Ted Koenig – President and Chief Executive Officer Aaron Peck – Chief Financial Officer and Chief Investment Officer.

Bob Napoli – William Blair Mickey Schleien – Ladenburg Chris Nolan – FBR & Company Bryce Rowe – Baird.

Good afternoon. And welcome to Monroe Capital Corporation’s Third Quarter 2015 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 or cash flows.

Although, we believe these statements are reasonable based on management’s estimates, assumptions and projections as of today, November 09, 2015. 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 risks, uncertainties and other factors, including, but not limited to the factors described from time to time in the Company’s filings with the SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements.

I will now turn the conference over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation..

Good afternoon. And thank you to everyone who has joined our earnings call this today. I’m joined by Aaron Peck, our CFO and Chief Investment Officer. This morning, we issued our third quarter earnings press release and filed our 10-Q with the SEC.

I will first provide a brief overview of the quarter before turning the call over to Aaron to go through the results in more detail. He will then turn the call back to me to provide some closing remarks. We are very pleased to have announced another strong quarter of financial results.

For the quarter we generated net investment income of $0.36 per share covering our third quarter dividend of $0.35 per share. This represents the sixth consecutive quarter net investment income has covered our dividend.

Our consistent dividend coverage continues to separate us from the pack of the BDCs that have either cut their dividends or have been unable to generate net investment income in excess of their most recent dividend.

Our book value per share increased again to $14.21 per share as of September 30, a $0.03 per share increase from the book value per share at June 30, primarily as a result of our net unrealized gains in the portfolio and also earnings in excess of the dividend paid in the quarter.

In summary, for the metrics that I think is the most relevant and differentiating BDC platforms for the third quarter will be one, have dividends in excess of our dividends and two our book value per share has increased. This has all occurred as we have grown and expanded our loan portfolio outstanding.

I’m now going to turn the call over to Aaron, who is going to discuss the financial results in more detail..

Thank you, Ted. Our investment portfolio grew significantly in the quarter and we have continued to generate high-yielding opportunities, which has allowed us to maintain a high level of weighted average yields in the portfolio.

As of September 30, the portfolio was at $329.7 million at fair value, an increase of approximately $47 million since the prior quarter end. At September 30, we had totaled borrowings of $116.2 million under our revolving credit facility and SBA debentures payable of $40 million.

The increase in outstandings under the revolver are the result of portfolio growth. We utilize the proceeds from our second quarter capital raise to immediately pay down the revolver and we have since reborrowed under the revolver as we continue to put this capital to work during the third quarter.

During the quarter, we also announced an increase in the capacity under our revolver $235 million, a $25 million increase under the accordion feature of the credit facility.

As of September 30, our net asset value was $179.9 million, which increased slightly from the $176.5 million in net asset value as of June 30, primarily as a result of capital raises under our ATM program during the quarter. On a per share basis, our NAV per share increased slightly from $14.18 at June 30 to $14.21 per share as of September 30.

Turning to our results for the quarter ended September 30, net investment income was $4.5 million or $0.36 per share, a decrease of $0.07 per share when compared to the prior quarter. At this level we continue to cover our quarterly dividend of $0.35 per share.

Additionally this quarter we generated net income of $4.7 million or approximately $0.38 per share, a decrease from the net income in the prior quarter of $0.43 per share.

The decrease in per share NII and net income from the second quarter was primarily due to a significant reduction in prepayment fees and pay down gains during the quarter, as repayment activity was minimum. Striping out key income in pay down gains our per share core net investment income was basically flat to the prior quarter.

As we have discussed in prior calls, we generally have a robust level of prepayment activity in the portfolio which is additive to earnings in return, but quarter-to-quarter this activity can be volatile and unpredictable, what is important to note is that our core earnings in the quarter continues to support the current dividend level.

Looking to our statement of operations, total investment income for the quarter was $9.1 million compared to $9.5 million in the prior quarter. This decrease in investment income is primarily as a result of reduced prepayment fees and pay down gains partially offset by additional income associated with our recent asset growth.

Total expenses of $4.7 million included $1.4 million of interest and other debt financing expenses, $1.4 million of base management fees, $1.1 million of incentive fees and $746,000 in general administrative and other expenses.

Of the $1.4 million in interest and other debt financing expense, approximately $1.2 million was cash interest expense with the remainder representing non-cash amortization of the up-front cost associated with establishing our credit facility and our SBA debentures, as well as the interest expense associated with the secured borrowing recorded under ASC 860.

Turning to the portfolio, during the quarter we continued to put to work the proceeds from our recent capital raise primarily through proprietary direct originations. As previously discussed many of the new liquid investments added during the second quarter or second lien assets as we saw some attractive opportunities in that part of the market.

We would expect to sell a portion of these liquid assets at some point in the future as we seek to optimize our portfolio. Our expectation is that future optimization of the portfolio will likely result in an increase in the percentage of first lien loans in our total portfolio when compared to today’s level.

As for our liquidity, as of September 30, we had approximately $19 million of capacity under our revolving credit facility. Our SBIC debentures were fully drawn at $40 million at the end of the quarter. I will now turn the call back to Ted for some closing remarks before we open the lines for questions..

Thank you, Aaron. The current pipeline for all of the funds at Monroe continues to be very strong. Our focus on proprietary national low and middle market origination has continued to provide our funds under management with unique attractive investment opportunities with high risk adjusted returns.

We have continued to generate solid earnings and cover our dividend at a time when many of peers have experienced declining net investment income trends and struggle to cover earnings to cover their dividends.

We attribute our success to our differentiated origination platform in the depths of the entire Monroe Capital Organization, which has supported a high effective yield and strong credit performance in our portfolio.

As many of you are aware, last week we announced the formation of our new industry vertical in a retail and consumer products after these lending area. This complements our existing vertical lending groups in healthcare technology and media.

These industry verticals create differentiated proprietary high yield deal flow through the entire Monroe Capital platform including our BDC, MRCC. We remain very excited about our Company’s prospects with a dividend yield greater than 9% fully supported by net investment income and a stable and growing book value.

We believe that Monroe Capital Corporation provides a very attractive investment opportunity for our shareholders and other investors. Thank you all for your time today. And with that, I’m going to ask the operator to open the call for questions..

[Operator Instructions] Our first question comes from Bob Napoli with William Blair. .

Good afternoon. Nice quarter. Just the – what level Aaron, what level of transitional portfolio do you have or liquid portfolio, what’s the dollar amount that you would look to I guess replace overtime with what I would call our core product I guess. .

It really depends Bob on the market, and what opportunity we see in space, it could be clear to people on the call.

Every deal we buy whether it would be in the liquid book or the proprietary book is the book that we’re comfortable holding for the long-term that we think provides attractive repeat as in return that we think is a good asset, that we [indiscernible], that we understand, that we follow and that we are very careful to do that.

So there are some assets that are more liquid that we could chose to sell, at the right time, at the right price, if we saw opportunities of proprietary book that we’re accretive.

And when I think about those loans, I think of them somewhere around $23 million to $25 million in the near-term and then over the longer term, it is probably more like $40 million of assets that are somewhat liquid that we – in that transitional portfolio. A lot of them are secondly, some of them are firstly..

And where would be the yield on those portfolios and what would be the yield on..

Yes..

What would be the benefit I guess, as you move [indiscernible].

I don’t have a weighted average yield from me on these but they tend to be lower than the average yield portfolio. So it would be expected to be accretive and we would really only do it, to create accretion in the yield in the book.

We wouldn’t sell these assets otherwise unless we saw our credit region to sell them because their assets we like and that we underwrote. So if I were just eyeballing it, it’s probably between 8.5% and 9.5% kind of yield on average for the portfolio that we would look to sell. And it’s going to be largely assets below 9% or 10% yield..

Okay. Then credit quality, you guys have had very strong credit quality really since your IPO then I think most of your peers now and then there is a hick up here or there that and but you guys haven’t really had any and looking at your rating system and you’re not accruals that doesn’t look like there is anything near-term.

What is – what do you seeing, I mean, why you’ve been able to maintain that level of credit and what should we expect over the medium-term on the credit side..

Bob, this was Ted, I’ll take a stab at that. We’ve been doing this now as a team for about 15 years, we have had very, very little turnover. We look at lots of deals in any given year, we’ve got about 220 companies cross our portfolio as a firm, so the way I look at things nobody is immune from a credit event.

And it happens, when he know what’s going to happen at some point to us and with us. But at the end of the day, I think in my heart-to-hearts that we have a better underwriting and credit model than most of our competitors. And our performance over the last 15 years, there’s that up.

So I would anticipate that to continue and then the last comment I’ll make is that we tend not do things as a firm that we don’t really understand. So if you look at our portfolio lots of our competitors have exposure in the oil and gas area, just to pick one particular industry. We have very, very little exposure if any in that’s fixed.

And that’s just because we’re not looking to face incremental yield in areas where there is credit challenges. We generate incremental yield from having nine offices throughout North America with 20 originators and I prefer to look at things on or near the fair way in terms of our origination instead chastening in the rock. .

All right. Thank you. Last question, just up on Aaron, what level have additional loans could you provide on more what would be, what are you comfortable with and capable of maximum leverage. We must be getting pretty near where are you would like to be. .

Yes. We have some room. I think the way I have always talked about on this call that we target regulatory leverage capping out between 0.75 and 0.81 and I think today we’re about 0.65 or something like that in that neighborhood. So that calculation would tell you we’re probably under the $20 million or so of room on our current capital base.

And then obviously we’ve made proactive use of the ATM, so [indiscernible] place to do that, that will be incremental..

Right, thank you. .

Our next question comes from Mickey Schleien with Ladenburg. .

Good afternoon, Ted and Aaron. First question is, what drove the mark above Rockdale Blackhawk. I couldn’t find any news or anything on that.

Can you give us some color there?.

Sure. Rockdale Blackhawk is a healthcare investment that we’ve made I don’t know at about eight, nine months ago some where [indiscernible] it’s the company that is a very well run healthcare business in the hospital space and they’ve lot of ancillary medical services and frankly their EBITDA just keeps going up.

So the company had much lower EBITDA level when we first got into the deal and they just have performed exceedingly well and when you do a fair value, it’s pretty low levered company with a lot of performance.

And so our fair value estimate on the equity as preferred by the different third party showed a considerable mark up as they continued to do better and better..

Aaron, do they provide services or do they own facilities or both..

They are facility based healthcare provider, they have book hospitals as well as physician practices and other practices around general healthcare for individuals..

Maybe they can go and buy that force park deal done in San Antonio that’s in trouble. If you back that out though, then obviously that most or not most, there were a many debt investments that were marked down, I’m just curious whether that was due, how much of that was due to deterioration of underlying credit. .

Yes, it’s good question. Generally speaking as you know spreads applied in the period and so, some of that movement down debt is more general, because the discount rates that our evaluation firms use increased slightly in the quarter, as spreads widened. So are better than they are some individual credit has been some credit deterioration.

In most cases, honestly that there hasn’t been a lot of near-term credit deterioration it’s been some more changes in approached valuation as forecasted improvement have not really come to provision yet some of these names.

So there is nothing on individual names that has changed dramatically in our thinking in terms of how these individual credits performing everything in the book, by enlarge we still expect to see a CFO recovery on.

And we’re still expecting those names to improve and there is nothing that we’re looking at in the near-term that we have any expectations to go an non-accrual. So there is nothing that we’re looking at the day, that’s materially different. Then if you’re asking about any names a quarter ago..

Okay, my last question is in the previous quarter, you made an opportunistic investment in Answer Corp. But it’s mark declined further from June to September.

So can you give us an update on the outlook for that investment?.

Yes, we’re doing our diligence on that we’ve been following it very carefully it is the name that is liquid, I think there is the combination of things happening in this name. One is that the market clearly weaker, generally in a liquid market and this is the name that has had some decline in it’s performance.

But we got involved this name we were just a time when our large private equity sponsor had put at just a ton of money into the company behind us.

And we are very well on a loan-to-value basis, based on where their investment is it’s the very smart sponsor that I just believe we know to whom it is going on and feels confident about the future of the company, they had a little bit of a hick up as there are some changes to the Google algorithm with regards to their business and how their business appears on mobile devices.

But we still feel really, really solid about the company and we’re taking a hard look at, at what we might want to do here going forward given the decline in the mark. There is not a lot of creating volume around the system. But we still feel really confident at the name..

So, you might, actually increase your exposure to that name at these prices..

Never now, I mean, we’re always looking at every name and we see a name we like we always concern to buying it. And if we see a name that we would like to price and don’t the name, we always consider selling it. So, we’ll always be opportunistic and I put that in the same categories any one we look at..

Okay. And I just want to one more question, Ted, I was like to ask you, what do you think, we are in the credit cycle. I think it’s pretty consistently said, we’re fairly deepened to – into the process. That still your view or you’ve seen any changes in the last three months..

I think it’s consistent with what I’ve said in the last quarter, I think we’re in the later innings of it. Seventh or eighth [indiscernible] I don’t see any real deterioration though. There is no outside shock issue that I see happening. Middle market companies the area that we play in, are valued fairly still, there is a lot to capital.

Very high level of transaction activity lots of our undrawn powder, dry powder from the private equity and something that is really come to loose this year, more so than any of the last few years is the strategic buyers have really hooked up in our bid in the private equity buyers in the market quite a bit.

So of all healthy from a deal flow standpoint..

Very good. Thanks for your time this afternoon..

Thank you, Nick..

Next questions comes from Chris Nolan with FBR & Company..

Hey guys, Ted, on the origination platform, I know you got nine of this 20 originators, as we enter into late cycles here, how do you - do you increase your origination platform, as you know, as the economy gets weaker as you plan to actually try to source more deal flow, I mean what’s the thinking there. .

From my standpoint Chris is I’ve been focused on increasing our market share and deal that we want to do. So if you look at what we’ve done in the last year, we opened a Toronto office recently, because I think there is lots of opportunities in Canada that other firms are not going to be able to take advantage of.

I think that I’m always looking to add to our vertical strategies. We’ve recently announced a retail and consumer products focused in the asset based lending area. I think what you can expect is probably not opening more offices with nine offices, now I think we cover the U.S. relatively well as well as now Canada.

I think what you may see from us as time goes on, some more vertical practice group mix focus origination. That’s the one thing that really sets our platform apart from the rest is that not only that we have the geographic coverage where most don’t.

We have a really deep following in some various industry verticals and that gives us the real strategic advantage in terms of originating high quality product. .

And follow-up question on the SPA any consideration of increasing the allocation to the BDC in terms of capital..

Well. If everybody goes their thing in Washington, it’s the – that the act just get out of committee to increase the allocations and family of funds limits, so if our wonderful publications, due to their job in DC, I think that could be a 2016 event for us..

Finally, Aaron I [indiscernible] income was there in the quarter..

The question about spill over income the quarter itself, I mean there was no time right. We had a $0.35 dividend, so we added just a little bit to be spill over in terms of what we spilled over in this quarter in terms of just adding to that. I think it was about 200 – $230,000 of additional income that it still over.

It gets us to a cumulative year-to-date of about $1.7 million of on the undistributed NII..

Great. Thank you..

[Operator Instructions] Our next question comes from Bryce Rowe with Baird..

Hi, good afternoon. I wanted to Ted, ask you a question about capital. I appreciate that your stock and for you appreciate trading at a premium when many of your peers are struggling to reach book value from a stock price perspective.

What’s your inclination in this current environment? Would you prefer to may be raise a little bit more capital to put to work as the origination pipeline strong enough to possibly support, a capital raise hits the stock price cooperative. Thanks..

Hi Bryce, how are you? Thanks for your question. As you know, we completed in accretive raise of capital in April of this year. We continue to monitor the stock price as well as the market and we always consider all of our options in terms of capital rising and this is one of several..

Okay. Thanks, Ted..

And I’m not showing any further questions at this time. I’d like to turn the call back over to management..

Thank you all for joining us in the call today. We look forward to a busy fourth quarter. And we wish you all your families and health happiness and prosperity in the fourth quarter. Thank you..

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect. Have a wonderful day..