Investcorp Credit Management BDC (ICMB) 15 May 242024 Q3 Earnings call transcript

Good afternoon, and thank you for joining today's Investcorp Credit Management BDC Third Quarter Fiscal Year 2024 Earnings Call. It is now my pleasure to turn the floor over to Peter Sattelmair, CFO.

Thank you, operator. I would like to remind everyone that today's call is being recorded and that this call is the property of Investcorp Credit Management BDC. Any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by visiting our Investor Relations page on our website at icmbdc.com. I would also like to call your attention to the safe harbor disclosure in our press release regarding forward-looking information and remind everyone that today's call may include forward-looking statements and projections. materially projections. differ may results from these Actual

website. At We law. Shaikh. latest To update the forward-looking call on SEC to the would required Credit by statements unless Management our page obtain Relations of please over our will time, turn visit I like not filings, Investor this CEO copies Investcorp to of our Suhail BDC,

Michael call. third you Chairman by Thanks, for our year everyone Credit thank Investcorp our BDC; Mauer, on to Peter quarter Peter, I'm XXXX Management earnings and us joining fiscal Sattelmair, joined of and CFO.

earnings Before we begin to I our the on call, update a leadership company. at provide short like would

sole is this time I alternative business yesterday, be of immediately, now of lenders at Chief ICMB, an As named of as and CEO effective to has the will Investment our we well advisor. the of environment our Directors look at honor to strategy of I market. Mike to current been partnership that, Vice Board Executive the remain Officer over the appointed and continue lending Investcorp. favors such to are companies, positioned in It to call as Chief and where private Officer turn as have to appointed current of will credit the Private Chairman as the development forward Chairman will Credit our grow platform. With I continued been execute business now Mike. serve

an forward investment investment during of our and will Suhail, to nonaccrual as platform always, our quarter everyone our CEO pleasure XXXX on supporting built financial results, as you the with the through provide Board joining to Investcorp's our to end thank year and after private the a proud team earnings as grow regarding the the credit and in the our the third Peter quarter, years we've commentary ICMB. activity and will investments, walk will Suhail, and and they been outlook. fiscal I'm through lending of update performance Suhail seek look go Q&A. our over market on It's quarter to Thanks, for us end. the call, our call. leverage, I quarter platform. On today's serve dividend we'll March then

During March $X.X or was our investment income. income net XX% the increase quarter from $X.XX million the net ended quarter's of share. XX, was previous an approximately This per investment

share of Additionally, increase gains. driven was the by value quarter. per NAV share capital from increased in at to increase asset net in an per the approximately end per share X.X% $X.XX prior $X.XX The

to a continue mentioned fair of experiencing this of on to portfolio our mitigation, nonaccrual total of position as that compared new X.X% last to for are portfolio risk quarter, periods on management the as As we quarter, the X.X% positions did not borrowers percentage to add focused nonaccrual any and We remain the stress. especially declined highly our of value previous quarter. and

value. We company nonaccruals due next supplemental has over was adjustment not dividend, remainder net XX XX to Other of deferred dividend, rotating discount We than quarterly received consideration the investment including our realized to The is our been income. months. the the on the months. We majority XXXX in the material delayed The the cash and make position progress partially over at closing. the the covered sold spread remaining any progress on the the continue to next a noncontingent payments receivables as not in there carrying expect March during quarter. payment, the portfolio was with prior

quarter We end, June to its expect through dividend next company earn the XX. the

per as of April XXXX. of XXXX, on well payable record ended of a distribution of $X.XX share, on the XX, of June XXXX, that to XX, stockholders Directors $X.XX as XX, a Board per XXXX, announce XX, quarter as June both to declared for May share, supplemental pleased are distribution We the

quarter X.XX. Our this was leverage gross

was of discuss transaction X.XX trends. slightly in the X.X. I'll target was squarely X.XX. volume to now Our leverage range net saw Gross market above leverage leverage decline We quarter. the range briefly target net since previous the and was

However, in investment strong supported this continue we leverage has our primarily focused not wavered, environment, market and reasonable companies and on that sponsors. are to lending to diligence by be have middle

to continue secondary. the attractive take of also opportunities in We advantage

remain at performance, borrowers the operating portfolio solid. we quality to look our credit of As continues

performing Our XX%, is from last investments approximately XX% weighted our average loan-to-value quarter. debt ratio an for increase

rotating continue We diversifying the and portfolio.

Our portfolio diversification has since year. prior the improved

across the industries, during prior through activity to it I'll the up to we XX after and XX March year's borrowers end. quarter, quarter investments in XX During compared quarter. Suhail and which our investment that, XX With turn March is had quarter will walk over Suhail. back borrowers in the industries now

you, Thank Mike.

direct to activity compared declined portfolio Our ending lending the quarter volume investment money Sponsored in previous was almost the December slowdown. market activity down this new March the quarter market XX. XX% we quarter saw companies new XX middle as from in broader quarter ended

investments $XX.X XXXX, in our we activity portfolio rotated relationship EBITDA with a maintain March M&A, In credits driven million of add-ons the companies we of from past over sponsors. We've the of time the high-performing that have strategy year. quarter. we to through portfolio about in our This went The million this portfolio. to XX, rotation as average X/X and where by mentioned portfolio largely $XX.X quarter's weighted portfolio continued frame, this was existing execute dividend recaps

stable net period, larger, same portfolio credits. as of from X.Xx Over the shifting towards weighted the leverage continue to X.Xx the average increased more we

ongoing rotation, know. part we this credits sponsors As by larger backed we that in are generally invest aim to of

including diligently Nuts, are ArborWorks, Hersh. American Klein managing our and list We also watch names,

in we yield cost, ended with the million $XX.X approximately quarter period, X for XX, same Fundings with company investments realized we March portfolio at approximately totaled companies. an In proceeds, investments During weighted in approximately IRR X the invested of $X.X XX.XX%. XX.XX%. average of portfolio a totaling fully million existing new

can the hospitality of our industry which as example PureStar, amend-to-extend commercial is Clean steal on proprietary U.S. SOI to participated provided the play extend be an the Company. pure sponsor. of [ in in Acquisition the of largest laundry AMCP from PureStar is ] sole found PureStar First, we the

Our term cost also is we loan of another approximately yield first LLC. made XX.X%. And the as LSFX in Victra, investment lien known at Holdings, Atlantis

had an As history with exclusive market mentioned in largest team last Wireless. for Victra Verizon We purchased quarter, our price. this a has Victra secondary long-standing the at attractive the is independent name. retailer

is Our XX.X%. yield at cost approximately

rightsizing the We fleet sponsor company, Amerit an independent capital providers portfolio Fleet one Amerit investment also maintenance. the commercial upsized structure. in is our supported the of in largest of existing Solutions. We

is cost, at is, XX.X%. approximately yield Our

auction lien Lastly, known We first in XLerate nation's we in Auction. XLerate, loan full-service market the also is independent the invested secondary the of at XLerate used Auto attractive car term as largest price. an purchased provider. second America's

Our yield at XX%. cost is approximately

the had with Our this team across a platform. long-standing relationship team has

during X Additionally, realizations the company we quarter. portfolio had

we first First, in position fully Acquisitions, our lien realized in loan term the America Evergreen LLC. North

IRR approximately was Our XX.X%. realized

receive position. noncontingent position cash quarter, next mentioned, full which XX As and the equity of C, we the as E, Mike the deferred payments our includes loan was revolver a realized sold the was position partially and to the received over and majority months. XXXX during in loan we our The expect the that remainder term term

the to We advantage take of secondary trade also the first in in of sold lien opportunity an market. our position term Victra attractive loan

was realized Our for XX.X%. IRR Victra approximately

lien the the of secondary was in quarter term a loan position first in also Our trade. AHF sold during

trade, our IRR this exit XX.X%. For was

PureStar in the position of Our the was refinanced as quarter part during amend-to-extend transaction.

transaction the participated new our whole we of PureStar for realized IRR transaction, earlier, mentioned XX.X%. the in was approximately As

We refinanced. loan Lastly, rate. Amerequip our not the was the in as first a position lien in was refinancing loan at significantly did lower term participate refinanced of the

strategy by rate. We continue to as maintain our discipline around this evidenced investment

quarter portfolio approximately company the realized in X XX.X%. After end, was and portfolio new invested companies. IRR we Our existing one

of the the training we CPI a one We portfolio capital Institute, consulting first term or refinancing human and deescalation structure. After support the to end, WendelGroup in Prevention company. the company. care provides also a realized loan portfolio lien in for is company's CPI, quarter position CPI of Crisis professionals. invested

approximately is XX.X%. Our at yield cost

position secondary increased Multi-Color also an our first of in loan the also term as known lien market. take existing advantage attractive the We in Label, to Corp., of price

cost at approximately yield XX.X%. Our is

in first company, Northstar, XX.X%. And loan was existing our during refinanced lastly, participated term our quarter. portfolio Office, also yield there the cost lien is we an realized We at refinancing of which position the in Empire

We have XXXX. been Office in since April Empire invested

Our IRR realized was approximately XX.X%.

containers concentrations and at services X.X%; As commercial at trading IT of largest company at direct at XX.X%; packaging our X.X%; retail professional were and and March marketing XX, Internet X.X%. followed and XX.X%; industry X.X%; supplies at services distributors at by and services

would the is X now and a over as XX quarter of industries to financial end, the Our to previous from to quarter. I in positions, discuss portfolio the companies warrant turn industries results. of Peter decrease which call including our like equity GICS

Suhail. Thanks,

million was our share, XX, The $X.X For ended portfolio investment compared quarter the $X.X previous value of approximately $XXX.X million XX. of or income $XXX.X XXXX, $X.XX of December was million net March fair per million per net or to an share. from our quarter's the XX% income increase $X.XX investment on

net prior Our quarter. $XX.X the assets were $X.X of million, increase million an from

increase ended was debt our compared in to was December net net million. The for portfolio the approximately weighted from XX. operations quarter this quarter assets of average Our XX.XX% yield portfolio's XX.XX% $X.X

equity, and and investments were XX.XX% our our other and warrants instruments debt of fixed XX lien positions. invested of borrowers, debt XX, The floor investments. As in approximately March in the average XX.XX% our portfolio investments of portfolio X.X% X%. rate invested remaining floating consisted in of was was rate is on our XX.X% first

our basis to FMB restricted of and gross the X.XXx to $XX.X respectively, at largest had facility as respect of an as million. We [ revolving X.XXx of average approximately X.XXx compared million basis capacity investment Our a March Capital cash, credit our of $XX.X is Bioplan FMB XX in gross approximately One. portfolio XX, $XX.X company and cash, was was of had with on ] with [ million, an million under on previous company liquidity, we of position X.XXx leverage approximately which net, quarter. With million and for $XX.X portfolio a March $X.X leverage ] net our

the information Mike. which our included the would in XX-Q, to was composition over turn I that, our is to Additional back call Form regarding like yesterday. With of filed portfolio

Peter. you, Thank

a is preservation As stable maintaining we our look fiscal on year, focused dividend. priority last capital and the our towards of top quarter

As stable invest our are rotate to opportunities. actively Suhail more our to pipeline our working credits. and the portfolio high-quality capital in diversify We're in mentioned, confident we capacity and into

selection to quality our remarks. please to concludes Operator, committed continues be open Q&A. approach we're portfolio. That credit disciplined, for of Our the line our prepared and to maintaining the

Nolan from I our with Instructions] Ladenburg Thalmann. first which see [Operator comes Mr. question Christopher

with Suhail, working you. look Mike, it A good congratulations to forward questions. you. on was And with of your working I continue couple elevation.

portfolio, what that, please? the the on change yields the was driver First, in the for

Chris, has well. from thank platform we're we're for mean, Largely lack you seeing -- of hearing to spreads for the flow the others just comment. tighten. I gotten new in basically, deal sure the as seeing market And market, I'm supply lack as this the There's of marketplace transactions. and competitive. generally a start you're

we're some So yield starting to compression. see

then, one your Okay. guess can And update any Hersh, that? which you is on of Klein provide I on larger nonaccruals,

Not at this moment.

situation. to on a We we'll share in on. We pretty more but on the have discussion finalized. It's as are that a going we're restructuring believe gets good actively place, live working

supplement? the earnings Mike, that we or dividend you covering as in entire read June that base then, on will that expect base Should And the the quarter. and the dividend the your cover comments

Yes, Chris, how we point. that at I'm We'll point, out. plays will The see that not the at this cover this base. supplement, sure

higher a a Okay. X.XXX%. I are in attractive then the refinance, know you to final your looking strategy pretty at but notes, were And it's I wait coupon far see are you days, it's for little a early know in much be a but XXXX question. if that? coupon. terms mode? which of and And probably had a your thoughts it Or would of What still out,

are We strategy it, about it. -- we've around developing but we are been talking

net our total time. our As leverage seen, down leverage over we've brought you've and

and closer our So be that. of we part closer to that as discussions get will

from Adams James. next Sean-Paul Instructions] Our with comes question [Operator Raymond

time Industrial from off the Can resolution sold the color a like was for and touch in on frame more Services portfolio. portfolio. XXXX the nonaccruals you kind provide little other looks bit It the of

of forward. of kind health portfolio about the looking credit Additionally, overall the talk

Sure. I then in. start Mike, don't why and jump

we're the generally with I think, names. pretty of all portfolio, health the pleased overall actually

think be. names, we working list portfolio. There's I I actively you've -- the Nuts on X Klein are in problems Hersh. can in is as real think the put or situations, and about those developing. X seen, would to mentioned Sean, there watch we We we imminent, there's on X good portfolio going ArborWorks, is have evolving and marked developing or I they're where the nothing to outcome those -- feel positions from the that perhaps are We're at and tell X pike say nothing But than American where down are the this alarming time. think names we that the point, situations portfolio, other as the coming that pretty far

Yes. good is that would lender all on talked expand there and the have those. the dialogues think we The list only thing we existing I nonaccruals, we that going that I have on groups very watch about, constructive on,

So...

[Operator any Instructions] see don't other I questions.

all And soon. everyone appreciate to time. of your that, I'd you thank like to talk and will with we

everyone. Thanks,

everyone, concludes for Thank call. and you this conference today's you, Thank attending.