Main Street Announces New Portfolio Investment and Partial Exit of Portfolio Investments in an Existing Portfolio Company
Main Street Capital (NYSE: MAIN) has announced two significant transactions. The first is a $36.9 million investment in Nello Industries, to facilitate a management-led buyout. Nello, a manufacturer of engineered poles and towers, received a combination of first lien, senior secured term debt, a direct equity investment, and a revolving line of credit from Main Street and its co-investor to support future growth.
The second involves a partial exit from a Lower Middle Market portfolio company after the company's combination with a strategic acquirer. Main Street realized a $10.4 million gain from selling the company’s operating assets and holds a minority equity ownership in the acquirer. Additionally, Main Street has earned $10.1 million in dividends and achieves an annual IRR of 53.2% and a 4.6x money invested return on its equity investment. On a cumulative basis, including both debt and equity investments, the IRR is 22.1% with a 1.7x money invested return.
- $36.9 million investment in Nello Industries,
- Realized a $10.4 million gain from a partial exit in a portfolio company.
- Earned $10.1 million in dividends from the portfolio company.
- Achieved a 53.2% annual IRR on equity investment in the portfolio company.
- Attained a 4.6 times money invested return on equity investment.
- Cumulative IRR of 22.1% and 1.7 times money invested return including debt investments.
- Remaining contingent consideration has a fair value of $2.4 million against a maximum realizable value of $4.1 million.
- Partial exit implies remaining exposure and dependence on future contingent payments.
Insights
Main Street Capital Corporation's recent activities offer multiple insights for investors. The new portfolio investment in Nello Industries totaling
Moreover, the combination of first lien, senior secured term debt and a direct equity investment provides a balanced risk-reward profile. The revolving line of credit supports Nello's growth initiatives, which can lead to significant returns if the company expands as expected. The involvement of Nello's founding management team further adds a layer of confidence as they have inherent knowledge and vested interest in the company's success.
On the other hand, the partial exit from a lower middle market company generated a realized gain of
The investment in Nello Industries comes at a time when infrastructure improvements in electric utility and telecommunications are paramount, particularly with the ongoing transitions to 5G technology and renewable energy sources. Nello's focus on steel poles and structures positions it well to capitalize on this trend, which can translate into robust future growth. The revolving line of credit indicates Main Street's commitment to supporting Nello's strategic initiatives and enhancing its competitive edge.
The exit from the existing portfolio company, yielding a 10.4 million realized gain, highlights a successful investment cycle and showcases Main Street's ability to identify and capitalize on lucrative opportunities. The continued ownership of contingent consideration, valued at
The structure of the investment in Nello Industries, involving first lien, senior secured term debt and equity investment, indicates a comprehensive risk mitigation approach. First lien debt secures Main Street's position at the top of the repayment hierarchy, ensuring higher security in the case of financial distress. The equity portion allows for participation in potential upside due to Nello's growth.
Furthermore, the revolving line of credit and the provision for additional growth capital reflect a well-structured deal accommodating future financial needs and growth aspirations of Nello. The realized gain from the partial exit in another portfolio company and the retention of minority equity ownership in the acquirer enhance Main Street's diversified investment strategy, reducing risk exposure while maintaining potential for future earnings.
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Main Street is also pleased to announce that it recently exited its debt investments and partially exited its equity investments in a Lower Middle Market portfolio company (the "Existing Company") upon the combination of the Existing Company with a strategic acquirer through the sale of the Existing Company's operating assets. The Existing Company is a leading designer, manufacturer and distributor of decorative planters, fountains and related home décor items through partnerships with growers, garden shops and traditional and online retailers.
Main Street, along with its co-investor, made its initial investment in the Existing Company in March 2020, with Main Street's investment consisting of a
In May 2023, the Existing Company successfully sold this subsidiary to a strategic acquirer for upfront cash and future contingent consideration. The Existing Company continues to own the right to future contingent consideration payments from the sale of the subsidiary that are payable based on the achievement of certain future performance measures. Main Street's current remaining portion of the contingent consideration, through its equity ownership in the Existing Company, represents a maximum realizable value of
The sale of the subsidiary allowed the Existing Company to continue its focus on product innovation, supply chain management and exceptional customer service in its base business, allowing the Existing Company to capture significant additional market share with new and existing customers. This significant growth culminated with the recent combination of the Existing Company with the strategic acquirer.
Main Street realized a gain of
ABOUT MAIN STREET CAPITAL CORPORATION
Main Street (www.mainstcapital.com) is a principal investment firm that primarily provides long-term debt and equity capital to lower middle market companies and debt capital to middle market companies. Main Street's portfolio investments are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. Main Street seeks to partner with entrepreneurs, business owners and management teams and generally provides "one-stop" financing alternatives within its lower middle market investment strategy. Main Street's lower middle market portfolio companies generally have annual revenues between
Main Street, through its wholly owned portfolio company MSC Adviser I, LLC ("MSC Adviser"), also maintains an asset management business through which it manages investments for external parties. MSC Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended.
Contacts:
Main Street Capital Corporation
Dwayne L. Hyzak, CEO, dhyzak@mainstcapital.com
Jesse E. Morris, CFO & COO, jmorris@mainstcapital.com
713-350-6000
Dennard Lascar Investor Relations
Ken Dennard | ken@dennardlascar.com
Zach Vaughan | zvaughan@dennardlascar.com
713-529-6600
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SOURCE Main Street Capital Corporation
FAQ
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