Monroe Capital Corporation (MRCC) Announces Q4 and Full Year 2025 Results; Updates on Merger with Horizon Technology Finance (HRZN)

Key Financial Highlights

• Q4 2025 Net Investment Income (NII): \$2.2 million (\$0.10 per share)
• Q4 Adjusted Net Investment Income (Non-GAAP): \$2.3 million (\$0.11 per share)
• Q4 Net decrease in net assets from operations: \$(2.6) million (\$(0.12) per share)
• Q4 Net Asset Value (NAV): \$166.5 million (\$7.68 per share)
• Q4 dividend paid: \$0.18 per share
• Full Year 2025 NII: \$11.4 million (\$0.53 per share)
• Full Year Adjusted NII: \$11.6 million (\$0.54 per share)
• Full Year Net decrease in net assets from operations: \$(5.1) million (\$(0.24) per share)
• Full Year total investment income: \$37.9 million vs. \$60.5 million in 2024 (significant decline)
• Full Year total expenses: \$26.5 million, down \$9.5 million year-over-year
• Full Year net loss: \$16.5 million, up from \$14.8 million in 2024
• Q1 2026 dividend declared: \$0.09 per share, payable March 31, 2026 (sharp reduction)

Important Shareholder Information & Price Sensitive Updates

• MRCC is anticipating the closing of its merger with Horizon Technology Finance Corp (HRZN) near the end of Q1 or early Q2 2026.
• The merger is structured as NAV-for-NAV, aiming to unlock value for MRCC shareholders, offering participation in a larger, more scaled HRZN with expected synergies, operating leverage, wider debt funding solutions, potentially lower borrowing costs, and higher dividend potential.
• MRCC’s dividend has been reduced to \$0.09 per share for Q1 2026, a significant decrease from the previous \$0.18 per share. This aligns distributions with net investment income, reflecting the impact of lower base rates and a stand-alone entity structure.
• MRCC’s NAV decreased to \$166.5 million (\$7.68/share) from \$173.0 million (\$7.99/share) in Q3 2025, primarily due to utilization of spillover income and net unrealized losses.
• Estimated \$0.14/share in undistributed spillover income will be distributed in conjunction with the merger.
• Debt-to-equity leverage decreased to 1.15x (from 1.23x in Q3), driven by asset sales and paydowns.
• Portfolio: 87 company investments (up from 79 in Q3), 4.0% on non-accrual (up from 3.5%), weighted average contractual yield down to 9.4% (from 9.9%). First lien loans now 79.3% of portfolio by fair value.
• MRCC Senior Loan Fund I, LLC (SLF) joint venture was liquidated in Q4 2025, with in-kind distributions and a return of capital totaling \$28.3 million.
• Revolving credit facility amended in January 2026 for additional liquidity ahead of the merger, allowing full redemption of 2026 Notes and temporarily increasing interest margins by 0.75%.
• Total assets at year-end: \$372.96 million; debt outstanding: \$192 million; cash: \$1.93 million; available borrowings: \$113 million.
• MRCC’s average portfolio mark decreased by 2.5% year-over-year, reflecting mark-to-market losses.
• Shareholders have a special meeting scheduled for March 13, 2026 to approve merger-related proposals; definitive joint proxy statement filed with SEC.
• Dividend reinvestment plan remains in place; tax characteristics to be reported on Form 1099 after year-end.
• Forward-looking statements highlight merger risks, including regulatory approval, shareholder approval, integration, financing, litigation, macroeconomic factors, and market volatility.

Financial and Operational Details

Management Commentary & Outlook

CEO Theodore L. Koenig reaffirmed the strategic value of the merger with HRZN, emphasizing anticipated synergies, increased scale, expanded access to funding, and potential for higher dividends post-merger. The reduction in MRCC’s dividend aligns with net investment income and addresses lower base rates. Management expects undistributed spillover income to be distributed as part of the merger.

The liquidated SLF joint venture resulted in in-kind distributions and a return of capital, impacting dividend and income classifications. Asset quality is described as stable, despite mark-to-market losses, with portfolio marks improving following the SLF liquidation.

The amended revolving credit facility in January 2026 provided liquidity to redeem the 2026 Notes, temporarily increasing interest margins and prepayment provisions, in preparation for the merger.

Merger Details & Shareholder Actions

• Definitive joint proxy statement filed with SEC; special shareholder meeting scheduled for March 13, 2026 for approval.
• Asset sale to Monroe Capital Income Plus Corporation (MCIP) and subsequent merger with HRZN, each contingent on the other.
• Shareholders urged to read the proxy statement and registration materials for full details and implications.

Forward-Looking Statements & Risks

• Merger completion is subject to numerous risks: regulatory approval, shareholder approval, integration, financing, litigation, market conditions, and macroeconomic factors.
• No assurance of increased share price or enhanced shareholder value post-merger; risks of disruption and market volatility remain.
• MRCC and HRZN will update investors via SEC filings and communication channels as necessary.

What Investors Should Watch For

• The merger with HRZN, if completed, could significantly affect MRCC’s share price and dividend potential, offering exposure to a larger platform with broader funding options.
• Dividend reduction to \$0.09/share is a notable change and may impact income-oriented investors.
• Asset quality, portfolio yields, and leverage trends are key metrics to monitor as MRCC prepares for merger integration.
• Regulatory and shareholder approvals are critical; delays or failure could affect MRCC’s future strategy and valuation.
• Liquidity management steps (facility amendment, note redemption) signal proactive preparation for merger and operational flexibility.

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