ICMB - Earnings call transcript Q3 2021 | Investcorp Credit Management BDC, Inc.

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Operator

Welcome to Investcorp Credit Management BDC Incorporated Scheduled Earnings Release of Third Quarter Ended March 31, 2021.

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. Please 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

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

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

Mike Mauer

portfolio marked past We saw pick activity, several of increase This saw refinanced, large loans market. transactions. during of get end, our a both quarter number around end. activity quarter, Rocco. accelerated broader we year which in the Thanks, up and in to a Refinancing began and after in drove the

strong deals most coming at the are primary end we With the robust market. pressure consider our market, for on the new pipeline, with see primary to larger we refis drivers. the pricing of LBOs As and of continue a competition

credit We discipline. have maintained our

deals are which haven't most with. these structures, also comfortable companies have Apart we that deals are We see when structural that from refinancing we the portfolio trends, deals even chased unattractive Sector that are this are on structure market first, pricing accept loan tightened. credit management selection key decisions. our tool focused and in remains we in portfolio tighter. We're a spreads quality

oil well the hardest XXXX. by borrowers strong their We've the from to and play with were our are Many positioned new seen effects We COVID to gas, in well of in sectors on which of were in and rebound businesses. as investments as out as hospitality. the in second pandemic, this retail such half performance begin avoiding hit numbers

Our to be investment balanced club quarter activity loans. syndicated during continues middle and loans between the market

have invested in since in During each one we end, two quarter we the portfolio new quarter, invested and companies. of additional

the financial and quarter about realizations will during and finish discuss our financing the activity our purchases, the share quarter, few commentary for up outlook our months. Rocco dividend on detail into next and investments go our during the we'll Investcorp's then our First results. leverage, I'll with

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

Chris Jansen

Mike. invested Thanks in this both portfolio were two quarter, We companies new. of which

three realizations and debt realization. We had also full one equity

[Galaxy] Partners. in investment first Our Gainline first brands. products. was footwear is term Sponsor loan sources [Galaxy] designs, and for Capital lien markets, the

is in The the integrated this is lien loan on and second lenders. first cost auto yield loan investment was Our A platform. a club sales term X.X%. leasing company at for new auto vertically

cost X.X%. Our is yielded

realizations. the to Now

was Our Allsup’s. first quarter realization this

and one assets, refinance. entry their lower over of our point our attractive is this our While loans before yielding was sold par we

approximately was IRR realized fully XX.X%. Our

and approved dramatically rates. lower refinanced during Our debt our at second time company Limbach. was realization the investment the our Limbach’s of profile credit much

was IRR realized fully Our XX.X%. approximately

loan was loan. repaid our our realization position repaid Montreign. The Empire a one was bulk was with X%. Resorts, portion small known and into of The Our third originally a a IRR year bridge par at ago as refinance bridge was year

life XX.X%. Our entire was investment the fully the of realized IRR approximately over

Open Mobile a had of also position in realization our We warrants.

positions for mobile Our approximately of combined two all investments. Since of made end, the our that had new investment XX.X%. we was life the quarter IRR on

company provider Corporation. Our loan NWN for a is club leading a of first solutions managed in is The and cloud systems. services,

cost yield is X.X%. Our at approximately

in nutrition formulates lien and recent and vitamin, term for first INW. investment variety for innovations INW mineral supplement or in markets. loan wellness, Our produces products of is and second the a

Our X.X%. yield at approximately cost is

We also realizations had two since quarter end. full

First, facilities markets through equity GEE debt raised default. in its the pay public in

realized fully Our IRR was XX.X%.

its offering. refinanced early in of bond term Equipment proceeds loan a Alta the April with Second,

March industry realized companies and was fully XX.X%. X.X%. supplies GIC concentration and services Using XXst, at at IRR Our X% of largest professional and distributors X.X%, the XX.X%, standard, was services trading commercial and at packaging approximately as our containers

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

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

Rocco DelGuercio

Chris. Thanks,

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

$X.X quarter net approximately operations million. portfolio’s increase was from Our this

debt from quarter XX.X%, IRR yield new an of yield our weighted X.XX%, average of the Our realized an a had of investments XX quarter investments repayments X.X% and The had from fully of December realizations was at the and during yield and average XX. XX.X%. during debt basis decrease average points portfolio an

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

investment X.XX $X.X times was at X.XX our XX. was XX approximately [GEE] December We million. million, compared were Our companies largest $XX investment as March portfolio times portfolio of and of as average levered levered company to

March Our times subsequently was December as baby four leverage nonaccrual to X.X repaid XX. on had was XXth. our bond on fully when reduced We investments of

million as well capacity of our we million in of XX as liquidity to was respect which, million cash, March XX.X under facility our had with UBS. with restricted XX, as revolving credit Finally, X.X cash

at was April XX.X noted, notes, I of occurred XX. As XXXX which repay million this on to earmarked cash

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

Mike Mauer

us XXXX to as long of of new redeem We're Thank used these investing pleased notes. additional loans. quarter. bond well effect to XXXX, very place We In this the which XX million. [X.XXX%] with our capital proceeds is to you, due a new cost term proceeds provide fund to activities our notes net lowering The Rocco. as closed fully we of April, raised on net million XX.X

a of times X.X times. X.XX Last X.XX leverage target that on guidance at within to we quarter, Our times. were remains target

formerly our before leverage This known normal I do want in to normalizing Toronto non-accruals final [DSG], due nonaccrual X.X artificially investment anticipate quarter in that the in our notes at interest wind quarter. portfolio. to the end on [Deluxe] as quarter, last activity a down from Limited position on our placed Deluxe the times. this This of was company. the investment touch represents will keep stub We peaked small our the us rate. at around

subordinated those Term loans coming Loan expect quarters. received Term is The a A, additional the over of C B term XXXX collect several and paydowns small to the have to revolver. We market, resume Loan Loan accrual With thumbs do we remaining abstinence number in loans. its make activity has significant to loans. to B the interest. failed payment PGI growing in on XXXX's and second expect its on not Term lien paying interest both changes unexpectedly first and

in both fellow lenders are constructively engaging sponsor. the processes our with We well as as

We time. we at confidentiality March not For our can't within reasons, [NII]. say on this dividend did more quarter cover this

using than the March our spillover we income However, covered quarter prior dividend. more

confident we to and investment generate the have the to the While to dividend are are going disappointing, NII, that resources appropriate we we committed forward. cover disciplined approach capital

associated we the the committed base turn fees we've of one to over fee of raised portion loan. management with As do, management

Board We Our as to supplemental quarter. per this this shareholders July and declare record is ended distribution the level that quarter payable not the at did XXth. on distribution The X, share dividend declared supplemental of June XX, of Directors believe XXXX June stable $XX a of XXXX Board best separate dividend purchased been since make has open in way program. the Investcorp not approach any XX-BX to fluctuations of have capture generation. the two did income the program to the Investcorp under ICMB. purchases shares portfolios that shares distribution market purchase made commitments XXX,XXX remains this inception for in To-date, quarter.

core broadly has than purchase deals XXX,XXX especially purchased committed our make market, Secondly, December pricing that in and to-date. are Investcorp to transactions. holding to find middle on larger covenants continue structural focus we efforts syndicated protection, up and market, not much better increasingly In between the did and we purchases the XXst for shares frothy at an XXst, March has shares NAV. Investcorp any

we to have team to additional Our investment opportunities hard in cash portfolio. the is identify working deploy

quarter, I line we we said Operator, the Q&A. cycle have of consistent presented That's end open preservation with, what income As focus and shareholder generation the we for on our last the were prepared. opportunities to the the and want manage of portfolio seize capital. please keep the through

Operator

[Operator Robert from from instructions] James. Our Dodd first question comes Raymond

Robert Dodd

On Premiere Global and confidentiality. there's I understand

with on. color without whatever give the may the us asset resolution to expect current, on on of into what went So you entirely going time there be a Can either any or frame details going business? the what's all of reasonable issues the

Mike Mauer

It timeline. don't has been we a recent unfortunately, Robert, a event. have

of stages it's not beginning the So everyone in in stages. discussions, is the later

a So not that. at this on have we do timeline point

Robert Dodd

still of pretty Another marked Obviously, it's Exela It's marked one but on out that down. stands substantially. Intermedia. down it's kind accrual

on what that anything regard expected accrual on will stay on tell So us about mean, can is asset? your it to us there, Mark, any can give with expectations status? outcomes you I are potential you or color And are there that,

Mike Mauer

keep we watching Robert, on closely. that it

some financings discussions done, gotten. that there’s continues some out information the the of contracts the have have moves company some is It make among We there the one of to all on and lenders. public of they've

they made until perspective. attractive a that And get that But it some several continued think on that have to order accrual. that so make actually make moves marked it going guidance a and interest keep we to got We to an payments. they've we're we from indicative in keep not think to they're pretty we've level. is going So liquidity market payment,

Robert Dodd

or paying in, anything beyond still in et you're And there the cetera? obviously, Are so warning any -- given -- with are signs any in to general, should assets. out other some stress that assets particular that some then in that be there there attention we seeing economy, those there's just

Mike Mauer

One the away a table your from maybe here. think, feet use six me things. It's on digress question in kick I'll or three I partner, is, under speaking, great my and two just question as

quarter. I next $X.XX for dividend think I the not said $XX,

that to And wanted so I highlight.

or of the are two -- that several June is but and quarter, thing other covering strong would The had and this be funding we dividend, projections not to reinvestment look we because beyond had bond in we will the June with the the three repay market forward, the and cover should delay that that. dividend quarter to forward the going in I necessarily expect investments we our when

that's So one I think important thing.

that XXs, XXXX. hold If oil you The is low thing about, thank weeks, $XX other plus of been it's so today, not I'll XX couple about I but asset continues we did last high to and this always up you. ask in But or talk XXs. minus, $XX, the bring

a constant a seeing significantly very where below in the it's that slow it consistent but increase was pickup are still especially seeing Permian, fairly in nice pre-COVID, we but rigs, in are business. We

we're So concerned one that the current in environment. on not

Operator

Our Johnson. comes from Paul question next

Paul Johnson

to expect any sight able But of for to non-accruals $X million of maybe you bit do kind from repricings kind we spreads, in income from -- answered of of just interest to run that kind suppose of and line I'm that Robert you with off you level terms this But given this. like bring and market. just yields of do the little mean, quarter of dividend. and have of $X million the kind where a taking here? place in know driver around the I up question to interest on the or coming income be range, I are the big a I portfolio,

Mike Mauer

stretch we kind and new to assuming X% average. undue going because on of assuming So investments the X.X% risk. We're to and are environment in take an of we're not

bond. that we're Hopefully that from end, quarter we invested got that which process that the around baby we we've the of to our pipeline to not looking assets that the closer be also are a in cash assuming from [X.XX] and deals are of at helps. [X.XX] additional leverage, was [X.XX] came would that's that using We primarily our change should

Paul Johnson

are you've have And of more I or the even question. or that then companies labor pressure kind businesses in that labor looked your one I any with your guess of seen the middle at, manual you deals particularly all within just intensive. economy mean, broader throughout mean, market -- portfolio, I inflation just signs businesses? maybe

Chris Jansen

aware pressures more those it wage the in lower businesses pricing seeing middle are of a number But hourly skilled a with There We workers. haven't specifically. some workers We're in. pressure coming on seeing seen are rely but market. that they're our

a of Some in of had well, revenue resiliency the example, surprised for like by been say our across that and discussion And for we've the pricing. kind others. couple on draw PGI the IEA, companies portfolio, side can their others, on as we've

Operator

Our next Christopher Nolan. from question comes

Christopher Nolan

the yields portfolio Mike, what driver quarter? the was in decrease the for in

Mike Mauer

and that about our investments we averaged repayments, were and coming X.X%. driver The were was had decrease XX.X% around of portfolio and they at primary that in the new

Christopher Nolan

more significantly capital many those tax. think affects do then A come month How from ago, group, deals equity? your talk the so that private BDC you increasing question. a or strategic given And so company, gains the about

Mike Mauer

it been goes sponsors it equity talk at said rate tax that a raised. can, is motivation is not private available who avoid so been a sure prospectively don't margin the private it the assuming capital five to retrospectively. other there's by real up monetize trillion increased the tax short I I is, That you say, there that's materially changes and they have extent, not answer The equity that on having the I'm rate, to about depending to why huge, see than

and pipeline forget of fairly are a to new new about for deals deal, a look deals, significant refinanced, things from so And being deals at. of good us there amount new

motivation you deals. tax billion monetization below think margin, some at sourcing sense. will definitely for I where gains from makes new it sell see things the pressure people aren't the the So capital that But to the economic X.X is going

Operator

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

Mike Mauer

Thank talking you you, to everyone. to We forward look soon.

Operator

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

Investcorp Credit Management BDC (ICMB) 11 May 212021 Q3 Earnings call transcript