Investcorp Credit Management BDC(US:ICMB)2022-11-15 20:23Financial 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]