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FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION (Tables)
3 Months Ended
Mar. 31, 2024
Fair Value Disclosures [Abstract]  
Schedule of Fair Value Measurement Inputs and Valuation Techniques
The following tables provide a summary of the significant unobservable inputs used to fair value MSC Income Fund’s Level 3 portfolio investments as of March 31, 2024 and December 31, 2023:
Type of
Investment
Fair Value as of
March 31,
2024
(in thousands)
Valuation TechniqueSignificant
Unobservable Inputs
Range(3)Weighted Average(3)Median(3)
Equity investments$256,254 Discounted cash flowWACC
10.7% - 22.4%
14.2 %15.1 %
Market comparable / Enterprise valueEBITDA multiple (1)
4.3x - 9.4x (2)
7.3x6.5x
Debt investments$798,929 Discounted cash flowRisk adjusted discount factor (4)
9.6% - 17.0% (2)
13.3 %12.6 %
Expected principal recovery percentage
0.3% - 100.0%
99.3 %100.0 %
Debt investments$60,799 Market approachThird-party quote
38.3 - 100.5
85.291.5
Total Level 3 investments$1,115,982 
_____________________
(1)EBITDA may include proforma adjustments and/or other add-backs based on specific circumstances related to each investment.
(2)Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 2.0x - 15.7x and the range for risk adjusted discount factor is 8.0% - 31.9%.
(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
(4)Discount rate includes the effect of the standard SOFR base rate, as applicable.
Type of
Investment
Fair Value as of
December 31, 2023
(in thousands)
Valuation TechniqueSignificant
Unobservable Inputs
Range(3)Weighted
Average(3)
Median(3)
Equity investments$254,770 Discounted cash flowWACC
10.9% - 22.5%
14.4 %15.5 %
Market comparable / Enterprise valueEBITDA multiple (1)
4.9x - 9.2x (2)
7.3x6.5x
Debt investments$777,003 Discounted cash flowRisk adjusted discount factor (4)
9.8% - 16.8% (2)
13.1 %12.8 %
Expected principal recovery percentage
0.6% - 100.0%
99.6 %100.0 %
Debt investments$61,122 Market approachThird-party quote
4.5 - 99.2
85.089.5
Total Level 3 investments$1,092,895 
_____________________
(1)EBITDA may include proforma adjustments and/or other add-backs based on specific circumstances related to each investment.
(2)Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 2.0x - 15.7x and the range for risk adjusted discount factor is 8.0% - 27.3%.
(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
(4)Discount rate includes the effect of the standard SOFR base rate, as applicable.
Schedule of MSC Income Fund’s Level 3 Portfolio Investments
The following tables provide a summary of changes in fair value of MSC Income Fund’s Level 3 portfolio investments for the three months ended March 31, 2024 and 2023 (amounts in thousands):
Type of
Investment
Fair Value
as of
December 31,
2023
Transfers
Into
Level 3
Hierarchy
Redemptions/
Repayments
New
Investments
Net
Changes
from
Unrealized
to Realized
Net
Unrealized
Appreciation
(Depreciation)
Other(1)
Fair Value
as of
March 31,
2024
Debt$838,125 $— $(50,999)$75,519 $884 $(3,635)$(166)$859,728 
Equity254,029 — (3,324)3,025 673 1,053 166 255,622 
Equity Warrant741 — — — — (109)— 632 
$1,092,895 $— $(54,323)$78,544 $1,557 $(2,691)$— $1,115,982 
______________________
(1)Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information in the Consolidated Statements of Cash Flows.
Type of
Investment
Fair Value
as of
December 31,
2022
Transfers
Into
Level 3
Hierarchy
Redemptions/
Repayments
New
Investments
Net
Changes
from
Unrealized
to Realized
Net
Unrealized
Appreciation
(Depreciation)
Other(1)
Fair Value
as of
March 31,
2023
Debt$852,282 $— $(23,105)$25,679 $1,403 $(7,409)$(4,906)$843,944 
Equity214,687 — (1,311)1,828 (3,809)5,005 6,011 222,411 
Equity Warrant1,174 — — — — 670 (1,105)739 
$1,068,143 $— $(24,416)$27,507 $(2,406)$(1,734)$— $1,067,094 
_____________________
(1)Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information in the Consolidated Statements of Cash Flows.
Schedule of MSC Income Fund's Investments at Fair Value Hierarchy
At March 31, 2024 and December 31, 2023, MSC Income Fund's investments at fair value were categorized as follows in the fair value hierarchy for ASC 820 purposes:
Fair Value Measurements
(in thousands)
At March 31, 2024
Fair ValueQuoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Private Loan portfolio investments$631,447 $— $— $631,447 
LMM portfolio investments391,575 — — 391,575 
Middle Market portfolio investments68,352 — — 68,352 
Other Portfolio investments24,608 — — 24,608 
Total investments$1,115,982 $— $— $1,115,982 
Fair Value Measurements
(in thousands)
At December 31, 2023
Fair ValueQuoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Private Loan portfolio investments$595,326 $— $— $595,326 
LMM portfolio investments386,956 — — 386,956 
Middle Market portfolio investments85,990 — — 85,990 
Other Portfolio investments24,623 — — 24,623 
Total investments$1,092,895 $— $— $1,092,895 
Schedule of Investment Holdings
The following tables provide a summary of MSC Income Fund’s investments in the Private Loan, LMM and Middle Market portfolios as of March 31, 2024 and December 31, 2023 (this information excludes Other Portfolio investments, which are discussed further below).
As of March 31, 2024
Private LoanLMM (a)Middle Market
(dollars in millions)
Number of portfolio companies79 51 15 
Fair value$631.4 $391.6 $68.4 
Cost$624.3 $319.2 $97.7 
Debt investments as a % of portfolio (at cost)94.6 %70.3 %91.7 %
Equity investments as a % of portfolio (at cost)5.4 %29.7 %8.3 %
% of debt investments at cost secured by first priority lien99.9 %99.9 %99.9 %
Weighted-average annual effective yield (b)13.0 %13.0 %13.4 %
Average EBITDA (c)$34.7 $9.2 $62.5 
___________________
(a)At March 31, 2024, MSC Income Fund had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 9%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of March 31, 2024, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield on MSC Income Fund’s debt portfolio as of March 31, 2024 including debt investments on non-accrual status was 12.6% for its Private Loan portfolio, 13.0% for its LMM portfolio and 10.1% for its Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of MSC Income Fund’s common stock will realize on its investment because it does not reflect MSC Income Fund’s utilization of debt capital in its capital structure, MSC Income Fund’s expenses or any sales load paid by an investor.
(c)The average EBITDA is calculated using a weighted-average for the Private Loan and Middle Market portfolios and a simple average for the LMM portfolio. These calculations exclude certain portfolio companies, including one Private Loan portfolio company, two LMM portfolio companies and one Middle Market portfolio company, as EBITDA is not a meaningful valuation metric for MSC Income Fund’s investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
As of December 31, 2023
Private LoanLMM (a)Middle Market
(dollars in millions)
Number of portfolio companies78 50 16 
Fair value$595.3 $387.0 $86.0 
Cost$586.4 $315.7 $114.7 
Debt investments as a % of portfolio (at cost)94.1 %70.2 %93.1 %
Equity investments as a % of portfolio (at cost)5.9 %29.8 %6.9 %
% of debt investments at cost secured by first priority lien100.0 %99.9 %100.0 %
Weighted-average annual effective yield (b)13.1 %13.0 %13.0 %
Average EBITDA (c)$30.5 $8.8 $74.2 
___________________
(a)At December 31, 2023, MSC Income Fund had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 9%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2023, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield on MSC Income Fund’s debt portfolio as of December 31, 2023 including debt investments on non-accrual status was 12.6% for its Private Loan portfolio, 13.0% for its LMM portfolio and 9.9% for its Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of MSC Income Fund’s common stock will realize on its investment because it does not reflect MSC Income Fund’s utilization of debt capital in its capital structure, MSC Income Fund’s expenses or any sales load paid by an investor.
(c)The average EBITDA is calculated using a weighted-average for the Private Loan and Middle Market portfolios and a simple average for the LMM portfolio. These calculations exclude certain portfolio companies, including one Private Loan portfolio company, as EBITDA is not a meaningful valuation metric for MSC Income Fund’s investment in this portfolio company, and those portfolio companies whose primary purpose is to own real estate.
The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments at cost and fair value by type of investment as a percentage of the total combined Private Loan, LMM and Middle Market portfolio investments, as of March 31, 2024 and December 31, 2023 (this information excludes Other Portfolio investments, which are discussed above).
Cost:March 31, 2024December 31, 2023
First lien debt86.9 %86.5 %
Equity12.9 13.3 
Second lien debt— — 
Equity warrants0.2 0.2 
Other— — 
100.0 %100.0 %
Fair Value:March 31, 2024December 31, 2023
First lien debt78.7 %78.4 %
Equity21.2 21.5 
Second lien debt— — 
Equity warrants0.1 0.1 
Other— — 
100.0 %100.0 %
The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments by geographic region of the United States and other countries at cost and fair value as a percentage of the total combined Private Loan, LMM and Middle Market portfolio investments, as of March 31, 2024 and December 31, 2023 (this information excludes Other Portfolio investments). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.
Cost:March 31, 2024December 31, 2023
Northeast22.0 %21.9 %
Southwest21.3 23.8 
West18.8 17.0 
Southeast18.6 17.8 
Midwest17.5 17.6 
Canada0.8 0.8 
Other Non-United States1.0 1.1 
100.0 %100.0 %
Fair Value:March 31, 2024December 31, 2023
Southwest24.4 %26.8 %
Northeast21.6 21.6 
Midwest18.2 18.3 
West18.0 16.4 
Southeast16.0 15.0 
Canada0.8 0.8 
Other Non-United States1.0 1.1 
100.0 %100.0 %
MSC Income Fund’s Private Loan, LMM and Middle Market portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments by industry at cost and fair value as of March 31, 2024 and December 31, 2023 (this information excludes Other Portfolio investments).
Cost:March 31, 2024December 31, 2023
Internet Software & Services8.6 %8.8 %
Commercial Services & Supplies8.0 8.5 
Diversified Consumer Services5.9 5.4 
Machinery5.5 5.8 
Professional Services5.5 5.7 
IT Services5.3 5.2 
Health Care Providers & Services4.9 6.5 
Containers & Packaging4.2 4.3 
Distributors4.2 4.4 
Electrical Equipment3.8 2.2 
Leisure Equipment & Products3.6 3.7 
Textiles, Apparel & Luxury Goods3.1 3.1 
Specialty Retail2.9 2.9 
Communications Equipment2.7 2.7 
Computers & Peripherals2.7 2.9 
Building Products2.5 2.1 
Construction & Engineering2.5 2.5 
Aerospace & Defense2.4 2.6 
Media2.4 2.5 
Diversified Financial Services2.0 2.1 
Hotels, Restaurants & Leisure2.0 2.1 
Household Products2.0 2.0 
Energy Equipment & Services1.7 0.5 
Internet & Catalog Retail1.7 1.6 
Food & Staples Retailing1.6 1.5 
Software1.5 1.4 
Health Care Equipment & Supplies1.2 1.3 
Other (1)5.6 5.7 
 100.0 %100.0 %
___________________
(1)Includes various industries with each industry individually less than 1.0% of the total combined Private Loan, LMM and Middle Market portfolio investments at each date.
Fair Value:March 31, 2024December 31, 2023
Internet Software & Services7.1 %7.3 %
Commercial Services & Supplies6.9 7.3 
Diversified Consumer Services6.9 6.5 
Machinery6.9 7.2 
Professional Services5.4 5.5 
IT Services5.2 5.0 
Computers & Peripherals4.7 4.6 
Containers & Packaging4.6 4.6 
Distributors4.6 4.6 
Health Care Providers & Services4.3 6.0 
Electrical Equipment3.8 2.3 
Construction & Engineering3.2 3.1 
Leisure Equipment & Products3.1 3.3 
Specialty Retail2.8 2.9 
Textiles, Apparel & Luxury Goods2.8 2.9 
Media2.5 2.6 
Aerospace & Defense2.4 2.5 
Building Products2.3 1.9 
Construction Materials2.1 2.2 
Diversified Financial Services1.9 2.0 
Household Products1.9 1.9 
Software1.9 1.7 
Air Freight & Logistics1.6 1.6 
Hotels, Restaurants & Leisure1.6 1.6 
Internet & Catalog Retail1.5 1.5 
Energy Equipment & Services1.4 0.3 
Food & Staples Retailing1.3 1.2 
Communications Equipment1.1 1.1 
Other (1)4.2 4.8 
 100.0 %100.0 %
___________________
(1)Includes various industries with each industry individually less than 1.0% of the total combined Private Loan, LMM and Middle Market portfolio investments at each date.