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1. Company Snapshot

1.a. Company Description

Monroe Capital Corporation is a business development company specializing in customized financing solutions in senior, unitranche and junior secured debt, subordinated debt financing and to a lesser extent, unsecured debt and equity, including equity co-investments in preferred and common stock and warrants.It also provides financing primarily to leveraged buyouts in lower middle-market companies.It focuses to invest in the United States and Canada.


The fund prefers to invest in companies with EBITDA between $3 and $35 million.Its makes minority equity investments.

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1.b. Last Insights on MRCC

Monroe Capital Corporation's recent performance was negatively impacted by the decline in interest rates, which reduced its investment income. Despite improvements in earnings and solid dividend coverage, the company's net asset value (NAV) and portfolio value continue to decline, raising concerns about overall credit quality. The BDC's financials are also being impacted by lower interest rates, which is a significant negative driver.

1.c. Company Highlights

2. MRCC Delivers Steady Performance Amid Market Volatility

Monroe Capital Corporation (MRCC) reported its Q1 2025 results, showcasing a mixed bag of financial performance. Adjusted net investment income came in at $4.2 million, or $0.19 per share, missing the consensus estimate of $0.27. This represents a decline from the prior quarter, primarily due to lower portfolio yields and a smaller average investment balance. Despite the dip, the company maintained its dividend payout of $0.25 per share, supported by $0.53 per share in undistributed spillover income. The dividend yield stands at an attractive 15.48%, reflecting MRCC's commitment to returning capital to shareholders. Total investment income for the quarter was $11.6 million, down from the previous quarter, as lower yields and reduced assets weighed on performance. The net asset value (NAV) per share remained stable at $8.63, while leverage stood at 1.45x debt to equity, maintaining a conservative balance sheet posture.

Publication Date: May -10

📋 Highlights
  • Dividend Stability: Maintained $0.25 per share dividend, representing a 14.3% annualized yield.
  • NAV Performance: NAV per share of $8.63 as of March 31, 2025, with a leverage ratio of 1.45x debt to equity.
  • Net Investment Income: Adjusted net investment income of $0.19 per share, down from the prior quarter due to lower yields and portfolio size.
  • Portfolio Quality: 81% of investments rated high, with no new non-accruals and successful exits from underperforming assets.
  • SLF Segment Update: Unrealized losses in the SLF portfolio, which has declined to 30 borrowers, with management evaluating its future strategy.

Portfolio Quality and Strategic Focus

MRCC's portfolio quality remained robust, with 81% of investments rated high, and no new non-accrual investments during the quarter. The company successfully exited underperforming assets, further stabilizing the portfolio. Management emphasized its focus on incumbent lending and recession-resistant industries, avoiding exposure to tariff-sensitive sectors. This strategic positioning is expected to help navigate ongoing macroeconomic uncertainties. The Senior Loan Fund (SLF) segment, however, experienced unrealized losses, though it distributed $900,000 during the quarter. Alex Parmacek noted that the SLF portfolio has shrunk significantly over the past 18 months, now comprising around 30 borrowers, with no immediate plans for expansion.

Strategic Outlook and Valuation

Ted Koenig highlighted the platform's growth, with over $5.5 billion in assets under management across the wealth and high-net-worth channel, including MRCC. The recent partnership with Wendel, which closed on March 31, is expected to position the platform for future growth while maintaining Monroe's independence. Management remains focused on evolving its strategy to maximize shareholder value, exploring strategic opportunities to enhance growth. On the valuation front, MRCC trades at a price-to-book (P/B) ratio of 0.73, below its historical average, suggesting potential upside. The stock's dividend yield of 15.48% and free cash flow yield of 24.19% further underscore its attractiveness to income-focused investors. However, analysts remain cautious, forecasting a -0.7% revenue growth for the next year, reflecting broader market headwinds.

Management Confidence and Shareholder Engagement

During the earnings call, management expressed confidence in its ability to navigate market volatility, citing a strong balance sheet and disciplined investment approach. Mick Solimene emphasized that the decision to use spillover income this quarter was not a strategic shift but a tactical move, reaffirming the manager's commitment to supporting MRCC. "We have consistently waived incentive fees in past quarters, including this quarter, and will continue to do so," Solimene noted. The Q&A session also highlighted discussions around dividend sustainability and stock buybacks, with management prioritizing capital deployment to enhance shareholder value. As MRCC looks ahead, its ability to maintain portfolio stability and capitalize on strategic opportunities will be key to driving long-term performance.

3. NewsRoom

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Monroe Capital Supports Renovus Capital Partners' Acquisitions of K2 Services, Epiq GBTS and Forrest Solutions

Dec -04

Source: businesswire.com

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Monroe Capital Supports Shore Capital Partners' Acquisitions of Reliant Healthcare and Care Fusion Rx

Dec -02

Source: businesswire.com

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Monroe Capital Closes $730.7 Million Private Credit Collateralized Loan Obligation

Nov -24

Source: businesswire.com

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Monroe Capital Supports Milrose Consultants' Acquisition of Surface Design Group

Nov -20

Source: businesswire.com

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Monroe Capital Supports Frontenac's Acquisition of Beckway Consulting, LLC

Nov -18

Source: businesswire.com

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Monroe Capital Named to GrowthCap Advisory's 2025 List of Top Private Debt Firms

Nov -12

Source: businesswire.com

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Monroe Capital Supports Respida Capital's Acquisition of ENTOUCH

Nov -10

Source: businesswire.com

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Monroe Capital (MRCC) Q3 Earnings and Revenues Lag Estimates

Nov -06

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (12.30%)

6. Segments

Investment and Related Activities

Expected Growth: 12.3%

Growing demand for financing solutions among middle-market companies, increasing need for debt and equity investments, and expansion of financial services drive growth in Monroe Capital Corporation's investment and related activities.

7. Detailed Products

Unitranche Loans

Customized, one-stop financing solutions for middle-market companies

First Out Loans

Senior secured loans for middle-market companies

Second Lien Loans

Subordinated debt financing for middle-market companies

Last Out Loans

Delayed-draw term loans for middle-market companies

Equity Co-Investments

Equity investments alongside private equity sponsors

Asset-Based Loans

Collateral-based financing for middle-market companies

Real Estate Financing

Commercial real estate loans for property owners and developers

8. Monroe Capital Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Monroe Capital Corporation operates in a niche market with limited substitutes, but there are some alternatives available to customers.

Bargaining Power Of Customers

Monroe Capital Corporation has a diverse customer base, which reduces the bargaining power of individual customers.

Bargaining Power Of Suppliers

Monroe Capital Corporation has a moderate level of dependence on its suppliers, but it has some flexibility to switch to alternative suppliers if needed.

Threat Of New Entrants

The private equity and investment management industry is highly competitive, and new entrants can easily enter the market, posing a significant threat to Monroe Capital Corporation.

Intensity Of Rivalry

The private equity and investment management industry is highly competitive, with many established players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 59.63%
Debt Cost 9.34%
Equity Weight 40.37%
Equity Cost 9.34%
WACC 9.34%
Leverage 147.68%

11. Quality Control: Monroe Capital Corporation passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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OFS Capital

A-Score: 6.8/10

Value: 6.8

Growth: 6.8

Quality: 5.8

Yield: 10.0

Momentum: 4.0

Volatility: 7.7

1-Year Total Return ->

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Monroe Capital

A-Score: 6.8/10

Value: 6.1

Growth: 5.7

Quality: 7.1

Yield: 10.0

Momentum: 3.0

Volatility: 8.7

1-Year Total Return ->

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SuRo Capital

A-Score: 6.3/10

Value: 7.5

Growth: 1.0

Quality: 9.3

Yield: 7.0

Momentum: 9.5

Volatility: 3.7

1-Year Total Return ->

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OFS Credit

A-Score: 6.2/10

Value: 4.8

Growth: 5.8

Quality: 7.2

Yield: 10.0

Momentum: 1.5

Volatility: 7.7

1-Year Total Return ->

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BNY Mellon Strategic Municipals

A-Score: 6.1/10

Value: 5.4

Growth: 4.1

Quality: 5.5

Yield: 7.0

Momentum: 4.5

Volatility: 10.0

1-Year Total Return ->

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Logan Ridge Finance

A-Score: 5.3/10

Value: 6.5

Growth: 5.8

Quality: 2.4

Yield: 6.0

Momentum: 1.5

Volatility: 9.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

6.68$

Current Price

6.68$

Potential

-0.00%

Expected Cash-Flows