Earnings call transcript Q2 2023

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Operator

Welcome to the Investcorp Credit Management BDC, Incorporated. Schedules Earnings Release for Second Quarter ended December 31, 2022.

Your speakers for today's call are Mike Mauer; Chris Jansen; Suhail Shaikh; and Rocco DelGuercio. [Operator Instructions] A question-and-answer session will follow the presentation.

I would now like to turn the call over to your speakers.

Michael Mauer

thank today. joining and first on operator, call quarter you, you us for our Thank by Jansen; joined I'm Chris Suhail CFO; Shaikh. and Rocco DelGuercio, my my also co-CIO. would like welcome Shaikh I to as Suhail new

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

Rocco DelGuercio

and would Credit recorded replay Management call unauthorized of this Thanks, BDC. is our Mike. that in call property will icmbdc.com. be our call website visiting page this is the Audio to Any of like I call strictly any everyone is remind today's by being at that Investcorp prohibited. Relations form of broadcast available Investor on

I would may statements from and release attention press regarding the also forward-looking may these projections. information, projections. Actual include safe forward-looking results everyone your differ call to harbor and materially disclosure today's our to like in remind call that

unless forward-looking visit filings, law. not website. Relations statements obtain will Investor SEC our required We latest of please copies by our our on update To page

like call time, this CEO, back return Mauer. and Chairman I'd Michael At our to to the

Michael Mauer

Rocco. you, Thank

First, like to my this leadership. as I later years is will personally would Chris to Chris for and and change thank partnership all a want his Jansen role XX on co-CIO, After taking year. in retire, his an address advisory I contributions.

that credit private and expertise will with as and their private team's of credit of U.S. us pleased We the addition SLR. also origination as has believe at Suhail years He brings led three he seven partner him. investment a team co-CIO. including Suhail members at a decade now Solar joined his platform. enhance the are Shaikh has recently business We where Suhail was Alcentra, most experience, over and

Suhail Shaikh

and participant. Alongside my private look be and the to are pursuing whom to over will former to in be market a Mike, XX days of business. part private Thank join Investcorp's contributing to JPMorgan from I've at Corp. I time. and reconnect pivotal a years of our forward Alcentra for continuing Capital at credit Mike. new Investcorp in you, also Investcorp's excited a It opportunities you My team to and as resources, at pleased team industry I'm credit build out some a known with growth such great the colleague

Michael Mauer

Thank you, the Suhail. markets. second of influence on as marks private strong Macro The fiscal factors quarter December year. quarter, a our the persisted

been believe We beginning in to continue appears slowdown pace credit to is new a gaining be Refinancing issuances, issuance see of due particularly but the activity, likely to we in light, gradually which has also higher XXXX. LBO activity this spreads.

in to We XXXX during the expect with modest we Deal of continuing quarter, were in the XXXX. documentation the flow leverage remained in deals relatively we lender-friendly modest invest and remain portfolio quarter opportunities. extremely after end. the after company and and new in investing one quarter when added in one end, invest selective portfolio opportunistically company quarter to We new during existing

highly during debt investments, had mitigation. an remain quarter management portfolio Our risk and yield XX.X%. on focused We sector of average selection, the

and sponsors primarily before, are experienced As cushions. invest we loans in lien supported significant have stated that we first by equity have

Our average in is approximately loans our of loan-to-value times This is uncertainty. ratio performing XX%. for especially economic beneficial

to systematic borrowers identify areas While and of lenders, our proactively continue concern fellow to volatility work alleviate process that to life our experience us with of portfolio we allowed investment, maintain the may understand directly has some over issues. to acknowledge we that any a of our and management

nonaccrual commentary our investments, update our stable the outlook will our the capital have said goal dividend. As maintain after to is quarter, and during through a of walk financial NAV, main and our investment I'll with we on Rocco results. rest and for dividend, XXXX. end. quarter through leverage, will our go finish activity now our Chris the times, many preserve December platform

end As always, with Q&A. we'll

that, over Chris. With turn I'll it to

Chris Jansen

Mike. quarter. Capital. and of our realized end the is technology the business this invested to the services position invested one in by company Flatworld lien the and club and in Thanks, portfolio the past outsourcing equity term the invested that provides in company We a variety company markets. process outsourcing support fully Solutions, first company We revolver, acquisition a to Boeing one portfolio of financing in of We common loan new for Flatworld company.

is Our XX.X%. approximately cost yield at

Dollar fully realized We which in Express Inc. position by Financial, was our Barry acquired

our as current realization. was to Our XX.X%. our that transaction fully and portfolio realized in one company, of After approximately new part refinanced company end, one invested portfolio and in position IRR quarter one position added was we had

in invested and intelligence leading with globally. term operators network network provider of the Sandvine first loan security active a Sandvine. enterprises lien We for and solutions is

yield removal XX.X%. hair laser Our in We opportunistically on position dermatology. our a noninvasive approximately added and leading is to at is LaserAway LaserAway. chain of cost aesthetic

Oilfield Liberty was Our our approximately our cost debt We yield Services, at realized fully in refinanced. was as position XX.X%.

was approximately realized IRR Our XX.X%. fully

GICS our distributors commercial the Using largest retailers and at at followed at supplies chemicals and services IT concentration at XX.X%. services was by companies X.X%. of trading XX.X%, as XX, industry XX.X%, services and Internet X.X%, standard X.X% Professional marketing December and at at direct

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

to results. call to over to discuss like financial turn now our I'd Rocco, the

Rocco DelGuercio

Chris. Thanks,

was XX. is $X.X For which ending was $XXX.X share, income portfolio investment from $X.XX unchanged million quarter. million, net to relatively per million or compared $XXX.X quarter value XX, fair The the September our on of the December our prior

Our $X.X net assets million X.XX% from or prior quarter. by the decreased

Our this portfolio's approximately operation $XXX,XXX. from net increase quarter was

XX.X%. an average during income the Our debt had of yield investment quarter

fully had from was of basis an average our of of yield quarter, realization yield the average had realized XX.X%, during debt XX.X%. and XX.X% investment We of decrease portfolio weighted September which XX The XX. one a the repayment points

portfolio lien in our As of X.X% the first other companies, were of and positions. consisted portfolio equity, XX remaining XX, is of our December investments and XX.X% invested warrants

a investment floating our and company and and the average company investment in million, instruments of average rate was X.X% gross times compared was previous a in invested our as relatively times X.XX% X.XX $XX.X The quarter. of X.XX net net the rate. is portfolio million. -- to XX, and X.XX and times approximately leverage debt X.XX had portfolio for $X.X respectively, investment times December of XX.X% gross of portfolio fixed our of fusion We was leverage largest debt floor at

all investment December Bioplan. we on Deluxe our of had XX, the of As XXXX, lien eight included nonaccrual, which investments investments and PGi, first in three in three

with liquidity, approximately With revolving our million our we One. of million $XX.X XX, which, restricted with facility cash, December under cash of respect $X.X to was in $X.X capacity million as had Capital credit

of included our in which XX-Q, is we regarding the filed yesterday. composition our Form information portfolio Additional

With that, over to turn to like I'd the back call Mike.

Michael Mauer

Part quarter. the Rocco. to decline in Klein first Hersh you, I attributable our NAV preferred for Fusion marks was would Thank a and to decline during address decrease, the equity, Series CareerBuilder. like of the A

debt in change and methodology all This a which of can our one the in this our in on quarter added into sometimes expectations are exactly happened our result credit changes in quarter, of is a yield quarter, for which the position for nonaccrual our perceived portfolio. names We the metrics previously, take what mentioned we fair accordingly. was valuing Bioplan. few adjust account our decline risk, As credit return investments, in the during to any during value,

the confidentiality reasons. discuss are in we due further situation to to . detail However, unable

X.XX times was X.X of quarter this leverage times times. to above gross our X.XX guidance Our

net the times, Our range. X.XX target which leverage was is within

leverage last we mentioned As net see to growth our quarter, expect in generally converge.

times. of and times February X, our X.XX leverage and net As gross were X.XX

We of March the previously management As to company of portion leverage. adviser through our the stated, with over waive expects with ending associated dividend we dividend will have NII. our earn fees covered its XX. quarter December next base management one turn the The fee

March also dialogue of XX On since payable highlight the on and of of share, This distribution a quarter expenses as per and both an declared We per of developments. Directors few institutional initial AUM would XX, across of our $X.XX had our the and record March Board a XX, average platform like XXXX, our for $X.XX on fund. platform I shareholders supplemental last close March SMA quarter. to reducing X, to XXXX. doubles February share a fund. Increasing on our an closed distribution ended additional

our companies optimistic we secured attractive to As structures we an market remain into high-quality deploy at senior in in middle ability capital in head rate. XXXX,

LBOs. Our new that current expertise will especially and pipeline is sourcing and be robust, team's his flow, We and we in believe are capabilities, will significant platform. additive seeing our elevate deal underwriting to our which Suhail only

and as focused has always, and preservation capital a on Our ultimate stable maintaining dividend. is, not goal wavered

line prepared concludes Operator, That please Q&A. for remarks. open our the

Operator

Go first Ladies Instructions] time and question gentlemen, at [Operator session. James. ahead. conduct Adams will comes a with question-and-answer we Our from Sean Paul this Raymond

Sean-Paul Adams

averaging the were reasons your Hi, the flow, to I guys. for the relation each just five investments at four, six year. for rest this kind to underlying like the guys new or for deal quarter, XXXX? a get looked least it of comment quarter outlook flow on of and deal last you wanted behind In

Michael Mauer

side, at X% Yes. be wanted fourth to times a slow we of quarter back times, now. reassess the time, of back, of expect not to top in the as but X.X X% We a for flow what we roll slowed last couple that's cetera, over subject least, broadband. to reasons. stay from this that Thanks, to at pick sure We it, down the the on portfolio. end I'm fourth a in that sat normal, also was us, At up that existing We're to the I'd seen Sean. call et say same bit, offs, few refinancings, that range. want right we I'd saw a down the quarter. the One saw, our we But you've away I'll X.XX we'll portfolio. weeks. saw

And be so off new paying as quickly, to won't many making not that things as investments. we are the extent

were, I little where portfolio off in base rates a on that of spreads spreads refinance have slowdown environment normal them saw is we things we to have low and paying I'll an investments call bit. widened think part the previous

much people as also. not to for refinance incentive there's so And

Sean-Paul Adams

far NAV you. Got as you. Thank And as decline.

portfolio? ended. for NAV the for have given just projected quarter is quarter. But NAV the the you decline quarter, your going continued guys ideas about or to of with Do You current credit the industry underlying above decline you guys were median for to the rates, are base there's it median ahead related more be fourth last underlying guys well the if and any the

Michael Mauer

upon the we saw other say that as today, don't mention. there couple portfolio, as a we But One remark we is, any see I of things. just underlying to today and -- names was NAV. of episodic I'd of where two changes, we had rates based did

Sean-Paul Adams

it. appreciate I you. Thank you. Got

Operator

Thank much you very Mr. Adams.

Thalmann. from Ladenburg please. Our Christopher with Go Mr. Nolan next question ahead comes

Christopher Nolan

little a taking behind to increase reasoning give my Thanks quarter-over-quarter. for fair call. you seems value Can the Bioplan, that? modestly just

Michael Mauer

detail the Yes. We confidential details, our that Chris. from is we go through know, on everything

but and go we I So expected agent, the can't into value. company based upon go feeds that, value it all of through our and from we and the get

We expect a during that complete quarter. have to then And updates we'll after that. this restructuring,

Christopher Nolan

and Great. yields a the volumes excuse income, me, And as flattish slightly -- to follow-up, Was lower or lower there the interest asset then something? due timing were interesting quarter. issues in

Michael Mauer

good Yes, point. it's a

You two things three have to working there.

you that that You've did on mentioned got nonaccrual. a went Bioplan,

the affected came the the the the Barry, increase was and and contracts. from of us bit us you a a overall because that one positions then in as above far as of the during -- in three that during off an lag -- our calendar fourth average there's quarter, attractive of average was investment that So the had for SOFR, larger slightly month benefiting also that quarter yield, fourth

Christopher Nolan

and thank service you. the finally, And Great. hope then for I for pastures Chris, forward going green you

new and Thank So the team. you. -- to welcome

Michael Mauer

Long straight Thank green pastures. you.

Operator

Johnson. you go very next Johnson, Nolan. from And Paul please. Mr. Mr. our Mr. ahead [Operator much Instructions] Thank comes question

Unidentified Participant

Good Hi, question. for my afternoon. Thank taking guys.

[indiscernible] of just expenses great. that the changes of than in higher But I G&A potential actually you the terms historically just little and like that of platform, you can of and at some BDC. that. for maybe the bit could think you In decline overall for of guys, run because the there terms might scale a in share, that particularly wondering anything be there's would of you G&A of because can the recent BDC, if could the all come size of at you've talk alleviate expenses in out share expenses terms I quantify anything how was if the sector

Michael Mauer

pass which it an I'd Yes. I'd just say AUM from I'll that and that's Rocco. -- just that spreading to we the about expenses. and really basis over think say in

grow AUM full targeting a the fund throughout close to year, of But year. We're institutional won't fund. double be comment. During a institutional this another between going funds and mid-quarter you the let quarter, Rocco, to the first so this the it's closed, targeting in the benefit. separately quarter We're that to have account kind small during on managed we're I'll

Rocco DelGuercio

Yes. point, it's fund, definitely I mean be on the share going Mike's kind down. expenses is in back. To of going a look to the definitely public the come to

So quite end really and a the sure, of you down. Paul. at right I'll they question, tell is can't AUM kind how Hopefully, take the your look I of I answered -- that back. quarter if the to much definitely are going at I'm not come look now, but it

Michael Mauer

to build There's go, no are to platform continue doubt we and directionally, they're working -- going to that

Unidentified Participant

of overall general provided do portfolio? And the year, headed with of coverage would assessments into wondering intend provide some continue Hopefully you've that recession with there you potentially do kind in a be to interest of That's lot the good kind obviously, we're into the overall specific or Just to kind have the expectation with whether going made of portfolio. the sort just thing. so. have BDCs quality a then their that more performance to of I if if just terms quarter this and changes and of so results, those know. again, you that of just of credit recently, or was

Michael Mauer

not see our Yes. those nonaccrual at and intend where four or risk to of and looking the and We are whether not. most or five through it's the one ones credit continue we five, from ratings

And so metrics. we at additional sure way think, I'm we'll starting those, take are it. not a but we're doing are the the are that planning way approaching on . look I others it, not

Unidentified Participant

it. Got

taking for my Thanks Okay. questions.

Michael Mauer

Paul. you, Thank Yeah.

Operator

Thank on And other None to any you very queue. Mr. much I Johnson. questions. don't see

Michael Mauer

forward after following Well, everyone. the look and March to We quarter Thank much. up you the I'd in you like very meantime. to thank talking end, to

Operator

conference Thank you, you Thank everyone. And attending. call. again for today's this concludes

Investcorp Credit Management BDC (ICMB) 14 Feb 232023 Q2 Earnings call transcript