Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE HIERARCHY FOR INVESTMENTS???PORTFOLIO COMPOSITION

v3.24.3
FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION
ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. Main Street accounts for its investments at fair value.
Fair Value Hierarchy
In accordance with ASC 820, Main Street has categorized its investments based on the priority of the inputs to the valuation technique into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).
Investments recorded on Main Street’s Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1—Investments whose values are based on unadjusted quoted prices for identical assets in an active market that Main Street has the ability to access (examples include investments in active exchange-traded equity securities and investments in most U.S. government and agency securities).
Level 2—Investments whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the investment. Level 2 inputs include the following:
•Quoted prices for similar assets in active markets (for example, investments in restricted stock);
•Quoted prices for identical or similar assets in non-active markets (for example, investments in thinly traded public companies);
•Pricing models whose inputs are observable for substantially the full term of the investment (for example, market interest rate indices); and
•Pricing models whose inputs are derived principally from, or corroborated by, observable market data through correlation or other means for substantially the full term of the investment.
Level 3—Investments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (for example, investments in illiquid securities issued by privately held companies). These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the investment.
As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized within the Level 3 tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
As of September 30, 2024 and December 31, 2023, all of Main Street’s LMM portfolio investments consisted of illiquid securities issued by privately held companies and the fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of Main Street’s LMM portfolio investments were categorized as Level 3 as of September 30, 2024 and December 31, 2023.
As of September 30, 2024 and December 31, 2023, Main Street’s Private Loan portfolio investments primarily consisted of investments in secured debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street’s Private Loan portfolio investments were categorized as Level 3 as of September 30, 2024 and December 31, 2023.
As of September 30, 2024 and December 31, 2023, Main Street’s Middle Market portfolio investments consisted primarily of investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street’s Middle Market portfolio investments were categorized as Level 3 as of September 30, 2024 and December 31, 2023.
As of September 30, 2024 and December 31, 2023, Main Street’s Other Portfolio investments consisted of illiquid securities issued by privately held entities and the fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of Main Street’s Other Portfolio investments were categorized as Level 3 as of September 30, 2024 and December 31, 2023.
As of September 30, 2024 and December 31, 2023, Main Street did not hold any short-term portfolio investments.

As of September 30, 2024 and December 31, 2023, all money market funds included in cash and cash equivalents were valued using Level 1 inputs.
The fair value determination of each portfolio investment categorized as Level 3 required one or more of the following unobservable inputs:
•Financial information obtained from each portfolio company, including unaudited statements of operations and balance sheets for the most recent period available as compared to budgeted numbers;
•Current and projected financial condition of the portfolio company;
•Current and projected ability of the portfolio company to service its debt obligations;
•Type and amount of collateral, if any, underlying the investment;
•Current financial ratios (e.g., fixed charge coverage ratio, interest coverage ratio and net debt/EBITDA ratio) applicable to the investment;
•Current liquidity of the investment and related financial ratios (e.g., current ratio and quick ratio);
•Pending debt or capital restructuring of the portfolio company;
•Projected operating results of the portfolio company;
•Current information regarding any offers to purchase the investment;
•Current ability of the portfolio company to raise any additional financing as needed;
•Changes in the economic environment which may have a material impact on the operating results of the portfolio company;
•Internal occurrences that may have an impact (both positive and negative) on the operating performance of the portfolio company;
•Qualitative assessment of key management;
•Contractual rights, obligations or restrictions associated with the investment; and
•Other factors deemed relevant.
The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement of Main Street’s LMM equity securities, which are generally valued through an average of the discounted cash flow technique and the market comparable/enterprise value technique (unless one of these approaches is determined to not be appropriate), are (i) EBITDA multiples and (ii) the weighted-average cost of capital (“WACC”). Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value measurement, and significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of Main Street’s LMM, Private Loan and Middle Market debt securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (see Note B.1. — Summary of Significant Accounting Policies — Valuation of the Investment Portfolio) and (ii) the percentage of expected principal recovery. Significant increases (decreases) in any of these discount rates in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in any of these expected principal recovery percentages in isolation would result in a significantly higher (lower) fair value measurement. However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral and fair values as determined by independent third parties, which are not presented in the tables below.
The following tables provide a summary of the significant unobservable inputs used to fair value Main Street’s Level 3 portfolio investments as of September 30, 2024 and December 31, 2023:
Type of
Investment
Fair Value as of
September 30, 2024
(in thousands)
 Valuation Technique Significant Unobservable Inputs Range (4) Weighted-Average (4)(5) Median (4)
Equity investments $ 1,564,812  Discounted cash flow WACC
9.1% - 22.6%
 14.2  % 15.0  %
Market comparable / Enterprise value EBITDA multiple (1) (3)
4.8x - 8.9x (2)
 7.1x 6.4x
Debt investments $ 3,221,121  Discounted cash flow Risk adjusted discount factor (6)
9.8% - 18.9% (2)
 13.1  % 13.0  %
Expected principal recovery percentage
0.0% - 100.0%
 99.5  % 100.0  %
Debt investments $ 125,121  Market approach Third-party quote
27.5 - 99.9
 90.8 94.3
Total Level 3 investments $ 4,911,054 
____________________
(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 7.0% - 31.8%.
(3)The fair value of the equity investment in the External Investment Manager is based on a fee multiple of 7.9x. The fair value determination is based on a discounted, blended multiple based on the multiples for similar businesses in active markets and actual multiples used in private transactions.
(4)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.

(5)Weighted-average is calculated for each significant unobservable input based on the applicable security’s fair value.
(6)Discount rate includes the effect of the standard SOFR base rate, as applicable.
Type of Investment
Fair Value as of December 31, 2023
(in thousands)
 Valuation Technique Significant Unobservable Inputs Range (4) Weighted-Average (4)(5) Median (4)
Equity investments $ 1,402,354  Discounted cash flow WACC
9.7% - 22.7%
 14.5  % 15.5  %
Market comparable / Enterprise value EBITDA multiple (1) (3)
4.8x - 8.9x (2)
 7.1x 6.4x
Debt investments $ 2,720,425  Discounted cash flow Risk adjusted discount factor (6)
9.8% - 18.0% (2)
 12.9  % 13.0  %
Expected principal recovery percentage
0.0% - 100.0%
 99.7  % 100.0  %
Debt investments $ 163,492  Market approach Third-party quote
3.0 - 100.0
 89.8 92.4
Total Level 3 investments $ 4,286,271 
____________________
(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 7.0% - 31.6%.
(3)The fair value of the equity investment in the External Investment Manager is based on a fee multiple of 7.2x. The fair value determination is based on a discounted, blended multiple based on the multiples for similar businesses in active markets and actual multiples used in private transactions.
(4)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.

(5)Weighted-average is calculated for each significant unobservable input based on the applicable security’s fair value.
(6)Discount rate includes the effect of the standard SOFR base rate, as applicable.
The following tables provide a summary of changes in fair value of Main Street’s Level 3 portfolio investments for the nine months ended September 30, 2024 and 2023 (amounts in thousands):
Type of Investment
Fair Value
as of
December 31, 2023
 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
September 30, 2024
Debt $ 2,883,917  $ —  $ (637,879) $ 1,125,074  $ 5,270  $ (48,999) $ 18,859  $ 3,346,242 
Equity 1,395,744  —  (37,153) 85,289  (26,567) 158,565  (18,859) 1,557,019 
Equity Warrant 6,610  —  —  4,514  (110) (3,221) —  7,793 
$ 4,286,271  $ —  $ (675,032) $ 1,214,877  $ (21,407) $ 106,345  $ —  $ 4,911,054 
____________________
(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, 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
September 30, 2023
Debt $ 2,928,196  $ —  $ (536,800) $ 547,102  $ 101,276  $ (26,869) $ (29,969) $ 2,982,936 
Equity 1,166,643  —  (40,261) 55,699  2,394  88,079  32,322  1,304,876 
Equity Warrant 5,434  —  —  2,091  —  1,961  (2,576) 6,910 
$ 4,100,273  $ —  $ (577,061) $ 604,892  $ 103,670  $ 63,171  $ (223) $ 4,294,722 
____________________
(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.
As of September 30, 2024 and December 31, 2023, 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)
As of September 30, 2024
 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 $ 2,468,794  $ —  $ —  $ 2,468,794 
Private Loan portfolio investments 1,883,291  —  —  1,883,291 
Middle Market portfolio investments 178,194  —  —  178,194 
Other Portfolio investments 162,405  —  —  162,405 
External Investment Manager 218,370  —  —  218,370 
Total investments $ 4,911,054  $ —  $ —  $ 4,911,054 
Fair Value Measurements
(in thousands)
As of December 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 $ 2,273,000  $ —  $ —  $ 2,273,000 
Private Loan portfolio investments 1,453,549  —  —  1,453,549 
Middle Market portfolio investments 243,695  —  —  243,695 
Other Portfolio investments 141,964  —  —  141,964 
External Investment Manager 174,063  —  —  174,063 
Total investments $ 4,286,271  $ —  $ —  $ 4,286,271 
Investment Portfolio Composition
Main Street’s principal investment objective is to maximize its portfolio’s total return by generating current income from its debt investments and current income and capital appreciation from its equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. Main Street seeks to achieve its investment objective primarily through its LMM and Private Loan investment strategies.
Main Street’s LMM investment strategy is focused on investments in secured debt and equity in privately held, LMM companies based in the United States. Main Street’s LMM portfolio companies generally have annual revenues between $10 million and $150 million, and its LMM investments generally range in size from $5 million to $125 million. The LMM debt investments are typically secured by a first priority lien on the assets of the portfolio company, can include either fixed or floating interest rate terms and generally have a term of between five and seven years from the original investment date. Main Street typically makes direct equity investments and/or receives nominally priced equity warrants in connection with a debt investment.
Main Street’s Private Loan investment strategy is focused on investments in secured debt in privately held companies that generally have annual revenues between $25 million and $500 million, and its Private Loan investments generally range in size from $10 million to $100 million. Main Street’s Private Loan investments primarily consist of debt securities that have primarily been originated directly by Main Street or, to a lesser extent, through its strategic relationships with other investment funds on a collaborative basis through investments that are often referred to in the debt markets as “club deals” because of the small lender group size. In both cases, our Private Loan investments are typically made in a company owned by or in the process of being acquired by a private equity fund. Main Street’s Private Loan portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically
have a term of between three and seven years from the original investment date. Main Street may have the option to co-invest with the private equity fund in the equity securities of its Private Loan portfolio companies.
Main Street also maintains a legacy portfolio of investments in larger middle market (“ Middle Market”) companies (its “Middle Market investment portfolio”). Main Street’s Middle Market investments are generally debt investments in companies owned by a private equity fund that were originally issued through a syndication financing process. Main Street has generally stopped making new Middle Market investments and expects its Middle Market investment portfolio to continue to decline in future periods as its existing Middle Market investments are repaid or sold. Main Street’s Middle Market debt investments generally range in size from $3 million to $25 million, are generally secured by a first priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date.
Main Street’s other portfolio (“Other Portfolio”) investments primarily consist of investments that are not consistent with the typical profiles for its LMM, Private Loan or Middle Market portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, Main Street may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds. For Other Portfolio investments, Main Street generally receives distributions related to the assets held by the portfolio company. Those assets are typically expected to be liquidated over a five to ten-year period.
Based upon Main Street’s liquidity and capital structure management activities, Main Street’s Investment Portfolio may also periodically include short-term portfolio investments that are atypical of Main Street’s LMM, Private Loan and Middle Market portfolio investments in that they are intended to be a short-term deployment of capital. Those assets are typically expected to be liquidated in one year or less. These short-term portfolio investments are not expected to be a significant portion of the overall Investment Portfolio.
Main Street’s external asset management business is conducted through its External Investment Manager. The External Investment Manager earns management fees based on the assets under management for External Parties and may earn incentive fees, or a carried interest, based on the performance of the assets managed. Main Street entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with MSC Income Fund, Inc. (“MSC Income”) and its other clients. Through this agreement, Main Street shares employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities. Main Street allocates the related expenses to the External Investment Manager pursuant to the sharing agreement. Main Street’s total expenses for the three months ended September 30, 2024 and 2023 are net of expenses allocated to the External Investment Manager of $5.3 million and $5.4 million, respectively, and for the nine months ended September 30, 2024 and 2023 of $16.8 million and $16.1 million, respectively.
Investment income, consisting of interest, dividends and fees, can fluctuate dramatically due to various factors, including the level of new investment activity, repayments of debt investments or sales of equity interests. Investment income in any given year could also be highly concentrated among several portfolio companies. For the three and nine months ended September 30, 2024 and 2023, Main Street did not record investment income from any single portfolio company in excess of 10% of total investment income.
The following tables provide a summary of Main Street’s investments in the LMM, Private Loan and Middle Market portfolios as of September 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments and the External Investment Manager, which are discussed further below).
As of September 30, 2024
LMM (a) Private Loan Middle Market
(dollars in millions)
Number of portfolio companies 84  92  17 
Fair value $ 2,468.8  $ 1,883.3  $ 178.2 
Cost $ 1,924.5  $ 1,937.7  $ 218.3 
Debt investments as a % of portfolio (at cost) 72.2  % 95.9  % 88.0  %
Equity investments as a % of portfolio (at cost) 27.8  % 4.1  % 12.0  %
% of debt investments at cost secured by first priority lien 99.2  % 99.9  % 97.6  %
Weighted-average annual effective yield (b) 13.0  % 12.4  % 12.6  %
Average EBITDA (c) $ 9.6  $ 35.0  $ 53.1 
____________________
(a)As of September 30, 2024, Main Street had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 39%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2024, 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 September 30, 2024 including debt investments on non-accrual status was 12.3% for its LMM portfolio, 12.0% for its Private Loan portfolio and 10.6% 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, five Private Loan portfolio companies and two Middle Market 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 and those portfolio companies whose primary operations have ceased and only residual value remains.
As of December 31, 2023
LMM (a) Private Loan Middle Market
(dollars in millions)
Number of portfolio companies 80  87  23 
Fair value $ 2,273.0  $ 1,453.5  $ 243.7 
Cost $ 1,782.9  $ 1,470.1  $ 294.4 
Debt investments as a % of portfolio (at cost) 72.0  % 94.7  % 91.4  %
Equity investments as a % of portfolio (at cost) 28.0  % 5.3  % 8.6  %
% of debt investments at cost secured by first priority lien 99.2  % 100.0  % 99.1  %
Weighted-average annual effective yield (b) 13.0  % 12.9  % 12.5  %
Average EBITDA (c) $ 8.2  $ 27.2  $ 64.2 
____________________
(a)As of December 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 40%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 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 December 31, 2023 including debt investments on non-accrual status was 12.9% for its LMM portfolio, 12.5% for its Private Loan portfolio and 10.8% 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 two 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.
For the three months ended September 30, 2024 and 2023, Main Street achieved an annualized total return on investments of 17.7% and 16.0%, respectively. For the nine months ended September 30, 2024 and 2023, Main Street achieved an annualized total return on investments of 16.7% and 15.4%, respectively. For the year ended December 31, 2023, Main Street achieved a total return on investments of 16.3%. Total return on investments is calculated using the interest, dividend and fee income, as well as the realized and unrealized change in fair value of the Investment Portfolio for the specified period. Main Street’s total return on investments 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.
As of September 30, 2024, Main Street had Other Portfolio investments in 14 entities, collectively totaling $162.4 million in fair value and $155.8 million in cost basis and which comprised 3.3% and 3.7% of Main Street’s Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, Main Street had Other Portfolio investments in 15 entities, collectively totaling $142.0 million in fair value and $149.1 million in cost basis and which comprised 3.3% and 4.0% of Main Street’s Investment Portfolio at fair value and cost, respectively
As discussed further in Note A.1. — Organization and Basis of Presentation — Organization, Main Street holds an investment in the External Investment Manager, a wholly-owned subsidiary that is treated as a portfolio investment. As of September 30, 2024, this investment had a fair value of $218.4 million and a cost basis of $29.5 million, which comprised 4.4% and 0.7% of Main Street’s Investment Portfolio at fair value and cost, respectively. As of December 31,
2023, this investment had a fair value of $174.1 million and a cost basis of $29.5 million, which comprised 4.1% and 0.8% of Main Street’s Investment Portfolio at fair value and cost, respectively.
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 September 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments and the External Investment Manager, which are discussed above).
Cost: September 30, 2024 December 31, 2023
First lien debt 83.9  % 82.7  %
Equity 15.4  16.8 
Second lien debt 0.2  0.1 
Equity warrants 0.3  0.2 
Other 0.2  0.2 
100.0  % 100.0  %
Fair Value: September 30, 2024 December 31, 2023
First lien debt 72.7  % 71.6  %
Equity 26.7  27.8 
Second lien debt 0.2  0.2 
Equity warrants 0.2  0.2 
Other 0.2  0.2 
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 September 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments and the External Investment Manager). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.
Cost: September 30, 2024 December 31, 2023
West 25.3  % 25.8  %
Midwest 23.1  17.0 
Northeast 22.6  22.3 
Southwest 14.8  19.7 
Southeast 12.4  13.1 
Canada 0.3  0.4 
Other Non-United States 1.5  1.7 
100.0  % 100.0  %
Fair Value: September 30, 2024 December 31, 2023
West 24.7  % 25.4  %
Midwest 23.8  18.1 
Northeast 21.6  21.3 
Southwest 17.6  22.0 
Southeast 10.6  11.3 
Canada 0.3  0.3 
Other Non-United States 1.4  1.6 
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 September 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments and the External Investment Manager).
Cost: September 30, 2024 December 31, 2023
Professional Services 7.7  % 6.0  %
Machinery 7.6  7.7 
Internet Software & Services 7.1  7.6 
Electrical Equipment 5.3  1.6 
Commercial Services & Supplies 4.8  4.5 
Diversified Consumer Services 4.3  4.9 
Health Care Providers & Services 4.2  5.4 
Auto Components 4.0  1.6 
Distributors 4.0  4.3 
IT Services 3.9  5.0 
Construction & Engineering 3.8  4.9 
Containers & Packaging 3.8  3.8 
Energy Equipment & Services 3.1  2.7 
Textiles, Apparel & Luxury Goods 2.8  3.2 
Tobacco 2.8  3.1 
Leisure Equipment & Products 2.4  3.1 
Computers & Peripherals 2.2  2.7 
Software 2.2  2.0 
Specialty Retail 2.2  2.1 
Aerospace & Defense 2.0  2.9 
Media 1.8  2.4 
Food Products 1.7  1.6 
Food & Staples Retailing 1.6  1.6 
Building Products 1.5  1.7 
Diversified Financial Services 1.4  1.7 
Chemicals 1.3  1.0 
Electronic Equipment, Instruments & Components 1.3  1.5 
Hotels, Restaurants & Leisure 1.2  1.1 
Internet & Catalog Retail 1.2  1.3 
Communications Equipment 1.1  1.2 
Health Care Equipment & Supplies 1.1  1.3 
Household Products 0.8  1.0 
Other (1) 3.8  3.5 
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: September 30, 2024 December 31, 2023
Machinery 9.2  % 8.8  %
Professional Services 8.3  6.5 
Diversified Consumer Services 6.1  7.1 
Internet Software & Services 6.0  6.2 
Electrical Equipment 4.9  1.7 
Construction & Engineering 4.2  5.1 
Distributors 4.2  4.5 
Health Care Providers & Services 4.2  5.0 
Commercial Services & Supplies 4.1  3.9 
Computers & Peripherals 3.9  4.4 
Containers & Packaging 3.8  3.9 
IT Services 3.7  4.6 
Auto Components 3.6  1.5 
Energy Equipment & Services 3.0  2.5 
Tobacco 3.0  3.2 
Specialty Retail 2.7  2.7 
Software 2.2  2.1 
Media 2.0  2.7 
Aerospace & Defense 1.9  2.7 
Textiles, Apparel & Luxury Goods 1.9  2.6 
Leisure Equipment & Products 1.8  2.5 
Food Products 1.6  1.5 
Building Products 1.4  1.5 
Diversified Financial Services 1.3  1.6 
Food & Staples Retailing 1.3  1.2 
Chemicals 1.2  0.9 
Internet & Catalog Retail 1.0  1.2 
Air Freight & Logistics 0.9  1.1 
Health Care Equipment & Supplies 0.9  1.0 
Construction Materials 0.3  1.0 
Other (1) 5.4  % 4.8  %
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.
As of September 30, 2024 and December 31, 2023, Main Street had no portfolio investment that was greater than 10% of the Investment Portfolio at fair value.
Unconsolidated Significant Subsidiaries
In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, Main Street must determine which of its unconsolidated controlled portfolio companies, if any, are considered “significant subsidiaries.” In evaluating its unconsolidated controlled portfolio companies in accordance with Regulation S-X, there are two tests that Main Street must utilize to determine if any of Main Street’s Control Investments (as defined in Note A — Organization and Basis of Presentation, including those unconsolidated portfolio companies defined as Control Investments in which Main Street
does not own greater than 50% of the voting securities nor have rights to maintain greater than 50% of the board representation) are considered significant subsidiaries: the investment test and the income test. The investment test is generally measured by dividing Main Street’s investment in the Control Investment by the value of Main Street’s total investments. The income test is generally measured by dividing the absolute value of the combined sum of total investment income, net realized gain (loss) and net unrealized appreciation (depreciation) from the relevant Control Investment for the period being tested by the absolute value of Main Street’s change in net assets resulting from operations for the same period. Rules 3-09 and 4-08(g) of Regulation S-X require Main Street to include (1) separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which Main Street owns greater than 50% of the voting securities) in an annual report and (2) summarized financial information of a Control Investment in a quarterly report, respectively, if certain thresholds of the investment or income tests are exceeded and the unconsolidated portfolio company qualifies as a significant subsidiary.
As of September 30, 2024 and December 31, 2023, Main Street had no single investment that qualified as a significant subsidiary under either the investment or income tests.