Investcorp Credit Management BDC Q3 2025 Earnings Results & Report

Investcorp Credit Management BDC EPS Results

• Actual EPS: $0.03
• Consensus EPS: $0.05
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: N/A
• EPS Beat Rate: 2 of last 8 quarters

Investcorp Credit Management BDC Revenue Results

• Actual Revenue: $4.36 million
• Expected Revenue: $4.41 million
• Beat/Miss: Missed by -$50.00 thousand
• YoY Revenue Growth: N/A

Investcorp Credit Management BDC (NASDAQ:ICMB) (NASDAQ: ICMB) is a business development company that provides financing to middle-market companies. The company seeks to generate current income and long-term capital appreciation by investing in privately negotiated debt and equity securities.

Its investments have primarily consisted of senior secured, first-lien loans, along with select second-lien loans and equity investments. The portfolio companies generally operate across a range of industries and may use the financing for acquisitions, recapitalizations, growth initiatives, refinancing, or other corporate purposes.

The company was formerly known as CM Finance, Inc. and became part of Investcorp’s credit-management platform following a strategic transaction. Investcorp Credit Management BDC is externally managed by Investcorp Credit Management LLC, an affiliate of global investment firm Investcorp. Its investment activities are focused primarily on middle-market businesses in the United States.

Investcorp Credit Management BDC Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Investcorp Capital (affiliate) provided a $65 million backstop commitment to refinance the notes maturing April 1, 2026 (new coupon set at SOFR + 550 bps), bolstering liquidity and demonstrating parent-company support.
• Negative Sentiment: Net investment income was $0.6 million (4¢ per share), down 2¢ sequentially, and net asset value fell to $5.04 per share from $5.27, driven by fair-value marks on legacy credits and a dividend paid in excess of NII.
• Negative Sentiment: Non-accruals rose to 4.4% of portfolio fair value after Fusion’s preferred equity was placed on non-accrual, though management says these are primarily legacy credits being proactively managed.
• Positive Sentiment: Portfolio fundamentals remain solid with ~82% of assets in the top two risk categories, weighted average interest coverage improving to 2.3x, weighted average LTV ~41%, and weighted leverage declining to 4.6x.
• Positive Sentiment: Liquidity and shareholder returns supported by ~$11.6M cash (with $36.5M revolver capacity), parent ownership (~3.6M shares) and the board’s declared distribution of $0.14 per share payable Dec 12, 2025.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to today's Investcorp Credit Management BDC's quarter-ended September 30th, 2025, earnings call. It is now my pleasure to turn the floor over to Andrew Muns, Chief Financial Officer.

[Andrew Muns, CFO at Investcorp Credit Management BDC]

Thank you, Operator. Welcome, everyone, to Investcorp Credit Management BDC's earnings call for the quarter-ended September 30th, 2025. I'm joined today by Suhail Shaikh, President and Chief Executive Officer of the company. 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 broadcasts of this call in any form are strictly prohibited. An audio replay of the call will be available on the investor relations page of 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.

[Andrew Muns, CFO at Investcorp Credit Management BDC]

To obtain copies of our latest SEC filings, please visit the company's registration statement on the SEC's EDGAR platform or our investor relations page on our website. The format for today's call is as follows: Suhail will provide an overall business and portfolio summary, and then I'll provide an overview of our results, summarizing the financials. This will be followed by Q&A. At this time, I would like to turn the call over to Suhail.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

Good morning, everyone, and thank you for joining our third-quarter earnings call. We'll start with an update followed by a review of our third quarter results, current market conditions, portfolio activity, and then Andrew will walk through our financials for the quarter. I'm pleased to announce that the manager's parent company continues to provide strong support for the BDC. Our board of directors has approved Investcorp Capital, an affiliate of Investcorp Group, to provide a backstop commitment to refinance our four and seven-eighths new notes due April 1st, 2026. This commitment enhances our flexibility, proactively addresses the near-term maturity, and strengthens our balance sheet. Turning to our third quarter results, we reported net investment income before taxes of $0.6 million, or 4 cents per share, a decrease of 2 cents per share from the previous quarter.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

The sequential decline in NII was primarily driven by a decline in income-earning assets due to the loss of fixed dividend income from Fusion's preferred equity position, which was placed on non-accrual status, as well as portfolio repayments and our continued discipline in not chasing lower-yielding investments. Net assets declined by approximately 4%, with net asset value per share decreasing to $5.04 per share from $5.27 last quarter. This was largely the result of fair value adjustments in two legacy borrowers and the payment of a dividend in excess of NII. Non-accruals accounted for 4.4% of the portfolio at fair value, up from 1.6% last quarter following the addition of Fusion's preferred equity position. Although modestly higher, sequentially, the level remains comparable to the 4.8% reported a year ago, underscoring the continued stability of the portfolio and our proactive management of underperforming credits, especially legacy credits.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

Overall, the portfolio remains healthy. Approximately 82% of assets at fair value are rated in the top two risk-rated categories. Our weighted average interest coverage ratio improved to 2.3 times compared to 2 times a year ago, reflecting enhanced portfolio strength. Weighted average LTV remains approximately 41%, while weighted average leverage declined to 4.6 times in the current period from 4.8 times in the prior quarter, as weighted average EBITDA increased. 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. As we reflect on the quarter, we continue to operate in a backdrop of solid fundamentals, but heightened caution. Deal flow and the sponsor-led M&A remain slow, with many transactions still working their way through the processes rather than closing.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

Refinancing and portfolio redeployment activity has also slowed, compressing spreads and limiting opportunities for compelling new originations. We remain highly selective in evaluating opportunities that meet our targeted yield and credit quality criteria. Approximately 57% of sponsor-backed private credit deals were priced with spreads below 500 basis points in the current quarter. While we actively manage the portfolio, we're not rotating into lower-yielding assets simply for growth. Of all deals entering our pipeline this quarter, fewer than 10% advanced to deeper diligence. Instead, our focus remains on credit quality and structural protections. We're not chasing the lowest-yielding deals. Approximately 73% of our investments are incumbent into deals. Looking ahead, we expect NII to benefit from new fundings, and we remain committed to disciplined portfolio management to drive long-term shareholder value. I will now turn to a summary of our investment activity for the quarter.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

This was a lighter quarter, for sure, for investment activity. During the quarter ending September, we invested approximately $25,000 in the preferred equity of 4L Technologies, an existing portfolio company, to support an incremental equity raise in our existing positions. We also fully realized two portfolio company investments, generating total proceeds of $6.5 million with an IRR of approximately 12.7%. We realized our first lien term loan positions in PureStar, listed on our SOI as AMCP Clean Acquisition Company, and One Call Medical, both of which were refinanced during the quarter. Our realized IRRs on PureStar and One Call were 11.5% and 13.7%, respectively. I'll now turn the call back over to Andrew to review our financial results in more detail.

[Andrew Muns, CFO at Investcorp Credit Management BDC]

Thanks, Suhail. Let me begin by providing you with highlights of our quarterly performance. For the quarter ended September 30th, 2025, the fair value of our portfolio was $196.1 million compared to $204.1 million on March 31st. Our net assets were $72.7 million, a decrease of $3.3 million from the prior quarter. Our portfolio's net decrease in net assets from operations this quarter was approximately $1.3 million, and the remaining $2 million was due to distribution of cash dividends to shareholders. The weighted average yield of our portfolio from debt was 10.9%, a slight increase from 10.6% in the previous quarter ended June 30th. As of September 30th, our portfolio consisted of investments in 41 companies. Approximately 78% of these investments was in first lien debt, and the remaining 22% was invested in equity warrants and other securities.

[Andrew Muns, CFO at Investcorp Credit Management BDC]

98.5% of our debt portfolio was invested in floating-rate instruments and 1.5% in fixed-rate investments. The weighted average spread on our floating-rate debt investments was 4.6%, relatively unchanged from the prior quarter. The average size per portfolio company on a fair market value basis was approximately $4.7 million, or approximately 2.5% of the total, and our largest portfolio company investment on a fair market value basis was Bioplan at $13.4 million. Our largest industry concentrations by fair market value were professional services at 13.7%, insurance at 10.4%, containers and packaging at 8.9%, IT services at 8.5%, and trading companies and distributors at 8.4%. Overall, our portfolio companies are spread among 18 GIX industries as of the quarter end, including our equity and warrant positions.

[Andrew Muns, CFO at Investcorp Credit Management BDC]

We're also pleased to announce that on November 10th, 2025, the board of directors declared a distribution for the quarter ended December 31st, 2025, of $0.12 per share and a supplemental distribution of $0.02 per share payable in cash on December 12th, 2025, to stockholders of record as of December 1st, 2025. Gross leverage was 1.75 times, and net leverage was 1.59 times as of September 30th, compared to 1.77 times gross and 1.54 times net, respectively, for the previous quarter. With respect to our liquidity, as of September 30th, we had approximately $11.6 million of cash, of which approximately $7.8 million was restricted cash, with $36.5 million of capacity under our revolving credit facility with Capital One. Additional information regarding the composition of our portfolio and quarterly financial results are included in our Form 10-Q.

[Andrew Muns, CFO at Investcorp Credit Management BDC]

With that, I would like to turn the call back over to Suhail.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

Thank you, Andrew. To close, we remain focused on executing our strategy and positioning the portfolio for long-term value creation. We believe we are well-positioned for the current environment, with a robust portfolio, strong capital backing, and a disciplined investment posture that prioritizes credit quality and income stability over yield. As the broader backdrop remains uncertain, our emphasis continues to be on maintaining flexibility, protecting asset value, and ensuring our dividend remains fully supported. The refinancing commitment from our parent affiliate, Investcorp Capital, underscores the confidence and ongoing support from our parent company, further strengthening our balance sheet and providing additional financial flexibility as we navigate this environment. The $65 million commitment to refinance the 4% and 7.8% notes, coupled with approximately 3.6 million shares held by our parent, are reflective of Investcorp's strong commitment to increasing shareholder value and aligning interests.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

While market activity remains subdued, we continue to see solid underlying portfolio performance with strong coverage metrics and healthy diversification across sectors. We remain patient and selective, ready to deploy capital when attractive opportunities arise. Thank you again for your time and continued support. We look forward to updating you on our progress next quarter. That concludes our prepared remarks. Operator, please open the line up for Q&A.

[Operator]

Ladies and gentlemen, at this time, we will conduct the question-and-answer session. If you would like to state a question, please press seven pound on your phone now, and you will be placed in the queue in the order received, or press seven pound again at any time to remove yourself from the queue. Please listen for your name to be announced and be prepared to ask your question when prompted. We are now ready to begin. Our first question comes from Christopher Nolan with Lattenberg Palmer. Go ahead, please.

[Christopher Nolan, Analyst at Lattenberg Palmer]

Hi. Thank you for taking my questions. On the backstop, could you clarify whether or not that's to buy up the full refinance amount for the maturing $65 million bonds, or is that simply just to cover principal and coupon payments from the new bonds?

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

No. It's the former. So the backstop, Christopher, is to refinance the notes in the event that we have not refinanced them prior to the April 1st, 2026, maturity date.

[Christopher Nolan, Analyst at Lattenberg Palmer]

Right. Is there any sort of parameters in terms of the coupons?

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

Yeah. I believe the letter outlines it. We publish it. It's an exhibit to the 10-Q. We have agreed to SOFR plus 550 on a floating-rate basis as the new coupon.

[Christopher Nolan, Analyst at Lattenberg Palmer]

Great. Second question, I guess, for Andrew. What was the spillover income in the quarter, please?

[Andrew Muns, CFO at Investcorp Credit Management BDC]

I think, as we said last time, we don't give the specific spillover income, but I think you've probably noticed in the past that our dividend has been above NII, and obviously, the amount that we've chosen to pay out is reflective of the spillback amount that's required. You could make a similar assumption for the declared dividend to be paid in December of this year.

[Christopher Nolan, Analyst at Lattenberg Palmer]

Right. The final question I have is for Klein Hersh. This is non-accrual, but the cost basis is zero and the fair value is zero. Why keep it on the investment portfolio at all?

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

The subnotes?

[Andrew Muns, CFO at Investcorp Credit Management BDC]

We're required to.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

Yeah.

[Andrew Muns, CFO at Investcorp Credit Management BDC]

Under accounting rules, you have to put everything on there that has any chance of being paid at any time. You see the CareerBuilder warrants are on there, also marked at zero. Those were not expected to, and now that obviously the restructuring of that is complete, it certainly will not, in the future, pay anything. That is just something we are required to do, and we have had things marked at zero before. Interestingly, the notes for Klein Hersh that are on non-accrual actually have a zero coupon to them. I think if they were on accrual status, we would theoretically have to amortize the 100% discount over time, which I think would distort the results pretty materially.

[Christopher Nolan, Analyst at Lattenberg Palmer]

Okay. Thank you.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

Thank you.

[Operator]

Thank you very much. If you have any questions, please go ahead and press seven pound. Again, it is seven pound for your question. I do not see any other questions, sir.

[Suhail Shaikh, President and CEO at Investcorp Credit Management BDC]

Great. Excellent. Thank you, everyone. We appreciate your time, and we look forward to speaking again next quarter. Thank you, Luke.

[Operator]

You're welcome, sir. This concludes today's conference call. Thank you, everyone, for attending.

Participants

Executives

• Suhail Shaikh, President and CEO
• Andrew Muns, CFO

Analysts

• Christopher Nolan, Analyst at Lattenberg Palmer