Main Street Capital Corporation (NYSE:MAIN) reported net investment income of $0.59 per share for the fourth quarter, contrasting favorably to the company's current monthly dividend of $0.165 per share. Net increase in net assets per share, which includes investment income plus realized and unrealized gains and losses in the portfolio, came in at $0.49 per share.

Ups and downs
Main Street Capital telegraphed in its fourth-quarter update that it expected to post gains in its lower middle market portfolio, and losses in its middle market loan book. It noted that volatility in middle market loans would require writedowns on some of its investments.

No surprises here. Its lower middle-market investments performed well in the aggregate, while its private-loan and middle-market investments saw unrealized depreciation in the quarter. All in all, realized and unrealized gains tallied to a positive $5.1 million.


Unrealized gains or losses

Realized gains or losses

Lower middle market

$7 million gain

$12.4 million gain

Middle market

$14.2 million loss


Private loan

$3.2 million loss


Asset management business

$7 million gain


"Other portfolio investments"

$3.9 million loss


Source: Company press release.

Some notable items included a write up on the company's growing asset management business. As part of an agreement with Hines Securities, Main Street Capital provides advisory services to an unlisted BDC. Yes, it's a BDC that manages another BDC.

With $500 million in assets under management, its private BDC has a balance sheet nearly one-third as large as Main Street Capital's. It's part of the reason why Main Street Capital has managed to be so much more efficient than its peers. The company passed on $700,000 of expenses -- roughly 11% of its non-interest operating expenses -- to its asset manager during the quarter.

Portfolio non-accruals grow by one... kind of
As announced in its update, the company put another asset on non-accrual during the quarter. In total, five investments were on non-accrual as of Dec. 31, 2014, accounting for 1.7% and 4.7% of assets at fair value and cost, respectively. It did point out that it expected one asset to come off non-accrual during the current quarter, however, essentially leaving its non-accrual assets flat quarter over quarter.

As the annual report has yet to be filed with the SEC, it's impossible to know exactly how its portfolio companies are performing on an individual basis. We know only what it revealed in the press release -- 23 LMM investments were written up in value, and six were written down.

Given that no information is available for its middle-market or private-loan portfolios, I'd expect that writedowns were more frequent, but less severe to account for falling loan prices during the quarter.

Many of its portfolio companies are headquartered in the Houston area, so we'll want to see what impact falling oil prices had on its most exposed portfolio companies. Oil and gas investments tallied to 9.8% of the portfolio at fair value as of Sept. 30, 2014.

All in all, it appears as though Main Street Capital ended 2014 with much better results than its peers; but shareholders should wait until the annual report -- and its juicy details -- before calling it a slam dunk.

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