CION Investment (CION) 8 Aug 242024 Q2 Earnings call transcript

Greetings, and welcome to the CION Investment Corporation Second Quarter 2024 Conference Call. [Operator Instructions]. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. pleasure your my of Arestia, now Relations. Investor is to Charlie introduce Head It you. Thank ahead. go Please

Good to on the presentation company's reviewed at in with release and copy Conference this company's the www.cionbdc.com morning, welcome before SEC. of Call. and XXXX in Second morning the supplemental with the An Earnings section the Quarter release, earnings opened. press market was be earnings along the earlier CION distributed XX-Q should with A Investment filed Form is available website Investor Resources Corporation's conjunction

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

me CION I'd Officer; the Investment be and Chief Corporation's Mark to Keith Financial to that, turn over on Please Gatto. like Mark. Mark ahead, Gatto, Officer. Chief Franz, now Executive Bresner, President With Gregg will call Co-Chief today's go Joining Officer; Investment and call

described Charlie. results growth, in continued growth income, on I this net I our many more are buying performance. quarterly investment more of with morning, covering recently detail market rather quarter strong like investment peers. CION increased across and joining per deal discuss selection income am Thank as a reflected but later, in share measured $X.XX results challenging I these CION reported have net for you, to market dividend. deployment than our given many today. quarterly base Good the NAV than well and perform particularly will believe focus everyone, board portfolio CION's what pleased call believe that our thanks and lenders continues to report capital the impressive credit in environment. I

yield-enhancing every nature we you portfolio. always and beneficial recall, quarter, in As in resolutions last These quarter. We differentiated paired in structured a special investment superior be recognized situations accretion first model our tend is portfolio lien with transactional to more may not from provisions opportunistic recur and positioned combining several that significant conservatively loan situations CION's complex investing of risk-adjusted attractive for strategy special believe a returns. driving

base in underlying represents asset to accretive net quarterly partially modestly quarter-over-quarter credit remain $XX.XX approximately on over-earning This Our and the quarter share all to portfolio by last monitor our the grew performance of the our NAV dividend portfolio. driven X% closely appreciation fundamentals ongoing laser-focused appreciation year. We realized value and borrowers. by repurchases, same set compared and of our unrealized the

and metrics review includes upgrading loans of key external borrower fair internal During various X on that value the both rating and risk following quarter, the offset by X scale. our downgraded marks. We process examinations loans,

X or during fair X X.XX% We one less the the nonaccrual portfolio our also at to to X.X% bringing new total nonaccruals total than of In loans comprised aggregate, status the of portfolio. value. added quarter, loan the rated

environment, is where enormous which share believe with we there we alignment a end, challenging we of small capital QX, protection for marketing have the the traditional opportunities, of with price our in are of both logical this selective portfolio intend strong earlier shareholders. I average of new syndicated often and positioned in our an backdrop, is our ratio loan believe remain shares remain mentioned of to active deal X.XXx. We we repurchase dynamic leverage at and credit conditions this chasing deals the pleased tighter renew consequence Subsequent The years. middle-market adapt are at We as in stock lenders. Amidst a repurchasers with an that performance looser prior operating a authorization, in preserves the but positioning net we quarter remain common conservatively of new year. opportunities new deal remain in credit in $XX.XX. this XXX,XXX back to of pool compared portfolio amount highly but to evaluating our the a lending same CION market. nimble that direct of needed approximately the is buying We to the spreads as time, lightly macroeconomic relatively second evolve prudent environment, half given

operational capital recent Keith believe positioned discuss our given current as of As facility this our provides We for we largest increased flexibility navigate will our the neatly environment credit our and of amendment later, can landscape. middle activity reduces cost secured during also the with quarter. that capture situations. in our and turn that, alpha the paired over market to portfolio focus, to I complex and direct discuss CION's Gregg investment will strategy volatile call now our opportunistic With lending

Thank morning, good you, Mark, and everyone.

a benefited transaction of coupon and provisions premiums. from income income, and enhancing dividends, origination QX and yield as fees MOICs such investment combination Our diverse prepayment net

market in investments As higher dynamic Mark coupon noted conditions with lower highly remain in his of spreads, remarks, markets. leverage levels the attachment capital loan terms a as easing created chasing selective credit leveraged and we new throughout transactions, resulting

first quarter. at selectivity the market overall investing structure protection, into to and levels features, during investment lien to lien us deployment continue loan the provisions co-investments. We than helped equity and such MOIC reaching prefer continued call provisions We to whole of structures spreads the mezzanine enhance focus capital our structure our secured make loans strategically to the rather invest to fund enhancement capital capital higher utilize on the incrementally yields compared size deeper top top believe relative and at and when proportional the yield at for to PIK in as first of

where amortized also reasons we technical focus have significant attractive the able to secondary have total have been first risk investments. Historically, expect loan the the We restructuring lien recoveries acquire we been to that realized realize to continued excess opportunity lightly active discounts of recoveries selective see due the profiles tranches our on drive on investments return our roles refinancing highly reorganized par in transactions or healthy restructured, where syndicated one processes to [indiscernible] at in weighted we annual our of finance the or strategically PIK better. to of sweeps average are as flow we rated risk is where X those in one coupon attain or either with yields structures interest. Over cash and PIK to risk PIK income companies strict the XX%, of investments of incremental flexible or higher investments collections our structured rated where XX% majority matching cost investments, cash our litigation restructuring. The upon through from our such X is or portfolio of our at timing highly derived PIK time features situations as can by

PIK we result, driven may a credit. a not to by compare income PIK As restructured deterioration in believe this

our now Turning investment and to portfolio activity. QX

acted and SOFR completed for known and Our add-on weighted first and our Metal JP health LGC. PH We QX secondary either from AHF M&A completed approximately Voyager fitness club or WorkGenius, Power in where average also completed opportunities impactful arranger lien for approximately companies, restricted activities Health, quarter new co-lead for portfolio direct OptioRx, opportunistically X.X% pipeline benefited investments new opco common attractive [ products, [indiscernible]. Giving financings we core Holdings new mobility, companies. David's our acquisition a borrower and We debt X.X% direct as e-commerce including portfolio Synnex, portfolio Longview equity as refinancings ] Young, or Gold We add-on was plus secondary total as ownership Home [indiscernible] through plus the including SOFR and portfolio market companies. investments for STATinMED, and well health coupon through Beauty. The Intermediate first funded financing purchases partner. We refinancing, investments private as increased including direct portfolio lien Bridal, for Avison companies, in companies,

made existing and companies. $XXX across new of new portfolio a were $XXX first in to million we was million for portfolio QX, portfolio lien companies to XX% XX% Approximately investment X% which in direct existing new secondary portfolio first During funded. existing loans XX companies, primary loans total and lien X companies, investments commitments of

of previously We first in home also in our sales equity Yak second commitments. unfunded paydown holding million Mat. of for and had a refinancing health. repayments We lien the which investment of total $XX totaling giving the preferred our funded full of The million of quarter, consisted and $XX

of quarter. all the activities, million our a of result these funded As net during $XX approximately investments by increased

Longview in levels. Medical which of the companies were portfolio share flow equity earnings our of and additional acquire restricted driven performance, $XX.XX from value our terms net QX. in Health in in Carestream per the In per increases Power, stock increased share Longview CHC increased our $XX.XX to sales investments and asset performance via QX secondary equity cash saw attractive to value of We and in each ability at shares at by

in for portfolio perspective, QX. name investment in We quarter, LTM investment also equity fair capital of David's to and first our Global Bridal new the Trademark earnings the investments positions, We on lien this X.XX% QX working first of at our our in a equity of increased based borrowings. From and seasonal declines new including cycle. one our end our fair value market-to-market and had portfolio X.XX% credit TMK investment performance on from nonaccruals of value based to in TriMark end at value added nonaccrual lien

current of going we performance will pro portfolio, more forma continue reevaluate the corporate and benign, in we continued clarity on nonaccrual environment. of are our the expected development particularly with absolute largely status activities to the the continue nonaccruals investment. On pleased this an basis, to we gain of the As company rate strategy and business forward, be interest credit

million in market-to-market our lien time This acquisition Approximately GAAP of position acquisition of at only and product Deluxe providing first financial $X lien as million that quarter, impact negative preferred $XX risk realized common as introductions largely XX% million of debt realized loss final portfolio company a constituted investments. realized write-off and drive the which from in impact portfolio with investments pursue of initiatives. Overall, losses new the and NAV to negative defensive restructure, in they of and $X.X rated stub Fresh, holdings of in recovery with first lien remains X/XX/XX. or senior approximately in of to $X XX% were trust remains completed to which $X.X total the based of at transactions. We flexibility included legacy equity better. nature to GAAP the the new Cigna's valued During X investments the our our Entertainment and order growth value also in first million NAV X resulted a Country of on near million into secured by first K&B lien HW exchange XX% or the debt loss HW consisted

since risk are declined the initial investments, either expect engagement repayment to where Keith. investments X.X% rated now to call the and/or which seen X more we turn full are and the spending XX.X% risk of increased purchase time approximately asset portfolio. will Our from have over but I

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

mentioned, Mark investment results, another enhancing of generated within solid by financial provisions driven activity, and reported the a portfolio. we quarterly combination income including realized dividend our quarter of from yield As income

to in during activities compared investment the million with million earned or to to Total million income the of per $X.XX or premiums first QX share. QX. the and During income in by per reported repayment to $X.XX quarter. certain decrease share decrease the quarter, income whole net This was reported or $XX.X compared connection driven recorded compared prepayment make QX restructuring first investment million $X.X $X.XX quarter as lower was million in investments $XX.X during $XX.X a per and was when share $XX relating of

$XXX X.XXx or higher debt the the slightly equity X.XXx of million side, due $X.XX with and of million by the reported total June prior driven quarter, in when quarter. total lower QX. $XX XX, as expense and total at to Decrease outstanding is compared first our of At primarily the end debt-to-equity XX.X billion fees $X the operating to ratio investment to quarter. At assets expenses which billion approximately had assets compared end of and total shares million $XX.X the total a in decrease On million we advisory were was was of than outstanding. net income net

debt per at our repurchase share XX.X% is with our continue to an offset assets, The and liquidity. We reflecting Our consistent average short-term amortized on XX $XX.XX nature the an flexible over our to under was ended share share during in $X.X end a billion, outearning $X.XX at price to value had investment $XX.XX portfolio. We servicing NAV portfolio XX, net due the first of $XXX increase distributions the debt finance second June quarter. At quarter, compared quarter. March. and quarter cost a lower at companies. the additional $XX investment in to investments and with million the in in our The portfolio million other balance with million strong peers, up million of at share our declines $XX during ended or from net quarter the was relative over June and available X.X% weighted fair by partially program sheet accretive support leverage which of primarily investments our credit to capacity funded strong and facility income-producing as solid was the and our cash quarter existing primarily yield the pipeline increase activity further and per at first our $XXX our unencumbered per

in in XX% floating XX% XX% about Our unsecured over secured and current mix with rate. in debt is

debt of quarter, quarter. During first about the cost weighted is was from the our the X.X%, capital which average unchanged

needed of of believe our terms for facility to these have years more reduced reduce continue additional recently year. senior X spread and of flexibility debt secured of new effective points operating credit terms will debt the XX economics. by we to our mix which overall capital, JPMorgan cost amended will constructive us second and our with our was in with half help better group partners. give The extended basis diversify our In expand to and debt We an credit further lending capital the the provisions

distributions. Now turning to

includes $X.XX a of distribution QX total share is a second per the an increase per supplemental our which base distribution per share. of of $X.XX distributions During share, from and paid which we $X.XX of $X.XX share, $X.XX to shareholders in midyear quarter, per

quarterly base in per per X we increased $X.XX We distribution $X.XX per from or XXXX, share $X.XX raising the listed distribution back since to have share. our by times share now XX% base October

yield based distribution quarter through XX-month price the XX-month the was As the market end a trailing second based result, and the trailing yield NAV distribution the XX.X% average quarter on was XX.X%. on

per As our $X.XX quarter third the announced this share, we morning, second which of the as is declared distribution quarter. base same

on quarter third on paid for be shareholders September base of The distribution questions. the X. line to September Open XX will record

Instructions]. [Operator

is coming today question Zwick first Capital. Eric Our from Lucid of

first. start to Wanted

hearing You mentioned originations have others under and new pretty as from that that's spreads been what few the past in well. quarters, pressure on with we're consistent

XQ in you either going seeing latter as pipeline you look the of at are curious, those signs Just any forward? the stabilizing kind of of part or

it's Gregg. market, no. Eric, Broader

really I coming think supply to continuing based spreads just an are be on universe and in tight and grown accordingly. demand that money investable hasn't of

SOFR invested we've quarters. in is we us, For last quarter, at which previous XXX with been -- consistent where

and proportional able we your But premium. it your So your on versus fund to deployment size. really were for a And was it maintain that selectivity quarter. depends us, level

slow given that market mix M&A a this follow-up just similar shifting Is and pipeline, That's on of between terms then at And point? the at or follow-on point activity. pretty this still helpful. maybe the the in all new at

is it's up. very I what slightly we pipeline portfolio robust consistent which experienced, QX, we we're have think what we look in that balance saw companies. We investments portfolio current say similar new was pretty still QX shaping a to a in at. But looking higher issue with would

So what I saw where from sit with QX. we in it say will be today, would we consistent

And then moving leverage. to on

And quarter. outlook just that in regarding the still given slightly net a leverage the amount You of fair uncertain there's noted economy. increased that the

what see be kind of how kind today Just today? the on what range outlook given and think top on managing for refresh and end of the that based what's you the appropriate maybe would you leverage about us portfolio of

leverage Yes, X.XX. about currently range We're as is we the market, it's disclosed to our about X.XX. at Eric, target previously Keith.

leverage So that net activity, correlated ticked little for to the directly a but of the activity funding bit, yes, the was up investment the quarter.

see. me. We're And some economy. just to able your weakening then the you're portfolio, one anecdotal for in to U.S. evidence what last starting And see given of

the nonaccrual over so a any reacceleration not and seeing past down this acceleration, which You've working at point, done of is job year great signs levels solid. or the

curious, seeing But terms out ability So and industry to of at commonalities out, look of kind you in seeing you pipeline this weakening? geography? you're so, seat any across the you are of any in review, just look if And deals of given the curious, there are the what as your signs have or point?

honestly, underwriting it's Eric, it's haven't a what and would very then environment -- Gregg. I to we've of the say we've mean that very since seen been change. much since similar quarter I seen 'XX. we first defensively

seeing been the I we've forcing spreads terms in we're the documents or say fundamentals think credit. what change while. some seeing, It's more with are aware any really funds the in credit specific aggressive of universe, just the can't driving a -- of for than material maybe loosening it. But is to in becoming of there's perhaps we're be defense think And the the borrower. I credit I people coming actual of this other in mode in people what of more more and outcome is type

The from Securities. Fargo Wells next coming is Finian of O'Shea question

structure on with at Why allow you discretionary extending that's some the your Question those maintain And or buyback. renewing change your do be scale? [indiscernible] us economically you more no if that. sort and point. not and of, first, you to longer programmatic Appreciating I the say, size remind that a guess, your next then plan? would commensurate can fee lasting

share solid but prudent we're think it it that. that long think And we The reflect take programs wisely use most that's ] a to programmatic the as is should as do this we'll hopefully, the question, at we'll share issue perform. we're portfolio to the in -- effective price and price managing And undervalued, and and into will our address the we'll way. consideration. focused your continue stage, of right part that to using going on and happen soon. the We second now, way the [ performance and But is

gentlemen, Mark We this Gatto us at everyone their brings would to to participation. to for this and Ladies over turn I'd like closing question-and-answer And of session. the like time to today's end thank for comments. it

are building CION. In closing, durable a franchise at focused we on

which source, market deal the the space. execute opportunities lending continues direct underwrite BDC investment and serves to middle in Our team, only attractive

other situations to benefit credit management and our enable ability CION Our overlooked often reflects by performance ongoing and from opportunistic providers. complex our restructurings, portfolio navigate to capital

While layer total has the a the return over CION BDCs the this quarter. produced to may XX of last complexity story, through quartile in that second publicly the it top also another traded add months is all

again Given discounted this both performance all in an look CION, for provides historical investors and environment price and believe appreciation BDC where support strong we our share near unwarranted you potential. Thank continued to your for highs, a speaking sector, remain price unique is next income broader valuations quarter. opportunity we forward and CION with of

today's gentlemen, and Ladies this event. concludes

You log of may time disconnect or webcast off this and your the your enjoy lines at rest day. the