Investcorp Credit Management BDC(US:ICMB)2026-03-31 01:22Portfolio Composition - As of December 31, 2025, the portfolio consisted of 37 companies with a fair value of $172.7 million, comprising 80.76% first lien investments and 19.24% equity or other positions[19] - The industry composition of the portfolio included Professional Services (14.50%), IT Services (9.18%), and Insurance (8.87%), among others, totaling 100%[20] - As of December 31, 2025, the total fair value of investments is $172,658,862, with Investment Rating 2 comprising 64.9% of the portfolio[56] - The total number of investments in the portfolio decreased from 71 as of December 31, 2024, to 68 as of December 31, 2025[56] - The Company’s portfolio at fair value consisted of 80.76% first lien investments and 19.24% equity, warrant, or other positions as of December 31, 2025[105] Investment Strategy - The investment strategy includes standalone first and second lien loans, unitranche loans, and selective investments in unsecured debt and equity through warrants[34] - The investment strategy focuses on established companies with a history of positive operating cash flow and strong management teams[38] - The company targets middle-market companies with annual revenues of at least $50 million and EBITDA of at least $15 million, with typical investments ranging from $5 million to $25 million[36] - The current investment environment shows reduced availability of capital for middle-market companies, leading to less competition and higher quality deal flow[30] - Middle-market debt investments are generally priced more attractively, offering stronger covenant packages and higher interest rates compared to larger public debt financings[32] Management and Advisory - The Adviser is responsible for sourcing investment opportunities and monitoring portfolio companies, ensuring a disciplined approach to risk management[21] - The Adviser manages assets totaling $21.3 billion as of December 31, 2025, providing a significant advantage in investment opportunities[35] - The Adviser emphasizes disciplined underwriting policies and rigorous portfolio management, requiring majority approval from the Investment Committee for all initial investments[35] - The Adviser seeks to structure debt investments with strong protections, including default penalties and financial covenants, to minimize capital loss risk[37] - The Adviser utilizes extensive relationships with private equity sponsors and intermediaries to source attractive investment opportunities[39] - The Adviser provides managerial assistance to portfolio companies, which may include monitoring operations and consulting, potentially generating fees for these services[65] Financial Performance and Fees - The average total yield of debt and income-producing securities was 10.34%, while the average total yield on the total portfolio was 7.71%[19] - The Base Management Fee is calculated at an annual rate of 1.75% of gross assets, which includes assets purchased with borrowed funds[74] - The Income-Based Fee is 20.0% of Pre-Incentive Fee Net Investment Income exceeding a 2.0% hurdle rate, with a catch-up provision for income between 2.0% and 2.5%[78] - Pre-Incentive Fee Net Investment Income does not include realized capital gains or losses, and it is possible to pay an Incentive Fee in a loss quarter if the Pre-Incentive Fee Net Investment Income exceeds the hurdle rate[80] - The cumulative incentive compensation accrued for the preceding 11 quarters was $9,000,000, while 20.0% of the cumulative net increase in net assets was $8,000,000, which did not exceed the cumulative fees accrued[90] Market Conditions and Competition - Private equity firms had over $1.0 trillion of uncalled capital in the US as of December 3, 2025, indicating robust demand for debt capital[32] - The company faces competition from larger public and private funds, commercial banks, and private equity funds, which may have access to funding sources not available to the company[66] - The company is positioned to leverage current market conditions to structure attractively priced debt investments with potential return-enhancing mechanisms[35] Regulatory Compliance - The company must ensure that qualifying assets represent at least 70% of total assets when acquiring new assets, as per the 1940 Act[121] - The company is prohibited from acquiring more than 3% of the voting stock of any registered investment company without obtaining exemptive relief from the SEC[120] - The company is subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless it meets specific distribution requirements[146] - To qualify as a Regulated Investment Company (RIC), the company must distribute at least 90% of its investment company taxable income to stockholders[143] - The company must derive at least 90% of its gross income from specific sources to maintain its RIC status[151] Interest Rate Sensitivity - 98.0% of the company's debt investments bear interest based on floating rates, such as SOFR and the Prime Rate[500] - A 1.00% increase in interest rates would increase net interest income by approximately 44.27%, while a decrease would reduce it by 41.77%[501] - A 2.00% increase in interest rates would increase net interest income by approximately 89.87%, while a decrease would reduce it by 83.54%[501]