Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE HIERARCHY FOR INVESTMENTS???PORTFOLIO COMPOSITION (Tables)

v3.23.1
FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION (Tables)
 3 Months Ended
Mar. 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 March 31, 2023 and December 31, 2022:
Type of
Investment
Fair Value as of
March 31, 2023
(in thousands)
 Valuation Technique Significant Unobservable Inputs Range(3) Weighted Average(3) Median(3)
Equity investments $ 1,217,243  Discounted cash flow WACC
9.3% - 22.3%
 14.4  % 15.2  %
Market comparable / Enterprise value EBITDA multiple (1)
4.5x - 8.5x (2)
 6.8x 6.2x
Debt investments $ 2,696,096  Discounted cash flow Risk adjusted discount factor
6.0% - 16.4% (2)
 10.2  % 10.5  %
Expected principal recovery percentage
0.0% - 100.0%
 99.5  % 100.0  %
Debt investments $ 245,636  Market approach Third-party quote
3.0 - 97.5
 87.3 93.9
Total Level 3 investments $ 4,158,975 
____________________
(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 3.4% - 35.0%.
(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
Type of Investment
Fair Value as of December 31, 2022
(in thousands)
 Valuation Technique Significant Unobservable Inputs Range(3) Weighted Average(3) Median(3)
Equity investments $ 1,172,077  Discounted cash flow WACC
9.4% - 22.5%
 14.5  % 15.4  %
Market comparable / Enterprise value EBITDA multiple (1)
4.3x - 8.3x (2)
 6.7x 6.0x
Debt investments $ 2,663,958  Discounted cash flow Risk adjusted discount factor
5.7% - 15.7% (2)
 10.0  % 10.3  %
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 3.8% - 43.3%.
(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
Summary 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 three-month periods ended March 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
March 31, 2023
Debt $ 2,928,196  $ —  $ (88,300) $ 106,658  $ 33,064  $ (26,440) $ (11,446) $ 2,941,732 
Equity 1,166,643  —  (2,871) 8,476  (3,946) 29,890  14,022  1,212,214 
Equity Warrant 5,434  —  —  —  —  2,171  (2,576) 5,029 
$ 4,100,273  $ —  $ (91,171) $ 115,134  $ 29,118  $ 5,621  $ —  $ 4,158,975 
____________________
(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
March 31, 2022
Debt $ 2,509,568  $ —  $ (183,699) $ 287,044  $ 2,123  $ (6,807) $ —  $ 2,608,229 
Equity 1,043,709  —  (17,569) 24,711  418  22,512  —  1,073,781 
Equity Warrant 6,560  —  —  —  —  200  —  6,760 
$ 3,559,837  $ —  $ (201,268) $ 311,755  $ 2,541  $ 15,905  $ —  $ 3,688,770 
____________________
(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 March 31, 2023 and December 31, 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 March 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 $ 2,112,619  $ —  $ —  $ 2,112,619 
Private Loan portfolio investments 1,491,395  —  —  1,491,395 
Middle Market portfolio investments 306,244  —  —  306,244 
Other Portfolio investments 116,067  —  —  116,067 
External Investment Manager 132,650  —  —  132,650 
Short-term portfolio investments 1,942  —  1,942  — 
Total investments $ 4,160,917  $ —  $ 1,942  $ 4,158,975 
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 
Summary Investment Holdings
The following tables provide a summary of Main Street’s investments in the LMM, Private Loan and Middle Market portfolios as of March 31, 2023 and December 31, 2022 (this information excludes Other Portfolio investments, short-term portfolio investments and the External Investment Manager, which are discussed further below):
As of March 31, 2023
LMM (a) Private Loan Middle Market
(dollars in millions)
Number of portfolio companies 79  86  30 
Fair value $ 2,112.6  $ 1,491.4  $ 306.2 
Cost $ 1,727.9  $ 1,527.6  $ 391.0 
Debt investments as a % of portfolio (at cost) 72.9  % 97.1  % 93.6  %
Equity investments as a % of portfolio (at cost) 27.1  % 2.9  % 6.4  %
% of debt investments at cost secured by first priority lien 99.2  % 99.5  % 99.3  %
Weighted-average annual effective yield (b) 12.6  % 12.4  % 11.8  %
Average EBITDA (c) $ 8.3  $ 38.1  $ 65.4 
____________________
(a)At March 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 41%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of March 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 March 31, 2023 including debt investments on non-accrual status was 12.2% for its LMM portfolio, 12.0% for its Private Loan portfolio and 10.4% 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 four 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 March 31, 2023 and December 31, 2022 (this information excludes Other Portfolio investments, short-term portfolio investments and the External Investment Manager, which are discussed above).
Cost: March 31, 2023 December 31, 2022
First lien debt 84.7  % 85.0  %
Equity 14.6  14.2 
Second lien debt 0.3  0.3 
Equity warrants 0.2  0.2 
Other 0.2  0.3 
100.0  % 100.0  %
Fair Value: March 31, 2023 December 31, 2022
First lien debt 74.6  % 75.2  %
Equity 24.7  24.1 
Second lien debt 0.4  0.3 
Equity warrants 0.1  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 March 31, 2023 and December 31, 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: March 31, 2023 December 31, 2022
West 28.8  % 28.5  %
Northeast 19.5  19.0 
Southwest 19.1  20.1 
Midwest 16.7  16.3 
Southeast 13.9  14.0 
Canada 0.4  0.6 
Other Non-United States 1.6  1.5 
100.0  % 100.0  %
Fair Value: March 31, 2023 December 31, 2022
West 28.4  % 28.7  %
Southwest 21.4  21.4 
Northeast 19.1  18.8 
Midwest 17.1  16.6 
Southeast 12.2  12.4 
Canada 0.3  0.6 
Other Non-United States 1.5  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 March 31, 2023 and December 31, 2022 (this information excludes Other Portfolio investments, short-term portfolio investments and the External Investment Manager).
Cost: March 31, 2023 December 31, 2022
Internet Software & Services 8.0  % 8.0  %
Machinery 7.3  7.4 
Commercial Services & Supplies 6.7  6.7 
Construction & Engineering 5.8  5.8 
Distributors 5.2  5.1 
Health Care Providers & Services 4.8  4.7 
Diversified Consumer Services 4.6  4.5 
Professional Services 4.6  4.2 
Leisure Equipment & Products 4.5  4.5 
IT Services 3.6  3.3 
Specialty Retail 3.2  3.2 
Energy Equipment & Services 3.1  3.7 
Tobacco 3.1  3.1 
Containers & Packaging 2.5  2.6 
Media 2.4  2.4 
Aerospace & Defense 2.4  2.3 
Computers & Peripherals 2.2  2.2 
Building Products 1.9  1.9 
Software 1.9  1.9 
Textiles, Apparel & Luxury Goods 1.8  1.9 
Communications Equipment 1.8  1.8 
Diversified Telecommunication Services 1.7  1.9 
Auto Components 1.7  1.7 
Food Products 1.6  1.6 
Electronic Equipment, Instruments & Components 1.6  1.6 
Diversified Financial Services 1.4  1.5 
Internet & Catalog Retail 1.3  1.3 
Health Care Equipment & Supplies 1.3  1.3 
Food & Staples Retailing 1.1  1.2 
Chemicals 1.1  1.1 
Hotels, Restaurants & Leisure 1.1  1.1 
Electrical Equipment 1.0  1.0 
Household Products 1.0  0.4 
Other (1) 2.7  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: March 31, 2023 December 31, 2022
Machinery 8.4  % 8.4  %
Internet Software & Services 6.9  6.8 
Diversified Consumer Services 6.8  6.8 
Commercial Services & Supplies 6.0  6.1 
Construction & Engineering 5.6  5.7 
Distributors 5.6  5.5 
Health Care Providers & Services 4.5  4.3 
Professional Services 4.1  3.8 
Leisure Equipment & Products 3.9  4.0 
Specialty Retail 3.3  3.5 
Tobacco 3.3  3.4 
IT Services 3.3  3.1 
Computers & Peripherals 3.1  3.0 
Media 2.9  3.0 
Energy Equipment & Services 2.7  2.7 
Containers & Packaging 2.6  2.8 
Aerospace & Defense 2.2  2.2 
Software 2.1  2.1 
Building Products 1.8  1.9 
Food Products 1.8  1.8 
Textiles, Apparel & Luxury Goods 1.6  1.8 
Diversified Financial Services 1.6  1.7 
Auto Components 1.6  1.6 
Diversified Telecommunication Services 1.5  1.8 
Internet & Catalog Retail 1.3  1.3 
Chemicals 1.1  1.1 
Construction Materials 1.1  1.0 
Food & Staples Retailing 1.0  1.1 
Health Care Equipment & Supplies 1.0  1.0 
Electrical Equipment 1.0  1.0 
Other (1) 6.3  5.7 
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.