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3Q19 BDC New Issues: Monroe Capital books $57.7M in gross volume

Posted on November 13, 2019
Direct Lending Deals

DOWNLOAD: MRCC 3Q19 New Issues

Monroe Capital’s new issue activity last quarter grossed $57.7 million, a 4.6% decline from the second quarter’s $60.5 million.

The lack of growth was intentional on Monroe’s part, as the BDC keeps its balance sheet leverage in check.

At Sept. 30, leverage was 1.29x, near the top end of management’s targeted range, as discussed on last week’s earnings call. That level has since retreated with post-quarter repayments of $38.6 million, and while Monroe intends to reinvest a portion of those proceeds this quarter, material asset growth going forward will be generated mainly by the reinvestment of cash at an SBIC subsidiary.

Stripping out repayments and exits, net new issues for the quarter were $28.8M compared to $35.8 million in 2Q19.

Monroe primarily plays in the lower middle market space, lending to companies that typically generate less than $35 million of EBITDA. Total investments in 3Q19 were $675 million, at cost.

Deal Sourcing

Three new borrowers accounted for 36%, or $20.7 million, of new issues, while capital to 28 existing relationships accounted for 64%, or $37 million.

One of the larger investments during the quarter was a $10 million add-on to a unitranche loan priced at L+650 for existing borrower Priority Ambulance, an Enhanced Equity Funds portfolio company.


Average yields on new investments are not made available by Monroe, however averages for the entire portfolio are.

Senior secured yields averaged 9.4% in 3Q19, down from 10% in 2Q19; unitranche loans 9.6% versus 9.7%; and junior secured tranches 9.4% versus 10.7%.

Declines in portfolio yields were driven primarily by lower LIBOR rates triggered by two federal cuts during the quarter. October’s cut will put additional pressure on 4Q19 yields across all BDC portfolios.


Monroe added two more borrowers to non-accrual status: Luxury Optical Holdings and The Worth Collection (New Water Capital), both fashion retailers.

Curion Holding’s $4.9 million of senior secured debt also went on non-accrual, although the borrower’s promissory notes were already on the board.

With those three investments, Monroe’s non-accrual rate climbed to 4.7% on a fair value basis, up from 2.2% the prior quarter.
Kelly Thompson

Direct Lending Deals is a new publication that lifts the curtain on private credit by giving investors and originators the latest news and analysis on terms & trends in the direct lending market. DLD focuses on sponsored transactions, the main driver of deal flow. We tap into 20-year relationships to go deeper in market, and cover all segments of direct lending including structures, fundraising, BDCs and people shaping the market.

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