U.S. Middle Market Overview

WHY INVEST IN U.S. MIDDLE MARKET PRIVATE CREDIT?

ATTRACTIVE YIELDS
  • Historically strong performance throughout various economic cycles and largely uncorrelated with traditional asset classes
DOWNSIDE PROTECTION OF SECURED LOANS
  • Senior secured loan positions generally provide a higher level of safety and lower volatility than junior debt, mezzanine or equity. Top of the capital structure with a senior-lien on assets and often a pledge of company stock
STRONG RISK ADJUSTED INVESTMENT RETURNS
  • Lower default rates and higher recovery rates in middle market senior secured loans
CONTRACTUALLY MANDATED CURRENT CASH FLOW
  • Returns based on loan agreements requiring borrowers to pay contractual current income (coupon and fees); minimizes any J-curve effect
EFFECTIVE INTEREST RATE HEDGE
  • Investments are structured as loans with floating interest rates over LIBOR (with a floor) to hedge against rising interest rates
Indicative Capital Structure
Position in Capital Structure

Senior Secured Direct Loans

Junior Secured Direct Loans

Mezzanine Debt

Bonds

Preferred Equity

Common Equity

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U.S. Middle Market Overview

The U.S. middle market is defined as companies with annual revenues between $10 million and $1 billion and is equivalent in size to the world’s 3rd largest economy at $7.1 trillion

  • There are nearly 200,000 companies that make up this group
  • These companies are owned by families, entrepreneurs, private equity sponsors and occasionally, public shareholders
  • These companies manufacture, distribute, or otherwise provide a necessary product or service filling an important market niche
  • They generate approximately one third of the private sector GDP and employ roughly 47.9 million people
  • These businesses outperformed through the financial crisis by adding 2.2 million jobs across major industry sectors
  • As of Q1 2019, the rate of year-over-year revenue growth for middle market companies grew to 8.7% from 8.4% at the beginning of 2018.
  • Middle market firms contribute nearly $7.1 trillion to the national economy annually

United States $21.3T

United States $21.3T

China $14.2T

China $14.2T

U.S. Middle Market $7.1T

U.S. Middle Market $7.1T

Germany $4.0T

Germany $4.0T

India $3.0T

India $3.0T

Monroe Capital & The U.S. Middle Market

Monroe is a critical partner helping middle market companies grow. We provide capital that allows these middle market borrowers to:

  • Make acquisitions
  • Solve for generational or family transfers of ownership
  • Fund private equity merger and acquisition (M&A) transactions
  • Invest in property, equipment, and other capital expenditures
  • Increase working capital
  • Expand revenues and grow internationally