Investcorp Credit Management BDC(US:ICMB)2024-02-16 23:37Investment Portfolio - As of December 31, 2023, the investment portfolio represented 92.5% of total assets, down from 95.0% as of June 30, 2023[186] - The company primarily invests in standalone first and second lien loans, unitranche loans, and mezzanine loans to support middle-market companies[170] - As of December 31, 2023, the investment portfolio was valued at $207.4 million, consisting of 44 portfolio companies, with 84.97% in first lien investments[203] - The average portfolio company investment at fair value was $4.7 million as of December 31, 2023, down from $6.1 million as of June 30, 2023[203][204] - As of December 31, 2023, the investment portfolio's fair value totaled $207.4 million, with 57.9% rated as Investment Rating 2, indicating performance within expectations[212] Financial Performance - Investment income for the six months ended December 31, 2023, decreased to $12.1 million from $13.1 million for the same period in 2022, primarily due to decreased interest income from portfolio companies[220] - Total expenses for the six months ended December 31, 2023, increased to $9.1 million, compared to $8.6 million for the same period in 2022, driven by higher interest expenses[221] - Net investment income for the six months ended December 31, 2023, decreased to $3.2 million from $4.7 million for the same period in 2022, reflecting lower total investment income[222] - The company recorded a net realized loss from investments of $5.9 million for the six months ended December 31, 2023, primarily due to losses from restructurings and loan modifications[223] Borrowings and Financing - Borrowings under the Capital One Revolving Financing were $70.0 million as of December 31, 2023, compared to $71.9 million as of June 30, 2023[190] - The company issued $65.0 million in aggregate principal amount of 4.875% notes due 2026, with net proceeds of approximately $63.1 million after expenses[191] - The 2026 Notes will mature on April 1, 2026, and bear interest at a rate of 4.875%[192] - The Capital One Revolving Financing features a three-year reinvestment period and a two-year amortization period, expiring on August 23, 2026[188] - As of December 31, 2023, floating rate borrowings totaled $70.0 million, representing 51.9% of the outstanding debt[245] - The Fourth Amendment to the Capital One Revolving Financing extended the maturity date to January 17, 2029, and increased applicable interest spreads[241] Regulatory Compliance - The company is regulated as a Business Development Company (BDC) under the Investment Company Act of 1940[169] - The company is required to comply with regulatory requirements, including maintaining at least 70% of total assets in qualifying assets[196] - As of December 31, 2023, the asset coverage ratio for borrowed amounts was 158.4%, which is above the minimum requirement of 150% set by the 1940 Act[230] - The company intends to maintain its RIC status by distributing substantially all of its net taxable income to stockholders in the form of dividends[229] - The company is subject to a federal excise tax based on the distributive requirements of taxable income on a calendar year basis[233] Market Environment and Risks - The current inflationary environment and potential global recession may impact portfolio companies and financial results[176] - The company is positioned to manage the current market environment despite external uncertainties[177] - As of December 31, 2023, 99.6% of debt investments bore interest based on floating rates, with only 0.4% at fixed rates[208] - A 1.00% increase in interest rates would increase net interest income by approximately 8.48%, while a 2.00% increase would raise it by approximately 16.95%[246] - The company had no hedging transactions in place as of December 31, 2023, as the interest rate risk was deemed acceptable[248] Cash and Commitments - The total cash balance increased by $5.5 million for the six months ended December 31, 2023, with cash from operating activities totaling $12.2 million[227] - As of December 31, 2023, the company had $3.1 million in cash, $11.6 million in restricted cash, and $30.0 million of capacity under the Capital One Revolving Financing[228] - The company had five investments with aggregate unfunded commitments of $2.7 million as of December 31, 2023, down from nine investments with $5.7 million in commitments as of June 30, 2023[209] - As of December 31, 2023, off-balance sheet arrangements included $2.7 million in unfunded commitments to five portfolio companies, down from $5.7 million to nine companies as of June 30, 2023[238] Distributions - A distribution of $0.12 per share was declared for the quarter ended March 31, 2024, along with a supplemental distribution of $0.03 per share, both payable on April 5, 2024[240] - The company intends to distribute between 90% and 100% of its annual taxable income to stockholders, which includes taxable interest and fee income[234]