MidCap Financial Posts $0.20 Loss as Ares Deal Closes In

The Tip Desk · November 11, 2026 · 3 min read

Net investment income was $0.34 a share and NAV fell 3.8% to $12.86 as Ares Capital agreed to buy the BDC at $10.88 a share.

MidCap Financial Investment Corporation (MFIC) reported a basic loss of $0.20 a share for the quarter ended September 30, 2026, as net realized and change in unrealized losses widened to $44.0 million from $7.9 million a year earlier.

Net investment income was $27.6 million, or $0.34 a share, compared with $35.3 million, or $0.38 a share, a year earlier. The company said NAV per share declined 3.8% to $12.86 from $13.37 at June 30, after a 3.2% drop in the prior quarter. The company attributed the latest decline to a net loss on the portfolio, which it said reflected credit-related weakness concentrated in a limited number of positions, partially offset by net investment income in excess of the dividend.

On October 27, Ares Capital Corporation (ARCC) agreed to acquire MFIC in a stock-and-cash transaction valued at $10.88 per common share, consisting of $9.67 in ARCC stock and $1.21 in cash. The company said the price represented a 30.1% premium to MFIC’s last closing price and a 25.8% premium to its 30-day volume-weighted average. On November 4, the board declared a dividend of $0.31 a share payable December 22, 2026. The company said there can be no assurances the board will continue to declare a base dividend of $0.31 a share. Prior to closing, it said it will declare one or more distributions to distribute previously undistributed investment company taxable income, any prior-year shortfall and net capital gain, and to maintain its regulated investment company status.

The company did not repurchase shares in the quarter and said it has suspended its share repurchase program and will suspend its dividend reinvestment plan in the near term in connection with the transaction. In the prior quarter it had bought 2,755,221 shares for $31.9 million.

Portfolio contraction continued. Net investment activity was a $188.7 million contraction, versus a $148.0 million contraction a year earlier. Investments made in portfolio companies were $36.5 million, versus $400.4 million a year earlier. Gross fundings excluding revolver fundings totaled $11 million, down from $21 million in the prior quarter. New investment commitments were $0.9 million versus $6 million. Net repayments including revolvers totaled $189 million, including a $28.0 million repayment from Merx Aviation Finance that reduced the position to 1.7% of the total portfolio.

Net leverage was 1.43x as of September 30, down from 1.54x at June 30. The investment portfolio at fair value was $2.55 billion, and total assets were $2.65 billion. Debt outstanding was $1.58 billion. As of September 30, outstanding debt obligations excluding deferred financing cost and debt discount totaled $1.6 billion, including $80 million of senior unsecured notes maturing December 15, 2028, $456 million of secured debt in MFIC Bethesda CLO 1 LLC, $399 million in MFIC Bethesda CLO 2 LLC, and $648 million under the revolving credit facility. Available remaining capacity under the facility was $962 million.

The company said the facility is expected to be repaid in full and terminated upon closing of the transaction, and that ARCC may request optional redemption of the senior unsecured notes conditioned on closing. In light of the transaction, MFIC said it will not hold a conference call.

The portfolio remained 95% first lien secured debt. Total portfolio weighted average yield at amortized cost was 7.9%, down from 8.1% at June 30; first lien yield was 9.6%, excluding investments on non-accrual status. Floating-rate investments were 100% of the corporate debt portfolio, excluding aviation and investments on non-accrual status. The company is a closed-end, externally managed BDC that primarily invests in first lien senior secured loans to privately held U.S. middle-market companies.