CION Investment (CION) 9 Aug 232023 Q2 Earnings call transcript

Thank you. Good morning and welcome to the CION Investment Corporation's Second Quarter 2023 Earnings Conference Call. An earnings press release was distributed earlier this morning before market open. 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 Resources section and should be reviewed in conjunction with the company's Form 10-Q 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

to call the like Michael to go Please I'd Reisner. that, With turn over Michael. ahead

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

As by management, well including I'm and senior as Mark Co-CEO, Keith, Gatto. mentioned, as joined today my of other members Gregg

will Keith start the today I our open review prepared provide of will with investment call to our will we activity Keith's detail the results. quarter, After overview call financial during questions. on results. remarks our and will an our additional Gregg second quarter

income another $X.XX reported this announcing dividend we As an was led this two to share the a quarters. morning income dividend, increase additional a XX.X% next of morning, $X.XX investment Net our supplemental for of share, had yet a share a which $X.XX a quarter year-over-year. exceeding we our

dividend are quarter we to the pleased and our periodic EagleTree that throughout other anticipated QX. While income was joint without higher cash income company, higher a than our from to venture deleveraging dividends a equity last due distribution our outperform portfolio balance from and dividends a continued from

be the this structural of be entity. we construction entity. the our portfolio expected that previously quarters in that joint note from of simply periodic believe more quarter venture lack nature Therefore, the income to as reflective that coming will in the dividend I meaningful of from and a in is EagleTree there will distributions are advised,

quarter has the in quality we subsided. in the will of the delays our Gregg closings strong experienced remains Additionally, and during opportunities as discuss pipeline

fact, the cash million quarter in new expectations line will In since our $XX investable for our we balance current in investments to quarter. the quarter of with that compared more as end this closed the second have such be

we and that investment factor three the in basis an the took as into last on investment performing to the economy view the economy is Craig of the Moreover, why over this or quarters is underwriting Jenny We on non-accrual. of quarter believe a new one well. few cautious off placed entering recession with that non-accrual meaningful added portfolio was additional and a our was names

fair risk X% than five three fell rated our The on non-accrual four from names that with of value, of now of percentage portfolio the of X.XX% our rated X.XX% we book to XX% last decreased higher. to portfolio or have The of down or quarter. from percentage less

we last nature limited said stressed the those in identified to were believe we in and industries. As names QX quarter, idiosyncratic in consumer-facing

facilities. we financing the On extended secured side, JPMorgan and senior UBS our successfully

coming a we'll times, quarters We our continue X.XX do of our of levered the leverage conservatively we'll prudent so net a continue times, seek with debt-to-equity increase to relative X.XX peers to remain to fashion. and to in but in to ratio achieve target

portfolio our the to out $XX.XX increased and dividend. as value our last to owing earn asset net share part portion in buyback, illiquid from of in increase $XX.XX a an to quarter Our $X.XX continuing well due as share our

average beginning amount end $X.X of of approximately the million. a have X.X to since program prudent price for million value. XXX,XXX repurchase shares repurchased expect a of which month share $X.XX we for total for Regarding utilize In shares repurchase in buyback, QX, implemented drive amount will of the repurchased plan in a at our totaling QX, to August fashion share we XXXX. the of repurchase continue we Through shareholder long-term year, total to approximately repurchase per the this $XX.X extend another was we an million

We the we believe drive floating demonstrated the levered. headlines likelihood to that despite risk. returns predominantly media not remaining time diversified while senior shareholder now discussing have believe have being We unnecessary that take we recession the loans, ability and highly of decreased a to rate by secured is conservatively

$X.XX $XX We XXX size remain issuers million. our portfolio an billion, with with investment diversified average of highly across distinct investment of spread

investments. lien investment senior with Our in XX.X% portfolio XX% is secured first

of The of line to coverage to times, weighted portfolio of our was weighted prior EBITDA the average portfolio average with QX. net as The X.XX companies decreased times to companies two times in debt leverage slightly in quarter. our compared interest or X.X relatively

With that, call over the I will to, Gregg. now turn

everyone. good Michael morning you, and Thank

Our QX the prepayment pass-through a assets, diverse with yield-enhancing investment our origination rates of fees, direct provisions combination interest higher net benefited lien first amendment from premiums primarily portfolio. other embedded income from loan of and our and

large-cap we direct opportunities private markets markets relatively where the sharply has lackluster lowered its M&A syndicated market loan remain expand volume direct with focus. yield share sector, continues to and activity. clear the between the issuance which the and expense The of syndicated strategically There and active credit continued a market new to LBO at private issue to lending distinction less

consistent private platform strong. we is current transaction our as with remains direct our are what This inflow with experiencing

we will We many which for selective. remain opportunities highly seeing direct are attractive investment

beyond refinancing opportunities debt an of the groups. additional in We lender is is particularly that incumbent capital seen in have add-on conjunction the with where ability required increase acquisitions

to CLO at disruption issuance technical the well outflows from loan downgrades addition, have as reduced we funds substantial benefited first headwinds the ETFs. as from syndicated and the mutual discounts where have In loan acquire fundamental from market, ratings to and to loan due been lien able we syndicated par in tranches, lightly

where are as being cautious valuation circumstances transactions. consumer of particularly well We into lengthy not remain the we and new below and seen a XXXX M&A and converted we closed markets. in gaps respect lower negotiations activity highly selective investments, the with to US the with still have level, number middle are remains ultimately

additionally investment QX from to seeing approvals, regulatory due to resulted of timetables. QX. review delays These slipping are have in dynamics closing elongated governmental our in several We planned

our the end to, for portfolio pipeline. strategically investment Turning preserving QX of QX now QX we were our investment activity expected cash and at

delays most our in that just closings the funded expect targeted pipeline end transaction now of be to largely investment August. Given we I referenced, the of by

we on in higher-yielding first During our sourced QX, markets. directly continued the focus lien and syndicated both loan lightly opportunities

and drive processes refinancing investments. been the either expect of roles active as where markets to in focus due largely such we technical opportunities as structure-related -- has restructuring opportunities Our such with situations investment the investment valuation syndicated have or to distress, illiquid capital higher-yielding or that in the the

during lien the purchases lightly co-lead completed the higher-yielding facility of newly purchase role Also, of issued investments first PRA events an and QX, structured mix privately Florida we lien credit first the the of of the Avison for secondary attractive MedPlast tranche Young, discounted syndicated tranches R.R. including and private our of Donnelley in Foods.

new slightly QX. investments We in and of higher of working than year-over-year some strong strong end needs the XXX for the net invest point the our liquidity conservative that criteria. we in to direct maintained our seen approximately liquidity spreads, to profile basis debt dry XXX new at portfolio capital for growth have powder meet investments and of quarter and Overall, a equity times ended increase with a to roughly maintained investment strong companies. X.XX We

commitments opportunities. new $XX were balanced which million across were secondary direct we QX, These in and During of investments made investment all diversified funded. and

the the which We Isagenix repayments also funded new restructuring United successful a quarter totaling unfunded million of $XX of and total into and had primarily sales equity previously for tranches. the million repayment of and debt $X of and full IPP, commitments. Road investment of We one consisted

during by quarter. activity net As funded million a funded result, the $XX in net -- investment increased

this decreased utilized non-accruals X.X% to loan to secured quarter Independent Road removed fair X/XX/XX from our Partners companies. United in of We non-accrual from X.X% Our as Pet successfully we investments positions these X/XX/XX. and at our Sequoia restructure at Healthcare, value status

David's multiple, we David's holdings assets pre-petition emergence experience successful July, bankruptcy. the Bridal purchase company with restructuring the of extensive out the lead secured structure of We out of of substantially Bank David's successfully and America management help management In to and to Bridal our utilized and bankruptcy. and worked of Bridal with of all

issuers. we a in secured of are equity our debt now secured from David's pre-petition in QX. the defensive transaction, portfolio across non-accrual senior status highly a in owner lender industries Bridal David's that our result Overall, with removed investments be and XX% majority remains and and nature, of is As diversified will Bridal in secured

the turn Keith. over call now to I'll

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

driven Michael of and investment quarter we quarterly mentioned, solid an generated in a by reported As from activity. investment rates another base fees performance, increase

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

Total QX. during compared investment reported $XX million income was $XX.X quarter, as the million during to

were the expenses expenses consistent On to rates, quarter. million, the first operating expense increase higher lower expense interest reflect to an $XX.X advisory as due in as which side, fees SOFR is LIBOR quarter. and compared when well the operating prior total Total with

outstanding. the total debt X.XX net with million At of we slightly XX, times shares total times end quarter, $XXX June total assets X.XX and $X.X approximately of assets was million than the is higher the had at of of At net ratio and QX. for billion debt-to-equity end XX.X our equity $XXX outstanding million, which of

of $XX.XX $X.XX accretive with repurchase lower per as share NAV share per was our during liquidity. the was a assets, of strong the our price due June servicing sheet capacity increase nature balance at compared March solid ended distribution, XX, in and At debt of program over increases share The our relative and and portfolio to with $XX.XX quarter in outearning XX. to per flexible $XXX million our We share peers, unencumbered the strong leverage the quarter.

continue our in additional available $XXX $XXX portfolio our investment to support and million investments an our We had further over pipeline facilities million to credit and and under cash companies. finance existing short-term

and mix Our in of XX% current in is senior XX% with unsecured, secured XX% rate. floating debt

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

$X.XX to the We pay If to that continue rates to compared share June net basis share rate expect material yield deploy interest of debt a per impact XX or structure. $X.XX deals. the to and income, to that's our syndicated current premium assuming larger per broadly we a our when point rate an new base see increase income as to typically for to rate investment XXX the available the middle-market base into the to floating we as of increase XX, point changes for portfolio to continue expect interest investments positive next investment rise, capital increase continue and about net our to no basis

work we with slightly year for additional We towards debt extensions of something senior our as next term that an during of terms year. facilities and amended to will strategic better have the both both the mentioned, longer more In our give Michael us economics. flexibility structure, secured believe

Our diversify of is objective our and further unsecured lending to to between secured partners. syndicate and debt expand continue mix

to distributions. Now turning

During second of paid to our per shareholders $X.XX we share. quarter distributions the

As morning, third also announced this our $X.XX quarter distribution per of we share. declared

September The on XX third quarter to shareholders on X. paid record be of will September distribution

will announced paid In position. XX. December XX quarter addition our record distribution per and distribution on this fourth the shareholders on as outearned consistently we XX. both fourth as record for September paid supplemental shareholders And as October XX for quarter strong liquidity third share distribution distribution January have and of will third of for be be of of morning, of a to The the supplemental to supplemental we the $X.XX the quarters, a have

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

Keith. you, Thank

operator, to some take that questions. think ready Before we're I

line Instructions] with Hovde Erik Ladies Group. first [Operator session a your and of will time comes question. conducting gentlemen, we the Our from question Please Zwick with proceed at be question-and-answer this

Thanks. paying curious and Good start how up start $X.XX morning, dividend those one about to everyone. how Wanted supplemental on you kind of determining the the and of of that to level? of you kind think rationale just came that and magnitude the instituting

Thanks, Erik. It's, Michael.

I think you've been time. some now for following us

nature. conservative pretty think I by we're

permanent. be want to such be to into think dividend we that grow our supplemental that is it goal confidently that will able I

I happens the to try And also months. with level that our to leverage over six still X.XX that to, to see what XX sustainable. the is next until want the think XXX% we to target continue confident as economy want before, dividend to get said we we're we to increase

pushed I is then if And about correctly in pipeline, in concluded heard of terms just activity of helpful. and of that be That's kind by maybe commentary some expected kind closings think the likely thinking end the August. I to XQ the the fundings XQ of to and of

look might looks add-on in investment like beyond pipeline the opportunities what opportunities. the and So what curious that like terms mix of versus new

Erik, I'll take that. Hi it's Gregg.

we primarily QX. now August pipeline that into for the was over referred right spilled QX to So what

we have with the of balance it add-ons I strong forward, existing and new primarily largely issue, pipeline But in platforms new would new platforms companies. very remainder skewed to Going to expect say, and we a portfolio primary should from be QX. be to incremental for the nature

Got internal ratings in at that helped the in company perfect. or could broader you QX, I Thanks. for little And market was that. a the the it. one wonder prepared in drove improvement know just of this me remarks. it dynamics some factors more about that looking if you I if specifics That's talk bit portfolio-level the that last and slide But X just referenced

were that were transactions a transactions that we work working ratings. of the went during to I That's completed. It would more what the changes And getting those drove last was primarily in that of really those risk really had transitioning through names names inter-quarter. say we through. the and was quarter challenged the of it transactions the couple some

through to the change we risk we had ratings restructuring. worked to those. So, once for through forma were And the we those, able pro work

Thanks Make taking my this for all for sense. morning. questions me. That’s

Thank Erik. you,

of Our the question Finian question. with next with line comes your Fargo. Wells Please proceed from O'Shea

afternoon. Good Hi.

touch question business on on conditions? what's drivers outlook Can the improved there EagleTree. leading on for First you the to improved the

over I'll improved. not to turn I'm it it's sure Gregg.

distributions. would said think that I of be of always kind portfolio, we've nature lumpy it

some quarters soon, some in won't. income and you So quarters have you'll

improvement. an there's sure not I'm So

wrong that something But implies with think there's there. add comment I'll a Gregg it. let I

to Yes. thing The portfolio-driven a would said add it's I really stream. Michael is what only that, distribution

to and So translate function depends realization. really it on the realizations new of that investments

pattern a mature don't change. as diversified more substantive the realize, really a of will investments there's affect that and distributions. I -- portfolio. So It's think it's And

mean correct and debt-driven looking the wrong, profile now the the restructures. a names, Thanks. Sequoia mean color business drove Pet equity investments? of that I Thanks. touching get Just a couple you recap? if of me Does Okay. were And those think I'm you Independent of that senior on some on does or new are you to

IPP, it restructuring Street. with Main a So was along for

into equity. that conversion So a was

a and hospitals, the that, secured more result we were amending their then a equity. and into just to has As we there, stayed name transition as reverse lender, based specific was been to the that poll We a on situation. post better. added process capital converted on with on just factors into an there facilities. ultimately performance And It it Sequoia, of was the take the But an and it position. equity there of able improved going no was existing have improved. performance

put one markup to you Great. improvements more. there? performance the Bridal Thanks. as was or tailwind? equity And well, emerging-type Anything into or did On some on valuation just that David's see

streamline was It new process for of of to fundamental the It which company. utilization operations the emergence the not bankruptcy repositioning and the was the company outlook the equity. Yes. and improved

Very well. so Thanks much.

Finian. you, Thank

like session. back to our for concludes hand management closing it question-and-answer to remarks. I'd This

you you. to the look thank your call And We today. announce third speaking when of in November summer results. everyone you and interest appreciate the again in the joined Thank we we to CION, our forward quarter Enjoy everyone. rest who

Thank gentlemen, today's teleconference. participation. this does and Ladies you for conclude your

wonderful a day. disconnect and your time lines at have You may this