Annual report [Section 13 and 15(d), not S-K Item 405]

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

v3.25.1
FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION (Tables)
 12 Months Ended
Dec. 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’s Level 3 portfolio investments as of December 31, 2024 and 2023:
Type of
Investment
Fair Value as of
December 31, 2024
(in thousands)
 Valuation Technique Significant
Unobservable Inputs		 Range (3) Weighted-Average
(3)(4)		 Median (3)
Equity investments $ 281,831  Discounted cash flow WACC
11.5% - 22.5%
 14.8  % 15.1  %
Market comparable / Enterprise value EBITDA multiple (1)
4.9x - 9.0x (2)
 6.6x 6.5x
Debt investments $ 862,813  Discounted cash flow Risk adjusted discount factor (5)
8.5% - 18.0% (2)
 13.2  % 12.1  %
Expected principal recovery percentage
0.3% - 100.0%
 99.7  % 100.0  %
Debt investments $ 32,863  Market approach Third-party quote
21.0 - 99.4
 82.9 84.5
Total Level 3 investments $ 1,177,507 
_____________________________
(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 - 17.0x and the range for risk adjusted discount factor is 6.8% - 38.3%.
(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
(4)Weighted-average is calculated for each significant unobservable input based on the applicable security’s fair value.
(5)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 Technique Significant
Unobservable Inputs		 Range (3) Weighted-Average
(3)(4)		 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 (5)
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)Weighted-average is calculated for each significant unobservable input based on the applicable security’s fair value.
(5)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’s Level 3 portfolio investments for the years ended December 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
December 31, 2024
Debt $ 838,125  $ —  $ (223,664) $ 320,696  $ 7,867  $ (25,216) $ (22,132) $ 895,676 
Equity 254,029  —  (16,571) 18,838  (24,918) 24,043  22,132  277,553 
Equity Warrant 741  —  —  1,128  (90) 2,499  —  4,278 
$ 1,092,895  $ —  $ (240,235) $ 340,662  $ (17,141) $ 1,326  $ —  $ 1,177,507 
_____________________________
(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
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.
Schedule of MSC Income Fund's Investments at Fair Value Hierarchy
As of December 31, 2024 and 2023, MSC Income’s investments at fair value were categorized as follows in the fair value hierarchy for ASC 820 purposes:
Fair Value Measurements
(in thousands)
As of December 31, 2024
 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 $ 677,878  $ —  $ —  $ 677,878 
LMM portfolio investments 436,150  —  —  436,150 
Middle Market portfolio investments 39,402  —  —  39,402 
Other Portfolio investments 24,077  —  —  24,077 
Total investments $ 1,177,507  $ —  $ —  $ 1,177,507 
Fair Value Measurements
(in thousands)
As of 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 
Schedule of Investment Holdings
The following tables provide a summary of MSC Income’s investments in the Private Loan, LMM and Middle Market portfolios as of December 31, 2024 and 2023 (this information excludes Other Portfolio investments, which are discussed further below).
As of December 31, 2024
Private Loan LMM (a) Middle Market
(dollars in millions)
Number of portfolio companies 84 57 10
Fair value $ 677.9  $ 436.1  $ 39.4 
Cost $ 697.5  $ 357.1  $ 66.3 
Debt investments as a % of portfolio (at cost) 93.9  % 67.8  % 87.8  %
Equity investments as a % of portfolio (at cost) 6.1  % 32.2  % 12.2  %
% of debt investments at cost secured by first priority lien 99.9  % 99.9  % 99.9  %
Weighted-average annual effective yield (b) 12.0  % 13.0  % 14.1  %
Average EBITDA (c) $ 28.6  $ 10.8  $ 38.2 
_____________________________
(a)As of December 31, 2024, MSC Income 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 as of December 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, and are weighted based upon the principal amount of each applicable debt investment as of December 31, 2024. The weighted-average annual effective yield on MSC Income’s debt portfolio as of December 31, 2024, including debt investments on non-accrual status, was 11.4% for its Private Loan portfolio, 12.2% for its LMM portfolio and 9.0% for its Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of MSC Income’s common stock will realize on its investment because it does not reflect MSC Income’s utilization of debt capital in its capital structure, MSC Income’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 two Private Loan portfolio companies, three LMM portfolio companies and one Middle Market portfolio company, as EBITDA is
not a meaningful valuation metric for MSC Income’s investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate and those portfolio companies whose primary operations have ceased and only residual value remains.
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)As of December 31, 2023, MSC Income 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 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, and are weighted based upon the principal amount of each applicable debt investment as of December 31, 2023. The weighted-average annual effective yield on MSC Income’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’s common stock will realize on its investment because it does not reflect MSC Income’s utilization of debt capital in its capital structure, MSC Income’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’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’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, 2024 and 2023 (this information excludes Other Portfolio investments, which are discussed above).
Cost: December 31, 2024 December 31, 2023
First lien debt 85.2  % 86.5  %
Equity 14.5  13.3 
Equity warrants 0.3  0.2 
Other —  — 
100.0  % 100.0  %
Fair Value: December 31, 2024 December 31, 2023
First lien debt 77.6  % 78.4  %
Equity 22.0  21.5 
Equity warrants 0.4  0.1 
Other —  — 
100.0  % 100.0  %
The following tables summarize the composition of MSC Income’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, 2024 and 2023 (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, 2024 December 31, 2023
Northeast 22.4  % 21.9  %
Midwest 21.5  17.6 
West 18.7  17.0 
Southwest 18.2  23.8 
Southeast 17.0  17.8 
Canada 1.2  0.8 
Other Non-United States 1.0  1.1 
100.0  % 100.0  %
Fair Value: December 31, 2024 December 31, 2023
Midwest 22.7  % 18.3  %
Northeast 22.6  21.6 
Southwest 20.4  26.8 
West 18.4  16.4 
Southeast 13.8  15.0 
Canada 1.1  0.8 
Other Non-United States 1.0  1.1 
100.0  % 100.0  %
MSC Income’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’s total combined Private Loan, LMM and Middle Market portfolio investments by industry at cost and fair value as of December 31, 2024 and 2023 (this information excludes Other Portfolio investments).
Cost: December 31, 2024 December 31, 2023
Machinery 7.8  % 6.0  %
Commercial Services & Supplies 7.6  8.5 
Internet Software & Services 7.2  8.8 
Professional Services 6.1  5.7 
Diversified Consumer Services 5.2  5.4 
Electrical Equipment 4.6  2.2 
IT Services 4.6  5.2 
Containers & Packaging 4.5  4.3 
Distributors 4.3  4.4 
Health Care Providers & Services 4.2  6.5 
Leisure Equipment & Products 3.5  3.7 
Computers & Peripherals 3.0  2.9 
Communications Equipment 2.9  2.7 
Hotels, Restaurants & Leisure 2.8  2.1 
Textiles, Apparel & Luxury Goods 2.8  3.1 
Diversified Financial Services 2.3  2.1 
Building Products 2.2  2.1 
Construction & Engineering 2.1  2.5 
Specialty Retail 2.0  2.7 
Aerospace & Defense 1.7  2.6 
Auto Components 1.7  0.8 
Household Products 1.7  2.0 
Energy Equipment & Services 1.6  0.5 
Food & Staples Retailing 1.6  1.5 
Internet & Catalog Retail 1.6  1.6 
Software 1.6  1.4 
Marine 1.5  — 
Trading Companies & Distributors 1.3  — 
Media 1.2  2.5 
Health Care Equipment & Supplies 1.1  1.3 
Other (1) 3.7  4.9 
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, 2024 December 31, 2023
Machinery 9.1  % 7.4  %
Commercial Services & Supplies 6.6  7.3 
Internet Software & Services 6.3  7.3 
Professional Services 6.1  5.5 
Diversified Consumer Services 6.0  6.5 
Computers & Peripherals 5.1  4.6 
Containers & Packaging 4.8  4.6 
Electrical Equipment 4.7  2.3 
IT Services 4.5  5.0 
Distributors 4.3  4.6 
Health Care Providers & Services 3.8  6.0 
Construction & Engineering 3.0  3.1 
Leisure Equipment & Products 2.9  3.3 
Textiles, Apparel & Luxury Goods 2.6  2.9 
Building Products 2.3  1.9 
Diversified Financial Services 2.3  2.0 
Specialty Retail 2.2  2.7 
Software 2.1  1.7 
Hotels, Restaurants & Leisure 2.0  1.6 
Household Products 1.8  1.9 
Aerospace & Defense 1.7  2.5 
Auto Components 1.7  0.8 
Media 1.5  2.6 
Air Freight & Logistics 1.4  1.6 
Communications Equipment 1.4  1.1 
Internet & Catalog Retail 1.4  1.5 
Marine 1.4  — 
Energy Equipment & Services 1.3  0.3 
Food & Staples Retailing 1.3  1.2 
Trading Companies & Distributors 1.3  — 
Construction Materials —  2.2 
Other (1) 3.1  4.0 
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.