Q1 2024 Investcorp Credit Management BDC Inc Earnings Call

Okay.

Okay.

Okay.

Yeah.

The Who's just joined you will now be placed into the conference you're muted on this call this call.

Is being recorded.

Welcome to the Investcorp credit management BDC incorporated scheduled earnings release for first quarter ended September 32023.

Speaker 1: Welcome to the InvestCorp Credit Management BDC Incorporated Schedules Earnings Release for first quarter ended September 30, 2023.

Speaker 1: Your speakers for today's call are Mike Maurer, Zuil Sheik, and Rocco DelGercio. Operator assistance is available at any time during this conference by pressing zero pound. A question and answer session will follow the presentation.

Your speakers for today's call are Mike Mauer, so they'll shake and Rocco Delguercio.

Operator assistance is available at any time during this conference by pressing a zero pounds.

A question and answer session will follow the presentation.

I would now like to turn our call over to your speakers. Please begin.

Speaker 1: I would now like to turn or call over to your speakers. Please begin.

Speaker 2: Thank you operator and thank you for joining us on our first quarter call today. I'm joined by Suhbel Shaikh, my co-CIO and president of InvestCorp Credit Management BDC and Rocco DelGurcio our CFO . Before we begin Rocco will give our customary disclaimer regarding information and forward-looking statements Rocco.

Thank you operator, and thank you for joining us on our first quarter call today.

I'm joined by two held shake my co CIO and President of Investcorp credit management, BDC and Rocco Delguercio our CFO.

Before we begin Rocco will give our customary disclaimer regarding information and forward looking statements Rocco.

Speaker 3: Thanks, Mike. I would like to remind everyone that today's call is being recorded and that this call is the property of Investor Credit Management BDC. Any unauthorized broadcast of this call in any form is strictly prohibited.

Thanks, Mike I would like to remind everyone that today's call is being recorded and that this call is the property of and best Hawked credit management BDC.

Any unauthorized broadcast of this call in any form is strictly prohibited.

Speaker 3: Audio replay of the call will be available by visiting our investor relation page on our website at icmbdc.com.

Audio replay of the call will be available by visiting our investor relation page on our website at I C and B D C Dot com.

Speaker 3: 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.

I'd 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.

Speaker 3: Actual results may differ materially from these projections.

Actual results may differ materially from these projections.

Speaker 3: We will not update forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our investor relations page on our website. At this time, I would like to turn the call back over to our chairman and CEO , Michael Maurer.

We will not we will not update forward looking statements unless required by law.

To obtain copies of our latest SEC filings. Please visit our Investor Relations page on our website at this time I would like to turn the call back over to our chairman and CEO Michael Mauer.

Thanks Rocco.

Speaker 2: September quarter, March the first quarter of our fiscal year, we saw primary deal activity in the middle market.

The September quarter marks the first quarter of our fiscal year, we saw a primary deal activity in the middle market increase characterized by acquisition financing and to a lesser extent LBO.

Speaker 2: characterized by acquisition financing and to a lesser extent LBO.

Speaker 2: and refinancing as well as given recapitalization.

And refinancings as well as dividend recapitalization since our last call. We saw our pipeline increase at a healthy rate, albeit at a slower pace compared to historical norms.

Speaker 2: Since our last call, we saw our pipeline increase at a healthy rate, albeit at a slower pace compared to historical norms. We remain optimistic that deal activity in the primary market will continue to pick up over the next few quarters and that we will continue to see compelling investment opportunities.

We remain optimistic of deal activity in the primary market will continue to pick up over the next few quarters and that we will continue to see compelling investment opportunities.

Speaker 2: Our investment activity during the quarter was characterized by opportunistic investments in the secondary market.

Our investment activity during the quarter was characterized by opportunistic investment in the secondary market.

Speaker 2: Importantly, we invested in four new companies and added to our position in one existing portfolio company. These investments were all in borrowers we are familiar with.

Importantly, we invested in four new companies and added.

You are <unk>.

Physician and one existing portfolio company. These investments were all in borrowers we are familiar with.

Speaker 2: have previously invested in or have exposure in our other managed funds across the platform.

Have previously invested in or have exposure in our other managed funds across the platform.

Speaker 2: The weighted average yield of our debt investments made during the quarter was 12.3%, a 20 basis point decrease in the weighted average yield of investments that were made during the quarter ended 6 Thursday.

The weighted average yield of our debt investments made during the quarter was 12, 3% a 20 basis point decrease in the weighted average yield of investments that were made during the quarter ended 630. Additionally.

Speaker 2: Additionally, we continue to remain highly selective when it comes to new investors.

Additionally, we continue to remain highly successful selective when it comes to new investments.

Speaker 2: We are specifically focused on lending into companies that are sponsor backed, have financial covenants, high pre-cash flow, and are recession resilient. Shout out to Joshua, one of my family situations who made this film, all are

We are select specifically focused on lending to companies that are sponsored back have financial covenants high free cash flow and are recession resilient businesses as we look at our borrowers operating performance and the credit quality of our performing portfolio.

Speaker 2: As we look at our borrower's operating performance and the credit quality of our performing portfolio, continue to

Continues to remain stable.

Speaker 2: Our weighted average interest coverage ratio for our performing debt investments is approximately two times, and our loan-to-value ratio is approximately 41 percent.

Our weighted average interest coverage ratio for our performing debt investments is approximately two times and our loan to value ratio is approximately 41%.

Looking ahead to the rest of this fiscal year, our focus is on portfolio management and risk mitigation.

Speaker 2: Looking ahead toward the rest of the fiscal year, our focus is on portfolio management and risk mitigation.

Speaker 2: We are focused on our non-performing investments and reducing this amount. We continue to work toward diversifying our investments in new borrowers to reduce our position sizes to an average of two to 3% of our total portfolio and to work with our current borrowers that have covenant or liquidity issues in this high interest rate environment.

We are focused on our nonperforming investments and reducing this amount we continue to work toward diversifying our investment in new borrowers to reduce our position sizes to an average of 2% to 3% of our total portfolio and to work with our current borrowers that are covenant or liquidity issue.

And as higher interest rate environment.

Speaker 2: We increased our number of borrowers to 40 from 36 as of 630 and the number of GICS industries across our portfolios to 24 from 21 when compared to the previous quarter ended June 30.

We increased our number of borrowers to 40 from 36 at 630 and the number of G. Ics industries across our portfolios to 'twenty four from 'twenty, one when compared to the previous quarter ended June 30th.

Speaker 2: During the quarter and post-quarter end, we had two repayments. As mentioned on our last call, we are also expecting several repayments over the next few quarters. Our dividend coverage is an important consideration when making new investments.

During the quarter and post quarter end, we had two repayments as mentioned on our last call.

We are also expecting several repayments over the next few quarters, our different dividend coverage is an important consideration when making new investments Sue Hill will now walk through our investment activity during the September quarter and after quarter end Rocco will go through our financial results.

Speaker 2: Suhail will now walk through our investment activity during the September quarter and after quarter end. Raka will go through our financial results. I'll finish with commentary on our non-accrual investments, our leverage, the dividend, and our outlook. As always, we'll end with Q&A. With that, I'll turn it over to Suhail.

Finished with commentary on our non accrual investments our leverage the dividend and our outlook as always we'll end with Q&A with that I'll turn it over to CEVA.

Speaker 4: Thank you, Mike. As Mike mentioned, the quarter's activity was a continuation of executing on opportunistic investments in the secondary market and selectively looking at new buyout finance.

Thank you Mike.

As Mike mentioned, the quarter's activity, whether the continuation of executing on opportunities.

Let's take investments in the secondary market.

Selectively looking at new buyout financing.

Speaker 4: Sponsored middle market direct lending new money volume in the quarter was approximately 26% lower year-over-year. However, we saw primary deal flow pick up during the quarter and have continued to see it increase for this quarter end. Our pipeline remains robust and we believe that we can continue executing on our investment thesis like mentioned.

Sponsor backed middle market direct lending you're running volume in the quarter was approximately 36% lower year over year.

However, we saw primary deal club pickup during the quarter.

We've continued to see it increase post quarter end pipeline.

Pipeline remains robust and we believe that we can continue.

Hang on our investments he says that Mike mentioned.

During the quarter ended September <unk>, we invested in performing portfolio of companies and one existing portfolio company.

Speaker 4: During the quarter ended September 30th, we invested in four new portfolio companies and one existing portfolio company.

Speaker 4: We also fully realized our position in One Portfolio Company.

We also fully realized a position in one portfolio company.

Speaker 4: During the quarter, fundings for commitments and new investments totaled approximately $15.5 million at cost, with a weighted average yield of approximately 12.3%.

During the quarter fundings for commitments and new investments totaled approximately $15 $5 million at cost with a weighted average yield of approximately 12, 3%.

Speaker 4: In the same period, repayments total approximately $6.8 million from one investment that I mentioned, with an investment IRR of approximately 16.4%

In the same period repayments totaling approximately $6 million from and from one investment that I mentioned.

As an investment IRR of approximately 16, 4%.

Speaker 4: Let me now take you through our investment activity.

Let me now take you through our investment activity.

Speaker 4: First, we invested in the first-lane term loan of Axiom Global. Axiom is a leading provider of expert legal talent, offering legal counseling and representation services.

First we invested in the first lien term loan of axiom global axiom is a leading provider of expert talent offering legal counseling and representation reps.

Representation services.

Speaker 4: Axiom is a portfolio company of Premier, a sponsor we know well. We have been invested in Axiom for a few years in our other portfolios.

Axiom is a portfolio company of Bermuda.

<unk> said, we know well we have been an investor Nexium for a few years and our other portfolios.

Speaker 4: And we were able to purchase it at an attractive price. A yielded cost is approximately 13.9%.

And we were able to purchase at an attractive price a yield at cost is approximately 17, 9%.

We also invested in the first lien term loan.

Speaker 4: We also invested in the first clean term loan of Congrex. Congrex is a Crest Q4 partners portfolio company.

<unk> Congress, which is impressive.

<unk> portfolio of company.

Speaker 4: and provides mission-critical end-to-end engineering, construction and maintenance services to a diverse customer base in the broadband and other adjacent industries.

And provides mission critical end to end engineering construction and management services to a diverse.

Customer base and the broadband and other adjacent industries.

Speaker 4: A yielded cost is approximately $12.2 billion.

Our yield at cost is approximately two.

2%. This was also a secondary budget is for.

Speaker 4: This was also a secondary purchase for the portfolio.

The portfolio.

Speaker 4: Congress has been a portfolio company of ours and other funds for several quarters.

Congress has been a portfolio company of ours and other funds for several quarters.

Speaker 4: We also made a secondary investment in multicolor, also known as LABL or label.

We also made a second lien investment and multi color also known as L. A b L or label.

Speaker 4: A CDNR portfolio company, Label, is a global leader in the prime label manufacturing industry.

See DNI on Formula Company label as a global leader in the Bryan Labor manufacturing industry.

Speaker 4: A yielded cost is approximately 10.9%. As with Axiom and Congress, market color or label was also a secondary purchase of a name that we own in other vehicles that we've had.

Yield at cost is approximately 10, 9% azimuth axiom and Congress.

Color all level was also secondary budgets have been named that'd be on another vehicles that'd be knowledge.

Speaker 4: Finally, we also invested in Fleetbrite, an American Securities Capital Partners-backed company. Fleetbrite is a national distributor of aftermarket parts for the U.S. heavy-duty truck industry.

Finally, we also invested in fleet Pride and American Securities Capital Partners backed company tried as a national distributor of aftermarket parts for.

The U S heavy duty truck industry.

Speaker 4: Our yield limit cost is approximately 10.4%.

Our yield at cost is approximately 10, 4%.

Speaker 4: This is a name we have been tracking for a while. In addition, given Investcorp's private equity arm used to own the business several years ago, we were able to leverage their expertise to diligence our investment.

This is a name we had been tracking for a while in addition, given in desktops private equity investor on the business several years ago.

To leverage their expertise to diligence our investment.

And then I lost it.

Speaker 4: And then our last investment, which was the addition of our existing position to AMCP main acquisition company, also known as PureStar. This is a good example of an opportunistic secondary purchase of a credit that we already own, and we're able to source some paper for an attractive price. PureStar is a portfolio company of Cornell Capital.

<unk>, which was the addition of our existing position to AMC clean acquisition company also known as pure stock.

This is a good example of an opportunity opportunistic secondary bunches of the credits that we already own and we're able to source some depot for an attractive price.

John is a portfolio company of Cornell capital.

Speaker 4: It is one of the largest commercial laundry providers to the hospitality industry in the U.S.

It is one of the largest commercial laundry providers to the hospitality industry in the U S.

Speaker 4: We invested in the first lean terminal. Our yielded cost is approximately 15.2%.

We invested in the first lien term loan our yield at cost is approximately 15, 2%.

Speaker 4: During the quarter, we fully realized our position in Fusion's term loan, which was refinanced. We remain investors in Fusion's preferred and common equity. Our fully realized IRR was approximately 16.4%, as I mentioned earlier.

During the quarter, we fully realized our position in fusion's term loan, which was refinanced with a man investors infusions preferred and common equity our fully realized IRR was approximately 16, 4% as I mentioned earlier.

After quarter end, we invested in three new portfolio companies and fully realized in a position to portfolio comparable.

Speaker 4: After quarter end, we invested in three new portfolio companies and fully realized our position in two portfolio companies.

Speaker 4: First, we supported DLB of Althea by PAI part.

We supported the idea of Lcs.

<unk> partners L. P out as a contract manufacturer premium drive pet food ingredients, we are investing in the first lien term loan and our yield at cost is approximately 10, 7%.

Speaker 4: Althea is a contract manufacturer of premium dry pet food ingredients.

Speaker 4: We invested in the first-name term loan, and our yielded cost is approximately 10.7%.

Speaker 4: We have been investors in Althea through our other funds and we're able to re-underwrite the risk for the new LDO.

We had been investing as announced yet through our other funds and we're able to re underwrite the risk for the new LD yet.

Second we invested in the first lien term loan of victory also known as L. S. F Nine Atlantis Holdings LLC.

Speaker 5: Second, we invested in the first main term loan of Victra, also known as LSF9 Atlantis Holdings LLC.

Speaker 5: Victra is the largest exclusive independent retailer for Verizon Wireless.

<unk> is the largest exclusive independent retailer from horizon.

Wireless.

Speaker 5: We purchased Vectra in the secondary market at an attractive price. The yielded cost is approximately $13.7 billion.

Just victor in the secondary market at an attractive price yield at cost is approximately 13, 7%.

Speaker 5: Our team has had a long standing history with this name.

Our team has had a long standing history with this name.

We also made a proprietary and preferred equity investment in discovery behavioral health of Webster equity Bourne partners portfolio company.

Speaker 5: We also made a proprietary preferred equity investment in Discovery Behavioral Health, a Webster Equity Partners Portfolio.

Speaker 5: Discovery is one of the largest providers of residential and outpatient treatment for behavioral health services across eating disorders, mental health, and substance abuse.

Companies, one of the largest providers of residential and outpatient treatment.

Behavioral health services across Jason eating disorders, mental health and substance abuse.

Speaker 4: A yielded cost is approximately 20.4%.

At cost is approximately 24%.

We fully realize our position in the first lien term loan of advanced solutions International also known as ASI.

Speaker 4: We fully realized our position in the first interim loan of Advanced Solutions International, also known as ASI. We originally invested in the first interim loan and preferred equity in September 2020.

Originally invested in the first lien term loan.

And preferred equity in September 2020.

Speaker 4: of ASI. We remain investors in the preferred equity. Our fully realized IRR on the term loan was approximately 10.8%.

Oh, the ASI, we remain invested in the preferred equity.

Our fully realized IRR on the term loan was approximately 10.8%.

We also fully realize our position in the first lien term loan of Boardman, which was repaid as part of Nevada by Latin.

Speaker 5: We also fully realize the position in the first term loan of Cook and Portman, which was repaid as part of LBO by Latin America.

Platinum equity.

Speaker 4: A fully realized IRR was approximately 8.5.

Our fully realized IRR was approximately eight 5%.

As Mike mentioned I'd also like to note that the GIC S. Standard was updated in May of this year as such our industry categorization to existing portfolio companies have changed in some cases.

Speaker 5: As Mike mentioned, I'd also like to note that the GICS standard was updated in May of this year. As such, our industry categorizations for existing portfolio companies have changed in some cases. And our industry ratings have also changed.

And our industry rankings have also changed.

Speaker 5: As of September 30th, our largest industry concentrations were trading company and distributors at 17.1%.

As of September 30th.

Largest industry concentration spot trading company and distributors at 17, 1%.

Speaker 5: professional services at 11.5% followed by IT services at 7.5%.

Professional services at 11, 5%.

Bye I T services at seven 5% software at 6.15% and containers and packaging at six 1%.

Speaker 5: software at 6.15% and containers and packaging at 6.1%.

Speaker 5: Our portfolio companies are in 25, sorry, 24 GICS industries as of quarter end, including our equity and bond positions, which is an increase of three industries from the previous quarter.

Our portfolio companies on 25, sorry 20.

24, G Ics industries as of quarter end, including our equity and warrant positions, which is an increase of three industries from the previous quarter.

Speaker 4: I'd now like to turn the call over to Rocco to discuss our financial.

I'd now like to turn the call over to Rocco to discuss our financial results.

Thanks, So Hal for the quarter ended September 32023, our net investment income was $1.6 million or 11 cents per share.

Speaker 3: Thanks, Suhail. So the quarter ended September 30th, 2023. Our net investment income was $1.6 million or 11 cents per share.

Speaker 3: The fair value of our portfolio was $223.4 million compared to $220.1 million on June 30th.

The fair value of our portfolio was $223 4 million compared to $220 1 million on June 30th.

Speaker 3: Our net assets were $83.8 million, a decrease of $3.9 million from prior quarter.

Our net assets were $83 8 million a decrease of $3 9 million from prior quarter.

Our portfolio's decrease from operations this quarter was approximately $1 7 million.

Speaker 3: Our portfolio's decrease from operation this quarter was approximately $1.7 million.

Speaker 3: Our debt investments made during the quarter had an average yield of 12.3%.

Our debt investments made during the quarter had an average yield of 12, 3%.

Speaker 3: And the realization and repayments during the quarter had an average yield of fourteen point six.

And the realization of repayments during the quarter had an average yield of 14 six.

Speaker 3: percent and an average ILR of 16.4%.

Percent and an average IRR of 16, 4%.

The weighted average yield of our debt portfolio was 11% a decrease of 150 basis points from June 30.

Speaker 3: The weighted average yield of our debt portfolio was 11%, a decrease of 150 basis points from June 30.

Speaker 3: As of September 30th, our portfolio consisted of 40 portfolio companies.

As of September 30, our portfolio consisted of 40 portfolio companies.

Speaker 3: 89.7% of our investments were first lien and the remaining 10.3% is invested in equity warrants and other positions.

80, 89, 7% of our investments were first lien and the remaining 10, 3% is invested in equity warrants at other position.

Speaker 3: 99.7% of our debt portfolio was invested in floating rate instruments.

99.7% about debt portfolio was invested in floating rate instrument.

Speaker 3: 0.3% in fixed rate investment.

0.3% and fixed rate investments.

Speaker 3: The average floor on our debt investments was 1.1%.

The average floor on our debt investment investments was one 1%.

Our average portfolio company investment was approximately $5 $6 million and the largest portfolio company investment is bio plan at $13 $6 million.

Speaker 3: We had a gross leverage of 1.58 and a net leverage of 1.41 as of September 30th compared to 1.54 and 1.44 respectively for the previous quarter.

We had a we had a gross leverage of 1.58 and a net leverage of 1.41 as of September 30th compared to 1.54, and 144, respectively for the previous quarter.

As of September 30, our non accrual investments as a percentage of fair value was 10, 6% compared to four 1% for the quarter ended June 30th.

Speaker 3: As of September 30th, our non-equal investments as a percentage of fair value was 10.6% compared to 4.1% for the quarter ended June 30th.

With respect to our liquidity as of September 30, we had approximately $14 3 million in cash.

Speaker 3: With respect to our liquidity as of September 30th, we had approximately 14.3M in cash of which 14.2M was restricted cash with 28.8M of capacity under our revolving credit facility with Capital One.

Which point $14 2 million was restricted cash with $28 $8 million of capacity under our revolving credit facility with capital one <unk>.

Speaker 3: Additional information regarding the composition of our portfolio is included in our Form 10-Q , which was filed yesterday. With that, I'd like to turn our call back over to Mike.

Additional information regarding the composition of our portfolio is included in our Form 10-Q, which was filed yesterday.

With that I'd like to turn I'll call back over to Mike.

Thank you Rocco.

As mentioned earlier, we continue to remain focused on portfolio management and risk mitigation, especially for our borrowers that are experiencing periods of stress.

Speaker 2: As mentioned earlier, we continue to remain focused on portfolio management and risk mitigation, especially for our borrowers that are experiencing periods of stress. We added three borrowers to NonaCool, including two investments in ArborWorks,

We added three borrower nonaccrual.

Including two investments in Arbor work.

Careerbuilder and client Hirsch last out term loan.

It's been flat since quarter end.

Speaker 2: There's been continued development in Arbor.

Sure.

Then continued development in Arbor worse, while we are bound by confidentiality of the company's operating environment remains challenged and we continue to have an active dialogue with all.

Speaker 2: While we are bound by confidentiality, the company's operating environment remains challenged and we continue to have an active dialogue with all parties.

Speaker 2: While CareerBuilder continues to pay its interest, the company's fundamental performance has been weak for some time. We put the loan on nonaccrual as we believe there is significant doubt of full recovery of principal.

Wow.

Careerbuilder continues to pay its interest the company's fundamental performance has been weak for some time, we put the loan on non accrual as we believe there is significant out a full recovery of principal.

Speaker 2: We continue to make progress rotating the portfolio and expect progress on the remaining non-approved over the next 12 months. Our NAV per share declined 4.46% from the previous quarter end.

We continue to make progress rotating the portfolio and expect progress on the remaining non accrual over the next 12 months, our NAV per share declined 4.46% from the previous quarter at all.

Our gross leverage this quarter with 1.58.

Speaker 2: Rose leverage this quarter with 1.58 above our.

Above our guidance of.

One in a quarter to one five times, our net leverage was 141 times, which is within the target range and as mentioned last quarter, we expect to see our gross and net converge.

Speaker 2: one and a quarter to one and a half times. Our net leverage was 1.41 times, which is within the target range. And as mentioned last quarter, we expect to see our growth and net converge.

Speaker 2: As of November 6th, our growth and net leverage were 1.68 times and 1.51.

November six our gross and net leverage was 168 times and one point.

Five one times.

Speaker 2: As we have previously stated, the advisor will waive the portion of our management fee associated with base management fees over one time salever.

As we have previously stated the adviser will waive the portion of our management fee associated with base management fees over one times Levered.

Leverage.

Speaker 2: The company is expected to earn its dividend through the next quarter ended December .

The company is expected to earn its dividend through the next.

Quarter ended.

<unk> 31.

Speaker 2: Our November , on November 9th, 2023, the Board of Directors declared a dividend for the quarter ended December 31, 2023 of 12 cents per share.

Our November on November nine 2023, the board of directors declared a dividend for the quarter ended December 31, 2023 of 12 I appreciate it.

Speaker 2: as well as the supplemental distribution of $0.03 per share, both payable on January 8, 2024, the stock holds the record as of December 14, 2023. It is worth noting that the $0.03 supplemental distribution is related to fiscal year 2023 spillback.

As well as the supplemental distribution of <unk> <unk> per share both payable on January eight 2024 to stockholders of record as of December 14, 2023. It is worth noting the three cents supplemental distribution is related to fiscal year 2023.

Go back.

Speaker 2: As we look to the rest of our fiscal year, we will continue to work on rotating and diversifying the portfolio.

As we look to the rest of our fiscal year, we will continue to work on rotating and diversifying the portfolio.

Speaker 2: all while focusing on mitigating risks in our borrowers experiencing short-term periods of stress or volatility. Our investment strategy

All while focusing on mitigating risks and our borrowers experiencing short term period of stress or volatility our investment strategy.

Speaker 2: has not wavered and we continue to remain focused on capital preservation and maintaining a stable dividend. We are optimistic about our pipeline, our ability to deploy capital in high-quality investments. That concludes our prepared remarks. Operator, please open the line for Q&A.

Has not wavered and we continue to remain focused on capital preservation and maintaining a stable dividend. We are optimistic about our pipeline our ability to deploy capital in high quality investments.

Foods, our prepared remarks, operator, please open the line for Q&A.

Ladies and gentlemen at this time, we will conduct a question and answer session. If you would like to state. A question. Please press seven pound on your phone now and you will be placed in the queue in the order received or press seven pound at anytime to remove yourself from the queue. Please listen for your name to be announced and be prepared to.

Speaker 1: Ladies and gentlemen, at this time we will conduct a question and answer session. If you would like to state a question, please press 7 pound on your phone now, and you will be placed in the queue in the order received, or press 7 pound at any time to remove yourself from the queue. Please listen for your name to be announced and be prepared to ask your question when prompted. We are now ready to begin.

Ask your question when prompted.

We're now ready to begin.

Yeah.

Speaker 1: Our first question comes from Mr. Paul Johnson with KBW.

Yeah.

And our first question comes from Mr. Paul Johnson J B W.

Go ahead Sue.

Speaker 6: Yeah, good afternoon guys. Thanks for taking my questions. Just a couple from me, but in terms of, you know, investments that you made during the quarter, it sounds like there's a decent amount of secondary activity. I mean, can you just kind of speak to, you know, what you guys are seeing, you know, in the secondary market versus

Hey, good afternoon, guys. Thanks for taking my questions.

Just a couple from me, but in terms of you know investments that you made during the quarter. It sounds like there's a decent amount of secondary activity. I mean can you just kind of speak to what you guys are seeing in the secondary market versus.

Speaker 6: you know, what you can receive, obviously, in the primary market, and if that's more of kind of a, you know, one-time, you know, 3Q type of thing or, you know, a secondary type of purchases, you know, or something you probably expect to remain more active with in the future quarter.

You know what you you can receive obviously in the in the primary market.

And if that's more of kind of a.

You know one time, you know a <unk> type of thing or secondary type of purchases or is this something you probably expect to remain more active with them in the future quarters.

Okay.

Speaker 4: Paul, thank you for the question. This is Suhail. Let me take that in a couple of different ways. So I think, you know.

Well thank you for the question.

So some hang on let me take that in a couple of in touch with us.

So I think.

Yeah.

Speaker 5: The investments that we made are investments that we own and other portfolios that we manage.

The investments that we made our investments that meet one another.

Yes, it would be managed.

Speaker 4: So one of them was secondary opportunities. I think these are investments that we have and we were able to sort of find attractive opportunities to pick up additional paper that ICMB benefited.

So one of them a secondary opportunities I think these are investments should we havent be able are able to ship.

To find attractive opportunities.

Opportunities to pick up additional paper.

Icmp benefit if Trump.

Speaker 4: So we always are looking for things in the marketplace to add to our positions, to see what we can add, or frankly, in some cases, even sell it. We think there's an opportunity to get out of a position at a healthy rate of return. So that's part one of the question. Part two is.

We always are looking for things in the marketplace to add two oppositions to see what we can add or trying to in some cases even.

Now, let me think there's an opportunity to get out of a position at a healthy rate of return. So that's one other question too is.

Speaker 4: I think, as we mentioned, subsequent to the quarter end, we had a couple of investments that we made that are brand new investments that are not secondary investments.

I think as we mentioned in.

Subsequent to the quarter end, we had a couple of investments that we made.

Brand new investments that are not second lien.

Speaker 4: And those are, you know, Althea that I mentioned and Discovery Behavioral Health. Both of those are new investments. Now, Althea was one that we had in our portfolio, it's getting refinanced.

And those are you know.

Yeah, what I mentioned and just stop me.

Yeah.

Both of those.

Investments now algae ovens won that.

We had in our portfolio that's getting refinanced.

Speaker 4: And we reunderwrote that risk as part of it.

And we are re underwrite that risk is part of it.

Speaker 4: as part of a new buyout. This company was a brand new investment. So I think it's, you know, our pipeline is actually reasonably healthy. But, you know, we're being super selective about what to go after, how to sort of tackle, and frankly, credits that we know right now, we'd rather own more of those than go into things where we don't like the structure or the pricing of, hopefully.

As part of a nearby or discomfort with some brand new investment. So I think you know.

Our pipeline is actually reasonably healthy.

But you know we're being super selective about.

What to go ask Howard you Should've Jacqueline franking credits that we know right now we'd rather on more of those and go into things, where we don't like the structure of the pricing.

So hopefully that answers your question.

Speaker 6: Yeah, that's very helpful. Thanks for all the detail on that.

Yes, that's very helpful. Thanks for all the detail on that.

Speaker 6: My next question is just kind of on, you know, NII this quarter, 11 cents. I know Mike said that, you know, we expect to cover the dividend next quarter, the core dividend.

The next question is just kind of on NII. This quarter 11 cents I know, Mike said that we expect to cover the dividend next quarter that the core dividend.

I guess, what are you kind of foresee next year I mean, do you kind of look at this quarter as sort of a.

Speaker 6: I guess, you know, what do you kind of foresee next year? I mean, do you kind of look at this quarter as sort of a, you know, depressed level of NII where you'd expect, you know, that to obviously kind of trend back up to, you know, the core dividend level or possibly higher? You know, what sort of, I guess, levers, I guess, do you have, you know, to kind of move NII up from this quarter, you know, just being at, you know, just a low level?

Suppressed level of NII, where you'd expect that obviously kind of trend back up to.

Two you know the core dividend level or possibly higher.

What sort of I guess levers I guess do you have to kind of move NII up from this quarter.

Just being it.

Just a low level.

Yeah, Paul It's Mike. Thank you for the question I think it's an area that I know you're focused on the channel.

Speaker 2: Yeah, Paul, it's Mike. Thank you for the question. I think it's an area that I know you're focused on the channel it is and we are. There's, you know, a couple of key levers that we focus on one and, you know, the elephant in the room is are not a cool levels are high and we need to get those down. There are two ways to get those down. One is to

It is that we are.

There's you know a couple of key libraries.

We focus on one and you know the elephant in the room is our non accrual levels are high and we need to get those down.

There are two ways to get those down one is.

To compete.

Speaker 2: complete working with the group to convert that back to an accrual status in some way, shape, or form. I can't go into any more detail on that given where we are in discussion. So, that's where working with the company and the sponsor. The other one is if, and Sue Held mentioned this before, if there are opportunities to sell that and reinvest it in what we think are good new investments, that's another level.

Complete are working with the group could convert that back to.

And cool status in some way shape or form I can't go into any more detail on that just given where we are in discussions.

So that's where working with the company and the sponsor the other one is.

Sue Hilde mentioned this before there are opportunities.

To sell that and reinvested in what we think or good new investment that's another lever.

Speaker 2: And then the second area is we've got equity, some of which we've bought and co-invested and some of which we've gotten restructured for.

And then the second area is we've got equity some of which we bought a co invest in some of which we've gotten restructured for them. So that you know is a function of.

Speaker 2: So that, you know, is a function of working with the other lenders, the company, et cetera, to convert those. But those are the levers, the obvious levers. And we are, you know, really working.

Working with the other lenders the company et cetera could convert those but those are the lever the obvious levers and we are really working to and we've said this before rotate the portfolio and we've gone a lot of road King, but we've got more doing that correct.

Speaker 2: to, and we've said this before, rotate the portfolio. And we've done a lot of rotating, but we've got more work to do.

Speaker 6: Thanks for that, Mike. Last question for me.

Thanks for that Mike.

Last question for me.

Speaker 6: Unless anything's changed, I believe Investcorp is still around a 10% owner of the stock.

And unless anything is changed I believe investcorp is still.

Like around a 10% owner of the stock.

Speaker 6: based on the position that they bought several years ago. If I'm just looking back, I mean, NAB is down fairly materially since that time. I mean, around 43 percent, you know, I believe that NAB's decline, you know, since that quarter that InvestCorp came in to the advisor.

Based on the position that they bought several years ago. If I'm just looking back I mean, NAV is down fairly materially since that time, I mean around 43% I believe that nabs decline since that quarter that investcorp came in to the advisor.

Speaker 6: I mean, I guess, you know, what is, I guess, Invescorp's sort of, you know, level of engagement here? You know, how active, you know, are they with the business today versus, you know, kind of when they came in? You know, I'm just curious, kind of trying to get, you know, our thoughts around, you know, what they think of performance and, you know, what sort of the plan is going forward.

I guess you know.

What is I guess investcorp sort of level of engagement here you know how active you know or are they with the business today versus you know kind of when they came in.

You know I'm, just curious kind of trying to get your.

Thoughts around you know what they think of performance and you know what what sort of the the.

The plan is going forward here.

So there's two or three pieces to the answer and I think a critical one which Rocco will go back and double check it but I'm pretty sure Bloomberg has it right and I could be off by 30 days, but somewhere.

Speaker 2: So there's two or three pieces to that answer, and I think a critical one, which Morocco will go back and double check it, but I'm pretty sure Bloomberg has it right. And I could be off by 30 days, but somewhere June 1st, give or take 30 days, Investcorp increased its ownership to 24.9 percent of the stock. So that was a statement a year and a half plus.

June 1st.

Give or take 30 days and best Corp increased at all.

24, 9% of the stock so they that was the statement you know a year and a half plus I'll.

Speaker 2: I'll call it a year and a half ago, give or take, of commitment to the public PDC to put more money in.

I'll call it a year and a half ago give or take of.

Our commitment to the public BDC put more money in.

Speaker 2: The second thing is, how are they focused on it? I will tell you this, the CEO has a formal meeting every, scheduled every 30 days, a monthly meeting with Suleil and I to talk about it. What are we doing? How are we thinking about it? He's focused on it. It is a, and was initially a critical investment to think about how do we grow the platform?

The second thing is how are they focused on it I would tell you that the CEO has a a formal meeting every scheduled every 30 days a monthly meeting with two well and I did talk about it what are we doing how are we thinking about it. He is focused on it it is a.

And it was initially a critical investment to think about how do we grow the platform.

Speaker 2: And we need to make sure that, you know, the public BDC is part of that strategy and that we're doing the right thing by shareholders. So, it's got attention. It has gotten additional capital from the initial September of 19 investment. And trust me, we've got ongoing dialogue with our CEO beyond the formal meetings too. So.

And we need to make sure that you know the public BDC is part of that strategy and that we're doing the right thing by shareholders. So it's got attention has gotten the additional capital from your initial September of 19 investment.

And Trust me, we've got ongoing dialogue with our CEO beyond the formal meetings too so.

Speaker 6: Thanks for that. Yeah, thanks for the correction on the ownership level. That's all for me. Thank you for taking my questions.

Thanks for that yeah. Thanks for the correction on the ownership level. That's all for me thanks for taking my questions.

Yep.

Speaker 7: Thank you very much. Our next question comes from Mr. Robert Dodd with Raymond James. But again, if you have any questions, please press seven pounds so we can open up your line. Go ahead. Hi, guys. On just touching on the non-accrual question again, Mike, I mean, I think in your prepared remarks, you've made a reference to progress over the next 12 months. I mean, is that the kind of.

Thank you very much. Our next question comes from Mr. Robert Dodd with Raymond James but again, if you have any questions. Please.

Please craft's seven pound chicken open up very much.

Go ahead, hi, guys.

Just touching on the non accrual question again, Mike I mean, I think in your prepared remarks, you made a reference to.

Programs over the next 12 months I mean is that the kind of.

Speaker 7: time frame we're looking at to resolve.

Time frame, we're looking at to resolve to.

Speaker 7: get the non-accrual level down to something that might be more in line with the industry, or can you give us an idea of kind of the time frame?

I get the nonaccrual level down to to something that might be more in line with the industry or can you give us an idea of kind of the timeframe were talking about.

Speaker 2: Yeah, Robert, you know, I would love to say that I have a crystal ball that says this is the quarter where it will be down below the industry average. I will tell you that we have active dialogue.

Yeah Robert.

I would love to say that I have a crystal ball that says this is the quarter, where it will be down below the industry average I would tell you that we have active dialogue on almost every one I don't want to say a reward because even if you look at it some of those really are not active restructuring.

Speaker 2: on almost everyone. I don't want to say everyone because even if you look at it, some of those really are not active restructuring. They're more in liquidation and some of those are small. But the major ones

Is there more in the liquidation of some of those are small, but the major ones.

Speaker 2: uh we are very focused on uh we'd like to see those resolved in six months i said 12 months we don't know because we're not the sole lender and we deal with a group and we have to manage a lot of uh constituents in that process

We are very focused on we'd like to see those resolved in six months I said 12 months, we don't know because we're not the sole lender and we deal with the group and we have to manage a lot of constituent in that process, but I hoped.

Speaker 2: But I hope that it's much sooner than the 12th.

But it's a much sooner than the 12 months.

Speaker 7: Got it. Thank you. On just that on the dividend, the three cent supplemental viewpoint, I think you also said that was to do with essentially last year's spillover. So presumptively, that three cent, the supplemental program will not be continuing. Just want to be clear there with investor expectations, it's just going to be the base dividend going forward.

Got it. Thank you I'll just then on the dividend the three supplemental to your point I think you also said that was to do with with essentially last year's spillover. So.

Because I'm simply that <unk> said, the supplemental program will not be continuing just wanted to be clear, though right.

Investor expectations, it's just going to be the base dividend going forward.

Hi, Robert its Rockwell, Yeah, correct Youre correct.

Speaker 7: Got it. Got it. Thank you. And then on about this last quarter on the on the revolver with with cap one, we are now it's less than 12 months to the not maturity, but to the, the, the investment period expiring. Can you give us an update on on on what's going on?

Got it thank you and then one yes.

Volker about this last.

Last quarter on the only on the revolver.

Cap one beyond now it's less than 12 months to the maturity, but to the the reinvestment period expiring can you give us an update on what's going on there.

Speaker 2: Yeah and I know as you said we spoke about it on the last call this is you know since this is the first quarter patent after the annual call we don't have the normal I'll call it 90 days in between calls it's the short period in between.

Yeah, and look I know as you said, we spoke about on the last call. This is since this is the first quarter pattern. After the annual call. We don't have the normal I'll call. It 90 days in between calls.

Harry.

Speaker 2: We have been in and we are, of course, we haven't tried to accelerate those. There's nothing that's dragging, but we have an ongoing dialogue with them. It's going through what I would call a normal process. We do not anticipate any issues with Capital One as our revolver provider.

We have.

Binion.

But of course, we haven't tried to accelerate those there's nothing that's dragging but we have an ongoing dialogue with them is going through what I would call a normal process, we do not anticipate any issues with capital one is our revolver provider.

Got it thank you.

Okay.

Thank you very much and our last question comes from Christopher Nolan with Ladenburg.

Speaker 1: Thank you very much. And our last question comes from Christopher Nolan with Leidenberg Tum.

Go ahead.

Speaker 7: Hi, any guidance you can give in terms of where you think leverage is going to be, particularly in light of the increase in non-accrual, and should we expect a excise dividend, excuse me, excise tax in 2024 given the lack of a supplement? Thank you.

Hi, any guidance you can give in terms of where you think leverage is going to be particularly.

Particularly in light of the increase in non accrual.

And shall we expect a excise dividend.

Excuse me excise tax in 2024, given the lack of a supplement thank you.

Speaker 8: Walker, you want to take the exercise so yeah, so you.

Roger you want to take the exercise.

Speaker 3: Yeah, so excise tax for sure. A few years back, as many of you guys know, a lot of the BDCs, they'll keep the excise distribution and pay the tax on it because it's a cheap form of financing. So we will have an excise tax payment. It's kind of been, if you look at the financial statements, it's kind of going to be the same one.

Yes, so excise tax for sure a few years back.

Some many of you guys know a lot of the BDC.

They'll keep the.

The excise distribution and pay the tax on it because it's cheap form of financing. So we will have an excise tax and then it's kind of been.

You look at the financial statements are kind of going to be the same one.

Over and over the.

Speaker 2: the same one that we paid in the past. And Chris, on the leverage side, there's two pieces. There's the ratio and there's the nominal. So leverage, we would expect to decrease our nominal amount because we have brought our NAV down. And so we continue to focus around the 1 1?4 to 1 1?2, which means that absolute borrowings will decrease from a target perspective to be in that range.

The same one that we paid for it.

And Chris on the leverage side, there's two pieces, there's the ratio and there's the nominal leverage we would expect to decrease our nominal amount because we have broader now down.

So we continue to focus around the warning quarter to one and a half which means that absolute borrowings would decrease our from a target perspective.

To be in that range.

Thank you.

Thank you very much.

Speaker 1: Thank you very much. And after that, we have no questions in the.

After that we have no questions in the queue.

Okay.

Speaker 2: Thank you, everyone. We look forward to the next call in about 90 days. Thank you. Thank you.

Thank you everyone. We look forward to our next call in about 90 days. Thank you.

Thanks, Kevin.

Thank you everyone. This concludes today's conference call. Thank you for it.

Speaker 1: Thank you, everyone. This concludes today's conference call. Thank you for attending.