Investcorp Credit Management BDC Inc

Previous wording

As of December 31, 2023, our investment portfolio, valued at fair value in accordance with our Board-approved valuation policy, represented 92.5% of our total assets, as compared to 95.0% of our total assets as of June 30, 2023.

Current wording

As of March 31, 2024, our investment portfolio, valued at fair value in accordance with our Board-approved valuation policy, represented 91.5% of our total assets, as compared to 95.0% of our total assets as of June 30, 2023.

Previous wording

See Note 2.i “Significant Accounting Policies – Investment Valuation” and Note 4. “Investments” in the notes to the consolidated financial statements included in our most recent Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q for more information on our valuation process.

Current wording

See Note 2.j “Significant Accounting Policies – Investment Valuation” and Note 4. “Investments” in the notes to the consolidated financial statements included in our most recent Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q for more information on our valuation process.

Previous wording

On August 23, 2021, we, through Investcorp Credit Management BDC SPV, LLC, our wholly-owned subsidiary, entered into a five-year, $115 million senior secured revolving credit facility (the “Capital One Revolving Financing”) with Capital One, N.A. (“Capital One”), which is secured by collateral consisting primarily of loans in our investment portfolio. On June 14, 2023, we amended the Capital One Revolving Financing to decrease the facility size from $115 million to $100 million. The Capital One Revolving Financing, which will expire on August 23, 2026 (the “Maturity Date”), features a three-year reinvestment period and a two-year amortization period.

Current wording

On August 23, 2021, we, through Investcorp Credit Management BDC SPV, LLC, our wholly-owned subsidiary, entered into a five-year, $115 million senior secured revolving credit facility (the “Capital One Revolving Financing”) with Capital One, N.A. (“Capital One”), which is secured by collateral consisting primarily of loans in our investment portfolio. On June 14, 2023, we amended the Capital One Revolving Financing to decrease the facility size from $115 million to $100 million. On January 17, 2024, we amended the Capital One Revolving Financing to (i) extend the maturity date to January 17, 2029, (ii) increase of the applicable interest spreads under the Capital One Revolving Financing and (iii) extend the Scheduled Revolving Period End Date (as defined in Capital One Revolving Financing) to January 17, 2027. The Capital One Revolving Financing, which will expire on January 17, 2029 (the “Maturity Date”), features a three-year reinvestment period and a two-year amortization period.

Previous wording

Effective November 18, 2022, borrowings under the Capital One Revolving Financing generally bear interest at a rate per annum equal to Secured Overnight Financing Rate ("SOFR") plus 2.50%. The default interest rate will be equal to the interest rate then in effect plus 2.00%. The Capital One Revolving Financing required the payment of an upfront fee of 1.125% ($1.3 million) of the available borrowings under the Capital One Revolving Financing at the closing, and requires the payment of an unused fee of (i) 0.75% annually for any undrawn amounts below 50% of the Capital One Revolving Financing, (ii) 0.50% annually for any undrawn amounts between 50% and 75% of the Capital One Revolving Financing, and (iii) 0.25% annually for any undrawn amounts above 75% of the Capital One Revolving Financing. Borrowings under the Capital One Revolving Financing are based on a borrowing base.

Current wording

Effective January 17, 2024, borrowings under the Capital One Revolving Financing generally bear interest at a rate per annum equal to Secured Overnight Financing Rate ("SOFR") plus 3.10%. The default interest rate will be equal to the interest rate then in effect plus 2.00%. The Capital One Revolving Financing required the payment of an upfront fee of 1.125% ($1.3 million) of the available borrowings under the Capital One Revolving Financing at the closing, and requires the payment of an unused fee of (i) 0.75% annually for any undrawn amounts below 50% of the Capital One Revolving Financing, (ii) 0.50% annually for any undrawn amounts between 50% and 75% of the Capital One Revolving Financing, and (iii) 0.25% annually for any undrawn amounts above 75% of the Capital One Revolving Financing. Borrowings under the Capital One Revolving Financing are based on a borrowing base. The Capital One Revolving Financing generally requires payment of interest and fees on a quarterly basis. All outstanding principal is due on the Maturity Date. The Capital One Revolving Financing also requires mandatory prepayment of interest and principal upon certain events.

Previous wording

As of December 31, 2023 and June 30, 2023, there were $70.0 million and $71.9 million in borrowings outstanding under the Capital One Revolving Financing, respectively.

Current wording

As of March 31, 2024 and June 30, 2023, there were $57.5 million and $71.9 million in borrowings outstanding under the Capital One Revolving Financing, respectively.

Previous wording

As a BDC, we are required to comply with certain regulatory requirements. For instance, as a BDC, we may not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million. In each case, the company must be organized in the United States. As of December 31, 2023, approximately 2.19% of our total assets were non-qualifying assets.

Current wording

As a BDC, we are required to comply with certain regulatory requirements. For instance, as a BDC, we may not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million. In each case, the company must be organized in the United States. As of March 31, 2024, approximately 2.25% of our total assets were non-qualifying assets.

Previous wording

As of December 31, 2023, our investment portfolio of $207.4 million (at fair value) consisted of debt and equity investments in 44 portfolio companies, of which 84.97% were first lien investments and 15.03% were in equities, warrants and other positions. At December 31, 2023, our average and largest portfolio company investment at fair value was $4.7 million and $14.5 million, respectively.

Current wording

As of March 31, 2024, our investment portfolio of $192.2 million (at fair value) consisted of debt and equity investments in 41 portfolio companies, of which 83.82% were first lien investments and 16.18% were in equities, warrants and other positions. At March 31, 2024, our average and largest portfolio company investment at fair value was $4.7 million and $14.6 million, respectively.

Previous wording

As of December 31, 2023 and June 30, 2023, our weighted average total yield of debt and income producing securities at amortized cost (which includes interest income and amortization of fees and discounts) was 11.60% and 12.46% respectively. As of December 31, 2023 and June 30, 2023, our weighted average total yield on investments at amortized cost (which includes interest income and amortization of fees and discounts) was 10.07% and 11.32%, respectively. The weighted average total yield was computed using an internal rate of return calculation of our debt investments based on contractual cash flows, including interest and amortization payments, and, for floating rate investments, the spot SOFR, as applicable, as of December 31, 2023 of all of our debt investments. The weighted average total yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before payment of all of our fees and expenses, including any sales load paid in connection with an offering of our securities. There can be no assurance that the weighted average total yield will remain at its current level.

Current wording

As of March 31, 2024 and June 30, 2023, our weighted average total yield of debt and income producing securities at amortized cost (which includes interest income and amortization of fees and discounts) was 12.36% and 12.50% respectively. As of March 31, 2024 and June 30, 2023, our weighted average total yield on investments at amortized cost (which includes interest income and amortization of fees and discounts) was 10.68% and 11.32%, respectively. The weighted average total yield was computed using an internal rate of return calculation of our debt investments based on contractual cash flows, including interest and amortization payments, and, for floating rate investments, the spot SOFR, as applicable, as of March 31, 2024 of all of our debt investments. The weighted average total yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before payment of all of our fees and expenses, including any sales load paid in connection with an offering of our securities. There can be no assurance that the weighted average total yield will remain at its current level.

Previous wording

During the six months ended December 31, 2023, we made investments in nine new portfolio companies and two existing portfolio companies totaling approximately $33.6 million, at cost. Of the new investments, 88.01% consisted of first lien investments and 11.99% of equity investments.

Current wording

During the nine months ended March 31, 2024, we made investments in nine new portfolio companies and three existing portfolio companies totaling approximately $42.5 million, at cost. Of the new investments, 90.52% consisted of first lien investments and 9.48% consisted of equity investments.

Previous wording

Our investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require us to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of December 31, 2023, we had five investments with aggregate unfunded commitments of $2.7 million, and as of June 30, 2023, we had nine investments with aggregate unfunded commitments of $5.7 million. As of December 31, 2023, we had sufficient liquidity (through cash on hand and available borrowings under our Capital One Revolving Financing) to fund such unfunded loan commitments should the need arise.

Current wording

Our investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require us to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of March 31, 2024, we had three investments with aggregate unfunded commitments of $1.8 million, and as of June 30, 2023, we had nine investments with aggregate unfunded commitments of $5.7 million. As of March 31, 2024, we had sufficient liquidity (through cash on hand and available borrowings under our Capital One Revolving Financing) to fund such unfunded loan commitments should the need arise.

Previous wording

Investment income, attributable primarily to interest and fees on our debt investments, for the three months ended December 31, 2023 decreased to $6.2 million from $6.8 million for the three months ended December 31, 2022, primarily related to a decrease in interest income related to the repayment of four portfolio companies and a decrease in interest income related to the portfolio companies on non-accrual status, partially offset by an increase in PIK interest income earned on Crafty Apes, LLC due to its removal from non-accrual status during the quarter ended December 31, 2023.

Current wording

Investment income, attributable primarily to interest and fees on our debt investments, for the three months ended March 31, 2024 decreased to $6.6 million from $7.0 million for the three months ended March 31, 2023 primarily related to a decrease in interest income related to the sale of two portfolio companies and the repayment of four portfolio companies and a decrease in interest income related to the portfolio companies on non-accrual status, offset by increases in PIK income, dividend income, and other fee income.

Previous wording

Total expenses for the three months ended December 31, 2023 decreased to $4.8 million, compared to $4.5 million for the three months ended December 31, 2022, primarily due to a decrease in base management fees, a decrease in the allocation of administrative costs from the Adviser, a decrease in amortization of deferred debt issuance costs due to the extension of the Capital One Revolving Financing maturity date to August 23, 2026, and the write-off of deferred income-based incentive fees, partially offset by an increase in interest expense with the Capital One Revolving Financing associated with borrowing activities, an increase in the provision for tax expense, and an increase in professional fees.

Current wording

Total expenses for the three months ended March 31, 2024 increased to $4.6 million, compared to $4.5 million for the three months ended March 31, 2023, primarily due to an increase in the provision for tax expense, an increase in professional fees, and an increase in other expenses associated with the sale and write off of our investments in 1888 Industrial Services, LLC, partially offset by a decrease in base management fees and a decrease in the allocation of administrative costs from the Adviser.

Previous wording

Net investment income decreased to $3.2 million for the six months ended December 31, 2023 from $4.7 million for the six months ended December 31, 2022, primarily due to a decrease in total investment income primarily related to a decrease in interest income related to the repayment of four portfolio companies and a decrease in interest income related to the portfolio companies on non-accrual status, a decrease in base management fees, and a decrease in the allocation of administrative costs from the Adviser, partially offset by an increase in interest expense with the Capital One Revolving Financing associated with borrowing activities.

Current wording

Net investment income decreased to $2.1 million for the three months ended March 31, 2024 from $2.5 million for the three months ended March 31, 2023 primarily due to a decrease in total investment income primarily related to the sale of two portfolio companies and the repayment of four portfolio companies, a decrease in interest income related to the portfolio companies on non-accrual status, an increase in the provision for tax expense, an increase in professional fees, and an increase in other expenses associated with the sale and write off of our investments in 1888 Industrial Services, LLC, partially offset by increases in PIK income, dividend income, and other fee income and decreases in base management fees and the allocation of administrative costs from the Adviser.

Previous wording

We recorded a net change in unrealized appreciation of $1.4 million for the three months ended December 31, 2023, primarily due to the realization of previously unrealized losses resulting from the restructurings and loan modifications of our investments in American Nuts Holdings, LLC, Arborworks Acquisition LLC, ArborWorks, LLC, Crafty Apes, LLC, and Xenon Arc, Inc., mainly offset by the write down of our investments in Techniplas Foreign Holdco LP.

Current wording

We recorded a net change in unrealized appreciation of $6.6 million for the three months ended March 31, 2024, primarily due to the realization of previously unrealized losses resulting from the sale and write off of our investments in 1888 Industrial Services, LLC.

Previous wording

During the three months ended December 31, 2022, we recorded a net change in unrealized depreciation of $1.7 million, primarily due to the decrease in the fair value of our investments in CareerBuilder, LLC, Fusion Connect, Inc – Series A Preferred, and Klein Hersh, LLC which was offset by the increase in the value of our investments in the 4L Technologies, Inc – Preferred Stock and Work Genius Holdings, Inc – Equity Interest.

Current wording

During the three months ended March 31, 2023, we recorded a net change in unrealized appreciation of $23.2 million, primarily due to the reversal of depreciation related to the write off of our investments in the American Teleconferencing Services, Ltd. (d/b/a Premiere Global Services, Inc.) 1st and 2nd lien term loan which was offset by the decrease in the value of our investments in CareerBuilder, LLC and Techniplas Foreign Holdco LP Common Stock.

Previous wording

Investment income, attributable primarily to interest and fees on our debt investments, for the six months ended December 31, 2023 decreased to $12.1 million from $13.1 million for the six months ended December 31, 2022, primarily related to a decrease in interest income related to the repayment of four portfolio companies, a decrease in interest income related to the portfolio companies on non-accrual status, and decreases in dividend income and other fee income, primarily offset by an increase in PIK interest income earned on Crafty Apes, LLC due to its removal from non-accrual status during the quarter ended December 31, 2023.

Current wording

Investment income, attributable primarily to interest and fees on our debt investments, for the nine months ended March 31, 2024 decreased to $18.8 million from $20.1 million for the nine months ended March 31, 2023 primarily related to a decrease in interest income related to the sale of two portfolio companies and the repayment of eight portfolio companies, a decrease in interest income related to the portfolio companies on non-accrual status, and decreases in dividend income and other fee income, offset by an increase in PIK income.

Previous wording

Total expenses for the six months ended December 31, 2023 increased to $9.1 million, compared to $8.6 million for the six months ended December 31, 2022, primarily due to an increase in interest expense with the Capital One Revolving Financing associated with borrowing activities, partially offset by a decrease in base management fees and a decrease in the allocation of administrative costs from the Adviser.

Current wording

Total expenses for the nine months ended March 31, 2024 increased to $13.8 million, compared to $13.1 million for the nine months ended March 31, 2023, primarily due to an increase in interest expense with the Capital One Revolving Financing associated with borrowing activities, an increase in the provision for tax expense, an increase in professional fees, and an increase in other expenses associated with the sale and write off of our investments in 1888 Industrial Services, LLC, partially offset by a decrease in base management fees.

Previous wording

Net investment income decreased to $1.6 million for the three months ended December 31, 2023 from $2.3 million for the three months ended December 31, 2022, primarily due to a decrease in total investment income primarily related to the repayment of four portfolio companies and a decrease in interest income related to the portfolio companies on non-accrual status, partially offset by an increase in PIK interest income earned on Crafty Apes, LLC due to its removal from non-accrual status during the quarter ended December 31, 2023, an increase in interest expense with the Capital One Revolving Financing associated with borrowing activities, an increase in the provision for tax expense, and an increase in professional fees.

Current wording

Net investment income decreased to $5.3 million for the nine months ended March 31, 2024 from $7.2 million for the nine months ended March 31, 2023 primarily due to a decrease in total investment income primarily related to a decrease in interest income related to the sale of two portfolio companies and the repayment of eight portfolio companies, a decrease in interest income related to the portfolio companies on non-accrual status, decreases in dividend income and other fee income, an increase in interest expense with the Capital One Revolving Financing associated with borrowing activities, an increase in the provision for tax expense, an increase in professional fees, and an increase in other expenses associated with the sale and write off of our investments in 1888 Industrial Services, LLC, partially offset by an increase in PIK income and a decrease in base management fees.

Previous wording

There was a net realized loss from investments of $5.9 million for the six months ended December 31, 2023 primarily due to the realization of losses from restructurings and loan modifications of our investments in American Nuts Holdings, LLC, Arborworks Acquisition LLC, ArborWorks, LLC, Crafty Apes, LLC, and Xenon Arc, Inc. There was no net realized gain or loss on investments for the six months ended December 31, 2022.

Current wording

There was a net realized loss from investments of $12.1 million for the nine months ended March 31, 2024 primarily due to the realization of losses from restructurings and loan modifications of our investments in American Nuts Holdings, LLC, Arborworks Acquisition LLC, ArborWorks, LLC, Crafty Apes, LLC, and Xenon Arc, Inc. and the realization of losses associated with the sale and write off of our investments in 1888 Industrial Services, LLC. Net realized loss on investments totaled $26.9 million for the nine months ended March 31, 2023 primarily due to the write off of our investments in the American Teleconferencing Services, Ltd. (d/b/a Premiere Global Services, Inc.) 1st and 2nd lien term loans.

Previous wording

We recorded a net change in unrealized depreciation of $1.9 million for the six months ended December 31, 2023, primarily due to the decrease in fair value of our investments in Klein Hersh, LLC and Techniplas Foreign Holdco LP, partially offset by the increase in fair value of our investments in Bioplan USA, Inc., Investcorp Transformer Aggregator LP, and WorkGenius Holdings, Inc. - Equity.

Current wording

We recorded a net change in unrealized appreciation of $4.7 million for the nine months ended March 31, 2024 primarily due to the decrease in fair value of our investments in ArborWorks, LLC A-1 Preferred, Klein Hersh, LLC, and Techniplas Foreign Holdco LP, partially offset by the increase in fair value of our investments in Bioplan USA, Inc. and Discovery Behavioral Health and due to the realization of previously unrealized losses resulting from the sale and write off of our investments in 1888 Industrial Services, LLC.

Previous wording

During the six months ended December 31, 2022, we recorded a net change in unrealized depreciation of $2.4 million, primarily due to the decrease in fair value of our investments in Arborworks Acquisition LLC, CareerBuilder, LLC, and Fusion Connect, Inc – Series A Preferred which was offset by the increase in the fair value of our investments in the 4L Technologies, Inc – Preferred Stock and Work Genius Holdings, Inc – Equity Interest.

Current wording

During the nine months ended March 31, 2023, we recorded a net change in unrealized appreciation of $20.8 million, primarily due to the decrease in the fair value of our investments in Arborworks Acquisition LLC, CareerBuilder, LLC, and Techniplas Foreign Holdco LP Common Stock which was offset by the reversal of depreciation related to the write off of our investments in the American Teleconferencing Services, Ltd. (d/b/a Premiere Global Services, Inc.) 1st and 2nd lien term loans.

Previous wording

For the six months ended December 31, 2023, our total cash balance increased by $5.5 million. During that period, cash increased by $12.2 million from operating activities, primarily due to proceeds from sales and repayments of portfolio companies of $42.1 million and payables for investments purchased of $3.7 million, partially offset by a decrease in net assets resulting from operations of $4.6 million and payments for the purchase of investments in portfolio companies of $35.3 million. During the same period, net cash used in financing activities totaled $6.6 million, consisting primarily of $4.7 million of distributions paid to our stockholders and repayments of $30.0 million to paydown the Capital One Revolving Facility, offset by proceeds of $28.1 million from borrowing under the Capital One Revolving Facility.

Current wording

For the nine months ended March 31, 2024, our total cash balance increased by $3.7 million. During that period, cash increased by $26.0 million from operating activities, primarily due to proceeds from sales and repayments of portfolio companies of $68.8 million and payables for investments purchased of $1.7 million, partially offset by a decrease in net assets resulting from operations of $2.1 million and payments for the purchase of investments in portfolio companies of $44.6 million. During the same period, net cash used in financing activities totaled $22.3 million, consisting primarily of $6.9 million of distributions paid to our stockholders and repayments of $46.5 million to paydown the Capital One Revolving Facility, offset by proceeds of $32.1 million from borrowing under the Capital One Revolving Facility.

Previous wording

As of December 31, 2023, we had $3.1 million of cash as well as $11.6 million in restricted cash and $30.0 million of capacity under the Capital One Revolving Financing. We intend to generate additional cash primarily from future offerings of equity and/or debt securities, future borrowings or debt issuances, as well as cash flows from operations, including income earned from investments in our portfolio companies and, to a lesser extent, from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less.

Current wording

As of March 31, 2024, we had $2.7 million of cash as well as $10.2 million in restricted cash and $42.5 million of capacity under the Capital One Revolving Financing. We intend to generate additional cash primarily from future offerings of equity and/or debt securities, future borrowings or debt issuances, as well as cash flows from operations, including income earned from investments in our portfolio companies and, to a lesser extent, from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less.

Previous wording

On May 2, 2018, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the board of directors, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, effective May 2, 2019, our applicable minimum asset coverage ratio under the 1940 Act was decreased to 150% from 200%. Thus, we are permitted under the 1940 Act, under specified conditions, to issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. As of December 31, 2023, our asset coverage for borrowed amounts was 158.4%.

Current wording

On May 2, 2018, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the board of directors, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, effective May 2, 2019, our applicable minimum asset coverage ratio under the 1940 Act was decreased to 150% from 200%. Thus, we are permitted under the 1940 Act, under specified conditions, to issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. As of March 31, 2024, our asset coverage for borrowed amounts was 164.6%.

Previous wording

We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of December 31, 2023, our off-balance sheet arrangements consisted of $2.7 million in unfunded commitments to five of our portfolio companies. As of December 31, 2023, we had sufficient liquidity (through cash on hand and available borrowings under our Capital One Revolving Financing) to fund such unfunded loan commitments should the need arise. As of June 30, 2023, our off-balance arrangements consisted of $5.7 million in unfunded commitments to nine of our portfolio companies.

Current wording

We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of March 31, 2024, our off-balance sheet arrangements consisted of $1.8 million in unfunded commitments to three of our portfolio companies. As of March 31, 2024, we had sufficient liquidity (through cash on hand and available borrowings under our Capital One Revolving Financing) to fund such unfunded loan commitments should the need arise. As of June 30, 2023, our off-balance arrangements consisted of $5.7 million in unfunded commitments to nine of our portfolio companies.

Previous wording

From January 1, 2024 through February 16, 2024, we made advances of approximately $0.4 million on one existing revolving credit commitment to one portfolio company and received approximately $4.7 million from the repayment of two positions for one portfolio company.

Current wording

From April 1, 2024 through May 14, 2024, we invested $10.5 million in two new portfolio companies and one existing portfolio company and received approximately $13.8 million from the repayment of two positions.