CION Investment (CION) 14 Mar 242023 Q4 Earnings call transcript

Good morning, and welcome to CION Investment Corporation's Fourth Quarter and Year-End 2023 Earnings Conference Call. An earnings press release was distributed earlier this morning before market opened. A copy of the release along with a 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 call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties. with materially of in including a in company's differ as forward-looking those may the result a number filings results from the those statements described Actual SEC. the of factors,

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

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

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

and Greg our Keith well mentioned, will After results. an detail I'm review by As activity the management. remarks, and start prepared today members Keith's our other will overview quarter during additional [indiscernible] to on will quarter, call as our the of results. fourth joined open we call as with Greg and financial year-end investment provide questions. of Keith I our today will

solid overall, and increase net increase and quarter-over-quarter As of us continue we fourth strong almost asset reported quarter demonstrate performance share, per X% this $X.XX very income of morning, which year-over-year quarter-over-quarter. to X% our saw a and almost X% had credit with XXXX net value we an to of an

the XX% quarter XX.X% the year. for was ROE Our for and

and income XX% investment ROE Our net the for XX.X% the was year. quarter for

Our which features yield dividend. deals Greg syndicated coupled net with our ability buying again Because investment our discounts, to by once income our opportunistic more base of enhancement dividend, base will $X.XX drive of about. of our at ability outearned per share, outearn our continued and to speak lightly returns

XX to midyear a to of July today shareholders June payable announcing as are We intention dividend declare our of record XX. supplemental

will supplemental the be next of announced amount exact quarter. dividend The

portfolio at an nonaccrual of better as indication our rated perhaps deliver many performance, continued is portfolio have favorably compares below fair we the portfolio X% to that credit below risk risk names value, of fair which of on other X now resilient also to higher Our X% value, our X, credit the a is percentage even performance which of names percentage or BDCs. credit of represents our

book conservatively our when favorable X.Xx. of net levered peers. looking we still on or again, a XX% higher, at At a risk-weighted quarter at were basis benchmark is end, our X

Our share nature increased in repurchase to part owing to share $X.XX the value net $XX.XX of as the [ our accretive asset mark-to-market to as per to well program. ] portfolio adjustments

X compares net Our which the NAV was we improvement and over flat now asset asset where the continues values experienced higher rate is have decreasing period. its the same favorably of years with back values our Despite net and to in, recent operating to interest mostly environment peers, ago. it been have

$XX.XX QX, of amount approximately at XXX,XXX total shares During repurchased per $X.X an we million. price share for repurchase of a average

repurchase X.X repurchasing approximately and of we in since quarters. total repurchased August our of $XX a XXXX, for intend have of place a coming repurchase to total program beginning continue the million the We XXXX amount put shares the to million end through of be shares we active in the

their private depart XXXX. in banks of of our more Age credit to consider BDC Golden many While or peers as retrenched traditional true the to continue from companies market this of middle lending niche

a defensible as that to market activity, start believe the However, lending banks we middle paramount. resume having in is niche

is BDCs if many looser. even mentioned higher, larger covenants, and are are going quarter, present are leverage last I As after lower spreads companies where

over is weighted many recent private has with $XXX an grab. the $XX " our Bloomberg By end, question Wall As EBITDA almost of base comparison, million. Street cheapest of X.X% credit was the portfolio We just one receive deals million. basis that large covenants. meaningful The lender and fend "private approximately titled in cuts protection EBITDA At in the memory. recently, only in article alone, rate with OID, company deal XXX spread participated BDCs to pricing a credit of always of off a average points

weighted and average between X%. been the has rate is our Our basis X% and XXX base OID points average over spread

deal economics in be While middle the effort risk-adjustment wrong of there protections from put large and style billion of lending superior. in is forced itself nothing borrowers with we large referenced, assets, to buy I market work. are being or we in an almost we $X are to that is enough a to to so impactful money At sacrifice market without or the player our perspective, to total believe borrower a in

to Finally, turn a week. new senior announce welcoming management to our member wanted Gregg, that this to I call the before I we are team

a Director As was previously Managing Focus Charlie as Head JPMorgan. has was Charlie Partners at joined Relations. Investor and IR of part team that, and an at of us Financial the analyst before Arestia

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

you, everyone. good Thank Michael, and morning,

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

middle increased focus. where strategically referenced, the private money cap in credit banks Michael platforms between a large of market we remains clear As markets there center the management larger and levels distinction between sector the and the asset competition direct

is private experiencing robust lower-rated and markets, our B The market from share vibrant. continues as what single our with to direct with the direct transaction sourcing lending remains market platform remains we middle consistent which syndicated sector take are

for to selective. opportunities continue which attractive highly investment We we remain direct see

acquisitions incumbent lender M&A to equity conjunction While subdued the to chose sponsor in where with QX, provide particularly capacity strategies. additional groups additional or of capital an remains to increase or debt was refinance an M&A activity required the years we sales beyond in saw that refinancing was the private X add-on opportunities, in pursue

buyers to in prolong believe accepting are increase sellers rates. activity M&A expect higher as XXXX do now regarding the We we interest reality and

where extensions, loan continue to we we acquire ratings significant roles that due active syndicated a or maturity as in expect and for technically investments. addition, we the the par the such or from loan processes refinancing to were driven issues that where discounts lien holders market, first not the changes, In lightly disruptions to restructuring to syndicated existing the restructurings have tranches exchanges suitable can at benefit in of syndicate drive

still higher selective of highly investments we respect consumer, developments remain as new and and light rates cautious to global with We in of recent with are levels. the inflation the U.S. persistence particularly interest

provisions, deeper than capital equity lien into provisions the mezzanine incremental capital to the [ yields on top We continue protection, investing as at and to yield co-investments incrementally such first for to utilize ] enhance PIK and enhancement features, strategically of structures make-hole call prefer to and Molex reaching achieve structure rather focus yield.

finance where of from upon is higher investments matching structures Approximately PIK our flow through as incremental annual flexible or cash where timing features interest. PIK derived such we sweeps collections yields coupon structured situations, with attain our cash can to XX% PIK by our income strict litigation is highly

Approximately XX% of risk or or in risk rated better. XX% our companies either and PIK are X portfolio rated X investments X

Turning to investment now QX our and activity. portfolio

we act completed and tranches lien lien attractive financing QX, first Tactical compression, platforms, We in Star private Nova new completed where Air direct travel investments. During first we for support of co-lead North including as an arranger. mix

The first X% was of and portfolio approximately direct quarter. investments completed weighted including coupon number far HW plus Genius, for Bridal, David's investments a our work for average Lochner, so companies, add-on lien also Moss. the for We Usalco

significant Star, our be Avison and syndicated as tranches investment and of received Avalon We YacMat attractive income proved lien YacMat, discounts. in first Pure have additionally continued such purchases OID of and Avalon as Pure the of to at lightly companies from been this Star, refinanced acceleration year. purchases QX have recently Young These we

Avison comprehensive Avison company Young first investment. QX for close blended of Upon future XXXX growth recapitalization to we the significant deleveraging expected and positions of accretion to the announced and lien investment in cost that our closing, a Young. expect in to realize is transaction and

investments. made secondary QX, diversified we in new These were private direct companies, million $XXX was investment portfolio XX% existing and During funded. and commitments direct investments X across in across new approximately which with $XXX opportunities XX of million

$X of in Systems, the which associated consisted and funded previously commitments. totaling total sales the Archer repayment also of primarily of NWM and investments had a We quarter, unfunded asphalt. repayments full million $XX for Cadence, million our We of

result, has enhancement fueled and activity increased quarter. by the activity repayment and during to $XX as resulted investment as attached Molex that from premiums, QX XXXX investment yield [indiscernible] funded The [indiscernible] portfolio. a million repayments M&A approximately into recent our lien have incremental net trend provisions such OID As income has first acceleration significant continued in

to Ambrosia restructuring nonaccrual Our the X with January market to QX fair until million quarter. new at process was We lien value TriMark close investment fair value of in a not fair slightly that approximately at voluntary in XXXX. our second name, process nonaccruals $X.X of from of of X.X% TriMark added XX/XX/XX. of declined value X% in this X/XX/XX did

As we debt group a second result our positions lien in of received take participated equity of the in lien company. the back the restructuring, a and first package and fee backstop and for Backstop

and Given remove in we lien nonaccrual the closing with remains XX% of TriMark XXXX. in investments. of QX XX% from nature investments to portfolio senior Overall, transaction, the first in expect defensive status in secured our

over the Keith. call I'll now to turn

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

activity. rate fees As our Michael the generated a another by and in financial quarterly benefits rates driven of from of solid results investment reported quarter base mentioned, we floating higher mostly portfolio

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

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

quarter. operating $XX.X million in million On to the side, reported compared $XX.X total were the as expenses third expense

increase XX.X billion to $XXX shares and December higher in approximately At of an outstanding when we quarter. net arrangements of increase financing The the had million due of average total expense by compared total million interest $X.X $X or outstanding and equity billion debt outstanding. assets was debt under our assets and XX, to total driven prior our

our debt-to-equity X.XXx at which the higher At QX. the end of end quarter, slightly the was X.XXx, net ratio than of is

debt year, year, the by our the outstanding debt reflecting increased of capital. million from the or using our measured portfolio prior $XXX During total additional XX% growth

our from debt net yield of over the ended gains cost increased million quarter from $XXX at end billion, amortized basis the up XX, value reflecting and points QX income-producing basis the at December from was fair and net prior $X.X at XX.XX% weighted at which portfolio year-end. quarter increased of on from portfolio. Our other XXX average the XX The unrealized points at combination funding the XX.X% third and investments the

was increase share of was compared The an at XX, as by accretive nature our quarter At program our mark-to-market per price during $XX.XX the to and was year-end totaling share increase and which $X.XX December portfolio special September quarter, NAV X.X%. of XX, a share per offset per $XX.XX or increases by share. distributions share $X.XX our driven per in repurchase the fourth supplemental

a experienced investment we quarter, of significant mark-to-market the in to price equity For David's Bridal. common the increase our value

and largest investment investments Given end of relative have to size the expect the position the higher-than-average of we market basis. equity volatility seasonal this quarter-to-quarter our do in to nature overall and a of mark-to-market on other a this markets, fair price value its

at to assets, sheet Year-over-year, lower a reflecting unencumbered We the servicing quality per X.X% strong portfolio. million of debt capacity end per solid share of peers, XXXX, the $XX.XX share net ended to our balance credit $XXX and at and strong up the of our strong the NAV liquidity. was XXXX flexible quarter with per our from $X.XX relative in increasing or with leverage over $XX.XX share a end

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

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

a October, we terms issued in year. to offering rate notes in rate $XXX aligns investors. as financing with institutional rate. U.S. Series as in In million we senior our secured a $XX XX% unsecured our these notes and November, closed to the existing completing the on investments. addition A we of XX% to structure, floating sheet in unsecured debt million unsecured in institutional investors same the of The with XX% with floating certain these follow-on And completed terms our capital about our flexibility private previously earlier Israel mix floating discussed, now rate debt well is certain our brings additional After to X floating and about strength notes notes our in transactions, unsecured of mostly and debt to in balance

Now distributions. turning to our

distribution supplemental of of share $X.XX of paid which quarter $X.XX a our declared share. per a fourth includes shareholders previously During share, per distribution the total year-end $X.XX fourth distribution of distributions quarter, special per to in we $X.XX per base share, a

XXXX, For XXXX, compared to year-over-year. of of distributions we per the of per as XX% $X.XX share share during or year total full $X.XX total declared per share increase distributions $X.XX an

As a based result, and yield market yield based the X.X%, on XX.X%. was distribution price year-end our on our average distribution NAV the was year-end

As the of declared morning, first same of base declared base during is $X.XX the XXXX. this which we fourth the quarter per distribution share, announced our quarter amount as distribution

first The be paid shareholders will March on XX. of to quarter March XX on distribution record

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

Thanks, Keith.

shareholders. continue a undervalued, its like provide that our open to continues reiterate would we believe is positioned returns perform questions, and to As solid we before the to well to final thought for is CION line to message we well

ready And with we're operator, questions. take any that, to

first from from Erik question Zwick Group. [Operator Instructions] Hovde is Our

I quarter changes [indiscernible] XX/XX unsecured. additional actions mix now Or of debt, is that XXXX? secured the unsecured question [indiscernible] the versus you have do wanted making towards some to curious, you start the fourth your there? kind target following you anticipate noted with kind reached mix And a in of

this Erik, Keith. is

of current work had to capital, with we our partners banking on Those continue commercial terms continue conversations we our extending our today. in So debt arrangements.

couple a partners continue at probably the to of our do which between for lending also mix debt over that next expand would time, have capital the we our opportunities or unsecured markets, in business we'll And better months. So diversify the and explore with. you further update same we weeks

-- yes, we're think don't So we I done.

as I continue think explore themselves. opportunities to present they we'll

And opportunities any that new presenting as and opportunities just attractive stronger current of -- seeing any terms the could industries as you today? in if the versus particular switching well provide if gears, more curious maybe commentary you're on maybe mix any pipeline, add-on are of

focus. There's is specific really no Erik, It it's one strong. what Gregg. seeing diversified. remains we're industry From BXB

services will seeing care focus. health in that opportunities and business opportunities, our see you in So We're industrial services. niche still

broad-based. it. to it's So thing particular say wouldn't I one pretty there's

of thoughts Any add-on on opportunities new the kind today? and mix between

also to seeing add-on we're sides. both but on incremental platform We both. M&A in. Yes, lot step It's we're seeing of where up companies activity see pick sales do healthy a starting we of

So it is combination really both. a of

just slowdown some growing some other anecdotal in of at previously, you a evidence of that kind talking some your see then single-digit And EBITDA mentioned hearing certain to and portfolio starting companies to the been pockets that are from BDCs economy.

and provide if seeing So portfolio what just you're curious you into could to companies at any kind of your grow improve insight they point? continue whether and with this

I seeing that It's single-digit industry, haven't still slowdown. we It by -- measure holds. industry we're Yes, still any seen varies growth. but think the pronounced single-digit

what And in quarter? last drove X gains Can then comments provide unrealized me. on the you this for any past

Yes.

So particularly mark-to-market, [ obviously, spread there which was model ]. compression, some in our

do accounting The with adjustments associated tightened spreads to have perform had merchandise closing quarter, this transaction. do things that a that. revalue to and strong the auditors bit. time like really the the see inventory, the we with David's also, So in Bridal, and was And purchase

So mark-to-market analysis. saw you increase that a on based

is with Our from Capital Slater next Martin Management. question Steven

up last additional I Following talk performance, et information see current Bridal, David's turnaround? pay, is assume on you on cetera. can I any there and -- extended on response your it's its you credit, its incremental

not you're Part can material season going much -- share. no So really selling it now. too, of is it's information the we through

credit we'll The So a letter next debt of quarter incremental facility. better much synthetic view the a have couple this in was of quarters.

ADL to role. traditional it capacity LCs It up [ more free to ]. So under general was a wasn't back

help a capital standby more a the on So company really It was backstop wasn't basis use loan. really of LCs. efficiently cost corporate to per it

-- they were discussed And now the it. were all and Got complete are with closings previously? that restructurings

Yes.

then to you anomaly -- accounted QX was third talked just that -- in income XX% quarter. QX in from and QX to The Okay. What back XX%. that? this went for to and to the from something down probably is -- the XX% about XX% Interest QX

Yes. This is Keith.

exits had as QX, income brought we additional that some income. result restructuring some recapture transactions of some that back make-whole recognized in as a some and of and So we result some a recognized fees

find I PIK but you on stand couldn't I Yes. just and mentioned it. figured it, sequentially a do going forward? you on had Where note

we So in some today. discussed our conference

down it's refinances driven income time PIK usually is those repaid we're up in or do by diversified, number PIK and picking gets the as Our or for flexibility. yield situations come structured We to over that situations. where structured enhanced [indiscernible] expect

So to is be capital at the we've are equity for the you What over structure situations, in rather, than lot of PIK more would do it's where structure opportunistic. co-invest securities again, come strategically capital down. do time, a have top special we junior risk. which chosen more But we expect secure it mezz,

find for a risk it's return So us, we good trade-off.

Okay. quarter? and prospective nonperforming did the the on And a last you further this next or after there restructurings -- quarter would quarter reduce on -- that that good nonaccruals. Are any job

other Gregg than mentioned, off -- Other expect which [indiscernible]. it's TriMark, take Now Michael. that as to we

further like the this management are to hand back time. over at no for I'd questions closing comments. There floor to

thank Well, a and to everyone Thank forward quarter. today, the look tuning first you for you. couple after close of Take everyone. talking care, the to of we in we months Great.

conference. today's concludes This

you You may your for your disconnect lines participation. Thank this at time.