Web API Basic Authentication returns 401 - authentication

Question

I've build a web api service with basic authentication and using a global DelegatingHandler implementation which I hook up to the web API GlobalConfiguration, in order to extract the username:password credentials from the request and hook an IPrincipal to the HttpContext if the credentials map to a valid user.
I've tested my api thoroughly on localhost and it's working fine, but not quite when hosted on IIS on a VPS.
I've hooked up remote debugging on the VPS in order to inspect whats going on and it turns out that whenever I include the authorization header to my request, the breakpoints I have set on the message handler are not getting hit, meaning that the request does not reach the handler. If I remove the Authorization header from the request, the breakpoint is getting hit and the handler is able to process it.
Since the message handlers are the first that will process the request in the pipeline (from what I know of, correct me if I'm wrong) I guess there must be an IIS or setup issue that I'm not aware of that messes the authentication process.
Fiddler Request Headers
GET http://myip/api/v1/route/parameter HTTP/1.1
Content-Type: application/json; charset=utf-8
Authorization: Basic ZHJpdmVyOjEwMTAyMDAz
Host: myip
Fiddler Response Headers
HTTP/1.1 401 Unauthorized
Cache-Control: no-cache
Pragma: no-cache
Content-Type: application/json; charset=utf-8
Expires: -1
Server: Microsoft-IIS/8.5
X-AspNet-Version: 4.0.30319
WWW-Authenticate: Basic realm="myip"
X-Powered-By: ASP.NET
Date: Mon, 22 Aug 2016 15:04:15 GMT
Content-Length: 61
{"Message":"Authorization has been denied for this request."}
What could be possibly be wrong, where should I look at for a solution?
EDIT
Had to disable Basic Authentication from the Authentication menu on the right pane setting for the IIS application.