Investcorp Credit Management BDC, Inc. Q3 FY2025 earnings call

• Strategic priorities centered around resolving legacy credit issues and repositioning the portfolio for steady performance.
• NAV increased due to increased nonrealized gain, offset by decline in net investment income per share due to reduced investment activity and repayments.
• Market slowdown in new deal activity due to tariffs and geopolitical uncertainty, but market fundamentals intact and expecting activity to pick up as macro uncertainty related to tariffs improves.
• Portfolio companies with less than 20% direct tariff exposure are implementing mitigation strategies.
• In the quarter, invested in 1 new and 2 existing portfolio companies; fully realized 3 portfolio companies with varying IRRs.
• Fair value of portfolio was $192.4 million, net assets $78.1 million, weighted average debt portfolio yield 10.8%, 77% in first lien debt, 98.2% in floating rate instruments.
• Declared a distribution of $0.12 per share for the quarter ended June 30, 2025.

For the quarter ended March 31, 2025, net investment income before taxes was $0.7 million or $0.05 per share compared to $0.06 per share in the prior quarter. Net asset value per share increased $0.03 per share to $5.42. There were 2 nonaccrual investments representing approximately 1.7% of the total portfolio at fair value, down from 5 investments and 3.6% in the previous quarter. During the quarter, 1 new portfolio company was invested in with fundings totaling $5.1 million at cost, and 3 existing portfolio companies were invested in. 3 portfolio companies were fully realized with proceeds totaling $7.3 million. Industry concentrations at quarter end included Professional services at 15.5%, containers and packaging at 9.2%, trading companies and distributors at 8.6%, commercial services and suppliers at 8.0%, and IT services at 7.9%.

• Expect more stable earnings profile for the remainder of 2025 notwithstanding macro shocks.
• Second half of 2025 may provide interesting investment opportunities as market volatility abates.
• Confident in delivering consistent risk-adjusted returns going forward.

• Tariff concerns and broader geopolitical uncertainty contributing to decline in M&A volumes and sponsor-backed financing.
• Less than 20% of the portfolio may experience moderate direct effects from tariffs, with portfolio companies actively implementing mitigation strategies.

Q: Mr. Paul Johnson asks about how advisers can scale and the impact of adviser expenses, including allocation of about $1.4 million per year and insurance costs, and if the BDC is cash flow positive after stripping out PIK income.

A: Suhail Shaikh responds that waiving fees is something that can be considered, they are working on scaling the private credit platform at Investcorp which helps absorb overhead and expenses, and they are raising new capital.

Q: Mr. Christopher Nolan follows up asking about whether raising capital is for equity or debt, if they should do share repurchases given the stock trading at half book and dividend yield, and if we should see a bump up in NII in the second quarter.

A: Suhail Shaikh says the capital raising is for other vehicles, share repurchases are not currently planned but not off the table, and there may be a little increase in NII due to spread widening in new opportunities, though macroeconomic factors will drive spreads in the second half.