KBRA Assigns Rating to MidCap Financial Issuer Trust's $500 Million Senior Unsecured Notes due November 2029

NEW YORK--(BUSINESS WIRE)--KBRA assigns a rating of A- to MidCap Financial Issuer Trust's $500 million 7.050% senior unsecured notes due November 15, 2029. The rating Outlook is Stable. MidCap Financial Issuer Trust is a wholly-owned subsidiary of MidCap FinCo Intermediate LLC ("the company" or "MidCap"), which serves as guarantor of the debt. The proceeds will be used to repay senior secured debt.

Headquartered in Bethesda, MD, the company is a limited liability company that has operated since 2008 and focuses on middle-market specialty finance, maintaining a highly diversified investment portfolio.

Key Credit Considerations

The rating reflects MidCap's strong strategic relationship with Apollo Global Management (NYSE: APO or "Apollo"), which provides access to an experienced and expansive platform with over $1 trillion of assets under management ("AUM"), including ~$850 billion of credit-related products AUM as of June 30, 2026. Apollo, Athene Holding Ltd, Apollo's insurance subsidiary, and other Apollo affiliates together own ~50% of the company.

In September 2026, MidCap completed its previously announced company restructuring which included forming a separate entity to house its businesses that rely on securitizations for financing, mostly its Collateralized Loan Obligations ("CLOs"), which had an outstanding balance of about $4.3 billion. Pro-forma as of June 30, 2026, total assets were reduced to $10.7 billion from $15.1 billion with the top three asset classes comprising 47% leveraged loans, 23% Asset-Based Loans ("ABL"), and 11% Real Estate.

MidCap serves as Apollo's primary direct origination platform in the private middle market, encompassing more than 560+ borrower relationships and 500+ sponsor relationships across its credit platforms. MidCap had committed capital of $62 billion comprised of investments directly from Apollo vehicles and third-party investments which Apollo manages as a registered investment advisor as of June 30, 2026. The company benefits from a seasoned management team, with senior leadership averaging over 21 years of experience working together. Strong underwriting standards an discipline risk management are supported by Apollo, with fiduciary oversight provided by the Board.

The rating is further supported by reasonable earnings metrics driven by net interest income and historically low impairment levels across the credit cycle. MidCap's funding profile is diversified and well laddered, with a long-term funding strategy that includes revolving credit facilities and senior unsecured debt. The additional issuance of senior unsecured notes, furthers MidCap's goal of reducing secured debt while increasing unencumbered collateral to benefit senior unsecured noteholders and increase financial flexibility. Liquidity is further enhanced by capital support, primarily from Apollo, Athene, and institutional investors which is considered permanent in nature with any redemptions at the Board's discretion. The target of maintaining a ratio of unencumbered assets to senior unsecured debt in excess of 1.25x remains and was 1.46x pro-forma at June 30, 2026. The company's net debt to adjusted tangible equity is relatively conservative at a pro-forma 2.13x as of June 30, 2026, and is expected to remain below the company's financial policy of 2.5x when accounting for junior subordinated notes at 50% debt and equity at 50%.

These strengths are partially offset by risks inherent in investing in illiquid non-investment grade debt, as well as a somewhat elevated non-accrual rate for the investment portfolio as of June 30, 2026. Additionally, there is potential for increased investments on non-accrual status with a more uncertain economic environment characterized by elevated interest rates, inflationary pressures, and geopolitical risk. Nevertheless, KBRA believes that MidCap maintains a manageable level of impairments, supported by low historical credit losses and a diversified portfolio primarily comprised of fist lien, senior secured loans with modest company leverage when including JSNs.

Rating Sensitivities

Given the Stable Outlook, a rating upgrade is not expected over the medium term. Downward rating pressure could emerge if portfolio performance materially underperforms expectations, particularly if asset quality deterioration leads to significantly weaker financial performance and leverage metrics.

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Methodology

• Financial Institutions: Finance Company Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Information on certain affiliations between directors of KBRA Ratings and rated entities or related third parties can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the US Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. Kroll Bond Rating Agency Japan K.K. is registered as a CRA with the Japan Financial Services Agency. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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