Midcap Financial Investment Corporation · NASDAQ:MFIC
Midcap Financial Investment — Merger or Acquisition (November 2023)
43 slides from Midcap Financial Investment's merger presentation, Nov 7, 2023
Slide 1: MidCap Financial Investment Corporation Announces Merger Agreements with AFT and AIF
MidCap Financial Investment Corporation (NASDAQ: MFIC) Announces Merger Agreements with Apollo Senior Floating Rate Fund Inc. (NYSE: AFT), and Apollo Tactical Income Fund Inc. (NYSE: AIF) Apollo Global Management November 7, 2023 Unless otherwise noted, information as of September 30, 2023 Confident
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, AIF, and/or AFT 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: Proposed Mergers Are in the Best Interests of All Shareholders
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 share 2 Expected to be accretive to return on equity and net investment income per share 2 Special
Slide 5: Significant Shareholder Financial Benefits Related to the Transactions
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 of the applicable transaction, followin
Slide 6: Overview 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 Closed End Fund (“CEF”) Structure Regulated
Slide 7: Summary of Key Terms of the Transactions
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 proportional to each of MFIC’s, AFT’s, and AIF’s r
Slide 8: Illustrative Exchange Ratios and MFIC Pro Forma Ownership
Illustrative Exchange Ratios and MFIC Pro Forma Ownership Illustrative Exchange Ratios 1 Pro Forma Ownership AFT AIF $15.05 $14.63 AFT NAV Per Share AIF NAV Per Share $15.28 $15.28 AIF MFIC NAV Per Share MFIC NAV Per Share 15% 0.9849 x 0.9577 x Exchange Ratio Exchange Ratio AFT Pro Forma 15.6 14.5 1
Slide 9: Total Consideration to AFT and AIF (Illustrative)
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 $0.25 per share to each AFT or AIF shareho
Slide 10: Post Transaction MFIC Has Greater Scale and More Earnings Power
Post Transaction MFIC Has Greater Scale and More Earnings Power Enhanced Size and Liquidity Greater Portfolio Diversification Potential ROE Expansion MFIC Net Assets ($ in millions)1 MFIC Investment Portfolio ($ in millions)2 MFIC Net Investment Income Return on Equity3 Drivers of ROE Expansion 42%
Slide 11: Expense Synergies
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 G&A Expenses ($ in millions)1 • Adminis
Slide 12: Increased Scale and Secondary Market Liquidity
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 ($19) Market Capitalization Average Daily Value Traded 3 Mon
Slide 13: Investment Portfolios
Investment Portfolios Affiliates of Apollo manage MFIC, AFT, and AIF, which mitigates the diligence concerns typically associated with mergers of unaffiliated entities. The CEFs’ portfolios primarily include liquid assets that are owned throughout the Apollo platform, which will help facilitate a se
Slide 14: Pro Forma Portfolio Metrics Improve Once Rotated and Deployed
Pro Forma Portfolio Metrics Improve Once Rotated and Deployed Portfolio Rotation, at Fair Value ($ in millions) Deploy into direct origination 215 companies $3,358 Portfolio increases by ~$1.0 billion $656 $332 6%, $195 Merx decreases to <6% 149 companies 3 $474 Rotate into direct origination $2
Slide 15: Existing Sources of Financing in Place to Execute the Mergers
Existing Sources of Financing in Place to Execute the Mergers MFIC Debt ($ in millions) $2,500 $2,412 $2,412 $2,500 $2,180 $374 $974 Debt Outstanding $2,000 $2,000 $742 $2,038 $600 $1,500 $1,500 Debt Outstanding Debt Outstanding $1,438 $1,438 $731 $731 $963 $1,000 $1,000 $232 $232 $125 $125 $125 $50
Slide 16: Combined Company Expected to Generate Significant Value for All Shareholders
Combined Company Expected to Generate Significant Value for All Shareholders Financially Attractive Transactions for All Shareholders Upfront cash payments and accretive to return on equity and net investment income per share Potential for Increased Shareholder Value Larger company may enhance marke
Slide 17: Why Direct Lending?
APOLLO Why Direct Lending?
Slide 18: Strong Demand for Loans to Middle Market Companies
WHY DIRECT LENDING? Strong Demand for Loans to Middle Market Companies U.S. Middle Market is equivalent to the 5th largest global economy¹ Private Equity Dry Powder and Implied Loan Demand ($ in billions) 2 $629 $629 Significant Significantdry powder dry powder There are nearly 200,000 U.S. middle m
Slide 19: Reduced Bank Lending Continues to Drive Growth in Direct Lending
WHY DIRECT LENDING? Reduced Bank Lending Continues to Drive Growth in Direct Lending Number of U.S Banks Continues to Decline 1 Bank’s Reduced Participation in Loan Market 2 11,000 100% 10,000 53% decline since 2000 90% 9,000 80% 8,000 70% 7,000 60% 6,000 50% 5,000 40% 4,000 30% 3,000 20% 2,000 10%
Slide 20: Direct Lending Strong Returns and Lower Historical Volatility
WHY DIRECT LENDING? Direct Lending Strong Returns and Lower Historical Volatility 15-Year Annualized Returns and Volatility by Asset Class Return 10% DIRECT LENDING 9% 8% 7% 6% High Yield Bonds 5% 4% Investment Grade Bonds Leveraged Loans 3% 2% Treasuries 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% Volatili
Slide 21: Directly Originated Assets Produce Better Risk-Adjusted Returns
WHY DIRECT LENDING? We Believe Directly Originated Assets Produce Better Risk-Adjusted Returns BROADLY SYNDICATED LOANS & DIRECT ORIGINATION HIGH YIELD BONDS Credit Documentation Control Due Diligence Access PARTIAL FULL Relationship with Borrower LIMITED COMPREHENSIVE Origination and Spread Eco
Slide 22: What is a Business Development Company?
WHY DIRECT LENDING? What is a Business Development Company? • A business development company (“BDC”) is a type of closed-end fund designed to lend to private U.S. companies – In 1980, Congress passed the Small Business Investment Incentive Act, which created the BDC section of the 1940 Act – BDCs ar
Slide 23: BDC Sector Growing While Closed End Fund Sector Relatively Flat
WHY DIRECT LENDING? BDC Sector Growing While Closed End Fund Sector Relatively Flat Over the last several years, total BDC assets have grown significantly, while total closed end fund assets have been relatively flat. Total Assets of BDCs ($ in billions, year end) 1,2 Total Assets of Closed End Fund
Slide 24: Overview of MidCap Financial Investment Corporation
Overview of MidCap Financial Investment Corporation 24
Slide 25: MFIC Positioned to be a Pure Play Senior Secured Middle Market BDC
OVERVIEW OF MIDCAP FINANCIAL INVESTMENT CORPORATION MFIC Positioned to be a Pure Play Senior Secured Middle Market BDC MFIC is a publicly traded BDC treated as a Apollo is a high growth MidCap Financial1 is a regulated investment company (“RIC”) for global alternative asset leading lender to middle
Slide 26: MFIC Investment Strategy
OVERVIEW OF MIDCAP FINANCIAL INVESTMENT CORPORATION MFIC 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 Financial’s1
Slide 27: MFIC Senior Secured Diversified Investment Portfolio
OVERVIEW OF MIDCAP FINANCIAL INVESTMENT CORPORATION MFIC Senior Secured Diversified Investment Portfolio Portfolio Snapshot Portfolio by Strategy Portfolio by Industry Portfolio $2.37 bn # of Portfolio Companies 149 10.1% # of Industries 25 8.2% 18.5% 2.0% 2.1% Corporate Lending and Other1 % Total P
Slide 28: MFIC Has the Lowest Fee Structure Among Listed BDCs
OVERVIEW OF MIDCAP FINANCIAL INVESTMENT CORPORATION MFIC Has 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 other listed BDCs shown below charge on gross assets at a higher comparable rate.
Slide 29: Overview of MidCap Financial
Overview of MidCap Financial 29
Slide 30: MidCap Financial is a Leading Middle Market Lender
OVERVIEW OF MIDCAP FINANCIAL, 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 p
Slide 31: MidCap Financial Offers a Broad Suite of Products
OVERVIEW OF MIDCAP FINANCIAL 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 Franchise Leveraged Life Sciences and Lending Lending Finance Technology Lending Lending Lendin
Slide 32: Overview of Closed-End Funds
Overview of Closed-End Funds 32
Slide 33: Apollo Senior Floating Rate Fund Inc. (AFT) at a Glance
OVERVIEW OF CLOSED END FUNDS 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 seek current income and preservation of capital by investing
Slide 34: Apollo Tactical Income Fund Inc. (AIF) at a Glance
OVERVIEW OF CLOSED END FUNDS 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 Weighted Average Floating Rate Spread / % Floating Rate 5.46% / 84.1% investment
Slide 35: Appendices
APOLLO Appendices
Slide 36: AFT and AIF Liquid Assets to be Repositioned into Directly Originated Loans
APPENDICES AFT and AIF Liquid Assets to be Repositioned into Directly Originated Loans MFIC 1 AFT 1 AIF 1 MFIC Change 2, 3 MFIC Pro Forma Portfolio by Strategy, at fair value ($ in millions) Total direct origination 2,174 81 102 989 3,162 Merx Aviation Financial, LLC 195 0 0 0 195 Broadly syndicated
Slide 37: Transaction Roles
APPENDICES Transaction Roles Transaction Counsel Simpson Thacher & Bartlett LLP Financial Advisor to MFIC Special Committee Lazard Legal Counsel to MFIC Special Committee Proskauer Rose LLP Financial Advisor to AFT’s and AIF’s Special Committees Keefe, Bruyette & Woods, A Stifel Company Legal Counse
Slide 38: MFIC Corporate Information
APPENDICES MFIC Corporate Information Corporate Officers Board of Directors Research Coverage Additional Corporate Information Howard T. Widra Howard T. Widra Bank of America Merrill Lynch Fund Counsel Executive Chairman, Interested Director Simpson Thacher & Bartlett LLP Interested Director Derek H
Slide 39: MFIC Senior Leadership Team
APPENDICES 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
Slide 40: MFIC Senior Leadership Team (continued)
APPENDICES 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
Slide 41: AFT and AIF Corporate Information
APPENDICES AFT and AIF Corporate Information Corporate Officers Board of Directors Additional Corporate Information James Vanek Barry Cohen Fund Counsel President, Chief Executive Officer, and Interested Director Willkie Farr & Gallagher, LLP Portfolio Manager Chairman of the Board Counsel to the In
Slide 42: AFT and AIF Senior Leadership Team
APPENDICES AFT and AIF Senior Leadership Team James Vanek President, Chief Executive Officer, and Portfolio Manager Mr. Vanek is a Partner and Co-Head of Apollo’s U.S. Performing Credit business. Mr. Vanek joined the Firm in 2008, and before that he was Associate Director, Loan Sales & Trading in th
Slide 43: Contact Information
APPENDICES Contact Information MidCap Financial Investment Corporation Apollo Senior Floating Rate Fund Inc. and Apollo Tactical Income Fund Inc. Elizabeth Besen Elizabeth Besen Investor Relations Manager Investor Relations Manager Phone: (212) 822-0625 Phone: (212) 822-0625 Email: ebesen@apollo.com
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