Main Street increases income by expanding debt portfolio

The Texan investment firm increased lending resulting in a 33 percent year-on-year increase in distributable net investment income to $26.1 million.

Main Street Capital Corporation announced total investment income of $36.4 million for the third quarter, a year-on-year increase of 23 percent, according to a statement from the Houston, Texas-headquartered firm.

The NYSE-listed middle market debt and equity investor said that the growth in investment income was primarily attributable to a $2.9 million increase in interest income from a larger number of portfolio debt investments. Dividend income from equity investments and a greater flow of fee income due to the investment increases as well as higher refinancing and prepayment activity.

Main Street’s lower middle market investments totalled $681 million in fair value, of which 73 percent were debt investments. Around 86 percent of the debt were first lien secured deals. The weighted average yield of the debt portfolio was 13.5 percent, as of 30 September.

Debt investments made up the majority of Main Street’s $556.6 million fair value investments in the middle market. The weighted average annual yield on those, mainly first lien secured debt investments was 7.5 percent, as of 30 September.

Main Street also makes private loan portfolio debt commitments. These are sourced through strategic relationships with other private lenders. It has invested $188.1 million in 26 companies and the average weighted annual yield of the portfolio is 10.4 percent.

The firm was given an investment grade credit rating in the third quarter. Standard & Poor’s rated Main Street ‘BBB’. As a result, it cut the margin on its revolving credit facility to two percent, subject to a 25 basis point increase if it drops below investment grade.

The revolving credit facility was also increased to $522.5 million, with an accordion facility to allow an increase of up to $650 million. The maturity was extended by a year to September 2019, according to the firm’s earnings announcement.