CION - Earnings call transcript Q1 2022 | CION Investment Corporation

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Operator

Greetings and welcome to the CION Investment Corp.

First Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jeehae Linford, a company representative. Thank you.

begin. may You

Jeehae Linford

market morning Quarter Good An to Investment morning CION press press of www.cionbdc.com the be at reviewed Thank March and XX-Q with company's the along in company's with XX, available filed First the before this section Form earlier SEC. ended earnings conjunction was supplemental release, Investor with Call. A is XXXX Resources presentation on Corporation's copy release the you. distributed welcome opened. website Earnings earnings in should the and Conference the

this filings risks a for performance which future reminder, conference uncertainties. result differ may and as are note those you Corporation on any law. number the the statements in obligation a of call conference SEC. purposes. forward-looking today's of of company's as guarantees Investment or only this As which undue Actual the date of call results update or reliance to by the no results is such including recorded that forward-looking unless place of of caution from call. statements statements not materially those factors, forward-looking replay required management's and view not CION being may with undertakes We involve a in forward-looking contain number reflects statements revise Please described a to

Please Officer; Mark. and that, to Investment to Michael Investment With Gatto. go Corporation's CION now Chief like Reisner, Keith Co-Chief Financial call and Gregg call Speaking turn Gatto today's Officers; Bresner, Mark ahead, over would on President be will Franz, Mark I Executive the Officer. and Chief

Mark Gatto

review joining of our quarter on reported activity additional start call results. and This our stand the financial and Keith Good will provide quarter Michael our our morning, today strategy everyone XXXX we with solid Gregg discuss where for during first us detail I will today. quarter will overview investment results. to Jeehae. our corporate date. we will morning, Thank first results. an long-term and thank you, you

per share for quarter Our the net investment to share for of income compared fourth as increased to XXXX. $X.XX $X.XX per first quarter the

income $XX the portfolio quarter of growth This as million. quarter's activity with the we the funded net portfolio net investment ended of reflects

our positioned growth we fully further invested. continue our and portfolio to We calls more begin will we topic the being remarks. have believe on into are plans benefits previous dive in his to discussed and this to see well of Michael grow

at funded lien keep in XX% the focused new at and new from of which activity investment As remain investment the XXXX repayments significant totaling the from solid, relative We end we're increase commitments $XXX $XX of a mentioned, million. these was XX% XX investment unchanged We million year and investments debt companies. investments quarter on commitments ended of portfolio a new level with with to represents portfolio investments sales to of XX% over such first able XXXX. our quarter, year-end the first to at of

Nonaccruals continues of the were investments leverage our growth at accounted and fair on year-end XXXX. disciplined to portfolio during percentage at a for measured perform placed we status There terms overall the quarter. from Currently, have new X.X% in no quality, decrease overall nonaccrual strategy. pursue portfolio ample the end, credit In slight the just of to quarter well. value capacity

asset to know, year. XXX% requirement call received we coverage reduce from XXX% approval of As of many you our at last the end ratio shareholder to on this

JPMorgan an and call top end, XX% had are an rates pursuant on for which floor subsequent SOFR and floating loan. will of this borrowing increasing At quarter increased of our weighted to our total investments, in discuss term performing of to with average the a million $XXX debt the We recognize interest during or in portfolio additional roughly rising by rate we quarter quarter loan million available principal Michael and in that X.XX%. mind was by shortly, industry. capacity borrowed more LIBOR of by XX% As unsecured $XXX from successfully our end, detail those floor million $XX to a amount

investment On rising to side, our rates impact interest we the net but cost borrowings rates the to continue do we will liability rise. expect increase on positive a expect as net income

as Inflation, As rising on times events perspective, aspects when impacting let believe that prudent while markets the know, continue lie the about we and We it Michael. generate me ability investment about without and risk with and income and we our the the that, geopolitical to we With have measured and global we growth think under uncertain a manner. from core are to we bearing managing turn living respect control in pursuing investment are are the interest capacity From our in macro we think strategy. all over to financial to U.S. uncertainties ahead, our rates broader economy. economies. focused

Michael Reisner

you, Mark morning, good Thank everyone. and

Given environment are provide that today, long-term few on our pertinent especially remarks a seems strategy to in the our economic and we it current positioning.

XXXX. of call BDC as a operated you CION this for on nearly listing to New a Stock Exchange prior nontraded York As know, on our in decade many

focus our with and our turn a lender the We deep lien ourselves approach investment by served niche secured have and our in through has on team high-quality current as to viewed always well investment, crowded yield. our sourcing our solid investor differentiation characterized in primarily first position our competitive and us BDC. we of singular returns relationships investment by opportunities a driven generating field, believe In senior

to New Stock enhanced us potential shareholders to provide Exchange on to our and growth. opportunity listing position us fall last for the York liquidity gave Our the

the total support our available to increased took reduce are after increase Despite loan quarter, by rate floating have JPMorgan we borrowing we year-end and March to lenders, increase the a of XXX% During principal at approval in objective from growth ratio XXXX. our April. initial challenging borrowing $XXX $XXX total asset of in million our market for to existing amount borrowings unsecured available to steps receiving X our from capacity shareholder by coverage term this $XX of X-year to closing million pleased million conditions, successfully committed planned consisting the in an

pursuing prudent Looking believe to investment high-quality ahead, continue manner. the continue current and measured that we in our exist uncertainty should plan a and Despite environment, growth is to exist. of the operating opportunities

that our shareholders. sourcing committed are for to order opportunities continue our these in We investments sense make doing to in make best

our returns Furthermore, expect leverage been it junior ever. rely times As debt companies our communicated debt preference In capital previously structure more always now, debt-to-equity equity investments. on primarily stand to to increase of which and range we ratio end be investments first-lien a to directly than X has result, finance portfolio generate to X.XX. we have at do behind lower the philosophy rather to risk-adjusted of targeted we utilize our least our to like than this from the to

Gregg Now, I'd like the our turn and the it overview market for to quarter. for investment an to over activity investor of

Gregg Bresner

war investor consumers quarter activity transaction loan the That decline from mutual first raises market records high for the nearly to Michael. you, quarter, over the inflation ETFs backdrop effectively and we market funds were continued quarter loan significantly of sector market U.S. seen some investment a $XX.X quarter net on the uncertainty have all particularly noted activity into sharing in particularly rippling February in the before everyone. needed as XXXX markets of some a issuance investors billion, March since through by market XB- of is we urgently pricing unprecedented during and We themes loan believe spreads, overriding fact first abated the uncertainty rattled that liquidity rating demand resulting well on unprecedented in early loan Thank of our for challenges as XXXX net billion, XXXX. work in market tighter the down riskier to XXXX XX% was into more broken March of volatility XX% eclipsed Ukraine February credit, of first time. on morning, subscriptions credits of uncertainty. deal U.S. loan of chain supply. since ending the supply to as This in new and over the challenges impacted $XXX.X to XX quarter of Overall, trend intuitively where totaled weekly the inflows their unsustainable XXXX. believe in total of spite fund The This and accounted market, cash eventually the leveraged XXXX. inflows Good moving for equivalent all-time the and for credit I outflow washing dynamic the the the fundamental the in and that borrowers total backdrop inflation quarter. issuance Nevertheless, effects for and of market the investment ever an start the overall managers some resulted any current in the In inflows at terms. most with the the will put quarter, flexing into new record. during fund in and impacts XXXX loan loan private chain masked least the supply data

XXXX in quarter maturity and December from issue The up New level points of X.XX%. the since the for in middle XXX XXX basis loans yield January XXXX. the spreads to highest March the institutional index basis points dramatically loan to end March in was The increased for points, at average XXX basis is market February.

market the of that structures predictive strong index for overall took lagging reversals later and While captures the that in return share relatively the sentiment credit leveraged substantially credit low default calculation basis resulted large affecting to as many capacity. XX our in mark-to-market a The approach negative macroeconomic down key volatility The as and rate and highly first-lien down Bond rates of fund's not default the U.S. quarterly points. certainly was the index X.XX%. NASDAQ value immune market to X.X% have driven indicator of Index, down We S&P by the corporate total Equity the XXXX S&P underwriting of continues selective first spreads believe our Index, rate point The to was increases geopolitical And S&P/LSTA in of debt to quarterly growth the the market CION profiling. X.X%. cautious diluted overall and utilization a was X.XX%. a X.X% covenant-wide of of total percentage investors implement XXX approach down diversified net of focus return default do an measured to and Investment-Grade the managers quarter debt the impact were of The in the increased indexes organic performance relatively The portfolio to place investing. for inherent profile, We defensive high-yield investors. loan through not and in S&P down factors quarter. Corporate the overall staunch outlook, we investment nature and sentiment. to our continued CION's return the to total overall current X%.

to avoid to having We us through to during have fundraises strategically market urgently put buy attractive work raise disproportionately that our and chosen market the investor returns inherently less to periods. the large risk cash

targeted chosen measured implement leverage a approach instead step-function to better X.XXx X.X to that have level to We originated investment our our fundraising our selective pipeline. growth to matches achieving

to of solid QX quarter CION QX the XXXX. of activity. market a volatile investment Turning Despite highly heels on was now the robust environment, a for

the X $XX million commitments existing quarter, and were were and the portfolio during totaling totaled million quarter, million commitments portfolio previously investment in unfunded. $XXX $XXX new unfunded new new we investment the made Fundings XX for $XXX funded of million across quarter. commitments million $XX During companies Of the made companies. X

We the market investments middle X.XX% originate investment increased million. funded maturity $XX ability loan lien of activity to our at to net a premium result, first yield to to index. a debt were significant by sustain As able new the S&P

QX, to weighted funded maturity yield lien of approximately average first the During fundings X.X%. was our

debt. X.X% value in second This end, X.X% with rate comprised unsecured portfolio X% on of in $X.X composition. and debt in Moving portfolio XX.X% of the XX.X% companies industries less in billion, total a products. quarter to loan structured included floating XX lien fair in lien performing XX% senior had XXX investments. XXX first X.X% portfolio in we Approximately of about in than equity, debt, was debt, At in secured investments across

quarter As investment performing of to annual X.XX% loan had weighted $XX.X to the average gross prior XX.XX% yield par March fourth average about end of million price of at compared leverage of portfolio a size X.XX% portfolio our of the a per XX, and of company. with an purchase

was companies our the average at weighted net credit X.Xx, stable our at compared X.XXx to XX, of The of XXXX. EBITDA weighted consistent at Turning interest debt The coverage quality. portfolio companies next to average X.XXx March to portfolio prior quarter. remained as XX, December with

X.X% fair XX, on status the compared costs, of amortized As of value to investment investments respectively, March X.X%, at X.X% and and and X.X% total nonaccrual were an respectively. portfolio at

not As of during status quarter, we the place on end of any nonaccrual new did the fourth the investments quarter.

with of increase investments internal X the to note, ratings X XX% rated X% make X roughly from investments than risk or Of and quarter up approximately to year-end those less Our of at higher total portfolio. at end. XX% continue

to at one that cost of down our It of our to the definition indicates that from to quarter investment year-end. XX% rated origination about is of a was X or end XX% turn Although higher a rating our and which were internal ability note interest but Keith. investments more increased rated grade dividend risk over recoup is the is with a of important requires acquisition call principal portfolio now an since such I of company risk through active It monitoring. to expected. return investment. full will X has A at

Keith Franz

Okay. Gregg Thank and morning, everyone. you, good

size first reported in Mark results, by increase investment the portfolio. solid driven our quarter of As we mentioned, the

quarter, or quarter. per $X.XX $XX.X investment During share million to increased net or in fourth per Total investment per in prior during compared $XX.X the compared the million income share $XX.X million by $XX.X $X.XX the the quarter. to income was to quarter million share $X.XX

million total prior At of operating The $XX.X equity and $XXX $X.X compared slightly total outstanding assets fees. of On total increase incentive the debt quarter, the shares higher interest primarily expenses million net assets expense end quarter. the with quarter of million had XX.X $XXX we to was the $XX.X billion the and in or to total million of outstanding. million and expense due were side, for

growth mark-to-market credit $XX.XX at debt-to-equity through share As $X.XX end portfolio of XX% reflects of was $XX.XX driven XX, NAV per in additional quarter NAV was declines the of quarter. than and our use per the compared was March share the portfolio. XX% liquid to ratio of our or price by the adjustments the X% fourth at which quarter, per to fourth end in a of The the the result, caused less wider end the the compared of At leverage. spreads decrease share at our our by

pipeline. our million our flexible and $XX in during quarter our our which credit from to ended lenders. another assets, $XX with debt senior sheet rate mentioned, under unencumbered Mark to current X-year in As access end, low we the with liquidity and facilities million floating facility had our balance in the our We a investment new with existing liquidity. strong capacity quarter, $XXX supported investments a finance servicing $XXX and additional and We an quarter solid one strong cash JPMorgan we growth in million loan leverage, $XXX million over by short-term enhanced upsized connection with secured the term of the million after portfolio. of borrowed unsecured Furthermore,

Our and the XXXX mix senior weighted is XX% XX% current about XXXX all maturing majority in secured facilities our secured our of X.X%, debt debt senior The unsecured. our cost debt in average of is and beyond. and with of unsecured maturing capital

in assuming increase rate portfolio or share the that's and our point about of of floor the no rate continue XX. debt interest as at above our an investment per increase XXX structure. a in rates base to increase next our current $X.XX base basis interest XXX income net As for $X.XX share for March point levels, we the rise changes expect And to the per basis

paid quarterly first our million, quarter, covered a to about we of $XX.X In by $X.XX fully per cash distributions income. our were of of distributions, regular shareholders distribution all which the terms taxable reflecting during share, of our

quarter a first As record June paid per note, declared on a held the in consistent share $X.XX to June our timing forward. we regular quarterly expect earnings declare for second of the we announce distribution share X, will and a X. release be on March which the regular this X shareholders reminder, second $X.XX on going in will quarter, This for to distribution third paid per as And the our with stick final August and of quarter. during distribution we be to to expect quarter

turn call I some that, With Okay. will the Mark over back for to comments. closing

Mark Gatto

Thank you, Keith.

increasingly the have over As our weather before about we our of we optimistic We evident with headwinds we we for believe prospects like considered believe thought the a we will despite are as that for relatively to the various proposition leverage, regarding flexibility final CION potential questions, communicate Currently, market value low and current cycles. measured very time to well through open line we as become discussed would platform concerns future the growth. that conditions.

that We credit a take solid during in senior laser and of high-quality ready we focus to with our on us also And questions. position, are that, believe times secured investments operator, uncertainty. greater particularly discipline places

Operator

first Fargo. Our O'Shea comes line Wells of the from question Instructions] with [Operator Finian

Unidentified Analyst

give Anything what's little bit credits this durable Or in It's Jordan be choice, what's quarter market be top of out kind given X a maybe through this there it on? active names going looking origination more on was maybe an business for something would helpful. kind business it this looking just of just looks your of on X or like can color might any for can -- services. that Fin. maybe new Is and was the lot like the you of was both? I services, in a of you

Gregg Bresner

are and the obviously, zero-beta a defensive Sure. now. against underwriting been really have [ph] for both. many significant economy It have for we now very but I while we a would combination defensive say of quarters is been to,

from of as point to credit that we feel underwriting seeing. as of comfortable that combination of the view a situations deal flow a a reflection it's So we're well

Unidentified Analyst

then credit, That's some heard as in into the on Okay. say And private private side. the on we managers that going we've helpful. liquid about what's yet hasn't in what's translated spread happening side so think maybe

-- out are tap you public even can was I selling you to willingness So any don't catch let's private are names? guys Anything Maybe wondering never color can terms about seeing liquid there? widen up, guys spreads off, thought that. the -- on though have just you in your credit, what some if add that you and into maybe loans say

Gregg Bresner

Sure.

always been very the recently, Up actual spreads we a challenge, the for big and of at hasn't we and attractive ability until in trading But market. of be candidly, Part So activity opportunities. looking for very that always to to between it execute. and what credits market. consider a difference in are good value while the there's terms looking we're quotes

So we are always we're of be up at market, that what But for that. where to can situation we we always looking discount. a at names special opportunities pick mindful consider particularly

Operator

the [Operator question Ground of Capital. Our Cardona-Fox from comes next Instructions] Jenaro North line with

Jenaro Cardona-Fox

I if and coordinated with see provide on wanted XXbX-X lock-up? next color if the more that's to the you any could being

Michael Reisner

Yes.

right. that's think I

next believe. is X, July So lockup our I

in point XXbX. we time, that will at So refocus on the

We expect implement QX probably plan. QX late to and that

Operator

and question-and-answer session. our concludes you. management gentlemen, final any comments. the to turn floor Thank back for this Ladies I'll

Mark Gatto

us joining call. grow support our reiterate And We what is and appreciate to market. a perform advantage feel our uncertain like we in will and all that this in ability give given just scale to can manner. we'd your and to methodically that real an continue Again, we the you very confident believe prudently thank we for

and speaking soon. with thank forward look you So to you we

Operator

Thank concludes you. conference. today's This

this Thank at disconnect your time. may participation. your you You for lines

CION Investment (CION) 15 May 222022 Q1 Earnings call transcript