CION Investment (CION) 16 Mar 232022 Q4 Earnings call transcript

Thank you. Good morning, and welcome to the CION Investment Corporation's Fourth Quarter and Year Ended December 31, 2022, Earnings Conference Call. An earnings press release was distributed earlier this morning before market opened. A copy of the release, along with the supplemental earnings presentation, is available on the company's website at www.cionbdc.com in the Investor Relations section and should be reviewed in conjunction with the company's Form 10-K filed with the SEC.

As a reminder, this conference call is being recorded for replay purposes. uncertainties. conference of contain and future number risks today's are statements, involve that of guarantees not performance and note call forward-looking may which a Please or results in Actual the of results number including filings the factors, described of materially with may from the a forward-looking as SEC. a differ statements result in company's those those

Franz, and CION Executive Officer; Co-Chief on call Chief Officer; Speaking Investment Corporation's today's Officer. will Investment be Chief and Keith Bresner, Michael President Financial Reisner, Gregg

would to like I call the you. Michael go to that, over with And now Please turn Thank Reisner. ahead, Michael.

John. everyone, Good Thank you you, morning, for today. joining us thank and

open then mentioned, After As call an and overview and management, today quarter, our senior including will Keith during and year my Gregg quarter of full Co-CEO, our prepared results. today Keith's our as remarks, with call fourth I financial Gregg our well investment activity I'm Mark detail other the start of review joined will provide as the on members results. Gatto. for additional by questions. Keith will will we

this on reported to market year, our not companies. credit solid but quarter our higher we reflects, loans we we As believe, had which only and performance stable first rates, morning, lien focus another and middle

with We continue shareholders to provide their strong investment. on returns our

declared investment we been the dividend $X.XX of income per net the year, past per share of quarter share XXXX. has As the fourth case each the fourth quarter our outearned $X.XX quarter for for

comes heels the $X.XX we of today dividend quarter the $X.XX increase declared our the of our continued to the per an are strong of This almost share. at given performance, XX% dividend XXXX. share end declaring Accordingly, we fourth special per in on

a marked proud we XXXX a able first BDC, what public full XXth and as to of we are accomplish. as been traded entity have our year and our

environment. we a withstand turbulent build macroeconomic previously defensive operated our structured have a we and portfolio to communicated, challenging As and strategy to

the mark-to-market performance factors, to peers, similar downward affected performance, by of increases and our pressures was volatility. of Our spreads, many including overall credit macroeconomic in

that to and by strategy lender, highly cautionary remains down how unnecessarily for yield diversified the may not additional only while to on remain Our first overcome positions capital we face believe us XXXX. strategy challenges performance, solid to lien, economic any this but floating We reaching during portfolio stack. rate headwinds going refraining our helped well we predominantly these that drive confront challenging from also defensive

market I'm and of the we face strong say proud in a with the this ended environment. year challenging that to credit metrics portfolio solid

our While and of we we pleased ahead. cognizant are with performance, are the potential times uncertain challenges

being interest lender companies stress, provide higher significant are some comfort. challenge first withstanding some and, the where While we stress. there continue levered instances market to capable may portfolio our be most companies, less aggressively believe, of of levered in conservatively to Further, lien middle rates a companies

to EBITDA Although costs, year, we value quarter accounted times XX. compared or weighted net as increase portfolio for of X.XX X.X respectively. X.XX X.X% to our in average September to in The to the our compared companies fair times X% The average increased non-accruals, to times debt during and the and as slight companies portfolio X.XX as the times decreased weighted XXXX. coverage of interest third on of of just overall portfolio amortized saw leverage a those

compared peers, to continue strategy, we robust we our opportunistic market, extremely highly believe is have in be that measured healthy opportunistic levered gives us the fact we confidence as are this that liquidity a to a to We an to measured with grow continue This, coupled able and investment our remain implement paramount. in will management portfolio, be way. we modestly be do While to pipeline. the

aggregate in month, oversubscribed. The last notes the at times Israel, the Just we X.X dual approximately in Exchange. of X.XX% was these to notes rate million announced Series interest In of in year. plus public of due Aviv which we Secured a common A unsecured the with notes offering principal bear $XX XXXX this announced listing offering, Overnight amount a closing of credit a per and also on Tel listing conjunction to spread Financing of shares the Rate the our Stock equal

increased our This an same at further the rate offering structure through mitigation the financing interest floating potential has sheet provides further sources. that time our rate balance diversifying for unsecured and returns and strengthened risk while

new be to the We net as with seek investment shareholders proceeds accretive our will using we the returns offering on provide opportunities capitalize over term. to this from long

share our price total XXX,XXX million. program a quarter, of $X.X repurchase $X.XX continued at also this average for of amount shares repurchasing We repurchase an

shares for amount X.X repurchased in repurchase $XX.X since of repurchase the million million of have a We beginning August totaling total program XXXX. the

investment positioned take way XXXX from from We in core well opportunities advantage of this structured to strategy. resilient -- to is portfolio believe we uncertain such to have And deviating in entered our our sound provide environment without a times. as investment arising prove

over quarter our companies. I overview address to the want to I the activity of issues of and and how it portfolio to pertains Gregg our the portfolio investment for industry week year, turn an it banking last our Before and for involving the

Bank deposits. company of to any today, its exposure our portfolio companies only continue direct of Bank, evolving received Signature had has the Valley Silicon to as and all we one or monitor While situation, of that

exposure is banks our in is exposure less limited, Our X.X% for industry as which account the to year-end. general, regional technology at than overall to

of to likely overall regulation. smaller face banks increased fallout, economy, are likely lead a uncertainty as in The to which may banks the reduction lending by increase could

term banks liquidity, for their the may the increasing addition, opportunity us to lending thus limit preserve In short other lenders. and direct in

turn Gregg. the I will now call to over

and Thank you, Michael, morning, good everyone.

high liquidity resulting our in market realities XXXX. from credit into The constraints and market for XXXX had pulpit. interest labor challenges the operating market chain fundamentals inflation, XXXX, and and market rate our challenging hikes deteriorating during the inflows XXXX, in the we supply confront fundraising In substantial excess to call. we masked conditions as operated of QX funds the high earnings During foreshadowed level disproportionately loan investors the

As QX our we reality we XXXX. on first expected earnings XXXX for net our focus rate a in this already full This investment strategy achieved highly our lien we for for investment assets. portfolio call, us nearly as floating diversified positioning discussed continued were investment income increase defensively XX% well year served during

pass-through our quarter, and prepayment lien of other from income fourth assets premiums the our interest as dividends, the portfolio. In provisions within floating higher rate fees, direct primarily investment yield-enhancing from rates well as net benefited first our

quarter in continue of XXXX. first to trend that expect We the

year to full which included markets. investors the spreads return XXXX due was in for increasing declines volatility XX.XX%, of impact overall total and the mark-to-market Our to

shareholders S&P compares Index period. favorably the to S&P/Morningstar for X.X% in Equity of Leveraged Our for full XXXX year loss the to Loan same Index and XXX loss XX% total the XX.XX% the the return nearly

Our to dividend to our of shareholders to positioning defensive our our XX% XXXX. base first strategic also for nearly declare quarter quarterly contributed a the ability increase to

as We focus believe that liquidity market. and leverage points well to most represent portfolio continue net as important our metrics broader to for the capitalization the

value importance larger several pivot looser syndicated years documents covenant predictive cap historical and the credit the of rate diluted The the and default last over loan life and financings data. has markets to in

that to vintages difficult being compare maintenance to addition little in with the to loan loan financial market syndicated In is historical inherently default it contain covenants. the an also lagging data no indicator,

the operations. companies. We middle-market continue the no and rates, Even needs that interest most inflation emphasize least capital current of those chain liquidity challenges doubt as heightened have our operating headwinds additional just is to and their the to COVID-related focus challenges working needed market capital working increasing companies with sustain from there impact supply higher direct have

a between the the focus. syndicated markets There continues where direct private strategically and credit to we distinction remain clear

direct volatility As declining issue widening, in share conditions lending expand market spread continued yield market its syndicated XXXX deteriorate with opportunities. to robust continued and to higher new and activity, issuance private with

our now approximately with Turning and times. liquidity to activity. conservative We net and strong a investment profile portfolio debt-to-equity the ended of X QX year

in We and the respect be investment continue lightly highly with loan sourced directly syndicated opportunities both first to markets. new opportunistic to lien

valuation expect the situations focus first syndicated the processes or has roles the tranches. in refinancing opportunities or loan Our due capital in we active the investment with distress been of restructuring have largely technical drive structure-related where to that lien markets to

QX, companies seeking During portfolio the $XX $XX commitments we grow made to $XX new made million investment commitments, strategic in three included which during quarter, through million Of new in acquisitions. investment was funded. the new million

previously commitments. unfunded of We a also million funded $XX of total

see strong our in investment for strong approach environment investment relatively maintained pipeline challenging economic in preserving was ahead. prudent and a activity in QX, While new capital the we we

such pursue QX Our incremental successful issuance Israel to unsecured in provided note opportunities. in capital

sales selective robust of the Notwithstanding we of the the primarily challenges This full $XXX quarter. and totaling for by in sale have lower-yielding relatively the million market, was investments five to repayments continue and the names. driven a repayment four macro

As net companies investment at XXX a and during end at of QX. $XX from funded decreased activity million portfolio QX the decreased to by number end the the the quarter, of result, XXX of

Approximately our value in loans, was lien year-end, of floating including investments. XX.X% XX.X% secured investment At billion. loan of portfolio XX.X% senior was investments. the portfolio the in fair $X.XX The portfolio first rate total comprised about of performing was

XXXX, XX.XX% end of the increased up our gross end As of a a company average of the of of million par XX.XX%, with about average of portfolio XX/XX/XX. per purchase annual third of yield on yield the XX.XX% December XX, $XX investment performing to portfolio at leverage weighted X.XX% and of loan of at from quarter the size before materially XXXX at price an as

we our experienced metrics. with have As peers, portfolio some in market credit our movements overall

Jenny costs, X% and XX, to new and fair As status investments as added nonaccrual the non-accrual This and slightly Spraddle. three the at quarter and X.X%, The at portfolio from increased we at investments of total XXXX. third compares are on tranches we to to David of non-accrual investments status status. of of investment December three amortized X.X% value the X.X% Craig NBG, added end respectively, to respectively,

internal risk-weighted did amount X.X% end of portfolio risk at to in the the of slight at from With total the X X and X.X% end our our experience we of a ratings, QX names uptick total respect to QX. our of

continue not or We be are and where investments to work expect through to restructurings challenging conditions to needed. investments immune incremental the may market

and/or and companies strategic We Power, Vesta, are protection financial reasons: Heritage for bankruptcy NBG have in IPP. investors X first lien sought that

have situations and investment intent involved emergence successful rights optimize We lien first these of realizations help eventual to the and and to in our utilize investments. an remain these position, flexibility actively

turn to now Keith. will I the call over

Okay. Gregg, Thank and morning, you, everyone. good

reported were our on an lower fees by our from another increase investments. quarter mentioned, investment offset generated in of results, dividends increases solid and and LIBOR SOFR activity. Michael financial As rates driven we earned by These quarterly

compared as quarter. share quarter, investment $X.XX $XX.X net in to $XX.X million the or per the During was reported third share million income or $X.XX per

For full year, share investment XXXX. the $X.XX per million share or income $XX.X increase million for compared share $X.XX an full year-over-year. net year per This about the of is per to was $XX.X XX% or $X.XX or

million during increase the million investment reported year quarter million Total slightly to third during the the $XXX.X year. all when income about quarter. income XXXX, the million $XXX.X an for was for to compared compared full to was million is prior or compared of XX% higher investment $XX.X $XX.X to of $XX.X which Total

compared and side, was expense LIBOR million by in third in under compared The increase SOFR an the arrangements expense $XX.X rates $XX.X interest to our operating the On increased increase quarter. financing to total to when prior expenses driven quarter. million due higher to primarily the

total we shares assets outstanding. $XXX outstanding XX, total December debt million with $XXX total billion and million of net assets At approximately XX.X $X.X with of had million of

ratio of result, times QX. slightly which is was end at when debt a our to our X.XX X.XX the -- in higher the debt-to-equity debt-to-equity ratio compared of As quarter, our when times,

measured portfolio $XXX since our which outstanding additional capital. using the debt XXXX, Total debt increased year-end million reflects by of growth

the our share of to December distribution XX, as share NAV $XX.XX decrease XX. $X.XX due This was share year-end declared at was price $XX.XX during in The the offset and by At our at declines accretive share compared buyback the was special of of primarily per share partially plan per nature September portfolio. end of was our $X.XX per the December quarter. to per that

liquidity. and our flexible We assets, balance $XXX and to access ended $XX our and companies. servicing had and an in $XX million investment solid our debt pipeline continue facilities leverage, We strong under capacity a cash a unencumbered further in investments million the and over strong portfolio almost with additional million to short-term year sheet low finance to support existing with credit

February closing mix After to in mix our deal moves XX% total debt secured XX% XXXX, our capital. unsecured current senior debt debt in Our bond unsecured. the unsecured is on and of of about up in the XX% percentage

During of debt X.X%. capital the our the about weighted was cost quarter, average

We middle-market deploy income typically the investment syndicated investments capital deals. a see should we available floating net broadly to continue to our compared rate that when positive yield premium to as continue impact pay to into new large,

rates our to of assuming As increase for about the and rise, continue net interest as point a December to expect interest XX basis base $X.XX debt per changes for or point base rate to investment portfolio $X.XX of XXX rate, the next increase income increase and to the we an the a XXX-basis share material that's structure. no to

distributions. Turning to

distribution special of our $X.XX a we quarterly distributions During shareholders $X.XX per which per and consisted year-end share. $X.XX a declared base quarter, to of the share, fourth distribution of of per share

distributions increase during per total about total over distributions or XXXX. $X.XX declared $X.XX XX% we of is year, full of which the declared an share, the For

will morning, which increase This $X.XX $X.XX since an of we March share is announced now This have our shareholders first per of XX fourth about per we an back distribution increase in on paid distribution the or is the increased declared this March XX. quarterly quarter on we quarter listed distribution our October As third of be time record distribution. XX% of over share, XXXX. to

the I that, closing will call turn over for With to Michael remarks. Okay. back some

Thanks, Keith.

take John, ready I we're think questions. with that, to any

[Operator Fargo. Instructions] our with O'Shea question first with question. Finian proceed line the comes from Wells your And Please of

in you maturing this UBS later have Keith, give on morning. you potentially can us. facilities the wider replacing and ends Any that JPM those, the of us progress everyone. the give terms we're side, Good sort looking color if facility can year here? period and the color liability May. any in on nature the change at might I you revolving if spreads in appreciate Hi,

currently currently we on conversations that. work so yes, addressing those We're Fin, facilities. in two

to I no at too spreads early So, at widening tell indications But this point. a credit point. little of think there's this

So, we -- as see it's we'll really this. through progress

you. middle the Thank today's provide in you bit current then the to higher helpful. current And companies portfolio the a Appreciating portfolio That's interest lower market. question. a with spot looking and portfolio earnings Okay. Are LIBOR, leverage just level able your have today's of yield, core coverage? forward

the... the provided we in Well, --

pro a basis go-forward forma a On then?

a trailing the packages, But LIBOR, here the probably example, bit. are current from based current curve as spot where using of often months, the Yes. numbers rate a and of Well, I sort get. earnings, for in we on I know those on down lot points are XX little we know covenant the are

just say, sort today paying what or coverage is are your yes, that let's your, of kind their as XQ borrowers in much of what So is, 'XX? how

today don't with significant K., and, We consistent deviation that. reporting we It's what in from were see our any

so you, Okay, great. Thank much.

like to [Operator Instructions] back And any I comments. question-and-answer would for final this session. now management call to over turn concludes our the

and May do appreciate we today. call the joined when results. speaking everyone. to early your care, who quarter Take we our again We to interest forward XXXX first you everyone, in you, look Thank announce in CION,

This concludes today's teleconference.

have your participation, for disconnect may day. you time. great at You your a lines this Thank and