UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 814-01054 INVESTCORP CREDIT MANAGEMENT BDC, INC. (Exact Name of Registrant as Specified in Its Charter) (State or other Jurisdiction of Incorporation or Organizat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 814-01054 INVESTCORP CREDIT MANAGEMENT BDC, INC. (Exact Name of Registrant as Specified in Its Charter) Maryland 46-2883380 (State or other Jurisdiction of Incor ...

```markdown [Part I](index=3&type=section&id=PART%20I) [Business](index=3&type=section&id=Item%201.%20Business) The company operates as an externally managed Business Development Company (BDC) focused on maximizing total return by investing in debt and equity of U.S. middle-market companies - The company is an externally managed **BDC** and a **RIC**, primarily investing in debt of **U.S. middle-market companies** with enterprise values under **$750 million**[11](index=11&type=chunk)[12](index=12&type=chunk) Portfolio Snapshot as of June 30, 2023 | Metric | Value | | :--- | :--- | | Total Portfolio Fair Value | $220.1 million | | Number of Portfolio Companies | 36 | | First Lien Investments (as % of FV) | 89.21% | | Equity, Warrant, Other (as % of FV) | 10.79% | | Weighted Average Total Yield (Debt & Income Producing) | 12.46% | - The company is externally managed by **CM Investment Partners LLC**, which is approximately **76%** owned by **Investcorp Credit Management US LLC**[23](index=23&type=chunk)[24](index=24&type=chunk) [Portfolio Composition and Strategy](index=4&type=section&id=1.1%20Portfolio%20Composition%20and%20Strategy) The company's $220.1 million portfolio, as of June 30, 2023, is concentrated in specific industries, focusing on first and second lien loans to middle-market companies with defined revenue and EBITDA thresholds Top 5 Industry Concentrations (at Fair Value) - June 30, 2023 | Industry | Percentage of Total Portfolio | | :--- | :--- | | Trading Companies & Distributors | 15.98% | | Professional Services | 12.83% | | IT Services | 10.71% | | Commercial Services & Supplies | 6.51% | | Software | 6.26% | - The company primarily invests in standalone **first and second lien loans**, and **unitranche loans**, with selective investments in unsecured debt and equity, targeting companies with revenues of at least **$50 million** and EBITDA of at least **$15 million**[35](index=35&type=chunk) - The investment portfolio is managed using a **five-level risk rating system**, with **59.7%** of the portfolio by fair value rated **1 or 2** (performing at or above expectations) and **11.9%** rated **4 or 5** (performing substantially below expectations) as of **June 30, 2023**[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) [Management and Advisory Agreements](index=14&type=section&id=1.2%20Management%20and%20Advisory%20Agreements) The company is managed by CM Investment Partners LLC under an Advisory Agreement, outlining a Base Management Fee and a two-part Incentive Fee, alongside an Administration Agreement for services - The Base Management Fee is **1.75%** annually of gross assets, excluding cash and cash equivalents[76](index=76&type=chunk) - The Income-Based Incentive Fee is **20%** of pre-incentive fee net investment income over an **8%** annualized hurdle rate, with a catch-up provision, subject to a **Total Return Requirement**[79](index=79&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - The Capital Gains Fee is **20%** of cumulative realized capital gains, net of cumulative realized losses and unrealized depreciation, since the agreement's commencement[86](index=86&type=chunk) - The Board of Directors, including all Independent Directors, approved the continuation of the Advisory Agreement on **August 29, 2023**, finding the fees reasonable for the services provided[99](index=99&type=chunk)[100](index=100&type=chunk) [Regulation and Taxation](index=23&type=section&id=1.3%20Regulation%20and%20Taxation) Operating as a BDC and RIC, the company adheres to 1940 Act requirements for asset composition and coverage, and tax rules for income distribution - As a BDC, the company must invest at least **70%** of its assets in "**qualifying assets**," typically securities of private or small public U.S. companies[117](index=117&type=chunk) - The company is permitted to issue senior securities if its asset coverage ratio is at least **150%** immediately after issuance, a level adopted effective **May 2, 2019**[120](index=120&type=chunk)[121](index=121&type=chunk) - To maintain its RIC status and avoid corporate-level income tax, the company must distribute at least **90%** of its annual investment company taxable income to shareholders[136](index=136&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including dependence on key personnel, conflicts of interest, leverage, illiquidity, industry concentration, regulatory compliance, and market disruptions - The business is highly dependent on **key personnel** of the Adviser, particularly **Messrs. Mauer and Shaikh**, whose loss could significantly harm the company's ability to achieve its investment objective[153](index=153&type=chunk) - The use of leverage magnifies potential gains and losses, requiring the company to maintain an asset coverage ratio of at least **150%**, where a decline in asset value could force disadvantageous asset sales[161](index=161&type=chunk)[163](index=163&type=chunk) - The portfolio is concentrated in a few industries, with **Trading Companies & Distributors (16.0%)**, **Professional Services (12.8%)**, and **IT Services (10.7%)** representing significant portions as of **June 30, 2023**, exposing the company to downturns in these sectors[225](index=225&type=chunk)[226](index=226&type=chunk) - The transition away from **LIBOR** to alternative rates like **SOFR** could cause market disruptions and adversely impact the value of certain investments[240](index=240&type=chunk)[241](index=241&type=chunk) [Properties](index=57&type=section&id=Item%202.%20Properties) The company does not own real estate, with its principal executive offices provided by the Adviser under an Administration Agreement - The company **does not own any real estate**; its office facilities are provided by the Adviser pursuant to the **Administration Agreement**[316](index=316&type=chunk) [Legal Proceedings](index=57&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor is it aware of any threatened against it - The company is **not currently subject to any material legal proceedings**[317](index=317&type=chunk) [Part II](index=58&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=58&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'ICMB', experiencing a significant discount to NAV in FY2023, while maintaining quarterly distributions and an opt-out dividend reinvestment plan Quarterly Stock Price and Distribution Data (Fiscal Year 2023) | Quarter | NAV per Share | High Price | Low Price | Discount to NAV (High) | Discount to NAV (Low) | Distribution per Share | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Q1 2023 | $6.47 | $4.85 | $3.52 | (25.04)% | (45.60)% | $0.15 | | Q2 2023 | $6.36 | $4.32 | $3.42 | (32.08)% | (46.23)% | $0.15 | | Q3 2023 | $6.13 | $4.23 | $3.39 | (31.00)% | (44.70)% | $0.15 | | Q4 2023 | $6.12 | $3.98 | $3.24 | (34.97)% | (46.99)% | $0.18 | - As of September 15, 2023, the company's common stock traded at a discount of approximately **33.50%** to its **June 30, 2023** NAV of **$6.09 per share**[324](index=324&type=chunk) - The company has an '**opt out**' dividend reinvestment plan (**DRIP**), where cash distributions are automatically reinvested unless the stockholder elects to receive cash[328](index=328&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For FY2023, net investment income increased, despite a significant net realized loss partially offset by unrealized appreciation, while credit quality shifted and liquidity was maintained with a strong asset coverage ratio Results of Operations Comparison (in millions) | Metric | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Total Investment Income | $26.7 | $24.4 | $26.7 | | Net Expenses | $17.3 | $15.5 | $17.6 | | **Net Investment Income** | **$9.4** | **$8.9** | **$9.1** | | Net Realized Loss | ($26.9) | ($14.4) | ($5.8) | | Net Change in Unrealized Appreciation (Depreciation) | $20.7 | $8.1 | ($5.6) | | **Net Increase (Decrease) in Net Assets** | **$3.2** | **$2.6** | **($2.3)** | Portfolio Risk Rating Distribution (% of Fair Value) | Investment Rating | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | 1 - Performing Above Expectations | 7.5% | 15.0% | | 2 - Performing Within Expectations | 52.2% | 73.9% | | 3 - Performing Below Expectations | 28.4% | 10.0% | | 4 - Substantially Below, Loss of Return Expected | 6.0% | 0.0% | | 5 - Substantially Below, Loss of Principal Expected | 5.9% | 1.1% | - As of June 30, 2023, the company had **$71.9 million** outstanding on its **$100 million** Capital One Revolving Financing and **$65.0 million** of **4.875% Notes due 2026**, with an asset coverage ratio of **164.1%**, above the required **150%**[373](index=373&type=chunk)[380](index=380&type=chunk)[411](index=411&type=chunk) - Unfunded commitments to portfolio companies decreased to **$6.0 million** as of **June 30, 2023**, from **$13.9 million** as of **June 30, 2022**[437](index=437&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity, with 99.6% of debt investments being floating-rate, leading to a positive impact on net interest income from hypothetical rate increases - As of **June 30, 2023**, **99.6%** of the company's debt investments bore floating interest rates, making net interest income sensitive to rate changes[440](index=440&type=chunk) Interest Rate Sensitivity Analysis (as of June 30, 2023) | Change in Interest Rates | Estimated Impact on Net Interest Income | | :--- | :--- | | +1.00% | +5.4% | | +2.00% | +13.4% | [Financial Statements and Supplementary Data](index=80&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The FY2023 audited financial statements show total assets of $231.8 million and net assets of $87.7 million, with a NAV per share of $6.09, and an unqualified auditor's opinion highlighting Level 3 investment valuation Consolidated Financial Highlights (Per Share) | For the Year Ended June 30, | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net asset value, beginning of year | $6.50 | $6.92 | $7.79 | | Net investment income | $0.65 | $0.62 | $0.65 | | Net realized and unrealized gains (losses) | ($0.43) | ($0.44) | ($0.82) | | **Net increase (decrease) in net assets** | **$0.22** | **$0.18** | **($0.17)** | | Dividends from net investment income | ($0.63) | ($0.60) | ($0.70) | | **Net asset value, end of year** | **$6.09** | **$6.50** | **$6.92** | - The independent auditor, **RSM US LLP**, issued an **unqualified opinion** on the financial statements and highlighted the valuation of **Level 3 investments** as a **critical audit matter** due to subjective judgments involved[447](index=447&type=chunk)[452](index=452&type=chunk)[453](index=453&type=chunk) Consolidated Statement of Assets and Liabilities (in millions) | | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Total Investments, at fair value | $220.1 | $233.7 | | Total Assets | $231.8 | $246.4 | | Total Liabilities | $144.1 | $152.9 | | **Total Net Assets** | **$87.7** | **$93.5** | | **Net Asset Value Per Share** | **$6.09** | **$6.50** | [Controls and Procedures](index=120&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of June 30, 2023, management concluded that both disclosure controls and internal control over financial reporting were effective, with no material changes identified - Management concluded that the company's disclosure controls and procedures were **effective** as of **June 30, 2023**[630](index=630&type=chunk) - Based on the **COSO 2013 framework**, management determined that the company's internal control over financial reporting was **effective** as of **June 30, 2023**[633](index=633&type=chunk) [Part III](index=121&type=section&id=PART%20III) Information for Part III (**Items 10-14**) is incorporated by reference from the company's definitive **Proxy Statement** for the **2023 Annual Meeting of Stockholders** - Information required for Part III (**Items 10-14**) is incorporated by reference from the definitive **Proxy Statement** for the **2023 Annual Meeting of Stockholders**[637](index=637&type=chunk) [Part IV](index=122&type=section&id=PART%20IV) Part IV lists the financial statements, schedules, and comprehensive exhibits filed with the report or incorporated by reference, including governance and material contracts - Part IV lists the **financial statements, schedules, and exhibits** filed with the **Form 10-K**[645](index=645&type=chunk)[646](index=646&type=chunk) ```

Financial Data and Key Metrics Changes - For the year ended June 30, 2023, the company's net investment income was $9.4 million or $0.66 per share, with a fair value of the portfolio at $220.1 million, a slight decrease from $221.3 million on March 31 [18] - The weighted average yield on the debt portfolio decreased by 90 basis points to 12.5% from March 31 [19] - The company's net assets decreased by 60 basis points from the prior quarter to $87.7 million [18] Business Line Data and Key Metrics Changes - The company invested in two new portfolio companies and two existing portfolio companies during the quarter, with total fundings for commitments and new investments amounting to approximately $15.1 million at a weighted average yield of approximately 15.5% [10] - The average yield of debt investments during the quarter decreased by 12.5% from 13.4% at the end of the previous quarter [3] Market Data and Key Metrics Changes - Direct lending volume in the quarter was down almost 50% year-over-year, indicating a challenging market environment [9] - The company noted that high interest rates have discouraged sponsors from engaging in new dividend recaps or acquisitions, leading to lower investment activity [2] Company Strategy and Development Direction - The company plans to continue focusing on risk management and diversification, expecting repayments in the current quarter and redeploying them across new borrowers [5] - The company aims to invest in high cash flow generating businesses with enhanced structural protections and experienced sponsors [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the pipeline of investment opportunities, despite the slowdown in primary deal activity [68] - The company remains focused on capital preservation and maintaining a stable dividend while rotating and diversifying the portfolio [32] Other Important Information - The company had 6 investments on nonaccrual as of June 30, which included two investments related to American Nuts, indicating challenges in certain portfolio companies [27] - The company expects to cover its dividend for the next quarter, with a base distribution of $0.12 per share and a supplemental distribution of $0.03 per share [31][59] Q&A Session Summary Question: Clarification on repayments for next quarter - Management clarified that the repayments mentioned are those they have visibility on and will be redeployed [33] Question: Thoughts on portfolio performance compared to peers - Management acknowledged the need for a broader platform to enhance origination and mentioned ongoing efforts to grow the platform [36][40] Question: Sustainability of recent investment income - Management indicated that certain dividends received were one-off events and not expected to recur on a quarterly basis [46] Question: Credit facility amendment and future plans - Management confirmed that the credit facility amendment was made for financial flexibility and emphasized a selective approach to secondary investments [50] Question: Coverage of the distribution - Management confirmed that the expected coverage is for the base distribution of $0.12, with any supplemental distribution being additional [59]

Investcorp Credit Management BDC, Inc. (NASDAQ:ICMB) Q3 2023 Earnings Conference Call May 16, 2023 1:00 PM ET Company Participants Michael Mauer - Chairman & Chief Executive Officer Rocco DelGuercio - Chief Financial Officer Suhail Shaikh - Co- Head of U.S. Direct Lending Conference Call Participants Christopher Nolan - Ladenburg Thalmann Operator Welcome to the Investcorp Credit Management BDC, Inc. scheduled Earnings Release for Third Quarter ended March 31, 2023. Your speakers for today's call are Mike M ...

PART I. FINANCIAL INFORMATION This section encompasses the company's unaudited consolidated financial statements, management's discussion and analysis of financial condition, market risk disclosures, and internal controls [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including statements of assets and liabilities, operations, cash flows, and detailed investment schedules, with accompanying notes for the periods ended March 31, 2023 [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) As of March 31, 2023, total assets were $239.0 million and total liabilities were $150.8 million, resulting in total net assets of $88.2 million, representing a decrease from $93.5 million as of June 30, 2022, with Net Asset Value (NAV) per share decreasing to $6.13 from $6.50 over the same period Consolidated Balance Sheet Highlights (in millions) | Metric | March 31, 2023 (in millions) | June 30, 2022 (in millions) | | :--- | :--- | :--- | | Total Investments, at fair value | $221.3 | $233.7 | | Total Assets | $239.0 | $246.4 | | Notes Payable, net | $145.3 | $146.8 | | Total Liabilities | $150.8 | $152.9 | | Total Net Assets | $88.2 | $93.5 | | Net Asset Value Per Share | $6.13 | $6.50 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2023, the company reported a net decrease in net assets of $1.1 million, or ($0.08) per share, compared to a net decrease of $0.06 million in the prior year period, with the quarterly result driven by a significant net realized loss of $26.9 million, partially offset by a net change in unrealized appreciation of $23.2 million Operating Results Highlights (in millions, except per share data) | Metric | Q1 2023 (3 months, in millions) | Q1 2022 (3 months, in millions) | YTD 2023 (9 months, in millions) | YTD 2022 (9 months, in millions) | | :--- | :--- | :--- | :--- | :--- | | Total Investment Income | $7.0 | $5.9 | $20.1 | $18.6 | | Net Investment Income | $2.5 | $1.8 | $7.2 | $6.4 | | Net Realized Loss on Investments | ($26.9) | ($6.6) | ($26.9) | ($14.4) | | Net Change in Unrealized Appreciation | $23.2 | $4.7 | $20.8 | $14.6 | | Net Increase (Decrease) in Net Assets | ($1.1) | ($0.06) | $1.2 | $6.7 | | Earnings Per Share | ($0.08) | ($0.00) | $0.08 | $0.47 | [Consolidated Schedule of Investments](index=7&type=section&id=Consolidated%20Schedule%20of%20Investments) As of March 31, 2023, the total investment portfolio had a fair value of $221.3 million across 35 portfolio companies, heavily concentrated in Senior Secured First Lien Debt at 90.56% of fair value, with largest industry concentrations in Trading Companies & Distributors (15.94%) and Professional Services (14.05%) Portfolio Composition by Investment Type (March 31, 2023) | Investment Type | Fair Value ($) | Percentage of Total Portfolio | | :--- | :--- | :--- | | Senior Secured First Lien Debt Investments | $200,423,277 | 90.56% | | Equity, Warrants and Other Investments | $20,892,152 | 9.44% | | **Total** | **$221,315,429** | **100.00%** | - The total investment portfolio fair value decreased from **$233.7 million** at June 30, 2022 to **$221.3 million** at March 31, 2023[203](index=203&type=chunk)[204](index=204&type=chunk) - The portfolio consists of investments in **35 companies**, with an average investment size of **$6.3 million** and the largest single investment at **$12.5 million** by fair value[203](index=203&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes detail accounting policies, investment valuation, borrowing facilities, related-party transactions, and financial highlights, including Level 3 asset valuation and adviser fee structure - All investments were valued using **Level 3 significant unobservable inputs**, as determined by the Board of Directors[28](index=28&type=chunk)[82](index=82&type=chunk) Borrowings as of March 31, 2023 | Facility | Principal Outstanding (in millions) | Maturity Date | Interest Rate | | :--- | :--- | :--- | :--- | | Capital One Revolving Financing | $81.9 million | Aug 22, 2026 | SOFR + 2.50% | | 4.875% Notes | $65.0 million | Apr 1, 2026 | 4.875% (Fixed) | - The Investment Adviser earns a base management fee of **1.75% of gross assets** and a two-part incentive fee (Income-Based and Capital Gains). For the nine months ended March 31, 2023, the Adviser earned **$3.2 million** in base management fees, of which **$0.3 million** was voluntarily waived[133](index=133&type=chunk)[134](index=134&type=chunk) Financial Highlights (Per Share) | Metric | Nine months ended Mar 31, 2023 | Nine months ended Mar 31, 2022 | | :--- | :--- | :--- | | Net asset value, beginning of period | $6.50 | $6.92 | | Net investment income | $0.50 | $0.45 | | Net realized and unrealized (losses) gains | ($0.42) | $0.01 | | Net asset value, end of period | $6.13 | $6.93 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operating results, covering portfolio composition, investment activity, asset quality, liquidity, capital resources, and regulatory compliance, in light of market developments [Portfolio and Investment Activity](index=43&type=section&id=Portfolio%20and%20Investment%20Activity) As of March 31, 2023, the investment portfolio was valued at $221.3 million, down from $233.7 million at June 30, 2022, consisting of 35 companies with 90.56% in first lien investments, and a weighted average total yield on debt increasing to 13.36% from 10.09% due to rising interest rates, while asset quality shifted with '3' rated investments increasing to 20.2% of fair value - During the nine months ended March 31, 2023, the company added **16 new investments** totaling approximately **$29.8 million**, with **12 of these in new portfolio companies**[206](index=206&type=chunk) Asset Quality by Investment Rating (% of Portfolio Fair Value) | Investment Rating | Description | March 31, 2023 | June 30, 2022 | | :--- | :--- | :--- | :--- | | 1 | Performing above expectations | 16.2% | 15.0% | | 2 | Performing within expectations | 57.4% | 73.9% | | 3 | Performing below expectations | 20.2% | 10.0% | | 4 | Substantially below, loss of return expected | 5.2% | - | | 5 | Substantially below, loss of principal expected | 1.0% | 1.1% | - As of March 31, 2023, **99.6% of the company's debt investments were floating rate**, positioning the portfolio to benefit from rising interest rates[207](index=207&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) For the three months ended March 31, 2023, investment income increased to $7.0 million from $5.9 million year-over-year due to rising floating interest rates, but a net realized loss of $26.9 million, primarily from American Teleconferencing Services investments, led to a net decrease in net assets of $1.1 million, while the nine-month period saw net investment income rise to $7.2 million from $6.4 million despite the significant realized loss - For Q1 2023, investment income rose by **18.6% YoY** to **$7.0 million**, driven by higher floating interest rates on the portfolio[211](index=211&type=chunk)[212](index=212&type=chunk) - A net realized loss of **$26.9 million** was recorded in Q1 2023, primarily from the write-off of investments in American Teleconferencing Services, Ltd. (Premiere Global Services, Inc.)[215](index=215&type=chunk) - Net investment income for the nine months ended March 31, 2023, increased to **$7.2 million** from **$6.4 million** in the prior-year period, reflecting higher interest income[220](index=220&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, the company had $2.9 million in cash, $11.3 million in restricted cash, and $33.1 million of available capacity under its Capital One Revolving Financing, with an asset coverage ratio of 160.1% exceeding the regulatory minimum of 150%, indicating sufficient liquidity for operational needs, dividend payments, and unfunded commitments of $7.9 million - Total liquidity sources as of March 31, 2023, included **$2.9 million in cash** and **$33.1 million in borrowing capacity**[226](index=226&type=chunk) - The company's asset coverage ratio stood at **160.1%** as of March 31, 2023, compliant with the **150% minimum requirement** for BDCs[228](index=228&type=chunk) - For the nine months ended March 31, 2023, cash from operating activities was a positive **$15.7 million**, while financing activities used **$10.7 million**, primarily for stockholder distributions and net debt repayments[225](index=225&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk due to its portfolio of floating-rate investments and use of leverage, with 99.6% of debt investments being floating-rate as of March 31, 2023, and management estimating that a 1.00% increase in interest rates would increase net interest income by approximately 8.03%, with no hedging transactions in place - As of March 31, 2023, **99.6% of the company's debt investments bore floating interest rates**, making its income sensitive to rate changes[239](index=239&type=chunk) Interest Rate Sensitivity Analysis (as of March 31, 2023) | Change in Interest Rates | Estimated Impact on Net Interest Income (%) | | :--- | :--- | | +1.00% | +8.03% | | +2.00% | +16.06% | [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of March 31, 2023, concluding they were effective at a reasonable assurance level, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that as of March 31, 2023, the company's disclosure controls and procedures were **effective**[245](index=245&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[246](index=246&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, updated risk factors, unregistered sales of equity securities, and a list of filed exhibits [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently subject to any material legal proceedings, other than ordinary routine litigation incidental to its business - The company is **not currently subject to any material legal proceedings**[248](index=248&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) The company states there have been no material changes to the risk factors disclosed in its Annual Report on Form 10-K for the year ended June 30, 2022, except for the addition of a new risk factor addressing the potential impact of adverse developments in the financial services industry, such as liquidity issues or failures of financial institutions where the company, its Adviser, or its portfolio companies may hold cash balances exceeding federally insured limits - A new risk factor was added concerning the potential impact of **adverse developments in the financial services industry**, including the risk of holding **cash balances at financial institutions that exceed federally insured limits**[251](index=251&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended March 31, 2023, the company issued 3,319 shares of common stock under its dividend reinvestment plan for a total of $11,562, with these issuances not registered under the Securities Act - In Q1 2023, **3,319 shares** were issued via the dividend reinvestment plan for **$11,562**[254](index=254&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002, and Inline XBRL documents - Exhibits filed include **CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906**[260](index=260&type=chunk)

Financial Data and Key Metrics Changes - For the quarter ending December 31, the net investment income was $2.3 million or $0.16 per share, relatively unchanged from the prior quarter [36] - The fair value of the portfolio decreased to $228.6 million from $239.2 million as of September 30 [36] - The weighted average yield of the debt portfolio was 10.7%, a decrease of 12 basis points from September 30 [37] Business Line Data and Key Metrics Changes - The company invested in one new portfolio company and fully realized its position in another during the quarter [34] - The average yield of debt investments during the quarter was 10.6% [32] - 91.2% of investments were in first lien loans, with the remaining 8.8% in equity, warrants, and other positions [37] Market Data and Key Metrics Changes - The company noted a slowdown in new issuance activity, particularly in LBO issuances, but observed a gradual increase in early 2023 [9] - Deal flow remained modest during the quarter, with the company being extremely selective in new investments [9] Company Strategy and Development Direction - The company aims to preserve capital and maintain a stable dividend, focusing on high-quality senior secured structures in middle market companies [41] - The addition of Suhail Shaikh as co-CIO is expected to enhance underwriting and sourcing capabilities [41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macro factors influencing private markets and expressed optimism about deploying capital in 2023 [41] - The company expects to see a robust pipeline and significant deal flow, especially in new LBOs [41] Other Important Information - The Board of Directors declared a distribution of $0.13 per share and a supplemental distribution of $0.02 per share, payable on March 30, 2023 [18] - The company closed on a separately managed account and had an initial close on an institutional fund, doubling its platform AUM since the last quarter [18] Q&A Session Summary Question: What are the reasons behind the slowdown in deal flow this quarter? - Management indicated that the slowdown was due to reassessing the portfolio and a general decrease in deal flow, but expected a return to normal levels [43] Question: Can you provide insights on the NAV decline and its future outlook? - Management noted that the NAV decline was influenced by credit risk and portfolio performance, but did not foresee significant further declines at this time [52] Question: How will the recent changes in the platform affect G&A expenses? - Management stated that expenses are expected to decrease as AUM increases, but specific figures were not provided [56][58] Question: Will the company provide assessments of portfolio performance in light of potential recession risks? - Management confirmed that they will continue to evaluate credit risk and portfolio performance but do not plan to introduce additional metrics [60]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q For the quarterly period ended December 31, 2022 OR (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 814-01054 INVESTCORP CREDIT MANAGEMENT BDC, INC. (Exact Name of Registrant as Specified in Its Charter) Maryland 46-2883380 (State or other Jurisdiction of Incorp ...

Financial Data and Key Metrics Changes - For the quarter ended September 30, 2022, the net investment income was $2.3 million or $0.16 per share, with a fair value of the portfolio at $239.2 million compared to $233.7 million on June 30 [21][22] - The weighted average yield of the debt portfolio increased by 190 basis points to 11.9% from June 30, with approximately 64% of the change attributed to the increase in LIBOR SOFR [22][23] - Gross leverage was 1.64 times and net leverage was 1.56 times as of September 30, compared to 1.57 times gross and 1.48 times net for the previous quarter [23][30] Business Line Data and Key Metrics Changes - The company made four new investments during the quarter, averaging 6.5 new investments per quarter over the prior four quarters, with an average yield of 10% on new capital deployed [7][8] - The portfolio consisted of 37 companies, with 91.8% of investments in first lien and 99.6% in floating rate instruments [23][19] Market Data and Key Metrics Changes - The primary market saw a slowdown in new issuance activity and refinancing, leading to fewer new investments [6][7] - The company remains focused on sectors with resilient end markets and has increased selectivity in new investment opportunities [9][10] Company Strategy and Development Direction - The company aims to maintain a leverage range of 1.25 to 1.5 times while focusing on risk management and finding investment opportunities with strong structural protection [30][32] - The strategy includes building a base of private investments to decrease operational expenses and enhance dividend performance [65] Management's Comments on Operating Environment and Future Outlook - Management noted that macro factors, including the Fed's tight monetary policy and inflationary pressures, continue to influence private debt markets [6] - The company remains optimistic about the operating performance of its underlying portfolio companies despite economic uncertainties [32][46] Other Important Information - The board declared a distribution of $0.13 per share and a supplemental distribution of $0.02 per share, both payable on January 10, 2023 [31] - The company had seven investments on nonaccrual as of September 30, indicating ongoing challenges in certain portfolio companies [24] Q&A Session Summary Question: Breakdown of markdowns related to credit versus market spread adjustments - Management indicated that estimates for the December quarter are not yet available, but the portfolio is performing according to plan [36][38] Question: Plans to reduce risk in the portfolio amid economic uncertainty - Management acknowledged the increase in leverage and nonaccruals but emphasized ongoing dialogue with borrowers and a focus on equity cushions in new investments [44][46] Question: Update on weighted average interest coverage in the portfolio - The average interest coverage is still above 2.5, despite some decline [54][56] Question: Framework regarding dividend payouts and adjustments - Management explained the decision to adjust the core dividend while maintaining the overall dividend level, focusing on managing leverage and ensuring coverage [57][62] Question: Areas for improving fundamental performance to close valuation discount - Management is focused on strategic growth and building a base of private investments to enhance performance and reduce operational expenses [63][65]

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) The company is an externally managed BDC investing in U.S. middle-market debt, focused on maximizing total return through income and capital appreciation - The company operates as a **Business Development Company (BDC)** and a **Regulated Investment Company (RIC)**, investing primarily in the debt of U.S. middle-market companies with enterprise values under **$750 million**[11](index=11&type=chunk)[12](index=12&type=chunk) - The company is externally managed by CM Investment Partners LLC, majority-owned by Investcorp Credit Management US LLC, a global credit investment platform with **$14.7 billion** in assets under management as of June 30, 2022[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) Portfolio Snapshot as of June 30, 2022 | Metric | Value | | :--- | :--- | | Total Portfolio Fair Value | $233.7 million | | Number of Portfolio Companies | 35 | | First Lien Investments | 91.94% | | Second Lien Investments | 0% | | Equity, Warrant, Other | 8.06% | | Weighted Avg. Total Yield (Debt & Income Producing) | 10.09% | Top 5 Industry Concentrations by Fair Value (June 30, 2022) | Industry | Percentage of Total Portfolio | | :--- | :--- | | Professional Services | 11.55% | | IT Services | 9.25% | | Internet & Direct Marketing Retail | 9.02% | | Household Durables | 7.42% | | Trading Companies & Distributors | 6.72% | [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from macroeconomic factors, leverage, illiquid middle-market investments, and adviser conflicts of interest - The **COVID-19 pandemic** and related economic disruptions pose a significant risk, potentially impacting portfolio company performance, loan valuations, and the company's ability to raise capital[169](index=169&type=chunk)[170](index=170&type=chunk)[172](index=172&type=chunk) - The company's use of **leverage** magnifies potential gains and losses, requiring an asset coverage ratio of at least **150%** as a BDC[207](index=207&type=chunk)[208](index=208&type=chunk) - The Adviser's incentive fee structure, based on gross assets and capital gains, may create **conflicts of interest** by encouraging leverage and speculative investments[248](index=248&type=chunk)[250](index=250&type=chunk) - Investments are primarily in **illiquid, private middle-market companies**, susceptible to economic downturns and default risk due to limited financial resources[259](index=259&type=chunk)[261](index=261&type=chunk)[272](index=272&type=chunk) - Failure to maintain **Regulated Investment Company (RIC)** qualification would subject the company to corporate-level federal income tax, substantially reducing net assets and income for distribution[332](index=332&type=chunk) [Item 1B. Unresolved Staff Comments](index=73&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - Not applicable; the company has no unresolved staff comments[361](index=361&type=chunk) [Item 2. Properties](index=73&type=section&id=Item%202.%20Properties) The company does not own any real estate, with its principal executive offices provided by the Adviser - The company does not own any real estate; its office facilities are provided by the Adviser[362](index=362&type=chunk) [Item 3. Legal Proceedings](index=74&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor is it aware of any threatened against it - There are no material legal proceedings against the company[364](index=364&type=chunk) [Item 4. Mine Safety Disclosures](index=74&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[365](index=365&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=75&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'ICMB', consistently at a discount to NAV, with quarterly distributions Quarterly Stock Price and Distribution Data (Fiscal Year 2022) | Quarter | NAV per Share | High Price | Low Price | Discount of High to NAV | Discount of Low to NAV | Distributions per Share | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Q1 2022 | $7.00 | $6.42 | $5.30 | (8.29)% | (24.29)% | $0.15 | | Q2 2022 | $7.09 | $5.70 | $4.87 | (19.61)% | (31.38)% | $0.15 | | Q3 2022 | $6.93 | $5.72 | $5.08 | (17.46)% | (26.70)% | $0.15 | | Q4 2022 | $6.50 | $5.35 | $3.75 | (17.69)% | (42.31)% | $0.15 | - As of September 2, 2022, the company's common stock traded at a discount of approximately **33.08%** to its June 30, 2022 NAV per share of **$6.50**[370](index=370&type=chunk) - The company has an **'opt-out' dividend reinvestment plan (DRIP)**, where cash distributions are automatically reinvested unless stockholders choose to receive cash[375](index=375&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=78&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Total investment income decreased to $24.4 million, net investment income slightly declined, and the company replaced its credit facilities Results of Operations Comparison (Years ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Investment Income | $24.4 million | $26.7 million | | Total Net Expenses | $15.5 million | $17.6 million | | Net Investment Income | $8.9 million | $9.1 million | | Net Realized Loss | ($14.4 million) | ($5.8 million) | | Net Change in Unrealized Appreciation/(Depreciation) | $8.1 million | ($5.6 million) | | Net Increase/(Decrease) in Net Assets | $2.6 million | ($2.3 million) | - In August 2021, the company entered into a new five-year, **$115 million** senior secured revolving credit facility with Capital One, replacing its previous UBS facilities, with **$84 million** outstanding as of June 30, 2022[427](index=427&type=chunk)[429](index=429&type=chunk) - As of June 30, 2022, the investment portfolio had a fair value of **$233.7 million** across **35 companies**, with **91.94%** in first lien investments and a weighted average total yield of **10.09%**[446](index=446&type=chunk)[448](index=448&type=chunk) - Six investments were on non-accrual status as of June 30, 2022, representing **1.08%** of the portfolio's fair value, an improvement from **1.7%** in the prior year[421](index=421&type=chunk) [Item 7A. Quantitative and Qualitative Disclosure about Market Risk](index=98&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuation, with 91.9% of debt investments being floating-rate instruments - The company's primary market risk is interest rate fluctuation, with **91.9%** of its debt portfolio in floating-rate investments as of June 30, 2022[508](index=508&type=chunk) Interest Rate Sensitivity Analysis (as of June 30, 2022) | Change in Interest Rates | Impact on Net Interest Income | | :--- | :--- | | +1.00% | ~9.8% decrease | | +2.00% | ~19.9% increase | [Item 8. Financial Statements and Supplementary Data](index=99&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited financial statements show total investments of $233.7 million, net assets of $93.5 million, and a net increase in net assets from operations Consolidated Statement of Assets and Liabilities (as of June 30) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Total Investments, at fair value | $233.7 million | $245.9 million | | Total Assets | $246.4 million | $267.7 million | | Total Liabilities | $152.9 million | $171.3 million | | Total Net Assets | $93.5 million | $96.4 million | | Net Asset Value Per Share | $6.50 | $6.92 | Consolidated Statement of Operations (for the year ended June 30, 2022) | Account | Value | | :--- | :--- | | Total Investment Income | $24.4 million | | Net Investment Income | $8.9 million | | Net Realized & Unrealized Loss | ($6.3 million) | | Net Increase in Net Assets from Operations | $2.6 million | | Earnings Per Share (Basic and Diluted) | $0.18 | - The independent auditor, RSM US LLP, identified the valuation of **Level 3 investments** as a critical audit matter due to significant subjective judgments and unobservable inputs[521](index=521&type=chunk)[522](index=522&type=chunk) [Item 9A. Controls and Procedures](index=146&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of June 30, 2022 - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[747](index=747&type=chunk) - Management's assessment concluded that internal control over financial reporting was effective as of June 30, 2022, based on the **COSO 2013 framework**[750](index=750&type=chunk) [Item 9B. Other Information](index=147&type=section&id=Item%209B.%20Other%20Information) There is no other information to report for this period - None[753](index=753&type=chunk) Part III [Items 10-14](index=148&type=section&id=Items%2010-14) Information for Items 10-14 is incorporated by reference from the company's forthcoming 2022 Annual Meeting Proxy Statement - The information for Part III (Items 10, 11, 12, 13, and 14) is incorporated by reference from the company's forthcoming **2022 Proxy Statement**[755](index=755&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=149&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and key agreements filed as exhibits, including CEO and CFO certifications - The financial statements from Item 8 are listed as part of the report[762](index=762&type=chunk) - Key agreements filed as exhibits include the **Investment Advisory Agreement**, **Administration Agreement**, and the **Loan Agreement for the Capital One Revolving Financing**[763](index=763&type=chunk) - Certifications of the CEO and CFO as required by Sections 302 and 906 of the **Sarbanes-Oxley Act** are filed as exhibits[765](index=765&type=chunk)