ICMB - Earnings call transcript Q2 2021 | Investcorp Credit Management BDC, Inc.

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Operator

Welcome to Investcorp Credit Management BDC Scheduled Earnings Release of Second Quarter Ended December 31, 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. Gentlemen, you may begin.

Mike Mauer

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

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

Rocco DelGuercio

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

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

Mike Mauer

the and Activity resolve quarter XX Rocco. as December economic in Thanks, loan activity robust political was to began uncertainty ending primary increased.

type see dividend we quarter, this companies. new was were due this companies companies realizations portfolio and We our our and recaps of repricing investments dividend in are three four the Two disciplined. We of portfolio of to refinancing, portfolio refinancing. also emerging began our market. new recaps fully straight investments to market, in the In of made broader one in investments realized

economics. on on on and continue quality credit focus loan We structure, to

positions for mispriced staying structured of loans. remains selection We nimble, in than avoid can tool we Sector the avoiding relatively found many have a poorly identify opportunities distress and portfolio. by smaller that competitors, key our with

our of retail pandemic. and investments of Most by from the early well the effects sectors hospitality, design. borrowers zero in have restaurant have the traditional recovered We

might In be addition, we that PPE. round second them for eligible are evaluating any of

into our the the squarely Our I'll then Chris months. middle will loan finish leverage, be one with go during consistent our we financial repurchases, during club in This detail the investing is middle want our of share investment outlook investments pipeline. activity about on invested in quarter next the to market. our roughly in market results. loans. commentary quarter, syndicated we'll where for few realizations and dividend with Investcorp’s and the our We was three discuss Rocco and character core our

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

Chris Jansen

Mike. this in quarter, first new lien portfolio investments companies portfolio made four companies. We three including Thanks

on investments also during We realization. had four realizations and the partial significant one full quarter,

Services Deluxe on term First, Entertainment super loan. second the we a draw funded priority

the last noted was facility in long entire we full As repaid not quarter, afterwards.

Our extremely fully nature realized given this the high, of IRR short-term was loan.

at cost the the to Second, energy markets, lien school our providing municipal, is investment an an is X.X%. upgrades university, and Veregy. yield Veregy to environmentally efficient we made company systems loan in services for hospital first

and club in executive retained is Hersh. invested firm we the Klein state. deal on Klein search Third, lien focused the new Hersh leading LBL to loan the by the company sciences This the first healthcare verticals. supported life

cost Our is yield at X.X%.

deal worldwide. for their signal providers services or software to growth. additional provided broadband alignment first we provides the and ASSIA. products invested improve ASSIA spectrum This capital company adaptive customers. in club conductivity Finally, with Their lien for communication

XX.X%. is cost at yield Our

as loans the Toronto which the sufficient are do to U.S. was [indiscernible] to term that realization creative Toronto of the partially a repaid our Deluxe quarter super and Our priority significant loan Limited and realization well. priority mentioned I sold which term during fully both We super was tranche had and a the repay Deluxe’s loan not a division ago. were loan Deluxe’s first Deluxe’s we moment proceeds partial hold. loan

since We quarters. additional have over end, we are repayments recovery the will received to funds continue partial and received our quarter coming expect improve as that

Our loan during RPX, its the full which was quarter. realization repaid second

Group Our loan elected as realized IRR during to was we in X.X%. repaid dividend quarter not And recap. Northstar well. its the participate the

on Our pleased its opportunistic despite an and the fully IRR the LIBOR to plus XXX this for XX.X% Northstar KIK coupon. refinanced have us during KIK Custom also realized realized for we're was was Products X.X%. investment a loans quarter. IRR loan

not XX%. was activities XX, concentration our quarter since by both Using December construction trading and commercial services companies standard of equipment containers had services at distributors investment at at have any X.X%, energy services and X.X%, We packaging XX.X%, at X.X%. and Followed professional as industry engineering largest and end. and the and GICS at

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

As the call portfolio now XX financial Rocco our results. discuss XX of December to XX. like turn company to over XX was at I'd count to versus September

Rocco DelGuercio

Thanks Chris.

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

operations portfolios million. was approximately $X.X Our from this quarter increase net

fully is an Our And of new also XX.X%. average had during to of of September increase attributable from IRR debt super XX.X% term investments Deluxe basis investments XX outlier. an an portfolio high and X.XX% of average debt priority realizations X.X%. The quarter repayments our which an an yield had XX. loans, had and the is points weighted during IRR The was realized of yield quarter the unusual average yield Entertainment

other our of companies. investments X.X% of X.X% lien second unitranche and consisted portfolio lien, X.X% were December our in our of portfolios floating were loans. The investments remaining and XX.X% in was LIBOR of and portfolio As positions. XX, floor of investments. invested XX on rate warrants The debt XX.X% first were our our rate equity, investments fixed our in invested was in X.X% is portfolio of rate investments, X%. floating average

$X million. approximately was investment company portfolio average Our

our were X.XX of at We million. as at company levered X.XX times XX portfolio Empire to of September compared was XX. times investment as largest and Office largest investment December Our XX.X $XX.X levered is million PGi single

as non-accrual XX. December We investments of have on two

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

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

Mike Mauer

Thank you, Rocco.

above our in leverage times range. times. at environment well. X.X to investment and on X.XX leverage guidance this our and target We we Our quarterly that into range X.XX this will that to around came of quarter, remains We keep with NII expect December our dividend a Last times current X.XX covered target is quarter activity target period. us were our quarter, cover our we times anticipate this of target as down

committed leverage. the portion to we management we fees do of fee one our times base As associated waive with over management

of has purchased is XX, that Board for distribution dates. since have March on program. made ended as supplemental payable December quarter earning Investcorp quarter. distribution that also declared make X, additional distribution method program shareholders of April this the of on Board declared any and dividend Investcorp inception is of a this the market of per XX. record the the portfolio. $X.XX did shares. the power Our same We believe those XXXX under $X.XX supplemental share share To-date The ICMB a stable of to XXX,XXX level been Directors to XXXX to the its open not shares purchase purchases two of capture separate commitments XXbX prudent per

XX did September make December and Secondly, NAV. has at any and purchases Investcorp between shares Investcorp has committed not to purchased XXX,XXX purchase shares XX to-date.

cycles. market Our through team has together multiple worked

market. few the especially we Being in for competition begin months, always into weaker the the weaknesses the deals well the effects expected as and pricing, fewer structures syndicated for their larger competition. deals, lenders, follow-ons moving large before in seen Over past market as continued have protections of structural tighter middle

watch staying an intend Products middle example loan. the KIK presented signals portfolio Custom of across capital. invested December. we were through have of past is preservation the As pipeline that intend In the repriced a loans, we they and market with loan We combat of well companies. deals. focus sponsor manage mix new cycle we to club cycles the focusing in core that by opportunities kind our diversified January, including portfolio and environment through on this The refinanced shareholder we this we the are past and on consisted generation By disciplined non-sponsor the as also and with to contains of seizing income for

Operator

question from your first Nolan. Our question. Instructions] [Operator Please Christopher state comes

Christopher Nolan

Services the quarter the Entertainment in one investment of is new that - in is the investments new made made correct? Deluxe the quarter is Deluxe is

Mike Mauer

part there was company. it I'll quarter invested the but sale the of - Chris, new the money let through walk Chris was made during facilitating of it So

But into during you then to in the that put know I Chris, in the if don't more super detail. money waterfall there So the go to sale was priority. facilitate was quarter want

Chris Jansen

that that, got paid Yes And that. existing Chris, to a exposure. for thanks we nice was our out. It fee was Mike. senior loan fully doing structurally

sense So it growth. made that do XXX% perfect to

Christopher Nolan

within same exited the an quarter? invested You

Chris Jansen

Yes.

Mike Mauer

Yes.

Christopher Nolan

roughly then And change bps I you. in Got particularly that? any for guess the XX up yield reason

Mike Mauer

subs, X.X%, but those were average Yes, if pixel, The came three the weighted you and the and the was Northstar, at and new average to was at different to et the million, that average across with average KIK the heavily X.X% everything close names, cetera. down look at $XX RPX, four were all out out, X.X% XX.XX%. weighted X.X% between KIK, subs X%, there of the average an RPX, that yield Northstar, overall average investments all of coming an

Christopher Nolan

in up? you. overall will continue XX% and to yield Got will that investments new continue that can for thus anticipate go And Mike yield XX% you the the range to

Mike Mauer

too was X% would is to it's a And outperform But plus not end give I think going to to say underperform. XX% think high of or that that XX%, hope that now. There higher X% But not focusing if I be but that the I right XX%. be at to XX we're an on closer overall XX% I to minus. will average. to on I XX%. would range, I'd assumption And say the some of XX%

Christopher Nolan

we run is, My that Empire be on impact a York is is credit that on in years the should COVID’s market New keeping dealer know given had eye guess to which size? I a office City. large an But, on given I out. office loan final Office, has this that question the the couple is, furniture

Mike Mauer

kept it talk can't it eye some. on pass happy they've very NDA, managed I'd say into close go details let to obviously, will in Chris way the over management very we Chris let we're with I'll And but about we an I'll Chris, but I from have But it. a it.

Chris Jansen

consistent for company owner is of the the is the think the really this has with quite founder flat. the and company had is And Performance the been while. is personally, be. going involve one anticipated revenue I Yes, has actually a thought this son is - Chris. I been The where where, was honestly he's EBITDA founder. what we thanks to This he down basically run

in this So view in well my you is outperformed, general. personal what would as think

If York New - would you the City be We furniture big knew presence office that the you not in market case. gasping. saw be a with would

operations feel However, like well. that And have as in Florida personally outperformed. I they've they do

a So that diversified in they is team. downs you market. management where accustomed and bit. But again, the That's to this the owner have office is have ups an the

Mike Mauer

is quickly sorry ahead, cost Chris’ the Chris. point on go he front, to And reacted

Christopher Nolan

for very much you the detail. thank No,

Mike Mauer

Thanks.

Operator

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

Paul Johnson

is seen mark half that back I up case quite share be I know the of COVID. And get these the just last that again same that relatively impacted say. could by the I I'm kind with asked At portfolios of the you been any you a - quarters? kind Do should had that I kind that's the just are of their said you quarter, over curious we've of at appreciation thoughts. ask kind to portfolio want last of several companies afternoon, BDCs your commentary few on and during businesses held the to fairly meaningfully of couple of the Good holding same great? books it pressures XXXX. will still time, second back

Mike Mauer

back. week coming at Industrial B slow a markets very Yes and it to on. into on a Services thorough others go I'd I And credits COVID to hands One XXXX on recovery. degree evaluation. We portfolio. some fair is current coming that in oil them listen, related through We highlight non-accrual can't think The once quarter. evaluation two their continue we say so we're of are is And the lot. to service are loan that that put us. watching done least a we back, on weigh comment talked closely and I'd how we've

I is had on of in seen on one XXXX. down COVID quarter We line marked during a a PGi that think the a recovery second have seen you the PGi saw would actually in the the COVID other from second recovery nice, of in half benefit PGi we with of without NAV. market year. the The we slowdown benefiting significant quarter

more that tailwinds don't a that that we conservative, in become as second quarter. the look valuation bit we've at same given so, we And have had the we

so that's that little hopefully bit But And color. to we a another continue gives one watch. of you that

Paul Johnson

what quarter? that's no color. Did good your by any that with off really markdown PGi chance you those number this hand Yes, have the was

Mike Mauer

that but I'll jobs. on that I do. different million. $X.X $X.X Think two the if me think million Chris I you check up follow that's if between was and can

Chris Jansen

right it’s million Mike correct. $X.X Yes,

Paul Johnson

appreciate been But remains it trying Okay, make I I okay your right. - I explained in Deluxe thanks. just the portfolio, sure have well as then the the this understand prepared Chris, I you and that. non-accrual. piece in that remarks, to but understand And

if on is to a was I that if a can investment And company? seniority super term it loan guess right, why loan that like the to the understanding non-accrual provided like the I'm I So you guess almost bridge that repaid?

Mike Mauer

So the yes. answer is

Chris Jansen

Mike, Mike. I got this,

Mike Mauer

ahead. go Okay

Chris Jansen

business. sale it any Yes, bridge a has to was no of businesses. facilitate longer loan the the operating Deluxe

involved business final creation transactions. of sold they the in - which business, be M&A the when of typically, in typical sale to, So the adjustments. will subject created as escrows, released the is these time The

or that carry I involved. reflects our different collecting. So of four valuation where now we probability three escrows amount there and Deluxe of the is believe

Paul Johnson

Okay.

Chris Jansen

once couple So Deluxe? of no those received payments, exposure longer we’ll any to we have

Paul Johnson

of in that I at with with and approach of, - same any and looking COVID the source remains select that And with business? that you with And most working fairly in that point, this any a infected, relationships the that partners forced guess bigger piece it's you've Yes, defined or any in maybe the past? list the How worked do? obviously, partners quite affected a at has past, more way to is your that everything that is is the way? the picture, you Okay. that portfolio. even worked change in Are small of kind bit your of we in changed you way partners you've

Mike Mauer

sourcing, in take the ramps no, shot Chris if around and add but partnering the partners had I'll we new thing partners, before. same we first see with dialogue, wants partnered new still partners plus done are in opportunity. up only the to anything, new environment, but it say dialogue the deals is And before people - the word it's this I'd are a club with we that

the of one dialogue now three advisors, a look we've somebody out boutiques, We've with you at working partners. on lawyers, et that had two, We've concentration if never At a one times with cetera. may - the So got our those time, got same we're partner advisors. right with of XX of investments. we the portfolio,

don't really dynamic. I But Chris, to don't here? think you the I anything it's know So want if add changed

Chris Jansen

Nothing to add.

Paul Johnson

get And all had right. maybe in actually the just I ask portfolio. I to last one Okay. hoping to of was idea investment one that's if an wanted question,

a business of that marked marked could it's and mark, on stable pretty that fairly, was any But is? been it guys I that’s discounted company what think quarter-over-quarter, it’s give update at but exactly you Bioplan. kind

Mike Mauer

that? take to want you do Chris,

Chris Jansen

deal, and an Bioplan personalize I'll had of are a of another for been very Bioplan. very, performing this is, the This company update company personally is under products where, a not the But, basically is but we're has than Yes, The the one confidentiality. supportive on there is down sponsor COVID. lot much I better little anticipated. pre bit fragrances. numbers still from testing sells The

is have lien say, lien some to us is of I sprays And away to types again, and second of the stuff own supportive, they sponsor. lenders get been But that. all So an equity here, that's product mix because in can their their we there behind like have very and business from more contagious really the and first a the the in and constructive shifted sponsor of addition confidentiality.

Paul Johnson

Sure.

well, taking have Thanks And Okay comments. questions. the I for a thanks for day. that. my appreciate And great

Mike Mauer

Thank you.

Chris Jansen

Thank you.

Operator

next Our [Matt comes question. from question Jayden]. state Please your

Unidentified Analyst

market that the leverage competition, COVID one levels deal seeing? give First and color can any pre - of you documentation relative flow on you're to kind on spreads

Mike Mauer

Yes, question, it's risk, COVID start what exposed just you at that are trading. because an of top firm value interesting LBOs, the we're at aren’t or new seeing because for things if the is

are tends bit higher seeing that Because equity what the from. COVID. statistical same beneficiaries don't COVID multiple have sold. to we done. We're that We're little COVID we're multiples maybe But checks pre than we a of a than bit things mean is similar dealing are that's or that things you being what at insulated sample traded. have So pre saw leverage But little trading that those COVID. you're the pre saw that bigger of get seeing seeing to is companies

in of we was new two equity of those. on the going in it So just investments shy did, XX%

this So, and million lot is EBITDA And tighter. environment are the a the months. little XXX thing a And to I’ll bit six, spreads we've to less EBITDA in leverage the call on done bit the on that larger $XX and XXX plus a million last XX historically. it EBITDA $XX other focusing similar the where eight higher, maybe we more equity in

take to the I think larger are whole are think aggressive. structural tranches. more more, competition I points the trying is players the the And

active two to XX players kind of we've area and So our down neighborhood. been it's in that deals, in very avoided, club an we've

Unidentified Analyst

X.XX Are on at bit leverage then the so X.XX it going if little forward? to I this will And X.X plan kind more of you more range. all could just that end about at level, upper Okay, you thinking that's comfortable are of the running leverage at the or at one how to a deleverage helpful.

Mike Mauer

So we are. I’d comfortable we’re where start saying

December last the for I'm call, if we below are listen, like below on think similar We we'll at we I said X.XX not the sure X.X be were there. it. question quarter,

to new investments. We look continue at

that to or think there portfolio of two We or three companies a continue high refinanced. getting at that probability are repaid are

ability sure make keep to want to we so, we continue to And reinvest.

that So neighborhood down, go is we area the right and slightly in now. we that, very are may an mean above back but come may we're comfortable

Unidentified Analyst

the Great, it Appreciate from me. that's time.

Mike Mauer

Thank you very much.

Operator

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

Mike Mauer

Thank you it. very much. And appreciate We to will we everyone talk soon.

Operator

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

Investcorp Credit Management BDC (ICMB) 11 Feb 212021 Q2 Earnings call transcript