Investcorp Credit Management BDC, Inc. Announces Revised Financial Results for the Quarter Ended December 31, 2023, and Quarterly and Supplemental Distribution
Investcorp Credit Management BDC, Inc. (ICMB) announced revised financial results for Q2 2023, with adjustments of $0.02 per share. The company declared a distribution of $0.12 per share for Q1 2024. ICMB made investments in six portfolio companies, realizing $29.2 million. Net asset value decreased to $5.48 per share. The weighted average yield on debt investments was 11.46%.
The revised financial results for Investcorp Credit Management BDC, Inc. (ICMB) indicate a minor adjustment of $388,000 due to incorrectly accrued expenses. While this adjustment is relatively small compared to the Company's overall financials, it does raise questions about the internal financial control mechanisms and could potentially impact investor confidence. The reported net decrease in net assets from operations of $2.9 million, or $(0.20) per share, is a significant metric that warrants attention. This decrease suggests that the company's operations have not generated the expected value for shareholders during the quarter, which could influence the stock's performance in the short term.
Furthermore, the net asset value (NAV) per share decreasing from $5.83 to $5.48 reflects a devaluation of the company's assets relative to its liabilities. This decline in NAV is an essential indicator of the company's health and could influence the investment decisions of mutual funds, ETFs and individual investors who closely monitor these figures for changes in valuation.
The distribution yield of 16.85% on the company's share price is notably high and may be attractive to income-focused investors. However, such a high yield can sometimes be indicative of underlying risks or a potential reduction in future distributions if not supported by stable net investment income (NII) and capital gains.
ICMB's investment activities, including the addition of five new portfolio companies and realization of four, demonstrate an active management approach which is crucial in the Business Development Company (BDC) sector. The weighted average yield on debt investments increased slightly from 11.01% to 11.46%, which suggests that the company is potentially taking on higher-yielding and possibly riskier, investments to maintain its income levels.
It's also notable that the company's portfolio is heavily weighted towards floating rate investments (99.7%), which could be advantageous in a rising interest rate environment, as this may increase the income generated from these investments. However, this can also increase the risk of default if the underlying portfolio companies cannot meet the higher interest payments.
The company's capital resources, with $14.7 million in cash and $30.0 million of unused capacity under its revolving credit facility, provide it with liquidity that could be used for future investments or to weather potential downturns in the credit markets.
The disclosure of the incorrect accrual of certain expenses and subsequent financial restatement, while minor in value, is a legal matter that requires scrutiny. It is essential for companies, especially publicly traded ones, to maintain strict compliance with accounting standards and securities regulations to avoid legal repercussions and maintain market trust. The adjustment itself may not significantly impact the company's operations, but it could lead to heightened regulatory scrutiny and necessitate a review of internal controls to prevent future discrepancies.
Additionally, the Company's adherence to Section 19(a) of the Investment Company Act of 1940 in estimating the source of its distributions is an important legal compliance measure. This ensures transparency for investors regarding the nature of the distributions they receive, whether from net investment income or a return of capital, which has different tax implications.
02/21/2024 - 04:15 PM
NEW YORK --(BUSINESS WIRE)--
Investcorp Credit Management BDC, Inc. (NASDAQ: ICMB) (“ICMB” or the “Company”) announced its revised financial results today for its fiscal second quarter ended December 31, 2023, to reflect approximately $388,000 (or approximately $0.02 per share) of adjustments relating to the incorrect accrual of certain expenses reported in the Company’s consolidated financial statements contained in a press release issued by the Company February 12, 2024.
HIGHLIGHTS
On February 8, 2024, the Company’s Board of Directors (the “Board”) declared a distribution of $0.12 per share for the quarter ending March 31, 2024, payable in cash on April 5, 2024, to stockholders of record as of March 15, 2024 and a supplemental distribution of $0.03 per share, payable on April 5, 2024, to stockholders of record as of March 15, 2024.
During the quarter, ICMB made investments in five new portfolio companies and one existing portfolio company. These investments totaled $18.1 million , at cost. The weighted average yield (at origination) of debt investments made in the quarter was 12.13% .
ICMB fully realized four portfolio companies during the quarter, totaling $29.2 million in proceeds. The internal rate of return on this investment was 14.2% .
During the quarter, the Company had net advances of $0.3 million on its existing and new delayed draw and revolving credit commitments to portfolio companies.
The weighted average yield on debt investments, at cost, for the quarter ended December 31, 2023, was 11.46% , compared to 11.01% for the quarter ended September 30, 2023.
Net asset value decreased $0.35 per share to $5.48 , compared to $5.83 as of September 30, 2023. Net assets decreased by $5.0 million , or 6.0% , during the quarter ended December 31, 2023 compared to September 30, 2023.
Portfolio results, as of and for the three months ended December 31, 2023:
Total assets
$224 .3mm
Investment portfolio, at fair value
$207 .4mm
Net assets
$78 .8mm
Weighted average yield on debt investments, at cost (1)
11.46%
Net asset value per share
$5.48
Portfolio activity in the current quarter:
Number of new investments
5
Number of portfolio companies, end of period
44
Total capital invested
$18 .1mm
Proceeds from repayments, sales, and amortization
$31 .1mm
Net investment income (NII)
$1 .6mm
Net investment income per share
$0.11
Net decrease in net assets from operations
$(2.9)m m
Net decrease in net assets from operations per share
$(0.20)
Quarterly per share distribution paid on December 31, 2023
$0.15
(1) Represents weighted average yield on total debt investments for the three months ended December 31, 2023. Weighted average yield on total debt investments is the annualized rate of interest income recognized during the period divided by the average amortized cost of debt investments in the portfolio during the period. The weighted average yield on total debt investments reflected above does not represent actual investment returns to the Company’s stockholders.
The Company’s dividend framework provides a quarterly base dividend and may be supplemented, at the discretion of the Board, by additional dividends as determined to be available by the Company’s net investment income and performance during the quarter.
On February 8, 2024, the Board declared a distribution for the quarter ended March 31, 2024 of $0.12 per share payable on April 5, 2024 to stockholders of record as of March 15, 2024 and a supplemental distribution of $0.03 per share, payable on April 5, 2024, to stockholders of record as of March 15, 2024.
This distribution represents a 16.85% yield on the Company’s $3.56 share price as of market close on December 29, 2023. Distributions may include net investment income, capital gains and/or return of capital, however, the Company does not expect the dividend for the quarter ending December 31, 2023, to be comprised of a return of capital. The Company’s investment adviser monitors available taxable earnings, including net investment income and realized capital gains, to determine if a return of capital may occur for the year. The Company estimates the source of its distributions as required by Section 19(a) of the Investment Company Act of 1940 to determine whether payment of dividends are expected to be paid from any other source other than net investment income accrued for the current period or certain cumulative periods, but the Company will not be able to determine whether any specific distribution will be treated as taxable earnings or as a return of capital until after at the end of the taxable year.
Portfolio and Investment Activities
During the quarter, the Company made investments in five new portfolio companies and one existing portfolio company. The aggregate capital invested during the quarter totaled $18.1 million , at cost, and the debt investments were made at a weighted average yield of 12.13% .
The Company received proceeds of $31.1 million from repayments, sales and amortization during the quarter, primarily related to the realization of Cook & Boardman Group LLC, Advanced Solutions International, NWN Parent Holdings LLC and Archer Systems LLC.
During the quarter, the Company had net advances of $0.3 million on its existing and new delayed draw and revolving credit commitment to portfolio companies.
The Company’s net realized, and unrealized gains and losses accounted for a decrease in the Company’s net investments of approximately $4.4 million , or $0.31 per share. The total net decrease in net assets resulting from operations for the quarter was $2.9 million , or $(0.20) per share.
As of December 31, 2023, the Company’s investment portfolio consisted of investments in 44 portfolio companies, of which 84.97% were first lien investments and 15.03% were equity, warrants, and other investments. The Company’s debt portfolio consisted of 99.7% floating rate investments and 0.3% fixed rate investments.
Capital Resources
As of December 31, 2023, the Company had $14.7 million in cash, of which $11.6 million was restricted cash, and $30.0 million of unused and available capacity under its revolving credit facility with Capital One, N.A.
Subsequent Events
From January 1, 2024 through February 16, 2024, the Company made advances of approximately $0.4 million on one existing revolving credit commitment to one portfolio company, and received approximately $4.7 million from the repayment of two positions for one portfolio company.
Investcorp Credit Management BDC, Inc. and Subsidiaries
Consolidated Statements of Assets and Liabilities
December 31, 2023
(Unaudited)
June 30, 2023
Assets
Non-controlled, non-affiliated investments, at fair value (amortized cost of $208,587,401 and $219,319,251 , respectively)
$
198,904,947
$
210,150,018
Affiliated investments, at fair value (amortized cost of $23,866,290 and $23,979,565 , respectively)
8,476,606
9,961,311
Total investments, at fair value (amortized cost of $232,453,691 and $243,298,816 , respectively)
207,381,553
220,111,329
Cash
3,092,224
1,093,758
Cash, restricted
11,572,138
8,057,458
Principal receivable
89,224
93,581
Interest receivable
1,346,541
2,041,877
Payment-in-kind interest receivable
152,406
46,088
Due from affiliate
515,361
—
Other receivables
—
1,050
Prepaid expenses and other assets
160,442
361,719
Total Assets
$
224,309,889
$
231,806,860
Liabilities
Notes payable:
Revolving credit facility
$
70,000,000
$
71,900,000
2026 Notes payable
65,000,000
65,000,000
Deferred debt issuance costs
(961,761
)
(1,220,556
)
Unamortized discount
(159,998
)
(195,553
)
Notes payable, net
133,878,241
135,483,891
Payable for investments purchased
5,500,000
1,795,297
Dividend payable
2,159,237
2,590,520
Income-based incentive fees payable
128,876
576,023
Base management fees payable
871,955
906,218
Interest payable
2,268,211
2,293,766
Directors' fees payable
4,343
15,755
Accrued expenses and other liabilities
658,043
445,082
Total Liabilities
145,468,906
144,106,552
Net Assets
Common stock, par value $0.00 1 per share (100,000,000 shares authorized 14,394,916 and 14,391,775 shares issued and outstanding, respectively)
14,395
14,392
Additional paid-in capital
203,338,613
203,327,714
Distributable earnings (loss)
(124,512,025
)
(115,641,798
)
Total Net Assets
78,840,983
87,700,308
Total Liabilities and Net Assets
$
224,309,889
$
231,806,860
Net Asset Value Per Share
$
5.48
$
6.09
Investcorp Credit Management BDC, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
For the three months ended
December 31,
For the six months ended
December 31,
2023
2022
2023
2022
Investment Income:
Interest income
Non-controlled, non-affiliated investments
$
5,153,599
$
6,260,515
$
10,618,887
$
11,869,627
Affiliated investments
540
—
540
(20,611
)
Total interest income
5,154,139
6,260,515
10,619,427
11,849,016
Payment in-kind interest income
Non-controlled, non-affiliated investments
586,119
17,933
667,500
182,667
Affiliated investments
19,280
17,443
38,080
34,447
Total payment-in-kind interest income
605,399
35,376
705,580
217,114
Dividend income
Non-controlled, non-affiliated investments
—
101,755
—
101,755
Affiliated investments
—
—
—
—
Total dividend income
—
101,755
—
101,755
Payment in-kind dividend income
Non-controlled, non-affiliated investments
194,182
171,693
382,433
338,142
Affiliated investments
—
—
—
—
Total payment-in-kind dividend income
194,182
171,693
382,433
338,142
Other fee income
Non-controlled, non-affiliated investments
289,468
210,578
433,454
572,428
Affiliated investments
—
—
—
—
Total other fee income
289,468
210,578
433,454
572,428
Total investment income
6,243,188
6,779,917
12,140,894
13,078,455
Expenses:
Interest expense
2,259,936
2,160,336
4,475,119
3,952,344
Base management fees
980,260
1,057,104
1,959,179
2,161,085
Income-based incentive fees
(72,942
)
—
(72,942
)
(147,145
)
Provision for tax expense
109,497
65,858
210,244
110,188
Professional fees
398,981
271,782
626,388
543,563
Allocation of administrative costs from Adviser
629,045
375,900
892,420
751,800
Amortization of deferred debt issuance costs
97,961
173,334
271,294
346,667
Amortization of original issue discount - 2026 Notes
17,778
17,778
35,555
35,555
Insurance expense
112,984
137,820
225,968
275,641
Directors' fees
72,875
75,625
146,250
151,250
Custodian and administrator fees
77,569
71,828
146,861
143,516
Other expenses
91,550
136,334
215,827
275,815
Total expenses
4,775,494
4,543,699
9,132,163
8,600,279
Waiver of base management fees
(108,265
)
(112,481
)
(194,895
)
(206,627
)
Waiver of income-based incentive fees
—
—
—
—
Net expenses
4,667,229
4,431,218
8,937,268
8,393,652
Net investment income
1,575,959
2,348,699
3,203,626
4,684,803
Net realized and unrealized gain/(loss) on investments:
Net realized gain (loss) from investments
Non-controlled, non-affiliated investments
(5,871,039
)
—
(5,871,039
)
—
Affiliated investments
—
—
—
—
Net realized gain (loss) from investments
(5,871,039
)
—
(5,871,039
)
—
Net change in unrealized appreciation (depreciation) in value of investments
Non-controlled, non-affiliated investments
1,654,277
(1,649,361
)
(513,221
)
(2,113,636
)
Affiliated investments
(226,899
)
(82,479
)
(1,371,430
)
(296,801
)
Net change in unrealized appreciation (depreciation) on investments
1,427,378
(1,731,840
)
(1,884,651
)
(2,410,437
)
Total realized gain (loss) and change in unrealized appreciation (depreciation) on investments
(4,443,661
)
(1,731,840
)
(7,755,690
)
(2,410,437
)
Net increase (decrease) in net assets resulting from operations
$
(2,867,702
)
$
616,859
$
(4,552,064
)
$
2,274,366
Basic and diluted:
Net investment income per share
$
0.11
$
0.16
$
0.22
$
0.33
Earnings per share
$
(0.20
)
$
0.04
$
(0.32
)
$
0.16
Weighted average shares of common stock outstanding
14,394,081
14,388,242
14,393,398
14,387,526
Distributions paid per common share
$
0.15
$
0.15
$
0.30
$
0.30
About Investcorp Credit Management BDC, Inc.
The Company is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments by targeting investment opportunities with favorable risk-adjusted returns. The Company seeks to invest primarily in middle-market companies that have annual revenues of at least $50 million and earnings before interest, taxes, depreciation, and amortization of at least $15 million . The Company’s investment activities are managed by its investment adviser, CM Investment Partners LLC. To learn more about Investcorp Credit Management BDC, Inc., please visit www.icmbdc.com .
Forward-Looking Statements
Statements included in this press release and made on the earnings call for the quarter ended December 31, 2023, may contain “forward-looking statements,” which relate to future performance, operating results, events and/or financial condition. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. Any forward-looking statements, including statements other than statements of historical facts, included in this press release or made on the earnings call are based upon current expectations, are inherently uncertain, and involve a number of assumptions and substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control.
Investors are cautioned not to place undue reliance on these forward-looking statements. Any such statements are likely to be affected by other unknowable future events and conditions, which the Company may or may not have considered, including, without limitation, changes in base interest rates and the effects of significant market volatility on our business, our portfolio companies, our industry and the global economy. Accordingly, such statements cannot be guarantees or assurances of any aspect of future performance or events. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors and risks. More information on these risks and other potential factors that could affect actual events and the Company’s performance and financial results, including important factors that could cause actual results to differ materially from plans, estimates or expectations included herein or discussed on the earnings call, is or will be included in the Company’s filings with the Securities and Exchange Commission, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. All forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240221321957/en/
Investcorp Credit Management BDC, Inc.
Investor Relations
Email: icmbinvestorrelations@investcorp.com
Phone:(646) 690-5047
Source: Investcorp Credit Management BDC
What adjustments were made to ICMB's financial results for Q2 2023?
ICMB made adjustments of approximately $0.02 per share relating to the incorrect accrual of certain expenses.
What was the distribution declared by ICMB for Q1 2024?
ICMB declared a distribution of $0.12 per share for the quarter ending March 31, 2024, along with a supplemental distribution of $0.03 per share.
How many new investments did ICMB make during the quarter?
ICMB made investments in five new portfolio companies and one existing portfolio company during the quarter.
What was the total capital invested by ICMB during the quarter?
ICMB invested a total of $18.1 million, at cost, during the quarter.
What was the net asset value per share for ICMB as of December 31, 2023?
The net asset value per share for ICMB was $5.48 as of December 31, 2023.