ICMB - Earnings call transcript Q1 2020 | Investcorp Credit Management BDC, Inc.

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Operator

Welcome to Investcorp Credit Management BDC Earnings Conference Call.

Your speakers for today's call are Mike Mauer, Chris Jansen and Rocco DelGuercio. [Operator Instructions] A question-and-answer session will follow the presentation.

I'll now turn the call over to your speakers. Please begin.

Michael Mauer

operator. you, Thank for all this afternoon. Thank joining you us Co-Chief me Rocco and Chris my are Jansen, Investment DelGuercio, Officer; With our CFO.

Before statements. give information we our customary disclaimer will begin, regarding and Rocco? forward-looking Rocco the

Rocco DelGuercio

by Audio to will call Thanks Mike. being our and website is in visiting Any Investcorp any this that unauthorized everyone be of prohibited. today's is property Management icmbdc.com. call form recorded, at the page remind replay call Credit Relations I call on is that broadcast available of like the would BDC. Investor of strictly this our

your I may to and would also differ projections. materially include forward-looking like to press may forward-looking call Safe call our disclosure from information these release statements today's regarding attention in and results Harbor actual that everyone remind the projections,

statements not our please filings, unless by latest law. of on visit will copies update our required To our obtain We website. SEC page Investor Relations forward-looking

would Michael this like CEO, and to I call our Chairman the turn Mauer. At time, back to

Michael Mauer

Thanks, XX, the during the Partners quarter CM of Rocco. X September On in which XX. by occurred fiscal first through our August from majority Investment July Investcorp interest runs acquisition

one hand, have implementing was continued over the the portfolio been our it of transitions also a we year, transition quarter quarter for a for on While team.

talk Our ICMB. BDC name and BDC’s Inc. today here Investcorp will results Management Credit ticker CMFN we changes about from to CM Finance,

management and in and changed team. size the composition, investment changed board funds hasn't Our what is

originating we dividend shareholders. remains focus in to best consistent can assets Our investing a adjusted the deliver of mix and to risk our

the average which this balance design focused diversify across continues. also portfolio companies. necessity, appropriate By on helps risk. an to means number work and new reposition We ongoing portfolio manage sizes, smaller of Our industries to position while increasing and maintaining our

focusing first-lien loans three conservative first-lien Throughout our today. comprised is over investments been on and quarters of portfolio year, we've the past

managing great has our Although challenges created these new originating new in there portfolio, investments. a credit idiosyncratic been simultaneously done the investments opportunities underwriting job have team while company and issues that portfolio

as whether have $XXX million believe view transactions of structure borrower usual friendly. million don't than where are selective that protections more in compelling, of even economics we borrower has our $XX or the new the entire a been late, have deals EBITDA, are seen we too We've or

We the now to challenging Investcorp, don't a environment. into excessive lend documentation and stretch past seeing with nimble are we've that or with for are investments part are and want we bad we over quarter. of the It's deal we’re situations made flow we But increased to yield. leverage happy

now I'll activity then quarter-end Chris with our all as through investments. investment And our will walk the during conclude financials discuss XXXX. toward look we and will speak our about further. most outlook noteworthy commentary after in then I'll some and about Rocco detail

I'd With As we'll that, end always, Chris. Q&A. it turn like to over to with

Christopher Jansen

Thanks, companies new including Mike. We invested this three quarter, portfolio in four portfolio companies.

first-lien All were investments of our in loans.

we had also investments. four After quarter. additional the realizations made quarter-end, We three during

on First, positions. approximately million Industrial and $X.X XXXX draw like our revolver. funded We cover on fundings services to I'd revolving delayed

term of the company's amount debt small a to advanced also We support growth.

cost on yield is these positions X.X%. at Our

utilized first-lien incremental Carlyle. the auto loans the URS is States. in in United Road invested loan service sponsored transportation We Services, company the This leading United was acquisition. make to by an to

products very and Technologies. first-lien manufacturer Hyperion of loan is made is hard from diamonds. hard club synthetic an yield-to-cost a industrial for Materials We X.X%. carbide and materials, Hyperion participate in Our approximately &

out was year. by It of last carved Sandvik KKR

X.X%. at cost is approximately yield Our

Lehman. services owned club in the participants to environmental by markets. is remediation loan facility an NorthStar also Group on J.F. and first-lien the Services, we're deconstruction management focused Finally, company and NorthStar

X.X%. We quarter-end. and quarter, no realizations this four at yield had is realizations Our cost after approximately full

previously Wireless, of sold also our a funded sold debt our we summer. holding delay the We draw position to PR fully which had the commitment, over final as was bulk Mobile. exposure First, known only Open

was we on Today, Mobile’s NAV realized IRR Open fully an loans have approximately Open no Our perspective. XX.X%. Mobile exposure from to

carry as company Wireless cap. quality, do such as yielding This investment. non-core ultimately warrants zero PR our continue viewed high our position. in value, we portfolio is third and in and iteration at remains Although We position candidly, first-lien to And of a our the but we FleetPride. low sold it

was fully approximately position that September, due are and we of X.X% interest to timing and reported would across note to investments in was realized this approximately our IRR these higher XX.X%. call on in the Our than IRR all settlement receipts. in I you our FleetPride

loan a is sold ability and also meaningful the investment, to debt never a This term We build ABL smallest position we position. in had Sears.

fully Our XX.X%. approximately IRR realized was

our in we (inaudible). first-lien sold Finally, position

previously like have viewed an successfully And investment We non-core in the realized position. FleetPride company. on a as this much

industry GICS largest was supplies standard, services XX, A energy at our September X.X%. XX.X% as XX.X%, and X.X%. media professional services X.X% of at Immucor XX.X%, position all was fully realized commercial our in by approximately and this IRR at approximately was and on concentration services equipment XX.X% at IRR followed investments at the and construction Using engineering across and

After we made quarter-end, new three investments.

loan in of The first the activity company gathers The by company's a loan. It Basin. water This Permian infrastructure InstarAGF. assets the investment significant back to which the disposes small generated backs and E&P Infrastructure, businesses the does acquisition collateral value oilfield, Chorus water, by provide is in first-lien logistics. of

cost XX%. yield is Our approximately to

by first-lien Growth investment owned loan is second the Barry a and American is to Fund Our Financial, which a backing of is recapitalization Pinto company.

range community. primarily company Barry providing products under-banked broad is financial of Hispanic based Houston to the services a consumer a

cost approximately XX.X%. yield at is Our

facilities markets. to first-lien the a direct-to-consumer within credit of Hippo and and is transfer of market third pet products Our Golden is developer in and beauty to This ESOP. Hippo. a the wellness, partial supports an investment health ownership loan Golden care

at cost Our approximately X.X%. yield is

companies portfolio of quarter-end. GICS in are Our XX as industries

XX and at a XX of As XX June company September count our versus was XX, portfolio year-ago. XX

Rocco financial results. like at the over I'd stands XX to discuss our now Discount today. call to to turn

Rocco DelGuercio

Chris. Thanks,

For our million, $XXX.X XXXX, the XX, net compared was fair million per $X.X to our $XXX.X million ended XX. was $X.XX investment income portfolio or September at value June share. The quarter of

net decrease quarter portfolios from approximately Our this was $XXX,XXX. operation

The realized yield and during new the of portfolio debt XX.XX%, XX. the The decrease decrease this had IRR was average weighted X.XX% in exited an basis a a driver average six a average decline X.XX%. from yield LIBOR. of Investment of quarter points major the during of our of investments an quarter yield had June X.XX%. average The was of

in in XX, were X.X% portfolio of XX.X% tranche portfolio As consisted XX first-lien our in September unit portfolio investments. investment, XX.X% investments, the and were were companies, of of second-lien

essentially positions. of XX.X% rate portfolio -- debt are invested metrics these from in unchanged fixed rate was loans, of X.X% quarter, last in income All and fixed our floating in

company was largest and Our was investment our average at company approximately million investment portfolio XXXX Industrial $X.X portfolio million. $XX.X Services

X.XX XX. We September levered on XX, compared to were times June levered as of times X.XX

Finally, with $XX million to under respect of our September million revolving credit XX, capacity $X.X UBS. as restricted with of our cash facility we liquidity, and had $X.X million in in cash,

million. XXXX, we quarter-end, company Since net total closed about the approximately due of of offering proceeds receive X.XXX $XX.X including on the greenshoe, an notes

filed is Additional yesterday. information call to our included in Mike. was of composition regarding which back the XX-Q, portfolio turn our like over With to the that, I'd Form

Michael Mauer

Thank you, Rocco.

through between quarter the and more we mitigate on loan materially syndication. diversifying returns. deeper underwriting the average credit, it's that, higher typical last dive than sectors, call focus a portfolio across process the discussed risk geographies but we Targeted and our risk generates, than on we the in I As syndicated broadly then trade-off a our on into returns borrowers balanced possible September, carefully

idiosyncratic in the risk, documentation do not We loan focus current the maturities, but structure yield the we return business the in on evaluate not We of environment. to the feel have down we a risk reach loans, the capital. we second-lien current see generate environment. to right quality of was flows opportunity capital underlying and Selectively, cash now found that reasons drivers of still second-lien reward

exit on I'd few Fusion bankruptcy update been like to all in portfolio. to bankruptcy currently few expects December. our in X. a since investments has June Connect take in a Fusion to you minutes

The unrealized the a loss on position new our equity of loan the value will cost included and of the the and realized debt Fusion’s a our of company. positions. become will loans When new mix receive loss will become first-lien equity of fair the restructuring our consummated, and lenders, ourselves of XX.X% is combined

address we something that's subsidiary its of a bankruptcy said, this filed quarter. leveraged liquidity structure to over Deluxe The to and pre-pack I occur Entertainment lend We capital to a Limited, expect Services. parent, Deluxe As issues. during Deluxe Canadian Toronto Entertainment

great share with strategic unimpaired call. The briefly no remains Deluxe of remains like in first-lien performance a because that on hoc committee XL, are we information company ad confidentiality on in is of amortization. an a was and relevant was alongside resolution. to loan optimistic last interest we're XL. Our progress explore I are reinstated. good options news company. But deal new can There The continues There isn’t lenders current I of Much public discussed there It’s XL and the their our agreements. of you successful made new uncertainty Canada and is on the toward communication and parties with in cautiously situation. being advisors. a

released So stock ownership regarding have reports and been composition. there X-K board

is now XXXX, or largest position. AR our

out and supported sheet court We restructuring. an company have balance restructuring of operational through the ongoing

term debt as to revolver a provided purposes, fund have a We for as acquisition. working strategic capital well

last the an call, the to acquisition the Basin grow the historic into Wyoming. to diversifying on XXXX company D.J. exclusive I made As outside and on focus mentioned enable its Permian

D is difference why loan two on to newest restructuring, the the loan Our was the which term term tranches. a the is during you'll created senior which in debt remarks see structured B, significant

We managed to business. the new previously have with work acquired who hired CFO CEO new the a

has company of marked position We’re down million loans the that our aggregate We an cautiously Services the second-lien and by positioning optimistic and today. quarter. to first of Premier right Global succeed in this the $X.X staffing

of several turnaround quarter, $X.X million mark this that the proposed. period has results a has challenging in and behavior us their been last down for comfort been throughout in of company have fundamental quarters. supportive been PGI’s trends plan fundamental take sponsors, The very Sears helps Capital the weakness Following

We maintain open fellow with professionals. the and dialog sponsor, industry lenders our the

monitor to the more continue is will We quarters we the as and coming update information available. you company's results, in

be continues Our undertaking. to repositioning successful portfolio a

deals in number have club portfolio. portfolio have We today, the to increased company count the to our and of XX increased

have today new new the We portfolio along month of plus quarter the to in diversify the prospects and these loans will this pipeline, to bonds, further. sales our borrowers. with to issued we and lend September during opportunistic grow incremental capacity proceeds We issued the us likely which used allow those several purchase fund to newly

September in XX, at XX, times context. at the our X.X leverage that to the X.XX target. move were were guided have At June X.XX we We target We toward our new of times the will bottom target at range. be reaching times X.XX

As of I the waive on stated, will leverage excess previously quarter X% over advisor one-time. next in management fees base above the

our covered earn in fees management excess waive quarterly one-turn dividend did look the incentive it not fee base we associated our September fee due with back, NII, with leverage. management to of our of of We portion the

directors record XXXX. as of December Our on XXXX declared $X.XX board payable for a to January the X, December share XX, XX, quarter-ended of distribution per XXXX of of shareholders

and without We in our $X.XX our CM generate that quality purchase ability an opportunities. are have March focus lending Investcorp, from of additional transaction maintained quarter. confident and changing during such, dividend the extended is of we as between and or did investments our negotiation of supported Due reducing level not shares by any NII the September this Investment secured are since we our XXXX of period to blackout to Partners the

through remains their X, board the program approved May shares ICMB. extension this purchase are of Investcorp of committed reminder, the components of a There XXXX. $X As two to commitment. million

the has purchases program. under make in XXbX open to begun First market a quarter

expect purchase to to Second, we under will before begin committed they execute purchases of commitment NAV, Investcorp XXXX. the have shares second the end at

for Q&A. open Operator, please the line

Operator

Ladies at Johnson your Our Please a from and Paul question-and-answer question state this gentlemen, first Instructions] KBW. comes time from session. question. [Operator conduct we will

Paul Johnson

was transaction at first probably My question closed quarter August Thanks obviously with afternoon around you was maybe any my if had there see expect pipeline benefit, wondering, that the seen flow? you've But when your to activity during that the XX, the of for guys. And Investcorp was was your I deal and the manager? taking today. Investcorp, the Good that from in none benefit can realizing to not, questions new from anything start manager.

Michael Mauer

call-in, with I'll Yes, but from had third-tier thanks all put advisors dialog. Paul, theirs a There two question. camps. relationship There always a we've year. a we We to for originate A of sudden, of or those it first kind in the handful gone are three of through, of there's that second, call direct a

no few dialog working on transactions. We've seeing There's pipeline. to said more we're in we're there. So one a the

do that it there, bucket they'll there. then of put arrange they'll In we've market regional in do discussions is The and than second-liens. advisory second a middle seen, middle I market seen side for three the the less elevated revolvers for banks lot direct sponsors, least who you've been there's at but typically a

They that Investcorp are directly equity they arranging the equity sponsor. people on call deals and around also where underwriting private are

that debt around participants. everyone doesn't area Just some the will regional then There's a less that been think I especially that that, Investcorp equity where we as cetera. banks help the thirdly, directly they're reminder, et Investcorp private is placed, through second-lien club invest sponsor. That is this going a said aware has is of to And the an is in of And dialog. space, are never in gets lot there it go more extend as that.

an plate relationships those that’s area a yet investors that And Investcorp, really but the on not got to do. Investcorp, not deals our want that those is really have at we where elevated on can so on docket the that at of a point transactions look facilitating some because larger that with are lot that to are we've that's and we the

Paul Johnson

all would that good Thanks. you're see that because smaller some from the starting in sizes hear detail. that. next to My investment That’s of of the does to question very taking portfolio, benefit already you're that Good be

deals has that in drive participate even called limited ability or perhaps if possible? your get into or to deals terms

Michael Mauer

is ones last That driving able a where that. been a been as overstatement. have said, general of we have the having never not Yes, do driving we years an have one terms. the been few and over say never handful the There's if you terms, deals to rule, to we been look been

affect I yes, where that look, said, to and So historically, there it looking spot not round somebody the is your because on does $XX to out we're last do million think have million times looking $XX question, for piece. have been it. we're But people to

that have extent example, have To a are we we being we million positions. the smaller said, an in, taken we where took NorthStar $X taking position.

to the million plus positions minus, $XX are $XX I the to that are past. to the in all, We avoid situations, look want but will some million continue we at never or we $XX million to going have in most in say that done somehow

and plus we’re in So five in the minus. more going to XX or the be strategically

Paul Johnson

before? anything from other additional resources? the provided maybe didn't side that. just you great, been Thanks on any maybe actually maybe on the to of a benefit? to the also to But back have question, Okay, side with I'd Investcorp, of workout that, I great. first or Perhaps, things you afforded that Has has you one that add that like asked. has bit for to And last kind anything transaction my little there

Michael Mauer

our workouts lot myself a team not the the Chris and across I team's say Citigroup. ran and investment distressed stressed of would at got senior the of Restructuring and experience members are that because I beyond

we're thing whenever we've advantage a We're is we lot that that, us want always a added to is to had taking that we're people into Do extent familiarity, it's the the of perspective of lot the expert, some an the So internally you first with doing private guys and there. at that knowledge on there sure okay, to we're you and what it, got looking experience internal get industry equity now here's around and the something. has we’re have expertise account. to make of a where do that saying, experience it looking help deal, been open at who different on that let's they've guys that also we in look and have doing take

people not the and throughout some on are that do sure private very side, from vacuum anything, a existing very, operate making organization equity in that we credit are don't expertise. there but miss smart and We the we

Paul Johnson

my taking questions questions Those all today. Thanks. and thanks great. are for Sure, my

Michael Mauer

Thank you, Paul.

Operator

state from Our James. next comes Please Dodd question. from your question Robert Raymond

Robert Dodd

all on XXXX looks lot mainly with like interest it a going XXXX. a that it year-over-year nice the your was also it, I up to Hi of us guys, a on that of at think mean gave cetera. PIK et on there commit quarter, rundown first couple, was what's I look you I can on PIK When if restructuring this income substantially but I

to a a restructured of normally indicative over So to any that, be mean, read color, and of I give kind at I toggle permanently us it increase crunch switch business. PIK is can that you PIK, PIK cash is in is tool function, restructuring that more continued big significant coupons would

that you case? that to is, business going how do is So to it And the if long think, it's get take for

back onto potentially future? the its point that can to repay the loans some the in feet at point

Rocco DelGuercio

great Yes, question, a Robert.

not the is So permanent PIK PIK. a

years, or shorter think in don't it's the four-year two that, somewhere it's I know and road but same we in if right gone three the years temporarily two by evaluate exit working We there's And end to cash next your I of of don't a so the around us, think PIK, benefit make and to more to but the half if months. the will want we and down all over how got it sure the driven we about lot really a this is six all Permian that time facilitate second do we've we of flow needs because we that cash not we at the flow, for ramp-up capital want the growth have that of to that's huge question, range. capital starve our and to four to now cash

a with is few that the years, of having in Colorado. not that concentrated DJ is critical as A we've business this piece in just lived last

step the Texas areas takes a across And and that the and Permian so a little that up in things. diversification huge in Wyoming but and into other New Permian, to acquisition capital of expand Mexico, principal is the in working toward allows us equipment some and bit

to the long-term our So that we've not so fund in going that over and make that But to gone a mind. is sure structure we're near-term, we PIK.

Robert Dodd

obviously in Got appreciate cetera. then seeing got about And Investcorp that. and the et one weak more I mentioned I’ve the it, on got mean is it, terms you you’re one beginning market still I

deals we've attractive quarter. bit of but this end of it pretty so other a you some deals found the maybe this on some on found mean that some the bifurcation year variation remaining I You but with terms of looks market remaining spreads tight and weak like seen the side. in pretty far then

mean, just that you're kind any us call color type with in if of can you it's looking generally bifurcation you're I deals on, seeing overstock. Or the if we at. of share

Michael Mauer

Well, is yes and all over statement, a weak I I no, would general mean the with. agree

we're it's same the not we've showing everything, with us quickly, very are lot so flow we’ve At not XXX% got a limited that time, rejecting deals. people who work. and alienating putting capital we're we're As and to decent got

little allows a that be bit us to So selective. more

it's that Hippo, smaller, was at ago, at about we looked you a it's it few that, the years like of some brick merchandize what Barry Financial, direct done. we business, and If Financial, a like don't it's we're mortar, grown, Barry we not we retailer look marketing avoiding those. Golden it talked deals

most three ones I'd investors I'd say broader are say not looking there in are, is tend be But and deals. to that These market of at deals. six those the to club those

market not we're to get has each friend. competitive And you who and happens falling are to once if I to people deal you size, can be have over who anchor other strong so dozen a that the that to dictate your one dynamic avoid, that trying all gets don't middle and a a that's think be people terms,

Robert Dodd

necessarily a when of as you mean, I Investcorp. huge pool don't we deal drive And that, you obviously have don't on congratulations you can't that. the the a things you with terms. necessarily capital, of of mentioned, sort appreciate related mean, I of one right, kind I

Sometimes well, sometimes you'd I'm and like you'd to as sure hold like positions right. smaller

have motivate another is those of a can number over All across. tend pool the less, run have another where things co-invest of as help other then to private fund of one they the either or they sidecar of years or vehicles done BDCs capital things

be color? can the expect a within should any If the to what plans with give how you us and that's in you Investcorp would collaboration of we to So BDC? do benefit that

Michael Mauer

you have asked probably because someplace comments. you. I'm general should in question Thank So hit glad that I that

me business, expected shares this did the make the investments they're first which future they shares, different let So, order. not made be including of NAV this is Investcorp purchase with XX-bX start at where in buying the part to

real publicly they've that, $XX do million of grow, billion of got business of plus million billion cetera. as to to round are over to that of a credit plan we with being five so manager the goal are that They rest figures AUM, be they next who's part critical et manager $XXX $XXX a disclosed AUM the didn't as managing years, a the estate, $XX four well

specific is how by market Where the yes, would the fund? of are is the it lot a plan. put organization, part LPs? you, demand we Where's next do thought great To of So be would more Where what product, into raise the our with money? et we a run definition, private they a a little is there cetera?

seriously, started that having and expect raise which discussions So are well I the to the let's I go the the we year, how quarter, we us closed, would market of approvals end all August. finalized that on and additional holidays, capital. will quite through during even internal because that to the out we we the we it'll think of it first processes take before process, call take so and into That those that have

existing is in is, of critical shareholders that Second BDC. that that whatever in new view, investors the structure piece it not benefits our our just but is in that that everyone,

be is with to million allow of target minus position, co-investment us all to million able million diversification one allows more stakeholders. also that positions, for drive the not to future to, will investments, allows and co-invest control whether we $X important more by presence us and do in that significant not for terms or to be structure virtue it's the the pieces So have a in plus we small have us while BDC behalf investment $X of still on or $XX

Robert Dodd

I color, you. Mike. appreciate the Thank

Michael Mauer

you, Thank Okay. Robert.

Operator

next Our state comes Thalmann. question. from from question Nolan Christopher Please Ladenburg your

Christopher Nolan

given we drop Mike, the your based, based three-months LIBOR? more should in LIBOR see LIBOR are specifically, of most investments yield the compression given

Michael Mauer

question. It's a great

I call think XX that number points. one, basis the drop XX it to in LIBOR

is gets other XXX you We little a have when by spreads be that compressed basis LIBOR slightly seen XX that bit. LIBOR, offset my from that which the a doing see time-to-time go point think little statement, we average. of I is you think see from basis above to some some into of kind the a will I of and the a that, things bit that that piece we're But the

one-for-one, a a some as LIBOR saying or X% goal you plus it see I'm about six, X% he because think pay he X%. doesn't or eight and willing get thinks it's don't it listen, as plus You there about sponsor-to-sponsor if X% but LIBOR or compression to

deals that its spreads in but on on. bit not happen get does we floating also. those expansion But compression are way inverse of are that new on so $XXX We've we the over down extent our getting the little there. at coming we a to we're that So little benefit on liabilities of one-to-one, that also, a of million you that will got looking are portfolio, bit existing see

Christopher Nolan

that’s Great, Thank from it you. me.

Michael Mauer

Thank you.

Operator

we questions. time, At further have this no

Michael Mauer

Operator, in Have to a to us forward XXXX. everyone joining look with that, the next I'd thank will quarter of you call New Happy for to we speaking adjourn and like Year. February call.

Operator

This concludes conference. you for Thank attending. today’s

Investcorp Credit Management BDC (ICMB) 13 Nov 192020 Q1 Earnings call transcript