MRCC - Monroe Capital: Rising Non-Accruals Threaten Current Dividend

2024-05-21 06:33:08 ET

Summary

• Monroe Capital is a smaller BDC focused on lower middle market companies in the US and Canada.
• The high dividend yield of 13.5% has helped maintain positive total returns, but another dividend cut is expected due to the thin NII per share coverage.
• MRCC's portfolio is heavily exposed to the real estate sector, which has hindered its growth due to higher interest rates.
• Non-accruals have increased and NAV per share has decreased over the last decade.

Overview

Monroe Capital ( MRCC ) is a much smaller business development company in scale with a market cap of only $160M. This BDC is focused on lower middle market companies based within the United States and Canada. They bring in their revenues by providing financing to these lower middle market companies through the use of senior secured, unitranche, and junior secured debt. Although smaller in size, its history dates back to an inception in 2012. We can see how the price has moved down by over 50% since then, while the high distributions have helped total returns stay in the positive territory....

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