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Rating Action: Moody's assigns a Baa3 rating to Bain Capital Specialty Finance's senior unsecured notes maturing 2026Global Credit Research - 03 Mar 2021New York, March 03, 2021 -- Moody's Investors Service, ("Moody's") has assigned a Baa3 rating to Bain Capital Specialty Finance, Inc.'s (BCSF) $300 million 5-year 2.950% senior unsecured notes. The outlook is stable.Assignments:..Issuer: Bain Capital Specialty Finance, Inc.....Senior Unsecured Regular Bond/Debenture, Assigned Baa3RATINGS RATIONALEMoody's assigned a Baa3 rating to the senior notes based on BCSF's baa3 issuer credit profile as well as the priority and proportion of senior unsecured debt in BCSF's debt capital structure, and the strength of the senior notes' asset coverage. The proceeds from the note issuance will be used to repay outstanding indebtedness, including outstanding borrowings on secured revolving lines of credit.BCSF's ratings are supported by deep credit expertise and wide management capabilities of Bain Capital Credit, Bain Capital's credit investing arm, BCSF's external manager. The rating also reflects BCSF's focus on first-lien senior secured loans, which should help mitigate unexpected losses, as well as its solid profitability and low loan losses since inception. The rating also reflects BCSF's commitment to operating at a target debt-to-equity ratio of 1x-1.25x, consistent with other similarly-rated peers. This represents a shift from BCSF's previous operating target of 1x-1.5x debt-to-equity, which allowed for the possibility of higher leverage and therefore thinner cushion to the minimum regulatory 150% asset coverage ratio (ACR).The growing proportion of unsecured debt as part of BCSF's overall debt capital structure grants the firm greater availability to access alternative funding sources, particularly during time of stress by reducing the reliance on secured funding and therefore the amount of encumbered assets.The rating also considers the credit challenges from BCSF's limited operating history, having only commenced operations in 2016. It also incorporates the risks common to BDCs, including the illiquidity of private direct lending investments, covenant compliance and liquidity risks associated with the requirement that investments be marked to fair value, and high dividend payouts that increase its reliance on equity capital markets for growth capital.The stable outlook reflects Moody's expectation that BCSF will maintain stable asset quality, profitability and leverage in the next 12-18 months.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGThe rating could be upgraded if Moody's believes that debt-to-equity will remain consistently below 1x, and if the firm decreases the proportion of secured debt in its capital structure, improves liquidity and debt maturity laddering.BCSF's rating could be downgraded if the company increases leverage beyond 1.3x debt-to-equity, increases investments that Moody's expects will increase the firm's asset and earnings volatility, suffers a significant decline in earnings, pays dividends that exceed net investment income on a regular basis, or materially increases reliance on secured debt.The principal methodology used in this rating was Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Bruno Baretta Analyst Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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