BCSF Bain Capital Specialty Finance Inc

Bain Capital Specialty Finance, Inc. (NYSE: BCSF, the “Company”, “our” or “we”) today announced financial results for the fourth quarter and fiscal year ended December 31, 2023, and that its Board of Directors (the “Board”) has declared a dividend of $0.42 per share for the first quarter of 2024 and has also declared additional dividends totaling $0.12 per share for 2024.

“BCSF reported strong quarterly and full year 2023 results as we benefited from attractive levels of interest income, net asset value growth and continued stable credit performance across our primarily senior secured portfolio,” said Michael Ewald, Chief Executive Officer of BCSF. “As a result of our strong 2023 performance, we declared additional dividends totaling $0.12 per share to be paid in equal quarterly amounts during the year, bringing our total annualized dividend yield to 10.2% at ending book value, inclusive of our regular quarterly dividend of $0.42 per share.”

QUARTERLY HIGHLIGHTS

• Net investment income (NII) per share was $0.54, equating to an annualized NII yield on book value of 12.3%(1);
• Net income per share was $0.48, equating to an annualized return on book value of 10.9%(1);
• Net asset value per share as of December 31, 2023 was $17.60, as compared to $17.54 as of September 30, 2023;
• Gross and net investment fundings were $206.4 million and $(101.8) million, respectively; Ending net debt-to-equity was 1.02x, as compared to 1.12x as of September 30, 2023(2);
• Investments on non-accrual remained low at 1.9% and 1.2% of the total investment portfolio at amortized cost and fair value, respectively, as of December 31, 2023;
• Subsequent to quarter-end, the Company’s Board of Directors declared a dividend of $0.42 per share for the first quarter of 2024 payable to stockholders of record as of March 28, 2024 and has also declared additional dividends totaling $0.12 per share for 2024, to be distributed in four consecutive quarterly payments of $0.03 per share per quarter. The first additional dividend is payable to stockholders of record as of March 28, 2024(3); and
• In February 2024, Kroll Bond Rating Agency, LLC (KBRA) affirmed the Company’s investment grade rating of BBB and stable outlook.

SELECTED FINANCIAL HIGHLIGHTS

($ in millions, unless otherwise noted)

Q4 2023

Q3 2023

Net investment income per share

$0.54

$0.55

Net investment income

$34.9

$35.6

Earnings per share

$0.48

$0.52

Dividends per share declared and payable

$0.42

$0.42

 

 

 

($ in millions, unless otherwise noted)

As of

December 31, 2023

As of

September 30, 2023

Total fair value of investments

$2,298.3

$2,390.2

Total assets

$2,472.3

$2,566.5

Total net assets

$1,136.5

$1,132.5

Net asset value per share

$17.60

$17.54

PORTFOLIO AND INVESTMENT ACTIVITY

For the three months ended December 31, 2023, the Company invested $206.4 million in 43 portfolio companies, including $56.1 million in two new companies, $145.3 million in 40 existing companies and $5.0 million in ISLP. The Company had $308.2 million of principal repayments and sales in the quarter, resulting in net investment fundings of $(101.8) million.

Investment Activity for the Quarter Ended December 31, 2023:

($ in millions)

Q4 2023

Q3 2023

Investment Fundings

$206.4

$109.5

Sales and Repayments

$308.2

$102.8

Net Investment Activity

$(101.8)

$6.7

As of December 31, 2023, the Company’s investment portfolio had a fair value of $2,298.3 million, comprised of investments in 137 portfolio companies operating across 31 different industries.

Investment Portfolio at Fair Value as of December 31, 2023:

Investment Type

$ in Millions

% of Total

First Lien Senior Secured Loans

$1,464.4

63.8%

Second Lien Senior Secured Loans

68.4

3.0

Subordinated Debt

45.9

2.0

Structured Products

22.6

1.0

Preferred Equity

104.4

4.5

Equity Interests

221.4

9.6

Warrants

0.5

0.0

Investment Vehicles

370.7

16.1

Subordinated Note in ISLP

190.7

8.3

Equity Interest in ISLP

66.2

2.9

Subordinated Note in SLP

116.0

5.0

Preferred and Equity Interest in SLP

(2.2)

(0.1)

Total

$2,298.3

100.0%

As of December 31, 2023, the weighted average yield on the investment portfolio at amortized cost and fair value were 13.0% and 13.1%, respectively, as compared to 12.9% and 13.1%, respectively, as of September 30, 2023(4). 93.8% of the Company’s debt investments at fair value were in floating rate securities.

As of December 31, 2023, three portfolio companies were on non-accrual status, representing 1.9% and 1.2% of the total investment portfolio at amortized cost and fair value, respectively.

As of December 31, 2023, ISLP’s investment portfolio had an aggregate fair value of $709.8 million, comprised of investments in 37 portfolio companies operating across 17 different industries. The investment portfolio on a fair value basis was comprised of 93.7% first lien senior secured loans, 2.9% second lien senior secured loans and 3.4% equity interests. 100% of ISLP’s debt investments at fair value were in floating rate securities.

As of December 31, 2023, SLP’s investment portfolio had an aggregate fair value of $879.9 million, comprised of investments in 62 portfolio companies operating across 21 different industries.(5) The investment portfolio on a fair value basis was comprised of 97.7% first lien senior secured loans and 2.3% second lien senior secured loans. 99.3% of SLP’s debt investments at fair value were in floating rate securities.

RESULTS OF OPERATIONS

For the three months ended December 31, 2023 and September 30, 2023, total investment income was $74.9 million and $72.4 million, respectively. The increase in investment income was primarily due to an increase in dividend and other income.

Total expenses (before taxes) for the three months ended December 31, 2023 and September 30, 2023 were $39.0 million and $36.1 million, respectively.

Net investment income for the three months ended December 31, 2023 and September 30, 2023 was $34.9 million or $0.54 per share and $35.6 million or $0.55 per share, respectively.

During the three months ended December 31, 2023, the Company had net realized and unrealized gains (losses) of $(3.8) million.

Net increase in net assets resulting from operations for the three months ended December 31, 2023 was $31.1 million, or $0.48 per share.

CAPITAL AND LIQUIDITY

As of December 31, 2023, the Company had total principal debt outstanding of $1,263.5 million, including $311.0 million outstanding in the Company’s Sumitomo Credit Facility, $352.5 million outstanding of the debt issued through BCC Middle Market CLO 2019-1 LLC, $300.0 million outstanding in the Company’s senior unsecured notes due March 2026 and $300.0 million outstanding in the Company’s senior unsecured notes due October 2026.

For the three months ended December 31, 2023, the weighted average interest rate on debt outstanding was 5.3%, as compared to 5.4% for the three months ended September 30, 2023.

As of December 31, 2023, the Company had cash and cash equivalents (including foreign cash) of $49.4 million, restricted cash and cash equivalents of $63.1 million, $(7.1) million of unsettled trades, net of receivables and payables of investments, and $343.3 million of capacity under its Sumitomo Credit Facility. As of December 31, 2023, the Company had $266.1 million of undrawn investment commitments.

As of December 31, 2023, the Company’s debt-to-equity and net debt-to-equity ratios were 1.11x and 1.02x, respectively, as compared to 1.22x and 1.12x, respectively, as of September 30, 2023(2).

Endnotes

1. Net investment income yields and net income returns are calculated on average net assets, or book value, for the respective periods shown.
2. Net debt-to-equity represents principal debt outstanding less cash and cash equivalents and unsettled trades, net of receivables and payables of investments.
3. The first quarter dividend is payable on April 30, 2024 to stockholders of record as of March 28, 2024.
4. The weighted average yield is computed as (a) the annual stated interest rate or yield earned on the relevant accruing debt and other income producing securities plus amortization of fees and discounts on the performing debt and other income producing investments, divided by (b) the total relevant investments at amortized cost or fair value. The weighted average yield does not represent the total return to our stockholders.
5. SLP acquired 70% of the member equity interests of the Company’s 2018-1 portfolio (“2018-1”). The Company retained 30% of the 2018-1 membership interests as a non-controlling equity interest.

CONFERENCE CALL INFORMATION

A conference call to discuss the Company’s financial results will be held live at 8:30 a.m. Eastern Time on February 28, 2024. Please visit BCSF’s webcast link located on the Events & Presentations page of the Investor Resources section of BCSF’s website at http://www.baincapitalspecialtyfinance.com for a slide presentation that complements the Earnings Conference Call.

Participants are also invited to access the conference call by dialing one of the following numbers:

• Domestic: 1-888-886-7786
• International: 1-416-764-8658
• Conference ID: 46709784

All participants will need to reference “Bain Capital Specialty Finance - Fourth Quarter and Fiscal Year Ended December 31, 2023 Earnings Conference Call” once connected with the operator. All participants are asked to dial in 10-15 minutes prior to the call.

Replay Information:

An archived replay will be available approximately three hours after the conference call concludes through March 6, 2024 via a webcast link located on the Investor Resources section of BCSF’s website, and via the dial-in numbers listed below:

• Domestic: 1-844-512-2921
• International: 1-412-317-6671
• Conference ID: 46709784

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

 

As of

As of

December 31, 2023

December 31, 2022

 

Assets

 

 

Investments at fair value:

 

 

Non-controlled/non-affiliate investments (amortized cost of $1,615,061 and $1,846,172, respectively)

$

1,593,360

$

1,774,947

Non-controlled/affiliate investment (amortized cost of $132,650 and $133,808, respectively)

147,971

173,400

Controlled affiliate investment (amortized cost of $554,123 and $439,958, respectively)

557,012

438,630

Cash and cash equivalents

42,995

30,205

Foreign cash (cost of $6,865 and $34,528, respectively)

6,405

29,575

Restricted cash and cash equivalents

63,084

65,950

Collateral on forward currency exchange contracts

7,613

9,612

Deferred financing costs

2,802

3,742

Interest receivable on investments

37,169

34,270

Receivable for sales and paydowns of investments

4,310

18,166

Prepaid Insurance

210

194

Unrealized appreciation on forward currency exchange contracts

—

62

Dividend receivable

9,417

13,681

Total Assets

$

2,472,348

$

2,592,434

 

 

 

Liabilities

 

 

Debt (net of unamortized debt issuance costs of $7,567 and $10,197, respectively)

$

1,255,933

$

1,385,303

Interest payable

13,283

12,130

Payable for investments purchased

11,453

34,292

Unrealized depreciation on forward currency exchange contracts

2,260

—

Base management fee payable

8,929

8,906

Incentive fee payable

7,327

9,216

Accounts payable and accrued expenses

9,581

2,954

Distributions payable

 

27,116

 

23,242

Total Liabilities

1,335,882

1,476,043

 

 

 

 

 

 

 

 

Commitments and Contingencies (See Note 10)

 

 

 

 

Net Assets

 

 

Common stock, par value $0.001 per share, 100,000,000,000 and 100,000,000,000 shares authorized, 64,562,265 and 64,562,265 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

65

65

Paid in capital in excess of par value

1,168,384

1,168,384

Total distributable loss

(31,983)

(52,058)

Total Net Assets

1,136,466

1,116,391

Total Liabilities and Total Net Assets

$

2,472,348

$

2,592,434

 

 

 

Net asset value per share

$

17.60

$

17.29

 

See Notes to Consolidated Financial Statements

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Operations

(in thousands, except share and per share data)

 

For the Year Ended December 31,

2023

 

2022

 

2021

Income Investment income from non-controlled/non-affiliate investments: Interest from investments $

184,921

$

138,984

$

153,703

Dividend income

62

634

514

PIK income

20,536

13,495

4,475

Other income

10,561

15,091

6,173

Total investment income from non-controlled/non-affiliate investments

216,080

168,204

164,865

  Investment income from non-controlled/affiliate investments: Interest from investments

9,890

7,470

1,818

Dividend income

4,815

4,109

—

PIK income

2,308

1,542

5,622

Total investment income from non-controlled/affiliate investments

17,013

13,121

7,440

  Investment income from controlled affiliate investments: Interest from investments

33,739

19,819

11,822

Dividend income

30,957

18,401

12,601

PIK income

—

—

666

Total investment income from controlled affiliate investments

64,696

38,220

25,089

Total investment income

297,789

219,545

197,394

  Expenses Interest and debt financing expenses

80,008

52,318

51,345

Base management fee

36,095

34,669

34,888

Incentive fee

25,456

19,572

24,028

Professional fees

2,561

2,959

2,854

Directors fees

716

707

725

Other general and administrative expenses

7,981

5,777

5,038

Total expenses before fee waivers

152,817

116,002

118,878

Base management fee waiver

—

—

(4,837)

Incentive fee waiver

—

—

(4,519)

Total expenses, net of fee waivers

152,817

116,002

109,522

Net investment income before taxes

144,972

103,543

87,872

Income tax expense, including excise tax

3,357

837

134

Net investment income

141,615

102,706

87,738

  Net realized and unrealized gains (losses) Net realized loss on non-controlled/non-affiliate investments

(62,903)

(1,725)

25,084

Net realized gain (loss) on non-controlled/affiliate investments (net of taxes of $4,064, $0 and $0, respectively)

19,006

(1,355)

—

Net realized loss on controlled affiliate investments

—

—

(3,858)

Net realized gain (loss) on foreign currency transactions

(5,134)

5,292

(3,496)

Net realized gain (loss) on forward currency exchange contracts

(407)

20,894

(23,773)

Net realized loss on extinguishment of debt

—

(747)

(4,859)

Net change in unrealized appreciation on foreign currency translation

4,050

(3,644)

(936)

Net change in unrealized appreciation on forward currency exchange contracts

(2,322)

(5,259)

27,935

Net change in unrealized appreciation on non-controlled/non-affiliate investments

49,524

(50,309)

(568)

Net change in unrealized appreciation on non-controlled/affiliate investments

(24,271)

27,190

12,576

Net change in unrealized appreciation on controlled affiliate investments

4,217

12,437

3,964

Total net gains (losses)

(18,240)

2,774

32,069

Net increase in net assets resulting from operations $

123,375

$

105,480

$

119,807

  Basic and diluted net investment income per common share $

2.19

$

1.59

$

1.36

Basic and diluted increase in net assets resulting from operations per common share $

1.91

$

1.63

$

1.86

Basic and diluted weighted average common shares outstanding

64,562,265

64,562,265

64,562,265

About Bain Capital Specialty Finance, Inc.

Bain Capital Specialty Finance, Inc. is an externally managed specialty finance company focused on lending to middle market companies. BCSF is managed by BCSF Advisors, LP, an SEC-registered investment adviser and a subsidiary of Bain Capital Credit, LP. Since commencing investment operations on October 13, 2016, and through December 31, 2023, BCSF has invested approximately $7.0 billion in aggregate principal amount of debt and equity investments prior to any subsequent exits or repayments. BCSF’s investment objective is to generate current income and, to a lesser extent, capital appreciation through direct originations of secured debt, including first lien, first lien/last out, unitranche and second lien debt, investments in strategic joint ventures, equity investments and, to a lesser extent, corporate bonds. BCSF has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended.

Forward-Looking Statements

This letter may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this letter may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the U.S. Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this letter.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240227254296/en/

Investors: Katherine Schneider (212) 803-9613 investors@baincapitalbdc.com

Media: Charlyn Lusk (646) 502-3549 clusk@stantonprm.com