23.02.2023 22:15:00

BARINGS BDC, INC. REPORTS FOURTH QUARTER AND FULL YEAR 2022 RESULTS AND ANNOUNCES INCREASE IN QUARTERLY CASH DIVIDEND TO $0.25 PER SHARE

CHARLOTTE, N.C., Feb. 23, 2023 /PRNewswire/ -- Barings BDC, Inc. (NYSE: BBDC) ("Barings BDC" or the "Company") today reported its financial and operating results for the fourth quarter and full year of 2022 and announced that the Company's Board of Directors declared a quarterly cash dividend of $0.25 per share.

(PRNewsfoto/Barings)

Highlights

Income Statement

Three Months Ended

December 31, 2022

Three Months Ended

September 30, 2022

Full Year Ended

December 31, 2022

(dollars in millions, except per share data)

Total
Amount

Per

Share(1)

Total
Amount

Per

Share(2)

Total
Amount

Per
Share(3)

Net investment income

$37.0

$0.34

$27.9

$0.26

$115.7

$1.12

Net realized gains

$16.7

$0.15

$7.9

$0.07

$12.9

$0.13

Net unrealized depreciation

$(55.7)

$(0.51)

$(26.1)

$(0.24)

$(123.0)

$(1.20)

Net increase (decrease) in net assets resulting from operations

$(1.3)

$(0.01)

$9.9

$0.09

$4.7

$0.05

Dividends paid


$0.24


$0.24


$0.95








(1) Based on weighted average shares outstanding during the period of 108,604,645.

(2) Based on weighted average shares outstanding during the period of 109,272,489.

(3) Based on weighted average shares outstanding during the period of 102,911,986.

 

Investment Portfolio and Balance Sheet




(dollars in millions, except per share data)

As of

December 31,
2022

As of

September 30,
2022

As of

December 31,
2021

Investment portfolio at fair value

$2,448.9

$2,332.5

$1,800.6

Weighted average yield on performing debt investments (at principal amount)

9.7 %

8.6 %

7.2 %





Total assets

$2,710.0

$2,647.0

$2,160.9

Debt outstanding (principal)

$1,454.1

$1,376.0

$1,380.2

Total net assets (equity)

$1,192.3

$1,228.1

$741.9

Net asset value per share

$11.05

$11.28

$11.36

Debt-to-equity ratio

1.22x

1.12x

1.86x

Net debt-to-equity ratio (adjusted for unrestricted cash and net unsettled transactions)

1.12x

0.99x

1.49x

Fourth Quarter 2022 Results

Commenting on the quarter, Eric Lloyd, Chief Executive Officer, stated, "Amidst a volatile and uncertain economic backdrop, Barings BDC continued to drive net portfolio growth, increased revenue, and higher net investment income per share. Our diversified investment portfolio continues to perform well, and we expect that increasing base rates will continue to drive our portfolio yield higher, while our incentive fee 'look back' ensures alignment with our shareholders in the event of unrealized depreciation resulting from increasing yields, as we experienced in the fourth quarter."

During the three months ended December 31, 2022, the Company reported total investment income of $63.5 million, net investment income of $37.0 million, or $0.34 per share, and a net decrease in net assets resulting from operations of $1.3 million, or $0.01 per share.

Net asset value ("NAV") per share as of December 31, 2022 was $11.05, as compared to $11.28 as of September 30, 2022. The decrease in NAV per share from September 30, 2022 to December 31, 2022 was primarily attributed to net unrealized depreciation on the Company's investment portfolio, credit support agreements and foreign currency transactions of approximately $0.51 per share, partially offset by a net realized gain on investments and foreign currency transactions of $0.15 per share, share repurchases of $0.02 per share and net investment income exceeding the Company's fourth quarter dividend by $0.10 per share.

Jonathan Landsberg, Chief Financial Officer, stated, "We continue to benefit from rising base rates as the weighted-average yield on our debt investments expanded meaningfully again in the fourth quarter. Moreover, our current net leverage ratio of 1.12x is in the middle of our target range, and we have ample liquidity to take advantage of the attractive risk-adjusted returns available in the current environment. As a result of our stronger earnings profile, our Board of Directors declared a first quarter dividend of $0.25 per share, a $0.01 increase over the fourth quarter dividend, and representing a 9.0% yield on our December 31, 2022 net asset value of $11.05 per share. In addition, our Board of Directors authorized a new stock repurchase plan to repurchase up to $30 million of Barings BDC common stock at prices below then-current NAV per share. There is a clear benefit to purchasing shares below NAV, and share repurchases remain an important part of our long-term capital allocation process."

Recent Portfolio Activity

During the three months ended December 31, 2022, the Company made 26 new investments totaling $203.6 million and made investments in existing portfolio companies totaling $36.8 million. The Company had 8 loans repaid totaling $79.3 million, received $13.0 million of portfolio company principal payments and received $12.0 million of return of capital from its joint ventures. In addition, the Company sold $2.1 million of loans, recognizing a net realized loss on these transactions of $1.8 million. Lastly, the Company received proceeds related to the sale of equity investments totaling $6.1 million and recognized a net realized gain on such sales of $1.3 million.

During the three months ended December 31, 2022, the Company recorded net unrealized depreciation totaling $55.7 million, consisting of net unrealized depreciation on its current portfolio of $11.8 million, unrealized depreciation related to foreign currency transactions of $44.7 million and unrealized depreciation reclassification adjustments of $3.2 million related to the net realized gains on the sales/repayments of certain investments, net of unrealized appreciation of $3.1 million on the MVC credit support agreement with Barings, unrealized appreciation of $0.5 million on the Sierra credit support agreement with Barings and a deferred tax asset of $0.4 million. The net unrealized depreciation on the Company's current portfolio of $11.8 million was driven primarily by credit or fundamental performance of investments of $26.2 million and broad market moves for investments of $19.4 million, partially offset by the impact of foreign currency exchange rates on investments of $33.8 million.

Liquidity and Capitalization

As of December 31, 2022, the Company had cash and foreign currencies of $139.4 million, $729.1 million of borrowings outstanding under its $1.1 billion senior secured revolving credit agreement and $725.0 million aggregate principal amount of unsecured notes outstanding, partially offset by a net payable from unsettled transactions of $15.6 million.

Share Repurchase Program

In connection with the completion of the Company's acquisition of Sierra Income Corporation on February 25, 2022, the Company committed to make open-market purchases of shares of its common stock in an aggregate amount of up to $30.0 million at then-current market prices at any time shares trade below 90% of the Company's then most recently disclosed NAV per share. Any repurchases pursuant to the authorized program were to occur during the 12-month period commencing on April 1, 2022 and were made in accordance with a Rule 10b5-1 purchase plan that qualifies for the safe harbors provided by Rules 10b5-1 and 10b-18 under the Exchange Act, as well as subject to compliance with the Company's covenant and regulatory requirements. As of December 31, 2022, the Company had repurchased the maximum amount of $30.0 million of common stock authorized under the Sierra share repurchase program. In total under the Sierra share repurchase program, the Company repurchased a total of 3,179,168 shares of its common stock in the open market at an average price of $9.44 per share, including broker commissions.

On February 23, 2023, the Board authorized a new 12-month share repurchase program. Under the program, the Company may repurchase, during the 12-month period commencing on March 1, 2023, up to $30.0 million in the aggregate of its outstanding common stock in the open market at prices below the then-current NAV per share. The timing, manner, price and amount of any share repurchases will be determined by the Company, in its discretion, based upon the evaluation of economic and market conditions, the Company's stock price, applicable legal, contractual and regulatory requirements and other factors. The program is expected to be in effect until March 1, 2024, unless extended or until the aggregate repurchase amount that has been approved by the Board has been expended. The program does not require the Company to repurchase any specific number of shares, and the Company cannot assure stockholders that any shares will be repurchased under the program. The program may be suspended, extended, modified or discontinued at any time.

Dividend Information

The Board declared a quarterly cash dividend of $0.25 per share.

The Company's first quarter dividend is payable as follows:

First Quarter 2023 Dividend:


Amount per share:     

$0.25

Record date:               

March 8, 2023

Payment date:             

March 15, 2023

Dividend Reinvestment Plan

Barings BDC has adopted a dividend reinvestment plan ("DRIP") that provides for reinvestment of dividends and distributions on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, when the Company declares a cash dividend or distribution, stockholders who have not opted out of the DRIP will have their cash dividends or distributions automatically reinvested in additional shares of the Company's common stock, rather than receiving cash.

When the Company declares and pays dividends and distributions, it determines the allocation of the distribution between current income, accumulated income, capital gains and return of capital on the basis of accounting principles generally accepted in the United States ("GAAP"). At each year end, the Company is required for tax purposes to determine the allocation based on tax accounting principles. Due to differences between GAAP and tax accounting principles, the portion of each dividend distribution that is ordinary income, capital gain or return of capital may differ for GAAP and tax purposes. The tax status of the Company's distributions can be found on the Investor Relations page of its website.

Subsequent Events

Subsequent to December 31, 2022, the Company made approximately $118.9 million of new commitments, of which $74.0 million closed and funded. The $74.0 million of investments consists of $18.1 million of first lien senior secured debt investments, $10.9 million of equity investments and a $45.0 million preferred equity co-investment alongside certain affiliates in a portfolio company focused on directly originated, litigation finance loans to mass tort law firms. The weighted average yield of the debt investments was 10.8%. In addition, the Company funded $4.4 million of previously committed revolvers and delayed draw term loans.

Conference Call to Discuss Fourth Quarter and Full Year 2022 Results

Barings BDC has scheduled a conference call to discuss fourth quarter and full year 2022 financial and operating results for Friday, February 24, 2023, at 9:00 a.m. ET.

To listen to the call, please dial 877-407-8831 or 201-493-6736 approximately 10 minutes prior to the start of the call. A taped replay will be made available approximately two hours after the conclusion of the call and will remain available until March 3, 2023. To access the replay, please dial 877-660-6853 or 201-612-7415 and enter conference ID 13735384.

This conference call will also be available via a live webcast on the investor relations section of Barings BDC's website at https://ir.barings.com/ir-calendar. Access the website 15 minutes prior to the start of the call to download and install any necessary audio software. An archived webcast replay will be available on the Company's website until March 3, 2023.

Forward-Looking Statements

Statements included herein or on the webcast/conference call may constitute "forward-looking statements," which relate to future events or Barings BDC's future performance or financial condition. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management's current estimates, projections, expectations or beliefs, and which are subject to risks and uncertainties that may cause actual results to differ materially. Forward-looking statements include, but are not limited to, the Company's projected net investment income and earnings, the Company's distribution levels and frequency of distributions, the Company's share repurchase activity, and the ability of Barings LLC to manage Barings BDC and identify investment opportunities, all of which are subject to change at any time based upon economic, market or other conditions, and may not be relied upon as investment advice or an indication of Barings BDC's trading intent. More information on the risks and other potential factors that could affect Barings BDC's financial results and future events, including important factors that could cause actual results or events to differ materially from plans, estimates or expectations included herein or discussed on the webcast/conference call, is included in Barings BDC's filings with the SEC, including in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of Barings BDC's most recently filed annual report on Form 10-K, as well as in subsequent filings, including Barings BDC's quarterly reports on Form 10-Q. In addition, there is no assurance that Barings BDC or any of its affiliates will purchase additional shares of Barings BDC at any specific discount levels or in any specific amounts. There is no assurance that the market price of Barings BDC's shares, either absolutely or relative to net asset value, will increase as a result of any share repurchases, or that any repurchase plan will enhance stockholder value over the long term.

Non-GAAP Financial Measures

To provide additional information about the Company's results, the Company's management has discussed in this press release the Company's net debt (calculated as (i) total debt less (ii) unrestricted cash and foreign currencies (excluding restricted cash) net of net payables/receivables from unsettled transactions) and its net debt-to-equity ratio (calculated as net debt divided by total net assets), which are not prepared in accordance with GAAP. These non-GAAP measures are included to supplement the Company's financial information presented in accordance with GAAP and because the Company uses such measures to monitor and evaluate its leverage and financial condition and believes the presentation of these measures enhances investors' ability to analyze trends in the Company's business and to evaluate the Company's leverage and ability to take on additional debt. However, these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for analysis of the Company's financial results as reported under GAAP.

These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. These measures should only be used to evaluate the Company's results of operations in conjunction with their corresponding GAAP measures. Pursuant to the requirements of Item 10(e) of Regulation S-K, as promulgated under the Securities Exchange Act of 1934, as amended, the Company has provided a reconciliation of these non-GAAP measures in the last table included in this press release.

About Barings BDC

Barings BDC, Inc. (NYSE: BBDC) is a publicly traded, externally managed investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. Barings BDC seeks to invest primarily in senior secured loans in middle-market companies that operate across a wide range of industries. Barings BDC's investment activities are managed by its investment adviser, Barings LLC, a leading global asset manager based in Charlotte, NC with $347+ billion* of AUM firm-wide. For more information, visit www.baringsbdc.com.

About Barings LLC

Barings is a $347+ billion* global investment manager sourcing differentiated opportunities and building long-term portfolios across public and private fixed income, real estate, and specialist equity markets. With investment professionals based in North America, Europe and Asia Pacific, the firm, a subsidiary of MassMutual, aims to serve its clients, communities and employees, and is committed to sustainable practices and responsible investment. Learn more at www.barings.com.

*Assets under management as of December 31, 2022

Media Contact: 
MediaRelations@barings.com

Investor Relations: 
BDCinvestorrelations@barings.com, 888-401-1088

 

Barings BDC, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)      






December 31,



2022


2021

Assets:





Investments at fair value:





Non-Control / Non-Affiliate investments (cost of $2,191,345 and
$1,494,031 as of December 31, 2022 and 2021, respectively)


$             2,052,614


$             1,490,113

Affiliate investments (cost of $275,482 and $267,967 as of December 31,
2022 and 2021, respectively)


289,993


288,069

Control investments (cost of $95,571 and $25,826 as of December 31, 2022
and 2021, respectively)


106,328


22,412

Total investments at fair value


2,448,935


1,800,594

Cash


96,160


49,987

Foreign currencies (cost of $42,627 and $34,069 as of December 31, 2022
and 2021, respectively)


43,255


34,266

Interest and fees receivable


42,738


33,645

Prepaid expenses and other assets


1,079


3,356

Credit support agreements (cost of $58,000 and $13,600 as of December 31,
2022 and 2021, respectively)


53,086


15,400

Derivative assets


1,508


941

Deferred financing fees


3,224


2,985

Receivable from unsettled transactions


19,972


219,732

Total assets


$             2,709,957


$             2,160,906

Liabilities:





Accounts payable and accrued liabilities


$                        971


$                    2,341

Interest payable


7,635


5,704

Administrative fees payable


677


750

Base management fees payable


7,981


5,422

Incentive management fees payable



4,067

Derivative liabilities


16,677


1,160

Payable from unsettled transactions


35,565


26,786

Borrowings under credit facilities


729,144


655,189

Notes payable (net of deferred financing fees)


718,978


717,556

Total liabilities


1,517,628


1,418,975

Commitments and contingencies





Net Assets:





Common stock, $0.001 par value per share (150,000,000 shares authorized,
107,916,166 and 65,316,085 shares issued and outstanding as of
December 31, 2022 and 2021, respectively)


108


65

Additional paid-in capital


1,855,975


1,027,687

Total distributable loss


(663,754)


(285,821)

Total net assets


1,192,329


741,931

Total liabilities and net assets


$             2,709,957


$             2,160,906

Net asset value per share


$                    11.05


$                    11.36

               

Barings BDC, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share data)






Three Months

Ended (Unaudited)


Full Year
Ended


December 31,


September 30,


December 31,


2022


2022


2022

Investment income:






Interest income:






Non-Control / Non-Affiliate investments

$              47,299


$              39,994


$            158,927

Affiliate investments

357


278


1,218

Control investments

340


367


1,343

Total interest income

47,996


40,639


161,488

Dividend income:






Non-Control / Non-Affiliate investments

823


1,113


2,122

Affiliate investments

6,537


6,792


28,082

Total dividend income

7,360


7,905


30,204

Fee and other income:






Non-Control / Non-Affiliate investments

4,210


4,249


15,606

Affiliate investments

73


29


141

Control investments

51


43


(824)

Total fee and other income

4,334


4,321


14,923

Payment-in-kind interest income:






Non-Control / Non-Affiliate investments

3,165


2,757


10,280

Affiliate investments

203


224


564

Control investments

214


286


1,278

Total payment-in-kind interest income

3,582


3,267


12,122

Interest income from cash

201


174


392

Total investment income

63,473


56,306


219,129

Operating expenses:






Interest and other financing fees

16,695


15,341


56,865

Base management fee

7,981


8,267


29,501

Incentive management fees


1,825


6,579

General and administrative expenses

1,231


2,961


9,917

Total operating expenses

25,907


28,394


102,862

Net investment income before taxes

37,566


27,912


116,267

Income taxes, including excise tax expense

605



611

Net investment income after taxes

$              36,961


$              27,912


$            115,656


Barings BDC, Inc.

Consolidated Statements of Operations - (Continued)

(in thousands, except share and per share data)


Three Months

Ended (Unaudited)


Full Year
Ended


December 31,


September 30,


December 31,


2022


2022


2022

Realized gains (losses) and unrealized appreciation (depreciation) on
investments, credit support agreements and foreign currency
transactions:






Net realized gains (losses):






Non-Control / Non-Affiliate investments

$              (1,372)


$              (8,257)


$            (16,580)

Affiliate investments



101

Control investments

865


(773)


(722)

Net realized gains (losses) on investments

(507)


(9,030)


(17,201)

Distributions of realized gains by controlled investment companies


6,181


6,181

Foreign currency transactions

17,171


10,711


23,881

Net realized gains (losses)

16,664


7,862


12,861

Net unrealized appreciation (depreciation):






Non-Control / Non-Affiliate investments

(9,273)


(29,481)


(132,771)

Affiliate investments

(157)


(320)


(916)

Control investments

(5,206)


(16,991)


9,498

Net unrealized appreciation (depreciation) on investments

(14,636)


(46,792)


(124,189)

Credit support agreements

3,606


3,440


(6,714)

Foreign currency transactions

(44,701)


17,231


7,862

Net unrealized appreciation (depreciation)

(55,731)


(26,121)


(123,041)

Net realized gains (losses) and unrealized appreciation (depreciation) on
investments, credit support agreements and foreign currency transactions

(39,067)


(18,259)


(110,180)

Benefit from (provision for) taxes

855


240


(795)

Net increase (decrease) in net assets resulting from operations

$              (1,251)


$                9,893


$                4,681

Net investment income per share — basic and diluted

$                  0.34


$                  0.26


$                  1.12

Net increase (decrease) in net assets resulting from operations per share — basic and diluted

$                (0.01)


$                  0.09


$                  0.05

Dividends / distributions per share:






Total dividends / distributions

$                  0.24


$                  0.24


$                  0.95

Weighted average number of shares outstanding — basic and diluted

108,604,645


109,272,489


102,911,986

 

Barings BDC, Inc.

Consolidated Statements of Cash Flows

(in thousands)






Year Ended December 31,



2022


2021


2020

Cash flows from operating activities:







Net increase in net assets resulting from operations


$                 4,681


$               77,685


$                 8,177

Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by (used in) operating activities:







Purchases of portfolio investments


(1,162,247)


(1,461,057)


(881,171)

Acquisition of MVC Capital, net of cash acquired




(96,720)

Net cash acquired from Sierra merger (cash consideration paid)


101,896



Transaction costs from Sierra merger


(8,127)



Repayments received / sales of portfolio investments


1,041,370


943,867


684,531

Purchases of short-term investments



(297,561)


(1,182,185)

Sales of short-term investments



363,118


1,213,198

Loan origination and other fees received


20,120


30,504


19,193

Net realized (gain) loss on investments


11,020


(2,645)


38,302

Net realized (gain) loss on foreign currency transactions


(23,881)


6,025


(12)

Net unrealized (appreciation) depreciation on investments


124,189


(3,029)


(28,711)

Net unrealized (appreciation) depreciation of CSAs


6,714


(1,800)


Net unrealized (appreciation) depreciation on foreign currency transactions


(7,862)


(17,276)


10,161

Payment-in-kind interest / dividends


(12,307)


(10,795)


(1,348)

Amortization of deferred financing fees


3,053


1,620


1,478

Loss on extinguishment of debt




3,089

Accretion of loan origination and other fees


(11,538)


(9,444)


(2,717)

Amortization / accretion of purchased loan premium / discount


(2,322)


(4,646)


(1,806)

Payments for derivative contracts


(5,628)


(2,362)


(20)

Proceeds from derivative contracts


30,768


1,984


210

Changes in operating assets and liabilities:







Interest and fees receivable


(14,597)


(14,472)


(4,214)

Prepaid expenses and other assets


(3,214)


(2,198)


(45)

Accounts payable and accrued liabilities


(7,756)


2,446


3,891

Interest payable


1,935


3,483


(1,412)

Net cash provided by (used in) operating activities


86,267


(396,553)


(218,131)

Cash flows from financing activities:







Borrowings under credit facilities


244,657


455,732


636,707

Repayments of credit facilities


(148,061)


(506,580)


(280,523)

Repayments of debt securitization




(318,210)

Proceeds from notes



500,000


225,000

Redemption of notes




(95,472)

Financing fees paid


(1,870)


(7,274)


(774)

Net proceeds related to issuance of common stock for MVC acquisition




160,354

Purchases of shares in repurchase plan


(32,105)



(7,131)

Cash dividends / distributions paid


(93,726)


(53,559)


(31,325)

Net cash provided by (used in) financing activities


(31,105)


388,319


288,626

Net increase (decrease) in cash and foreign currencies


55,162


(8,234)


70,495

Cash and foreign currencies, beginning of year


84,253


92,487


21,992

Cash and foreign currencies, end of year


$             139,415


$               84,253


$               92,487








Barings BDC, Inc.

Consolidated Statements of Cash Flows - (Continued)

(in thousands)



Year Ended December 31,



2022


2021


2020

Supplemental Information:







Cash paid for interest


$              50,641


$              27,203


$              16,697

Excise taxes paid during the period


$                     —


$                     71


$                     86

Supplemental non-cash information







Acquisitions:







Fair value of net assets acquired, net of cash


(435,812)



171,242

Transaction costs


2,433



7,600

Common stock issued in acquisition of net assets


499,418



160,354

Credit support agreement


(44,400)



(13,600)

Deemed contribution - from Adviser


27,730



3,255

Deemed contributions - CSA


44,400



13,600

 

Barings BDC, Inc.

Unaudited Reconciliation of Debt to Net Debt and Calculation of Net Debt-to-Equity Ratio

(in thousands, except ratios)










 

December 31,
2022


 

September 30,
2022


December 31,
2021

Total debt (principal)


$   1,454,144


$   1,375,989


$   1,380,189

minus: Cash and foreign currencies (excluding restricted cash)


(139,415)


(137,323)


(84,254)

plus: Payable from unsettled transactions


35,565


18,768


26,786

minus: Receivable from unsettled transactions


(19,972)


(46,880)


(219,732)

Total net debt(1)


$   1,330,322


$   1,210,554


$   1,102,989








Total net assets


$   1,192,329


$   1,228,061


$      741,931








Total net debt-to-equity ratio(1)


               1.12 x


               0.99 x


               1.49 x








(1) See the "Non-GAAP Financial Measures" section of this press release.

 

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Barings BDC 9,09 1,34% Barings BDC