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Monroe Capital (MRCC) Q1 2020 Earnings Call Transcript

By Motley Fool Transcribing – May 13, 2020 at 4:31AM

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MRCC earnings call for the period ending March 31, 2020.

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Monroe Capital (MRCC -0.69%)
Q1 2020 Earnings Call
May 11, 2020, 11:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Hello and welcome to Monroe Capital Corporation's first-quarter 2020 earnings conference call. Before we 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 resource or cash flows particularly in light of COVID-19 pandemic. Although we believe these statements are reasonable based on management's estimate assumptions and projections of today, May 11th, 2020. These statements are not guaranteed of future performance.

Further, time-sensitive information may long no longer be accurate as of the time of any replay or listening. Actual results may differ materially as a result of risk, uncertainties, or other factors including but not limited to the risk factors described from time to time in the company 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.

Sir, you may begin.

Ted Koenig -- Chief Executive Officer

Good morning and thank you to everyone who has joined us on our call today. Welcome to our first-quarter 2020 earnings conference call. I'm joined by Aaron Peck, our CFO and chief investment officer. Friday evening, we issued our first-quarter 2020 earnings press release and filed our 10-Q with the SEC.

First and foremost, I hope you and your families are healthy and safe. This is a very difficult time for our country and the world, and we at Monroe Capital Corporation BDC and the broader Monroe Capital organization, of those that have been most affected by the COVID-19 pandemic in our thoughts and best wishes. We also want to thank the brave men and women, the essential workers who put themselves at personal risk every day to help the rest of us get through this pandemic. Our employees remain safe, as a firm, we have seamless -- seamlessly navigated the transition to a remote working environment.

Technology has allowed us to maintain close contact with all of our teams and we have been able to maintain highly collaborative in our approach, which we believe is very important to navigating the challenging economic environment we are facing as a result of the pandemic. We do not know for sure when we will be able to return to our offices, but we look forward to the day that we can return to a more normal working environment. As you all know, the uncertainty associated with the COVID-19 pandemic has created concerns related to the economy, as well as, specific unanticipated challenges for many companies due to business interruptions and a slowdown in business activity. This uncertainty has caused negative implications across the financial markets with the S&P 500 down almost 20% in the first quarter of 2020.

Significant price declines were also seen and traded credit investment as the S&P/LSTA leveraged loan index was down over 20% at times and finished the first quarter down 14% in market value. Uncertainty has also caused many of our portfolio companies across our platform to be focused on their own liquidity as evidenced by the wave of revolver draw request that we saw during March as a direct response to concerns over the COVID-19 pandemic. The Moroe firms including MRCC have met all borrower revolver draw request and we believe that we have appropriate liquidity to meet any future request across all of our funds. While we certainly couldn't have predicted the COVID-19 pandemic due to overall concerns about an overheated economy, we have been shifting our portfolios over the past several quarters in all of our Monroe funds, away from a higher risk cyclical industries.

As a result, MRCC has limited to no direct portfolio exposure in industries most effected by the pandemic such as airlines, automotive, travel, leisure, oil and gas, minerals and mining, and energy. However, the best thing about our portfolio is that we are typically a control lender. We are the agents and approximately 88% of our loan investments. We have tight baskets regarding indebtedness and restricted payments.

We have at least two and often several more financial covenant -- covenants on most or all of our deals including maintenance and occurrence test and debt leverage. This allows us to be proactively engaged with our borrowers and their financial sponsors in terms of liquidity. It also allows us to opportunistically amend and reprice our loans to constantly de-risk and rerisk our portfolio. In past calls, we have discussed the importance of tighter loan documentation in the lower middle market that we play in.

In the larger broad middle market, almost 80% of all loans are covenant light. In our markets, we are dialoguing with our companies weekly and sometimes on a daily basis to the points where, in most cases, they have to come to us to incur a PPP loan because they don't have the debt incurrence basket availability in their financial covenants. This allows us to manage risk and do many things to enhance our risk and return positions. Our risk is also mitigated by the fact that we maintain conservative starting leverage and loan-to-values when we underwrite our loans, an average Monroe agent of loan is between 4 times and 4.5 times leverage and below 50% loan-to-value at the time an investment is underwritten and closed.

And while with the benefit of hindsight, I am sure there are some things we would have done differently in managing our business. We believe that MRCC and the rest of the Monroe capital funds are in a strong position to navigate the current crisis vis-a-vis the market and our competitors. And we expect to emerge in a strong position to take advantage of the enhanced returns that will be available as a result of the market dislocation that has occurred. Also, as we discussed in prior calls, our arbitration proceeding in the Rockdale Blackhawk matter is now completed.

The award has been issued at [Inaudible] form and will cover more than 100% of our paramaounts on this loan and is consistent with the current fair value on our balance sheet. We anticipate payments in the coming quarter which will be a materially positive result for our company. Turning now to the first-quarter results. We are pleased to report that in this challenging environment, we generated adjusted net investment income of $0.33 per share, down from the adjusted net investment income of $0.37 per share in the fourth quarter.

Declines and our net investment income are primarily as a result of us proactively placing three additional assets on non-accrual, in part due to challenges faced by these borrowers related to COVID-19, as well as, a decline in fee income during the period. Aaron will go into more detail regarding the components of our net investment income and the non-accrual assets later in the call. We also reported a net decrease in assets resulting from operations of $36.9 million or $1.81 per share during the quarter, which was primarily as a result of a decline in the fair value of our investment portfolio during the quarter. As a result, our NAV on a per share basis fell from $12.20 per share at December 31st to $10.04 per share at the end of the first quarter or 18%.

As we have discussed on past calls, we maintain very disciplined valuation procedures at Monroe, which rely heavily independent third-party valuations or observable market prices for 100% of our portfolio each quarter. The process employed by our third-party valuation firms is not just based on individual credit performance from a bottoms-up basis, but also includes a top-down analysis and heavily incorporates the impact of general markets spreads on our assets. As a result of this process, our average portfolio mark across the entire portfolio fell by approximately 6.8% during the quarter. The decline in our marks resulted an approximately $2.21 per share in net unrealized mark-to-market valuation losses during the quarter.

We estimate that approximately $1.25 per share of these unrealized losses or 57% was attributable solely to the widening of credit spreads during the period unrelated to individual credit performance. Since quarter end, LCD first lien loan spreads have tightened by 108 basis points, already retracing around 28% of the Q1 spread widening. Of that $1.25 per share of NAV decline attributable to spread widening, approximately $0.71 per share or 57% of that was attributable to assets held directly by us, while $0.54 per share or 43% of that number was a result of markdowns on assets held in the MRCC senior loan fund joint venture. The loans in the joint venture tend to be larger upper middle-market companies and those loans experienced higher price volatility in times of market correction.

Assuming credit spreads continue to tighten, as we have seen post quarter end, an absent future permanent credit losses associated with these loans, we would expect a significant portion of these unrealized mark-to-market losses in both our lower middle-market portfolio and the MRCC senior loan fund joint venture to reverse, resulting in positive NAV adjustments and positive earnings performance in future periods. Approximately $0.96 per share of the $2.21 per share unrealized mark-to-market losses or 43% was attributable to specific credit deterioration in certain portfolio companies, a significant portion of which is as a result of the impact of COVID-19 pandemic on these borrowers. A recovery of these unrealized losses is dependent on both continued spread tightening, as well as, improved company performance for these specific borrowers. Regarding these unrealized losses associated with specific credit performance, while we believe that this quarter's increase in unrealized mark-to-market declines associated with the select borrowers were exacerbated by the COVID-19 pandemic, our senior management team is continuing to spend a significant amount of time analyzing these credits and focusing on our workout and collection strategies.

We are very focused on realizing the highest possible recoveries on the assets that we have marked down, and we are engaged in several processes to execute on that strategy. One such process was undertaken with respect to Rockdale Blackhawk in 2019, and we are seeing the positive results of that process today. Please be aware that the Monroe Capital organization has 135 employees with many devoted to underwriting, risk management, and workout strategies. During periods like this, it allows us to bring the very resources to bear on the portfolio that are necessary.

As many of you know, we have a long track record of significant success in managing through difficult economic environments, notably the great financial crisis in 2008 and 2009, including select workout situations with borrowers. If need be, we can come in and take over and own a business. While that is not our preferred option or outcome, we know how to do it and have done it successfully in the past. If necessary, we will roll up our sleeves with our 135 employees and get our companies through this period, and we think, achieve a good recovery.

The important thing is that we have the ability and experience to do that if needed to achieve the best recovery possible for our investors. We also announced in our earnings release last Friday that the Monroe management team made a recommendation to our board of directors and the board authorized a reduction in our dividend to $0.25 per share for the second quarter of 2020, payable in cash on June 30th, 2020. The decision to make a reduction in our dividend was very difficult and is the direct result of the uncertainty due to the COVID-19 pandemic. It reflects our desire to maintain a conservative approach regarding distributions and liquidity.

While we do not have any specific information regarding additional assets moving to non-accrual in the future, given the uncertainties in the economy, we believe it is prudent to plan for various stress test scenarios and have made the difficult decision to reduce our dividend rate for the first time in our company's history. We will continue to closely monitor the performance of all of our borrowers, as well as, overall economic trends, activity, and future prospects. And if appropriate, we will adjust the dividend amount in the future if we see evidence of a sustained recovery, which causes the positive impact on our net investment income. We believe that by making this dividend adjustment, we are acting decisively and responsibly in light of the uncertainties and challenges we are facing as a result of the current crisis.

As always, we are focused on the long-term interest of our shareholders and we'll continue to operate with caution. As we look ahead, while there is a high bar today for investing in new capital during these uncertain times and our focus in the near-term will be then reducing our debt leverage, as Aaron will discuss, we have seen many attractive opportunities to invest. Our focus will be to continue to make new investments in portfolio companies and very compelling risk return investments in new situations on an opportunistic basis. Just as we have done as a firm in 2010 and 2011, following the great financial crisis.

Investment spreads have widened considerably, and terms and leverage have improved as well. MRCC enjoys a very strong strategic advantage in being affiliated the best-in-class middle-market private credit asset management firm with over $9 billion in assets under management and over 135 employees as of April 1st, 2020. Monroe Capital will continue to devote whatever resources are necessary to generate acceptable levels of adjusted net investment income and improved NAV performance of MRCC going forward. I am now going to turn the call over to Aaron who is going to walk you through our financial results.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Thank you, Ted. During the quarter, we funded a total of $71 million in investments, consisting of $41 million in loans to new borrowers and $30 million in new fundings to existing borrowers, including $21 million in revolver draws and $9 million in add-ons and delayed draw fundings. As we discussed earlier in the call, many of our borrowers drew on their revolvers in order to increase liquidity on their balance sheets due to the uncertainty related to COVID-19. This portfolio growth was partially offset by sales and repayments on portfolio assets, which aggregated $53 million during the quarter, including four full payoffs, one asset sale and partial sales and paydowns.

All investments and new borrowers were made earlier in the quarter. Prior to the market dislocation and spread widening that occurred late in the quarter related to the pandemic. At March 31st, we had total borrowings of $416 million, including $192 million outstanding under our revolving credit facility, $109 million of our 2023 notes, and SBA debentures payable of $115 million. We are currently mostly focused on our portfolio and we are not expecting material new investment growth in the immediate term.

Any future portfolio of growth, revolver draws, or advances to existing borrowers will predominantly be funded by the availability remaining under our revolving credit facility, subject to borrowing base capacity, and the uninvested cash held in our SBIC subsidiary. Turning to our results. For the quarter ended March 31st, adjusted net investment income, a non-GAAP measure, was $6.8 million or $0.33 per share, a decrease from the prior quarter's adjusted NII of $7.7 million or $0.37 per share. The decrease was primarily as a result of declines in interest income as a result of overall declines in LIBOR, placing additional assets on non-accrual status, and a reduction in fee income earned on our assets during the quarter.

These declines were partially offset by a reduction in incentive fees, as these fees were fully limited during the quarter, as a result of the total return limitation in our shareholder-friendly advisory agreement. LIBOR rates were volatile during the period, and three-month LIBOR, as an example, fell from approximately 1.9% at the beginning of the year to 1.45% at March 31st. During March, however, the three-month labor rate fell to a level as low as 75 basis points, 0.75% and is even lower than that today. We maintain LIBOR floors in nearly all of our deals, which tend to be at least 1%, which insulates our portfolio from narrowing spreads in periods where LIBOR falls below our floors.

As of March 31st, our net asset value was $205.4 million, which was down approximately 18% from the $249.4 million in net asset value as of December 31st. Our NAV per share decreased from $12.20 per share at December 31st to $10.04 per share as of March 31st. As Ted already discussed in his earlier remarks, this decrease was primarily as a result of unrealized mark-to-market valuation adjustments in the portfolio, approximately 57% of which was solely related to the general widening of credit spreads during the quarter due to coron -- due to concerns over the COVID-19 pandemic. We believe all things being equal, that a significant portion of these valuation adjustments could reverse over the next several quarters if the general level of market spreads continues to tighten.

Looking to our statements of operations. Total investment income decreased during the quarter, primarily as a result of a decrease in interest income due to additional non-accruals, as well as, a decrease in fee income as last period included a success fee-related to our investment in tap room gaming, $854,000 of which was not previously accrued and was realized on the payoff of our investment during the fourth quarter, and a slight reduction in dividend income from the SLF during the period. During the quarter, we placed three additional positions on nonaccrual status, including the last out tranche of Incipio, our investments in SHI and Bluestem. While total nonaccruals are now approximately 7% of the portfolio at fair value, once the expected proceeds are received on Rockdale Blackhawk, assuming all things remain the same and no additional nonaccruals are added, our nonaccruals would fall to approximately 4.3% based on fair value.

Moving over to the expense side. Total expenses for the quarter decreased, primarily driven by the elimination of incentive fees in the quarter. Base management fees also declined slightly, primarily due to the lower level of assets at fair market value as a result of fair value adjustments to the portfolio during the quarter. Interest and other debt financing expenses also declined during the quarter, primarily as a result of lower average debt outstanding and reductions in LIBOR during the quarter.

At the end of the quarter, our regulatory leverage was approximately 1.47 debt-to-equity, an increase from the regulatory leverage nearly one point two at the end of the prior quarter. While this is higher than we would prefer, it is not only anticipated as a result of COVID-19 related issues. The increase in regulatory leverage is as a result of a fair value -- fair market value adjustments in our portfolio, as well as, the significant amount of unanticipated revolver draws during the period. The current level of regulatory leverage is higher than the targeted leverage range we have guided you to on prior calls.

As such, our near-term focus will be on reducing leverage rather than portfolio growth. As we discussed earlier in the call, market loan prices have begun to recover, which should reverse some of the fair value marks on our assets. This, coupled with normal course principal amortization and possible repayments on recent revolver draws could contribute to future deleveraging of the portfolio. We are currently comfortably in compliance with the SEC asset coverage ratio limitation and do not currently need to take advantage of the relief the SEC recently provided due to the extreme volatility of asset prices during the first quarter.

As of March 31st, the SLF had investments in 63 different borrowers, aggregating $217.2 million at fair value with a weighted average interest rate of approximately 6.56%. The SLF had borrowings under its nonrecourse credit facility of $150.7 million and $19.3 million of available capacity under this current facility, subject to borrowing base availability. We do not expect to significantly grow the assets held in the SLF at this time, and the SLF continues to be in compliance with all covenants in its credit facility. As discussed earlier, the loans held in the SLF saw significant unrealized mark-to-market writedowns during the period as a result of market spread widening due to the pandemic.

Regarding Rockdale Blackhawk, as we have discussed on prior calls, there was a pending private arbitration of an accounts receivable claim with a national insurance carrier with a material amount in dispute. That claim serves as collateral for the MRCC loan of Rockdale Blackhawk. The underlying arbitration proceedings were completed in mid-August and final trial breached were due and submitted to the arbitrator in late September, an interim award was issued in January 2020. Just recently, the arbitrator issued a final award, which updated the interim award to include certain attorneys fees, interest, and other amounts.

The final award was very positive and should result in a substantial recovery from MRCC and the other lenders to Rockdale, far in excess of the cost basis of our outstanding loan balances due to the lenders' right to receive excess proceeds pursuant to the terms of a sharing agreement between the lenders and the estate. If there are any updates that could have a material effect on the value of the position, either positive or negative, we will update the shareholders at the appropriate time. Another portfolio company TooJay's has been in the news recently, as it recently filed for bankruptcy protection in Florida. TooJay's is a chain of fast casual gourmet deli restaurant down in Florida.

As a result of the COVID-19 pandemic, their restaurants have been closed for dine-in service and their revenues have been severely impacted as a result. In the bankruptcy filings, which are public, the company has indicated that they believe our loan is within the enterprise value of the company and we anticipate receiving adequate protection payments on our TooJay's loan given our over collateralization position in the bankruptcy proceedings. I will now turn the call back to Ted for some closing remarks before we open the line for questions.

Ted Koenig -- Chief Executive Officer

Thank you, Aaron. In closing, we find ourselves in an unprecedented economic environment, which is likely to cause rising default rates and the potential for an extended recession. Despite these challenges, we remain optimistic that we can weather the storm and emerge strong as we did as a firm after the great recession of 2008 and 2009. The key to our optimism is our conservative underwriting, a purposeful defensive portfolio, and our access to a large and very experienced portfolio management team with experience managing through multiple economic cycles and workouts.

We have a defensively positioned portfolio with solid loan documentation and a lot of control over our own destiny in terms of risk management. As such, we continue to believe that Monroe Capital Corporation provides a very attractive investment opportunity to our shareholders as evidenced by the substantial amount of recent insider buying in March by members of our board, our extensive management team, and the senior management team at Monroe Capital. We are committed to navigating successfully through this economic crisis and are confident that we have the skills and experience necessary to manage through on behalf of all of our lending partners, bondholders, JV partners, and shareholders. We believe that MRCC is affiliated with a best-in-class external manager, which has decades of experience, 135 highly skilled employees, and approximately $9.3 billion in assets under management, which provides us the stability to steer the ship toward calmer waters.

We would like to thank our shareholders for their loyalty and confidence in us through these difficult times. I would also like to thank the entire team at the Monroe Capital organization for their hard work and dedication. Thank you for all of your time today, and this concludes our prepared remarks. I am going to ask the operator to open the call now for questions.

Thank you.

Questions & Answers:


[Operator instructions] Our first question comes from Bob Napoli with William Blair. Your line is open.

Bob Napoli -- William Blair and Company -- Analyst

Thank you. Good morning, Ted and Aaron. Good to hear your voice and hope you're doing well. Appreciate the moves you've announced here this morning, and I think, they're appropriate.

I guess the biggest question, the hardest question to tell is, the marks that you've taken on the portfolio and the economy, the economic trends. I mean, how confident are you -- and I know it's impossible to forecast the next several quarters, but how confident are you in the current marks you that have, excluding the spreads -- changes in spread, the credit quality of the portfolio. How many of those companies have -- are on a watch list and were maybe not there three months ago because of COVID? So, just some commentary around your comfort there would be helpful.

Ted Koenig -- Chief Executive Officer

Yeah. Thanks for the question, Bob. That's a great question. We -- like all BDCs, we hope, like all BDCs, attempt to do an in-depth internal analysis and review each of our marks every quarter.

We look at 100% of our portfolio. We have outside third parties that come in and look at 100% of our marks, not review management marks, not review 25% of our portfolio on a rolling basis, but 100% of the portfolio, top to bottom. So from a credibility standpoint, which is our at Monroe, one of our guiding principles, is both not only for our publicly traded BDCs, but for also our privately managed funds. We try to do the best we can and we bring in outside parties to do the best they can to provide us with the most accurate information we have at the time.

We took some significant marks this quarter. Hopefully, as time goes on, some of those marks will turn around. Some of it was -- 57% of those marks were based on spread widening in and some factors that were beyond our control as a company. So from our perspective, management's, we're hoping that this thing -- this crisis cools and within another quarter or two goes away and we can get back to business as usual.

But we feel that we've done the very best job we could under the circumstances with the information we have and taking these remarks. Aaron, do you have anything to add?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah, just quickly. To the other part of your question, Bob, we've been pretty aggressive in rerating our credits based on their impact of COVID and how that implies on a credit rating basis movements they need to make. So we've definitely seen an increase in three-rated credit as a result of the pandemic because some of our borrowers are more directly affected than others. And so, you'll see when you look at the aggregation in the 10-Q that there's more three-rated credits than there were last period and that's what you would expect, and we're very carefully looking at all of the deals in the portfolio across the entire Monroe platform.

Our credit teams are meeting multiple times a day on every deal, particularly the ones that are impacted by COVID. And the one of the real benefits of having real scale in our investment teams is that when the new deal activity is later, which it is now due to low M&A activity. We have so many people available to make sure we're as on top of this portfolio as any firm could be. So, we feel really good about where we stand with regards to being able to manage through the prices.

Bob Napoli -- William Blair and Company -- Analyst

Thank you. Just one follow-up question and congratulations on Rockdale. That's a great outcome. But this is probably a great environment to make good loans, attractive terms.

And I know you talked about not growing the portfolio. You hope to get, I guess, the recovery from Rockdale, but how many -- what do you feel like the opportunity is to make new loans in this environment, given your current leverage?

Ted Koenig -- Chief Executive Officer

You know me, Bob, as well as, others. We're going to play offense here. We did it after the crisis and we're going to do it now. We see some great opportunities across the firm.

We have funds that we've raised for this very purpose. We've got plenty of room across the firm and we're going to do everything we can to create some availability at MRCC. And as Aaron mentioned, some of this is going to turn around. We're going to get our leverage where we want it to be.

Again, but for the COVID pandemic, with the spread widening and everything else, we'd be in much better shape. But again, post quarter, that's already started to reverse. So, we will be playing offense in this environment and we will be taking the best opportunities we can in the market and generating return for our shareholders.

Bob Napoli -- William Blair and Company -- Analyst

Thank you. Appreciate it.


Thank you. Our next question comes from the line of Tim Hayes with B. Riley. Your line is open.

Tim Hayes -- B. Riley FBR -- Analyst

Hey, good morning, everyone. Thanks for taking my question and hope you're doing well. My first one here, just a follow-up on Bob's. In the pipeline, what you're seeing today, what do leverage multiples and spreads look like? And are there any other characteristics that are a little bit different than what kind of your normal pipeline looks like based on the circumstances?

Ted Koenig -- Chief Executive Officer

Yeah. Good question. If you look across the environment, just on the publicly reported LSG data, there's been a couple of hundred basis points of spread widening across the more broad syndicated and traded names. We're seeing in our markets, deals that we're getting done at L5, L550, and now at L800, L850, and L900.

We're quoting term shapes today at L800 to L1000 on deals in terms of rates. We're seeing that. We're seeing leverage that used to be in the 5s, down in the low 4s, sometimes in the mid 3s. So if you look at what we're seeing on a pipeline basis, we're seeing leverage 3.5 turns to 4 turns where we used to be 5 to 6 turns.

And the biggest opportunity, I think, that we have, which is unique to the Moroe platform, we have a substantial opportunistic financing business, which is a different strategy than lending to PE firms and leverage buyouts. Our opportunistic business is the combination of secondaries purchasing business where we're requiring good performing loans at less than par, substantially less than par in the 80s very often. We're doing asset-based asset-backed type financing, where we're running against pools of performing assets. We're doing bridge type lending against bridge situation, sometimes real estate, sometimes other assets, and we're doing portfolio NAV type loan purchases and portfolio acquisitions.

So we've got substantial capital available for that and that is probably the lowest hanging fruit today in terms of generating double-digit yields for investors is this opportunistic strategy that we've been running for the last 10 years. So we've been looking forward to a time when the economy cools and we can start deploying alternate strategies to generate return for investors. I was just hoping it didn't cool this much and this fast. But I think, that you're going to see Monroe come out of this very much stronger as an organization both our private funds, as well as, MRCC and our high net worth retail funds, just as we did after the financial crisis in 2008 and 2009.

Tim Hayes -- B. Riley FBR -- Analyst

Thanks, Ted. That's a good point and good color. Can you give us an update on kind of credit trends so far in the second quarter. I know you said that in 1Q, about over 97% of the portfolio was current.

But how has that trended with scheduled payments in the second quarter? How many companies would you say your portfolio have requested some type of forbearance? And how have you satisfied those requests?

Ted Koenig -- Chief Executive Officer

Good question. I will tell you that I think we've done a really good job in Q1 over our companies. And because of that, we've had an exceptionally high rate of performance. I think, it's too early to tell yet in Q2.

What happens, because we're way early in the quarter, and the effects of this COVID-19, I think, are really going to play out in Q2 for many companies. As I mentioned in our prepared remarks, we've been extraordinarily lucky. And I think, some of that luck was just based on good historical practice and we pulled out our playbook that we ran in the great financial crisis in '08, '09. We've avoided industries in a significant manner that are going to get decimated in the next quarter or two.

And those are autos, airlines, cruise, leisure, health club type things, oil and gas, minerals and mining, energy. If you look across the spectrum of private credit and other BDCs, you're going to see a drastically different type of portfolio with MRCC and in the Monroe organization in general. Because historically, we haven't had the expertise to lend into some of these specialized energy industries and we stayed away from the aviation, we stayed away from autos because we didn't like what happened the last time when the economy got overheated. So all things being equal, we should come out of this in much better shape than our peers.

And as I mentioned in our prepared remarks, we're not afraid to own companies. I mean, we've got a number of companies that we've taken over historically and we've generated some pretty darn good redults by replacing management teams, bringing some of our resources to bear some of our resources, to bear some of our professional staff, some of our outside professionals, consultants, combining businesses. We can do a fair amount. We've got 508 companies in our portfolio across the firm.

So that's 508 CEOs, CFOs, boards of directors, professionals, contacts. So when we take over a company, we put the Monroe brand to bear in a situation, just like we do with Rockdale Blackhawk. I mean, that was a hospital, if you recall, that was closed. It was a closed hospital that basically went out of business.

We brought the resources to bear necessary to file a bankruptcy, to purchase claims in that bankruptcy, to acquire the entire rights to manage the credit out of that bankruptcy. And then, we proceeded against what we felt was a party that wronged the company, one of the insurance carriers, and we received a substantial recovery on that, way in excess of our loan. And we've got a number of other situations that are in the portfolio that we're proceeding now with similar type strategies and I would expect once this crisis passes, to again, to be a much better position vis-a-vis the markets in the portfolio versus other private credit managers.

Tim Hayes -- B. Riley FBR -- Analyst

That's helpful, Ted. And yeah, congrats again on a successful outcome here with Rockdale, definitely very positive and demonstrates the resources you guys have there. But just poking on the part B of that question there a little bit more was, I'm just curious if you've done anything like reducing covenants or deferring principal or interest payments or anything to satisfy forbearance request at this point? And just trying to maybe size the magnitude of that versus the companies that haven't had it request that at this point.

Ted Koenig -- Chief Executive Officer

Yeah. Listen, we're dialoguing, as I mentioned in our prepared remarks with every company. To date, we've been lucky. And as I said, since we're not in the high-risk industries.

This hasn't been something that across the portfolio has been a significant undertaking like others. We're mostly in business services, we're in software, we're in IT. We're in businesses that are in business, which is good. We look at this that if we can be a solution provider right now, that's our No.

1 goal is to stand up and protect our companies, our management teams, our private equity sponsors. So, we're there is more of a support system for them right now. As Aaron mentioned in his remarks, we've been able to fund revolvers for companies. And it's -- I told a lot of the companies, it's kind of silly, companies were taking revolvers when they didn't need them just because they were afraid that the lenders weren't going to be there to fund capital requirements in the future.

We funded everything. Once our borrowers saw that Monroe was a strong counterparty here, we're actually seeing an interesting trend over the last two weeks. We're seeing our revolver usages start to come down again, not go up. They peaked and we're heading down.

And I think, that's going to be a continued trend in the future, which is going to help us in a number of fronts. As Aaron mentioned, with a -- as we get back on the side with where we want to be with our target leverage. So to specifically answer your question, we feel pretty good that we're dialoguing with our clients, we're supporting them on a revolver basis. But across the portfolio, we're not seeing rampant needs to make drastic changes here.

And that's all a function of where we are with the assets we have.

Tim Hayes -- B. Riley FBR -- Analyst

That's good color. Thanks, Ted. I appreciate it. And then, just one more since you brought up the revolvers there.

Just a little bit more maybe context around unfunded commitments right now. How much of unfunded commitment is approved and kind of readily available for borrowers to draw down on versus if any of that is achieved in milestone-based or needs approval?

Ted Koenig -- Chief Executive Officer

Well, I will tell you, I'm -- I made a comment, I'm going to turn it over to Aaron for further, but I will tell you that we have reserved 100% of all revolver capacity or clients. And unlike others, we run our business on a much more conservative basis and we make sure that we have revolver commitments now. That said, we'll probably only get to 50% or 60% in terms of our usage on the revolvers. And as I also said, we're coming down now because now the companies know that they've got the ability to contact Monroe and Monroe will fund when we need to, there's no reason for borrowers to borrow on the revolver, put the money in bank accounts that we control, where we have liens on and pay us to excess interest that they don't need to pay.

If you think about it, that's why I tell a lot of the companies are silly. We're not going anywhere. I've got $9.3 billion at Monroe as an organization. We're not going anywhere.

We're going to work. Unlike the banks that folded in the last crisis, we're strong from a firm liquidity standpoint. So to borrow money, to take down revolvers that you don't need and pay us interest, it's not a really good use of thought process. I mean, Aaron, do you have any other thoughts?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah. Just to your question around milestones and things like that. For the delayed draws, most of the committed delayed draw are set up for very specific uses. A lot of them are things like acquisitions.

And so as you might imagine, M&A activity is pretty light right now because most companies that need to buy some lot in this market would need to put up substantial equity, and it's a hard thing for sponsors to want to do right now until they start seeing things normalize. So I think of our total unfunded amount, it's something like $22 million is delayed draw. A lot of that we would not expect to fund, at least in the near term. And then the remaining, I think, it's around $18 million is remaining unfunded revolver availability, which is subject to covenant compliance and things like that is available.

Tim Hayes -- B. Riley FBR -- Analyst


Aaron Peck -- Chief Financial Officer and Chief Investment Officer

So that's how we look at it.

Tim Hayes -- B. Riley FBR -- Analyst

That's helpful. Great, guys. Well, thanks for taking my questions and stay well.

Ted Koenig -- Chief Executive Officer

Thank you, Tim.


Thank you. Our next question comes from the line of Chris York with JMP Securities. Your line is open.

Chris York -- JMP Securities -- Analyst

Hey, Ted. Hey, Aaron. A couple of questions to begin on the senior loan funds. Aaron, in your prepared comments, you said you are in compliance with the SLF credit facility.

But can you just update us on those financial covenants with cap one?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah. I mean, these are pretty standard things, Chris. I think the thing that most people would be concerned about in a credit facility is the mark-to-market aspect of it. That's the -- that would be in the market right now -- that would be the Nos.

1 sort of triggering concern is if you had mark-to-market calls on a fund like that that's pretty highly leveraged. That's -- unfortunately, that credit facility is not a pure mark-to-market fund. There are certain things that have to occur in the underlying borrowers to allow the lender there to look at a revaluation. So something called revaluation events for the SLF credit facility and that's what would create -- any issues in that fund would be if that were to occur.

And so far, we're in pretty good shape and we've modeled out some, obviously, gone through all the names and what could happen and model that out. And between all of that, we feel like we should be in an minimal situation there but we continue to monitor it.

Chris York -- JMP Securities -- Analyst

OK. So just to be clear, no minimum equity covenants are in that facility?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

No, there are other covenants. I'd have to get back to you on the specifics. I don't have them in front of me, but that facility, just to be clear, is nonrecourse to the parent. So there's nothing that creates a scenario that would come back to the parent.

But clearly, we've got significant equity in the SR that we want to preserve and we expect we'll be able to do that. But I'd have to get back to you on specific covenants at the SLF credit facility. I don't have them all but I --

Chris York -- JMP Securities -- Analyst

OK. And then two follow-ups. How much unfunded commitment exists in the SLF? And then secondly, do you expect to fund your remaining equity? Or do you expect it to be drawn in SLF?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yes. So we don't have a lot of unfunded commitments in the SLF. I don't have the exact number in front of me, but it'd be very small. We don't do a lot of revolvers in there and we don't do a lot of delayed draws in there.

There's a handful. And so, there isn't a lot of unfunded risk in that SLF. We do still have the ability to call some capital in order to -- in order to deal with any issues that may happen in that fund. They're still unfunded commitments in terms of equity under the original commitments.

But at this point, there's no current expectation at this moment that we would need to fund any of those. And right now, we're not growing the assets in there. So -- and we are, believe it or not seeing from time to time, a natural payoff in that fund, even in this environment. So, so far, so good.

I think, there's definitely less than $1 million in revolvers at the SLF. I think it's about $800,000 of revolvers and maybe something like under $2 million is the delayed draws, I think. And as I said, those really are draws very similar to the loans we hold on the balance sheet from some of the specific uses of proceeds for delayed draw, most of which is pretty dormant right now.

Chris York -- JMP Securities -- Analyst

Very helpful. The DTLs would be very small, but I just wanted to confirm. Ted, I heard your comments about wanting to play offense and know you have the desire to be opportunistic, but how can Monroe or MRCC participate in that from a funding perspective, given your leverage is above your target, and then, marginal capacity could be needed to support the portfolio companies?

Ted Koenig -- Chief Executive Officer

Good question. We're -- as we mentioned in our prepared remarks, Chris, as a firm, we're going to be playing offense. We've got lots of different pockets of capital. To do that, MRCC, we're very focused on making sure that we're taking a conservative approach to managing our liquidity, to managing our leverage ratios.

We think that based upon the things that Aaron mentioned, the spread widening changes, the valuations of the assets coming down, we're going to see unnatural progression of a reduction of leverage rates. And then as we continue to get payoffs, obviously, we're going to recycle capital and that's a normal occurrence for us. And we're going to do the best we can to generate -- to increase our rerisk deals every time we talk to sponsors. We're companies about leaving covenants and about making modifications to covenants.

That's an opportunity for us as a firm to, on a continual basis, rerisk and reprice the portfolio. And we're taking advantage of that opportunity to make sure that we're -- our portfolio is reflecting current market conditions across the board when companies and sponsors are asking us to assist them.

Chris York -- JMP Securities -- Analyst

OK. And just to reiterate what I thought I heard. So, paydowns would be the principal funding mechanism to be opportunistic. And then alternatively, no other capital planning or exogenous events would drive the funding?

Ted Koenig -- Chief Executive Officer

Not today. Not today. Again, we're always looking at thoughts here and we're looking at taking advantage of market conditions when we can. But right now, let's stay the course, let's run our business, let's be conservative.

You're looking to see what we've done here in terms of valuations. I think, we've taken a conservative view here. Number two, on liquidity and our plan going forward. We've taken a conservative view on what we're doing with our leverage.

And number three, on our dividend action, we've taken a very conservative view again to make sure that we're acting decisively, we're doing the right thing by our shareholders, and we're preparing here for the long term. This opportunity isn't a matter of days or weeks. This opportunity is going to last a while and we want to make sure that MRCC is positioned to be the price maker and to be the firm that can take advantage of this, the best and lower end of the middle market. This is a very fragmented market.

And when you look across the board, Monroe, MRCC has always been one of the strongest players in this part of the market and we're making sure we're taking way of action we can to ensure that MRCC will continue to be one of the very strongest players in this segment of the market.

Chris York -- JMP Securities -- Analyst

Great. And those are all good points. Moving on just a couple housekeeping items. In regards to the new nonaccrual loans, when did you stop accruing interest? And then, how much interest was not recognized in the quarter from those new accruals?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah. So when we announced to you that loans are going on nonaccrual for the quarter, they go all the way back to the beginning of the quarter. So it's not that the part of the quarter. So in other words, the first quarter will not include any income from the new nonaccrual assets that we announced.

Chris York -- JMP Securities -- Analyst

Got it. Very helpful. OK.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah. I don't have a specific number for each of the three in front of me in terms of the amount of interest that would have been recognized, but there's nothing you need to back out of the first quarter because it wasn't recognized in the quarter for those.

Chris York -- JMP Securities -- Analyst

Yup. My thought process is that you stopped accruing maybe March, right? Yeah, either March --

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah. We don't do it that way. Yeah. We don't do it that way.

We just take it out for the whole quarter.

Chris York -- JMP Securities -- Analyst

OK. And then on TooJay's, I know you had addressed it there, but is that investment still accruing interest today?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

It's still accruing. It's still paying.

Ted Koenig -- Chief Executive Officer

Yeah. That's never going nonpay. Just, Chris, as a matter -- and I don't know how that works in bankruptcy, I don't know from those that may not be as familiar with bankruptcy is your loan is either continue to be lateralized in bankruptcy or not. If it's collateralized in bankruptcy or over secured, you're entitled adequate protection payments, which are your interest payments.

If it's deemed to be not adequately secured, then there is an adjustment. We expect TooJay's to continue to pay us. We feel we're in a good leverage position and we're within the enterprise value and the company has stated that when their filings in court procedures.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah. Just to be clear on that, Chris. A lot of times in the bankruptcy, there's a bit of a fight between the estate and the senior lender over this issue and there has been no fight on this particular situation. They -- the company didn't even ask us.

They absolutely said right out of the gates that we believe we were over collateralizing the intend to keep us current.

Chris York -- JMP Securities -- Analyst

Got it. OK. Very helpful. I just know some BDCs, there are different nonaccrual policies.

So recognizing that TooJay's is helpful. Last one is just on CPK. I know you took a mark there, I think two out of two investment. Another peer put it on nonaccruals and abundance of caution.

I know it's a broadly syndicated loan. Do you feel pretty good about your evaluation there? And I know, there's a lot of uncertainty over the next couple of quarters, but relative to how others are thinking about it? Just curious on your update.

Ted Koenig -- Chief Executive Officer

Yeah. Look, I mean, I think we'll continue to look at it very carefully going into the successive quarters. And we'll determine that we think that there's high probability of us not receiving interest, we will make the same determination. We haven't made a determination as of March 31st.

But we're watching it closely. We hold it across a few different funds and we're keeping a very close watch on the situation and it's one that could be real careful about going forward in terms of accrual steps.

Chris York -- JMP Securities -- Analyst

Got it. That and all the data point on having it at other funds is helpful to -- from having potential more interesting. So that's it for me. Thank you, guys and be well.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Thanks, Chris.


Thank you. Our next question comes from the line of Chris Kotowski with Oppenheimer. Your line is open.

Chris Kotowski -- Oppenheimer and Company -- Analyst

Yeah. You actually kind of got it, my question a little bit on the last one. I was just kind of when we see these triangulating back and forth between where we see the marks, you see, right, California petition at $0.50 and [Inaudible] at 60, and often you see the nonaccruals at similar kinds of marks. And if you said you put things on nonaccrual, on a proactive basis, I guess, what philosophically makes you keep some of these other heavily marked names on equitable status? Is there just visibility to some interest -- to interest payments there?

Ted Koenig -- Chief Executive Officer

Yeah. Good question. So like, in a normal environment, there is definitely some correlation between something being marked down a considerable amount and being on nonaccrual test and that's definitely a signaling effect that we also look at and we reexamine every name. We do them independently.

We look at individual credits and how they're performing and think about nonaccrual. And then, we also look at where the marks are coming in and think about nonaccrual. So it isn't lost on us that you might look at -- I mean, Forman Mills, I would say, marked in the 60s, should that be on accrual status or not. But what you have to look at is, we're in an environment where assets that aren't performing as completely performing high-quality performance during COVID, are taking pretty aggressive marks right now, even if there is some visibility that they will improve and Forman Mills is a really good example.

I mean, coming into COVID-19, Forman Mills seeing some significant improvement in same-store sales, is outperforming its budget. But it was forced to shut down all of its stores as a result of COVID. And so, that's the issue with that company. But given the nature of what they do, it's a pretty countercyclical business.

Historically, it's a company that's done really well in times of an economic cycle. So when those stores reopen, that company should do really well. And so, we do think -- and we believe that the market there should not be permanently down in this level and should recover once the stores open up because of the nature of what that company does, which is low-price, off-price retail.

Chris Kotowski -- Oppenheimer and Company -- Analyst

Right. OK. And then, unrelated issue, can you just remind us again how the limitation on your incentive fee works? Because we were reading the definition of the pre-incentive fee income and we're -- is the definition of the incentive fee, does it include the base management fee or does it exclude that? You know, the 12-quarter look back.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Right. I'll try my best with this description. And then, if you need to follow off, you can do that because it is complicated.

Chris Kotowski -- Oppenheimer and Company -- Analyst


Aaron Peck -- Chief Financial Officer and Chief Investment Officer

So our part one is a calculation, which is based on NII, is structured with this shareholder-friendly cloud and has a limitation in place to ensure that we don't pay a significant amount of incentive fees based on NII during periods where there has been a significant amount of realized or unrealized losses in the portfolio, right?

Chris Kotowski -- Oppenheimer and Company -- Analyst


Aaron Peck -- Chief Financial Officer and Chief Investment Officer

So the way it works is, is that the Part where incentives are limited to the extent that our incentive fees for the last 11 quarters exceed 20% of GAAP earnings, excluding adjusted incentive fees for the last 12 quarters. So to the extent we have unrealized losses like we've had here, it's going to limit our incentive fees fully until we earn a lot of that back. But it looks at 20% of GAAP earnings, excluding the incentive fees. That's what it compares to.

Chris Kotowski -- Oppenheimer and Company -- Analyst

OK. OK. That's what I thought. All right.

Thanks. That's it for me.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Thanks, Chris.


Thank you. Our next question comes from the line of Christopher Nolan with Ladenburg. Your line is open.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Hey, guys. Can you give us an indication as to where you think the leverage ratios were going down? I mean, what's your -- what are you targeting 1.25 or lower?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah, good question, Chris. I mean, I think right now, we're just targeting lower than where we are. I think, we'd like to see ourselves below that kind of 1.3 -- 1.2 to 1.3 level that we've talked about in the past. I think still that's a reasonable level for us to get to.

And we'll see how we get -- as we move along, we'll see how the market deals. Everything we do is really based on our view of the market and where the opportunities lie and what the risks are in the portfolio. So getting the Rockdale money in, hopefully, coming up here in the next couple of months will help delever us a little bit. And then, we'll take a hard look at where I think we stand in the market with our names and where we see risk, and we'll make a final decision about kind of where leverage should be.

But as a general matter, I think, between 1.2 and 1.3, still seems like a reasonable place to be, particularly, when a lot of our reasonably good quality means a marked low, we think we'll recover. And that would argue that we don't need to be at even lower leverage because there's so much mark already in the names. And so, some of this is really artificial, but we have to look at it because it's based on fair value to that.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

And Aaron, on the credit facility, what sort of advance -- has the advance rate changed at all in terms of the value -- the fair market value of the assets up against the borrowings?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

So the advances are based on fair market value. So the advances themselves don't change. The only time that advances change is that in terms of how you categorize an asset. So with certain performance an asset that was historically counted as a first lien asset might have a portion -- if the leverage goes up in the underlying asset might have a portion that's considered second lien.

And then, you do a bifurcation of the asset into two buckets when you look at advance rates, but the increase themselves are advanced rates on fair market value. So obviously, as far market value comes down, the amount that is advanced comes down in terms of the borrowing base, but it doesn't mean if the advance rate moves.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

OK. That's it for me. Thank you.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Thanks, Chris.


Thank you. Our next question comes from the line of Robert Dodd with Raymond James. Your line is open.

Robert Dodd -- Raymond James -- Analyst

Hi, guys, and glad everybody's healthy. First, a housekeeping one, then, a couple of detailed questions. On the Rockdale Blackhawk, I mean, Ted, in your prepared remarks, you expect that settlement to be paid in, I think, the coming quarter. Does that mean the second quarter or the third quarter, just for clarity?

Ted Koenig -- Chief Executive Officer

Yeah. Good question, Robert. First of all, I'm glad you're safe and everything is good. I think it will get paid in Q2 is our plan right now.

You know, our lawyers are telling us that this money should be in Q2. So that's what we've been planning for.

Robert Dodd -- Raymond James -- Analyst

Got it. Got it. Thank you. And then on -- I have some questions today.

Can you give us any color on what percentage of your portfolio is, say, a cash monthly interest payout versus quarterly? And of those sho -- how many of have made the payment in April?

Ted Koenig -- Chief Executive Officer

Good question. I will tell you that most of our portfolio is quarterly pay. I don't have the specifics in front of me now, but we can certainly get that for you. But we set up our system, again, across our entire firm to be mostly quarterly pays.

And as Aaron mentioned in his prepared remarks, I mean, we've got a 97% or higher number paid our March payments. So we anticipate -- we don't anticipate -- hopefully, much fall off, but it's early yet. This is -- we're in May. We've got another six weeks or so to go to the end of the quarter.

I can tell you that we're dialoguing with our companies on a regular basis, a weekly basis. And because of the loan documentation that we have with companies in this spot in the market, we're able to get real time information, very often, a weekly financial information from the companies, and a very high percentage of our companies also applied for and we're successful in getting the PPP loans. That's another thing that you over -- sometimes people overlook. But in our segment of the market, because of our infrastructure, we were very, very active in helping and assisting our companies with the sole PPP program.

And that's going to, I think, pay dividends to us in more ways than one with stability and liquidity, as well as, performing -- our borrowers performer.

Robert Dodd -- Raymond James -- Analyst

Got it. Got it. I appreciate that color. Thank you.

And then one more, if I can. On the recovery process there's going to be recovery processes as we go through this, obviously. I mean, how are you going to allocate or what's the approach to maybe allocating time? It could be quite an intensive process, and in some cases, obviously, lockdown, very good recovery. The picture people, if we go back, not so good recovery, you spend a lot of time on that one.

So how is the allocation of resources going to be decided, if it's only 3% of the portfolio, it's not that bad, but we don't know how things are going to turn out. So, how is that allocation being of head count your time and some except of being allocated across the more stressed portfolio right now?

Ted Koenig -- Chief Executive Officer

That's a very good question. I will tell you that given the size of our platform, we've got some inherent advantages. And not only that, we've lined a few lessons over the years. And sometimes, the best lessons you learn are from less than positive outcomes.

The picture people transaction was not a great result for us. We put forth some efforts into that and we believe that we were making progress, and we didn't have the right people in the right spots there, and we have some lessons at the time. This time, it's different. We have eight people that we brought on to the firm over the last three, four years that are solely focused on workouts, restructuring, equity optimization.

We have an equity group now at the firm. That's led by a fellow named Brad Bernstein, who is an old guy like the rest of us, and he's been in the business for over 30 years. And he is a team of eight people that are all 15-, 20-year experience, people buying companies, managing companies, running companies. And what we've done is we've basically taken our high-risk companies and we're monitoring them in two different ways.

One, on behalf of a lender but also, two, as an equity owner because these are businesses that we could end up owning. We looked at Rockdale the same way. We went in and we bought up debt there with the intention of either operating or filing and making the claim, and in that instance, we chose to make a claim. Other instances, we took over companies and I'll tell you one that we have in our portfolio.

It's a maintenance repair operation, which is an airline company that does maintenance and repair. We took over that company years ago with broader Monroe Capital platform and we are able to restructure that, bring people in, run that business, and it's not part of the MRCC portfolio today. But what it is, is the situation where we brought the right resources to bear and that company is going to get sold for a high multiple of earnings. So with respect to MRCC specifically, most BDCs that cover the lower part of the middle market don't have the resources, eight equity workout -- dedicated workout people.

So the good news is with MRCC, it's getting the benefit of being part of the legal platform, all of the infrastructure, all the resources to run those companies to take them over, if we need to and to manage those processes out now so that we can focus on our day jobs of running MRCC and doing the right thing on a conservative basis for our shareholders.

Robert Dodd -- Raymond James -- Analyst

I appreciate that color. Thanks, Ted. Stay healthy.

Ted Koenig -- Chief Executive Officer

You too, Robert.


Thank you. Our next question comes from the line of Troy Ward with Ares Management. Your line is open.

Troy Ward -- Ares Management -- Analyst

Thank you and good morning, Ted and Aaron, and thanks for the call. I hope you're team is staying safe and healthy. First, we'd just like to comment on the details you provided, the breakout of the unrealized marks related to credit versus spread widening. As you're aware, that's extremely helpful.

For us to understand the movement in NAV and what we might expect in the future -- in the coming months and quarters. And as you correctly laid out, the spreads tightening and some amortization and some portfolio cash flow should see some natural occurrence, I think, Ted, as you used to get back into a lower leverage perspective. But kind of a follow-up on what -- I feel like a lot of the questions have been revolving around is really kind of the ability to put attractive capital out in the near-term without pushing that leverage back up. So, Ted, if you could speak to kind of conversations you're having maybe directly with the companies.

But maybe, the company's and their ability to access any potential government programs that could help on the lower side, but also, the private equity ability or willingness to put in additional capital. And also, the relaxation of some of the co-investment rules, is there an opportunity for other capital to come in and protect the investments in MRCC from the broader Monroe platform? So any commentary around that would be really helpful.

Ted Koenig -- Chief Executive Officer

Yeah. Good, Troy. Listen, I'm glad you asked that question, actually, it's a thoughtful one. The -- most people don't really understand in our market and the lower part of the middle market.

There's opportunities to play offense while you're playing offense, but there's also opportunities to put offense while your play defense. And the neat thing about our market is companies don't have the ability to go out and do bond offerings and do unsecured notes. In our part of the market, what we try to look for is ways to assist companies. It can be through a revolver draw.

It could be through a relaxation of a covenant. It could be introducing the company to go mezzanine debt provider to put additional capital in and reprice our loan. It can be leading on the private equity sponsor to do something. If we do something, then, we ask them to do something.

Very often, when we make a covenant waiver or we make a combination for our borrower, it's because we're doing that in concert with something else. The private equity sponsor is stepping up, additional equity, the sponsor is guaranteeing as part of our loans, the sponsor is committed to put forth capital in the future into the company. We're, as I mentioned earlier in my remarks, we've taken a very active program in assisting our companies with PPP money. We have 53 banks in our credit facilities across the Monroe platform.

The first thing that we did as a firm is, we've identified the banks that were most likely to assist each one of our portfolio companies. And then, we made the appropriate introductions to make sure that that process was set up appropriately. And then, we monitored the effectiveness of that and the staging of the applications and the approvals and the funds awarding under the PPP program. There's a couple of other programs now that are online and the regulations are being formed, the main street lending program, other loan programs were equally as active in those programs with our borrowers to make sure that they can access the liquidity.

So from a company standpoint, very often, the things that happen behind the scenes that don't show up in our earnings calls are the things that are the most effective in creating value and playing offense. And as I mentioned earlier, we're taking a hard look at all of our companies and we're being asked to make accommodations and to provide assistance. We're asking for the same benefit from our companies in terms of repricing and rerisking our portfolio and very often deleveraging as well. So, this is an interesting time in the space that we play.

We've got a number of different levers to pull that we can pull that in larger companies, they can't. And very often, in these -- the middle-market companies, too, we've got control over their income statement very often in terms of identifying areas where they can cut expenses encouraging them to make certain expense cut reductions and things to to preserve and protect cash as well. So that's a long winded answer to -- I think, your question, but it shows all the tools that we have available in our arsenal to work to bring to bear.

Troy Ward -- Ares Management -- Analyst

No, that's very insightful and very helpful. One last thing. I think you mentioned, the broader mineral platform as upwards of $9 billion of AUM. Can you speak to the the kind of dry powder, if you're -- if you're willing, that you have available to step in and put capital to work where needed?

Ted Koenig -- Chief Executive Officer

Sure. Sure. I will tell you that going into this crisis situation on March 1st, we had about $1.4 billion neighborhood of dry powder available at our Monroe Capital level. And as you know, we've got SCC co-investment capability that we can do across of our funds exempt of belief.

So we were feeling pretty good. We have been aggressively raising additional capital in the low level. We have a number of funds in the market. We have private credit funds in the market.

We have opportunistic funds. We have retail funds, high net worth funds, and we've been using this as a really -- as an opportunity to continue to raise capital from both institutional investors, sovereign wealth funds, pensions, endowments, foundations, retail, high net worth retail, and others that are looking for yield. You know, when the S&P drops 20% when bonds get hit, when LIBOR goes down, when U.S. Treasuries are 30-basis points for 10 years.

Investors don't really have anywhere to hide. And the best place to hide is in the private credit space generally. And within the private credit space, what investors are realizing is that you turn to the very best managers, the ones that have been around the longest, that have a track record probably with very long period of time. You know we've been doing this business 20 years now.

We've gone through four down cycles, two crisis, the dot com crash in 2000 and the great financial crisis in 2008. What will likely be the third crisis that people will look back to is the 2020 COVID pandemic. So we've got a playbook for dealing with this. You know, we've got the infrastructure.

We've got the capital. And you know, in each of the last downturns and crises, if you look at our track record, we've done very well in that vintage period. During and right after that crisis. I think that 2020, '21 and very much into '22 are going to be very strong periods for private credit and the firms that are set up and have the capital and the infrastructure to manage into be active in these periods.

I think we'll do very well. And the other side of that coin is the firms that are more one dimensional that have one product or are very highly concentrated set of investors or don't have the scale to you know to have the staying power over the next few quarters are not going to do as well. And quality always rises to the top and I'm confident that the infrastructure and the organization that we've built in Monroe will continue to deliver outsized returns during this crisis, after this crisis, just like it has in the last two crisis that we've experienced.

Troy Ward -- Ares Management -- Analyst

Great. Thanks. Great color, Ted.


Thank you. I am not showing any further questions. I will now turn the call back over to Ted Koenig for any closing remarks.

Ted Koenig -- Chief Executive Officer

I want to thank everyone today for joining the call. I know it ran a little bit longer than our prior calls. I think, there are a lot of good questions. Again, we don't take decisions and actions lightly, and we've put forth, I think, a thoughtful and decisive manner in which we're managing MRCC.

We've made some hard decisions at MRCC, which are going to be in the long-term best interest of our shareholders. And we continue to see value where we are today, as evidenced by a lot of the insider purchases that have been made in our company. And we wish everyone health and be safe, and we will all talk to you again next quarter, sometime in early August. So with that, any follow-up questions that anyone that has, as always, we endeavor to be as transparent as we can.

Please contact Aaron offline and I'm sure we can give more information that is requested. So, thank you, and everyone, have a good day.

Duration: 83 minutes

Call participants:

Ted Koenig -- Chief Executive Officer

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Bob Napoli -- William Blair and Company -- Analyst

Tim Hayes -- B. Riley FBR -- Analyst

Chris York -- JMP Securities -- Analyst

Chris Kotowski -- Oppenheimer and Company -- Analyst

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Robert Dodd -- Raymond James -- Analyst

Troy Ward -- Ares Management -- Analyst

More MRCC analysis

All earnings call transcripts

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Motley Fool Transcribing has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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