ICMB - Earnings call 4 2023 | 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.

Your speakers for today's call are Mike Mauer, Suhail Shaikh and Rocco DelGuercio. [Operator Instructions] I would now like to turn the call over to your speakers. Please begin.

Michael Mauer

Thank you, operator, and thank you for joining us on our fourth quarter call today. Shaikh, and and Rocco Suhail Credit of by BDC; Management DelGuercio, joined my President co-CIO Investcorp I'm our CFO.

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

Rocco DelGuercio

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

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

At Chairman to Mauer. and Michael turn I like call our back CEO, would this the time, over to

Michael Mauer

year. last quarter June Rocco. our Thanks, The quarter of fiscal marks the

new New acquiring remained companies. deal LBOs dividend discourage have the quarter. especially High rates or and markets, limited new activity in primary refinancings interest the doing during sponsors recaps from

periods. result, activity quarter investment to remained our a previous this As lower compared

primarily our are market. quarter deal in We exposure secondary our and opportunities the pipeline. and expect to we in with across pick These the platform. investment this funds opportunities we primary continue in several slowdown to compelling familiar we next investments made up other have see However, quarters, activity borrowers, in the to were few our

and focused quarter risk X at management companies. very investments X/XX. We the existing During new remain we weighted companies of yield debt in X The during on XX.X% portfolio our from decreased average invested and mitigation. portfolio portfolio the quarter, XX.X%

We borrowers sizes reduce investments new with environment. high issues into to continue our have rate borrowers average or to current our liquidity to work interest the position to covenant diversify and in

number This the of our industries to borrowers of when the increased quarter, GICS we quarter. previous compared industries XX to our number portfolio across and

look operating quality our portfolio performance, borrowers' at we As our credit stable. of the remains

Our weighted ended the relatively at leverage net average is unchanged quarter from X/XX X.Xx.

our weighted approximately investments debt ratio loan-to-value all for XX%. Additionally, average is

expect theme risk we forward, management diversification. to Looking and continue our of

We size. in and -- expect are which expecting in quarter average we deploy the this current a quarter smaller to borrowers new repayments across both year, the fourth redeploy

suspect we levered opportunities remain positions we pent-up primary for with create of borrowers. record is where maturities, operating we as demand track While and there issuance, focused as convexity secondary shorter established can on well,

through with will the Rocco our dividend after go finish investment the on Suhail activity and will quarter financial through our I'll and quarter-end. outlook. investments, nonaccrual commentary results. now during walk our our our leverage,

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

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

Suhail Shaikh

Thank you, Mike.

Mike XX% in mentioned, secondary had characterized down activity almost opportunities. volume estimates this lending direct by Market this year-over-year. As was quarter's quarter

slowdown. summer are to see flow primary whether selective secondary deal However, pick the being a after this We're we environment, credit we're or beginning transaction. primary a highly up in evaluating

supported cash investing protections high sponsors. cash structural Our -- high by businesses with focus flow generating enhanced in primary operating and remains experienced

in portfolio existing During as companies and the companies, invested X portfolio quarter, new we X mentioned. Mike

X in of position companies. our realized fully the also We

$X.X at of new investment X.X%. weighted $XX.X period, In fundings XX.X%. totaled with investments with During an million approximately of million yield stood cost, average approximately approximately the repayments and IRR X from commitments the approximately for quarter, same a of

the talk through you To new investments.

credit is also that PureStar. secondary an Company, good of of Clean It first-lien been example Capital. purchase in Acquisition investment to Cornell This opportunistic providers of company an is first-lien loan First, of tracking. term We term portfolio loan the in the U.S. our the AMCP and industry one we largest a of term invested the a in known loan. as we the in made monitory commercial a delayed hospitality is PureStar have

cost XX.X%. Our approximately is at yield

loan in attractive Second, XLerate. an known own American Auto that investment invested of as the secondary purchase of able we first-lien Auction also to in to we're [ portfolio market. term another example is find Group, we on ] the an This an and opportunity

[ accelerate Capital customers. is used portfolio services auction a for company full BrightStar Our service, future vehicle provider ]

cost XX.X%. approximately at is yield Our

in we provides Bioplan packaging invested the and industry. solutions term Bioplan. the of Finally, [indiscernible] loan sampling priority to

cost approximately at XX.X%. is yield Our

position our fully was realized which refinanced. marketing, quarter, this During in auto and we

Our approximately realized portfolio invested before. IRR portfolio in company and we end, existing quarter After was X new mentioned fully X.X%, company. I as X

we was a portfolio First, company of loan of offering, is and term Axiom a provider Axiom first-lien Axiom and of Global. global talent counseling in invested leading the Permira. representation legal expertise services. of

and We for we've similar to attractive at in XLerate, our portfolios have it in purchase to been been price. years an investor able other an a Axiom few

yield at approximately is Our XX.X%. cost

We a investment follow-on PureStar. in also made secondary

note this Our like standard yield of that investment year. approximately to original at was updated GICS cost the in payments XX.X%. I'd is May of

for our in companies also has changed categorization such, have ratings existing some changed. our industry portfolio As cases, industry and

XX.X% following: at at and and professional XX.X%. at As XX%; trade by June at XX, largest services supplies X.X%. services concentrations of software distributors our company and industry followed IT services the X.X% Commercial were at

Our of are discuss Rocco call our to and in the now industries, to over like results. as quarter-end, positions. I'd as financial GICS warrant mentioned, including portfolio to back turn equity companies XX high Mike

Rocco DelGuercio

Thank you, Suhail.

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

quarter. a of the points decrease XX basis from net Our $XX.X were prior assets million,

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

quarter investments debt had average Our X.X%. an made yield during of the

basis decrease XX.X%, the had debt from weighted XX.X%, of was XX average quarter our our during repayments and of The average points an realizations IRR was XX. yield X.X%. March Our yield on average portfolio and a

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

average Our is largest to as portfolio was company our approximately million. X.XXx and X.XXx million, gross compared at portfolio respectively, the of and for had a and investment $X.X previous XX leverage X.XXx $XX Bioplan leverage X.XXx investment gross of quarter. We of net, June a net

investments the investments $XX.X Nuts related X from This the Nuts. American investments June of included As had we PGi in and an increase of to X revolver our American million nonaccrual, XX, X on respect X the of our in XXXX, which June investments previous in is to of of million restricted had facility quarter. which we With as credit revolving XX, with cash under liquidity, One. with approximately was cash, Capital capacity million $X.X $X.X

our of Mike. regarding over our the filed included in Form week. With like is this to later portfolio XX information will back turn the which Additional composition be to call filing, that, I'd

Michael Mauer

you, Rocco. Thank

dried sources earlier, American recent we new other borrowers risk products. Loan procures among that nonaccrual, Term especially and and period. Loan American B nuts, Nuts remain mentioned X been stress. management positions. on periods in positions on portfolio focused the are have Nuts fruits and distributes Their of Term seeds As added A mitigation, and experiencing results We in our challenged

on sponsor are the working and the co-lenders currently path forward. other We with

the on expected portfolio remaining We next progress continue and make to months. progress XX nonaccruals the rotating the over

Our relatively NAV declining by basis XX remained unchanged, points.

X.XXx, Our above of was gross leverage our to X.Xx. X.XXx guidance

Our at range. net target leverage the X.XXx was within

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

As XX, X.XXx. of September our and and leverage net were gross X.XXx

of portion As with associated waive we base of management have previously stated, the the fees X our leverage. over adviser management will turn fee

a We quarterly share is September $X.XX covered of XXXX, dividend XX. fiscal earn supplemental as ended per XX, share, the related of On noting XXXX. the the X, XXXX, that September dividend year declared worth of It is supplemental quarter distribution as NII. XXXX both expected as with quarter on November of record to through to for to payable back. ending distribution our spill next $X.XX per October XX, well June company XXXX, Board June shareholders $X.XX Directors its the of a is distribution The XX,

an of expansion and our our platform reduced resulted the of the mentioned, the which As previously on in SMA institutional average we and fund, through assets acquisition AUM doubled investable our close initial fund. expenses an the across

be year. terms sourcing Our in a expanded of pipeline to proved our meaningful remainder remain originating and of as already result, healthy for to has team and we expect the the

stable As preservation maintaining dividend. focused on and a remain always, we increasingly capital

and are experiencing borrowers our stress. on continuing rotating all mitigating risk our focusing while work diversifying the on We in short-term portfolio,

open please capital concludes optimistic in we we into about of our back half As the the deploy ability our line year, to the investments. This high-quality our remarks. remain prepared for Q&A. pipeline Operator, and our head

Operator

Instructions] [Operator

Our first KBW. Johnson question Paul with comes from

Paul Johnson

quarter year, you said you're sight talking the this comments half expect of or -- next -- this you repayments. you're repayments on of Do of above for net year, have on Just you repayments that is clarifying redeploy? net to this expecting necessarily expect your repayments about this kind line Or is repayments? second not the I what that -- you rest for just the guess, of

Michael Mauer

Paul. be redeploying. sight but that payments will Thank have be you some the today will we in, No, net repayments, that coming taking of not are there today. for These line on we time

Paul Johnson

Got you.

BDC kind to of kind lot that, And possibly of been expected And are of as the a pretty a [ almost things context BDCs to benefit Okay. that what hopefully in a the and step really you raising for rest would of space? that addition new you terms the the taking sector adviser particular. end just looking guess, a And a with your despite quite the of helpful? in back funds you improve much year. much guess pretty then of rate just could little my X cycle. bit every of why, hike do at the as anything think, the lowering ] worked this or think to year of help in quarter, year, . I'm in your from that so to quite costs, second but follow-up we curious potentially performance I benefited obviously, and what portfolio then on to has that good but the mentioned in I some the Singer BDC bit broader, that, space, the thoughts in the hasn't this question I has far And kind a earlier -- be

Michael Mauer

fund is I a it's broader mind, to your -- our that there, continue And that's to that We've making on think additional need that. fund, advance have we the it we and you a platform. so Paul. this I is first Yes, talked call, money in we headway platform How on minds close, bringing about done know you can year. every throughout more. as hit with day. of on last on we the originate do We're -- a

bring is in in We're The another. second thing on discussions did SMA. we an

first We are the an quarter year. fund targeting close of additional first next

continue seen that they pick year, I funds All origination and a but more of we of are the some equally and really getting you've touched only platform. you on on not bigger because better have terms lot really to think are small as spreads But have to cost it. big and traction and of are I that we important, those that just platforms earlier a areas bringing think down that origination We beneficiary generates started costs, focused I on it up. the that on expect this

Paul Johnson

that. at in think base growth -- has size they equity-based appreciate equity these the it I of is shrunk as a mean, what BDC I I few million came years mean, next possible not BDC, quite that this point see you market scale Investcorp, inhibitor you I mean, the BDCs essentially adviser case where BDC mean, of smaller levers? I ago. out the roughly at cap this, you roughly of kind the being -- the where point, with expect, to X to I the a, years? And point as in see I that do -- just in about a guess coverage space $XX this you're in smallest Or pulling mean one guess, for the our calling do least. I do guess, of I I

Michael Mauer

I don't BDC is think inhibitor. the an

XX reasons. grow time few lot to the did not a I go looking there different into, strategic happen choice I lot to lot years, our was mostly growth. over those for ways organic And last of not on spent that at that. first it, focused we've the can't and months a execute been a around of over of think but

traded publicly beneficiaries. hopefully, of external the the be of But has size will BDC not forward, inhibitor. the going so And been one the it

Operator

with Dodd from next comes question Our Raymond James. Robert

Robert Dodd

First, dividend to can. continue? to in in, mean event? like, I fairly a a there preferred that something was quarter. the of I a one-off a onetime one, new related fourth position was I equity going is Or housekeeping or a if it that i.e., is income... that say, source mean, sizable is Or

Michael Mauer

referring event. $X.XX that think, was That you're, a I onetime to

the next the for makes supplemental have give sense, to said to the quarter, past, got going expect we and next have dividend that as we we we'll a we've the base the So will it a forward and and the we extent we -- in visibility for quarter. $X.XX, cover

Robert Dodd

BDC number? this BDC. $XXX,XXX appreciate There Is was in to investment a a the income that total I that. income sustainable for quarter. meant dividend I the the

Rocco DelGuercio

statement, income the on correct? talking you are Rob,

Robert Dodd

Correct. yes. Yes, Yes.

Rocco DelGuercio

dividend Mike, Yes. we the that of talking got. [indiscernible] He's about

some they're -- don't dividend. think one-offs. think the paid of position they're think equity I I I a

Michael Mauer

Yes, not quarterly in. those coming we'll We think I about those get basis. not recurring dividends think one-offs, but are the dividends. that would on them a do episodically, as

Robert Dodd

Got the credit thought the I spoke and amended for quarter. revolving does -- -- about you background it. changed you I in if and apologize facility, amendment hasn't period. the it. last I we noise, that I that That Got -- color. not can appreciate Then obviously,

added that I bucket for any can year. extend of now purchases note if syndicated So Also, of rate terms on an Or us broadly to is revolving next more the credit it plan BDC advanced on do that, give within August you're a Is you've in facility you more part that expires doing in period that BSLs? loans. of the to it. just... amendment, the and That's obviously, color what secondary do

Suhail Shaikh

is Suhail. this Robert,

due. The have Rocco short didn't I'll an up is we credit pick coming the facility. So let on answer expiration

we amended a deal for big secondary positions, perspective. is, the to we're the facility picture selective response financial I this to are credit think from I flexibility in in allow think we've respect With marketplace some it. very being flow --

As you down for year-on-year. know, flow deal flow deal is XX% -- buyouts primary almost

see we what lot is, passing that So a on. are frankly, of stuff we

either the know from. business the or looking leverage investments or we're at private we secondary platform, So liquid Investcorp where to credit our equity credit broader we our can ideas source

loans, And as of move traditional your theory come the somewhat because some those when are doing have liquid we those more more behind room can So out to in we they of that's they investments. than really middle for and market make deals primary through.

that hopefully, question. So your answers

Robert Dodd

question. no that XX answers then less just has That on the... facility, -- months the depends yes. on but the now revolving period Yes, on And maturity there's credit than revolving

Michael Mauer

revolver goes out further, term the The ends.

Rocco DelGuercio

ends The revolver facility -- in One Capital XXXX. the

Robert Dodd

Right. But period the ends -- revolving in the XXXX. reinvestment

Michael Mauer

check those we've back go One and I'll all been healthy. that, and And very Capital working but back... double and we'll ongoing all review with that, come are relationships we'll Robert,

Robert Dodd

appreciate Yes, it. I no worries.

Operator

KBW. again Paul Johnson Our next with comes from question

Paul Johnson

follow-up. more one Sorry,

expect clear we you just During want $X.XX next -- believe, the quarter. the are the the $X.XX? about -- I of I talking to you guys to I'm talking sure make full remarks, distribution said simply distribution, just base that Or distribution? cover are so about you

Suhail Shaikh

on No, Paul, going spillover And be or It's extent distribution the Suhail. to supplemental, base of is there that. that's of this any is top to $X.XX. the

Operator

no Go other queue. questions in ahead. I see the

Michael Mauer

everyone quarter. was very talking but to next year-end, you everyone long talk we'll because a of to September gap the questions, other no much. there's the be If Thank you. Thank quarter. after This we'll

Suhail Shaikh

you. Thank

Operator

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

Investcorp Credit Management BDC (ICMB) 19 Sep 232023 Q4 Earnings call transcript