Q2 2025 Investcorp Credit Management BDC Inc Earnings Call

Speaker Change: The host just joined. You will now be placed into the conference. You are muted on this call. This call is being recorded.

Speaker Change: Good afternoon and thank you for joining today's Investcorp Credit Management to BBC Incorporated Second Quarter and Fiscal Period and the Summary 31, 2024 Earnings Call.

Speaker Change: It is now my pleasure to turn the floor over to Walter Tsin, CFO .

Speaker Change: Thank you, operator. Welcome, everyone, to Invest for Credit Management, BDC's quarter and fiscal year ended December 31st, 2024 earnings fall. I am joined by Suhail Shaikh, President and Chief Executive Officer of the company.

Speaker Change: I would like to remind everybody that today's call is being recorded, and this is a property of the Investor Credit Management CDC. Any unauthorized broadcast of this call in any form is strictly prohibited.

Speaker Change: Audio Replay of the Call will be available by visiting our Investor Relations page at our website at icmbdc.com

Speaker Change: I would also like to call your attention to the State Harvard Disclosure in our press release regarding forward-looking information and remind everyone that today's call may include forward-looking statements and projections. Actual results may differ materially from these projections.

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

Speaker Change: To obtain copies of our latest SEC filing, please visit the company's registration statement on the SEC's Edgar platform or our Investor Relations page on our website.

I: The format for today's call is as follows. Suhail will provide an overall business portfolio summary, and I'll then provide an overview of our results summarizing the financials followed by a Q&A. At this time, I would like to turn the call over to Suhail.

Christopher Sattelmair, Suhail Shaikh, Peter Sattelmair,

I: Thanks, Walton. Thank you to everyone for joining us today. Before I discuss the market environment and portfolio activity, it gives me great pleasure to announce that we've appointed Andrew Mons, managing director of the advisor and a senior member of the investment team as a Investcorp credit management peerage.

Chief Operating Officer.

I: Andrew has been with the farm for several years and has been a team member of the team. He brings a bunch of experience and I'm excited to have and join the executive team of the company.

I: For the quarter ending December 31st, 2024, we recorded net investment income of 0.8 million or 6 cents a share, Quebec 16 cents per share in the right quarter.

Speaker Change: Christopher Nolan, Michael Mauer, Walter Tsin, Investcorp Cr

I: Consequently, our net-ass value share decreased by $0.16 per share to $5.39 compared to $5.25 as of September 30, 2024.

I: The decline in NAF was primarily driven by lower investment deals and market fluctuations reflecting broader market act volatility and effecting.

Spent time.

I: As we closed our 2024, we have served continued spread compression, especially towards the end of December , largely due to refinancing and repraising activity amid heightened competition among lenders and strong demand for quality assets.

I: Post-Election Market Optimism raised expectations for assertions in M&A activity. However, the risk of data wars and change in fiscal policy is creating uncertainty leading to adapting

I: Despite economic uncertainties, we remain well positioned to navigate challenges and consistently

I: We believe our portfolio is well positioned to weather shifting economic burden.

We have estimated that approximately 30%

I: Alpop, or for you may experience modern effects from tariffs on either a direct or indirect basis.

I: However, we believe he has affected companies a well-positioned navigate these challenges through a range of medication strategies, including the ability to pass through price-price increases to end customers, diversifying the switching suppliers and optimizing their supply chains.

I: We're working with our underlying portfolio companies and sponsor partners to understand these risks further.

Additionally, we're factoring in.

I: Christopher has been evaluating new investment opportunities to ensure the resilience and long-term stability of our portfolio.

I: Heighten Market volatility has led us to the strategic peak target investment, critical

I: A notable example is our recent investment in the data center sector.

I: We are also encouraged by a proof and an art portfolio's credit quality, evidence by law, conical rate measured on a fair market value basis compared to the private

I: The median EBITDA of our portfolio remained relatively flagged at the brough of SMAG-61.7, 6 million at the end of the quarter, compared to the previous quarter, while the weighted average net leverage increased slightly from 4.8 to 5 times of the same period.

I: The percentage of covenant to teals increased from 70% in the previous quarter to 77% in the current quarter.

I: These outcomes reinforce the durability of our strategy, focus on credit quality and our proactive portfolio management as we look forward to the remainder of the year.

I: Additionally, though, although on that investment it can not fully cover at a fair dividend this quarter accumulated spillover income from previous periods with partially offset the shortfall.

I: We remain committed to delivering system returns to our shareholders while navigating the

I: Jackson losses, and quantify gets component manufacturer that specializes in designing a kissing engineered plastic box governance.

Cost to onboard it's approximately 20%.

I: We also made another investment in craft.

I: After yesterday's at full service special effects studio with offices across the globe high yield at cost is approximately 45%.

I: Lastly, we realized the first lien term loan position of merit.

I: Which was refinanced during the quarter and a bridge loan and craft.

I: Our realized IRR on the back was Brooks.

I: 17, 3% and I realize that all of them have to yes. It was approximately 54%.

I: As of December 31st our largest industry concentration is by fair market that well.

I: First on services at 14, 4% contained.

I: Dana is packaging up 10, 5% trading company as a distributor does that eight 6%.

I: Insurance up seven 8%.

I: I T services diversified consumer services.

I: But if you fail at seven 1% each.

I: Our portfolio companies on 19, yes, yes industries as of quarter end tuning, our equity and warrant positions.

Ward: I would now like to turn the call over to ward to discuss our financial results.

Ward: Thanks Danielle.

Ward: Order ended December 31, 2020 for the fair value of our portfolio was $191 6 million compared to $191 million on September 30.

Ward: Our net assets were $77 6 million a decline of $2 3 million from the prior quarter.

Our portfolio's net decrease in net out through operations. This quarter was approximately negative one 6 million.

Ward: The weighted average yield of our debt portfolio was $10 four a slight decrease from $10 five in the previous quarter ended September 30.

Ward: As of December 31, our portfolio consisted of 43 borrowers approximately 81, 2% of our investments were in first lien debt with the remaining $18 eight invested in equity warrants and other positions.

Ward: 96, 4% of our debt portfolio was invested in floating rate instruments, and three 6% fixed rate instruments.

Ward: The weighted average spread on our debt investments was four 3% and a weighted average floor was <unk>, 9%, which was unchanged compared to the previous quarter.

Ward: Our average portfolio of issuer on a fair market value basis was approximately $4 5 million.

Ward: Portfolio company investment on a fair market value basis, Yes, bio plan at $15 4 million.

Ward: We are pleased to announce that on March 20th 2025, the board of directors declared a distribution for the quarter ended March 31st once you 25.

Ward: <unk> 12 per share payable in cash on May 16th 2025 to stockholders of record as April 25 2025.

Ward: Gross leverage was one five net leverage was 142 as of December 31, compared to 139 X gross and 1.26 X net respectively for the previous quarter.

Ward: With respect to our liquidity as of December 31st we had approximately $1 million in cash of which approximately $11. Three was restricted cash was $41 $5 million of capacity under our revolving credit facility with capital one.

Ward: As disclosed in the Ecu filed in November 'twenty, one through 'twenty four we repriced the capital one revolving credit facility during the quarter, bringing our borrowing cost.

Ward: Brad.

Ward: Base rate from 310, Bips to 250 bps.

Ward: Information regarding the composition of our portfolio is included in our Form 10-K.

Suzanne: With that I would like to turn the call back over to Suzanne.

Suzanne: Thank you art.

Suzanne: As you move into 2020 five.

Suzanne: Being highly focused on executing our strategy with a focus towards capital preservation.

Suzanne: And last <unk>.

Suzanne: We believe that our disciplined investment approach combined with our strategic focus on critical sectors positions us well to navigate the evolving market landscape.

Suzanne: And drive long term value to our shareholders.

Suzanne: Thank you for your continued support and we look forward to taking your questions.

Suzanne: Ladies and gentlemen at this time, we will conduct the question and answer session.

Suzanne: 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.

Suzanne: Seven pounds at any time to remove yourself from the queue.

Suzanne: Please listen for your name to be announced and be prepared to ask your question when prompted.

Suzanne: We are now ready to begin.

Speaker Change: And our first question comes from Mr. Christopher Nolan.

Bird Tolman: Bird Tolman.

Speaker Change: Go ahead, Sir Hey, How're you doing.

Bird Tolman: Increased leverage.

Bird Tolman: Well, let me back up.

Bird Tolman: What was the cause for the drop in pick income quarter over quarter. Please.

Speaker Change: So actually it increase in fixed income for the September quarter, Chris.

Speaker Change: It was really driven by reversing the nonaccrual loans for one of the portfolio companies flying Hirsch that actually drove a pik income higher than usual in the September quarter. So it looks like it's a drop in the December quarter, but actually.

Speaker Change: There's been a consistent so that's a big reason why it sort of pops up in jumps out and it looks like that can come has come down.

Speaker Change: And then I guess my question is on the sustainability of the dividend because.

Speaker Change: You like a lot of other bdcs are experiencing lower yields.

Speaker Change: But also you. Unlike a lot of bdcs have a much higher leverage ratio.

Speaker Change: And in my view that leverage ratio gives you a lot like plus less flexibility.

Speaker Change: To manage earnings.

Speaker Change: And sustain the dividend and what are your comments on that please.

Speaker Change: Yes, no great question look where you.

Speaker Change: Constantly evaluating that.

Speaker Change: You know our portfolio is running at about 18% or so of the portfolio of certain non income generating assets.

Speaker Change: Sharon.

Speaker Change: But I think Joanna incur.

Speaker Change: We will continue to monitor that Christopher.

We'll take it up to the board and decide if it makes sense for us to reevaluate the dividend.

Speaker Change: Such a decision has been made to date.

Speaker Change: I think your observation is is the right path.

Speaker Change: Okay, and I guess on going forward.

Speaker Change: <unk>.

Speaker Change: Is the.

Speaker Change: So on the 10-Q, where you are I believe changing over to a calendar fiscal year is that correct.

Speaker Change: Yes, we did we already said, which is by the time, it's actually a 10-K T. That'd be fine we didn't file a 10-Q this past quarter sort of changed the fiscal year and from June to December richest by if you look at the 10-K Youll see the comparative.

Speaker Change: Usually more than what's required in the filings.

Speaker Change: So next quarter will be first quarter 2020, correct.

Speaker Change: Yeah got you I guess the final question would be what where do you see the trend for your investment yield over the next quarter or two.

Speaker Change: Yeah.

Speaker Change: Hmm.

Speaker Change: I suspect it's going to be similar we don't see any.

Speaker Change: Anything on the horizon, but everything spreads are going to widen in fact spreads have tightened as you rightly pointed out.

Speaker Change: We're operating in the same market as all our competitors.

Speaker Change: So invest for New York to remain in a similar ZIP code, that's sort of 10, 5% plus or minus.

Speaker Change: Unless something.

Speaker Change: There is a shock to the economy.

Speaker Change: There's a lag down or something bad spreads start to buy not liquidity dries up in the marketplace.

Speaker Change: Based on what we're seeing.

Speaker Change: Right now we don't foresee any of that the only thing that we're watching very carefully.

Speaker Change: This potential impact of tariffs on our portfolio in the M&A market talking to our sponsor partners.

Speaker Change: That's something that can only time will tell how that manifests itself into spreads in the marketplace.

Speaker Change: Okay. That's it for me. Thank you for taking my questions sure. Thank you.

Speaker Change: Thank you very much again, if you have any questions. Please go ahead and press seven pound on your phone.

Speaker Change: That's seven pound on your phone.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: I don't see any other questions here.

Speaker Change: Great.

Speaker Change: Thank you everyone and thank you again for taking the time.

Speaker Change: And we look forward to seeing you at the end of the March quarter's discussion. Thank you look we can end the call.