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New words:
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abrupt, announced, Atlanta, basic, climate, conform, correspondingly, count, cyclicality, Description, dramatically, erosion, expropriation, fabrication, facing, fundamentally, Georgia, governmental, hierarchal, immigration, inducement, introduced, latitude, outbreak, pursuing, rapid, setting, speculation, suddenly, Tech, travel, unclear, unemployment
Financial report summary
?Risks
- We depend upon MC Advisors’ senior management for our success, and upon its access to the investment professionals of Monroe Capital and its affiliates.
- Our business model depends to a significant extent upon strong referral relationships with financial institutions, sponsors and investment professionals. Any inability of MC Advisors to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
- Our financial condition and results of operations depend on our ability to manage our business effectively.
- There may be conflicts related to obligations that MC Advisors’ senior investment professionals and members of its investment committee have to other clients.
- MC Advisors or its investment committee may, from time to time, possess material nonpublic information, limiting our investment discretion.
- Our management and incentive fee structure may create incentives for MC Advisors that are not fully aligned with the interests of our stockholders.
- Our incentive fee may induce MC Advisors to make certain investments, including speculative investments.
- The Investment Advisory Agreement with MC Advisors and the Administration Agreement with MC Management were not negotiated on an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third-party.
- Our ability to enter into transactions with our affiliates is restricted, which may limit the scope of investments available to us.
- We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
- An extended disruption in the capital markets and the credit markets could negatively affect us and our portfolio companies.
- We could raise capital through other channels.
- We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income.
- The 1940 Act allows us to incur additional leverage, which could increase the risk of investing in us.
- Regulations governing our operation as a BDC affect our ability to and the way in which we raise additional capital.
- We maintain several leverage facilities 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 are subject to certain risks in connection with securitization transactions.
- We are exposed to risks associated with changes in interest rates.
- If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would have a material adverse effect on our business, financial condition and results of operations.
- Many of our portfolio investments are recorded at fair value as determined in good faith by our Valuation Designee and, as a result, there may be uncertainty as to the value of our portfolio investments.
- Legislative or regulatory tax changes could adversely affect investors.
- We may experience fluctuations in our quarterly operating results.
- Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
- Our Board may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
- MC Advisors can resign on 60 days’ notice under the Investment Advisory Agreement, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
- MC Management can resign on 60 days’ notice from its role as our administrator under the Administration Agreement, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
- There are significant financial and other resources necessary to comply with the requirements of being a public reporting entity.
- Efforts to comply with the Sarbanes-Oxley Act involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely affect us and the value of our common stock.
- Terrorist attacks, acts of war, global health emergencies or natural disasters may affect any market for our common stock, impact the businesses in which we invest and harm our business, operating results and financial condition.
- The failure in cybersecurity systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning, could impair our ability to conduct business effectively.
- We may incur lender liability as a result of our lending activities.
- We may incur liability as a result of providing managerial assistance to our portfolio companies.
- MC Advisors may not be able to achieve the same or similar returns as those achieved by our senior management and investment teams while they were employed at prior positions.
- Economic recessions or downturns could impair our portfolio companies and harm our operating results.
- Market conditions have materially and adversely affected debt and equity capital markets in the United States and around the world.
- We and our portfolio companies may maintain cash balances at financial institutions and exceed federally insured limits and may otherwise be materially affected by adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties.
- Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
- Our investments in leveraged portfolio companies may be risky, and we could lose all or part of our investment.
- Our portfolio companies consist of and will likely continue to consist primarily of lower middle-market, privately owned companies, which may present a greater risk of loss than loans to larger companies.
- We may be subject to risks associated with our investments in senior secured loans.
- We may be subject to risks associated with our investments in junior debt securities.
- We may be subject to risks associated with “covenant-lite” loans.
- We may be subject to risks associated with our investments in unitranche secured loans and securities.
- We may be subject to risks associated with our investments in bank loans.
- We may be subject to risks associated with our investments in Securitized Products.
- Loans may become nonperforming for a variety of reasons.
- The lack of liquidity in our investments may adversely affect our business.
- Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized losses.
- Our portfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactions with equal or greater expected yields.
- We may be subject to risks associated with our investments in the business services industry.
- We may be subject to risks associated with our investments in the healthcare and pharmaceuticals industry.
- To the extent original issue discount and payment-in-kind interest constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income.
- We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited by the 1940 Act with respect to the proportion of our assets that may be invested in securities of a single issuer.
- We may hold the debt securities of leveraged companies that may, due to the significant volatility of such companies, enter into bankruptcy proceedings.
- Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
- Because we do not hold controlling equity interests in the majority of our portfolio companies, we may not be able to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies, which could decrease the value of our investments.
- Defaults by our portfolio companies will harm our operating results.
- Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
- We may be subject to risks associated with syndicated loans.
- We may be subject to risks associated with our investments in special situation companies.
- The disposition of our investments may result in contingent liabilities.
- We may be subject to additional risks if we engage in hedging transactions and/or invest in foreign securities.
- We may not realize gains from our equity investments.
- There is currently no public market for our stock, and the liquidity of your investment is limited.
- Although we adopted a share repurchase program, we have discretion to not repurchase your shares, to suspend the program, and to cease repurchases.
- The timing of our repurchase offers pursuant to our share repurchase program may be at a time that is disadvantageous to our stockholders.
- Our stockholders may experience dilution.
- We may not be able to pay distributions, our distributions may not grow over time and/or a portion of our distributions may be a return of capital.
- We may choose to pay a portion of our dividends in our own stock, in which case a stockholder may be required to pay tax in excess of the cash you receive.
- We may defer dividend payments to a subsequent taxable year.
- Investing in our common stock may involve an above-average degree of risk.
- Provisions of the Maryland General Corporation Law and our charter and bylaws could deter takeover attempts and have an adverse effect on the price of our common stock.
Management Discussion
- (1) During the years ended December 31, 2023, 2022 and 2021, dividend income includes PIK dividends of $484, $358 and $176, respectively.
- The increase in investment income of $133.0 million during the year ended December 31, 2023, as compared to the year ended December 31, 2022, and the increase in investment income of $59.5 million during the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily the result of an increase in interest income due to the growth of our investment portfolio and increases in effective rates on the portfolio as a result of the rising interest rate environment.
- (1)Base management fees for the years ended December 31, 2023, 2022 and 2021 were $23,875, $13,011 and $6,027, respectively. MC Advisors elected to voluntarily waive zero, $1,701 and $1,425 of such base management fees for years ended December 31, 2023, 2022 and 2021, respectively. Such waivers are not subject to recoupment by MC Advisors. There is no guarantee that MC Advisors will waive any base management fees in the future.