ICMB - Earnings call transcript Q2 2022 | Investcorp Credit Management BDC Inc

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Operator

00:12 Welcome to the Investcorp Credit Management scheduled Earning Release of Second Quarter Ended December 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. 00:34 I’d now like to turn the call over to speakers. Please begin.

Mike Mauer

and quarter all call operator on joining you, second our today. Thank thank for you us XX:XX I'm joined by and Rocco Chris Jansen, my our Co-Chief CFO. DelGuercio, Investment Officer; information give XX:XX customary Rocco we statements. will Before disclaimer begin, regarding and forward-looking our Rocco?

Rocco DelGuercio

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

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

Mike Mauer

Thank XX:XX Rocco. you,

restructuring industries moderate the stability B Fusion as of position existing earlier of into Connect invested diverse of January, busiest rotation, this companies, in This the concentrations portfolio and the and well companies promised a size, all in conversion the results. was to made total quarter the in Term December of among began our to we Our new proceeds. quarter, average our we've in added history. equity. other continues XXXX's As portfolio of set of portfolio investments increasing our completed maintained Loan seven decreased a portfolio into year. last one supported we support other acquisitions We we of as LBO We in seven uses We lend of additional and with companies goal investments the XX:XX portfolio companies. number count

these the through our on to I'll After investment friendly. Rocco financial is the call investments, environment, market real discussion will over I'd investments capital the new our of quarter activity. our yield more XXXX like complete, X:XX the maintain in the during address continue in an but to legacy light we our environment With I'll finish deploying speak in with we'll non-accrual, turn in competitive results. which Chris. of in story details our to Since the highly at covenant turn issues it go call. and dividend the his new our which a for later to price significant to challenging always, of and our with on structure in Fusion the outlook be were we Only about leverage, well to of successful It Q&A. as excess one over and Chris. a average With X:XX increasingly end quarter. and the Connect, restructurings restructurings credit sponsor is market XXXX continues as X% portfolio. that, I'll commentary

Chris Jansen

removal portfolio XX:XX a laser cover invested well. LaserAway, as companies full six as to leading Management. there Please company hair chain had bear first of lot of seven well me Thanks, lien existing We and of is is this the a companies. boutiques. We seven a in skincare portfolio as invested as this loan quarter. Ares realizations We in new LaserAway Mike. with portfolio quarter

provides the welding, services. Equity invested first approximately XX:XX X.X%. metal to is partners. finishing One company the bending lien back machining, Patriot Our Group loan We yield Momentum cost in Momentum or of of MMG at the Manufacturing LBO and by

at approximately is yield cost X.X%. Our

a made participated LBO of in in financing utility the services. loan club small co-investment supported ArborWorks clearing, transaction New a vegetation the equity. invested We by relief and ArborWorks. for management The revolver, the disaster also in company We and State the provides term Capital.

revolver lien first LBO Terminals the it’s Coast Our invested backing yield loan, at X.X%. Partners. We is cost by XX:XX Platform South in and approximately the

chemicals is a manufacturer Coast South contract of and specialty lubricants.

at cost yield Our is X.X%. approximately

invested also revolver materials. the chemicals first term solutions delayed-draw loan of loan We and sponsor. the Rock Xenon distribution for provides tech specialty is lien Arc, which in and term enabled Peak

a in club Our company serving the it Gemspring acquisition. production upsizing is yield film sponsor. Apes' Crafty supporting XX:XX We the TV loan, term X%. Apes' cost is an Crafty as made deal effects a participated and at an approximately of the industries. company and is visual joining

cost Our is yield at approximately X.X%.

equity Finally, we an related as In portfolio listed power private Gexpro existing we power Investcorp’s provides our acquisition. of investments products of corporate utility, and generation, to companies, government a LP specialty customers. in and support American distribution Investcorp Aggregator in Transformer investments XX:XX our group. alongside small made incremental to terms Power loan scheduled services, co-investment to North made first equity field our RESA systems

Our yield approximately X%. at is cost

were Our talk about Gexpro a loans to moment. in I'll quarter end, which refinanced after

made to the incremental Fusion to Connect loan process. support a also restructuring We small during its liquidity

later cost approximately we We made a as company will Way umbrellas covers, furniture and in incremental outdoor Easy is the XX%, cushions, at us to the designer Mike was manufacturer was end. refinance for a last which of provide portfolio additional new accessories for about GexPro quarter quarter. detail after and Fusion's market. an call. other Way, yield the this Our loan restructuring XX:XX Easy loan

made additional products and now of a yields position the X.X% of useful approximately We prolong in lien the these whose loan participate costs. had We new subscale in is were comfortable life XX:XX term Galaxy hold cost number first fruits. and refinanced an loan the food first-lien of brands purchased acquisition. bankruptcy loans investment and at X.X%. a AgroFresh, our a sciences already Universal footwear company to with size. are Galaxy Brands transformational Galaxy's Sequential existing to this yield Our pleased from auction. brands Sequential’s we're approximately manage in

approximately leverage closing with below Hersh an to financial provide to at leverage. loans Klein of dividend the Hersh’s This We incremental fact yield helped our is cost a been X.X%. alongside the Capital. get that sponsor partners. the us comfortable today club Our was outstanding New use proceeds Klein has State performance is and

approximately at Our is yield X.X%. cost

loan a to to provided acquisition. small company we Finally, the help incremental ASI make an

Our yield at XX:XX realizations. now to cost our Turning is approximately X.X%.

As PRO repaid acquired I mentioned was our company a last Unlimited. to ZeroChaos full, was quarter, loan in by as

We auction. Our ago fully realized of Galaxy we in company Universal's Pixelle position XX.X%. old financing participated Solutions I assets exited bankruptcy IRR new minute XX:XX approximately our opportunities loan our our in first acquired as also for refinance opportunistically mentioned originated realized approximately a loan lien Brands new fully that of in we new This Specialty Sequential in quarter. favor a this IRR XX.X%. that was

Our was IRR fully approximately X.X%. realized

financing. loan also the of EEPC We repayment received full in utilizing company the in a syndicated market One exited favor for Sky as

Our fully positions realized was rating also the of XX:XX which X. sold risk United IRR one in We of approximately our our position Services, with XX.X%. was Road

IRR fully Our was X.X%. approximately realized

and After outcome intended Finally, two fully hold Lockwood. portfolio quarter in are position we or which investments was companies. XX.X%. had we XX:XX be with always our approximately pleased IRR, realized very and in with realization end, we to our both and the Services This short-term a Veteran was

a lien financing approximately our We XX.X%. loan, IRR first for the and First, fully refinanced which loan club delayed-draw includes company, was took to with new part the new term loan revolver Gexpro the of commitment. term in realized

Connect. was in at approximately realizations Fusion also We cost loan and Gexpro’s more is cost on the new of loan yield with yield rejoined investments had term term refinanced, approximately term on revolver approximately exit fully IRR of new lien which Our the has funded loan called premium about XX.X%. X.X%. restructuring the talk Mike at a realized in is The and X.X% X.X%. call. later XX:XX book it’s We the runners will first

A services coupon XX.X% our at December We preferred company’s services approximately and concentration of which at XX.X%. of supplies at the industry the in as and followed and X.X%, and Internet Using equity, also services and professional the X.X%, GICS a has participated standard direct of commercial X.X%. XX, marketing PIK X% of at at Series was energy retail costs XX.X%, software largest yield XX:XX equipment new by

XX quarter-end, [indiscernible] our Our including positions. equity in GICS of portfolio industries as are companies

September to discuss Rocco As of portfolio an of from results. companies, two to now increase financial XX I'd XX:XX like over we XX. had December our XX, call the turn to

Rocco DelGuercio

XX:XX Thanks, Chris.

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

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

XX.X%. of XX. X.XX%, during investments of September The and average of new had in debt X.X% our during had an yield the investment of realizations increase repayments basis portfolio XX.X% Our yield while was an realized average average weighted fully from quarter points average X debt quarter an had IRR an and of yield the XX:XX

X.XX our consisted December rate in company XX.X% XX, of gross XX.X% investment compared portfolio X.XX and and at XX warrants and leverage our of investment portfolio of of XX debt $XX.X in of respectively companies, X.X As in average the leverage Our largest quarter. portfolio investments $X.X is LIBOR other was We X.XX instruments December remaining had was of average portfolio our Empire in was our invested and of X.XX the of fixed first positions. floor and for XX:XX were lien was and gross The portfolio a equity investment our invested X.X%. million. approximately Office to floating debt net of million previous rate X.X% investments. as

three -- XX:XX PGi our million partial we our cash, capacity Capital as million take we credit had with as back in of $XX.X One. all Deluxe Fusion As respect of revolving December December With had investment XX, investments no cash of which in unused to one under liquidity, on and which restricted loan. well was investments accrual facility XX, with $XX.X non-accrual, included as four on and

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

Mike Mauer

been interest difficult negotiations, the equitized. holdings. After XX%, equity by been term period to Rocco. approximately has aligned fully leaving XX:XX holders the loan has cost Thank you. significant the XXXX reduces for company us. a debt This investment of B lenders at a and while

with Through by restructuring, Fusion XX%. years played lenders. an but balance by the in We refinanced on sheet Fusion's other bankruptcy restructuring lead reduce secured we lien structural which exited loan unsustainable joint first Connect. We arranger structure new also this two ago, by debt were the demand major of company hope debt driven approximately loan. role a the Fusion certain the exit

B Series money take the To will back our XX:XX and party equity occur convert loan, providing additional shares debt the the anticipate a was was of equitized later shareholders. company’s We Series into bulk upon regulatory for A this receipt preferred new also we which approvals, equity were year. of back-stop company’s to the will common to income which

prices received which money. warrants strike immediately are of the also We in multiple some with

stated Our manage the of the this growing potential quarter the to introduce the XX:XX last we said, investments in our we I NAV of times. X.X PGi the times, that this gross leverage As X.XX point negative which portfolio, at was over is number we at of leverage fair have Instead, has this think while appreciate net terms quarter, to limited our point. X.XX X.XX guidance our times, to coming above That to. within volatility to ability think value small infusion XXXX in of number equity years.

fluctuations repayments, for closing quarter, especially after need active the in hold end. quarter cash to timing deals This unexpected included a on cycle of investment including in investments

see We to of our high end the target expect generally net both with leverage converge the gross range. and around

associated our the of run fee forward. and basis, As to we at our management management we portion expect continue We going have of December we on waived quarterly with fees to XX:XX NII a one dividend previously portfolio with covered over cover the dividend committed, our March turn base in looking rate leverage.

generate approach NII. and Our well resources capital to continue to disciplined sufficient appropriate positioned investment leaves us

is to-date deployed companies companies. We busiest of am of shareholders existing dividend is to nine accomplished for the price payable we the an December yield the fourth new was sustainable stable quarter The capital March ended on compromising eight our level of For invested Directors record and proud portfolio market share and what distribution in a $X.XX XX. as with covenants. quarter without what portfolio during deals XXXX low strong protections, Board and per team believe stock. represents market We months March on a attractive March Our of and I and the our XX, that of structural ICMB focusing principles, XX:XX it XX, pricing club of six traditionally (ph). XX given ended declared the

income shareholder XX:XX will promising portfolio well and As repayments which to We probable pipeline, goal XXXX, with we of as visibility the we manage as preservation continue in the generation to into enter will of have continue enable rotation. consistent our us several the deals portfolio capital.

on our the We focus stability. XX:XX our and Operator, continue please optimizing portfolio expect prepared yield to This for remarks. Q&A. line for open concludes diversity

Operator

gentlemen, Our from [Operator question-and-answer Robert Instructions] this at conduct your question Please state a session. Ladies and XX:XX Raymond comes we time, Dodd first from James. question. will

Robert Dodd

XX:XX weakness the year, down in guys. Fusion mean marked the on a was kind of in December of the then and function that us loan Connect. on just the new I of first because mean, came assets. or just questions. mean Several business that. term the it Hi, of, I out was restructuring after negotiations the mean terms I the down I quarter occurred some give I this restructured can the that's in restructuring framework? mean was of you mark where take-back

Chris Jansen

XX:XX Hey, Chris. Rob. Yeah. It's

Robert Dodd

XX:XX Hi, Chris.

Chris Jansen

are there for The management new Much teams of more in while. have the -- in you? XX:XX more management latter, new a is Much teams business been the stabilizing. -- how

no change there So business. is market the in

Robert Dodd

new mean, a I seems the the Yes, point. business I X.X% mean, think some trouble new had said Good on Okay. loan that I pretty pricing over looking on year. XX:XX for just that attractive you that, has on at that.

come -- in on us couple a the to something on mean pricing seems that, I years of can So give that restructurings mean new color that's that's for good pretty you loan. why any I

Chris Jansen

warrants XX:XX the financing pricing -- regard that are lenders attractive with also to. Yeah. preferred Basically I've the the group that are there financed and were

it be may think deal rate it We of little it since -- of think economics as was strip. un but a we're total, the kind So little the lighter less, a on compelling. the

Robert Dodd

I comments leverage. Appreciate I it. Got against that mean X.XX. Mike, pretty mean net to mean that mean, if a available appreciate which to less I one, I XX:XX pay the Last that. your not down on net I is can is I there, the cash leverage. so there's high that obviously all payable, the

the range range. of kind X.XX it to of target. that high can expect in the So X.XX kind should kind would would high kinds for appropriate the is with if above timeframe is get low? low you that or of high I adjusted think the you what of the the environment well, market end the end be is of end required of range we to where terms what -- What to end functions, be of than we about to decide, as the And say, why high in to of a then down tied or more should

Mike Mauer

XX:XX asked So some you there because been Robert, I'm glad end. has post that quarter activity

don’t two pro monetizations I know weeks or If close the for it cash I And we've weeks we're identified some forma told repaid. business we've that’s that I at So if and done. for and look six at if I net been that a repayments getting that look today payables. over

think above, below slightly either X.X. are slightly I We we're

think I like X.XX, it's okay.

How So that we're it there to net and level X.X at today, we're us the there will of long take going everything. get to today.

Robert Dodd

doing so yeah. I'm XX:XX

ahead, sorry. Okay. Yes. Go [Multiple Speakers]

Mike Mauer

a X.XX when at coming it, advance want we're repayments. were XX:XX call we we X.XX to kind X.XX we some That's to December as operating up in a, of of visibility fund this target kind repayments down range in advance the of being had of to So order in key of we'd the in, is, at that call would come that a going operate be because thing rate to at what to quarter blip getting in and be things doing and because X.XX in end it we of I'll X.XX X.X. see

to don't I X.XX see range. us the this X.XX in stay term, that near trying So see in I to

Robert Dodd

one The On it. if Obviously, interest were looked XX:XX little higher two I functional I was revolvers, quarter. Got there during expecting. than a housekeeping expense the can. one

But any is which with expenses has and dealt them there that? one UBS done of to the related down. obviously the one-time exit facility, of is gone were the UBS One

Rocco DelGuercio

XX:XX Yeah. Hi, Robert. It's Rocco.

because XXX had $XXX,XXX incurred facilities at look which interest the we had two the because it. was -- we this in fee through UBS mid-November, of we breakage So of facility it

Robert Dodd

XX:XX Got it. Yeah. Thanks. it. Thank you. Appreciate

Rocco DelGuercio

XX:XX No worries.

Operator

XX:XX Our Nolan from next your question. question comes Christopher Please from Ladenburg. state

Christopher Nolan

quarter? XX:XX Hi. Rocco, for fees, you the non-recurring breakage said so that's the XXX,XXX

Rocco DelGuercio

Correct. XX:XX

Christopher Nolan

by rate any of you And expecting? so, how Federal assuming then, guys action Reserve Okay. increase XX:XX to sort are may are interest you and hikes rates, the if

Mike Mauer

our hike ops, figures XX:XX round XX. side in We on it, first debate call XX but on fixed you not odd -- We're liabilities. And know, to expecting viewing got rate our we, as we've hikes. rate be I'll internally can XX% is

not average is XXX. our so before least at got of XX, floors get to here. rising some LIBOR assumption But Our the months LIBOR. We've all about they're six that benefit at we nine that at will,

of the now. stability increase, to So to -- debt, LIBOR side, lift the where lift a plus we've of that seeing was, on we're on on the got we're and have I’d of X.X a little XXX part bit seeing asset to not we will bit fixed on a lot a the little bit say right (ph) little spread everything but of

Christopher Nolan

or XX:XX missed question, Did pieces moving a quarter. it. if your conferencing. just I Great. you A on the follow-up mentioned guys remarks, Telecom There in American you did, of are lot prepared

Chris Jansen

at profits operating trying or movement is and The business much for The to progress who mark anticipate value business this actually. just maximize point. lenders the the restore on XX:XX stakeholders. Yeah. basically Chris. It's and Hey, to the operating back the maximizing static. Chris. Don't upward profits, making They're fairly stayed company

Christopher Nolan

in as you would quarters? this Chris, candidate coming a restructuring And likely characterize XX:XX

Chris Jansen

of XX More in a to sale XX months. the XX:XX months next

Christopher Nolan

XX:XX Great.

you. Thank Okay.

Mike Mauer

XX:XX Sure.

Chris Jansen

XX:XX Thank you, Chris.

Mike Mauer

Thank XX:XX you.

Operator

KBW. next Our Paul from Johnson your XX:XX question state comes Please from question.

Paul Johnson

Thanks Hey. my afternoon, for questions. XX:XX guys. taking Good

do kind questions on the in one today guys XX me just the and guys have you you there commitments, you that in with a I balance that there. quarter any a the wrong would correct guess coming that in where position back It account for thing, I amount the of you stand combined commitments coming do I'm guess decent basis of where out, then of investment repayments terms Dodd's in that today's had, of holding you terms Going out in market? just what sort really how of believe in, are construct, off Did your sizes? does insight your leverage. of unfunded quarter of into the how quarter to gross around active like if taking unfunded do ideal insight million, but you today, like you kind on on sheet sounds way balancing to your a activity of of hold are into I guys how balance any I that have mean of kind into or you're level

Chris Jansen

were XX:XX out We overstatement, of have that small -- doing have handful again. the portfolio always an in consideration in of -- have were a unfunded what always more we we of. probably names portfolio. a the we're we're very within can endeavor is point Yeah, as to we cycle liquid commitments We cognizant but carefully we Chris there where the that Paul. It's primary to that manage the

have current where never the around level We the this of we will a did mark, what but at that's quarter. guarantee, we or

or handle So unfunded not commitment line, the is we the it doesn't really portfolio? really inhibit how bottom

Paul Johnson

readily XX:XX maybe unfunded on to much much think and that drawn versus how drawn do to companies available you upon. insight subject milestones by per And portfolio se, of you your do to be it. unlikely are be how have those are Got commitments

Chris Jansen

always XX:XX all mentally I'd more be than say half assume drawn. can but we they

Paul Johnson

XX:XX Sure.

when quick an might fee insight Okay. guys in you be just earning you again? And then have incentive a terms my last question, into one, of do any

Rocco DelGuercio

we're So guess. XX:XX through of I going of what September probably model assuming now. would looking at if out kind I XX-ish We're

Mike Mauer

or is on. when are of talk had assume we kind of modeling, And around We And on not is our this unrealized turning we pickup that purposes X.X for Those because We’d leverage. the -- that it X.X things where follow. the quarter times September we would -- rate would about assume to it's and it X.XX that Mike unlevered all that it accelerate assume the of Speakers] conservatively any we on the [Multiple -- run do that then not rate rate are today. a XX:XX portfolio, do, we about it we after -- gains. September would big in realized turn earn would

Paul Johnson

for all XX:XX I that's taking Okay. Yeah. Got it. from me. question. my All right, Thanks understand.

Mike Mauer

XX:XX very much. Thank you

Operator

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

Mike Mauer

everyone. XX:XX Thank much you very

Moving forward to next talking to you quarter.

Operator

Thank for call. you Have conference today's day. concludes This attending. a XX:XX great

Investcorp Credit Management BDC (ICMB) 9 Feb 222022 Q2 Earnings call transcript