Annual report pursuant to Section 13 and 15(d)

FAIR VALUE HIERARCHY FOR INVESTMENTS???PORTFOLIO COMPOSITION (Tables)

v3.24.0.1
FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION (Tables)
 12 Months Ended
Dec. 31, 2023
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 December 31, 2023 and 2022:
Type of
Investment
Fair Value as of
December 31, 2023
(in thousands)
 Valuation Technique Significant
Unobservable Inputs		 Range(3) Weighted Average(3) Median(3)
Equity investments $ 254,770  Discounted cash flow WACC
10.9% - 22.5%
 14.4  % 15.5  %
Market comparable / Enterprise value EBITDA multiple (1)
4.9x - 9.2x (2)
 7.3x 6.5x
Debt investments $ 777,003  Discounted cash flow Risk 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 approach Third-party quote
4.5 - 99.2
 85.0 89.5
Total Level 3 investments $ 1,092,895 
_____________________________
(1)EBITDA may include proforma adjustments and/or other addbacks 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.
Type of
Investment
Fair Value as of
December 31, 2022
(in thousands)
 Valuation Technique Significant
Unobservable Inputs		 Range(3) Weighted
Average(3)		 Median(3)
Equity investments $ 215,861  Discounted cash flow WACC
10.4% - 22.5%
 14.3  % 15.7  %
Market comparable / Enterprise value EBITDA multiple (1)
4.3x - 8.5x (2)
 7.2x 6.4x
Debt investments $ 743,887  Discounted cash flow Risk adjusted discount factor (4)
8.5% - 18.2% (2)
 13.0  % 12.4  %
Expected principal recovery percentage
0.7% - 100.0%
 99.1  % 100.0  %
Debt investments $ 108,395  Market approach Third-party quote
5.6 - 98.5
 85.7 90.0
Total Level 3 investments $ 1,068,143 
_____________________________
(1)EBITDA may include proforma adjustments and/or other addbacks 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 6.5% - 43.3%.
(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 LIBOR and 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 years ended December 31, 2023 and 2022 (amounts in thousands):
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
December 31, 2023
Debt $ 852,282  $ —  $ (253,517) $ 230,663  $ 33,078  $ (5,467) $ (18,914) $ 838,125 
Equity 214,687  —  (15,329) 16,377  923  17,352  20,019  254,029 
Equity Warrant 1,174  —  (284) 523  284  149  (1,105) 741 
$ 1,068,143  $ —  $ (269,130) $ 247,563  $ 34,285  $ 12,034  $ —  $ 1,092,895 
_____________________________
(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, 2021
 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
December 31,
2022
Debt $ 879,970  $ —  $ (205,481) $ 211,631  $ 10,645  $ (42,747) $ (1,736) $ 852,282 
Equity 196,374  —  (22,234) 7,728  (7,037) 38,120  1,736  214,687 
Equity Warrant 792  —  (45) 1,111  (305) (379) —  1,174 
$ 1,077,136  $ —  $ (227,760) $ 220,470  $ 3,303  $ (5,006) $ —  $ 1,068,143 
_____________________________
(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 December 31, 2023 and 2022, 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 December 31, 2023
 Fair Value Quoted 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 investments 386,956  —  —  386,956 
Middle Market portfolio investments 85,990  —  —  85,990 
Other Portfolio investments 24,623  —  —  24,623 
Total investments $ 1,092,895  $ —  $ —  $ 1,092,895 
Fair Value Measurements
(in thousands)
At December 31, 2022
 Fair Value Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
Private Loan portfolio investments $ 559,763  $ —  $ —  $ 559,763 
LMM portfolio investments 352,661  —  —  352,661 
Middle Market portfolio investments 126,744  —  —  126,744 
Other Portfolio investments 28,975  —  —  28,975 
Total investments $ 1,068,143  $ —  $ —  $ 1,068,143 
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 December 31, 2023 and 2022 (this information excludes Other Portfolio investments, which are discussed further below):
As of December 31, 2023
Private Loan LMM (a) Middle Market
(dollars in millions)
Number of portfolio companies 78 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 lien 100.0  % 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 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.
As of December 31, 2022
Private Loan LMM (a) Middle Market
(dollars in millions)
Number of portfolio companies 70 48 21
Fair value $ 559.8  $ 352.7  $ 126.7 
Cost $ 563.0  $ 312.5  $ 159.7 
Debt investments as a % of portfolio (at cost) 96.2  % 73.2  % 95.0  %
Equity investments as a % of portfolio (at cost) 3.8  % 26.8  % 5.0  %
% of debt investments at cost secured by first priority lien 99.4  % 99.9  % 98.5  %
Weighted-average annual effective yield (b) 11.8  % 12.1  % 11.3  %
Average EBITDA (c) $ 36.8  $ 8.6  $ 79.2 
_____________________________
(a)At December 31, 2022, 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, 2022, 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, 2022 including debt investments on non-accrual status was 11.4% for its Private Loan portfolio, 11.7% for its LMM portfolio and 9.7% 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 December 31, 2023 and 2022 (this information excludes Other Portfolio investments).
Cost: December 31, 2023 December 31, 2022
First lien debt 86.5  % 88.5  %
Equity 13.3  10.8 
Second lien debt —  0.3 
Equity warrants 0.2  0.2 
Other —  0.2 
100.0  % 100.0  %
Fair Value: December 31, 2023 December 31, 2022
First lien debt 78.4  % 81.4  %
Equity 21.5  17.9 
Second lien debt —  0.3 
Equity warrants 0.1  0.1 
Other —  0.3 
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 December 31, 2023 and 2022 (this information excludes Other Portfolio investments). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.
Cost: December 31, 2023 December 31, 2022
Southwest 23.8  % 22.2  %
Northeast 21.9  20.3 
Southeast 17.8  17.8 
Midwest 17.6  15.1 
West 17.0  22.9 
Canada 0.8  0.8 
Other Non-United States 1.1  0.9 
100.0  % 100.0  %
Fair Value: December 31, 2023 December 31, 2022
Southwest 26.8  % 25.3  %
Northeast 21.6  20.3 
Midwest 18.3  15.9 
West 16.4  21.1 
Southeast 15.0  15.2 
Canada 0.8  1.2 
Other Non-United States 1.1  1.0 
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 December 31, 2023 and 2022 (this information excludes Other Portfolio investments).
Cost: December 31, 2023 December 31, 2022
Internet Software & Services 8.8  % 7.8  %
Commercial Services & Supplies 8.5  11.3 
Health Care Providers & Services 6.5  4.9 
Machinery 6.0  5.9 
Professional Services 5.7  3.7 
Diversified Consumer Services 5.4  4.7 
IT Services 5.2  4.9 
Distributors 4.4  5.0 
Containers & Packaging 4.3  3.4 
Leisure Equipment & Products 3.7  3.7 
Textiles, Apparel & Luxury Goods 3.1  2.0 
Computers & Peripherals 2.9  1.9 
Specialty Retail 2.7  4.0 
Communications Equipment 2.7  3.5 
Aerospace & Defense 2.6  3.6 
Media 2.5  2.4 
Construction & Engineering 2.5  2.5 
Electrical Equipment 2.2  1.8 
Building Products 2.1  2.4 
Hotels, Restaurants & Leisure 2.1  2.0 
Diversified Financial Services 2.1  1.7 
Household Products 2.0  1.5 
Internet & Catalog Retail 1.6  1.3 
Food & Staples Retailing 1.5  0.9 
Software 1.4  1.3 
Health Care Equipment & Supplies 1.3  1.2 
Food Products 0.9  1.1 
Energy Equipment & Services 0.5  1.2 
Diversified Telecommunication Services 0.1  3.4 
Other (1) 4.7  5.0 
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: December 31, 2023 December 31, 2022
Machinery 7.4  % 7.5  %
Commercial Services & Supplies 7.3  10.3 
Internet Software & Services 7.3  6.7 
Diversified Consumer Services 6.5  5.9 
Health Care Providers & Services 6.0  4.6 
Professional Services 5.5  2.8 
IT Services 5.0  4.7 
Distributors 4.6  5.5 
Computers & Peripherals 4.6  2.8 
Containers & Packaging 4.6  3.8 
Leisure Equipment & Products 3.3  3.7 
Construction & Engineering 3.1  2.9 
Textiles, Apparel & Luxury Goods 2.9  2.0 
Specialty Retail 2.7  3.1 
Media 2.6  2.6 
Aerospace & Defense 2.5  3.5 
Electrical Equipment 2.3  1.9 
Construction Materials 2.2  2.1 
Diversified Financial Services 2.0  1.8 
Building Products 1.9  2.5 
Household Products 1.9  1.3 
Software 1.7  1.7 
Air Freight & Logistics 1.6  1.2 
Hotels, Restaurants & Leisure 1.6  1.5 
Internet & Catalog Retail 1.5  1.9 
Food & Staples Retailing 1.2  0.8 
Communications Equipment 1.1  1.3 
Energy Equipment & Services 0.3  1.0 
Diversified Telecommunication Services 0.1  3.6 
Other (1) 4.7  5.0 
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.