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 Main Street’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 (4) Weighted Average (4) Median (4)
Equity investments $ 1,402,354  Discounted cash flow WACC
9.7% - 22.7%
 14.5  % 15.5  %
Market comparable / Enterprise value EBITDA multiple (1) (3)
4.8x - 8.9x (2)
 7.1x 6.4x
Debt investments $ 2,720,425  Discounted cash flow Risk adjusted discount factor (5)
9.8% - 18.0% (2)
 12.9  % 13.0  %
Expected principal recovery percentage
0.0% - 100.0%
 99.7  % 100.0  %
Debt investments $ 163,492  Market approach Third-party quote
3.0 - 100.0
 89.8 92.4
Total Level 3 investments $ 4,286,271 
______________________
(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 7.0% - 31.6%.
(3)The fair value of the equity investment in the External Investment Manager is based on a fee multiple of 7.2x. The fair value determination is based on a discounted, blended multiple based on the multiples for similar businesses in active markets and actual multiples used in private transactions.
(4)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
(5)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 (4) Weighted Average (4) Median (4)
Equity investments $ 1,172,077  Discounted cash flow WACC
9.4% - 22.5%
 14.5  % 15.4  %
Market comparable / Enterprise value EBITDA multiple (1) (3)
4.3x - 8.3x (2)
 6.7x 6.0x
Debt investments $ 2,663,958  Discounted cash flow Risk adjusted discount factor (5)
8.5% - 18.8%(2)
 12.2  % 12.4  %
Expected principal recovery percentage
0.0% - 100.0%
 99.4  % 100.0  %
Debt investments $ 264,238  Market approach Third-party quote
5.6 - 98.5
 87.0 91.4
Total Level 3 investments $ 4,100,273 
______________________
(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)The fair value of the equity investment in the External Investment Manager is based on a fee multiple of 6.1x. The fair value determination is based on a discounted, blended multiple based on the multiples for similar businesses in active markets and actual multiples used in private transactions.
(4)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
(5)Discount rate includes the effect of the standard LIBOR and SOFR base rate, as applicable.
Schedule of Changes in Fair Value of Main Street’s Level 3 Portfolio Investments
The following tables provide a summary of changes in fair value of Main Street’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 $ 2,928,196  $ —  $ (891,359) $ 800,838  $ 114,759  $ (24,629) $ (43,888) $ 2,883,917 
Equity 1,166,643  —  (46,829) 89,950  3,028  136,570  46,382  1,395,744 
Equity Warrant 5,434  —  (425) 2,091  425  1,661  (2,576) 6,610 
$ 4,100,273  $ —  $ (938,613) $ 892,879  $ 118,212  $ 113,602  $ (82) $ 4,286,271 
______________________
(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 $ 2,509,568  $ —  $ (590,740) $ 1,085,808  $ 19,674  $ (89,178) $ (6,936) $ 2,928,196 
Equity 1,043,709  —  (55,197) 74,274  (12,234) 109,154  6,936  1,166,643 
Equity Warrant 6,560  —  (655) 1,036  (1,834) 327  —  5,434 
$ 3,559,837  $ —  $ (646,592) $ 1,161,118  $ 5,606  $ 20,303  $ —  $ 4,100,273 
______________________
(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 Portfolio Investments by Level in the Fair Value Hierarchy
At December 31, 2023 and 2022, Main Street’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)
LMM portfolio investments $ 2,273,000  $ —  $ —  $ 2,273,000 
Private Loan portfolio investments 1,453,549  —  —  1,453,549 
Middle Market portfolio investments 243,695  —  —  243,695 
Other Portfolio investments 141,964  —  —  141,964 
External Investment Manager 174,063  —  —  174,063 
Total investments $ 4,286,271  $ —  $ —  $ 4,286,271 
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)
LMM portfolio investments $ 2,060,459  $ —  $ —  $ 2,060,459 
Private Loan portfolio investments 1,471,466  —  —  1,471,466 
Middle Market portfolio investments 329,119  —  —  329,119 
Other Portfolio investments 116,299  —  —  116,299 
External Investment Manager 122,930  —  —  122,930 
Short-term portfolio investments 1,904  —  1,904  — 
Total investments $ 4,102,177  $ —  $ 1,904  $ 4,100,273 
Schedule Investment Holdings
The following tables provide a summary of Main Street’s investments in the LMM, Private Loan and Middle Market portfolios as of December 31, 2023 and 2022 (this information excludes Other Portfolio investments, short-term portfolio investments and the External Investment Manager, which are discussed further below):
As of December 31, 2023
LMM (a) Private Loan Middle Market
(dollars in millions)
Number of portfolio companies 80  87  23 
Fair value $ 2,273.0  $ 1,453.5  $ 243.7 
Cost $ 1,782.9  $ 1,470.1  $ 294.4 
Debt investments as a % of portfolio (at cost) 72.0  % 94.7  % 91.4  %
Equity investments as a % of portfolio (at cost) 28.0  % 5.3  % 8.6  %
% of debt investments at cost secured by first priority lien 99.2  % 100.0  % 99.1  %
Weighted-average annual effective yield (b) 13.0  % 12.9  % 12.5  %
Average EBITDA (c) $ 8.2  $ 27.2  $ 64.2 
______________________
(a)At December 31, 2023, Main Street had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 40%.
(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 Main Street’s debt portfolio as of December 31, 2023 including debt investments on non-accrual status was 12.9% for its LMM portfolio, 12.5% for its Private Loan portfolio and 10.8% for its Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of Main Street’s common stock will realize on its investment because it does not reflect changes in the market value of Main Street’s stock, Main Street’s utilization of debt capital in its capital structure, Main Street’s expenses or any sales load paid by an investor.
(c)The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and Middle Market portfolios. These calculations exclude certain portfolio companies, including two LMM portfolio companies and two Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for Main Street’s investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
As of December 31, 2022
LMM (a) Private Loan Middle Market
(dollars in millions)
Number of portfolio companies 78  85  31 
Fair value $ 2,060.5  $ 1,471.5  $ 329.1 
Cost $ 1,719.9  $ 1,500.3  $ 401.7 
Debt investments as a % of portfolio (at cost) 73.7  % 97.1  % 93.8  %
Equity investments as a % of portfolio (at cost) 26.3  % 2.9  % 6.2  %
% of debt investments at cost secured by first priority lien 99.1  % 99.6  % 98.8  %
Weighted-average annual effective yield (b) 12.3  % 11.6  % 11.0  %
Average EBITDA (c) $ 8.0  $ 38.1  $ 68.7 
______________________
(a)At December 31, 2022, Main Street had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 41%.
(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 Main Street’s debt portfolio as of December 31, 2022 including debt investments on non-accrual status was 11.6% for its LMM portfolio, 11.2% for its Private Loan portfolio and 10.3% for its Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of Main Street’s common stock will realize on its investment because it does not reflect changes in the market value of Main Street’s stock, Main Street’s utilization of debt capital in its capital structure, Main Street’s expenses or any sales load paid by an investor.
(c)The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and Middle Market portfolios. These calculations exclude certain portfolio companies, including three LMM portfolio companies and two Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for Main Street’s investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.
The following tables summarize the composition of Main Street’s total combined LMM, Private Loan and Middle Market portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM, Private Loan and Middle Market portfolio investments, as of December 31, 2023 and 2022 (this information excludes Other Portfolio investments, short-term portfolio investments and the External Investment Manager, which are discussed above).
Cost: December 31, 2023 December 31, 2022
First lien debt 82.7  % 85.0  %
Equity 16.8  14.2 
Second lien debt 0.1  0.3 
Equity warrants 0.2  0.2 
Other 0.2  0.3 
100.0  % 100.0  %
Fair Value: December 31, 2023 December 31, 2022
First lien debt 71.6  % 75.2  %
Equity 27.8  24.1 
Second lien debt 0.2  0.3 
Equity warrants 0.2  0.1 
Other 0.2  0.3 
100.0  % 100.0  %
The following tables summarize the composition of Main Street’s total combined LMM, Private Loan 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 LMM, Private Loan and Middle Market portfolio investments, as of December 31, 2023 and 2022 (this information excludes Other Portfolio investments, short-term portfolio investments and the External Investment Manager). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.
Cost: December 31, 2023 December 31, 2022
West 25.8  % 28.5  %
Northeast 22.3  19.0 
Southwest 19.7  20.1 
Midwest 17.0  16.3 
Southeast 13.1  14.0 
Canada 0.4  0.6 
Other Non-United States 1.7  1.5 
100.0  % 100.0  %
Fair Value: December 31, 2023 December 31, 2022
West 25.4  % 28.7  %
Southwest 22.0  21.4 
Northeast 21.3  18.8 
Midwest 18.1  16.6 
Southeast 11.3  12.4 
Canada 0.3  0.6 
Other Non-United States 1.6  1.5 
100.0  % 100.0  %
Main Street’s LMM, Private Loan and Middle Market portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of Main Street’s total combined LMM, Private Loan 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, short-term portfolio investments and the External Investment Manager).
Cost: December 31, 2023 December 31, 2022
Machinery 7.7  % 7.4  %
Internet Software & Services 7.6  8.0 
Professional Services 6.0  4.2 
Health Care Providers & Services 5.4  4.7 
IT Services 5.0  3.3 
Construction & Engineering 4.9  5.8 
Diversified Consumer Services 4.9  4.5 
Commercial Services & Supplies 4.5  6.7 
Distributors 4.3  5.1 
Containers & Packaging 3.8  2.6 
Textiles, Apparel & Luxury Goods 3.2  1.9 
Leisure Equipment & Products 3.1  4.5 
Tobacco 3.1  3.1 
Aerospace & Defense 2.9  2.3 
Energy Equipment & Services 2.7  3.7 
Computers & Peripherals 2.7  2.2 
Media 2.4  2.4 
Specialty Retail 2.1  3.2 
Software 2.0  1.9 
Building Products 1.7  1.9 
Diversified Financial Services 1.7  1.5 
Electrical Equipment 1.6  1.0 
Auto Components 1.6  1.7 
Food Products 1.6  1.6 
Food & Staples Retailing 1.6  1.2 
Electronic Equipment, Instruments & Components 1.5  1.6 
Internet & Catalog Retail 1.3  1.3 
Health Care Equipment & Supplies 1.3  1.3 
Communications Equipment 1.2  1.8 
Hotels, Restaurants & Leisure 1.1  1.1 
Chemicals 1.0  1.1 
Household Products 1.0  0.4 
Diversified Telecommunication Services 0.3  1.9 
Other (1) 3.2  3.1 
100.0  % 100.0  %
______________________
(1)Includes various industries with each industry individually less than 1.0% of the total combined LMM, Private Loan and Middle Market portfolio investments at each date.
Fair Value: December 31, 2023 December 31, 2022
Machinery 8.8  % 8.4  %
Diversified Consumer Services 7.1  6.8 
Professional Services 6.5  3.8 
Internet Software & Services 6.2  6.8 
Construction & Engineering 5.1  5.7 
Health Care Providers & Services 5.0  4.3 
IT Services 4.6  3.1 
Distributors 4.5  5.5 
Computers & Peripherals 4.4  3.0 
Commercial Services & Supplies 3.9  6.1 
Containers & Packaging 3.9  2.8 
Tobacco 3.2  3.4 
Specialty Retail 2.7  3.5 
Media 2.7  3.0 
Aerospace & Defense 2.7  2.2 
Textiles, Apparel & Luxury Goods 2.6  1.8 
Energy Equipment & Services 2.5  2.7 
Leisure Equipment & Products 2.5  4.0 
Software 2.1  2.1 
Electrical Equipment 1.7  1.0 
Diversified Financial Services 1.6  1.7 
Food Products 1.5  1.8 
Building Products 1.5  1.9 
Auto Components 1.5  1.6 
Internet & Catalog Retail 1.2  1.3 
Food & Staples Retailing 1.2  1.1 
Air Freight & Logistics 1.1  0.9 
Construction Materials 1.0  1.0 
Health Care Equipment & Supplies 1.0  1.0 
Chemicals 0.9  1.1 
Diversified Telecommunication Services 0.2  1.8 
Other (1) 4.6  4.8 
100.0  % 100.0  %
______________________
(1)Includes various industries with each industry individually less than 1.0% of the total combined LMM, Private Loan and Middle Market portfolio investments at each date.