Investcorp Credit score Administration BDC (ICMB) ($17MM market cap) is a distressed subscale BDC that was compelled to refinance maturing debt in March with an affiliate of the exterior supervisor, publish refinancing, the economics of being a standalone BDC do not work and the board commenced a evaluation of strategic options led by a committee of unbiased administrators (together with Lee Shaiman, former head of the LSTA, financial institution mortgage market’s commerce group and Thomas Sullivan who was on the SMTA board). Since then, NAV has eroded to $3.65/share (versus a present quote of $1.20/share), Houlihan Lokey has been formally engaged as an advisor, the exterior supervisor has waived a bulk of their charges and closed-fund activist Bulldog Traders (4.1% proprietor) issued a letter demanding the exterior supervisor buy-in the excellent shares at NAV. This must be offered fast, its a melting ice dice splayed out on a scorching summer season day asphalt driveway.
BDCs are simply swimming pools of property, they are often offered and merged away pretty simply to any variety of keen asset managers seeking to bulk up their AUM and ensuing administration charges. Most of those offers occur at an NAV-for-NAV foundation, so we’re on the lookout for a BDC with a smaller low cost (nearly all of them) to come back in and merge away ICMB. Typically there’s additionally just a little money kicker for shareholders to encourage them to vote sure and serves as compensation for getting into into a brand new exterior administration settlement. ICMB’s supervisor, Investcorp, needs to be incentivized to simply accept nearly any deal, they personal 25% of the BDC, have been waiving administration charges and by chance for shareholders, do not seem to have a termination price. Reputationally, they’re going to need to transfer on from this experiment.
Beneath is little math primarily based on our present favourite BDC consolidator, BCP Funding Corp (BCIC), assuming an NAV-for-NAV merger, ICMB may see vital upside. BCIC is simply an instance, could possibly be plenty of potential BDC consumers or if Bulldog has its approach, Investcorp would possibly purchase it into one among their different methods (just like Apollo with ARI) to save lots of face.
That is an illiquid microcap with an the other way up steadiness sheet, if it does not get wrapped up pretty shortly, all fairness may get worn out.
Disclosure: I personal shares of ICMB
