Investcorp Credit Management BDC(US:ICMB)2019-09-11 22:51Financial Data and Key Metrics Changes - For the quarter ended June 30, 2019, the net investment income was $3 million or $0.22 per share, with a fair value of the portfolio at $306.4 million compared to $299.1 million at March 31, 2019 [21] - The weighted average yield of the debt portfolio increased by 6 basis points to 10.5%, driven by new investments with an average yield of 11.5% [21][22] - The company was 1.16 times levered as of June 30, 2019, compared to 0.91 times levered as of March 31, 2019 [22] Business Line Data and Key Metrics Changes - The portfolio consisted of 33 companies, with 77.6% in first lien investments, a slight increase from the previous quarter [22] - The company made investments totaling $32.2 million in the quarter, all in first lien and debt loans [11] - The largest industry concentration was in professional services at 13.5%, followed by energy equipment and services at 10.2% [19] Market Data and Key Metrics Changes - The company has increased its portfolio company count from 25 to 34 over the past year, indicating a diversification strategy [19][33] - The portfolio is now spread across 21 GICS industries, up from 14 industries last year [19] Company Strategy and Development Direction - The company is focused on repositioning and diversifying its portfolio, emphasizing first lien loans, which currently make up approximately 80% of the portfolio [8] - The management aims to mitigate risks through diversification across sectors, geographies, and borrowers, while maintaining a focus on quality loan documentation and cash flows [25] - The acquisition of a majority ownership interest in the advisor is expected to enhance sourcing opportunities and leverage additional resources [36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to cover dividends and earn incentive fees in the upcoming quarters, despite challenges in the portfolio [34] - The company is actively managing positions in borrowers facing performance issues, with expectations of improved outcomes in the near future [27][30] - Management acknowledged the uncertainty in the operating environment but remains confident in the potential for portfolio repositioning and growth [33] Other Important Information - The company declared a distribution of $0.25 per share for the quarter ended September 30, 2019, maintaining the dividend level since March 2017 [34] - Investcorp's commitment to purchase shares of the company is expected to commence within the next 90 days [35] Q&A Session Summary Question: How do you anticipate recovering the dividend going forward? - Management indicated that they will cover the dividends based on the current portfolio construction and leverage targets [39] Question: Was the higher yield on new investments skewed by the DIP loan? - Management clarified that the higher yield was not disproportionately affected by the DIP loan, as new investments were well dispersed across various yields [40] Question: Can you clarify the management fee waiver above one-to-one leverage? - Management confirmed that base management fees above 1% will be waived, not the entire fee [42] Question: What value does Investcorp bring to the company? - Management highlighted Investcorp's extensive experience in the middle market and its ability to enhance dialogue with lenders and sourcing opportunities [46] Question: Will the yield flow from Investcorp's assets be immediate? - Management noted that while some deals have already come in, it will take time to ramp up the relationship's benefits [47] Question: Are there any credit losses factored into the dividend outlook? - Management stated that they are confident in covering the dividend and are monitoring the portfolio for potential credit losses [51]