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Edited Transcript of ICMB.OQ earnings conference call or presentation 11-Sep-19 5:00pm GMT

Q4 2019 Investcorp Credit Management Bdc Inc Earnings Call

NEW YORK Sep 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Investcorp Credit Management Bdc Inc earnings conference call or presentation Wednesday, September 11, 2019 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher Edward Jansen

Investcorp Credit Management BDC, Inc. - President, Treasurer & Secretary

* Michael C. Mauer

Investcorp Credit Management BDC, Inc. - Chairman & CEO

* Rocco Angelo DelGuercio

Investcorp Credit Management BDC, Inc. - Chief Compliance Officer & CFO

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Conference Call Participants

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* Christopher Whitbread Patrick Nolan

Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research

* Paul Conrad Johnson

Keefe, Bruyette, & Woods, Inc., Research Division - Associate

* Robert James Dodd

Raymond James & Associates, Inc., Research Division - Research Analyst

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Presentation

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Operator [1]

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Welcome to the CM Finance Fourth Quarter Earnings Conference Call. Your speakers for today's call are Mike Mauer, Chris Jansen and Rocco DelGuercio. (Operator Instructions) I'll now turn the call over to your speakers. Gentlemen, you may begin.

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [2]

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Thank you, operator. Thank you all for dialing in this afternoon. I'm joined by Chris Jansen, my Co-Chief Investment Officer; and Rocco DelGuercio, our CFO. Before we begin, Rocco will give you our customary disclaimer regarding information and forward-looking statements. Rocco?

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Rocco Angelo DelGuercio, Investcorp Credit Management BDC, Inc. - Chief Compliance Officer & CFO [3]

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Thanks, Mike. I would like to remind everyone that today's call is being recorded and that this call is the property of Investcorp Credit Management BDC. Any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by visiting our Investor Relations page on our website at www.icmbdc.com.

I would also like to call your attention to the safe harbor disclosure in our press release regarding forward-looking information and remind everyone that today's call may include forward-looking statements and projections. Actual results may differ materially from these projections. We will not update forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our Investor Relation page on our website.

At this time, I'd like to turn the call back to our Chairman and CEO, Michael Mauer.

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [4]

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Thanks, Rocco. The past few months have been an exciting time for us as we announced on June 26, Investcorp entered into a definitive agreement to purchase the majority ownership interest in the Adviser. On August 30, the last of the steps associated with that purchase was completed. More comprehensive detail is provided in our press release, which can be found on our website and will be further elaborated on -- in our 10-K, which will be released at the end of the week.

To summarize, Investcorp acquired Stifel and Cyrus' interest in the Adviser. The composition of our Board will change somewhat on September 15. And we have changed the name and ticker of our fund from CM Finance, Inc., CMFN, to Investcorp Credit Management BDC, ICMB.

Chris, Rocco and I, along with the entire investment team, will continue in our roles and are truly excited to join the Investcorp platform. We see enormous opportunities ahead for the BDC. The format of this call will follow what we have customarily done. I'll comment on the quarter and our outlook. Chris will detail portfolio activity during and after the quarter. Rocco will review our financial results and then I'll conclude with additional commentary on a handful of specific portfolio positions before we take Q&A.

We continue to reposition and diversify our portfolio with investments in new industries into new portfolio of companies. We have been conservative, focusing on first-lien loans, and our portfolio is approximately 80% first lien today. We have experienced some challenges in the portfolio, but I'm proud of the work the team has done managing existing investments, originating new opportunities and continuing to reposition us through a focus on direct and club relationships.

New deal economics are, in our view, more borrower and sponsor-friendly than we think is ideal. But we have seen name-specific opportunities to find tighter, noneconomic terms, especially when considering leverage levels, maintenance covenants, restricted payments and other elements, which add risk from a lender's perspective.

As always, the direct lending and club loan space tends to be slower moving, less certain, but ultimately a source of better structured loans for us to evaluate and invest in. This quarter, we made investments in a DIP loan, [in] secondary market purchases of loans and bonds, a syndicated loan and in a number of club deals. We leveraged our relationships to find and make some of the most attractive loans this quarter and club deals for Limbach and Potpourri.

Chris will walk through all of our investment activity during and after the quarter in detail, and then Rocco will discuss our financial results.

I'll conclude with some commentary about our largest marks, a few particularly topical investments and then I'll talk about our outlook over the balance of the calendar year. As always, we'll end with Q&A.

With that, I'll turn it over to Chris.

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Christopher Edward Jansen, Investcorp Credit Management BDC, Inc. - President, Treasurer & Secretary [5]

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Thanks, Mike. We had another active quarter investing in 6 portfolio companies, including 3 new portfolio companies. We invested $32.2 million this quarter, all of which was in first lien and DIP loans. We also had 2 full realizations during the quarter. First, I like to cover our fundings on revolving and delayed draw positions. We funded approximately $200,000 on 1888 Industrial Services revolver. We have no delayed draw commitments outstanding currently. As we disclosed on our last call, we made a new investment in the first-lien loan of Limbach Holdings, a contract that focused on HVAC, plumbing, electrical and mechanical services for commercial construction. Our yield at cost on Limbach was 10.8%. We participated in the new first-lien loans for Flow Control, a manufacturer of pumps and valves for the power, industrial and energy markets. First Reserve is the sponsor. Our yield at cost is approximately 9%. We're also a part of a first-lien club transaction for Potpourri Group. Rosslyn Capital is the sponsor.

Potpourri is a large multichannel, direct-to-consumer marketer, targeting middle-income women aged 45 and over and is focused on clothing, accessories, home goods and specialty products. Our yield at cost was approximately 11.6%.

We joined with other existing Fusion lenders to first provide a super-senior first-lien facility, which then rolled into a DIP loan as the company filed for bankruptcy in June. These loans provided needed liquidity as Fusion began its reorganization process. The yield is not a particularly meaningful number as the bankruptcy is set to last about 4 months, [but] we calculated approximately 30% to 60% depending on the specific funding date.

We also provided a small incremental loan for 1888 Industrial Services on a first-lien basis as the company made a small strategic acquisition. This loan supports our broader investment in the turnaround of the company, which has been making good progress since the oil crisis. Our yield on this new loan at cost is 7.3%. We're active in managing our positions in Exela during the quarter. Early in the quarter when sentiment was very positive and yields tightened, we sold our position in the first-lien 10% notes at a price above par and purchased a small additional position in the first-lien loan.

In May, we added back a small position in the bonds. Our yield on the incremental loan position was approximately 9% at cost, and the new bond position yields approximately 13.1% at cost.

We reduced our net exposure to Exela by a net $4 million as well as lowering our average cost. We had 2 small realizations during the June quarter. First, we sold our position in Nexeo Plastics secured bond. We evaluated our ability to build a more meaningful size at an attractive price and decided the market was more conducive to selling. Our fully realized IRR on the small position was 17%, which is elevated due to the short holding period.

Secondly, we sold our co-invest position in Zinc Acquisition Holdings. Our loan had already been repaid, and we're very pleased with our 80.5% IRR on our 2 year-long equity investment. When considered together, we realized a 23.1% IRR on our debt and equity investment in Zinc. Since quarter end, we have made 3 new investments and had 2 full realizations. First, we invested in an incremental first-lien loan to United Road Services, the leading auto transportation service company in the U.S. United Road is sponsored by Carlyle. Our yield at cost is approximately 8.6%.

We also participated in the first-lien club loan for Hyperion Materials & Technology. Hyperion is an industrial manufacturer of products made from hard and very hard materials, carbide and synthetic diamonds. It was carved out of Sandvik by KKR. Our yield at cost is approximately 8.3%.

Finally, we're also participants in a first-lien club loan to Northstar Group Services, an environmental and facility management company, focused on the remediation and deconstruction services markets. Northstar is owned by J.F. Lehman. Our yield at cost is approximately 7.8%. We had 3 full realizations after quarter end as well. First, we sold our final debt exposure to PR Wireless, also known as Open Mobile. We had previously sold the bulk of our position holding only a delayed draw commitment, which fully funded last quarter. Today, we have no exposure to Open Mobile from an NAV perspective, although we do continue to carry warrants at 0 value. Our fully realized IRR on Open Mobile's loans was approximately 10.8%.

We also sold our first-lien position in FleetPride. This is our third iteration of the investment and candidly we viewed it as a high quality, but [ultimately] noncore position. Our fully realized IRR in this position was approximately 6.5% and our IRR across all investments in FleetPride was approximately 14%. We sold our first position -- first-lien position in Sears. This is a small position, and we never had the ability to build it to a more meaningful size. Our fully realized IRR on the small position was approximately 11.3%.

Using the GICS standard as of June 30, our largest industry concentration was professional services at 13.5%, followed by energy equipment and services at 10.2%, media at 9.9%, construction and engineering at 9.8% and commericial services and supplies at 8.6%.

Our portfolio companies are in 21 GICS industries versus 14 industries last year. As of June 30, our portfolio company count was 33 versus 32 at March 31 and 25 companies a year ago. This count stands at 34 today.

I'd now like to turn the call over to Rocco to discuss our financial results.

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Rocco Angelo DelGuercio, Investcorp Credit Management BDC, Inc. - Chief Compliance Officer & CFO [6]

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Thanks, Chris. For the quarter ended June 30, 2019, our net investment income was $3 million or $0.22 per share. The fair value of our portfolio was $306.4 million compared to $299.1 million at March 31. Our investment activity account for $7.3 million increase in our portfolio, including $8.2 million of net realized and unrealized losses.

Our new investments during the quarter had an average yield of 11.5%. The weighted average yield of our debt portfolio was 10.5%, an increase of 6 basis points from March 31. The major drivers of this increase were our new investments, which had a slightly higher yield than our portfolio on an average and the decline in LIBOR, which accounted for a negative 25 basis point impact.

As of June 30, our portfolio consisted of 33 portfolio companies, 77.6% were first-lien investments, a slight increase from last quarter, driven by our continuing -- continued focus on first-lien investments in this quarter.

As of June 30, 18.7% of our portfolio is in second-lien investments, 3.7% is in unitranche investments and 0% of our investments are in equity warrants or other positions. 96.8% of our debt portfolio was invested in floating rate loans and 3.2% in fixed rate positions. Our average portfolio company investment was approximately $9.3 million, and our largest portfolio company investment was PGi at $17.3 million. We were 1.16x levered as of June 30 versus 0.91x levered as of March 31.

Finally, with respect to our liquidity, as of June 30, we had $19.7 million in cash, $6.6 million in restricted cash and $19 million of capacity under our revolving and credit facility with UBS. Additional information regarding the composition of our portfolio will be included in our Form 10-K, which will be filed on Friday, September 13.

With that, I'd like to turn the call back over to Mike.

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [7]

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Thank you, Rocco. As we all know there's a trade-off between risk and return. We and our peers in the BDC space target returns materially higher than that of investment grade bonds, broadly syndicated loans or even high-yield markets. We try to mitigate the risk through diversification in the portfolio across sectors, geographies and borrowers. We focus on the quality of loan documentation, maturities, cash flows and return of principal. We've managed down the portion of the portfolio in second-lien investments from 48% in 2016 to less than 20% today, and we do not see reasons to reach down the capital structure now to generate yield in the current environment. We also have an investment team with deep investment background in distressed market, which is a valuable resource when any of our borrowers has performance issues.

Fusion Connect filed for bankruptcy on June 3 due to a combination of factors, especially failure to manage costs and integrate the acquisitions. Fusion ran out of liquidity in April and defaulted on its interest in principal payments due to lenders. Since that time, we have been in active discussions with other lenders, counsel and advisers to ensure the greatest extent possible we can, our ability to participate ratably and strategically and economically advantageous transactions with the company.

Fusion currently expects to exit bankruptcy in October. During May, 4L unexpectedly announced that both of its major segments had lost major customers. Management's previously announced guidance was lowered meaningfully, and the company hired advisers. Lenders have now formed an ad hoc committee, we're working with counsel and advisers to work toward reorganization of the business. There's a great deal of uncertainty in this situation as the loan is still transitioning from a largely CLO based ownership group. Business plans are being developed and capital structure discussions are ongoing.

As Chris explained, we actively managed our position in Exela Technologies through the quarter. Since our trades, the market consensus appears to be that Exela's operational restructuring charges are actually permanent in nature, which if true would reduce EBITDA and at current run rate level these charges put the company under liquidity pressure. The market's negative sentiment is most apparent in the trading levels of the high-yield bonds with the loans trading down in sympathy.

Our view is that the market is overly pessimistic. The company has multiple levers to manage liquidity, and we expect the current sentiment to shift over the coming quarters. We marked down our position in the first and second-lien loans in Premiere Global Services by an aggregate of $1.2 million this quarter. Trends in PGi's fundamental results continue to be challenging. That said, the sponsor, Cyrus Capital, continues to be supportive and behave in a manner that gives us confidence in the business over the longer term, and we've maintained an open dialogue with the sponsor, our fellow lenders and industry professionals. We're optimistic of the company's ability to continue to execute a turnaround, and we see real upside potential if PGi's transition to its new business model is reasonably in line with management's plans.

AAR or 1888 has been a constant focus for us since 2014. We supported the company through an out-of-court restructuring and currently provide a revolver for working capital purposes as well as multiple tranches of term debt. 1888 made an acquisition this quarter and is poised to grow outside its historic exclusive focus on the DJ Basin, diversifying into the Permian and Wyoming.

We provided an incremental term loan to help support this acquisition. We remain cautious as revenues are still highly concentrated. We have hired a new CEO in conjunction with the acquisition, and we are in the process of hiring a new CFO. Deluxe Canada continues to perform well and its independent results are well within our expectations. That said, the U.S. parent company, Deluxe Entertainment Services has entered into an RSA with its lenders and is targeting to reorganize their capital structure in the coming weeks due to difficulties in its other business segments. We are in active dialogue with lenders to the U.S. parent to advisers and counsel and most especially with our fellow club lenders to Deluxe Canada. We expect that there maybe some business disruption associated with this, but our loan was well underwritten and the RSA contemplates no impairment for our class.

Despite the negative credit events for several of our borrowers this quarter, we continue to make progress with our portfolio repositioning. We've increased our portfolio company count from the mid-20s to the mid-30s today and are gradually increasing the number of club deals in the portfolio. We've used opportunistic sales to help reposition the portfolio and fund the purchase of new loans.

In addition, we have several investments that are either committed or in the pipeline that we expect to fund in the near term.

Last quarter, I guided that our new leverage target would be in the 1.25 to 1.5x context. We were at 1.16x as of June 30, moving toward our target range. As I previously stated, The Adviser will waive base management fees in excess of the excess over 1% for next quarter on leverage 1 -- above 1x. We did not cover our June quarterly dividend with NII and did not earn our incentive fee.

We waived the portion of our management fees associated with base management fees over 1x leverage. We do expect to cover the dividend and earn our incentive fee in the September quarter. Our Board of Directors declared a distribution for the quarter ended September 30, 2019, of $0.25 per share payable on October 16, 2019, to shareholders of record as of September 26. We have maintained our dividend at $0.25 since March of 2017 and are confident that this level is supported by our ability to generate NII without reducing the quality of our investments or changing our focus from secured lending opportunities. Due to the negotiation of the transaction between CM Investment Partners and Investcorp, we have been in an extended blackout period and as such we are unable to purchase any additional shares.

As a reminder, the Board approved the extension of this $5 million program through May 1, 2020. I would also like to update you on Investcorp's commitment to purchase shares of ICMB. There are 2 components of their commitment. First, there is the commitment to make open market purchases under a 10b5 program; and secondly, to purchase shares at NAV. Investcorp has told us that they expect to execute purchases under both components commencing within the next 90 days.

Lastly, I want to finish by emphasizing that while 2 quarters ago we started to reposition the portfolio and further diversify it, we've only begun to make progress. As part of a larger platform with Investcorp, a firm which has over $32 billion of run rate AUM

(technical difficulty)

credit being over $12 billion of that amount. We have enhanced sourcing opportunities and additional resources to leverage as we execute this repositioning.

Operator, please open the line for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Christopher Nolan.

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Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [2]

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The dividend. Given your high leverage ratios, your migration to first-lien loans, how do you anticipate covering the dividend going forward?

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [3]

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As we look at the portfolio as it's currently constructed and our target between 1.25 and 1.5, we will cover the dividend.

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Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [4]

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And then was the higher yield on new investments this quarter basically skewed by the DIP loan?

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [5]

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No. It was not. If you look at the additions, there are probably about 10 additions, and they were principally between 8% to 12% yield. So it was well dispersed and no high concentration. The DIP loan is a very, very small investment. So did not disproportionately affect things.

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Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [6]

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Great. And final question would be, Mike, your comments on waiving the management fees above 1:1 debt to equity, is that waiving all base management fees above 1:1? It wasn't clear to me.

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [7]

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I just want to make sure that I'm answering the question as asked. Any base management fee above 1%, not 100% of base management fee, it's the above 1% will be waived above 1 turn of leverage.

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Operator [8]

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Our next question comes from Paul Johnson.

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Paul Conrad Johnson, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [9]

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So I wanted to start -- we're not aware of Investcorp's presence in the U.S. middle market. And I know -- I think you mentioned that they managed $12 billion or so in credit assets. Are any of those middle market assets? And if so, or if not speak a little bit to what Investcorp brings to the table in terms of value.

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [10]

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So a couple of things. One is, in credit, none of those are in middle market. That was the strategic rationale for us becoming part of Investcorp's platform. Investcorp, who has been around since 1982 and is, by definition, approximately 37 years in the middle market private equity. So they are very, very prevalent in the middle market and prevalent in the U.S. middle market equity side. It brings to the table a platform that has $32 billion overall. It's got -- of the $12 billion a little less than half of that is in broadly syndicated credit in the U.S., which has dialogues across the street with regional and large banks. It also brings to the table a lot of middle market lenders who are trying to underwrite to the parent private equity side and bring dialogue. So over the last month, there's been several times that I have gotten calls for people who were looking for dialogue with Investcorp who are very active in middle market lending, some of which we know very well, but it has really ramped up the dialogue and others that we did not know as well who have reached out and want to have a dialogue where before they did not.

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Paul Conrad Johnson, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [11]

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And then -- so as far I believe that transaction closed on August 30. So are you guys starting to see deal flow right away? I mean, has that already changed or do you think it will take more time to sort of integrate in...

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [12]

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Well, I think I'm going to stress on the word starting, the answer is, yes. There's 2 deals in the last 2 weeks that have come in, one of which was not interesting to us, that we've already passed on; the other, which is interesting and we're digging into. So it has started, but I think, it is nowhere near what I would say is a ramped up stage as a result of the relationship. I think that will take several months. And more importantly, we are looking at ways to broaden the platform from AUM whether or not there's private funds alongside or other ways to do that, and having more capital will also facilitate ramping up those discussions.

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Paul Conrad Johnson, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [13]

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And then as far as their equity fusion at NAV basically 5% of the equity base is planned to inject into the BDC. Just to be clear, did you say that they expect to execute that within the next 90 days or is that something that will take place over the next 2 years?

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [14]

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We are in discussions with them about how it will happen, but it will begin within the next 90 days is what they have told us they expect, both the at NAV, Paul, and the open market.

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Paul Conrad Johnson, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [15]

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Okay. And then just 1 or 2 more, if I may. I was hoping you could provide any sort of color or update on your investment in PGi from your global systems since that was one of the larger investments that stressed marked last quarter?

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [16]

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Listen, as you know, we operate under NDA, so it's hard to say much there. What I would say is that Cyrus, the sponsor continues to be very active, very focused on it. It's one of their largest equity investments. And we continue to feel positive about the way they are managing that investment.

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Paul Conrad Johnson, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [17]

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And then my last question, as far as your outlook for the dividend, I know you said you expect to earn that along with your full incentive fee or begin earning an incentive fee next quarter. Does your outlook analysis include any sort of credit losses baked into those assumptions?

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [18]

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So what is -- what we've done is we continue to look at our portfolio. We run models against it without going into any details. We think that, that will cover the dividend. We'll earn our base management fee, but if or how much of the incentive fee is probably the question there. But we're very happy over the near to medium term to be covering the dividend and then we'll figure out how much we earn in the incentive fee. But the objective here is to have a portfolio that earns the dividend and we have -- and we move toward repositioning of the portfolio more diverse as we continue over the next 6 months.

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Operator [19]

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Our next question comes from Robert Dodd.

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Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [20]

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I'm out of the office today for the moment, so excuse me if there's background noise. On the -- going back to Chris' imposed question on the dividend. I mean, obviously, if we look accruing portfolio at principal was up sequentially, dividend yield was stable, yet total investment income and NII, obviously, were down materially, sequentially and didn't cover the dividend this quarter. So could you give us some kind of more explicit color than your confidence level about why there was the decline in that quarter with the portfolio growing and the yield stable, and why you expect that trend to reverse pretty dramatically next quarter?

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [21]

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Yes. I'd say there are 2 pieces to that Robert, and thank you for the question because it requires a little bit of explanation. Number one is, we have increased a little bit under our leverage from prior quarter. So we're at, I believe, it was 1.16x, I don't have it right in front of me. As of the end of the quarter, we're targeting to get into that 1.25 to 1.5x range, which I think we will be barring some unexpected repayments or something like that, which is not necessarily be a bad thing, but that would affect the leverage ratio.

The second piece is that we had unsettled trades going into quarter end where we had made investments, we were poised to start earning the interest, they delayed a little on the settling of those. And thirdly was the cash balances that we deployed during the quarter. So when we look at going into September, we should cover it and then going into the December quarter, we should be in better shape as far as the fully deployed.

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Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [22]

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Got it. Got it. And as you mentioned in your prepared remarks, you started rotating the portfolio -- repositioned the portfolio about 3 quarters ago, obviously since then there's been a fairly steady downward trend in NAV with the marked coming through. So is there anything to read into the portfolio repositioning, the attrition of NAV and as you continue to finalize kind of that portfolio repositioning, are we going to continue to see this slow kind of attrition of NAV until some of those legacy assets get washed out?

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [23]

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Well, listen, I mean, if we felt that the fair value was done we would have marked it down as of the quarter end. So I don't know that we will or won't. We do have some positions that we talked about 4L and we talked about Fusion. I think over the next 60, 90 days both of those should have a lot more clarity on the restructuring and where they are coming out. I think also Exela had indicated publicly that they expected to work through their restructuring charges through the end of the year. That obviously has a delay in the timetable in which we see it. But if they do what they said they're going to do, there presents upside from where it is right now. So there's offset and uncertainty still there. So unfortunately, I don't have a very succinct answer for you, Robert. Hopefully, I...

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Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [24]

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That's helpful. And that's kind of the -- to where the question comes from. You comments on like 4L, where it's still rotating from the CLO-type ownership group to maybe something that might be more distressed oriented or not CLO eligible. I mean, doesn't that kind of activity tend to put pressure on the fair values in the near term, maybe not permanently, right, just trading values though, I mean. So is that a risk there?

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [25]

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Yes, absolutely. The -- I would say, your observation is correct, I'd actually take it one step further. When you have any large group that's transitioning, you have pressure on values because that's technical not fundamental. Those are people who want to sell and not hold. On the other side, the people who are buying tend to be people who see value and they are not seeing value where they are buying it, they are seeing value significantly above where they are buying it because it tend to be hedge funds that are distressed. And if they are seeing it at the purchase price, they'd never buy it. So...

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Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [26]

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Got it. Yes. Understood. Understood. And if I can 1 more, obviously, we don't have the portfolio, but just one other name I know that I've discussed with you guys in the past because it used to be a big position I don't know how big it is today. But Montreign, any update on those, guys? I think at one point it was your #1 position, but obviously it hasn't been for a while now, but anything going on there?

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [27]

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Yes. We've -- the public data says that it -- from a volatility, it went down a bit over the last 6, 9 months. Over the last month to 2 months, we've seen some positive news and it's playing out the way we would have expected it to long term. It would be what I'd say. The other thing is you can go on publicly and look at the New York State Gaming Commission numbers of revenue by week. They were very, very weak when they opened 18 months ago. As of this spring, they had opened or it was open nearby the water park and some other things. They still do not have open all of the, I think, it's the village, but definitely the golf course and some other things. So you can see that their top -- I want to say their top 10 weeks of revenue have been in the last 15 weeks. I could be off a little there, but you can go and look at that, and it continues to ramp up.

I don't think it'll be significant as a stand-alone, but hopefully it will help the overall business. The sport book became legal as of September 1. There's only 2 weeks in as of today as far as revenue on that separately identified piece. And neither one of those has 4 weeks of college football and NFL in it. And it tends to be sport books that these -- we -- our view is NFL and college football, NCAA basketball are probably the biggest drivers around that piece, but it will help drive some incremental traffic too.

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Christopher Edward Jansen, Investcorp Credit Management BDC, Inc. - President, Treasurer & Secretary [28]

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And I will top that off. It's Chris. The parent has continued to be supportive in their public documents as it's a public filer and there is a commitment to continue to fund from the parent owner to continue to fund just in case the funds are needed.

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Operator [29]

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We have another question from Christopher Nolan.

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Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [30]

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The look back, I see with the new management that there's an 11 quarter look back, and that's a change from just a calendar quarter look back. Is that correct we are looking at?

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Rocco Angelo DelGuercio, Investcorp Credit Management BDC, Inc. - Chief Compliance Officer & CFO [31]

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No. No, it's the same thing, Chris, it's 11 quarters, including the current quarter. It just -- it was just reset.

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [32]

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So it's a rolling 12. It's not a calendar, it's always 12 back.

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Operator [33]

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(Operator Instructions) At this time, we have no questions.

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Michael C. Mauer, Investcorp Credit Management BDC, Inc. - Chairman & CEO [34]

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Thank you very much, operator. Thank you, everyone. We look forward to speaking in several weeks.

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Operator [35]

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This concludes today's conference call. Thank you for attending.