Investcorp Credit Management BDC, Inc. Q2 FY2026 earnings call

Parent Support

• The Board of Directors approved Investcorp Capital, an affiliate of Investcorp Group, to provide a backstop commitment to refinance the $65 million 4.78% notes due April 1, 2026, enhancing flexibility and strengthening the balance sheet.

Third Quarter Results

• Net investment income before taxes was $0.6 million or $0.04 per share, down from prior quarter. Net assets declined 4%, NAV per share $5.04. Nonaccruals 4.4% of portfolio. Weighted average interest coverage ratio 2.3x, LTV ~41%, leverage 4.6x.

Market Conditions

• Deal flow and sponsor-led M&A slow; refinancing and portfolio redeployment activity slowed. Selective in evaluating opportunities meeting targeted yield and credit quality criteria; fewer than 10% of pipeline deals advanced to deeper diligence.

Investment Activity

• Invested in preferred equity of 4L Technologies; fully realized 2 portfolio investments generating $6.5 million proceeds with IRR ~12.7%.

Financials

• Portfolio fair value $196.1M, net assets $72.7M. Weighted average yield of debt 10.9%. Declared dividend of $0.12 per share and supplemental $0.02 per share. Liquidity: ~$11.6M cash, $7.8M restricted, $36.5M capacity under revolving credit.

Net investment income before taxes for the quarter was $0.6 million or $0.04 per share, a decrease of $0.02 per share from the previous quarter. Net assets declined by approximately 4% with net asset value per share decreasing to $5.04 per share from $5.27 last quarter. Nonaccruals accounted for 4.4% of the portfolio. The weighted average interest coverage ratio improved to 2.3x, weighted average LTV remained approximately 41%, and weighted average leverage declined to 4.6x. Approximately 82% of assets at fair value are rated in the top 2 risk rating categories. The portfolio is broadly diversified across 18 industries with average exposure to any single company representing less than 3% of the portfolio's fair value.

Forward-Looking

• Expect NII to benefit from new fundings.
• Committed to disciplined portfolio management for long-term shareholder value.
• Refinancing commitment from parent strengthens balance sheet and flexibility.

Risks

• Market conditions: Solid fundamentals but heightened caution; deal flow and M&A slow; refinancing activity slowed.
• Accounting: Required to keep certain nonaccrual assets on portfolio despite 0 cost and fair value due to accounting rules.

Q: On the backstop, could you clarify whether or not that's to buy up the full refinance amount for the maturing $65 million bond?

A: No, it's to refinance the notes in the event that we have not refinanced them prior to the April 1, 2026 maturity debt, with an agreed coupon of SOFR plus 550 on a floating rate basis.

Q: What was the spillover income in the quarter?

A: Our dividend has been above NII, and the declared dividend to be paid in December can be assumed similarly to the spillover amount.

Q: Why keep nonaccrual assets with 0 cost and fair value on the investment portfolio?

A: Required by accounting rules to include all assets with any chance of being paid at any time, even if 0 value.