Business Context and Reporting Period
Company: Investcorp Credit Management BDC, Inc. (ICMB)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Twelve months ended December 31, 2025
Business Overview: ICMB is an externally managed, non-diversified closed-end management investment company regulated as a Business Development Company (BDC) and treated as a Regulated Investment Company (RIC). The Company invests primarily in the debt (first lien, second lien, unitranche) and related equity of privately held U.S. middle-market companies. It is managed by CM Investment Partners LLC (the "Adviser"), which is majority-owned by Investcorp.
Key Financial Metrics
| Metric | Value (Dec 31, 2025) | Value (Dec 31, 2024) |
|---|---|---|
| Portfolio Fair Value | $172.7 million | $191.6 million |
| Number of Portfolio Companies | 37 | 43 |
| Total Investment Income | $17.4 million | $23.4 million |
| Net Investment Income (After Tax) | $1.9 million | $3.1 million |
| Net Realized Gain/(Loss) | $(1.8) million | $(16.2) million |
| Net Change in Unrealized Appreciation/(Depreciation) | $(8.9) million | $16.2 million |
| Net Increase/(Decrease) in Net Assets from Operations | $(8.8) million | $6.0 million |
| Net Assets | $61.3 million | $77.6 million |
| Net Asset Value (NAV) Per Share | $4.25 | $5.39 |
| Total Debt Outstanding | $123.9 million | $123.5 million |
| Asset Coverage Ratio | 1.50x | 1.63x |
| Weighted Average Total Yield (Debt) | 10.34% | 10.60% |
Material Changes vs. Prior Period
- Portfolio Contraction: Portfolio fair value decreased by approximately 10% ($18.9 million) from $191.6 million to $172.7 million, driven by the sale and repayment of twelve portfolio companies and unrealized depreciation.
- Operating Results: Net investment income declined to $1.9 million from $3.1 million, primarily due to lower interest rates, reduced PIK interest income, and the removal of certain loans from non-accrual status. However, the Company avoided the significant realized losses seen in the prior year ($16.2 million loss in 2024 vs. $1.8 million loss in 2025).
- Unrealized Depreciation: The Company recorded $8.9 million in net unrealized depreciation, a reversal from the $16.2 million appreciation recorded in the prior year. Key drivers included decreases in fair value for Bioplan USA, Max US Bidco, and Fusion Connect.
- Asset Coverage: The asset coverage ratio tightened to 1.50x (the minimum required under the 1940 Act) from 1.63x, reflecting the decline in net assets relative to debt levels.
- Debt Structure: Borrowings under the Capital One Revolving Financing remained relatively stable at $58.9 million. The Company holds $65.0 million in 4.875% Notes due 2026.
Guidance, Outlook, and Risks
- Recent Financing (Subsequent Event): On March 29, 2026, the Company entered into a financing arrangement with Investcorp Capital plc (ICAP) for a $65.0 million unsecured note (SOFR + 5.50%) maturing in 2029. Proceeds were used to fully repay the 4.875% Notes due April 1, 2026. Management believes this ensures compliance with asset coverage requirements.
- Outlook: Management continues to monitor the inflationary environment and potential global recession risks. The Company maintains sufficient liquidity to fund unfunded commitments ($3.7 million) and believes it is well-positioned to manage the current environment.
- Key Risks:
- Leverage: The Company operates near the 150% asset coverage minimum. A further decline in asset values could restrict the ability to borrow or make distributions.
- Asset Quality: Five investments were on non-accrual status as of December 31, 2025, representing 6.93% of the portfolio. Investments rated 4 or 5 (workout status) comprised 7.6% of the portfolio.
- Interest Rate Sensitivity: 98% of debt investments are floating rate. A 1% increase in rates would increase net interest income by approximately 44%, while a 1% decrease would reduce it by 42%.
- Valuation Uncertainty: The majority of the portfolio ($149.2 million) is classified as Level 3, relying on unobservable inputs and management judgment.
Important Facts for Investor Verification
- Asset Coverage Ratio: Verify the Company's ability to maintain the 150% asset coverage ratio required by the 1940 Act, especially given the recent decline to 1.50x.
- Debt Maturity Wall: Confirm the successful execution of the March 2026 refinancing of the $65 million 2026 Notes and the terms of the new 2029 notes.
- Non-Accrual Assets: Monitor the performance of the five non-accrual investments (6.93% of portfolio) and the eight investments in "workout" status (Rating 4/5).
- Fee Waivers: Note that the Adviser waived $349,320 in base management fees for the year. Verify if future waivers are likely given the pressure on net investment income.
- Stock Price Discount: As of March 20, 2026, the stock traded at $1.71, representing a significant discount of approximately 60% to the NAV of $4.25.