MidCap Financial Stock Price, News & Analysis

MidCap Financial Investment Corporation (NASDAQ: MFIC) is a closed-end, externally managed, diversified management investment company that has elected to be treated as a business development company (BDC) under the Investment Company Act of 1940. For tax purposes, the company has elected to be treated as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code. Its common stock trades on the Nasdaq Global Select Market under the symbol MFIC, and it also has 8.00% notes due 2028 listed under the symbol MFICL, as disclosed in its SEC filings.

The company’s stated investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. According to its public disclosures, MidCap Financial Investment Corporation primarily invests in directly originated and privately negotiated first lien senior secured loans to privately held U.S. middle-market companies. The company generally defines these middle-market borrowers as companies with less than $75 million in EBITDA, subject to certain adjustments for market disruptions, mergers and acquisitions-related charges and synergies, and other items. This focus on first lien senior secured loans is reflected in its portfolio composition data, where secured debt represents the vast majority of the investment portfolio at fair value.

In addition to first lien senior secured loans, the company may invest, to a lesser extent, in other types of securities. These include first lien unitranche loans, second lien senior secured loans, unsecured, subordinated, and mezzanine loans,> as well as equity interests in both private and public middle-market companies. Its portfolio also includes structured products and other instruments, preferred equity, and common equity/interests and warrants, as shown in its periodic financial and supplemental information disclosures.

MidCap Financial Investment Corporation is externally managed. The company states that it is managed by Apollo Investment Management, L.P., or by an investment adviser that is an affiliate of Apollo Global Management, Inc. and its consolidated subsidiaries. Apollo is described in the company’s materials as a global alternative asset manager. Through this management relationship, MFIC gains access to loans originated by MidCap Financial, which the company characterizes as a leading middle market lender with a significant direct lending platform. MFIC also notes that it benefits from the expertise of Apollo and MidCap Financial in areas such as collateralized loan obligation (CLO) management and structuring.

The company’s investment activities and financing arrangements are detailed in its earnings releases and SEC filings. MFIC reports on net investment income, net asset value (NAV) per share, total assets, investment portfolio at fair value, debt outstanding, and net leverage ratio, among other metrics. Its portfolio is composed largely of first lien secured debt, with smaller allocations to second lien secured debt, structured products, preferred equity, and common equity/interests and warrants. The company also discloses information on the interest rate characteristics of its portfolio, noting that the overwhelming majority of its corporate debt investments are floating rate, with only a small fixed-rate component.

MFIC finances its investment portfolio through a mix of unsecured notes, a senior secured multi-currency revolving credit facility, and term debt securitizations in the form of CLOs issued by consolidated subsidiaries. Public disclosures describe a senior secured revolving credit facility (the “Facility” or “Amended Senior Secured Facility”) with lender commitments in the billions of dollars, subject to borrowing base and asset coverage requirements under the 1940 Act. The company has also completed on-balance-sheet CLO transactions, such as MFIC Bethesda CLO 1 LLC and MFIC Bethesda CLO 2 LLC, backed by diversified portfolios of middle-market commercial loans. In these transactions, MFIC or its subsidiaries retain certain classes of notes, including subordinated and Class D notes, and MFIC serves as collateral manager.

As a BDC, MidCap Financial Investment Corporation regularly reports portfolio and investment activity, including investments made in portfolio companies, investments sold, investments repaid, and net investment activity over various periods. It also discloses the number of portfolio companies at the beginning and end of each period, the number of new portfolio companies added, and the number of exited companies. These disclosures provide insight into the company’s origination activity, portfolio turnover, and diversification across a large number of middle-market borrowers.

The company’s capital management practices include a share repurchase program authorized by its board of directors. Over time, MFIC has repurchased millions of shares of its common stock under this program, at weighted average prices per share that are disclosed in its earnings releases. The company also reports on dividends declared by its board of directors, including base cash dividends per share payable to stockholders of record on specified dates. While the company provides historical dividend information, it also cautions that there can be no assurances that its board will continue to declare a particular base dividend amount in the future.

MidCap Financial Investment Corporation has also engaged in corporate transactions that affect its scale and portfolio composition. For example, it completed mergers with Apollo Senior Floating Rate Fund Inc. and Apollo Tactical Income Fund Inc., which were accounted for as asset acquisitions under applicable accounting guidance. Through these mergers, MFIC acquired additional investments and issued shares of its common stock to former stockholders of the acquired funds. The company has described its approach to integrating these assets, including selling certain non-directly originated assets and redeploying capital into directly originated middle-market loans.

MFIC’s governance and regulatory disclosures include information on its annual meeting of stockholders, director elections, and the ratification of its independent registered public accounting firm. The company files current reports on Form 8-K to report material events such as earnings releases, amendments to its credit facility, CLO transactions, and appointments of key officers. These filings also confirm that MFIC is a Maryland corporation with its principal office in New York, New York, and that its common stock is registered under Section 12(b) of the Securities Exchange Act of 1934.

Overall, MidCap Financial Investment Corporation presents itself, through its public disclosures, as a BDC focused on generating current income and long-term capital appreciation by investing primarily in directly originated first lien senior secured loans to U.S. middle-market companies, supported by an external manager affiliated with Apollo Global Management and by access to a large pipeline of middle-market lending opportunities.

Business model and investment focus

According to its public descriptions, MFIC’s business model centers on investing in debt and equity instruments of middle-market companies. The core of its strategy is to originate and hold first lien senior secured loans that are directly negotiated with privately held borrowers. These loans are typically secured by the borrower’s assets and occupy a senior position in the capital structure, which the company highlights in its portfolio composition tables showing a high percentage of total secured debt.

To complement its primary focus on first lien senior secured loans, MFIC may allocate capital to other instruments such as first lien unitranche loans, second lien senior secured loans, unsecured and subordinated debt, mezzanine loans, and equity positions. The company’s supplemental information packages break down the portfolio by type of security and show that common equity/interests and warrants, preferred equity, and structured products and other investments represent smaller, but recurring, components of the overall portfolio.

MFIC’s investment activity disclosures show ongoing origination of new investments, sales of certain positions, and repayments. The company tracks and reports net investment activity over quarterly and annual periods, indicating whether it is in a net funding or net repayment position. It also discloses the number of portfolio companies and the distribution between new and existing portfolio investments, illustrating the breadth and evolution of its middle-market exposure.

Financing structure and leverage

The company’s financing structure includes senior unsecured notes, secured debt issued through CLOs, and borrowings under its senior secured, multi-currency revolving credit facility. MFIC reports its debt outstanding, debt-to-equity ratio, and net leverage ratio in its financial highlights. The net leverage ratio is defined in the company’s disclosures as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash and cash equivalents, less foreign currencies, divided by net assets.

MFIC has amended and extended its revolving credit facility multiple times, as described in its news releases and Form 8-K filings. These amendments have included changes to lender commitments, extensions of the final maturity date, and adjustments to the applicable margin and commitment fee. The facility is subject to a borrowing base that applies different advance rates to different types of assets in the company’s portfolio, and borrowings are also subject to leverage restrictions under the 1940 Act.

The company has also executed term debt securitizations through its consolidated subsidiaries, such as MFIC Bethesda CLO 1 LLC and MFIC Bethesda CLO 2 LLC. These CLO transactions involve issuing various classes of senior secured floating rate notes and subordinated notes backed by diversified portfolios of middle-market commercial loans. MFIC retains certain tranches, including all Class D notes and all subordinated notes in specified transactions, and uses the proceeds to repay borrowings under its revolving facility. The company serves as collateral manager to these CLO issuers under collateral management agreements.

Regulatory status and structure

MidCap Financial Investment Corporation operates as a business development company under the Investment Company Act of 1940. As a BDC, it is subject to asset coverage requirements, leverage limits, and other regulatory provisions designed for closed-end investment companies that invest in small and middle-market businesses. The company has also elected to be treated as a regulated investment company for U.S. federal income tax purposes, which influences how it distributes income and manages its earnings and profits.

The company is incorporated in Maryland and files periodic and current reports with the U.S. Securities and Exchange Commission, including Forms 10-K, 10-Q, and 8-K. Its securities registered under Section 12(b) of the Exchange Act include its common stock and certain notes, which are listed on the Nasdaq Global Select Market. MFIC’s governance framework includes a board of directors elected by stockholders, and its annual meeting materials describe the election of directors in staggered classes and the ratification of its independent registered public accounting firm.

Key characteristics highlighted in disclosures

• Closed-end, externally managed, diversified management investment company.
• Operates as a BDC under the Investment Company Act of 1940 and as a RIC for tax purposes.
• Externally managed by an affiliate of Apollo Global Management, Inc.
• Primary focus on directly originated and privately negotiated first lien senior secured loans to privately held U.S. middle-market companies, generally defined by the company as borrowers with less than $75 million in EBITDA (subject to adjustments).
• Additional investments in first lien unitranche, second lien senior secured, unsecured, subordinated, and mezzanine loans, as well as equity in private and public middle-market companies.
• Use of a senior secured, multi-currency revolving credit facility and on-balance-sheet CLOs for financing.
• Regular reporting of net investment income, NAV per share, leverage metrics, portfolio composition, and investment activity.
• Share repurchase program and recurring cash dividends as described in board declarations.
• Corporate actions including mergers with Apollo Senior Floating Rate Fund Inc. and Apollo Tactical Income Fund Inc., accounted for as asset acquisitions.

Frequently Asked Questions about MidCap Financial Investment Corporation (MFIC)

• What is MidCap Financial Investment Corporation’s primary investment objective?
  

  The company states that its investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. It seeks to achieve this by investing primarily in directly originated and privately negotiated first lien senior secured loans to privately held U.S. middle-market companies, along with other debt and equity securities.

• What types of companies does MFIC focus on?
  

  MFIC focuses on privately held U.S. middle-market companies. In its public descriptions, the company generally defines middle-market borrowers as companies with less than $75 million in EBITDA, subject to adjustments for factors such as market disruptions and mergers and acquisitions-related items.

• What kinds of investments does MFIC hold in its portfolio?
  

  According to its disclosures, MFIC’s portfolio consists largely of first lien secured debt. It may also invest in first lien unitranche loans, second lien senior secured loans, unsecured, subordinated, and mezzanine loans, structured products and other instruments, preferred equity, and common equity/interests and warrants in private and public middle-market companies.

• How is MidCap Financial Investment Corporation managed?
  

  The company is externally managed. It states that its investment adviser is Apollo Investment Management, L.P., or an affiliate of Apollo Global Management, Inc. and its consolidated subsidiaries. Through this relationship, MFIC describes access to loans originated by MidCap Financial and to the broader alternative credit and structuring expertise of Apollo and its affiliates.

• What does it mean that MFIC is a business development company (BDC)?
  

  As a BDC under the Investment Company Act of 1940, MFIC is a type of closed-end investment company that invests primarily in small and middle-market businesses. It is subject to specific regulatory requirements, including asset coverage and leverage limits, and it provides periodic public reporting of its financial condition, portfolio, and investment results.

• How does MFIC finance its investments?
  

  MFIC finances its investment portfolio through a combination of senior unsecured notes, secured debt issued by consolidated CLO subsidiaries, and borrowings under a senior secured, multi-currency revolving credit facility. The company reports its debt outstanding, debt-to-equity ratio, and net leverage ratio, and it describes amendments to its credit facility and CLO transactions in its news releases and Form 8-K filings.

• What role do CLOs play in MFIC’s capital structure?
  

  The company has completed collateralized loan obligation transactions through subsidiaries such as MFIC Bethesda CLO 1 LLC and MFIC Bethesda CLO 2 LLC. These CLOs issue various classes of senior secured floating rate notes and subordinated notes backed by diversified portfolios of middle-market commercial loans. MFIC or its subsidiaries retain certain tranches and use the proceeds to repay borrowings under its revolving credit facility, while MFIC serves as collateral manager.

• Does MFIC pay dividends?
  

  MFIC’s board of directors has declared recurring cash dividends per share, as described in the company’s earnings releases. These disclosures specify dividend amounts and payment and record dates. The company also notes that there can be no assurances that the board will continue to declare a particular base dividend level in the future.

• Has MFIC repurchased its own shares?
  

  Yes. The company describes a share repurchase program authorized by its board of directors. Over time, MFIC has repurchased millions of shares of its common stock at disclosed weighted average prices per share, up to a maximum aggregate authorization amount.

• What stock exchange lists MFIC’s securities?
  

  MFIC’s common stock is listed on the Nasdaq Global Select Market under the symbol MFIC. Certain of its notes, including 8.00% Notes due 2028, are also listed on the Nasdaq Global Select Market under the symbol MFICL, as reported in its SEC filings.