All Financing Needs of Middle Market Clients Business Segments Asset Based Real Estate Lender Life Sciences and Franchise Leveraged Lending Lending Finance
Slide 17: MidCap Financial is a Leading Middle Market Lender
MFIC INVESTMENT HIGHLIGHTS: ROBUST ORIGINATION CAPABILITIES 2 MidCap Financial1 is a Leading Middle Market Lender Middle Market Lending League Table2 Rank Lender # Deals 1 Antares Capital 183 2 MIDCAP FINANCIAL 159 3 TPG Twin Brook 138 4 Churchill 124 5 Ares Capital Corp 107 6 Crescent Capital 89 7
Slide 18: Investment Strategy
MFIC INVESTMENT HIGHLIGHTS: PRUDENT PORTFOLIO CONSTRUCTION 3 Investment Strategy Focused on First Lien Loans to Middle Market Companies Focused on true first lien assets, top of the capital structure, with flexibility to invest across the capital structure Assets Primarily Sourced by MidCap Financia
Slide 19: MFIC Compares Favorably to BDC Averages on Select Key Metrics
MFIC INVESTMENT HIGHLIGHTS: PRUDENT PORTFOLIO CONSTRUCTION 3 MFIC Compares Favorably to BDC Averages on Select Key Metrics We believe MFIC’s portfolio is We believe MFIC’s revenue We believe MFIC’s relatively more senior when compared to quality is higher compared to high exposure to floating rate B
Slide 20: MFIC Has One of the Lowest Fee Structures Among Listed BDCs
MFIC INVESTMENT HIGHLIGHTS: SHAREHOLDER FRIENDLY FEE STRUCTURE 4 MFIC Has One of the Lowest Fee Structure, Among Listed BDCs MFIC charges a management fee of 1.75% on net assets (i.e., equity) (equates to ~0.75% on gross assets) while all comparable listed BDCs charge a management fee on gross asset
Slide 21: MFIC Recent Accomplishments and Portfolio Review
MFIC Recent Accomplishments and Portfolio Review 21
Slide 22: Recent Key Accomplishments
MFIC RECENT ACCOMPLISHMENTS AND PORTFOLIO REVIEW Recent Key Accomplishments • LTM Net Investment Income ROE of 11.5% DELIVERED SOLID ROE’s1 • LTM Net Income ROE of 11.4% DEMONSTRATED • NAV per share rose $0.24 or 1.6% over the LTM period (increased from $15.18 as of 3/31/23 to $15.42 as of 3/31/24)
Slide 23: MFIC Senior Secured Diversified Investment Portfolio
MFIC RECENT ACCOMPLISHMENTS AND PORTFOLIO REVIEW MFIC Senior Secured Diversified Investment Portfolio Portfolio Snapshot Portfolio by Strategy Portfolio by Industry Portfolio $2.35 bn # of Portfolio Companies 154 # of Industries 23 8% 16.5% 19.3% Corporate Lending and Other1 % Total Portfolio 92% 8%
Slide 24: MFIC Credit Quality Remains Resilient
MFIC RECENT ACCOMPLISHMENTS AND PORTFOLIO REVIEW MFIC Credit Quality Remains Resilient Median LTM EBITDA1 Net Leverage and Attachment Point2 Net Leverage Attachment Point $55 $54 5.49 x 5.45 x 5.45 x 5.44 x 5.27 x 5.36 x $48 $47 $47 0.2 x 0.1 x 0.1 x 0.1 x 0.1 x 0.0 x Dec-22 Mar-23 Jun-23 Sep-23 Dec
Slide 25: Proposed Mergers of MFIC, AFT, and AIF
Proposed Mergers of MFIC, AFT, and AIF 25
Slide 26: Proposed Mergers of AFT and AIF with MFIC Are in the Best Interests of All Shareholders
PROPOSED MERGERS OF MFIC, AFT, AND AIF We Believe the Proposed Mergers of AFT and AIF with MFIC are in the Best Interests of All Shareholders1 & MFIC AFT & AIF Expected to be accretive to return on equity and net investment income per share2 Expected to be accretive to return on equity and net i
Slide 27: Significant Shareholder Financial Benefits Related to the Transactions
PROPOSED MERGERS OF MFIC, AFT, AND AIF Significant Shareholder Financial Benefits Related to the Transactions Special Cash Payment to • An affiliate of Apollo will make a special cash payment of $0.25 per share to each AFT or AIF shareholder of record as of the closing AFT and AIF Shareholders date
Slide 28: Overview of MFIC, AFT, and AIF
PROPOSED MERGERS OF MFIC, AFT, AND AIF Overview of MFIC, AFT, and AIF MidCap Financial Apollo Senior Apollo Tactical Investment Corporation Floating Rate Fund Inc. Income Fund Inc. NASDAQ: MFIC NYSE: AFT NYSE: AIF Listed Business Development Company (“BDC”) Listed Closed End Fund (“CEF”) Listed Clos
Slide 29: Summary of Key Terms of the Transactions
PROPOSED MERGERS OF MFIC, AFT, AND AIF Summary of Key Terms of the Transactions1 • MFIC to acquire 100% of AFT and AIF in two parallel stock-for-stock transactions, with shares to be exchanged on a NAV-for-NAV basis2 • The Mergers will result in an ownership split of the combined company proportiona
Slide 30: Illustrative Exchange Ratios and MFIC Pro Forma Ownership
PROPOSED MERGERS OF MFIC, AFT, AND AIF Illustrative Exchange Ratios and MFIC Pro Forma Ownership Illustrative Exchange Ratios 1 Pro Forma Ownership AFT AIF $15.07 $14.89 AFT NAV Per Share AIF NAV Per Share $15.42 $15.42 AIF MFIC NAV Per Share MFIC NAV Per Share 15% 0.9776 x 0.9657 x Exchange Ratio E
Slide 31: Total Consideration to AFT and AIF (Illustrative)
PROPOSED MERGERS OF MFIC, AFT, AND AIF Total Consideration to AFT and AIF (Illustrative1) MFIC to acquire 100% of AFT and AIF in two parallel stock-for-stock transactions, with shares to be exchanged on a NAV-for-NAV basis.2 In addition, an affiliate of Apollo will make a special cash payment of $0.
Slide 32: Post Transaction MFIC Has Greater Scale and More Earnings Power
PROPOSED MERGERS OF MFIC, AFT, AND AIF Post Transaction MFIC Has Greater Scale and More Earnings Power Enhanced Size and Liquidity Greater Portfolio Diversification Potential ROE Expansion MFIC Net Assets ($ in millions)1 MFIC Investment Portfolio ($ in millions)2 MFIC Net Investment Income Return o
Slide 33: Expense Synergies
PROPOSED MERGERS OF MFIC, AFT, AND AIF Expense Synergies The proposed mergers of AFT and AIF with MFIC are expected to be accretive to net investment income in part due to the opportunity for operating synergies by eliminating certain duplicative corporate expenses Category Potential Savings Annual
Slide 34: Increased Scale and Secondary Market Liquidity
PROPOSED MERGERS OF MFIC, AFT, AND AIF Increased Scale and Secondary Market Liquidity Potential for increased stock liquidity could lead to increased institutional ownership Net Asset Value ($ in millions)1 Market Cap, Trading Volume & Research Coverage ($ in millions)2 $1,600 ($19) Market Capitaliz
Slide 35: Investment Portfolios
PROPOSED MERGERS OF MFIC, AFT, AND AIF Investment Portfolios Affiliates of Apollo manage MFIC, AFT, and AIF, which mitigates the diligence concerns typically associated with mergers of unaffiliated entities. The CEFs’ portfolios primarily include liquid assets that are owned throughout the Apollo pl
Slide 36: Pro Forma Portfolio Metrics Improve Once Rotated and Deployed
PROPOSED MERGERS OF MFIC, AFT, AND AIF Pro Forma Portfolio Metrics Improve Once Rotated and Deployed Portfolio Rotation, at Fair Value ($ in millions) ~224 companies Deploy into direct origination $3,418 Portfolio increases by ~$1.0 billion 6%, $190 Merx decreases to <6% $679 $386 154 companies
Slide 37: Existing Sources of Financing in Place to Execute the Mergers
PROPOSED MERGERS OF MFIC, AFT, AND AIF Existing Sources of Financing in Place to Execute the Mergers MFIC Debt ($ in millions) $2,492 $2,492 $2,500 $476 $2,000 $1,080 Debt Outstanding $2,016 $604 $1,500 Debt Outstanding $625 $1,412 $625 $1,000 $232 $232 $80 $80 $125 $125 $500 $350 $350 $- 3/31/2024
Slide 38: Combined Company Expected to Generate Significant Value for All Shareholders
PROPOSED MERGERS OF MFIC, AFT, AND AIF Combined Company Expected to Generate Significant Value for All Shareholders Financially Attractive Transactions for All Shareholders Upfront cash payments and expected accretion to return on equity and net investment income per share Potential for Increased Sh
Slide 39: Apollo Senior Floating Rate Fund Inc. (NYSE: AFT) at a Glance
PROPOSED MERGERS OF MFIC, AFT, AND AIF Apollo Senior Floating Rate Fund Inc. (NYSE: AFT) at a Glance Objective and Strategy Portfolio Characteristics 1 AFT is a diversified, closed-end management investment company. AFT’s investment objective is to Weighted Average Floating Rate Spread / % Floating
Slide 40: Apollo Tactical Income Fund Inc. (NYSE: AIF) at a Glance
PROPOSED MERGERS OF MFIC, AFT, AND AIF Apollo Tactical Income Fund Inc. (NYSE: AIF) at a Glance Objective and Strategy Portfolio Characteristics 1 AIF is a diversified, closed-end management investment company. The Fund’s primary investment Weighted Average Floating Rate Spread / % Floating Rate 5.4
Slide 41: Conclusion
APOLLO Conclusion
Slide 42: Reasons to Own MFIC
CONCLUSION Reasons to Own MFIC 1 SECULAR TAILWINDS AND RECENT VOLATILITY CREATE ATTRACTIVE ENVIRONMENT FOR PRIVATE CREDIT 2 ROBUST ORIGINATION CAPABILITIES OF MIDCAP FINANCIAL 1 / APOLLO PROVIDE ATTRACTIVE AND SIGNIFICANT DEAL FLOW 3 PRUDENT PORTFOLIO CONSTRUCTION WITH FOCUS ON FIRST LIEN, CASH PAY,
Slide 43: Appendix
APOLLO Appendix
Slide 44: MFIC Senior Leadership Team
MFIC Senior Leadership Team Howard T. Widra Executive Chairman Mr. Widra has been with Apollo and/or its affiliates since 2013 and serves as Apollo’s Head of Direct Origination. He was appointed Executive Chairman in August 2022. He served as the Company’s Chief Executive Officer from May 2018 to Au
Slide 45: MFIC Senior Leadership Team (continued)
MFIC Senior Leadership Team (continued) Kristin Hester Chief Legal Officer and Secretary Ms. Hester joined Apollo in 2015 and currently serves as Senior Counsel for Apollo. She was promoted to Chief Legal Officer for the Company in August 2022 and served as General Counsel for the Company from May 2
Slide 46: MFIC Top Corporate Lending Issuers as of March 31, 2024
MFIC Top Corporate Lending Issuers1 as of March 31, 2024 Fair Value % of Total ($ in millions) Portfolio 1 ChyronHego Corporation 2 $ 130 6.1% 2 LashCo $ 44 2.1% 3 Lending Point $ 38 1.8% 4 Beacon Mobility $ 38 1.8% Top 10 5 UpStack $ 33 1.6% 20.9% Corporate Lending 6 Heniff and Superior $ 32 1.5% 7
Slide 47: Financial Highlights
Financial Highlights ($ in thousands, except per share data) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Financial Highlights Net investment income per share $0.44 $0.46 $0.43 $0.44 $0.45 Net realized and change in unrealized gains (losses) from investments and ($0.05) $0.05 $0.03 ($0.05) $0.01 foreign curre
Slide 48: Portfolio Highlights
Portfolio Highlights ($ in thousands) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Portfolio by Strategy, at fair value ($) Leveraged lending $1,819,089 $1,788,586 $1,788,540 $1,830,834 $1,803,762 Life sciences 155,128 153,666 187,698 189,687 204,036 Asset based, franchise finance and lender finance 143,175 1
Slide 49: Corporate Lending Portfolio Detail
Corporate Lending Portfolio Detail1 ($ in thousands) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Portfolio by Asset Class, measured at fair value ($) First Lien $2,051,724 $2,016,930 $2,010,175 $2,050,105 $2,015,709 Second lien 13,459 $31,886 $66,558 68,441 69,357 Other 52,210 $48,435 $50,122 49,636 50,852 T
Slide 50: Corporate Lending Commitments
Corporate Lending Commitments1 ($ in thousands) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Gross Commitments Made by Asset Class First lien $149,153 $174,923 $19,745 $78,733 $110,020 Second lien and Other 118 16 - - 311 Gross commitments made $149,270 $174,939 $19,745 $78,733 $110,331 Gross Commitments Made
Slide 51: Funded Investment Activity
Funded Investment Activity ($ in thousands) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Fundings, excluding Merx Aviation and Revolvers Gross fundings $128,925 $113,518 $16,188 $72,828 $105,792 Repayments (95,398) (152,086) (58,552) (57,666) (54,151) Net fundings, excluding Merx Aviation and revolvers 33,527
Slide 52: Credit Quality
Credit Quality As of March 31, 2024, 0.9% of total investments at amortized cost, or 0.6% of total investments at fair value, were on non-accrual status ($ in thousands) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Investments on Non-Accrual Status Non-accrual investments at amortized cost $23,506 $31,568 $33
Slide 53: Net Asset Value Rollforward
Net Asset Value Rollforward ($ in thousands, except per share data) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Per Share NAV, beginning of period $15.41 $15.28 $15.20 $15.18 $15.10 Net investment income 0.44 0.46 0.43 0.44 0.45 Net realized and change in unrealized gains (losses) (0.05) 0.05 0.03 (0.05) 0.0
Slide 54: Quarterly Operating Results
Quarterly Operating Results ($ in thousands, except per share data) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Total investment income Interest income (excluding PIK) $65,681 $70,065 $66,681 $66,655 $64,787 Dividend income 12 473 740 115 23 PIK interest income 930 930 479 812 784 Other income 1,708 484 275
Slide 55: Quarterly Balance Sheet
Quarterly Balance Sheet ($ in thousands, except share and per share data) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Assets Investments at fair value $2,352,835 $2,334,199 $2,369,108 $2,409,287 $2,385,211 Cash and cash equivalents (including foreign currencies) 49,612 122,127 43,150 50,197 70,063 Interest r
Slide 56: Funding Sources as of March 31, 2024
Funding Sources as of March 31, 2024 Debt Facilities ($ in thousands) Debt Issued/ Final Maturity Interest Principal Amount Amended Date Rate Outstanding Secured Facilities: 1 Senior Secured Facility ($1.705 billion) 4/19/2023 4/19/2028 SOFR + 187.5 +10bps 4 $ 625,110 6 5 MFIC Bethesda CLO I LLC Cla
Slide 57: Interest Rate Exposure as of March 31, 2024
Interest Rate Exposure as of March 31, 2024 1 Investment Portfolio by Interest Rate Type Funding Sources by Interest Rate Type Variable rate assets Fixed rate debt 1% Fixed rate assets 23% 4% Non yielding and non-accrual assets 9% Common equity 42% Floating rate debt Floating rate 35% assets 86% Flo
Slide 58: Realized and Change in Unrealized Gains (Losses) by Strategy
Realized and Change in Unrealized Gains (Losses) by Strategy ($ in millions) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Leveraged lending ($4.0) $4.5 $0.0 ($0.5) $1.0 Life sciences ($0.5) ($3.3) ($2.2) ($2.0) $0.1 Franchise Finance ($0.0) $0.0 $0.1 $0.1 ($0.1) Asset based and Lender finance ($1.9) $2.7 $0.2
Slide 59: Outstanding Commitments
Outstanding Commitments ($ in thousands) Mar-24 Dec-23 Sep-23 Jun-23 Mar-23 Revolver Obligations and Bridge Loans Funded 1 $75,762 $89,089 $89,691 $88,357 $100,566 Unfunded 1, 2 182,695 176,723 175,720 181,088 182,462 Par $258,457 $265,811 $265,411 $269,445 $283,029 Unfunded Revolver and Bridge Loan
Slide 60: MFIC's Portfolio by Strategy and Lien Type
MFIC’s Portfolio by Strategy and Lien Type $ in 000's First Lien Second Lien Other Total Corporate lending $ 2,051,724 $ 13,459 $ 52,210 $ 2,117,392 Merx Aviation 70,075 - 119,672 189,747 Other 14,879 - 30,817 45,696 Total Potfolio $ 2,136,677 $ 13,459 $ 202,699 $ 2,352,836 % Total Portfolio First L
Slide 61: Contact Information
Contact Information Elizabeth Besen Gregory W. Hunt Investor Relations Manager Chief Financial Officer and Treasurer Phone: (212) 822-0625 Phone: (212) 822-0655 Email: ebesen@apollo.com Email: ghunt@apollo.com 61
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