MidCap Apollo's Net Assets Rise Amidst Increased Unrealized Losses

TL;DR

**MidCap Apollo's rising unrealized losses are a red flag, signaling potential portfolio weakness despite higher investment income.**

AI Summary

MidCap Apollo Institutional Private Lending reported a net increase in net assets from operations of $17.232 million for the six months ended June 30, 2025, a decrease from $23.342 million in the prior year period. Total investment income rose to $49.694 million for the six months ended June 30, 2025, up from $48.361 million in the same period of 2024, driven by an increase in PIK interest income to $1.525 million from $489 thousand. However, net realized and change in unrealized losses significantly impacted performance, totaling $(8.985) million for the six months ended June 30, 2025, compared to $(1.202) million in the prior year. Net assets increased to $382.979 million as of June 30, 2025, from $364.527 million at December 31, 2024. The company issued 1,015,847 common shares for net proceeds of $25.000 million during the six months ended June 30, 2025, a decrease from $60.000 million in the prior year. Debt (net of deferred financing costs) decreased to $556.456 million from $573.522 million over the same period, while cash and cash equivalents declined from $33.276 million to $17.344 million.

Why It Matters

For investors, the significant increase in net realized and unrealized losses to $(8.985) million for the six months ended June 30, 2025, compared to $(1.202) million in the prior year, signals potential valuation challenges within its private lending portfolio. While net investment income grew, this erosion of asset value could impact future distributions and overall shareholder returns. The decrease in net proceeds from common share issuance from $60.000 million to $25.000 million suggests a slowdown in capital raising, potentially affecting the company's ability to fund new investments and compete in the private credit market. Employees and customers might see this as a sign of a more cautious operational environment, while the broader market will watch how MidCap Apollo navigates these valuation pressures in a competitive private lending landscape.

Risk Assessment

Risk Level: medium — The risk level is medium due to the substantial increase in net realized and change in unrealized losses to $(8.985) million for the six months ended June 30, 2025, from $(1.202) million in the prior year, indicating potential deterioration in asset quality. Additionally, cash and cash equivalents decreased significantly from $33.276 million to $17.344 million, reducing liquidity.

Analyst Insight

Investors should scrutinize the underlying reasons for the increased unrealized losses and monitor future filings for trends in asset valuations. Consider if the current distribution yield adequately compensates for the increased portfolio risk and reduced liquidity, and evaluate the company's strategy for managing credit risk in its private lending portfolio.

Financial Highlights

debt To Equity

1.45

revenue

$49,694,000

operating Margin

N/A

total Assets

$958,819,000

total Debt

$556,456,000

net Income

$17,232,000

eps

$23.98

gross Margin

N/A

cash Position

$17,344,000

revenue Growth

+2.76%

Revenue Breakdown

Key Numbers

• $17.232M — Net increase in net assets from operations (Decreased from $23.342M in prior year period)
• $49.694M — Total Investment Income (Increased from $48.361M in prior year period)
• $1.525M — PIK interest income (Increased from $489K in prior year period)
• $(8.985)M — Net realized and change in unrealized losses (Significantly increased from $(1.202)M in prior year period)
• $382.979M — Total Net Assets (Increased from $364.527M at December 31, 2024)
• $25.000M — Net proceeds from common shares issuance (Decreased from $60.000M in prior year period)
• $556.456M — Debt (net of deferred financing costs) (Decreased from $573.522M at December 31, 2024)
• $17.344M — Cash and cash equivalents (Decreased from $33.276M at December 31, 2024)
• 15,969,674 — Common shares outstanding (As of June 30, 2025)
• $23.98 — Net Asset Value Per Share (As of June 30, 2025, decreased from $24.43 at December 31, 2024)

Key Players & Entities

• MidCap Apollo Institutional Private Lending (company) — Registrant
• $17.232 million (dollar_amount) — Net increase in net assets from operations for six months ended June 30, 2025
• $23.342 million (dollar_amount) — Net increase in net assets from operations for six months ended June 30, 2024
• $49.694 million (dollar_amount) — Total Investment Income for six months ended June 30, 2025
• $48.361 million (dollar_amount) — Total Investment Income for six months ended June 30, 2024
• $1.525 million (dollar_amount) — PIK interest income for six months ended June 30, 2025
• $489 thousand (dollar_amount) — PIK interest income for six months ended June 30, 2024
• $(8.985) million (dollar_amount) — Net realized and change in unrealized gains (losses) for six months ended June 30, 2025
• $(1.202) million (dollar_amount) — Net realized and change in unrealized gains (losses) for six months ended June 30, 2024
• $382.979 million (dollar_amount) — Total Net Assets as of June 30, 2025

FAQ

Risk Factors

• Increased Net Realized and Unrealized Losses [high — financial]: The company experienced a substantial increase in net realized and change in unrealized losses, totaling $(8.985) million for the six months ended June 30, 2025, compared to $(1.202) million in the prior year. This indicates a significant deterioration in the fair value of investments or realized losses from sales.
• Declining Cash Position [medium — financial]: Cash and cash equivalents decreased from $33.276 million at December 31, 2024, to $17.344 million as of June 30, 2025. This reduction in liquidity could impact the company's ability to meet short-term obligations or capitalize on new investment opportunities.
• Reduced Equity Issuance [medium — financial]: Net proceeds from common shares issuance decreased significantly to $25.000 million for the six months ended June 30, 2025, down from $60.000 million in the prior year. This reduction in capital raised could limit future growth and investment capacity.
• Valuation of Investments [medium — market]: The significant increase in unrealized losses suggests potential challenges in accurately valuing illiquid private debt instruments, especially in volatile market conditions. The fair value of non-controlled/non-affiliated investments decreased from $909.845 million to $922.183 million, but this is offset by realized and unrealized losses.
• Leverage Levels [medium — financial]: While debt decreased to $556.456 million from $573.522 million, the company still maintains a significant debt load relative to its net assets. The ratio of debt to net assets is approximately 1.45:1, indicating substantial financial leverage.

Industry Context

MidCap Apollo Institutional Private Lending operates in the private credit market, providing debt financing to middle-market companies. This sector is characterized by increasing competition and a demand for flexible, bespoke financing solutions. While the overall market for private credit has grown, rising interest rates and economic uncertainty present challenges in asset valuation and credit risk management.

Regulatory Implications

As a private lending entity, the company is subject to financial regulations concerning capital adequacy, risk management, and investor protection. Changes in accounting standards or regulatory oversight could impact reporting requirements and operational flexibility. The increase in PIK interest and unrealized losses may attract closer scrutiny regarding valuation methodologies and risk assessment.

What Investors Should Do

1. Monitor the trend of increasing realized and unrealized losses.
2. Analyze the sustainability of the increased PIK interest income.
3. Evaluate the company's liquidity position.
4. Assess the impact of reduced equity issuance on future growth.

Key Dates

• 2025-06-30: End of Six-Month Period — Reporting period for the 10-Q, showing decreased net assets from operations and increased investment income, but significantly higher losses.
• 2025-06-30: Net Asset Value Per Share — Stood at $23.98, a decrease from $24.43 at the end of the previous fiscal year, reflecting the impact of losses on per-share value.
• 2025-06-30: Common Shares Outstanding — Increased to 15,969,674 from 14,922,603 at December 31, 2024, due to share issuances.
• 2024-12-31: End of Fiscal Year — Prior period comparison point for assets, liabilities, and net assets.

Glossary

PIK interest income

Payment-in-Kind interest income, where interest is paid in the form of additional debt or equity rather than cash. (A significant increase in PIK interest income ($1.525M vs $489K) contributed to higher total investment income, but may indicate less cash generation from investments.)

Net realized and change in unrealized losses

The sum of profits or losses from selling investments (realized) and the changes in the market value of investments still held (unrealized). (These losses increased substantially to $(8.985)M, negatively impacting the net increase in net assets from operations.)

Net Asset Value Per Share (NAVPS)

The value of a company's net assets divided by the number of outstanding shares. (Decreased to $23.98 from $24.43, indicating a decline in the per-share value of the company's holdings.)

Debt (net of deferred financing costs)

The total amount borrowed by the company, reduced by the unamortized costs associated with obtaining that debt. (Represents a significant portion of the company's liabilities, decreasing slightly to $556.456M.)

Year-Over-Year Comparison

Compared to the prior year period, MidCap Apollo Institutional Private Lending reported a lower net increase in net assets from operations ($17.232M vs $23.342M). While total investment income saw a modest increase to $49.694M, driven by a substantial rise in PIK interest income, this was overshadowed by a significant escalation in net realized and unrealized losses, which grew from $(1.202)M to $(8.985)M. The company also raised less capital through equity issuance ($25M vs $60M) and saw its cash reserves decline substantially.

Key Financial Figures

• $0.001 — ares of the Registrant's Common Shares, $0.001 par value per share, outstanding as of

Filing Documents

• ck0002006758-20250630.htm (10-Q) — 15858KB
• ck0002006758-ex31_1.htm (EX-31.1) — 15KB
• ck0002006758-ex31_2.htm (EX-31.2) — 15KB
• ck0002006758-ex32.htm (EX-32) — 9KB
• 0000950170-25-107988.txt ( ) — 47242KB
• ck0002006758-20250630.xsd (EX-101.SCH) — 1773KB
• ck0002006758-20250630_htm.xml (XML) — 9602KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1. Consolidated Finan cial Statements 1 Consolidated Statements of Assets and Liabilities as of June 30, 2025 (Unaudited) and December 31, 2024 1 Consolidated Statements of Operations for the three and six months ended June 30, 2025 and June 30, 2024 (Unaudited) 2 Consolidated Statements of Changes in Net Assets for the three and six months ended June 30, 2025 and June 30, 2024 (Unaudited) 3 Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and June 30, 2024 (Unaudited) 4 Consolidated Schedule of Investments as of June 30, 2025 (Unaudited) 5 Consolidated Schedule of Investments as of December 31, 2024 30

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 48 Report of Independent Registered Public Accounting Firm 74 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 75 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 84 Item 4.

Controls and Procedures

Controls and Procedures 85

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 86 Item 1A.

Risk Factors

Risk Factors 86 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 86 Item 3. Defaults Upon Senior Securities 86 Item 4. Mine Safety Disclosures 86 Item 5. Other Information 86 Item 6. Exhibits 87

Signatures

Signatures 88 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION In this report, the terms the " Company ," " we ," " us ," and " our " refer to MidCap Apollo Institutional Private Lending unless the context specifically states otherwise.

Consolidated Financial Statements

Item 1. Consolidated Financial Statements MIDCAP APOLLO INSTITUTIONAL PRIVATE LENDING CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (In thousands, except share and per share data) June 30, 2025 December 31, 2024 (Unaudited) Assets Investments at fair value: Non-controlled/non-affiliated investments (cost $ 939,170 and $ 918,595 , respectively) $ 922,183 $ 909,845 Non-controlled/affiliated investments (cost $ 7,216 and $ 0 respectively) 7,216 — Cash and cash equivalents 17,344 33,276 Foreign currencies (cost $ 1,519 and $ 711 , respectively) 1,553 678 Receivable for investments sold 959 8,607 Interest receivable 9,550 5,399 Other assets 14 — Total assets $ 958,819 $ 957,804 Liabilities Debt (net of deferred financing costs and unamortized original issue discount of $ 7,951 and $ 5,150 as of June 30, 2025 and December 31, 2024, respectively) $ 556,456 $ 573,522 Payable for investments purchased 15 — Management fees payable 482 — Performance-based incentive fees payable 788 — Distributions payable 12,575 13,169 Interest payable 2,762 3,256 Accrued administrative services expense payable 362 1,414 Unrealized depreciation on foreign currency forward contracts 39 — Other liabilities and accrued expenses 2,361 1,916 Total liabilities $ 575,840 $ 593,277 Commitments and contingencies (Note 8) Total Net Assets $ 382,979 $ 364,527 Net Assets (Note 6) Common shares, $ 0.001 par value ( Unlimited shares authorized; 15,969,674 shares issued and outstanding as of June 30, 2025 and 14,922,603 shares issued and outstanding as of December 31, 2024) 16 15 Capital in excess of par value 387,185 375,365 Accumulated under-distributed (over-distributed) earnings ( 4,222 ) ( 10,853 ) Net Assets $ 382,979 $ 364,527 Net Asset Value Per Share $ 23.98 $ 24.43 See notes to the consolidated fin

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