ICMB - Earnings call transcript Q4 2021 | Investcorp Credit Management BDC, Inc.

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Operator

Welcome to the Investcorp Credit Management BDC, Inc. scheduled Earnings Release of Fourth Quarter Ended June 30, 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'll now turn the call over to your speakers.

begin. may You

Mike Mauer

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

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

Rocco DelGuercio

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

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

Mike Mauer

The investments of active was syndicated with of Rocco. a activity company go which co-led terms including our were The loans, basis. we of quarter quarter from fourth in one challenges. will Three in our four Chris detail year-end, investments a June had realizations. very new loan. portfolio on into Thanks, name-by-name new lot a market a we middle partner. marks standpoint, with club a and had fiscal our We both highlights and investment both

the We best in core believe continue that middle market. value the to lies

thoughtful seems of covenants. somewhat. activity the refinancing in have the pace and to broader We also market The of relevance slowed structuring see

mid-summer but summer refinancings we Of hit year this the early announced had and course, it's none also two doldrums possible since. that

is pipeline refis on more new less and on LBOs. now focused Our

market's still months to frenzy current is our there the five also saw the new the have we quarter. costs deals, financing We capacity seems our feeling, While abated and somewhat. during quarter extended four pricing or pressure lowered and during on ago

last which discuss. our earnings XXXX notes secured had More As some we we due thematic go will credit value. new the effects quarter borrowings our asset quarter, will replace XXXX. discussed recently, notes we in facility. will -- which we detail would stabilizing facility towards issued like repaid onetime have will Rocco and a UBS Capital on this to is One make with new the later call. our point under One eventually net which great into the I more Rocco go strides made that This

this Exela as volatility We Technologies have investments with did by reduced we exiting quarter.

year the We our cost. our payments have past reduced on received fair X% of over current which have original Deluxe value to

for several have of We the same team's our marks both point great risk to of as you to NAV have the Negative two offset now. the quarters concern both rest downside on Coincidentally, portfolio. PGi. of on know to years as specifically us positions these that restructuring marks, in and our work XXXX through have the our at also over the reached been I well across substantially eliminated of overshadowed positions these have past time.

to left, portfolio is poised we the downside rebound. limited with think Now entire

months. borrowers the the Chris our outlook all finish financial XL, points and Bioplan, low examples with and appreciate investment our and will our Techniplas now Investcorp's purchases, value our performance dividend end. I'll will you quarter have our the begun results Rocco activity as during from the leverage share have underlying next financing to and the June Arcade quarter of on take and improved. has Some few commentary recovered after discuss through include activity, over and which fair

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

Chris Jansen

five Mike. as full Thanks, five portfolio this realizations in existing portfolio portfolio invested We debt company. well. We companies across one new companies quarter had six and

club investment managed new once XXXX. in the for NWN grown has first company NWN was solutions loan a Our in Corporation. invested services, and leading is substantially State a New The in provider We under of ownership systems. which before of Capital cloud

yield cost at approximately X.X%. is Our

and vitamin, wellness was formulates and was mineral by Our loan INW first the which innovations a in in investment markets. supplement second term produces and variety products purchased for Cornell or new the for Partners, lien INW. nutrition of

yield X.X%. cost Our is at approximately

in investment loan first was third Veteran as statements new in our lien Services the shown Our financial for Lockwood, LLC.

facility Our is in to bridge former area. the a support hospital Services Veteran a of loan Chicago year the one metropolitan redevelopment to

yield approximately cost XX.X%. Our at is

across investment various WIS Lane Our Centre retail WIS of a in fourth the new was customers Partners. to lien industries. loan services inventory first company for portfolio verification services merchandising International, and provides

X.X%. cost yield is at Our approximately

partners was Corporation, first in loan fifth another for investment club our co-led Finally, portfolio Partners. Lenox Dynamics. Capital deal the Lane Centre at of with company our this lien We

Oneida supported tabletop focused leading loan the of business form combination Lenox, Our on the better market. to Hampton Forge and the

Our X.X%. yield at is approximately cost

an additional We also made Group existing Financial in portfolio term an loan Barry company is investment which investment.

approximately investment cost on is this Our at yield X.X%. incremental

bond early quarter. loan April in now our of the Alta during refinanced to the Equipment proceeds the it's offering. Turning term with realizations

fully it's Our XX.X%. IRR realized April. credit Flow facilities was amended in Control

we position not the roll par. at Term As into Loan this opted to we part facility our amendment, and new of were repaid C

IRR debt full. Our realized the raised GEE fully repay it's in equity in to X.X%. was public facilities markets

XX.X%. Our it's by Platinum fully with company or connection the of ACProducts Equity. the loans in acquisition IRR ACTi refinanced was realized

investment X.X%. was Our on realized fully IRR this

and sold bonds. Mike commentary. term his also will in loan Exela's our this in positions further discuss We

loan negative manufacturer additional Way, Easy on Way Our quarter our we loan bond realized end, of to positive the a the a IRR covers, to was X.X%. investments on IRR accessories club Insight furniture one in outdoor made cushions, the term portfolio other a umbrellas and and in X.X% company a invested Equity. market. Easy designer of position was We realization. had the and Since and several full is

approximately X.X%. Our We useful lien AgroFresh, company yield the a of prolong cost to food at in the fruits. sciences loan first life whose invested product is

Our yield cost X.X%. at is approximately

and draw invested term in one Empire portfolio facility for also of incremental delayed loan Office, We our existing companies.

Our yield X.X%. cost investment incremental is this approximately at on

also investment to existing to We equity Techniplas' part complementary the as expected which business. made and is acquisition of an the highly additional Nanogate accretive in strategic be of

term which had equity additional the invested Hippo also we in of purchase to the ESOP. an debt of to Finally, facilitate loan incremental amount a significant Golden repaid by

X.X%. quarter and received we in repayment IEA. a After end, alternatives loan The or repay at placed full infrastructure the to of in yield approximately bond Our is full. it's energy cost company

were approximately XX.X%. Hyperion the also investment company repaid on was the as Our broadly our it's first refinanced syndicated in in loans realized IRR lien market. and We second

standard by at X.X%, was Using the GICS energy our construction X.X% of services X%. industry at XX.X%, equipment services commercial approximately and IRR and professional and realized XX, fully containers at and X.X%. and largest packaging supplies at Our was X.X%, as concentration at June followed services engineering

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

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

Rocco DelGuercio

Chris. Thanks,

million and of $XXX the was ended value million offering $X.X For write-off redemption $X.X share. our would Normalizing the XXXX portfolio share. have for on expenses notes the quarter March investment or of XX, fair notes, $X.XX was net those or $X.XX the for of June income compared per XXXX, our $XXX per million XX. capitalized been NII our million to The

quarter this approximately decrease net $XX.X portfolio's operations from million. was Our

of Our The and weighted had average XX.X%, our this XX.X%. average during fully of quarter March XX realized repayment yield investments average investments yield an attributable XX. new points IRR the repayments had was of GEE XX.X% quarter the decrease to the debt The debt an of portfolio Group. during while decrease of average our X.XX%, an to is basis had from of yield loan a realization, of majority

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

floor Our investments our LIBOR on debt X.XX%. was average

was well were as of XX. revolving million and X.X -- times. accrual investment of We excuse million $XX and million levered partial had of $XX.X of portfolio four credit under on March million times net had June We was approximately average was $X.X capacity largest Our as cash, With XX, UBS. our X.X me, in had we XX respect our investment million. non-accrual XX at varied compared $X.X portfolio of as XX our investments XX we June leverage was leverage facility as of as cash on as company restricted as on which and X.XXx liquidity, June June our $XX to to

Finally, to basis compared three The plus savings. onetime that new facility I the August details XX-K a to our costs facility UBS' to closed period. and on related LIBOR More this in is facility quarter facilities interest plus would X-K December. filed the off One. new X.XX% replace be has a we early existing UBS and has credit point will on December. The filed will with facility are -- early our facility December credit to credit in the Capital UBS like regarding until of rolls have XX. new rate recently XX, year LIBOR X.XX% set facility August XX credit in note an It which available mature may two investment on the also

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

Mike Mauer

Rocco. you, Thank

the facilities $XX we us XXXX. on due to lower of closed of provide set Over April, new leverage expanded [indiscernible] established months, cost. have and flexibility notes past a with million In several we new

$X.XX. onetime with of the cost credit facility our As off there NII we a secured writing remaining cost Rocco new with recently, the offering was approximately notes associated noted, Capital XXXX reduced by which capitalized More One. a

Capital our Our UBS. new facility replace with One with will borrowings

times. leverage of remains X.XX to X.X Our on a guidance target

We're reducing We been work not typical I down in note high result but refinancing inflated activity times. to the discuss like our normal quarters to book over to just our the I two approximately to leverage working quarters, our to toward note I'd of On the reduce decline described consequence stands direct value. decrease bringing a and our front, in investment that NAV. the X.XX rather of leverage it past persistently the that leverage have in due our the coming the at going times X.XX it to is continue which in X.XX Today, March over June. was from

for and XXXX credit were markdowns quarter, we significant company time more while were discuss some like on XXXX both investments on for Well, all. cannot would in share of These Both and each took with details I have of color on already confidentiality many companies, you portfolio reasons, PGi. been This several two particular. the loans. has non-accrual. term concerns I these to

reduces a that debt. will and constructively restructuring sheet into and We company ability the we but that restructuring the downside to us quarter, appropriately in believe point risk our for addition our at was We important reducing recovering in payments Lenders interest, on to realize tranches XXXX on would we it's PGi, an further also uncertainty paying have of which several believe our view resume for Exela for after IRR an our downside will and we interest detail in in sold to recovers. our retain value marks a through the risk on We holdings about significant balance go both can't the discussions from recognition restructure liquidity into volatility. have a we months. after been in that especially upside price non-accrual zero price this defaulted at performance interest together positions loans. to limits as second I equitization and loan the significant Technologies first further it value. not the exited preserve NAV a in term of lien B theme By position. benefit debt. restructuring has holding this equity mark ultimately Exela begun subordinated This the After path a possibility. market should a if toward portfolio, near of been remarkable both the to increase define the portion real exit working XXXX in PGi

have is discussed of two XXXX in PGi, have position PGi, I wind-down -- part marks Deluxe and two below of June XX. in which apart I'm XX sorry, As XXXX we we or marks from as have prior DSG and quarters.

We the a of as position have cash a future sum marked probable receipts.

adjusted recent is in principal but we additional future. based view and note realized, the to remaining upon would As recover time of sources have I most at markets It's recoveries this on that of investment of to reduced a position amounts value. our the like XX% small we and our are recovered the excess expect in balance

company's future. and business the As of years our structure we quarter. out back I first fair par cost. paper loan-to-value today, XX of management X% facing a loan This of represents at is deal mark challenges underlying out the ago. the vision that DSG original indicative to would at and have Fusion's take the it's unsustainable business, confidence well we as second two this during for the value the [indiscernible] approximately continue low of is marked bankruptcy their the on great capital it's in due as which was of our note to

Techniplas noted, an working number ASI Chris be as In have made asymmetric own well. for as potential. Fusion. is, positions further we see believe, is as on immediately with XXXX addition equity well stable recovery ASI and limit we downside positioned We and should XL XL, and upside which recovery. perform to accretive. to NAV, hard to our and positions begun Techniplas future of in to continues has acquisition a

to portfolio of to Beyond will we expanded never I the equity order conflicts. exemptive in them. Investcorp avoid our private also an current with invest Investcorp's in of portfolio, to recently us would LBOs will which company like debt received note Investcorp's to invest we alongside in relief equity allow funds co-invest

However, avenues we and dividend not NII. investing are additional alongside equity our for growth. We excited about our creating partners private June prospect did the NAV cover with of quarterly

offering NII these onetime noted, however, our served from costs associated costs, our off onetime we XXXX to than for more share. per costs writing the capitalized share $X.XX Rocco per to $X.XX notes dividend. As from covered with bring Except

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

with waived we portion we leverage. As do, our committed fee management management over Xx of base fees the to associated

XX, supplemental a declared Board capture be distribution made purchase the fluctuations and XXXX, per of believe $X.XX of We the October on quarter. distribution a stable shares should Our as XX. in remains income this Directors The generation. Board did approach to September of dividend the level not September XX share for shareholders quarter portfolio's in ended to declare supplemental best the record payable two sustainable the way and distribution to Investcorp separate ICMB. commitments of

did pricing environment transactions. purchases we current structural typically in for or covenants Investcorp protections, and it's invested in during vintage deals the all commitments syndicated portfolio has better XX, a challenging made club NAV the remain are shares market purchases focused of on during broadly XXbX March under where current successfully it's we open any summary, not have Investcorp any despite origination. seven to find companies purchases quarter. new at make of We that quarter. since program In While fulfill June

investments. We make at opportunities also are existing for looking to companies portfolio incremental

We our line will the income the on keep prepared and the manage our generation end open focus preservation please through of the of for statements. cycle shareholder portfolio Operator, capital. and Q&A. That's consistent

Operator

[Operator session. now Instructions] to at this a ready begin. time, We gentlemen, we conduct question-and-answer and will Ladies are

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

Christopher Nolan

Hi, rate new the One advance guys. facility, the What's Capital on Rocco?

Rocco DelGuercio

rate? advance The

Christopher Nolan

Yes.

Rocco DelGuercio

I'm -- It's sorry.

Chris Jansen

It Chris. the rate total. in varies, on advance It varies

Christopher Nolan

Hello?

Rocco DelGuercio

Yes, Hello? okay.

Chris Jansen

Okay.

factor different well. loans It which there's we average were Sorry. It classes about the different and UBS They're for XX%. also as depends of advance a upon where obviously, about portfolio. should size is rates with

Christopher Nolan

Understood. with XXXX, sponsors sponsors -- that equity there company? associated private are

Mike Mauer

sponsor, for There was question. a Thanks Mike. the it's

want answer I to that, Before one I did clarify thing.

like I in. think a ago, additional sponsor. was transaction leverage sponsor -- that. They was X.X to his was removed. XXXX, several I initial to just a it going sounded sponsor be through in X.XX, restructured net talked for to the fundless earlier, have clear about was XXXX statements, it did put On Rocco everyone, not back in there to and capital were When not it that want years clarify

participate. and helping an So sellers the the Wells operating equity into are continue lenders sellers stepped not family point, capital but some from to the That's the the At strategic the strategic standpoint. this in out Basin. from of standpoint a DJ

Christopher Nolan

did Great. a become the one final It's turn loan guess And Would Or just non-accrual. into which on turn I equity? a is equity? as that question XXXX. term exposure B all --

Mike Mauer

We it. are expect is going debt that some -- on still I would there

not point. other it's but if B has been finalizing are the amount term this loan finalized some or that at We

Christopher Nolan

Great, thank you.

Operator

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

Robert Dodd

guys. I've got Hi, a few.

is case, as that Fusion means? give Connect numbers I a as housekeeping kind Can partial it what is is in listed one one. us think counted partial. non-accrual of First non-accrual. explain you fully you marked it's but In like the your that

what's So there? distinction the

Rocco DelGuercio

Yes.

So that non-accrual. it's X% the portion is We're on it. cash only It PIK X% PIK. the portion cash. pays cash, Robert, is recognizing believe, The I a -- of paying only

Robert Dodd

cover highest had yes, fee $X.XX. I it. -- least this Got -- find for been one mean, But X-plus also be I the Mike, income it. it color can model the I mean, Got to I would quarter you mean onetime the you very quarter, my you without have that. in to able cost, years. at of high questions gave dividend. expect the appreciate mean I I on this

normal with to extra slowed the just fee can confident the has fee cover you if of that is with income. the without either income So, refinancing fee dividend income -- mean that market stay you're going benefit I elevated or

Mike Mauer

have is year-end. income, we to expect through the our question. models two the out Robert, we are With things. with thanks fee One $X.XX. And cover There done normal, normal for

we the little rates reinvestment portfolio, the year-end, the the get level etcetera. and beyond think bit a guessing I of into of

Robert Dodd

Got it. Understood.

last year-end I NAV I or mark a But when to forward. going American on look eliminate that, gets I mean Teleconferencing, it risk there's one, It Global, has. other XXX your else you the Premiere Then or different your do. got Beyond at is more people BDCs some substantially it in something anything on you reduce your at wanted there look downside on you've about least either and than anybody does tricky. think Is loan? there and don't market PIK lower -- emphasized

So I'm in to that know as it than the mark lowest is XX same others? you not there about Or a sure as other tranche conservative. XX if something you're a very which implies think has you've got necessarily business lower exactly the being the being relates I and

So, that's an factored position is of ultra wanted the on more marked? on take to you any that? that? What's just valuation Or color how into that conservative

Mike Mauer

tried the the appreciate you've information. to I Robert, non-public because question way given sensitive the word it's

we that felt So, information any and with conservative $X I'd And focused range that but that the first believe minimize minimize, all you marks lien And eliminate risk. we have to is the we portfolio. that -- lien, eliminate we never a analyst is any we there my lien X, then frustration which to we of $X okay? on of it's lenders, some first or is the sensed whatever. a there not the range the to for have downside very and say the bits second other that the unless market range is loan do valuations the shareholder can we you're have say And pieces or asymmetric is wanted I end at difficult you're of went that expectation thought if effectively to on have a

PGi a specific. on that's of the overall bit background in So, portfolio

Robert Dodd

all mean what's Got One, allocate around and net I UBS can a NAV end, it. net per balances then share. beneficial move obviously which gets Capital on things other after bit presume cash the stock NAV quarter X.XX, that with The obviously, bought replaced leverage on leverage, taking would that today obviously can have bought etcetera; of you at gave potentially. it. impact Got as I And things differently was leverage the equal. have being But little you account some an they at NAV, obviously, Investcorp a

we basis? So where on do that stand today

Rocco DelGuercio

it net, closer The would be to X.XX.

Robert Dodd

it. Got

that's Thank me. for Okay, you. it

Mike Mauer

Sure.

Operator

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

Paul Johnson

guys. my afternoon, Thanks good Hey, for questions. taking

more I forward, Rob's that planning any bit more so, Just target know balance you which have you growth guess, little sheet? I you mean new going the growth mean on sort just cash than do Obviously, of are repayments? I level facility? new I'm or balance higher do of of that the going you've how a little running, question. do off guys, think, you just of high last into you of on have? leverage I a the had drawing on curious, your X.X is I net just quarter-to-date. How balance incoming around Or all visibility previous end. think, the bit I on

Mike Mauer

you Just to were the to? clarify, growth in referring what

Paul Johnson

just the quarter, investments third Quarter-to-date, that quarter-to-date. you've made

Mike Mauer

got The there that on minimis, in So and some we've visibility We've some repayments visibility I visibility a some is gross on -- it's redeployments. wouldn't some de lot. say some investments? that, are on and -- on got coming

markups just don't because notifications earlier. it's reiterate And XX any this then, don't talked think to vis-à-vis modest of And our see marked. I I day. NAV to downside take about repayment opportunity see the We some of overall today, we them we what where have So next upside. I

to the Investcorp, order I think relief the NAV it's we've to which plus to to strategy And of X.X allow getting equity now with for the co-invest. into asset will the XX deploying enhanced base. X months. grow years spent grow months us exemptive

is over time. think or look Investcorp's think equities, portfolio, change have will will X% manage and about that and be alongside. X% versus in target right minus in of and will But that that plus restructured -- good co-investing that, X months a We I medium-term XX today, the equities being deals may to to diversified a portion that they XX% those near-term sponsored to that is we

growth. So, another of way

Paul Johnson

be my the the think on next for with I you going now sense are equity to affiliated Thanks strategy you. private question Investcorp was actually that. makes that platform. Got which was That

So, and were my today. I I appreciate Those it. have questions all that's all

Mike Mauer

with No, the and I of them equity PE in familiar one XXth the market. the always investors been appreciate middle focused it. next will being a year and private original platform. XXs the are all continues focused of Investcorp to But Listen, I anniversary you equity don't on sponsored know on private of how market middle the be investor be

So are co-investment not to only away us helping their to questions? be of to investments it that's strategy market from be on Investcorp because a now we lend on the to exercise do that think around deals; it accretive Any non-Investcorp is deals lot partnerships able but a there will calls Investcorp originate PE help shareholders debt also to deals. our starting to other

Operator

[Operator this no time, there Instructions] questions. At are further

Mike Mauer

very it, everyone. We Thank appreciate much. you

talk you quarter. to will We next

Operator

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

Investcorp Credit Management BDC (ICMB) 14 Sep 212021 Q4 Earnings call transcript