CION Investment (CION) 7 Nov 242024 Q3 Earnings call transcript

Greetings, and welcome to the CION Investment Corporation's Third Quarter 2024 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce you to your host, Charlie Arestia, Managing Director and Head of Investor Relations. Thank you, Charlie.

You may begin.

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

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

Officer. Joining CION Gatto, Franz, President Chief be Investment me Officer; Gregg Investment Corporation's Financial will today's Keith Bresner, on Executive Officer; and Mark and call Co-Chief Chief

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

rate the The with Charlie. cut Fed's interest broader thanks represented navigate the markets. capital move call pleased uncertainty for am during I results joining CION's first the you, credit Good and quarterly today. competitive in environment we first towards highly environment. in rate inflation a lower with continue normalized morning, and quarter, steps such the years, a X as to potentially our Thank more persistent everyone,

past However, the year. end quarters, the prudent as heading of we outlook, we have continue to several for the a maintain and conservative calendar into

balance resulted unsecured debt the of the in were we third debt making call, quarter, right overall which the active more in the of on our later year discuss heading the will any time. capital. our mix side given the our positioned of in Keith is managing believe transactions meaningfully up funding majority sheet As volatility better first increasing a cost potential without balance markets into to us next withstand These that flexible sheet in we have for very capital

of execution from public oversubscribed which existing retail and more We a was were strong well interest and than new bond as offering, investors. our showing from baby both strong with also the Xx institutional investors as pleased saw

is This baby BDC were the thrilled a in listed the significant the the we of see Our a and bond in largest investor space offering public stand-alone strong is publicly evolution support. CION as today. company, to step

net as our primarily investment mix now quarter, Moving our $X.XX reported transaction investment quarterly well quarterly dividend. than third a to $X.XX covering quarterly portfolio from for as by our fees results. base from our income interest driven the more CION quarterly in income of activity,

base $XX.XX, our fair quarter-over-quarter by asset net over-earning to value portfolio, quarter, the somewhat accretive dividend second equity repurchases. share down offset and value Our by driven marks $XX.XX in declined our in primarily from

As call. equity given calls, we relatively some in later our discussed provide the the details in Gregg have we some book large prior anticipate volatility David's additional will in of position. Bridal's the size

as pleased a Over track company XXXX. CION's value listing public with asset preserving term, of the our net longer in since are record we

We also as to of credit unpredictable with our an performance portfolio continue environment. remain navigate the macroeconomic our pleased borrowers

to or value, the less loans X% X quarter. to rated fair nonaccruals total last X portfolio than of end by We added valuation both the review scale. X.XX% from specialist, quarter, at new rating nonaccrual up loans portfolio and downgraded internal utilizing during risk Following the upgrading bringing of comprise X.XX% internal team our loans, X an status our process extensive we external on the value. overall at of At offset X our quarter, loan fair X modestly

that our $XX.XX. Early shareholders. share average of XXX,XXX end at quarter, repurchase our the Once average we again, the Since with buyback strong $XX.XX. renewed we inception third shares of at an undervalued QX, view XXXX, price price the we shares of alignment through purchasers shares common back our buying through X.X of approximately our an authorization million were reflecting of the our active remain have quarter, in preserving and stock repurchased in over

The have market lender pricing environment in during affect the quarter highly quarters earlier the competitive, and of have deal many third volumes, trends to remained we and observed continued protections.

thought following are shoots has constructive M&A market also green continues typical rebuild and extensive seeing pipeline our some sluggish to summer of period the However, an been as following broader deal our in slowdown, late more activity. we the

opportunities, transactions certainly given deploying deal but Gregg amount a these we seeing are selective healthy discuss As regards highly dynamics. later, remain of with to will we new into

believe we CION environment. and to sheet advantage remain in opportunities should sufficient balance a flexibility volatility allow increased that take and Additionally, may liquidity the higher nimble arise of of our

will that, to during to activity and investment With the I our now portfolio call the over turn Gregg discuss quarter.

you, Mark, morning, Thank good and everyone.

income, net a investment yield-enhancing diverse and leverage We X.XXx. of as as prepayment MOICs targeted highly quarter transaction most QX were fees income full from provisions new the and of at we level remain selective as our coupon effectively with Our achieved during investment such combination of premiums. investments benefited we successfully

addition, been on credit pricing on percentage In of and we've investments considerations. passing potential higher historically a based

continue credit market and markets. resulting loan throughout remarks, leverage higher easing as As transactions lower Mark terms competitive discussed spreads, chase leveraged the remain in inflows in to conditions coupon levels attachment his capital

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

of invest to to first equivalent the and during total help plus continued quarter our spreads weighted SOFR believe investments in coupon size deployment for quarter. investment when our lien our levels X%. fund debt funded We to us the higher the proportional the relative markets loans loan lien at selectivity overall average first The was for compared

reasons, or investments. attractive selective focus our realized realize drive average reorganized to also of cost restructuring investments investments, the have we the acquire recoveries where our We to opportunity the our that in expect return to healthy technical lien the at of able of roles or profiles transactions lightly on discounts as the the the see been tranches we at recoveries restructured, restructuring. to loan have first to where lien processes advertised Historically, total continued in first par weighted of highly syndicated secondary risk refinancing we've on excess been those active time due significant

the realized loan par at approximately cash Heritage we with over X-year acquired a ultimately Power million an quarter, exited in that term unlevered We investment several total period of restructured lien our first of gross achieved During a XX% investment of gain X.Xx return dollars. we successfully exited significant value. our cost and approximately

yields through better. XX.X% or to X structures Over are our collections, we The finance PIK higher can litigation attain interest. risk is PIK PIK investments, is with PIK our cash XX% X, investments matching of X majority risk sweeps our timing strategically coupon income derived annual as flow or features our rated strict incremental in where or highly and of where flexible rated such from situations by structured companies cash upon either portfolio

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

the finance During par paydowns significant we within quarter, received our investments. litigation

comprise the several XX% approximately over continue quarters. to now trend finance PIK investments that next Litigation income. of our expect We

portfolio QX to investment activity. now our Turning and

Property Our third lien platform as consisted our where investment well direct of for a pipeline refinancing portfolio we as Services quarter financing new for We transaction. as add-on first arranger. opportunities completed and Ascension a co-lead served companies private acquisition new

Bridal, Community [ companies, additionally completed We Tree Solutions American STATinMED, Stengel Services add-on Architecture. David's American Hill for investments Clinical ] K&N, Service, including portfolio and Clinical (sic)

and and incremental Longview including secondary for Power. equity investment portfolio We Young, lien also an completed Avison first refinancings companies, Cennox in

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

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

had Homer of in XX% in of and Fluid first and nearly Avison day the our NewsCycle, refinancing of quarter for of quarter, of Presents totaling and paydown and tranches of consisted Young or Approximately the the investment $XXX occurred last sales City, total for sale investments Paris ] [ repayments investments and our Cennox repayments our full in million the Heritage Control, the USALCO $XX Tel*Link, the on quarter. the Global lien We million which WIS, Power.

expect to pipeline. into redeploy We our QX active these proceeds

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

net Approximately to the in which portfolio. X% of mark of our our which billion performance, portfolio from decline $XX.XX In in $XX was of decreased QX, XX% approximately primarily share by David's of driven unrealized asset equity QX investments, per unrealized represents our XX% terms $XX.XX value of Bridal. value net per in portfolio equity of our our driven declines approximately to million, is total related investments share net in by $X.X declines

diversified our we quarterly overall to Healthway investments working we seasonal ]. is size base restaurant rates. As mark in and the David's of the company's Bridal's investment higher still due in revenue the and we quarter-to-quarter TriMark capital macro equity its note, the our in calls, expect larger Of equity to saw lingering of also unrealized mentioned profile. highly effects of well nature on significant interest from and declines inflation [ volatility the demand relative the previous of of Trimark's see experiencing as value TMK, as operations marks

venture, increases as which of and debt City stronger driven gains, unrealized IWCO marked we well investments in equity investments our joint performance In our in Generation, in all Health, Power terms value and of by CION/Eagletree mark Carestream of the underlying had were Berlitz, Homer unrealized our trends. Longview as

industry, new which to rapidly. pharmaceutical driver loan the STATinMED the credit the growth financing The decision name are a to X.X% senior terms We this quarter, to is senior nonaccruals fair fund a dilutive led place its help the term initially for QX. round to the of primary From the mark in one with to term CION STATinMED. super nonaccrual in expect partnership of of of offering value loan grow increased private we our on to company's in a nonaccrual our from investment added X.X% valuation, in for equity STATinMED super which now. portfolio our perspective, QX priority sponsor to subscription-based

financial continued STATinMED, with particularly continue credit in accrual for we reevaluate historical nonaccruals performance the pleased There are on continue to be in an other status based to basis, to potential positive largely are and current several return portfolio, including experience, environment. the interest names, our absolute we performance, On transaction-related and that of line with developments. rate

our of or XX% in Overall, our defensive in first nature, lien Approximately remains remains risk-rated XX% portfolio X portfolio with investments. better.

risk-rated of purchase, the spending have from TriMark. where Our XX.X% investments, repayment investments our risk expect which Hollander driven are initial we full seen are the increased in time QX, approximately the asset X.X% and/or but X investments by engagement since either in in and primarily portfolio QX to more increased

the now Keith. turn I to call will over

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

we and during other transaction results, As from by reported combination Mark generated of another activity, our solid quarterly fees income realized driven period. financial amendment quarter of the investment mentioned, a including

the During $XX.X $X.X the per per income or decrease in share. per to a $X.XX or million share was $XX.X investment net of $X.XX second share quarter, quarter, $X.XX compared million reported million or

driven decrease $XX.X during to of by to Total transaction The QX period, as offset was lower investment million dividend the by $XX.X during income income was recorded which the QX. second slightly higher quarter. compared compared reported fees million $X.X million was in

as was operating compared decrease million second $XX quarter. prior the side, the On to lower expense the and quarter. primarily compared were million advisory expense total when in fees The reported driven $XX.X interest by to expenses

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

$X.XX at received activity the repayment from quarter quarter, increase the down in the $XX ended million reflecting an value of the billion, fair portfolio Our second quarter. end at

our distributions decrease The nature or was price our equity quarter. XX.X% average and was September June. XX.X% share of $XX.XX X.X% at on was our weighted end per from the which the to share cost price accretive second quarter. debt repurchase the XX, the volatility and share our from The our per offset other as basis mostly was share is mark-to-market compared down portfolio points to investments in of NAV yield income-producing about partially $XX.XX September declines XX in outearning $X.XX from or At XX, book, of at due by during our which per at amortized program

with capacity with unencumbered had the facilities current ended XX% secured an liquidity. We additional further $XX strong in a companies. a third finance about XX% debt and and investment our million XX% to and $XXX about strong with sheet flexible floating our $XXX existing our assets, to loans, and credit We and solid cash million million support in senior rate. balance pipeline portfolio quarter over unsecured and over short-term debt service available XX, in under in At bank September is continue debt mix our in investments

points capital than cost the of the debt quarter, lower is X.X%, our average the weighted quarter. about XX During was second basis which

terms structure. In our of debt

new transactions, the debt XX% in extending and through weighted remaining on documents refinanced the over our new investors. to effectively debt raised markets. During the in terms X recently UBS go next and with while X unsecured is debt wall to new capital, and working million existing years weeks. very expect capital the by from XXXX, quarter, active are closed average our almost XX% $XXX institutional actively refinancing them We of debt few where we The were maturity to we be facility,

period, effective reduced and we points. credit additional our credit economics. provisions with X the constructive an spread The years, with XX facility extended JPMorgan During secured for more by and operating amended basis better was

a rate X-year of XXXX of spread spread rate credit a rate fee of X-year also $XXX million with X.X%. We also loan, term term our notes issuing for our million refinanced due floating X.X%. unsecured And by floating notes credit $XX unsecured upsized we with loan fixed unsecured a new tranche unsecured

mostly will due debt recently, we with new over end, CICB and completed the Exchange of strength well mix XX% post our a capital our new and notes approximately transactions, XX% ticker Stock in unsecured unsecured baby listed were the debt X. now commenced completing more on XXXX, After debt fixed And slightly rate sheet. X.X% benefits floating bond expand under which $XXX.X York a New cost public our rate October mix symbol capital aligns financing when investments to rate. The only X on million of issuing trading considering these quarter secured, increase offering in the in our unsecured group balance XX% flexibility the institutional floating to lending our brings partners, average it and brings of increasing with our of and balance total to in digital debt while our XX% weighted sheet, be

distributions. to turning Now

NAV price trailing During we the is base XX-month to distribution the the on and third a QX. based market end which distribution we the the The base third paid $X.XX same through distribution per based share, quarter quarter, of yield XX-month on XX.X%, in was yield shareholders average XX.X%. was paid distribution quarter the our trailing

which will the shareholders December third $X.XX December is on The base quarter base share, per distribution fourth announced we be declared same to morning, XX paid of on quarter. the our As of quarter record fourth this we X. distribution as

that, the call will open Okay. who will the questions. line the to I now for With back turn operator,

Instructions] There questions I to call back [Operator closing time. Mark to this no pass for would at are like over remarks. the

fit a bond took fiscal of opportunities you. successful profile. increase had to we quarter believe our In positioned is of into market our financial end as navigate a baby highly our flexibility led and with a deploy offering. to forward into closing, major volatility investment well the we CION a year, the by repositioning Heading that company our balance and public sheet Thank strong step

return BDCs. with upper all last remains over months We the very year as of our echelon performance this CION's the public XX in are total strong pleased

broad of risk-adjusted However, investors ability variety remain attractive a in platform our we of in diligent educating to differentiated environments. market will a audience of on very the returns generate

Thank continued next look CION, quarter. you again for forward your of we all speaking support to and

teleconference. today's concludes This

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