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 assessment of strategic alternate options led by a committee of impartial 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 Buyers (4.1% proprietor) issued a letter demanding the exterior supervisor buy-in the excellent shares at NAV. This must be bought fast, its a melting ice dice splayed out on a sizzling summer time day asphalt driveway.
BDCs are simply swimming pools of belongings, they are often bought 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 return in and merge away ICMB. Typically there’s additionally slightly money kicker for shareholders to encourage them to vote sure and serves as compensation for coming into into a brand new exterior administration settlement. ICMB’s supervisor, Investcorp, ought to be incentivized to just accept nearly any deal, they personal 25% of the BDC, have been waiving administration charges and fortuitously for shareholders, do not seem to have a termination payment. Reputationally, they will wish to transfer on from this experiment.
Beneath is little math based mostly on our present favourite BDC consolidator, BCP Funding Corp (BCIC), assuming an NAV-for-NAV merger, ICMB may see important upside. BCIC is simply an instance, may very well be numerous potential BDC consumers or if Bulldog has its means, Investcorp would possibly purchase it into one in every of their different methods (just like Apollo with ARI) to save lots of face.
That is an illiquid microcap with an the wrong way up steadiness sheet, if it would not get wrapped up pretty shortly, all fairness may get worn out.
Disclosure: I personal shares of ICMB