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Operator
Welcome to Monroe Capital Corporation's first quarter 2024 earnings conference call. Before we begin, I would like to take a moment to remind our listeners that remarks made during this call today 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, May 9, 2024, These statements are not guarantees 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 risk, 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 call over to Ted Koenig, Chief Executive, officer of Monroe Capital Corporation. Please go ahead.
Ted Koenig
Good morning, and thank you to everyone who has joined us on our call today. Welcome to our first quarter 2024 earnings call. I am here with Mick Salamini, our CFO and Chief Investment Officer, and Alex Parmasek, our Deputy Portfolio Manager. Last evening, we issued our first quarter 2024 earnings press release and filed our 10-Q with the SEC On today's call, I'll begin by addressing our first quarter results and then some perspective on current market conditions. I am pleased to report that for the 16th consecutive quarter, our adjusted net investment income covered our 25 cents per share dividend. MRCC delivered a total annualized dividend yield on our trading price of nearly 14% using our May 7th, 2024 closing share price. We are proud of our track record of delivering stable and consistent dividends to our shareholders. In the first quarter of 2024, our adjusted net investment income was $5.5 million, or 25 cents per share, a slight decrease from $5.6 million, or 26 cents per share last quarter. We reported NAV of $2.01.5 million, or $9.30 per share as of March 31, 2024, compared to $203.7 million, or $9.40 per share as of December 31, 2023. The 1.1 percent decline in NAV was primarily due to net unrealized losses attributable to certain portfolio companies that have underlying credit performance concerns. MRCC's debt to equity leverage increased from 1.49 times debt to equity at December 31, 2023, to 1.6 times at March 31, 2024. While MRCC's average leverage during the quarter was lower than during the prior quarter, we made various debt and equity investments into new portfolio companies later in the quarter, which resulted in an increase in leverage as of March 31, 2024 compared to December 31, 2023. We continue to focus on managing our investment portfolio and selectively redeploying capital resulting from repayments into attractive new investment opportunities. Our portfolio continues to demonstrate solid revenue and EBITDA growth and is positioned to weather an increasingly likely higher for longer interest rate environment given the sound interest coverage portfolio management remains our primary focus in the face of a volatile and uncertain macro economic environment where borrowing costs are elevated for our portfolio companies our portfolio risk rating distribution has been relatively stable despite a higher interest cost borrowing environment while we did see a slight increase in our non-accrual 1.1 percent We believe that the recent challenges faced by the companies on non-accrual are primarily idiosyncratic. They're not indicative of broader or fundamental issues within the portfolio. Over the course of two decades, Unrollers established a time-tested playbook and proven track record of navigating and turning around underperforming investments. We are confident that we can and will continue to maximize outcomes and deliver value for our shareholders. Turning now on our view on the macro market environment, through the early part of 2024, M&A activity and loan volumes have been down compared to the fourth quarter of 2023, but represent a year-over-year increase of 41% per LSEG LPC's first quarter 2024 middle market analysis. While activity levels in the overall market have been relatively low, our positioning in the lower middle market has allowed us to see a steady flow of investment opportunities to selectively execute on. Our lower middle market focus and ability to provide flexible capital solutions with low execution risk to our borrowers has proven to be a true differentiator. We expect that transaction activity will accelerate throughout the year as inflation and interest rates steadily normalized. Further, private equity investors are actively seeking to deploy dry powder and LP capital, which is another factor supporting higher levels of activity. These favorable market dynamics driving an increasingly active M&A environment will provide us with opportunities to rotate out of legacy assets and into attractive newer vintage assets. Currently, we have seen heightened competition in the credit markets. This has resulted in the tightening of spreads across the middle market spectrum. Although spreads have generally experienced compression, loan to value attachment points have held relatively stable. Given the high base rate environment, gross yields in our segment of the middle market continue to be attractive. This dynamic continues to offer direct lenders, such as Monroe Capital, compelling risk-adjusted returns, as MRCC's effective yield remains at an attractive rate of nearly 12% on a predominantly senior secured loan portfolio. Syndicated and bank deal activity has also accelerated, although direct lending still executes on a dominant share of the deal volume. Per Refinitiv, direct lenders still account for nearly three times the middle market deal volume of banks and the syndicated markets. In this increasingly competitive landscape, we will lean on our best-in-class originations team to source new investment opportunities while continuing to leverage our lower-risk incumbency lending opportunities within the portfolio. Our ability to consistently generate deal flow to our existing portfolio has allowed us to retain higher quality assets while maintaining a highly selective approach with our originations, underwriting, and deal execution. MRCC enjoys a strong advantage of being affiliated with a best-in-class middle market private credit manager with approximately $19 billion in assets under management, supported by a deep team consisting of approximately 250 employees, including 110 dedicated investment professionals, as of April 1, 2024. We continue to focus on generating adjusted net investment income that meets or exceeds our dividend and achieving positive long-term NAV performance. I am now going to turn the call over to Mick, who is going to walk through with you our financial results in greater detail.
Mick
Thank you, Ted.
Ted
As of March 31st, 2024, our investment portfolio totaled $500.9 million, a $12.5 million increase from $488.4 million as of December 31st, 2023. Our investment portfolio consisted of debt and equity investments in 98 portfolio companies compared to 96 portfolio companies at the end of the prior quarter. During the quarter, we funded $10.2 million to three new portfolio companies consisting of debt investments of $8.6 million at an effective interest rate of approximately 11.1% and $1.6 million of equity investments. Further, we had revolver and delayed drop fundings and add-ons to existing portfolio companies of $14 million. In the quarter, we received one full payoff for $7.9 million. This payoff was related to a portfolio company that was previously rated a grade three in our investment performance risk rating scale. And this deal was fully repaid at par. Finally, we incurred $4.2 million of partial and normal course pay downs during the quarter. At March 31st, 2024, We had total borrowings of $321.7 million, including $191.7 million outstanding under our floating rate revolving credit facility and $130 million of our 4.75% fixed rate 2026 notes. Total borrowings outstanding increased by $17.6 million during the quarter as we utilized the revolving credit facility to fund new and existing portfolio company investments. At quarter end, the revolving credit facility had $66.3 million of availability subject to borrowing-based capacity. Now, turning to our financial results. Adjusted net income, a non-GAAP measure, was $5.5 million, or 25 cents per share this quarter, compared to $5.6 million, or 26 cents per share in the prior quarter. The slight decrease in adjusted net investment income during the quarter was primarily driven by a decrease in total investment income primarily resulting from a reduction in the average investment and average invested assets over the period. Our effective yield decreased slightly during the quarter from 12.1% at December 31st, 2023 to 11.9% at March 31st, 2024. This reduction in effective yield was primarily driven by the movement of two of our investments to not accrual during the quarter. 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 March 31st, 2024, our NAV was $201.5 million, which decreased from $203.7 million of NAV as of December 31st, 2023. Our corresponding NAV per share decreased by 10 cents from $9.40 per share to $9.30 per share. The decline in NAV this quarter was primarily the result of net unrealized losses attributable to a few portfolio companies that as of March 31st, 2024, had grades of three, four, or five on our investment performance risk rate scale. These mark-to-market unrealized losses were partially offset by net gains on the remainder of the portfolio. I will now turn it over to Alex who will provide more details on our first quarter operating performance.
Alex
Thank you, Mick. Looking to our statement of operations, investment income totaled $15.2 million during the first quarter of 2024, slightly down from $15.5 million in the fourth quarter of 2023. Results of the fourth quarter 2023 included the reversal of previously accrued fee income associated with the company's former loan investment in IT Global. Excluding the impact of the fee income reversal, investment income decreased by $800,000, primarily due to the decrease in the size of the average investment portfolio during the quarter. In the first quarter, we placed two new investments on non-accrual with an aggregate fair market value of $4 million. As of March 31st, 2024, we had seven investments on non-accrual status, representing 2.1 percent of the portfolio fair market value, a modest increase from the 1.5 percent of the portfolio fair market value as of December 31st, 2023. Now shifting over to the expense side, total expenses were $9.7 million for the first quarter of 2024, compared to $10.2 million of total expenses for the fourth quarter of 2023. A decline in income taxes, including excise taxes, and a decline in interest and other debt financing expenses due to the reduction in MRCC's average set outstanding throughout the quarter resulted in the reduced expense base. The decrease in the income taxes, which include excise taxes, was primarily the result of a decline in income tax expense associated with blocker entities that hold certain of MRCC's equity investments. Our net loss for the quarter was $2.3 million, compared to a net loss of $3.7 million from the prior quarter. These net losses were primarily attributable to unrealized mark-to-market losses on the portfolio companies that, as of March 31, 2024, had grades of 3, 4, or 5 in our investment performance risk rating scale. These mark-to-market unrealized losses were partially offset by net gains on the remainder of the portfolio. Turning now to SLF. As of March 31st, 2024, SLF had investments in 41 different borrowers aggregating $116.4 million of fair value. 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 the lower middle market companies. In the quarter, the average mark on the SLF portfolio decreased slightly by approximately 2% from 90.9% of amortized costs as of December 31st, 2023 to 88.9% of amortized costs as of March 31st, 2024. Consistent with the prior quarter, MRCC received income distributions from SLF of $900,000. As of March 31, 2024, SLF had borrowings under its non-recourse credit facility of $58 million, with $52 million of available capacity subject to borrowing-based availability.
Mick
At this point, I will turn the call back to Ted for some closing remarks before we open up the line for questions. Thank you, Alex.
Ted Koenig
To conclude, we remain confident in the overall quality of the portfolio. and its ability to navigate the higher for longer credit environment. Our focus continues to be on portfolio management, and we remain steadfast in executing on our plans to optimize recoveries for each of our more challenging investments. Further, our predominantly first lien portfolio carries an average effective yield of 11.9%, offering compelling risk return dynamics to our investors. MRCC continues to deliver stable and consistent dividends for our shareholders. This quarter marked the 16th consecutive quarter where our net investment income has met or exceeded our dividend, and our dividend yield is at an attractive rate of nearly 14% as of May 7, 2024. We believe that Monroe Capital Corporation, which is affiliated with an award-winning, best-in-class external private credit manager with around $19 billion in assets under management, provides a very attractive investment opportunity to our shareholders and to other investors. Thank you all for your time today. And this concludes our prepared remarks.
Mick
I'm going to ask the operator to open the call now for questions.
Operator
Thank you. We will now begin our question and answer session. At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you.
Mick
We'll pause for a moment to compile the Q&A roster. The first question comes from the line of Chris Nolan from Leidenberg Tallman.
Operator
Please go ahead.
Chris
I want to compliment you on sustaining the dividend. I don't think I know of another BDC which has maintained the same base dividend for as long as you guys have, so kudos to you. On that, going forward, given everything going on, if necessary, would you reinstitute the management fee waiver to support the dividend?
Mick
That's a good question, Bryce. Historically, we've been very aligned with our shareholders.
Ted Koenig
If you look at historical practice over the last 10 years, 12 years since we've been public, from a management company standpoint, we've taken actions to ensure that our alignment with shareholders continues. And I don't see any reason that that will change in the near future.
Chris
Great. And then, Can we get an idea in terms of direction of leverage? The leverage ratios seem high. Oh, hi, Chris. This is Max.
Mick
Thanks for the question.
Ted
So, you know, we're trying to maintain leverage in, you know, kind of the 1.5 to 1.6 times range. We've been at that range kind of for the past handful of quarters. We were at the higher end of the range this quarter due to just some of the ins and outs of the portfolio. Our current pipeline supports this guided kind of leverage range as we look at kind of the ins and outs of it. And we do remain comfortable with this range given the fact that, you know, portfolio is in decent shape and is primarily, you know, tilted in the direction of a first link.
Chris
Gotcha. Just two more quick questions. The SLF, which invests in larger companies, more mature companies, but the asset quality over recent quarters seems to be a little bit lower than I would have expected. And the markdown in the fair value ratio from 90.9 to 88.8 is also interesting. I'm just trying to get an idea of what's going on with that.
Ted
Yeah, it's a really good question, Chris. And as a refresher, you know, SLF is comprised of loans primarily made to upper middle market companies. We've been cautious around the upper end of the market during most of 2023, early 2024, because the economic headwinds and the looser structures and the higher leverage and loan to value attachment points in that portfolio are, are, Non-accrual percentage is a tad higher in this portfolio. We're standing around 9%. Non-accrual rate on a fair market value basis up from, you know, call it 3.5% at the most quarter end. So we're, you know, we're cautious about this portfolio. We're, you know, we're, you know, considering, you know, kind of the re-entry point in terms of, you know, kind of reinvesting in these kinds of assets. We did have a bunch of paydowns. in the last quarter, many of them unexpected in a good way. But we do have a little bit of a more cautious approach, just given the nature of that market and the little higher attachment point, looser structures, and that business.
Chris
Okay. I'll get back in the queue. Thank you.
Mick
Thanks, Chris. Thanks, Chris. Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. As there are no further questions at this time, this concludes our Q&A session.
Operator
I would like to turn the call over back to Ted Koenig for brief closing remarks.
Ted Koenig
I want to thank everyone today for the call. As always, please feel free to reach out to Mick or to Alex on an interim basis. If you have any questions and we look forward to speaking with you again soon, next quarter.
Mick
Thank you.
spk05
Thank you, everybody.
Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you. Thank you. you Thank you. Thank you. Welcome to Monroe Capital Corporation's first quarter 2024 earnings conference call. Before we begin, I would like to take a moment to remind our listeners that remarks made during this call today 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, May 9, 2024, These statements are not guarantees 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 risk, 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 call over to Ted Koenig, Chief Executive, officer of Monroe Capital Corporation. Please go ahead.
Ted Koenig
Good morning, and thank you to everyone who has joined us on our call today. Welcome to our first quarter 2024 earnings call. I am here with Mick Salamini, our CFO and Chief Investment Officer, and Alex Parmasek, our Deputy Portfolio Manager. Last evening, we issued our first quarter 2024 earnings press release and filed our 10-Q with the SEC. On today's call, I'll begin by addressing our first quarter results and then some perspective on current market conditions. I am pleased to report that for the 16th consecutive quarter, our adjusted net investment income covered our 25 cents per share dividend. MRCC delivered a total annualized dividend yield on our trading price of nearly 14% using our May 7th, 2024 closing share price. We are proud of our track record of delivering stable and consistent dividends to our shareholders. In the first quarter of 2024, our adjusted net investment income was $5.5 million, or 25 cents per share, a slight decrease from $5.6 million, or 26 cents per share last quarter. We reported NAV of $2.01.5 million, or $9.30 per share as of March 31, 2024, compared to $203.7 million, or $9.40 per share as of December 31, 2023. The 1.1% decline in NAV was primarily due to net unrealized losses attributable to certain portfolio companies that have underlying credit performance concerns. MRCC's debt to equity leverage increased from 1.49 times debt to equity at December 31, 2023, to 1.6 times at March 31, 2024. While MRCC's average leverage during the quarter was lower than during the prior quarter, we made various debt and equity investments into new portfolio companies later in the quarter, which resulted in an increase in leverage as of March 31, 2024 compared to December 31, 2023. We continue to focus on managing our investment portfolio and selectively redeploying capital resulting from repayments into attractive new investment opportunities. Our portfolio continues to demonstrate solid revenue and EBITDA growth and is positioned to weather an increasingly likely higher for longer interest rate environment given the sound interest coverage portfolio management remains our primary focus in the face of a volatile and uncertain macro economic environment where borrowing costs are elevated for our portfolio companies our portfolio risk rating distribution has been relatively stable despite a higher interest cost borrowing environment while we did see a slight increase in our non-accrual 1.1 percent We believe that the recent challenges faced by the companies on non-accrual are primarily idiosyncratic. They're not indicative of broader or fundamental issues within the portfolio. Over the course of two decades, Unrollers established a time-tested playbook and proven track record of navigating and turning around underperforming investments. We are confident that we can and will continue to maximize outcomes and deliver value for our shareholders. Turning now on our view on the macro market environment, through the early part of 2024, M&A activity and loan volumes have been down compared to the fourth quarter of 2023, but represent a year-over-year increase of 41%. per LSEG LPC's first quarter 2024 middle market analysis. While activity levels in the overall market have been relatively low, our positioning in the lower middle market has allowed us to see a steady flow of investment opportunities to selectively execute on. Our lower middle market focus and ability to provide flexible capital solutions with low execution risk to our borrowers has proven to be a true differentiator. We expect that transaction activity will accelerate throughout the year as inflation and interest rates steadily normalized. Further, private equity investors are actively seeking to deploy dry powder and LP capital, which is another factor supporting higher levels of activity. These favorable market dynamics driving an increasingly active M&A environment will provide us with opportunities to rotate out of legacy assets and into attractive, newer vintage assets. And currently, we have seen heightened competition in the credit markets. This has resulted in the tightening of spreads across the middle market spectrum. Although spreads have generally experienced compression, loan to value attachment points have held relatively stable. Given the high base rate environment, gross yields in our segment of the middle market continue to be attractive. This dynamic continues to offer direct lenders such as Monroe Capital compelling risk-adjusted returns, as MRCC's effective yield remains at an attractive rate of nearly 12% on a predominantly senior secured loan portfolio. Syndicated and bank deal activity has also accelerated, although direct lending still executes on a dominant share of the deal volume. Per Refinitiv, direct lenders still account for nearly three times the middle market deal volume of banks and the syndicated markets. In this increasingly competitive landscape, we will lean on our best-in-class originations team to source new investment opportunities while continuing to leverage our lower-risk incumbency lending opportunities within the portfolio. Our ability to consistently generate deal flow to our existing portfolio has allowed us to retain higher quality assets while maintaining a highly selective approach with our originations, underwriting, and deal execution. MRCC enjoys a strong advantage of being affiliated with a best-in-class middle market private credit manager with approximately $19 billion in assets under management, supported by a deep team consisting of approximately 250 employees, including 110 dedicated investment professionals, as of April 1, 2024. We continue to focus on generating adjusted net investment income that meets or exceeds our dividend and achieving positive long-term NAV performance. I am now going to turn the call over to Mick, who is going to walk through with you our financial results in greater detail.
Mick
Thank you, Ted. As of March 31st, 2024, our investment portfolio totaled $500.9 million, a $12.5 million increase from $488.4 million as of December 31st, 2023.
Ted
Our investment portfolio consisted of debt and equity investments in 98 portfolio companies compared to 96 portfolio companies at the end of the prior quarter. During the quarter, we funded $10.2 million to three new portfolio companies consisting of debt investments of $8.6 million at an effective interest rate of approximately 11.1% and $1.6 million of equity investments. Further, we had revolver and delayed drop fundings and add-ons to existing portfolio companies of $14 million. In the quarter, we received one full payoff for $7.9 million. This payoff was related to a portfolio company that was previously rated a grade three in our investment performance risk rating scale. And this deal was fully repaid at par. Finally, we incurred $4.2 million of partial and normal course pay downs during the quarter. At March 31st, 2024, We had total borrowings of $321.7 million, including $191.7 million outstanding under our floating rate revolving credit facility and $130 million of our 4.75% fixed rate 2026 notes. Total borrowings outstanding increased by $17.6 million during the quarter as we utilized the revolving credit facility to fund new and existing portfolio company investments. At quarter end, the revolving credit facility had $66.3 million of availability subject to borrowing-based capacity. Now turning to our financial results. Adjusted net income, a non-GAAP measure, was $5.5 million, or 25 cents per share this quarter, compared to $5.6 million, or 26 cents per share in the prior quarter. The slight decrease in adjusted net investment income during the quarter was primarily driven by a decrease in total investment income primarily resulting from a reduction in the average investment and average invested assets over the period. Our effective yield decreased slightly during the quarter from 12.1% at December 31st, 2023 to 11.9% at March 31st, 2024. This reduction in effective yield was primarily driven by the movement of two of our investments to non-recrual during the quarter. 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 March 31st, 2024, our NAV was $201.5 million, which decreased from $203.7 million of NAV as of December 31st, 2023. Our corresponding NAV per share decreased by 10 cents from $9.40 per share to $9.30 per share. The decline in NAV this quarter was primarily the result of net unrealized losses attributable to a few portfolio companies that as of March 31st, 2024, had grades of three, four, or five on our investment performance risk rate scale. These mark-to-market unrealized losses were partially offset by net gains on the remainder of the portfolio. I will now turn it over to Alex, who will provide more details on our first quarter operating performance.
Alex
Thank you, Mick. Looking to our statement of operations, investment income totaled $15.2 million during the first quarter of 2024, slightly down from $15.5 million in the fourth quarter of 2023. Results of the fourth quarter 2023 included the reversal of previously accrued fee income associated with the company's former loan investment in IT Global. Excluding the impact of the fee income reversal, investment income decreased by $800,000, primarily due to the decrease in the size of the average investment portfolio during the quarter. In the first quarter, we placed two new investments on non-accrual with an aggregate fair market value of $4 million. As of March 31st, 2024, we had seven investments on non-accrual status, representing 2.1% of the portfolio fair market value, a modest increase from the 1.5% of the portfolio fair market value as of December 31st, 2023. Now shifting over to the expense side, total expenses were $9.7 million for the first quarter of 2024, compared to $10.2 million of total expenses for the fourth quarter of 2023. A decline in income taxes, including excise taxes, and a decline in interest and other debt financing expenses due to the reduction in MRCC's average set outstanding throughout the quarter resulted in the reduced expense base. The decrease in the income taxes, which include excise taxes, was primarily the result of a decline in income tax expense associated with blocker entities that hold certain of MRCC's equity investments. Our net loss for the quarter was $2.3 million, compared to a net loss of $3.7 million from the prior quarter. These net losses were primarily attributable to unrealized mark-to-market losses on the portfolio companies that, as of March 31, 2024, had grades of 3, 4, or 5 in our investment performance risk rating scale. These mark-to-market unrealized losses were partially offset by net gains on the remainder of the portfolio. Turning now to SLF. As of March 31st, 2024, SLF had investments in 41 different borrowers aggregating $116.4 million of fair value. 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 the lower middle market companies. In the quarter, the average mark on the SLF portfolio decreased slightly by approximately 2% from 90.9% of amortized costs as of December 31st, 2023 to 88.9% of amortized costs as of March 31st, 2024. Consistent with the prior quarter, MRCC received income distributions from SLF of $900,000. As of March 31, 2024, SLF had borrowings under its non-recourse credit facility of $58 million, with $52 million of valuable 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 questions.
Mick
Thank you, Alex.
Ted Koenig
To conclude, we remain confident in the overall quality of the portfolio. and its ability to navigate the higher for longer credit environment. Our focus continues to be on portfolio management, and we remain steadfast in executing on our plans to optimize recoveries for each of our more challenging investments. Further, our predominantly first lien portfolio carries an average effective yield of 11.9%, offering compelling risk return dynamics to our investors. MRCC continues to deliver stable and consistent dividends for our shareholders. This quarter marked the 16th consecutive quarter where our net investment income has met or exceeded our dividend, and our dividend yield is at an attractive rate of nearly 14% as of May 7, 2024. We believe that Monroe Capital Corporation, which is affiliated with an award-winning, best-in-class external private credit manager with around $19 billion in assets under management, provides a very attractive investment opportunity to our shareholders and to other investors. Thank you all for your time today. And this concludes our prepared remarks.
Mick
I'm going to ask the operator to open the call now for questions.
Operator
Thank you. We will now begin our question and answer session. At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you.
Mick
We'll pause for a moment to compile the Q&A roster. The first question comes from the line of Chris Nolan from Leidenberg Tallman.
Operator
Please go ahead.
Chris
I want to compliment you on sustaining the dividend. I don't think I know of another BDC which has maintained the same base dividend for as long as you guys have, so kudos to you. On that, going forward, given everything going on, if necessary, would you reinstitute the management fee waiver to support the dividend?
Mick
That's a good question, Bryce. Historically, we've been very aligned with our shareholders.
Ted Koenig
If you look at historical practice over the last 10 years, 12 years since we've been public, from a management company standpoint, we've taken actions to ensure that our alignment with shareholders continues. And I don't see any reason that that will change in the near future.
Chris
Great. And then, Can we get an idea in terms of direction of leverage? The leverage ratios seem high. Oh, hi, Chris.
Ted
This is Max.
Mick
Thanks for the question.
Ted
So, you know, we're trying to maintain leverage in, you know, kind of the 1.5 to 1.6 times range. We've been at that range kind of for the past handful of quarters. We were at the higher end of the range this quarter due to just some of the ins and outs of the portfolio. Our current pipeline supports this guided kind of leverage range as we look at kind of the ins and outs of it. And we do remain comfortable with this range given the fact that, you know, portfolio is in decent shape and is primarily, you know, tilted in the direction of a first link.
Chris
Gotcha. Just two more quick questions. The SLF, which invests in larger companies, more mature companies, but the asset quality over recent quarters seems to be a little bit lower than I would have expected. And the markdown in the fair value ratio from 90.9 to 88.8 is also interesting. I'm just trying to get an idea of what's going on with that.
Ted
Yeah, it's a really good question, Chris. And as a refresher, you know, SLF is comprised of loans primarily made to upper middle market companies. We've been cautious around the upper end of the market during most of 2023, early 2023, before, because the economic headwinds and the looser structures and the higher leverage and loan to value attachment points in that portfolio are, are, Non-accrual percentage is a tad higher in this portfolio. We're standing around 9%. Non-accrual rate on a fair market value basis up from, you know, call it 3.5% at the most quarter end. So we're, you know, we're cautious about this portfolio. We're, you know, we're, you know, considering, you know, kind of the re-entry point in terms of, you know, kind of reinvesting in these kinds of assets. We did have a bunch of paydowns. in the last quarter, many of them unexpected in a good way. But we do have a little bit of a more cautious approach, just given the nature of that market and the little higher attachment point, looser structures, and that business.
Chris
Okay. I'll get back in the queue. Thank you.
Mick
Thanks, Chris. Thanks, Chris. Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. As there are no further questions at this time, this concludes our Q&A session.
Operator
I would like to turn the call over back to Ted Koenig for brief closing remarks.
Ted Koenig
I want to thank everyone today for the call. As always, please feel free to reach out to Mick or to Alex on an interim basis. If you have any questions and we look forward to speaking with you again soon, next quarter.
Mick
Thank you.
spk05
Thank you, everybody.
Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Disclaimer