Business Context and Reporting Period
This Form 8-K, dated September 3, 2019, reports the closing of a material transaction for Investcorp Credit Management BDC, Inc. (formerly CM Finance Inc.). On August 30, 2019, Investcorp BDC Holdings Limited acquired a majority ownership interest in the Company's investment adviser, CM Investment Partners LLC. Concurrently, the Company changed its name to Investcorp Credit Management BDC, Inc., and its NASDAQ trading symbol changed from "CMFN" to "ICMB" effective September 3, 2019.
Key Financial Metrics and Agreements
The filing details the terms of new material definitive agreements entered into on August 30, 2019, rather than reporting period-specific financial performance metrics such as revenue or cash flow.
- Base Management Fee: 1.75% annual rate of Gross Assets (excluding cash and cash equivalents).
- Incentive Fee (Income-Based): 20% of Pre-Incentive Fee Net Investment Income exceeding a 2.0% quarterly hurdle rate (8.0% annualized), subject to a "catch-up" provision and a Total Return Requirement.
- Incentive Fee (Capital Gains): 20% of cumulative aggregate realized capital gains, net of losses and unrealized depreciation, payable annually commencing with the fiscal year ending June 30, 2021.
- Administration Fee: Based on the Company's allocable portion of the Adviser's overhead, including rent, compliance costs, and executive staff costs.
Material Changes Versus Prior Period
The filing documents significant structural and governance changes effective August 30, 2019:
- Corporate Identity: Name changed from CM Finance Inc. to Investcorp Credit Management BDC, Inc.
- Advisory Agreements: Termination of the 2014 Investment Advisory and Administration Agreements and execution of new agreements with the same Adviser under new fee structures.
- Stockholder Agreement: Termination of the Third Amended and Restated Stockholder Agreement dated December 7, 2017.
- Board Composition: Reduction of the Board size to four members effective September 15, 2019. Resignations of directors Robert Ryder, Robert Wagner, and Christopher Jansen (who remains President and Secretary). Election of Thomas Sullivan as an Independent Director.
Guidance, Outlook, and Risks
The filing does not provide financial guidance, revenue outlook, or specific risk factors beyond the standard disclosures inherent in the new agreements.
- Agreement Duration: The New Advisory and Administration Agreements have an initial two-year term, renewable annually upon Board approval.
- Termination Rights: Either party may terminate the agreements without penalty upon 60 days' written notice. Stockholders holding a majority of voting securities may also terminate the Advisory Agreement without penalty.
- Indemnification: The Adviser is entitled to indemnification for liabilities arising from services unless caused by willful misfeasance, bad faith, or gross negligence.
- Future Governance: Investcorp retains the right to identify a second director candidate by March 31, 2020 (extendable to August 30, 2020 under specific conditions).
Important Facts for Investor Verification
- Verify the impact of the new 1.75% base management fee and 20% incentive fee structure on future Net Investment Income compared to the prior agreement.
- Confirm the effective date of the trading symbol change to "ICMB" on the NASDAQ Global Select Market (September 3, 2019).
- Monitor the timeline for the appointment of the "Post-Closing Designated Director" by Investcorp, with a deadline of March 31, 2020.
- Review the specific terms of the "Total Return Requirement" for the Income-Based Fee, which defers fees if cumulative net asset growth does not exceed fees paid.
- Note that the Capital Gains Fee calculation excludes portfolio gains/losses as of June 30, 2020.