Business Context and Reporting Period
Company: Investcorp Credit Management BDC, Inc. (formerly CM Finance Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: October 18, 2019
Event: Entry into a Material Definitive Agreement (Underwriting Agreement) and creation of a direct financial obligation.
Key Financial Metrics and Transaction Details
- Instrument Issued: $15,000,000 aggregate principal amount of 6.125% Notes due 2023.
- Interest Rate: 6.125% per annum, payable quarterly.
- Maturity Date: July 1, 2023.
- Redemption: Callable at the Company's option on or after July 1, 2020 at 100% of principal plus accrued interest.
- Net Proceeds: Approximately $14,276,250.
- Offering Price: 96.875% of aggregate principal amount.
- Estimated Offering Expenses: Approximately $255,000.
- Underwriter: Ladenburg Thalmann & Co. Inc.
Material Changes and Use of Proceeds
The Company entered into an underwriting agreement to issue additional notes under an existing Indenture dated July 2, 2018. These new notes are fungible with $34,500,000 of existing 6.125% Notes due 2023.
Intended Use of Proceeds:
- Repayment of outstanding indebtedness under the Company's senior secured revolving credit facility.
- Funding investments in middle market companies.
- Working capital and general corporate purposes.
Note: The filing does not provide specific revenue, profit, cash flow, or margin figures for the period, as this is a transactional report rather than a periodic financial statement.
Outlook, Risks, and Covenants
Debt Structure and Seniority: The Notes are direct unsecured obligations ranking pari passu with existing unsecured indebtedness. They are effectively subordinated to all secured indebtedness and structurally subordinated to obligations of the Company's subsidiaries.
Key Covenants:
- Compliance with asset coverage requirements under the Investment Company Act of 1940.
- Restrictions on declaring cash dividends or purchasing capital stock if asset coverage falls below 150%.
- Requirement to provide financial information to Note holders if the Company ceases to be subject to Exchange Act reporting requirements.
Risks: The Company may re-borrow under its revolving financing to invest in middle market companies, which introduces leverage risk. The Notes are subject to the credit risk of the Company and its subsidiaries.
Investor Verification Checklist
- Verify the total outstanding principal of the 6.125% Notes due 2023 (now $49,500,000 combined with existing notes).
- Confirm the current status of the Company's senior secured revolving credit facility and whether proceeds were used to reduce this balance.
- Review the Company's asset coverage ratio to ensure compliance with the 150% threshold required for dividend declarations.
- Assess the impact of the new unsecured debt on the Company's overall leverage and liquidity position.
- Check for any subsequent filings regarding the actual deployment of the $14.28 million in net proceeds.