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Bain Capital Specialty Finance, Inc. Announces September 30, 2021 Financial Results and Declares Fourth Quarter 2021 Dividend of $0.34 per Share

·14 min read

BOSTON, November 03, 2021--(BUSINESS WIRE)--Bain Capital Specialty Finance, Inc. (NYSE: BCSF, the "Company", "our" or "we") today announced financial results for the third quarter ended September 30, 2021, and that its Board of Directors has declared a dividend of $0.34 per share for the fourth quarter of 2021.

"Our positive third quarter earnings results were driven by higher interest income and continued stable credit quality across our diversified portfolio," said Michael Ewald, Chief Executive Officer of BCSF. "We also had a strong quarter of new origination activity, demonstrating the strength of Bain Capital Credit’s Private Credit Group in sourcing compelling new investment opportunities in the middle market."

QUARTERLY HIGHLIGHTS

  • Net investment income per share was $0.34, as compared to $0.34 for the quarter ended June 30, 2021;

  • Net income per share was $0.36, as compared to $0.66 for the quarter ended June 30, 2021;

  • Net asset value per share as of September 30, 2021 was $17.03, as compared to $17.01 as of June 30, 2021;

  • Gross and net investment fundings were $286.4 million and $31.5 million, respectively. Ending debt-to-equity (net of cash) ratio was 1.15x, as compared to 1.12x as of June 30, 2021;

  • No investments were on non-accrual status as of September 30, 2021;

  • Subsequent to quarter-end, the Company’s Board of Directors declared a dividend of $0.34 per share for the fourth quarter of 2021 payable to stockholders of record as of December 31, 2021(1); and

  • On October 13, 2021, the Company closed an offering of $300.0 million aggregate principal amount of 2.55% unsecured notes due 2026. The net proceeds of the offering were primarily used to pay down debt under the Company’s revolving credit facilities.

SELECTED FINANCIAL HIGHLIGHTS

($ in millions, unless otherwise noted)

Q3 2021

Q2 2021

Net investment income per share

$0.34

$0.34

Net investment income

$21.8

$21.9

Earnings per share

$0.36

$0.66

Dividends per share declared and payable

$0.34

$0.34

($ in millions, unless otherwise noted)

As of

September 30, 2021

As of

June 30, 2021

Total fair value of investments

$2,356.7

$2,319.5

Total assets

$2,498.7

$2,449.3

Total net assets

$1,099.7

$1,098.3

Net asset value per share

$17.03

$17.01

PORTFOLIO AND INVESTMENT ACTIVITY

For the three months ended September 30, 2021, the Company invested $286.4 million in 39 portfolio companies, including $229.1 million in 10 new companies, $46.2 million in 28 existing companies and $11.1 million in the ISLP. The Company had $254.9 million of principal repayments and sales in the quarter. On a net basis, our investments in the quarter totaled $31.5 million.

For the three months ended September 30, 2021, the ISLP invested $63.5 million in five portfolio companies. The ISLP had $62.3 million of principal repayments and sales in the quarter. On a net basis, ISLP’s investments in the quarter totaled $1.2 million.

Investment Activity for the Quarter Ended September 30, 2021:

($ in millions)

Q3 2021

Q2 2021

Investment Fundings

$286.4

$213.2

Sales and Repayments

$254.9

$257.7

Net Investment Activity

$31.5

$(44.5)

As of September 30, 2021, the Company’s investment portfolio had a fair value of $2,356.7 million, comprised of investments in 105 portfolio companies operating across 29 different industries.

Investment Portfolio at Fair Value as of September 30, 2021:

Investment Type

$ in Millions

% of Total

First Lien Senior Secured Loans

$1,887.2

80.1%

Second Lien Senior Secured Loans

116.2

4.9

Subordinated Debt

16.8

0.7

Equity Interest

160.9

6.8

Preferred Equity

32.2

1.4

Warrants

0.1

0.0

Investment Vehicles

143.3

6.1

Subordinated Note in ISLP

105.9

4.5

Equity Interest in ISLP

37.4

1.6

Total

$2,356.7

100.0%

As of September 30, 2021, the weighted average yield on the investment portfolio at amortized cost and fair value were 7.5% and 7.6%, respectively, as compared to 7.5% and 7.7%, respectively, as of June 30, 2021.(2) 98.9% of the Company’s debt investments at fair value were in floating rate securities.

As of September 30, 2021, no investments were on non-accrual status.

As of September 30, 2021, ISLP’s investment portfolio had an aggregate fair value of $395.8 million, comprised of investments in 23 portfolio companies operating across 10 different industries. The investment portfolio on a fair value basis was comprised of 96.7% first lien senior secured loans and 3.3% second lien senior secured loans. 100% of ISLP’s debt investments at fair value were in floating rate securities.

RESULTS OF OPERATIONS

For the three months ended September 30, 2021 and June 30, 2021, total investment income was $49.5 million and $46.5 million, respectively. The increase in investment income was primarily due to an increase in prepayment related income and other income.

Total expenses (before taxes), net of fee waivers for the three months ended September 30, 2021 and June 30, 2021 were $27.8 million and $24.6 million, respectively. The increase was primarily driven by an increase in investment advisory fees as a result of no fee waivers by the Advisor given the Company’s net investment income coverage of the dividend during the quarter ended September 30, 2021.

Net investment income for the three months ended September 30, 2021 and June 30, 2021 was $21.8 million or $0.34 per share and $21.9 million or $0.34 per share, respectively.

During the three months ended September 30, 2021, the Company had net realized and unrealized gains of $1.6 million.

Net increase in net assets resulting from operations for the three months ended September 30, 2021 was $23.3 million, or $0.36 per share.

CAPITAL AND LIQUIDITY

As of September 30, 2021, the Company had total principal debt outstanding of $1,356.7 million, including $179.7 million outstanding in the Company’s credit facility with JPMorgan Chase Bank, National Association (the "JPM Credit Facility"), $365.7 million outstanding of the notes issued through BCC Middle Market CLO 2018-1 LLC, $398.8 million outstanding of the debt issued through BCC Middle Market CLO 2019-1 LLC, $112.5 million outstanding in the Company’s senior unsecured notes due 2023 and $300.0 million outstanding in the Company’s senior unsecured notes due 2026.

For the three months ended September 30, 2021, the weighted average interest rate on debt outstanding was 3.0%, as compared to 3.2% for the three months ended June 30, 2021.

As of September 30, 2021, the Company had cash and cash equivalents (including foreign cash) of $35.1 million, $270.3 million of capacity under its JPM Credit Facility and $50.0 million of capacity under the Revolving Advisor Loan. As of September 30, 2021, the Company had $225.3 million of undrawn investment commitments.

As of September 30, 2021, the Company’s debt-to-equity and debt-to-equity (net of cash) ratios were 1.23x and 1.15x, respectively, as compared to 1.20x and 1.12x, respectively, as of June 30, 2021.

As of September 30, 2021, the Company was in compliance with all terms under its secured credit facilities.

During the quarter, the Company repurchased $37.5 million of its senior 8.50% unsecured notes due 2023 at a total cost of $39.5 million.

Endnotes

(1)

The fourth quarter dividend is payable on January 28, 2022 to holders of record as of December 31, 2021.

(2)

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. The weighted average yield does not represent the total return to our stockholders.

CONFERENCE CALL INFORMATION

A conference call to discuss the Company’s financial results will be held live at 8:00 a.m. Eastern Time on November 4, 2021. Please visit BCSF’s webcast link located on the Events & Presentations page of the Investor Resources section of BCSF’s website at http://www.baincapitalbdc.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: 1-800-458-4121

  • International: 1-323-794-2597

  • Conference ID: 7785735

All participants will need to reference "Bain Capital Specialty Finance - Third Quarter Ended September 30, 2021 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 November 11, 2021 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: 7785735#

Bain Capital Specialty Finance, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

As of

As of

September 30, 2021

December 31, 2020

(Unaudited)

Assets

Investments at fair value:

Non-controlled/non-affiliate investments (amortized cost of $2,023,858 and $2,281,809, respectively)

$

2,005,635

$

2,261,461

Non-controlled/affiliate investment (amortized cost of $99,438 and $93,089, respectively)

107,576

92,915

Controlled affiliate investment (amortized cost of $256,766 and $147,841, respectively)

243,460

130,112

Cash and cash equivalents

34,277

53,704

Foreign cash (cost of $1,033 and $976, respectively)

829

972

Restricted cash and cash equivalents

57,802

27,026

Collateral on forward currency exchange contracts

4,564

4,934

Deferred financing costs

864

3,131

Interest receivable on investments

20,943

15,720

Receivable for sales and paydowns of investments

3,850

5,928

Prepaid Insurance

376

-

Unrealized appreciation on forward currency exchange contracts

4,071

-

Dividend receivable

14,417

7,589

Total Assets

$

2,498,664

$

2,603,492

Liabilities

Debt (net of unamortized debt issuance costs of $10,500 and $7,147, respectively)

$

1,346,183

$

1,458,360

Interest payable

8,471

8,223

Payable for investments purchased

5,400

10,991

Unrealized depreciation on forward currency exchange contracts

-

22,614

Base management fee payable

8,776

6,289

Incentive fee payable

4,531

3,799

Accounts payable and accrued expenses

3,673

3,261

Distributions payable

21,951

21,951

Total Liabilities

1,398,985

1,535,488

Commitments and Contingencies

Net Assets

Preferred stock, $0.001 par value per share, 10,000,000,000 shares authorized, none issued and outstanding
as of September 30, 2021 and December 31, 2020, respectively

$

-

$

-

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 September 30, 2021 and December 31, 2020, respectively

65

65

Paid in capital in excess of par value

1,166,453

1,166,453

Total distributable earnings (loss)

(66,839)

(98,514)

Total Net Assets

1,099,679

1,068,004

Total Liabilities and Total Net assets

$

2,498,664

$

2,603,492

Net asset value per share

$

17.03

$

16.54

Bain Capital Specialty Finance, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

For the Three Months Ended September 30

For the Three Months Ended September 30

For the Nine Months Ended September 30

For the Nine Months Ended September 30

2021

2020

2021

2020

Income

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

Interest from investments

$

37,821

$

43,558

$

114,439

$

135,576

Dividend income

38

34

38

748

PIK income

1,046

-

3,108

-

Other income

1,181

607

5,512

1,106

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

40,086

44,199

123,097

137,430

Investment income from non-controlled/affiliate investments:

Interest from investments

455

56

1,355

56

PIK income

1,421

-

4,173

-

Total investment income from non-controlled/affiliate investments

1,876

56

5,528

56

Investment income from controlled affiliate investments:

Interest from investments

4,983

715

9,192

2,225

Dividend income

2,600

1,847

7,564

6,473

PIK income

-

-

483

-

Total investment income from controlled affiliate investments

7,583

2,562

17,239

8,698

Total investment income

49,545

46,817

145,864

146,184

Expenses

Interest and debt financing expenses

12,265

14,426

37,115

49,614

Base management fee

8,776

8,885

26,096

26,250

Incentive fee

4,531

-

19,301

-

Professional fees

581

296

2,254

1,909

Directors fees

186

209

529

555

Other general and administrative expenses

1,445

1,545

4,075

3,878

Total expenses before fee waivers

27,784

25,361

89,370

82,206

Base management fee waiver

-

-

(4,837)

-

Incentive fee waiver

-

-

(4,519)

-

Total expenses, net of fee waivers

27,784

25,361

80,014

82,206

Net investment income

21,761

21,456

65,850

63,978

Net realized and unrealized gains (losses)

Net realized gain (loss) on non-controlled/non-affiliate investments

(668)

(24,263)

22,589

(34,667)

Net realized loss on controlled affiliate investments

(621)

-

(3,858)

-

Net realized gain (loss) on foreign currency transactions

(72)

(19)

(2,093)

(368)

Net realized gain (loss) on forward currency exchange contracts

(2,085)

(130)

(23,773)

6,472

Net realized loss on extinguishment of debt

(2,546)

-

(2,546)

-

Net change in unrealized appreciation (depreciation) on foreign currency translation

(508)

194

(186)

89

Net change in unrealized appreciation (depreciation) on forward currency exchange contracts

6,080

(11,177)

26,685

(7,921)

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

922

73,892

2,125

(45,077)

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

2,905

1,689

8,312

4,697

Net change in unrealized appreciation (depreciation) on controlled affiliate investments

(1,826)

(10,185)

4,423

(18,421)

Total net gains (losses)

1,581

30,001

31,678

(95,196)

Net increase (decrease) in net assets resulting from operations

$

23,342

$

51,457

$

97,528

$

(31,218)

Basic and diluted net investment income per common share

$

0.34

$

0.33

$

1.02

$

1.13

Basic and diluted increase (decrease) in net assets resulting from operations per common share

$

0.36

$

0.80

$

1.51

$

(0.55)

Basic and diluted weighted average common shares outstanding

64,562,265

64,562,265

64,562,265

56,692,267

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 September 30, 2021, BCSF has invested approximately $4.7 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/20211103006276/en/

Contacts

Investor Contact:
Katherine Schneider
Tel. +1 212 803 9613
investors@baincapitalbdc.com

Media Contact:
Charlyn Lusk
Tel. +1 646 502 3549
clusk@stantonprm.com