Investcorp Credit Management BDC, Inc. Announces Revised Financial Results for the Quarter Ended December 31, 2023, and Quarterly and Supplemental Distribution
- None.
- None.
Insights
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.
HIGHLIGHTS
-
On February 8, 2024, the Company’s Board of Directors (the “Board”) declared a distribution of
$0.12 $0.03 -
During the quarter, ICMB made investments in five new portfolio companies and one existing portfolio company. These investments totaled
$18.1 million 12.13% . -
ICMB fully realized four portfolio companies during the quarter, totaling
$29.2 million 14.2% . -
During the quarter, the Company had net advances of
$0.3 million -
The weighted average yield on debt investments, at cost, for the quarter ended December 31, 2023, was
11.46% , compared to11.01% for the quarter ended September 30, 2023. -
Net asset value decreased
$0.35 $5.48 $5.83 $5.0 million 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 |
|
|
Investment portfolio, at fair value |
|
|
Net assets |
|
|
Weighted average yield on debt investments, at cost (1) |
|
|
Net asset value per share |
|
|
Portfolio activity in the current quarter: |
|
|
Number of new investments |
5 |
|
Number of portfolio companies, end of period |
44 |
|
Total capital invested |
|
|
Proceeds from repayments, sales, and amortization |
|
|
Net investment income (NII) |
|
|
Net investment income per share |
|
|
Net decrease in net assets from operations |
|
|
Net decrease in net assets from operations per share |
|
|
Quarterly per share distribution paid on December 31, 2023 |
|
|
(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
This distribution represents a
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
The Company received proceeds of
During the quarter, the Company had net advances of
The Company’s net realized, and unrealized gains and losses accounted for a decrease in the Company’s net investments of approximately
As of December 31, 2023, the Company’s investment portfolio consisted of investments in 44 portfolio companies, of which
Capital Resources
As of December 31, 2023, the Company had
Subsequent Events
From January 1, 2024 through February 16, 2024, the Company made advances of approximately
Investcorp Credit Management BDC, Inc. and Subsidiaries Consolidated Statements of Assets and Liabilities |
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|
|
December 31, 2023 |
|
|
|
|
|
|||
|
|
(Unaudited) |
|
|
June 30, 2023 |
|
||||
Assets |
|
|
|
|
|
|
|
|
||
Non-controlled, non-affiliated investments, at fair value (amortized cost of |
|
$ |
|
198,904,947 |
|
|
$ |
|
210,150,018 |
|
Affiliated investments, at fair value (amortized cost of |
|
|
|
8,476,606 |
|
|
|
|
9,961,311 |
|
Total investments, at fair value (amortized cost of |
|
|
|
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 |
|
|
|
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) |
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|
|
For the three months ended
|
|
|
For the six months ended
|
|
||||||||||||||
|
|
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
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.
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Investcorp Credit Management BDC, Inc.
Investor Relations
Email: icmbinvestorrelations@investcorp.com
Phone:(646) 690-5047
Source: Investcorp Credit Management BDC
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