KBRA Affirms Ratings for MSC Income Fund, Inc.

KBRA affirms the BBB- issuer and senior unsecured debt ratings for MSC Income Fund, Inc. (NYSE: MSIF or “the company”). The rating Outlook is Stable.

Key Credit Considerations

The ratings are supported by MSIF’s well-diversified, granular investment portfolio of approximately $1.4 billion, comprising investments in more than 150 portfolio companies across over 30 industries as of June 30, 2026. Historically focused on the comparatively less competitive lower middle market, MSIF has gradually shifted toward Private Loan investments, which generally involve somewhat larger, private equity-sponsored borrowers. Upon its listing on the NYSE in January 2025 via IPO, MSIF changed its investment strategy with respect to new platform investments to be solely focused on its Private Loan investment strategy. As a result, the size of MSIF’s LMM investment portfolio is expected to decrease over time as existing Lower Middle Market (LMM) investments are repaid or sold, although MSIF plans to continue making follow-on investments in its existing LMM portfolio companies. Nevertheless, KBRA expects debt and equity position sizes to remain relatively granular compared to peers, reflecting the advisor’s core expertise and investment approach. The weighted average EBITDA of borrowers within MSIF’s Private Loan debt portfolio is approximately $33 million, modestly above the upper end of the typical lower middle market range.

The ratings also benefit from MSIF’s experienced management team, which has worked together in private credit markets for more than two decades, as well as its affiliation with Main Street Capital Corporation (NYSE: MAIN), whose broader investment platform provides established underwriting expertise, credit monitoring capabilities, and a demonstrated track record across multiple economic cycles.

MSIF maintains comparatively conservative leverage of approximately 0.9x, below rated peer levels. However, KBRA expects leverage to gradually increase as the company operates under the lower regulatory asset coverage requirement and asset growth potentially outpaces equity capital generation. This trajectory is consistent with management’s targeted leverage range of 1.15x–1.25x, which KBRA views as reasonable, particularly as senior secured first-lien Private Loan investments represent an increasing proportion of the portfolio and equity exposures decline.

MSIF’s funding profile has become increasingly diversified, comprising a secured revolving credit facility, an SPV asset-backed facility, and two issuances of senior unsecured notes, pro forma for the recent issuance and October 2026 note maturity. Following these transactions, unsecured debt is expected to represent approximately 45% of total debt, comparing favorably with rated peers and providing greater financial flexibility.

Counterbalancing these strengths are elevated non-accrual investments, representing 1.9% of fair value and 5.8% of cost, although improved modestly from 2.6% and 6.3%, respectively, a year earlier. The majority of non-accruals are senior secured first-lien investments, providing structural protections that may support recoveries and mitigate ultimate credit losses. Additional constraints include the portfolio’s limited liquidity, restrictions on earnings retention associated with MSIF’s regulated investment company (RIC) status, and an uncertain economic environment characterized by elevated base rates and geopolitical risks.

Rating Sensitivities

Given the Stable Outlook, a rating upgrade is not anticipated over the near-to-medium term. Over the longer term, sustained strong asset quality, an increased proportion of unsecured debt to at least 60% of total debt, and leverage maintained at or below management’s targeted range could support positive rating momentum. Conversely, negative rating action, including a downgrade and/or revision of the Outlook to Negative, could result from a significant U.S. economic downturn that materially weakens MSIF’s asset quality or leads to meaningfully higher leverage, including a breach of regulatory asset coverage requirements. Significant adverse changes in senior management or risk management policies could also pressure the ratings, although neither is anticipated.

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