Midcap Financial Investment Corporation · NASDAQ:MFIC
Midcap Financial Investment — Investor Presentation (October 2024)
45 slides from Midcap Financial Investment's investor presentation, October 2024
Slide 1: MidCap Financial Investment Corporation Investor Presentation
MidCap Financial Investment Corporation Investor Presentation October 2024 Unless otherwise noted, information as of June 30, 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
Slide 2: Disclaimers, Definitions and Important Notes
Disclaimers, Definitions and Important Notes Forward-Looking Statements Additional Important Disclosure We make forward-looking statements in this presentation and other filings we make with the Securities and Exchange Commission This presentation is confidential and may not be distributed, transmit
Slide 3: Table of Contents
Introduction Private Credit Environment Table of Contents MidCap Financial MFIC’s Investment Strategy and Portfolio Conclusion Appendix 3
Slide 4: Introduction
APOLLO Introduction
Slide 5: MidCap Financial Investment Corporation ("MFIC") is a Middle Market BDC
INTRODUCTION MidCap Financial Investment Corporation (“MFIC”) is a Middle Market BDC Managed by an affiliate of Apollo, and focused on investing primarily in loans sourced by Midcap Financial Apollo is a high growth MFIC is a publicly Apollo traded is a high (NASDAQ: growth MFIC is MidCap a publicly
Slide 6: Apollo Today: Integrated Asset Management and Retirement Services Capabilities
INTRODUCTION Apollo Today: Integrated Asset Management and Retirement Services Capabilities GL OBA L M A NA GEMENT $74B+ 4,500+ 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 $696B A / A2 / A ~$23B A
Slide 7: Private Credit Environment
Private Credit Environment 7
Slide 8: Bank Continued Retrenchment from Middle Market Lending Expands the Opportunity for Non-Bank Lenders
PRIVATE CREDIT ENVIRONMENT Bank Continued Retrenchment from Middle Market Lending Expands the Opportunity for Non-Bank Lenders Total Number of U.S. Banks Continues to Decline 1 Banks’ Reduced Participation in Loan Market 2, 3 12,000 100% 50%+ decline since 2000 ~ 65%+ reduction in bank share of the
Slide 9: Our Active Opportunities Retain Attractive Risk-Return Despite Market Tightening
PRIVATE CREDIT ENVIRONMENT Our Active Opportunities Retain Attractive Risk-Return Despite Market Tightening Economic and Documentation Terms are Rapidly Tightening Amid Heightened Competition and Gradual Easing of the Lending Environment Elevated Yields… …at Attractive Entry Points in Capital Struct
Slide 10: Strong Demand for Loans to Middle Market Companies
PRIVATE CREDIT ENVIRONMENT Strong Demand for Loans to Middle Market Companies U.S. Middle Market Key Statistics¹ Private Equity Dry Powder and Implied Loan Demand ($ in billions)2 Nearly 200,000 U.S. middle market businesses in all industry $640 $640 segments and geographies Represents one-third pri
Slide 11: How Private Credit Produces Better Outcomes for Lenders
PRIVATE CREDIT ENVIRONMENT 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 Syndication Control Recurrin
Slide 12: MidCap Financial
APOLLO MidCap Financial
Slide 13: MidCap Financial is a Leading Middle Market Lender
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 provider of se
Slide 14: MidCap Financial's Strong Strategic Partnership with Apollo
MIDCAP FINANCIAL MidCap Financial’s1 Strong Strategic Partnership with Apollo Apollo Platforms Yield Origination MidCap Financial is Apollo’s primary direct origination Assets + Capabilities platform ² in private middle market credit Demand Full service finance company focused on senior debt needs
Slide 15: MidCap Financial Offers a Broad Suite of Products
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 Life Sciences and Franchise Leveraged Lending Lending Finance Technology Lending Lending Lending Product Ca
Slide 16: MidCap Financial is a Leading Middle Market Lender
MIDCAP FINANCIAL MidCap Financial1 is a Leading Middle Market Lender 2023 Middle Market Lending League Table2 1H 2024 Middle Market Lending League Table2 Rank Lender # Deals Rank Lender # Deals 1 Antares Capital 183 1 Antares Capital 111 2 MidCap Financial 159 2 MidCap Financial 99 3 TPG Twin Brook
Slide 17: MFIC's Investment Strategy and Portfolio
MFIC’s Investment Strategy and Portfolio 17
Slide 18: MFIC Investment Strategy
MFIC’S INVESTMENT STRATEGY AND PORTFOLIO 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 from MidCap Financial’s1 Portfoli
Slide 19: MidCap Financial Demonstrated Ability to Source Investment Opportunities
MFIC’S INVESTMENT STRATEGY AND PORTFOLIO MidCap Financial¹ Demonstrated Ability to Source Investment Opportunities MidCap Financial Commitments Closed 2 ($ in Billions) MidCap Financial and MFIC Commitments Closed LTM 3 $20.0 $19.6 $16.4 $16.6 $15.5 $15.0 MidCap Financial MFIC $10.0 Commitments Comm
Slide 20: MFIC Recently Merged with Two Apollo Funds, Creating a Larger, More Scaled BDC
MFIC Recently Merged with Two Apollo Funds, Creating a Larger, More Scaled BDC Focused on Middle Market Direct Lending 1 Key Potential Expected Benefits of the Mergers Excpected Portfolio Growth, at fair value Increased scale and ROE and NII per share enhanced portfolio ~$1 B accretive 2 diversifica
Slide 21: MFIC Select Key Metrics Pre / Post Mergers
MFIC’S INVESTMENT STRATEGY AND PORTFOLIO MFIC Select Key Metrics Pre / Post Mergers June 30, 2024 July 22, 2024 Notes Investment Portfolio 1 $2.44 billion $3.07 billion Investment capacity to grow portfolio to ~ $3.4 billion 2 Direct Origination % 92% 81% Intend to increase % as acquired assets are
Slide 22: MFIC Senior Secured Diversified Investment Portfolio
MFIC’S INVESTMENT STRATEGY AND PORTFOLIO MFIC Senior Secured Diversified Investment Portfolio Portfolio Snapshot 6/30/2024 7/22/2024 Portfolio by Strategy, 7/22/2024 Portfolio by Industry, 7/22/2024 Portfolio $2.44 bn $3.07 bn # of Portfolio Companies 165 277 2% # of Industries 23 23 2% 6% 3.5% 5.5%
Slide 23: MFIC Credit Quality Remains Resilient
MFIC’S INVESTMENT STRATEGY AND PORTFOLIO MFIC Credit Quality Remains Resilient Median LTM EBITDA1 Net Leverage and Attachment Point2 Net Leverage Attachment Point $55 $54 5.45 x 5.44 x 5.38 x 5.27 x 5.36 x $47 $47 $46 0.14 x 0.14 x 0.09 x 0.04 x 0.04 x Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Jun-23 Sep-2
Slide 24: MFIC Compares Favorably to BDC Averages on Select Key Metrics
MFIC’S INVESTMENT STRATEGY AND PORTFOLIO MFIC Compares Favorably to BDC Averages on Select Key Metrics We believe MFIC’s portfolio is more senior when We believe MFIC’s revenue quality is higher compared compared to BDC peers which should mitigate to peers with far less contribution from non-cash so
Slide 25: MFIC Has One of the Lowest Fee Structures, Among Listed BDCs
MFIC’S INVESTMENT STRATEGY AND PORTFOLIO MFIC Has One of the Lowest Fee Structures, Among Listed BDCs MFIC charges a management fee of 1.75% on net assets (i.e., equity) (equates to ~0.75% on gross assets assuming a net leverage ratio of 1.40x) while all comparable listed BDCs charge a management fe
Slide 26: Conclusion
APOLLO Conclusion
Slide 27: Reasons to Own MFIC
CONCLUSION Reasons to Own MFIC 1 Secular tailwinds create attractive environment for middle market direct lending 2 Robust origination capabilities of Midcap Financial1 / Apollo provide attractive and significant deal flow 3 Significant investment capacity to deploy into attractive opportunities 4 P
Slide 28: Appendix
APOLLO Appendix
Slide 29: MFIC Senior Leadership Team
APPENDIX 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 2
Slide 30: MFIC Senior Leadership Team (continued)
APPENDIX 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 f
Slide 31: MFIC Top Corporate Lending Issuers as of June 30, 2024
APPENDIX MFIC Top Corporate Lending Issuers1 as of June 30, 2024 Fair Value % of Total ($ in millions) Portfolio 1 ChyronHego Corporation 2 $ 131 5.4% 2 Lending Point $ 45 1.8% 3 LashCo $ 45 1.8% 4 Rise Baking $ 41 1.7% 5 Beacon Mobility $ 36 1.5% Corporate Lending 6 Medical Guardian $ 36 1.5% Avera
Slide 32: Financial Highlights
APPENDIX Financial Highlights ($ in thousands, except per share data) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Financial Highlights Net investment income per share $0.45 $0.44 $0.46 $0.43 $0.44 Net realized and change in unrealized gains (losses) from investments and ($0.11) ($0.05) $0.05 $0.03 ($0.05) fo
Slide 33: Portfolio Highlights
APPENDIX Portfolio Highlights ($ in thousands) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Portfolio by Strategy, at fair value ($) Leveraged lending $1,898,044 $1,819,089 $1,788,586 $1,788,540 $1,830,834 Life sciences 149,601 155,128 153,666 187,698 189,687 Asset based, franchise finance and lender finance
Slide 34: Corporate Lending Portfolio Detail
APPENDIX Corporate Lending Portfolio Detail1 ($ in thousands) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Portfolio by Asset Class, measured at fair value ($) First Lien $2,144,973 $2,051,724 $2,016,930 $2,010,175 $2,050,105 Second lien 13,401 $13,459 $31,886 66,558 68,441 Other 53,166 $52,210 $48,435 50,122
Slide 35: Corporate Lending Commitments
APPENDIX Corporate Lending Commitments1 ($ in thousands) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Gross Commitments Made by Asset Class First lien $285,238 $149,153 $174,923 $19,745 $78,733 Second lien and Other 77 118 16 - - Gross commitments made $285,316 $149,270 $174,939 $19,745 $78,733 Gross Commitme
Slide 36: Credit Quality
APPENDIX Credit Quality As of June 30, 2024, 2.1% of total investments at amortized cost, or 1.5% of total investments at fair value, were on non-accrual status ($ in thousands) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Investments on Non-Accrual Status Non-accrual investments at amortized cost $54,555 $23
Slide 37: Net Asset Value Rollforward
APPENDIX Net Asset Value Rollforward ($ in thousands, except per share data) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Per Share NAV, beginning of period $15.42 $15.41 $15.28 $15.20 $15.18 Net investment income 0.45 0.44 0.46 0.43 0.44 Net realized and change in unrealized gains (losses) (0.11) (0.05) 0.05
Slide 38: Quarterly Operating Results
APPENDIX Quarterly Operating Results ($ in thousands, except per share data) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Total investment income Interest income (excluding PIK) $65,513 $65,681 $70,065 $66,681 $66,655 Dividend income 277 12 473 740 115 PIK interest income 2,473 930 930 479 812 Other income 89
Slide 39: Quarterly Balance Sheet
APPENDIX Quarterly Balance Sheet ($ in thousands, except share and per share data) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Assets Investments at fair value $2,444,352 $2,352,835 $2,334,199 $2,369,108 $2,409,287 Cash and cash equivalents (including foreign currencies) 67,037 49,612 122,127 43,150 50,197 I
Slide 40: Funding Sources as of June 30, 2024
APPENDIX Funding Sources as of June 30, 2024 Debt Facilities ($ 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 $ 731,176 6 5 MFIC Bethesda CLO I
Slide 41: Interest Rate Exposure as of June 30, 2024
APPENDIX Interest Rate Exposure as of June 30, 2024 1 Investment Portfolio by Interest Rate Type Funding Sources by Interest Rate Type Variable rate Fixed rate debt assets 22% 2% Fixed rate assets 3% Non yielding and non-accrual assets 9% Common equity 40% Floating rate debt Floating rate 38% assets
Slide 42: Realized and Change in Unrealized Gains (Losses) by Strategy
APPENDIX Realized and Change in Unrealized Gains (Losses) by Strategy ($ in millions) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Leveraged lending ($4.7) ($4.0) $4.5 $0.0 ($0.5) Life sciences $0.1 ($0.5) ($3.3) ($2.2) ($2.0) Franchise Finance $0.0 ($0.0) $0.0 $0.1 $0.1 Asset based and Lender finance ($2.8)
Slide 43: Outstanding Commitments
APPENDIX Outstanding Commitments ($ in thousands) Jun-24 Mar-24 Dec-23 Sep-23 Jun-23 Revolver Obligations and Bridge Loans Funded 1 $86,561 $75,762 $89,089 $89,691 $88,357 Unfunded 1, 2 195,345 182,695 176,723 175,720 181,088 Par $281,906 $258,457 $265,811 $265,411 $269,445 Unfunded Revolver and Bri
Slide 44: MFIC's Portfolio by Strategy and Lien Type
APPENDIX MFIC’s Portfolio by Strategy and Lien Type 1 $ Millions % of Total First Lien Second Lien Other Total First Lien Second L Direct Origination $2,145 $13 $53 $2,212 88% Merx Aviation 67 120 187 3% Other 15 31 46 1% MFIC, 6/30/2024 $2,227 $13 $204 $2,444 91% MFIC Direct Origination, 6/30/2024
Slide 45: Contact Information
APPENDIX 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 45
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