- Apollo Global Management is in active talks to sell its $3 billion BDC, MFIC (formerly MidCap Financial Investment Corp), likely to another BDC in a share-for-share exchange.
- MFIC’s default rate surged to 5.3% in Q1 2026, up from 3.9% a year earlier, as several portfolio companies missed payments or entered workout situations.
- The fund reported a $61 million net loss in Q1 and its stock trades at roughly 85% of net asset value — a significant discount that makes capital-raising difficult and signals investor skepticism.
- A sale would allow Apollo to consolidate private credit assets under better-performing vehicles and avoid the reputational drag of a struggling public BDC.
What Happened?
Apollo Global Management is exploring a sale of MFIC, its publicly traded business development company with roughly $3 billion in assets, according to people familiar with the matter. The most likely structure is a merger with another BDC, where MFIC shareholders would receive shares of the acquiring fund. Apollo has been managing MFIC — formerly known as MidCap Financial Investment Corp — since 2022, but the fund has struggled as its portfolio of middle-market loans has soured. Defaults climbed to 5.3% in Q1 2026 from 3.9% a year ago, and the fund posted a $61 million net loss for the quarter. Its stock currently trades at around 85 cents on the dollar relative to its net asset value.
Why It Matters?
MFIC’s troubles are a microcosm of the broader stress building in private credit, but with an added wrinkle: the public market. Unlike institutional private credit funds, BDCs trade on stock exchanges, which means their difficulties are visible and immediate. A stock at 85% of NAV signals that the market doesn’t fully trust the book value of the loans — either because defaults will rise further, or because the fund will need to mark down assets. For Apollo, a sale cleanly removes a problem child from its product lineup. For the broader private credit industry, it’s a signal that not all players will survive the current period of rising defaults and falling yields intact. The likely BDC-to-BDC structure also suggests that consolidation — not liquidation — will be the dominant exit path for stressed funds.
What’s Next?
Talks are ongoing and a deal is not certain. Apollo could also choose to continue managing MFIC through the credit cycle if talks stall. If a sale proceeds, the acquiring BDC would need to absorb MFIC’s problem loans, likely at negotiated marks. Shareholders would receive shares of the buyer — and whether that’s attractive depends on the premium offered versus current trading prices. The deal would set a precedent for how large private credit managers handle underperforming public vehicles, and other BDC sponsors with similar stresses may be watching closely. More consolidation across the BDC universe is widely expected as the cycle plays out.
Source: The Wall Street Journal
