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Operator
Welcome to Monroe Capital Corporation's second quarter 2023 earnings conference call. Before we begin, I would like to take a moment to remind our listeners that remarks made during this call may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs, future potential, operating results, and cash flows. Although we believe these statements are reasonable based on management estimates, assumptions and projections as of today, August 10th, 2023, these statements are not guaranteed of future performance. Further, time sensitive information may no longer be accurate as of the time of any replay or listening. Actual results, may differ materially as a result of risks, uncertainty, or other factors, including but not limited to the risk factors described from time to time in the company's filings with the SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements. I will now turn the conference over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation.
Ted Koenig
Good morning and thank you to everyone who has joined us on our earnings call today. I am here with Mick Salamini, our CFO and Chief Investment Officer, and Alex Parmasek, our Deputy Portfolio Manager. Last evening, we issued our second quarter 2023 earnings press release and filed our 10-Q with the SEC. An uncertain economic backdrop, elevated interest rates, and volatility in the bank and syndicated capital markets continue to make direct lenders such as Monroe Capital consistent and reliable sources of capital. Direct lenders continue to amass a larger share of the middle market lending landscape. According to Refinitiv, direct lenders accounted for 85% of new LBO financing activity in the second quarter of 2023. Further, M&A activity dipped to its lowest level since the third quarter of 2020 due to the expensive cost of capital and valuations enduring a period of correction. During this period, direct lenders such as Monroe have continued to step up to support existing portfolio companies as they execute on growth strategies to enhance enterprise value. Transaction activity began to show signs of picking up in the latter part of the second quarter and into the third quarter, particularly in the lower middle market. Monroe's ability to offer a variety of underwritten solutions with a certainty of execution has proven to be a distinct advantage for our clients. In the first half of 2023, When middle market transaction activity marked a three-year low, our platform funded nearly $1.4 billion, a slight increase over the first half of last year. The market continues to offer direct lenders attractive pricing, terms, and structures. Simultaneously, our transactions are being completed at lower leverage levels with higher equity contributions. We continue to selectively deploy new capital into recession-resilient sectors that offer these compelling risk-return dynamics. We will focus on capitalizing on opportunities where we can add attractive higher-yielding assets as older legacy assets repay. We believe that we are positioned to generate strong risk-adjusted returns supported by one of the most compelling vintages in recent history. While the economy has demonstrated more resiliency than many had anticipated, companies continue to face higher borrowing costs and the lingering impact of inflationary pressures. We've seen many instances where companies have been able to grow their top line, albeit at more compressed margins. Yet certain sectors with consumer-facing business models have faced bigger challenges. Through the economic backdrop, remains highly uncertain, the Fed's latest interest rate increase has made an economic slowdown more probable. We continue to emphasize portfolio management, actively monitoring the cash flows in our portfolio companies, and engaging with the management teams to keep a pulse on developing trends in these industries. We believe that the purposefully defensive positioning of our portfolio will allow MRCC to navigate the potentially challenging economic conditions ahead. The portfolio's interest coverage remains sound with sufficient cushion to weather the current interest rate environment. Additionally, the average loan-to-value and portfolio company leverage across the portfolio indicate meaningful equity value cushions below our debt. As the direction of the economy and interest rates become more apparent, Our primary focus will be on maintaining the quality of the portfolio while being value add partners to our borrowers. We maintain a deep and highly experienced portfolio management team with a time-tested playbook to navigate potential challenges and maximize our outcomes. Turning now to our second quarter results. Adjusted net investment income was $6.1 million or 28 cents per share which covered our dividend by 1.12 times and represented a 12% year over year increase to the second quarter of 2022. Adjusted net investment income declined from $6.9 million or 32 cents per share for last quarter. We also reported NAV of $213.2 million or $9.84 per share as of June 30th, 2023, compared to $223 million or $10.29 per share as of March 31st, 2023. The decline in NAV was primarily attributed to net losses and defensive realizations in two portfolio companies. These companies were impacted by difficult market conditions affecting consumer, household, and markets. And our portfolio has nominal remaining exposure to those specific sectors. During the quarter, MRCC's debt to equity leverage increased from 1.49 times debt equity to 1.54 times debt to equity. The increase in leverage was driven by the aforementioned decrease in NAB. Portfolio is well positioned to ride the current interest rate environment and face potential challenges resulting from an eventual slowdown in the economy. Our loan underwriting focus continues to be on those companies with resilient business models, defendable market positions, proven and experienced management teams, and exceptional sponsors or owners. MRCC enjoys a strong strategic advantage in being affiliated with the best-in-class middle-market private credit asset management firm with approximately $17.2 billion in assets under management and approximately 240 employees as of June 30th, 2023. We continue to focus on generating adjusted net investment income that meets or exceeds our dividend and restoring positive long-term NAV performance. I am now going to turn the call over to Mick our financial results in greater detail. Thank you, Ted.
Mick Salamini
As of June 30th, 2023, our investment portfolio totals $515.4 million, a decrease of $16.7 million from $532.1 million as of March 31st, 2023. At the end of the quarter, our investment portfolio consisted of debt and equity investments, in 99 portfolio companies compared to 102 portfolio companies at the end of the prior quarter. During the quarter, we made investments in three new portfolio companies with fundings totaling $6.3 million at a weighted average effective interest rate of 11.9%. We also made a nominal equity investment in one of those portfolio companies. Further, we had revolver or delayed draw fundings and add-ons to existing portfolio companies, totaling $11 million. We received two full payoffs for $12.2 million and incurred normal course paydowns, totaling $14.4 million. At June 30, 2023, we had total borrowings of $327.4 million, including $197.4 million outstanding under our floating rate revolving credit facility and $130 million of our 4.75% fixed rate 2026 notes. Total borrowings outstanding decreased nominally during the quarter. The revolving credit facility had $57.6 million of availability subject to borrowing base capacity. Now turning to our financial results, adjusted net investment income, a non-GAAP measure was $6.1 million, or $0.28 per share this quarter, compared to $6.9 million, or $0.32 per share in the prior quarter. Our average portfolio yield increased from 11.6% as of March 31st to 12.2% as of June 30th, which was offset by a decrease in fee income and prepayment gains, a reversal of previously accrued interest related to the restructuring of Foreman Mills, and slightly lower average portfolio balances. When considering current leverage levels, the interest rate environment, and the favorable percentage of our fund leverage at a fixed rate, we believe that on a run rate basis, our adjusted net investment income will continue to cover our current 25 cent per share quarterly dividend. All other things being equal. As of June 30th, 2023, our net asset value was $213.2 million, which decreased from 223 million in net asset value as of March 31, 2023. In the quarter, our NAV per share decreased from $10.29 per share to $9.84 per share. Our net asset value this quarter was affected by market conditions, which negatively impacted realizations on our investments in Foreman Mills and California Pizza Kitchen. These were two legacy investments in the brick-and-mortar retail space where we have only nominal remaining exposure. The balance of the decrease to net asset value was the result of net mark-to-market unrealized losses due to the fundamental performance of a couple specific portfolio companies still held in the portfolio and in SLF. These decreases were partially offset by our net investment income outperformance of our dividend for the quarter. I will now turn it over to Alex, who will provide more details on our second quarter operating performance.
Alex
Thank you, Mick. Looking to our statement of operations, total investment income was $16.3 million during the second quarter of 2023, down from $16.8 million in the first quarter of 2023. The increase in effective yield on our debt and preferred equity portfolio was offset by several factors, including slightly lower average portfolio balances a decrease in fee income and prepayment gains and the one-time reversal of previously accrued interest income associated with the restructuring and realization on the majority of our investment in Foreman Mills. While rising interest rate environment will continue to improve the yield on our investment portfolio and increase investment income, fee income and prepayment gains and losses are tied to transactions, which can cause volatility in our investment income. As of June 30th, 2023, we had four investments on non-accrual status, representing 1.3% of the portfolio of fair market value, which compares to three investments on non-accrual status and 0.4% of the portfolio of fair market value as of March 31st, 2023. During the quarter, we placed two new investments on non-accrual, ARC Store VATCO, which resulted in an impact of approximately 0.7 cents per share of NII, and our remaining restructured position in Foreman Mills. Additionally, during the quarter, we disposed of a previous non-accrual asset, Vinci Brands. Moving over to the expense side, total expenses slightly increased to $10.4 million in the second quarter of 2023 from $10.2 million in the first quarter. The $0.2 million increase in expenses during the quarter was primarily driven by an increase in interest and other debt financing expenses resulting from the rising interest rate environment. Our net loss for the second quarter of 2023 was $10.3 million compared to a net loss of $3.3 million for the first quarter of 2023. Net realized and unrealized losses on investments were $10.2 million for the quarter. Other net losses for the quarter, which were comprised primarily of net gains on foreign currency forward contracts used to hedge currency exposure on investments denominated in foreign currency totaled $0.1 million. As of June 30th, the SLF had investments in 56 different borrowers, aggregating to $168.2 million at fair market value with a weighted average interest rate of 10.7%. The SLF's underlying investments are loans to middle market borrowers that are generally larger and more sensitive to market spread movements than the rest of MRCC's portfolio, which is focused on lower middle market companies. The SLF portfolio decreased in value by approximately 200 basis points during the quarter from 93.5% of amortized costs at March 31st, 2023 to 91.5% of amortized costs as of June 30th, 2023. During the second quarter, MRCC received income distributions from SLF of $900,000, consistent with the prior quarter. As of June 30th, 2023, The SOF had borrowings under its non-recourse credit facility of $107.9 million and $2.1 million of available capacity, subject to borrowing-based availability. At this point, I will turn the call back to Ted for some closing remarks before we open up the line for any questions.
Ted Koenig
Thank you, Mick and Alex. In summary, we remain confident in the overall quality of the portfolio and its positioning to navigate a challenging economic and market environment. This quarter's challenge in the retail space was isolated, primarily with one company, Foreman Mills, and our remaining sector exposure is nominal. Portfolio management is a primary focus, and we remain actively engaged with our portfolio companies and their management teams, especially in this volatile environment. We have a time-tested, proven playbook and a highly experienced portfolio management team. And while the middle market is enduring a period of historically low transaction activity, the mineral pipeline is strong heading into the second half of 2023. We are excited about the opportunity for MRCC to take advantage of this compelling lending environment where we are benefiting from increasingly favorable pricing, deal terms, and structures. As legacy assets pay off, we will maintain our rigorous underwriting standards as we selectively resilient, safe, and attractive cash flow characteristics. MRCC continues to be well positioned to deliver stable and consistent dividends for our shareholders. Monroe maintains a two-decade track record of consistently delivering solid risk-adjusted returns for our shareholders across various economic cycles. We believe that Monroe Capital Corporation, which is affiliated with an award-winning best-in-class external private credit manager, approximately $17.2 billion in assets and our management provides a very attractive investment opportunity at this entry point to our shareholders and to other investors. Thank you all for your time today and this concludes our prepared remarks. I'm going to ask the operator to open the call now for questions.
Operator
At this time, I would like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad.
spk05
We'll pause for a moment to compile a Q&A roster.
Operator
Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your first question is from the line of Christopher Nolan with Lindenburg Bellman. Your line is open.
Christopher Nolan
Hey, guys. Sorry if I covered this in the prepared remarks to have overlapping calls.
spk05
What was the driver for the decline in the SLF fair value? So the decline in the value in SLF
Mick Salamini
And SLF was largely due to market-to-market adjustments on a handful of names. As you know, Chris, SLF is a differentiated-rated portfolio relative to MRCC. It's mostly upper-middle-market loans and broadly syndicated loans. And so there were a handful of names that, on a mark-to-market basis, basically drifted downward during the course of the quarter.
Ted Koenig
Yeah, I would imagine, Chris, it's mostly attributable to spread widening, you know, in current market versus legacy market. That's what usually happens when the market goes up. We see a slight decline. Then when the market retracts, we tend to pick it back up again.
Christopher Nolan
Great. And then I guess on a more strategic question, MRCC's external manager has acquired another BDC focus in technology space. with an emphasis on healthcare technology. Should we actually start seeing MRCC's investment books start, you know, seeing more healthcare-related investments?
Ted Koenig
Good question. MRCC gets the benefit of everything that the external manager of Monroe Capital does. And Mick and Alex are the PMs for MRCC. And to the extent they believe that there's some valuable risk adjusted returns that we can pursue through the origination and through the specific sector that Horizon Technology Finance has developed, we'll certainly incorporate that into some of MRCC's portfolio. But the venture debt business that Horizon does is a different business than the middle market financing from leverage and from a cash flow standpoint, EBITDA. So when there's overlap, which there will be in companies that are generating good EBITDA, I expect that MRCC will take advantage and have the ability to take advantage of those on a selective basis.
Mick
Great. That's it for me. Thank you.
Operator
Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. There are no further questions at this time. I will now turn the call back to CEO Ted Koenig. Please go. Please go ahead.
Ted Koenig
Thank you all very much for your time today. We appreciate your time. To the extent you have any other questions between now and our next call, please feel free to follow up with Mick and Alex. And we look forward to seeing everyone again and enjoy the rest of the summer. Thank you very much.
Operator
Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect. Thank you. Thank you. Hello. Thank you.
spk00
Thank you.
Operator
Welcome to Monroe Capital Corporation's second quarter 2023 earnings conference call. Before we begin, I would like to take a moment to remind our listeners that remarks made during this call may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs, future potential, operating results, and cash flows. Although we believe these statements are reasonable based on management estimates, assumptions, and projections as of today, August 10th, 2023, these statements are not guaranteed of future performance. Further, time-sensitive information may no longer be accurate as of the time of any replay or listening. Actual results show may differ materially as a result of risks, uncertainty, or other factors, including but not limited to the risk factors described from time to time in the company's filings with the SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements. I will now turn the conference over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation.
Ted Koenig
Good morning, and thank you to everyone who has joined us on our earnings call today. I am here with Mick Salamini, our CFO and Chief Investment Officer, and Alex Parmasek, our Deputy Portfolio Manager. Last evening, we issued our second quarter 2023 earnings press release and filed our 10-Q with the SEC. An uncertain economic backdrop, elevated interest rates, and volatility in the bank and syndicated capital markets continue to make direct lenders such as Monroe Capital consistent and reliable sources of capital. Direct lenders continue to amass a larger share of the middle market lending landscape. According to Refinitiv, direct lenders accounted for 85% of new LBO financing activity in the second quarter of 2023. Further, M&A activity dipped to its lowest level since the third quarter of 2020 due to the expensive cost of capital and valuations and during a period of correction. During this period, direct lenders such as Monroe have continued to step up to support existing portfolio companies as they execute on growth strategies to enhance enterprise value. Transaction activity began to show signs of picking up in the latter part of the second quarter and into the third quarter, particularly in the lower middle market. Monroe's ability to offer a variety of underwritten solutions with a certainty of execution has proven to be a distinct advantage for our clients. In the first half of 2023, When middle market transaction activity marked a three-year low, our platform funded nearly $1.4 billion, a slight increase over the first half of last year. The market continues to offer direct lenders attractive pricing, terms, and structures. Simultaneously, our transactions are being completed at lower leverage levels with higher equity contributions. We continue to selectively deploy new capital into recession-resilient sectors that offer these compelling risk-return dynamics. We will focus on capitalizing on opportunities where we can add attractive higher-yielding assets as older legacy assets repay. We believe that we are positioned to generate strong risk-adjusted returns supported by one of the most compelling vintages in recent history. While the economy has demonstrated more resiliency than many had anticipated, companies continue to face higher borrowing costs and the lingering impact of inflationary pressures. We've seen many instances where companies have been able to grow their top line, albeit at more compressed margins. Yet certain sectors with consumer-facing business models have faced bigger challenges. Through the economic backdrop, remains highly uncertain, the Fed's latest interest rate increase has made an economic slowdown more probable. We continue to emphasize portfolio management, actively monitoring the cash flows in our portfolio companies, and engaging with the management teams to keep a pulse on developing trends in these industries. We believe that the purposefully defensive positioning of our portfolio will allow MRCC to navigate the potentially challenging economic conditions ahead. The portfolio's interest coverage remains sound with sufficient cushion to weather the current interest rate environment. Additionally, the average loan-to-value and portfolio company leverage across the portfolio indicate meaningful equity value cushions below our debt. As the direction of the economy and interest rates become more apparent, Our primary focus will be on maintaining the quality of the portfolio while being value add partners to our borrowers. We maintain a deep and highly experienced portfolio management team with a time-tested playbook to navigate potential challenges and maximize our outcomes. Turning now to our second quarter results. Adjusted net investment income was $6.1 million or 28 cents per share which covered our dividend by 1.12 times and represented a 12% year over year increase to the second quarter of 2022. Adjusted net investment income declined from $6.9 million or 32 cents per share for last quarter. We also reported NAV of $213.2 million or $9.84 per share as of June 30th, 2023, compared to $223 million or $10.29 per share as of March 31st, 2023. The decline in NAV was primarily attributed to net losses and defensive realizations in two portfolio companies. These companies were impacted by difficult market conditions affecting consumer, household, and markets. And our portfolio has nominal remaining exposure to those specific sectors. During the quarter, MRCC's debt to equity leverage increased from 1.49 times debt equity to 1.54 times debt to equity. The increase in leverage was driven by the aforementioned decrease in NAB. Portfolio is well positioned to ride the current interest rate environment and face potential challenges resulting from an eventual slowdown in the economy. Our loan underwriting focus continues to be on those companies with resilient business models, defendable market positions, proven and experienced management teams, and exceptional sponsors or owners. MRCC enjoys a strong strategic advantage in being affiliated with the best-in-class middle-market private credit asset management firm with approximately 17.2 billion dollars in assets under management and approximately 240 employees as of june 30th 2023 we continue to focus on generating adjusted net investment income that meets or exceeds our dividend and restoring positive long-term nav performance i am now going to turn the call over to mick who is going to walk you through our financial results in greater detail.
Mick Salamini
Thank you, Ted. As of June 30th, 2023, our investment portfolio totals $515.4 million, a decrease of $16.7 million from $532.1 million as of March 31st, 2023. At the end of the quarter, our investment portfolio consisted of debt and equity investments, in 99 portfolio companies compared to 102 portfolio companies at the end of the prior quarter. During the quarter, we made investments in three new portfolio companies with fundings totaling $6.3 million at a weighted average effective interest rate of 11.9%. We also made a nominal equity investment in one of those portfolio companies. Further, we had revolver or delayed draw fundings and add-ons to existing portfolio companies, totaling $11 million. We received two full payoffs for $12.2 million and incurred normal course paydowns, totaling $14.4 million. At June 30, 2023, we had total borrowings of $327.4 million, including $197.4 million outstanding under our floating rate revolving credit facility and $130 million of our 4.75% fixed rate 2026 notes. Total borrowings outstanding decreased nominally during the quarter. The revolving credit facility had $57.6 million of availability subject to borrowing base capacity. Now turning to our financial results, adjusted net investment income, a non-GAAP measure was $6.1 million, or $0.28 per share this quarter, compared to $6.9 million, or $0.32 per share in the prior quarter. Our average portfolio yield increased from 11.6% as of March 31st to 12.2% as of June 30th, which was offset by a decrease in fee income and prepayment gains, a reversal of previously accrued interest related to the When considering current leverage levels, the interest rate environment, and the favorable percentage of our fund leverage at a fixed rate, we believe that on a run rate basis, our adjusted net investment income will continue to cover our current 25 cent per share quarterly dividend. All other things being equal. As of June 30th, 2023, our net asset value was $213.2 million, which decreased from $223 million in net asset value as of March 31st In the quarter, our NAV per share decreased from $10.29 per share to $9.84 per share. Our net asset value this quarter was affected by market conditions, which negatively impacted realizations on our investments in Foreman Mills and California Pizza Kitchen. These were two legacy investments in the brick and mortar retail space where we have only nominal remaining exposure. The balance of the decrease to net asset value was the result of net mark-to-market unrealized losses due to the fundamental performance of a couple specific portfolio companies still held in the portfolio and in SLF. These decreases were partially offset by our net investment income outperformance of our dividend for the quarter. I will now turn it over to Alex, who will provide more details on our second quarter operating performance.
Alex
Thank you, Mick. Looking to our statement of operations, total investment income was $16.3 million during the second quarter of 2023, down from $16.8 million in the first quarter of 2023. The increase in effective yield on our debt and preferred equity portfolio was offset by several factors, including slightly lower average portfolio balances, a decrease in fee income and prepayment gains, and the one-time reversal of previously accrued interest income associated with the restructuring and realization on the majority of our investment in Foreman Mills. While rising interest rate environment will continue to improve the yield on our investment portfolio and increase investment income, fee income and prepayment gains and losses are tied to transactions, which can cause volatility in our investment income. As of June 30th, 2023, we had four investments on non-accrual status, representing 1.3% of the portfolio at fair market value, which compares to three investments on non-accrual status and 0.4% of the portfolio fair market value as of March 31st, 2023. During the quarter, we placed two new investments on non-accrual, ARC Store VidCo, which resulted in an impact of approximately 0.7 cents per share of NII and our remaining restructured position in Foreman Mills. Additionally, during the quarter, we disposed of a previous non-accrual asset, Vinci Brands. Moving over to the expense side, total expenses slightly increased to $10.4 million in the second quarter of 2023 from $10.2 million in the first quarter. The $0.2 million increase in expenses during the quarter was primarily driven by an increase in interest and other debt financing expenses resulting from the rising interest rate environment. Our net loss for the second quarter of 2023 was $10.3 million, compared to a net loss of $3.3 million for the first quarter of 2023. Net realized and unrealized losses on investments were $10.2 million for the quarter. Other net losses for the quarter, which were comprised primarily of net gains on foreign currency forward contracts used to hedge currency exposure on investments denominated in foreign currency, totaled $0.1 million. As of June 30th, the SLF had investments in 56 different borrowers, aggregating to $168.2 million at fair market value, with a weighted average interest rate of 10.7%. The SLF's underlying investments are loans to middle market borrowers that are generally larger and more sensitive to market spread movements than the rest of MRCC's portfolio, which is focused on lower middle market companies. The SLF portfolio decreased in value by approximately 200 basis points during the quarter from 93.5% of amortized costs at March 31, 2023 to 91.5% of amortized costs as of June 30, 2023. During the second quarter, MRCC received income distributions from SLF of $900,000, consistent with the prior quarter. As of June 30, 2023, The SOF had borrowings under its non-recourse credit facility of $107.9 million and $2.1 million of available capacity, subject to borrowing-based availability. At this point, I will turn the call back to Ted for some closing remarks before we open up the line for any questions.
Ted Koenig
Thank you, Mick and Alex. In summary, we remain confident in the overall quality of the portfolio and its positioning to navigate a challenging economic and market environment. This quarter's challenge in the retail space was isolated, primarily with one company, Foreman Mills, and our remaining sector exposure is nominal. Portfolio management is a primary focus, and we remain actively engaged with our portfolio companies and their management teams, especially in this volatile environment. We have a time-tested, proven playbook and a highly experienced portfolio management team. And while the middle market is enduring a period of historically low transaction activity, the mineral pipeline is strong heading into the second half of 2023. We are excited about the opportunity for MRCC to take advantage of this compelling lending environment where we are benefiting from increasingly favorable pricing, deal terms, and structures. As legacy assets pay off, we will maintain our rigorous underwriting standards as we and attractive cash flow characteristics. MRCC continues to be well positioned to deliver stable and consistent dividends for our shareholders. Monroe maintains a two-decade track record of consistently delivering solid risk-adjusted returns for our shareholders across various economic cycles. We believe that Monroe Capital Corporation, which is affiliated with an award-winning best-in-class external private credit manager, approximately $17.2 billion in assets and our management provides a very attractive investment opportunity at this entry point to our shareholders and to other investors. Thank you all for your time today and this concludes our prepared remarks. I'm going to ask the operator to open the call now for questions.
Operator
At this time, I would like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad.
spk05
We'll pause for a moment to compile a Q&A roster.
Operator
Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your first question is from the line of Christopher Nolan with Lindenburg Bellman. Your line is open.
Christopher Nolan
Hey, guys. Sorry if I covered this in the prepared remarks to have overlapping calls.
spk05
What was the driver for the decline in the SLF fair value? So the decline in the value in SLF
Mick Salamini
And SLF was largely due to market-to-market adjustments on a handful of names. As you know, Chris, SLF is a differentiated-rated portfolio relative to MRCC. It's mostly upper-middle-market loans and broadly syndicated loans. And so there were a handful of names that, on a mark-to-market basis, basically drifted downward during the course of the quarter.
Ted Koenig
Yeah, I would imagine, Chris, it's mostly attributable to spread widening, you know, in current market versus legacy market. That's what usually happens when the market goes up. We see a slight decline. Then when the market retracts, we tend to pick it back up again.
Christopher Nolan
Great. And then I guess on a more strategic question, MRCC's external manager has acquired another BDC focus in technology space. with an emphasis on healthcare technology. Should we actually start seeing MRCC's investment books start, you know, seeing more healthcare-related investments?
Ted Koenig
Good question. MRCC gets the benefit of everything that the external manager of Monroe Capital does. And Mick and Alex are the PMs for MRCC. And to the extent they believe that there's some valuable risk-adjusted returns that we can pursue through the origination and through the specific sector that Horizon Technology Finance has developed, we'll certainly incorporate that into some of MRCC's portfolio. But the venture debt business that Horizon does is a different business than the middle market financing from leverage and from a cash flow standpoint, EBITDA. So when there's overlap, which there will be in companies that are generating good EBITDA, I expect that MRCC will take advantage and have the ability to take advantage of those on a selective basis.
Mick
Great. That's it for me. Thank you.
Operator
Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. There are no further questions at this time. I will now turn the call back to CEO Ted Koenig. Please go. Please go ahead.
Ted Koenig
Thank you all very much for your time today. We appreciate your time. To the extent you have any other questions between now and our next call, please feel free to follow up with Mick and Alex. And we look forward to seeing everyone again and enjoy the rest of the summer. Thank you very much.
Operator
Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.
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