ICMB - Earnings call transcript Q1 2022 | Investcorp Credit Management BDC, Inc.

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Operator

[Call Starts Abruptly] Investcorp Credit Management BDC, Inc. scheduled Earnings Release of First Quarter Ended September 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’d like to now turn the call over to your speakers. begin. Please

Mike Mauer

by This you and our DelGuercio, for call I’m operator. thank like first our Mike Co-Chief today. of my all joining joined CFO. is you, and I’d Mauer, to quarter Investment Thank Officer; Jansen, Rocco Chris us on

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

Rocco DelGuercio

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

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

Mike Mauer

quarter Thanks, our Rocco. fiscal is the of September first year.

there to of an more end, portfolio and existing XX% the marks We find the other will As this investments the companies of our we we team volatility new saw our the look additional of two hard in quarter the average out companies our diversify of we portfolio two companies. June portfolio reduce increase the investment. are been like that low good loan name then IRR quarter concentrations one over sector an point is increase portfolio in in portfolio to additional mark of and into yield and working optimistic from XXXX would lending three recognize further. invested count here, added opportunities in an realizations. we our made We average you has an that We to direct After continue incremental and on physicians, to NAV. or many made

goals to a structures. We found take deals and some In to for made companies our typical of come environment, to see one in part already ago, initial to our those that lend is better when activity near-term, a of those always and these market theme. portfolio tend – best highly know the of of our competitive we is the yield continues to our our expect protection have on express a new when from asset in and the our challenge investments in exchange price it end call. significant and highly to specifically competitive we capital. discuss XXXX It’s are Last structure stabilize toward PGi. to I’ll of give markdowns Thematically, one covenants environment value. to preference, today’s the we had and/or better companies. have also two we two quarter, able on to, be investments. and a we major to in we maintain Refinancing of financings investments we for of refinancings years net a bit for three two a opportunities

mark were I’ll or the positive Other exhibited loan. past investments, take net ZeroChaos. and infusion had material discuss back including as This in we quarter, our negative which volatility connect stable situation and well. later that this Techniplas a quarter XL, positive single have marks Bioplan, were

and investment will quarter end. on increase and of September the the maintain or financial for our portfolio improving Rocco the the investments on stability the results. some Chris dividend the balance of year. quarter or with we non-accrual number in outlook and walk to during leverage industries commentary discuss will We I’ll of activity our goal the then finish through our the companies after portfolio. continue to gradually of of increase our number the invest with now

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

Chris Jansen

Thanks, Mike. and so call what to existing We We’ve our companies three as two portfolio two invested much in portfolio companies. last this new of conference had Since realizations full was quarter well. recent as AgroFresh, about We I’m on discussed first lien September cover life the sciences the call in whose fruits. of in product useful company well. prolong a to our was food invested loan

Easy designer Our and Way and to Way, invested club cushions, in manufacturer a yield approximately of a cost the We Equity. outdoor other company covers, to furniture of accessories X.X%. portfolio loan Insight Easy market. at is a is umbrellas

cost yield at X.X%. approximately is Our

Turning existing companies. in our term draw and incremental Office. portfolio loan an We facility Empire delayed to invested for

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

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

Our at yield approximately is cost X.X%.

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

Turning to our realizations.

to alternatives repaid. was infrastructure IEA energy and Our or loan

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

skincare and removal incremental approximately two laser company Ares of existing Management. made in invested one X.X%. away a of chain IRR new investment Our lean a companies an full one end, After of LaserAway made was quarter portfolio loan company realization. of we portfolio loan had the – laser in leading investments boutiques. We is first and fully hair realized of

cost at approximately Our yield is X.X%.

LBO loan and also markets. Momentum back machining, metal the to company provides manufacturing group momentum the finishing by welding, one lien in the diverse for bending, first partners. end equity of We services invested

X.X%. Our yield at cost is approximately

first We acquisition. an small lien also investment JetPros term to made loan in a incremental support

& Using September X.X%. was XX.X%, Equipment GICS was Our Commercial PRO & Energy loan at our Companies as X.X%, Packaging at full Services Professional the at XX.X%/ ZeroChaos Distributors by as realized at was Trading a Services by repaid and was Containers followed Supplies X.X%, approximately X.X%, a workforce a or fully & concentration to & at acquired industry in company largest logic standard Services Unlimited, IRR XX,

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

XX XX, I’d of unchanged like As to financial we from over companies results. June September turn XX. portfolio had to call now our discuss Rocco to the

Rocco DelGuercio

Thanks, Chris.

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

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

portfolio at during X.XX%, quarter of realized X.X%, And of yield on new average in weighted the an while the from average of X.X%. was fully an XX. had yield an The basis XX.X%. debt X quarter had increase average our investments June during investments the Our yield an points and realization repayments average debt IRR

positions. X.XX%. debt equity warrants rate rate our XX.X% were As And floating of in XX.X% second public in first instruments our investment fixed our of LIBOR lien, our in remaining companies, X.X% was September invested and the investments. debt lien. investments XX, portfolio X.X% was and investments X.X% portfolio floor average portfolio XX of consisted of of our on were invested is The

X.XX million. to portfolio X.XX for largest at portfolio XX quarter. respectively leverage X.XX average gross and as and $XX.X of and compared We of the company the was investment had times September our invested Our Empire growth times, was leverage a company million $X.X X.XX approximately previous of Office net

information With $XX.X As with I’d loan our capacity term loan. facility, Capital million investment utilized investments investments cruel as cash filed of to that, non-accrual, be takeback Mike. million the turn September to Form With XXXX the under include liquidity, respect our fusion call of $XXX UBS revolving partial on retire which is our September in XX, in UBS revolver, One two portfolio which which deluxe we XX-Q, and million next million back well three well regarding which the restricted of one as we term credit had include B of $X.X cash and $XX was under in as as our the like included had on will composition was five all XX, yesterday. our as weeks to PGI, over over loan and for additional facility

Mike Mauer

Thanks, Rocco.

our financing We with XXXX credit UBS One, facility a lowered about and this we secured new feel borrowings replace Capital our capacity. between leverage quarter, the discussed will notes, of comfortable As Capital which and very extended last borrowing. we quarter, with One facility capacity we cost the our

leverage been bringing it to X.XX leverage trend we on to guidance an September remains our to investments fluctuations artificially from over in of times. our be always high expect down Our but quarter-end. to see X.XX target quarters, a the continue and level There reduce of several downward. X.XX will due to to X.XX timing March leverage repayments, of We’ve working

to term management As Last our as associated turnaround in company is waived aid management was value. several effort, of sponsor fees work a RSI of times of over our current we driven amount. decline quarter, for This company sold leverage. the one downside the our portion priority we To Lenders first base by as a to non-accrual. committed fee I on into the expected this book do, the expected discussed our lien facility. quarter. that opportunity perfusion, portion forbearance investments XXXX, restructuring performance leaving will balance B their continue. discussions with Restructuring was We to PGi the partial and is loan term the be which upside Siris, converted expect nominal loan remains operational be interest no mark. on PGI the super remain still sheet which takeback us loan in from included non-accrual, a revolving accrual. XXXX on in equitized recovers former completed is significant in underway. that with

PGi an Our quarter, and of standard our repaid that allocated facility like and investment trench. fusions. value was last not loan fair view again, total second revolver can out this additional in quarter. value Fusion’s is of marked be But now the across quarter. the change takeback reborrowed this on of The you revolving did a

not that value crunch. and The first loan concerned through out are at marked about par, remains we

But below regular the September marked our NAV be cause also at there negative which covered much NII. from to loans fellow XX closely with limited in was infusion touch For go in at repayment At dividend par. management stage, upside lenders. are marked monitoring as also ability reasons, as there ZeroChaos, I we In our can’t our further recovery, equity confidentiality and quarterly at potential in our this XXXX will and volatility have of We with – quarter, into see the was this We XX. current in credit think PGi about are the NAV. our that well a investments, September detail Fusion we time.

year. calendar rate on to December and the we run basis, have Looking covered portfolio a well, expect in cover as at the to our fully dividend

approach well capital us investment cover the going NII dividend appropriate disciplined resources and to Our with leave forward. come positioned

Our a payable of attractive board level represents of per as ended declared and price December on of that should of the shareholders X, directors given market the an and to quarter ICMB January share stock. XX, record distribution dividend of sustainable stable XX. XXXX the believe We it yield be December $X.XX XXXX for

So year, competitive far this and our so we – originations portfolio invested have very successfully have without we or a companies, calendar far compromising quarter, done this principles. I’m new sorry so environment for nine despite in

focused Our protections, structure club covenants. find pipeline we better and where on is deals, pricing

for incremental to existing companies. expect portfolio in opportunities find also We investments

concludes please generation to of Operator, our That consistent We the goal a income shareholder the will Q&A. manage portfolio account. remarks. prepared and line with for open preservation of continue

Operator

question-of-answer And ahead, Raymond Robert. Ladies comes our [Operator from time, this James. first Robert and the will session. gentlemen, question from Please conduct we Dodd at go Instructions]

Robert Dodd

questions. and the congratulations guys, a on I’ve couple quarter. Hi, got

down size overall like your especially the one-time now of was going of of equity which kind the or context one that. dividend that I it’s of recap in pretty isn’t book, P&I, First something big. kind mean, the a income dividend sizable of

the So cut give basically, it sustainable source you this any is mean, us of and I can on quarter?

Mike Mauer

Yes.

other fees one-time probably the there And – little current that XXX,XXX. there than in $XXX,XXX As a far in and less over quarter. little then income, then other non-recurring was there probably a the was was fees, as were

quarter. looked we when so next forecast and we’re dividend, for cover that this we should And continue very at the the to comfortable it quarter

Robert Dodd

I this you to than Sorry. dividend the income to dividend $XXX,XXX the dividend rather the meant in quarter. income shareholders

Mike Mauer

sorry. I’m

Rocco he’s to going and looking up… look at that while I’m Okay.

Rocco DelGuercio

It’s is dividend. Techniplas, about Techniplas talking he

Robert Dodd

time. one The

Rocco DelGuercio

that paid is that That’s That’s didn’t I of Techniplas, the it Yes. onetime that. paid didn’t I’m Yes, Robert. understand. a apologize. I Techniplas dividend sorry, dividend. I portion of the the fee. a get equity

Mike Mauer

in current do So, when portfolio. the without a yes. at that dividend level easily filter material the cover out, change And we we still

Robert Dodd

Understood.

evaluated reasonable that On basis turn that fees obviously, on mean, over the quarter-to-quarter Should think basis? it’s to a the kind fee a and expect as that plan? you we to be do that gave points long-term? Mike, XX you waiver, leverage. base – management one on of I is Or being over investors something should waving on is in continued factor Or long-term for

Mike Mauer

me One there that. Let plan is, that answer two change no is ways. to

it So is the basis on no point. with something is revisit in. from but you a It the is quarter-to-quarter there way factor at plan what we’re doing this revisited board, to that

Robert Dodd

it. Got I that. appreciate

versus, you’ve structures in and the If interest work expense On were for say, X.XX% at however, we X.X% last I look next say, with or et done in new goal or right, quarter – want interest expense, you et of how – a the quarter? the lot the new mean, cetera. I quarter there’s much this the structures that the quarterly total saved do cetera, newer think to

Mike Mauer

All right.

put here it maybe So can this different. Maybe way. let I me Robert, it say

facility credit LIBOR at current new is one Our plus is LIBOR. at X.XX% and X.XX% our plus

Robert Dodd

And also… then there’s

Mike Mauer

X.XX% plus LIBOR. sorry. I’m

X.XX% So versus X. at that you is is December the we have now what And X.XX%. facility on if X.XX% that UBS look roll off with facility will and credit credit UBS plus

Robert Dodd

Got it. it. Got

I think the…

Mike Mauer

thing one other to and we’re have million been new interest just all paying add under structure, we’ve just is the add got more other more UBS a minimum that the I’d One, Capital I’ve loan yes, to $XX we’ve under because term thing as looking Robert, each the loan, here under term carrying at cash that is current Only flexibility. full $XX the million of –

we down have borrowed be paying if not and there. So that we excess on we it cash, pay will will funds

Robert Dodd

it. Got it. Got Appreciate that.

of anything and to on cetera. you’re expect on I the completed not are control. give and and But et this kind in Okay. you And Fusion. color be there reasonable PGi fusion, we say to color But timeline the I’m a PGi, anything could restructuring I appreciate – there? realize of about like Then just anything you sure Mike, – is can’t quarter I XXXX kind on realize any XXXX us you

Mike Mauer

sure. not Yes, I’m

was I say, be a that to going think all patient, we’re it months year? RSI I’d it no. plus I to a big is And six think on. bring to

plus me RSI, we’ve in, strategically and this if wild two it or think, comes and I plus bias way years in, is but the time. looks my minus. structured upside the and more I it think got, be a team with good that realize could card as got plus someone over big And real you at it’s asked we’ve be would unless they management value

Robert Dodd

it. you. Got Thank

Chris Jansen

and all what had or this with business, guarantee lenders it is term are. for that be again, seriousness other past – This Robert. Are they fit to the to performance good results RSI before but Yes. complexity have but used the there really not strengths deals them performances, Chris, fit surprisingly RSI managed and of future whatever couple Robert. that on had RSI good they over results, is, of surprisingly

want we’re So we we’re but optimistic, said, – – optimistic we’re like Mike don’t long-term.

Mike Mauer

in have optimism – our think we not We’ve And upside done what valuation. is built that to into we yes.

Robert Dodd

Appreciate you. it. yes. Thank Yes,

Operator

question Paul. next go ahead, Johnson KBW. comes from Our from Paul Please

Paul Johnson

you new existing alongside portfolio. other level companies a opportunity say in of first, or any high to my had guys. one you. the positions taking I Hey, the invest achieving balance that a I’d necessarily out question obviously for you taking How greater if in portfolio? in diversification out. idea how to you of but sort do wrong from questions. do investments, if good answer had the guys. hear morning I for with I the I just Thanks don’t balance guys goal preference should balance your here, be obviously know new of just in there’s or right guess the you for businesses How in curious or curious a you

Chris Jansen

we’re like which like I credit It’s Paul. by case a be Thanks, the but case lien a shares ESOP no Hippo, back close to the ever I’ve as the is This they debt to as reload Golden that to the facility have come back is more in. from Chris. hate three original first you basis. founders When something Yes. non-committal, repaid for really encountered. significantly brainer to that, buy And

of down average the our are effort mindful hold the how how And the We to the every managed we’ve – we do double-digits. levels in below make keep portfolio past.

the deals run we sometimes, mindful down. It’ll leverage invested longer for where us have answer to may an your a that on we’re be new b, tend or So with little it’s imagine we manageable tried I we’re and a at with higher. are now, teams deal But where $X is we three a or looking a, less paid state company is it. to up apologize I’ve position of when better a there bit two more. If manageable to comfort that higher hurdle top question a little for and deal already million in a older or have

Paul Johnson

Sure.

Yeah, that. Okay. I appreciate

Chris Jansen

That how it. we give but for some we ended at a flavor lot, you hopefully look

Paul Johnson

any partnership any the is or sort the Yes, it. just question or with manage basis I My way, It’s ICM you raising of of the was are best do I of advisor. outside does by process for the other to BDC? advisor outside and you say any other deal is in BDC probably – of complicated the deal in in think way capital guys along do curious understand. the are any – assets – I’m additional

Mike Mauer

which that, raising are talking private fund. to about parts number had a pre-COVID So one, been there’s two we

I and capital had They licenses first be should insurance discussions on ago from in the Investcorp owns that now so would week an half, on But XXXX. half it’s separate or close the will think on a coincidental We a first during half second United that’s private XX up. will it, overlap it, not probably close are fund were theme an it the shell the I the have that not with company of analogy close during that a think new the I’m and for acquisition progress a States. with about a those sure target some, to ramp first throughout XXXX. they think if but a – coincidental back announcement be supplying in during new that

So of opportunity has process write through there’s a the along to with it to capitalizing CIO. private assets a new insurance will Investcorp We’ve us got the They’re company. That premiums the And during gone hiring identifying will start shell. additional CEO, hopefully create fund. XXXX. raise it. manage for to

is around it. platform there is that building So a

Paul Johnson

Great. on was that. last Thanks good that. That’s that just leverage And one – but on gross a net quick your for I very basis? is color. target or basis question, And appreciate ratio, that a

Rocco DelGuercio

So gross. was was netball. so did One, I X.XX% ways. it both The – the was, it I X.XX%

Mike Mauer

target number gross In to – of know is a are sure we supposed repaying, and to based that few we to a trying are upon make are we is would that deploy. expect that And that of we said the have to X.XX% X.XX% example repay. we we great there anticipation

the comes a being if little in in. bit would that the repayment until a have target. delayed it higher But repayment is X.XX%, we be deployed, Now X.XX% gets and

Rocco DelGuercio

need said if the be credit because and net sit follow we credit down it earlier, you facility would in the – borrow it. same, gross new about way the until the to I the on credit just facility, cash, to think just where Mike pay Paul, And Yes. on is, would I our

look kind at So that it way if too. of you

Mike Mauer

new will facility. December X, fully facility UBS the the and be out And by into we of

Paul Johnson

Okay. Got it.

I So for. what gross questions. on it, the for basis my target was taking guys. Appreciate range that’s looking Thanks

Rocco DelGuercio

Thank you.

Operator

[Operator no there to this time, questions. Instructions] at And appears further be gentlemen,

Mike Mauer

much. Thank you very

Operator

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

Investcorp Credit Management BDC (ICMB) 9 Nov 212022 Q1 Earnings call transcript