KBRA Assigns Rating to MidCap Financial Issuer Trust's $500 Million Senior Unsecured Notes due November 2029

MidCap aims to increase unencumbered collateral and financial flexibility by replacing secured borrowing with senior unsecured debt.

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NEW YORK--(BUSINESS WIRE)-- KBRA assigns a rating of A- to MidCap Financial Issuer Trust's $500 million 7.050% senior unsecured notes due November 15, 2029. The rating Outlook is Stable. MidCap Financial Issuer Trust is a wholly-owned subsidiary of MidCap FinCo Intermediate LLC ("the company" or "MidCap"), which serves as guarantor of the debt. The proceeds will be used to repay senior secured debt.

Headquartered in Bethesda, MD, the company is a limited liability company that has operated since 2008 and focuses on middle-market specialty finance, maintaining a highly diversified investment portfolio.

Key Credit Considerations

The rating reflects MidCap's strong strategic relationship with Apollo Global Management (NYSE: APO or "Apollo"), which provides access to an experienced and expansive platform with over $1 trillion of assets under management ("AUM"), including ~$850 billion of credit-related products AUM as of June 30, 2026. Apollo, Athene Holding Ltd, Apollo's insurance subsidiary, and other Apollo affiliates together own ~50% of the company.

In September 2026, MidCap completed its previously announced company restructuring which included forming a separate entity to house its businesses that rely on securitizations for financing, mostly its Collateralized Loan Obligations ("CLOs"), which had an outstanding balance of about $4.3 billion. Pro-forma as of June 30, 2026, total assets were reduced to $10.7 billion from $15.1 billion with the top three asset classes comprising 47% leveraged loans, 23% Asset-Based Loans ("ABL"), and 11% Real Estate.

MidCap serves as Apollo's primary direct origination platform in the private middle market, encompassing more than 560+ borrower relationships and 500+ sponsor relationships across its credit platforms. MidCap had committed capital of $62 billion comprised of investments directly from Apollo vehicles and third-party investments which Apollo manages as a registered investment advisor as of June 30, 2026. The company benefits from a seasoned management team, with senior leadership averaging over 21 years of experience working together. Strong underwriting standards an discipline risk management are supported by Apollo, with fiduciary oversight provided by the Board.

The rating is further supported by reasonable earnings metrics driven by net interest income and historically low impairment levels across the credit cycle. MidCap's funding profile is diversified and well laddered, with a long-term funding strategy that includes revolving credit facilities and senior unsecured debt. The additional issuance of senior unsecured notes, furthers MidCap's goal of reducing secured debt while increasing unencumbered collateral to benefit senior unsecured noteholders and increase financial flexibility. Liquidity is further enhanced by capital support, primarily from Apollo, Athene, and institutional investors which is considered permanent in nature with any redemptions at the Board's discretion. The target of maintaining a ratio of unencumbered assets to senior unsecured debt in excess of 1.25x remains and was 1.46x pro-forma at June 30, 2026. The company's net debt to adjusted tangible equity is relatively conservative at a pro-forma 2.13x as of June 30, 2026, and is expected to remain below the company's financial policy of 2.5x when accounting for junior subordinated notes at 50% debt and equity at 50%.

These strengths are partially offset by risks inherent in investing in illiquid non-investment grade debt, as well as a somewhat elevated non-accrual rate for the investment portfolio as of June 30, 2026. Additionally, there is potential for increased investments on non-accrual status with a more uncertain economic environment characterized by elevated interest rates, inflationary pressures, and geopolitical risk. Nevertheless, KBRA believes that MidCap maintains a manageable level of impairments, supported by low historical credit losses and a diversified portfolio primarily comprised of fist lien, senior secured loans with modest company leverage when including JSNs.

Rating Sensitivities

Given the Stable Outlook, a rating upgrade is not expected over the medium term. Downward rating pressure could emerge if portfolio performance materially underperforms expectations, particularly if asset quality deterioration leads to significantly weaker financial performance and leverage metrics.

To access ratings and relevant documents, click here.

Methodology

• Financial Institutions: Finance Company Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Information on certain affiliations between directors of KBRA Ratings and rated entities or related third parties can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the US Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. Kroll Bond Rating Agency Japan K.K. is registered as a CRA with the Japan Financial Services Agency. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1017618

View source version on businesswire.com: https://www.businesswire.com/news/home/20261104346361/en/

Analytical Contacts

Teri Seelig, Managing Director (Lead Analyst)
+1 646-731-2386
teri.seelig@kbra.com

Bain Rumohr, Managing Director
+1 312-680-4166
bain.rumohr@kbra.com

Joe Scott, Global Head of Financial Institutions
+1 646-731-2438
joe.scott@kbra.com

Business Development Contact

Justin Fuller, Managing Director
+1 312-680-4163
justin.fuller@kbra.com

Source: Kroll Bond Rating Agency, LLC

Key Terms

senior unsecured notes financial

Senior unsecured notes are a type of loan a company borrows from investors, promising to pay back with interest. They are called "unsecured" because they aren’t backed by specific assets like buildings or equipment, but "senior" because they are paid back before other debts if the company gets into trouble. Investors see them as a relatively safer way for companies to raise money.

collateralized loan obligations financial

A collateralized loan obligation is a financial product that pools many corporate loans and repackages them into slices sold to investors, with some slices offering steady, lower returns and others offering higher returns but more risk. Like splitting a pizza into pieces for different tastes, CLOs let investors pick their preferred risk level and help banks fund lending, so changes in CLO performance influence credit availability and can move markets.

asset-based loans financial

A loan that is backed by a company’s tangible assets—such as inventory, accounts receivable, or equipment—which the lender can seize or sell if the borrower defaults. For investors, asset-based loans signal how a company finances day-to-day operations and the quality of its balance sheet: they often provide easier access to cash but can indicate higher credit risk if the lender relies heavily on asset values to secure repayment, similar to borrowing against valuables at a pawnshop.

non-accrual financial

A non-accrual loan or asset is one for which a lender has stopped counting expected interest as income because the borrower is very late on payments or in serious financial trouble. For investors, non-accruals signal that future cash from interest is uncertain and that the lender may need to write down the loan’s value or set aside extra reserves, similar to a landlord who stops recording rent when a tenant stops paying.

first lien financial

A first lien is a legal claim that gives a lender the top priority to be repaid from specific collateral if a borrower defaults or liquidates assets. Think of it as being first in line for the proceeds from a sale—investors who hold a first lien are more likely to recover their money than holders of later claims, so these loans generally carry lower risk and different pricing compared with unsecured or subordinated debt.