Welcome to the Investcorp Credit Management BDC, Inc. Earnings Release for the Third Quarter ended March 31, 2023. Your speakers for today's call are Mike Mauer, Suhail Shaikh, and Rocco DelGuercio. I would now like to turn the call over to your speakers. Please begin.

Thank you, operator, and thank you for joining us on our third quarter call today. I'm joined by Suhail Shaikh, my Co-CIO, and Rocco DelGuercio, our CFO. Before we begin, Rocco will give our customary disclaimer regarding information and forward-looking statements. Rocco?

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

Thank you, Rocco. The March quarter marks the third quarter of our fiscal year. In the beginning of 2023, there continue to be limited new issue and refinancing opportunities driven by broader market uncertainty and high interest rates. In the second half of the March quarter, we saw the level of activity pick up slightly. The collapse of Silicon Valley Bank and Signature Bank led to a broadly accepted credit contraction from middle market banks, which will further increase our opportunities. We saw our deal flow pick up after a slow December quarter, primarily driven by secondary opportunities across all industries. Especially during periods of market volatility, we actively focus on opportunities in both existing portfolio companies across our platform as well as in sectors we are familiar with. During the quarter, we invested in one new portfolio company and three existing portfolio companies. We have typically found that in a highly competitive market environment, our best opportunities come from companies we already lend to, as these tend to have known performance and better structures. The investments we made during the quarter and after quarter-end were all sponsor-backed. Even in a competitive environment, we remain optimistic about our pipeline and believe our portfolio is well positioned to benefit from any further increase in interest rates. The weighted average yield of our debt investments during the quarter increased approximately 25% to 13.4% from 10.7% at December 31. Although our pipeline is robust, we continue to be very selective when investing in new credits. We remain focused on investing in high free cash flow and recession-resistant businesses. The credit quality of our current portfolio remains stable. Despite a challenging market environment, the weighted average EBITDA of our debt investments improved quarter-over-quarter. This is supported by the substantial amount of equity question in our portfolio of companies, provided by well-established middle market sponsors. Our weighted average loan-to-value ratio for all debt investments is approximately 50%. We're proud of the continued improvement in the credit quality of our portfolio. Suhail will now walk through our investment activity during the March quarter and after quarter-end. Rocco will go through the financial results. I'll finish with commentary on our non-accrual investments, our leverage, the dividend, and our outlook for the rest of 2023. As always, we'll end with Q&A. With that, I'll turn it over to Suhail.

Thank you, Mike. As Mike mentioned, we've been seeing a steady flow of new opportunities. These typically fall into two main categories: add-ons or secondary purchases of existing portfolio investments and opportunistic secondary purchases and refinancing of new companies. We're beginning to see some new responsive platform transactions where the volumes are significantly below our historical experience. We invested in one new portfolio company and three existing portfolio companies this quarter. We also fully realized our position in two portfolio companies. During the quarter, fundings for commitments and new investments totaled approximately $11.1 million. In the same period, repayments totaled approximately the same amount of $11 million. We invested in Sandvine, a portfolio company of Francisco Partners. We have been an investor in Sandvine and our other funds for over four years. The company is a leading provider of active network intelligence and security solutions for network operators and enterprises globally. We invested in the first lien term loan. Our yield at cost is approximately 11.8%. We opportunistically added to our position in two existing portfolio companies. First, we invested in the first lien term loan of LaserAway. LaserAway is a leading chain of laser hair removal with non-invasive aesthetic dermatology, and our yield at cost is 11.3%. Second, we invested in the priority term loan of Bioplan. Bioplan provides packaging and labeling solutions to the beauty and fragrance industry. Our yield at cost is approximately 15.8%. We also participated in a small equity raise for Techniplas, one of our existing portfolio companies. Techniplas is a global manufacturer of plastic components for the automotive industry. As mentioned above, we fully realized our position in Limiting Oil Field Services, which was refinanced. Our fully realized IRR was approximately 11.3%. We also fully realized a position in AgroFresh, which was repaid as part of our exit. Our fully realized IRR was approximately 10%. After quarter-end, we invested in two new portfolio companies. First, we invested in the first lien term loan of PureStar, also known as AMCP Clean Acquisition Company. This is a good example of an opportunistic secondary purchase of credit that we had been tracking. PureStar is a portfolio company of Cornell Capital. It's one of the largest commercial laundry providers to the hospitality industry in the U.S. We invested in the first lien term loan and delayed draw term loan. Our yield at cost is about 15.7%. We invested in the first lien term loan of American Auto Auction Group, formerly known as Accelerate. This is another example of an investment that we own in other portfolios, and we're able to find an attractive opportunity to purchase in the secondary market. Our BrightStar Capital portfolio company, Accelerate, or American Auto Auction Group, is a fully serviced used vehicle auction services provider to customers. Our yield at cost is 13.3%. Using our standard as of March 31, our largest industry concentrations were trading company and distributors at 15.9%; professional services at 14%, followed by IT services at 10.8%. Commercial services and supplies at 6.5% and software remain at 6.2%. Our portfolio companies are in 20 industries as of quarter-end, including our equity and warrant positions. I'd now like to turn the call over to Rocco to discuss our financial results.

Thanks, Suhail. For the quarter ended March 31, 2023, our net investment income was $2.5 million or $0.18 per share. The fair value of our portfolio was $21.3 million compared to $228.6 million on December 31. Our net assets were $88.2 million, a decrease of 3.6% from the prior quarter. Our portfolio's net decrease from operations this quarter was approximately $1.1 million. Our debt investments made during the quarter had an average yield of 12.8%. Our realizations and repayments during the quarter had an average yield of 11.9%, and our average IRR was 10.7%. As Mike mentioned, the weighted average yield on our debt portfolio increased 270 basis points to 13.4% as of December 31. As of March 31, our portfolio consisted of 35 portfolio companies. 9.6% of our investments were in first lien, and the remaining 9.4% is invested in equity, warrants, and other positions. 99.6% of our debt portfolio was invested in floating rate instruments and 0.4% in fixed rate investments. The average floor of our debt investment was 1.1%. Our average portfolio company investment was approximately $6.3 million, and our largest portfolio company investment is Fusion at $12.5 million. We had a gross leverage of 1.65% and net leverage of 1.49% as of March 31, compared to 1.5 gross and 1.46 net, respectively, for the previous quarter. As of March 31, we had four investments on non-accrual which included PGI revolver and three investments in 1888; this is a decrease of four investments from the previous quarter. With respect to our liquidity, as of March 31, we had approximately $14.1 million in cash, of which $11.2 million was restricted cash, with $33.1 million of capacity under our revolving credit facility with Capital One. Additional information regarding the composition of our portfolio is included in our Form 10, which was filed yesterday. With that, I'd like to turn the call back over to Mike.

Thank you, Rocco. As mentioned last quarter, we acquired an SMA and had an initial close on our institutional fund. This doubled our platform AUM, expanding our level of investable assets and reducing average expenses across the funds. We also have an opportunity to grow the platform throughout the year. We believe that the scale and experience of our expanded team and platform position us to be more meaningful to the market in terms of sourcing and origination. I would like to also address that we have made significant headway in completing our portfolio rotation initiative. The number of portfolio companies on non-accrual was reduced from eight in the previous quarter to four investments in the current quarter, those four investments across two companies. First, on Deluxe, we have recovered 80.9% of our principal received, including principal and interest, representing 106% of our cost on that position to date. We believe future recoveries are likely to be minimal at this stage and have decided to write off the remaining position. For PGI, all remaining value is expected to be recovered in the priority revolver which remains on non-accrual. We have written off our positions in the first lien and second lien loans and are not expected to realize any recovery on those. As such, those were written off. Bioplan recently completed a balance sheet restructuring during the quarter. We currently hold positions in the take-back term loan, priority term loan, and the common equity. The two loan positions are on accrual, and we're excited about the company's prospects going forward. In summary, we expect significant progress on the remaining non-accruals over the next 12 months. Our NAV declined 3.6% this quarter. Equity positions represented a majority of this decline. While this is disappointing, we believe that we will see a bounce back in the coming quarters. We had three portfolio companies that declined in value by $0.5 million or more. First, we marked down our investment in ArborWorks. ArborWorks is a vegetation management company providing services to utility companies. Their results have been challenged by weather patterns in California, the largest market. We reduced the mark in our equity position in Techniplas due to increased margin pressures and lower production volumes in the auto industry. We also marked down our equity position in Fusion due to changes in model inputs related to market conditions. Our gross leverage this quarter was 1.65x above our guidance of 1.25x to 1.5x. Our net leverage was 1.49x, which is within the target range. As mentioned last quarter, we expect to see our gross and net leverage generally converge. As of May 15, our gross and net leverage were 1.59x and 1.56x. As we have previously stated, the adviser will waive the portion of our management fee associated with base management fees over one turn of leverage. We covered our March quarterly dividend with net investment income. The company is expected to earn its dividend through the next quarter ending June 30. On May 4, 2023, the Board of Directors declared a distribution for the quarter ended June 30, 2023, of $0.13 per share payable on July 7, 2023, to stockholders of record as of June 16, and a supplemental distribution of $0.05 per share, payable on July 7, 2023, to stockholders of record as of June 16, 2023. As we continue into the second half of 2023, we remain very optimistic about our team's ability to deploy capital in high-quality credit. Our growing platform will allow us to be more meaningful as a club partner, giving us expanded reach into origination and bringing new and valuable relationships with private equity sponsors. Our growth will provide you, our investors, an increasingly diversified portfolio as we have access to a larger set of opportunities in the market. Our goal has not wavered and has always focused on capital preservation and maintaining a stable dividend. This concludes our prepared remarks. Operator, please open the line for Q&A.

Our first question is from Chris Nolan.

Congratulations on improving the non-accruals in the quarter. On Deluxe, did I hear you correctly that there was an 89% recovery?

I believe it's 80.9% recovery on costs, excluding the interest. Including the interest, it was 106% of our invested capital.

Okay, great. Did you participate in the equity raise by one of your portfolio companies, and would that be a rights offering?

It was a rights offering we participated in. So we were not diluted down. It was less than $0.5 million.

Okay. I guess on that note, given your focus on sponsored deals, have there been conversations from your sponsors where if they have to raise equity for the eight portfolio companies they want you to participate in, what are your thoughts around that?

Chris, this is Suhail. The short answer is no. I mean, I think in a couple of situations, we're looking at sponsors coming to us with a preferred equity investment opportunity so that they don't have to refinance the existing capital structures but as an equity co-invest, if that's what you're looking for. No, we haven't been asked to participate in any equity with outside sponsors.

And just to clarify, in the initial investment, we have looked at small equity co-investment opportunities and you'll see them in our portfolio, but they're few and far between, and that's our option.

And just a final question on leverage. Given the uncertain economic times, is the intent to maintain leverage in your target area, which is less, I know, 1.4x to 1.5x?

The answer is yes. As we continue to look at new opportunities as we reinvest money coming back in, we're not looking to invest incremental capital but reinvestments are, while I can never say 100%, are principally lower risk, more equity-backed, with better covenants. So we're improving the quality of the portfolio and maintaining a consistent leverage against it.

Our next question is Mr. Robert Dodd.

First follow-up on Chris's question, obviously, you are 1.59x now in May on leverage. What kind of time frame do you expect to get back down to the target range of 1.4x to 1.5x?

I'd expect at quarter end that we're back in that range. That's the expectation. If you look at December 31, net leverage was 1.46. At March 31, it was 1.49 million. We'd expect to be somewhere around there on a net leverage at June 30.

Got it. Then on the credit discussions in your opening remarks when you talked about disruption in the bank on Capital One isn't exactly regional. But have you started having any conversations with them about amending the facility? I mean, it does not mature until 2026. But the evolving period or an investment period ends next year. So maybe any preliminary discussions on that front?

We've continued to have an active dialogue with Capital One, all positive. There's been no indication that they are starting to pull back on the credit that they want to commit to us or the sector. But yes, we have ongoing dialogue with them.

Got it. And then one last one, if I can, on Techniplas. I mean, you said you anticipate in the rights issue, putting in less than $0.5 million. But then not written down, obviously during the quarter because of margin pressures, et cetera, that you talked about. So I mean, yes, you did want to be diluted. But at the same time, you're putting more capital into one of your larger write-downs this quarter. So could you give us any more thoughts on the capital purpose beyond dilution which may or may not be beneficial to shareholders?

Yes. I'd make a couple of observations. Number one is from our cost basis of that equity, we're averaging down. That having been said, we don't want to keep putting more money in if we don't think this will recover. We think they are a critical supplier to Tier 1 OEMs to top platforms. I think we've all seen the inventory constrained, especially from foreign production, and they've been hurt by that. The forecast is that that's starting to normalize. But I personally, and anecdotally, I've not seen that fully normalize. We expect this to recover over the next 12 to 24 months and did not want to see that over a small investment hurting our existing investment.

Our next question is from Paul Johnson.

Yes, I only have one question today, but I want to get a sense of the situation. It sounds like you have made some investments in the platform since Investcorp joined and possibly raised some funds along the way. I'm hoping to understand how many people at Investcorp, including yourselves, are directly involved with the BDC.

Well, the direct team on the BDC is about 12 people. Then indirectly, there's another 30 people in Investcorp Credit which expands to other liquid and separate accounts that we leverage off of for research and flow and relationships. And then there is the middle market private equity team and we interact with constantly from a standpoint of, I will call it, club origination, networking, and other deal flow opportunities. So it's a broad base that we work within at Investcorp.

Got it. And then I guess with the leverage, obviously, it sounds like kind of a focus to get that down further back in line with the target range. But among all the other funds that you have access to with Investcorp, I mean, has the maintenance of leverage then any kind of constraining factor for you guys in terms of participating in deals?

No, it has not.

There are no more questions at this time.

Thank you very much, operator. And thank you, everyone, for dialing in.