ICMB - Earnings call transcript Q4 2020 | Investcorp Credit Management BDC, Inc.

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Operator

Welcome to the scheduled earnings conference call, fourth quarter ended June 30, 2020.

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 will now turn the call over to your speakers. begin. Please

Mike Mauer

our and am of my joined Officer Rocco operator us for Co-Chief you and I today. by DelGuercio, thank you you all joining Investment Thank CFO. Chris Jansen,

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

Rocco DelGuercio

call and our I Investor regarding Investcorp recorded Audio Credit include Relations this Any release Harbor broadcast this Mike. Management is projections. and page to projections. would at may forward-looking on would call everyone the the call in your will disclosure website forward-looking visiting call the by of form information of like materially prohibited. like BDC. replay statements attention that Safe Thanks call may is in to from call results is also these today's today's Actual to remind and press I differ available being that remind our icmbdc.com. of that strictly any property everyone unauthorized be our

We CEO, our latest statements, will to call our of Relations please would our visit At time, obtain filings, page and I back unless law. Investor To the this not Chairman like required our SEC Michael copies website. by Mauer. turn update on to forward-looking

Mike Mauer

well beyond safe immense pandemic difficult been Rocco. suffering and have hoped. The all across environment. undiminished that team in and cut longer We globe Thanks remains economic COVID-XX is is home coping by on time. has than you the that fortunate from portfolio The are we this of our work effects our lines. geographic across healthy that focus far our the persisting hope we been have There had demographic and and

have causing economic affected the portfolio companies weathered Other one companies storm our portfolio of COVID of been by even and and several markdowns. thrived. restructuring Some the have fallout

whole. we and By the exposure situations current allowed over capital. provide years more over and number the risk have now a work environment borrower decreasing reduced a third underlying helped and protect our we Our have the position size, far to for and the Oil borrowers industry that more with are borrowers or individual average by credit on diversify address the There to to effort distresses but ranks in future us and average and of of position portfolio help term. sectors proud increasing has our medium gas, still reduce sizes. do once past to count the we have our largest smaller diversification, is as portfolio effects industry our recovery standards shareholder

We have ongoing activity. and investments E&P and geared our are maintenance production no borrowers toward

other as hard sectors brick-and-mortar as and restaurants. have hit We retail well avoided such

Golden there portfolio Despite the are our been persistent believe portfolio positive market, believe upside will market the underwriting and a Hippo, of that of Our in the We collection. difficult cycle. in our on and we credit market expectations. positioned exposure, our business bids the increasing and NAV. that a online investment volatility products We have underwriting is portfolio weather to consumer M&A company outperforming We believe to portfolio. number positions the we has were an the and store buyouts, retail exclusively in the loan for syndicated provide

and share results. do few about will I Rocco discuss with prepared our we commentary investments on commentary through Investcorp's conclude my a conclude and will dividends. walk As levers, purchases quarter, then some every remarks activity the investment of with our our Chris and will financial our

always, end Chris. As And that, to with Q&A. it will I with we turn over will

Chris Jansen

will mentioned positions explain draw commitment the companies moment realizations on had to had revolving during I quarter our did quarter one further an three under this portfolio After Techniplas, and across Thanks but no addition in revolving the in which commitment. detail. funding restructure a Mike. We made quarter-end, existing we six investment ago. I made an investments existing We in

First, This was round dilution most We of made which financing preferred in making we a by part small XL. participated. known Technologies, investment. as investment existing investors a Clover equity reported in for substantial this formally

Second, spanning several its from investments we loan. filing exit for bankruptcy in the made Techniplas, forced through

The the provided for liquidity a first to was filing small advance loan, in which company bankruptcy.

investment loan. was DIP in the Our second

own the approximately The reorganized third the loan company. Today, exit were the the in investments of of Techniplas. equity post X.X% and and fourth of equity we

Our loan yield XX%. exit cost is approximately at on the

loan. eligibility also We their minimis de a XXXX PPP facilitate to for made a in equity investment

approximately for funded $X.X commitment Finally, our million Golden Hippo. revolving under we

Advanced membership ASI. software commitment engagement. its association million, an and total International in various measuring dues made ASI at is We for lien Solutions manager nonprofits two first and equity for on or collection a new CRM we produces and and a quarter-end, in company. donations Since quarter-end. $X.X portfolio or loan investments unfunded between interactions and Our leaving invested focusing million managing term preferred marketing, $X.X new membership,

at X.X% of professional first coupon services at yield cash at at and at XX.X%, companies and and has trading industry The our at the was media XX.X%, Using distributors GICS the X.X%. at X.XX%. coupon which equity X% largest as on energy, June Our starts equipment cost investment followed an XX, by preferred XX.X%, term and services concentration engineering standard, construction X.XX%. approximately loan is a lien increasing and PIK

portfolio of and including industries of XX are our warrant quarter-end, Our companies positions. as equity GICS

our XX portfolio XX, like versus to financial June our turn over last XX to I of count quarter. results. to the call now would was As company Rocco discuss

Rocco DelGuercio

our $X.XX net $XXX.X The or million XX, $XXX.X June fair million XX. of ending investment portfolio to income Quarter compared at million Chris. March value share. was per was $X.X our XXXX, Thanks

this operation was quarter from million. $X.X decrease net portfolio Our approximately

point had of from basis during XX the average Our new of was average an yield a portfolio decrease our XX. X.XX%. of the quarter March Paydowns The yield investments quarter during amortizations and received had X.XX%. yield X.XX%, debt of an average weighted

in investments XX.X% of of and X.X% June X.X% companies. debt investments. of portfolio equity, of our with floating XX, were and other our invested of first in rate investments. investments, lien, was portfolio warrants in fixed in were loans invested X% consisted lien As portfolio rate and our our the XX.X% second in were XX portfolio XX.X% remaining unitranche

approximately X.XX company company average and was Our Endemol of investment our We million June largest portfolio at portfolio $X.X was March times to million. of investment as levered X.XX as XX, were compared XX. times levered $XX

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

which portfolio would over in next will like composition that, days. in I the involving included our filed is turn With the Mike. to information the call Additional of to few be Form our XX-K back

Mike Mauer

Rocco. you Thank

in we into who participated for and the Techniplas in profitable of this May reduced X a As its hoc the as the mentioned global temporarily halt. necessary liquidation. and for shutdowns liquidity almost Chapter to through the the and in we group most competitors noteholders most believe the company bankruptcy a a liquidity severely as ground leverage reorganization an around with company filed see to call, facilitate automotive our the forced profile. significantly a the business ad of assets Without protection provided result of have and to company of liquidity supply been a injection, customers revenues chain would brief restructuring the on previous We impacted which complete

provide were noteholders only receive able the capital who and addition, superior or on dollar. not who during and upon economics recovered could also those In before not exit pennies filings to the while will did participate

auto that production the we well-positioned term, long a franchise Techniplas believe the normalizes. defensible is that Over as company recover global has to

guidance above is Our a that target rather target. we on marks, quarter, times. our changes slightly of X.XX Last to to in decision, were due investment than leverage X.X

expect declined quarter this above to well. to June range. with that is NII quarter, dividend X.XX We leverage and covered from X.XX cover the current Our level quarterly our as target our a still we

$X.XX XX, payable committed for to Board share we XX, associated do, XX, record the of XXXX stockholders raised per to leverage. October management September XXXX. On as fee a September As distribution with August fees one a XXXX, of portion declared XX, of on management ended our of quarter times the over base XXXX, we

XXXX quarter stockholders XX, record share XX, a XX, to of XXXX. addition, for October In per XXXX, the payable September distribution September on of the Board supplemental as declared $X.XX of ending

ICMB. As discussed, previously we commitments of to has Investcorp shares purchase made two separate

open June has and made since inception XX,XXX bought XXbX First, purchases XX and under X market that program of has Investcorp shares program. and between April a the XXX,XXX shares

solution X Investcorp of NAV. pandemic no to purchased April XXX,XXX between has June significant shares The economic committed companies. integrity COVID-XX shares purchase of XX We the and threat spot all to to-date. remains enormous crisis and shares a Investcorp Part to good Secondly, at need to invest investing is mission companies be BDCs our our is part of the in intend captures companies. to to of as capital. sweet U.S. number the that evolve this

investing will of We on remain the the capital structure. focused at top

We open our discipline our and Q&A. Operator, line standards will maintain please with the credit construction. portfolio keep for

Operator

[Operator Instructions].

from question. Our first your question Please Dodd. state comes Robert

Robert Dodd

In about other at remarks markdowns. and obviously your Mike. Hi one guys. restructuring prepared beginning, Hi talked the you several

it's the the how in mean the round comes marks depreciation anything but obviously the marks the broad was were How how about Techniplas? many were not can us, the that versus Was that out, on number, unrealized we out with? bulk million the any portfolio in will the more detail get concentrated assets $X concentrated? associated yet, For us detail quarter? can more I marks K give you when in that quarter, you of give of

Mike Mauer

for and calling Robert, you Yes. everybody thank much thanks very in.

other I Before one thing. want to that, clarify do I

this diversifying I really a affected question, And believe, COVID. I of of of by And markdowns Bioplan its both, looks adequate business X.X all highly Rocco's long over of were a to get exclusively pipeline Two those, One it $X million-odd credits reference away accurate were Techniplas K. recovery. Clover all of we the term, was have leverage and at had continue lot but X.X and Bioplan of pipeline, XXXX, time. those and business forward-looking to completing doing from gone quarter-end. four XL you one look show around a recover referenced and And that band strong. is times between energy. the dynamics XXXX, different and has down. Techniplas, as work very of of our basic that to perils liquidity to focused leverage think, will or in which be we prospective X.XX the to positioning XXXX of say of underlying remote the through the lots be your really was that Arcade restructuring. each. and the would and Clover from are Bioplan, in continues locations, stable business, is should to

that see hopefully looking We to to come three to forward six to are next fruition. the months

Robert Dodd

color. related because Got much be it. about transitory, i.e., that, hasn't working of things follow-up. that of how it markdowns, at million impacts? here on you in NAV have even being are upside the Obviously, value $XX is depreciation from much How This total the versus think NAV back permanent that a aggregate but end really a a as versus sort the through you can still of yet come COVID how I is question, talked and been essentially to appreciate would then If realized well in today unrealized do portfolio of whole. potential the you characterize of numbers in as got you it much future.? could you June much I if because could how is permanent tough of

Mike Mauer

think As It's going how difficult it's we three look because to we It's that, you a did environment you to and it months. at back. six recovery question not in are answer to companies how I the going be to this and come correctly. opened of of

XX%, in going represent XX be least that to hopefully not it's closer And look at we recoverable. at months. that would of that XX somewhere XX, that but it, I XX%. as it's think months to think half XX I and be believe I to we XX to could

Robert Dodd

will thought take to more Honestly I was me, going color than it. were give I that you so

Mike Mauer

say much. too will I assume I didn't

Robert Dodd

you actually the of Spreads range or some is the portfolio in get down shrinking there. Hippo over wider. of, can out dogs. of expect the say, No. the to any But next be next, XX year opportunistically What And leverage me, Excuse give realizing Golden the over the seems terms one we then from leverage plan another mean, obviously well period market color? or remainder potentially and months require us capital? assets that be are just to quite will you and redeploying this like the to the to in midpoint tied over-leveraged. which doing selling the running should are away I

Mike Mauer

it's probably little But two we think bit is very sure standpoint, range liquidity I I to trying think run things. it target from with above latter from redeploying. being, and think and is cash. And our term. risk the liquidity a One more make managing I near the over a importantly, definition, that our adequate

The of but wanted sell we as that good think some liquidity, at our if downside. a from or perspective to second at sell have the we available part to protect leverage look that could continues that we collateral additional assets do they is, assets we liquid are are financing

Robert Dodd

that. a Thanks appreciate Those I lot. were my questions.

Mike Mauer

Robert. you Thank

Operator

Johnson. Please comes question Paul your next Our from state question.

Paul Johnson

did you just mentioned Just other questions. not if was couldn't it. filing, Hi on Techniplas I guys. My on investments Thanks were this on Were and nonaccrual. call, if any forgive there credit catch the for tell any first my question I me nonaccruals this or the quarter? with just Good investment morning. taking

Mike Mauer

nonaccruals June no are as of XX. There

Paul Johnson

of was? And accelerated forward. upfront benefit maybe It you pay Thanks. there a have looks the just that Okay. the that like this were reversal if financing maybe been some may maybe can NII bit case? mention that Is NII could you costs for mentioned what about that to quarter? the guys And then little a

Rocco DelGuercio

we to will then and amended the going late had charged fall have will we back I to the We rid taken you When would Rocco. Hi in was actually point is there in Mike, way. UBS that we lower we initially And all pay that. point front Paul, up pay. be were got facility getting rid of we credit credit we it, and a and the and you rate it like what the was out facility, have along to forward. of that a Yes, reversal. paying basically a already take did now

is answer slightly. the reversal So around $X.XX to the today, maybe impact in your question

Paul Johnson

Okay.

Rocco DelGuercio

It helps?

Paul Johnson

when Thanks. does. facility remind can That credit finally, the And that out? you coming is then, And when period? just Yes. is me, reinvestment

Mike Mauer

So revolver December term and the through there's of this the year. December two pieces it, is goes loan XXXX to

that We extend finalizing out. with discussions at point UBS are this all to

Paul Johnson

any gave commentary But performing. Okay. kind and portfolio I about, Are right a come kind And those of of from good probably or sort that then lastly, appreciate, we how I are companies, in color? mean could supporting in if any the program provide PPP any on those a rely as additional like them four you where just of I any you the would investments a the talked way today? support government such of priority of that lot that like of do the like investments Congressional other -- now think of general on on your any additional commentary programs we action? stand to have supporting is terms anything

Mike Mauer

question have upon past. future is, something or as be some to But your that clear, opposed So received Chris this. they the in to PPP are question? support I take That's let the to am going just dependent

Paul Johnson

yes. Correct,

Mike Mauer

are you Chris, Okay. mute? on

Chris Jansen

is businesses that do anticipate Yes. it. not we couple been a for have forgiveness couple the PPP received a for the bulk permanent of that of There vast have our of it, all if qualifying but

Paul Johnson

Okay. How about --?

Mike Mauer

viability that upon that dependent nothing But standpoint getting additional there support a thing the there one we juncture. this from think is is at

Chris Jansen

all. part. at No, I not not I that No, sorry. all. am missed at

Paul Johnson

all you my taking Thank questions were Those Okay. for today. my questions.

Mike Mauer

the appreciate We time.

Operator

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

Christopher Nolan

please? X/XX, commitment What's Hi. the at unfunded

Mike Mauer

the a largest don't COVID are issues who well million pre-COVID The is we and performing Holdings. numbers. highly Golden see outperforming $X in That's and also any second unfunded commitments Limbach is Hippo there. X/XX quite shy little around And of at concentrated

Christopher Nolan

Mike, should forward And of going yields of going investment the terms in as will the forward, coupon that look a down drift sort dividend stable we to at yield X% level? that investment

Mike Mauer

reinvestment your that question? unlevered The level, is

Christopher Nolan

overall do be months? expect yields debt the Yes. you six out I what find next trying am the to coupon investment to over just to

Mike Mauer

Chris to is everything lien. referenced a Chris. the we just say, to the would The to on are yield it's great question, high a first investment looking mid one from that So X% XX%. I in maturity X% at

it's are X% goes a but that's it's our of to XX%, not. you On the a it's in anywhere And Chris. teens. event, XX, would stating mid a basis to way to to that not then go to do maturity. are that target. blended, that prefs, If and X% all XX going assumes X.XX, I to to range, they am if the get X.X% other out in most something they XX On If points these would than it's to obvious some you transaction But a something discussion. guys, but probably maturity, normal higher. lower I the XX%, usually If say refi we

Christopher Nolan

over PIK quarters? And do the anticipate Great. you the of increase component to next couple

Mike Mauer

The expect. $X The one all which only we PIK first pay. lien don't is be on was is million $X will the quarter million. preferred did public all in the in September it filings the I just has that and component which cash

portfolio, it's today, significant at at I what I are don't majority, isn't a of that got notional XXX% I of anything not already. pipeline vast In this shifting amount. we would looking PIK today we be XX%-plus point else say, anything on So know PIK'd. And don't cash. that the is have in anticipate the would existing to

Christopher Nolan

Great. That's for Thanks me. it Mike.

Mike Mauer

Yes.

Operator

Please Our next your state David question Rothschild. comes questions. from

David Rothschild

Yes.

would to have for at spillover June then just And discount. your is One, have stock as know, you of I dividends? second, XX% trading I So much like income questions. two how XX,

why stock guaranteed it, return is going back you with As on That you seems you get to XX% making your get a rather what Thank than of return them. new are than investment. off, a better you. and aren't loans new like loans paid buying

Mike Mauer

Yes. take second I half the of will that.

reinvest. payments we trying As get to back, are we run

We the are return. firm maximize to make to trying the portfolio the overall we run sure that and

If your you you portfolio. That cash will it, and get cover to one, manage of can't term would Rocco, take to the you income. can't the think, the shareholders. $XX just term and point a keep you please? next hit that be, you focused reinvest spillover the to the you we on And that repaying we are detrimental but over million long Could here. not the returns return long to reinvestment cost

Rocco DelGuercio

Yes.

would say, of So I the the income, somewhere spillover is $XXX,XXX. neighborhood in

David Rothschild

Okay. you. Thank

Mike Mauer

Thank you.

Operator

time, further Instructions]. [Operator no question. this have we At

Mike Mauer

to and everyone forward November. We to thank to would look we like speaking in you

Operator

This attending. for concludes Thank today's conference you call.

Mike Mauer	Chairman, Chief Executive Officer
Rocco DelGuercio	Chief Compliance Officer, Chief Financial Officer
Chris Jansen	President, Secretary
Robert Dodd	Raymond James & Associates
Paul Johnson	Keefe, Bruyette & Woods, Inc.
Christopher Nolan	Ladenburg Thalmann & Co. Inc.
David Rothschild	Rothschild Capital Partners, LLC

Investcorp Credit Management BDC (ICMB) 15 Sep 202020 Q4 Earnings call transcript