(Bloomberg) — A private credit fund overseen by Apollo Global Management Inc. cut its dividend and marked down the value of its assets amid signs of strain in parts of its loan book.
MidCap Financial Investment Corp., a business development company focused on direct lending, lowered its quarterly payout to 31 cents a share from 38 cents and wrote down its portfolio by about 3%, citing weakness in a handful of older investments and a reassessment of its long-term earnings power as interest rates shift. Net investment income edged up to 39 cents a share from 38 cents in the prior quarter.
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The BDC is turning to stock repurchases to boost shareholder returns, authorizing a new $100 million buyback plan. The stock closed at $10.53 Thursday, about 26% below the fund’s $14.18 net asset value per share at quarter-end.
“At these trading levels, we continue to believe allocating capital toward stock repurchases is more accretive than deploying capital into new investments,” MFIC Chief Executive Officer Tanner Powell said in a statement.
BDC results are coming under sharper scrutiny as private credit managers confront investor concerns about their exposure to software companies amid disruption from artificial intelligence. With many portfolios concentrated in tech loans, results offer an early read on mounting valuation and credit pressures.
While software represents MFIC’s largest industry concentration, accounting for 11.4% of the portfolio at fair value as of Dec. 31, the fund has less exposure to the sector than most other BDCs, Chief Investment Officer Ted McNulty said in the statement. He added that the fund is positioned to withstand potential disruption from AI, focusing on businesses with established, long-term customer relationships.
During the fourth quarter, MFIC placed investments in scooter company Bird Rides, Banner Solutions and Renovo on non-accrual status, meaning the fund no longer expects to collect interest on them.
The lender said losses tied to the restructuring of LendingPoint and valuation declines in Amplity, ChyronHego, Bird Rides and Kauffman resulted in about $29 million of net unrealized losses for the year. It also recorded around $47 million of net realized losses on investments during the period.
