KBRA assigns a rating of BBB- to MSC Income Fund, Inc.'s (NYSE: MSIF or “the company”) $150 million, 6.34% senior unsecured notes due 2029. The rating Outlook is Stable. The proceeds will be used for repayment of existing secured indebtedness.

Key Credit Considerations

The rating is supported by MSIF’s well diversified $1.3 billion investment portfolio spread among 150 portfolio companies (including equity investments) across 30+ industries as of 4Q25, with ~77% of its portfolio consisting of senior secured first lien loans. The top three portfolio sectors are Electrical Equipment (9.8%), Machinery (8.0%), and Commercial Services & Supplies (6.6%), indicating a highly granular portfolio. Historically, MSIF invested primarily into the comparatively less competitive lower middle market but has shifted the portfolio to more exposure to Private Loan investments, which are typically slightly larger, and to companies owned/being acquired by a private equity fund. We expect this dynamic to continue as the company changed the investment strategy to be solely focused on Private Loan investments when it completed the listing of its common stock on the New York Stock Exchange and the follow on offering in January 2025, raising just over $90 million in new equity.

MSIF maintains SEC exemptive relief to co-invest with Main Street Capital Corp. (NYSE: MAIN), the owner of MSIF's adviser and MAIN's affiliates with 100% of the investment portfolio overlapped with MAIN as of 4Q25. MSIF’s solid management team has a long track record working within the private credit markets having been together for 20+ years. The MAIN platform provides a 25+ year history of strong credit performance through economic cycles.

The company's leverage ratio of 0.82x is low relative to peers though we expect leverage to trend up as the prior 200% asset coverage requirement has rolled off and the company’s asset growth will potentially outstrip equity capital growth. This is consistent with management's expected target ratio of 1.15x-1.25x after the regulatory coverage decrease. We view this as reasonable, particularly as the senior secured first lien-focused Private Loan investment book grows in proportion to the overall balance sheet.

MSIF’s funding profile has become more diversified over time and is comprised of a secured revolving bank facility, an SPV asset facility, and now two issues of senior unsecured notes following the subject issuance. Pro-forma for the new issuance, the ratio of unsecured debt to total debt is expected to be ~50%, which is relatively strong compared to rated peers, though we note that the firm has $150 million of near-term unsecured debt maturities (October 2026). As such, to the extent that additional unsecured debt is not issued ahead of the maturity, we would expect the ratio of unsecured debt to total debt to revert to ~30%, more in-line with rated peers. As of 4Q25, the company had adequate liquidity of $92 million in available credit lines and $20.6 million of cash set against $128.9 million of unfunded loan commitments and the aforementioned $150 million of near-term debt maturities. We expect the company to continue to be opportunistic in its issuance of senior unsecured notes.

Counterbalancing these strengths are elevated non-accruals at 1.4% and 4.6% at FV and cost, respectively, slightly down from 1.5% and 5.6% at FV and cost, respectively, at 4Q24. However, the vast majority of non-accruals relate to senior secured first lien loans, likely providing for higher recovery rates. In addition, credit strengths are counterbalanced by the expected mostly secured funding profile, though somewhat offset by low leverage. Further counterbalancing strengths are potential risks associated with all BDCs such as MSIF’s illiquid assets, retained earnings constraints as a regulated investment company (RIC), and the uncertain economic environment with high base rates, inflation, and geopolitical risks.

Incorporated in 2011 as a Maryland corporation, MSIF is a closed-end, externally managed, non-diversified investment company that has elected to be treated as a business development company under the Investment Company Act of 1940 and as a RIC, which, among other things, must distribute to its shareholders at least 90% of the company’s investment company taxable income.

Rating Sensitivities

We do not anticipate a rating upgrade in the near-to-medium term. A rating downgrade and/or Outlook change to Negative could be considered if there is a significant downturn in the U.S. economy with negative impact on MSIF’s asset quality, and leverage, or if regulatory asset coverage is breached. A significant change in senior management and/or risk management policies could also lead to negative rating action, though is not expected.

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Methodologies

• Financial Institutions: Finance Company Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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