09.08.2022 22:15:00

BARINGS BDC, INC. REPORTS SECOND QUARTER 2022 RESULTS AND ANNOUNCES QUARTERLY CASH DIVIDEND OF $0.24 PER SHARE

CHARLOTTE, N.C., Aug. 9, 2022 /PRNewswire/ -- Barings BDC, Inc. (NYSE: BBDC) ("Barings BDC" or the "Company") today reported its financial and operating results for the second quarter of 2022 and announced that the Company's Board of Directors declared a quarterly cash dividend of $0.24 per share.

(PRNewsfoto/Barings)

Highlights

Income Statement

Three Months Ended

June 30, 2022

Three Months Ended

March 31, 2022

(dollars in millions, except per share data)

Total
Amount

Per
Share(1)

Total
Amount

Per
Share(2)

Net investment income

$31.8

$0.29

$19.0

$0.23

Net realized losses

$(10.2)

$(0.09)

$(1.4)

$(0.02)

Net unrealized appreciation (depreciation)

$(44.7)

$(0.40)

$3.5

$0.04

Net increase (decrease) in net assets resulting from operations

$(25.0)

$(0.23)

$21.0

$0.25

Dividends paid

$0.24

$0.23



(1)

Based on weighted average shares outstanding during the period of 110,759,443.

(2)

Based on weighted average shares outstanding during the period of 82,656,326.

 

Investment Portfolio and Balance Sheet




(dollars in millions, except per share data)

As of

June 30, 2022

As of

March 31, 2022

As of

December 31, 2021

Investment portfolio at fair value

$2,389.1

$2,403.4

$1,800.6

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

7.6 %

7.3 %

7.2 %

Total assets

$2,829.5

$2,849.4

$2,160.9

Debt outstanding (principal)

$1,539.4

$1,482.2

$1,380.2

Total net assets (equity)

$1,252.9

$1,317.6

$741.9

Net asset value per share

$11.41

$11.86

$11.36

Debt-to-equity ratio

1.23x   

1.12x   

1.86x   

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

1.00x   

0.89x   

1.49x   

Second Quarter 2022 Results

Commenting on the quarter, Eric Lloyd, Chief Executive Officer, stated, "Despite an uncertain macroeconomic backdrop, Barings BDC continued to drive net portfolio growth, increased revenue, and higher net investment income per share. Additionally, our shareholder friendly fee structure further demonstrates investor alignment in the face of unrealized write-downs resulting from increasing yields."

During the three months ended June 30, 2022, the Company reported total investment income of $55.6 million, net investment income of $31.8 million, or $0.29 per share, and a net decrease in net assets resulting from operations of $25.0 million, or $0.23 per share.

Net asset value ("NAV") per share as of June 30, 2022 was $11.41, as compared to $11.86 as of March 31, 2022. The decrease in NAV per share from March 31, 2022 to June 30, 2022 was primarily attributed to a net realized loss on investments and foreign currency transactions of $0.09 per share and net unrealized depreciation on the Company's investment portfolio, credit support agreements and foreign currency transactions of approximately $0.40 per share, partially offset by net investment income exceeding the Company's second quarter dividend by $0.05 per share.

Jonathan Bock, Chief Financial Officer, stated, "Our net debt-to-equity profile of 1.00x, as well as our flexible balance sheet, allow us to drive attractive returns across market cycles with best-in-class alignment and financial stability. As a result, our Board of Directors declared a third quarter dividend of $0.24 per share, or an 8.4% yield on 2Q22 net asset value of $11.41."

Recent Portfolio Activity

During the three months ended June 30, 2022, the Company made 26 new investments totaling $248.7 million, made investments in existing portfolio companies totaling $101.5 million and made additional investments in joint venture equity portfolio companies totaling $2.1 million. The Company had 17 loans repaid totaling $165.9 million, received $15.0 million of portfolio company principal payments and received $35.5 million of return of capital from our joint ventures. In addition, the Company sold $82.5 million of loans, recognizing a net realized loss on these transactions of $1.0 million. The Company had a $13.8 million exchange of a debt investment in one portfolio company for equity totaling $13.9 million and realized a $0.8 million loss on the exchange. Lastly, the Company received proceeds related to the sale of an equity investment totaling $0.2 million and recognized a net realized gain on such sale totaling $0.1 million.

During the three months ended June 30, 2022, the Company recorded net unrealized depreciation totaling $44.7 million, consisting of net unrealized depreciation on our current portfolio of $62.7 million, unrealized depreciation of $5.7 million on the MVC credit support agreement with Barings, unrealized depreciation of $7.7 million on the Sierra credit support agreement with Barings, net of unrealized appreciation reclassification adjustments of $0.9 million related to the net realized gains on the sales / repayments of certain investments and net unrealized appreciation related to foreign currency transactions of $30.5 million. The net unrealized depreciation on our current portfolio of $62.7 million was driven primarily by credit or fundamental performance of investments of $5.8 million, the impact of foreign currency exchange rates on investments of $24.5 million and broad market moves for investments of $32.4 million.

Liquidity and Capitalization

As of June 30, 2022, the Company had cash and foreign currencies of $197.8 million, $814.4 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. In addition, the Company had a net receivable from unsettled transactions of $86.6 million and commitments from an investor to purchase an additional $25.0 million aggregate principal amount of senior unsecured notes under its Note Purchase Agreement entered into on August 3, 2020 (the "August 2020 NPA"), subject to the terms of the August 2020 NPA.

Share Purchase Programs

In connection with the completion of the Company's acquisition of MVC Capital on December 23, 2020, the Company committed to make open-market purchases of shares of its common stock in an aggregate amount of up to $15.0 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 will occur during the 12-month period that commenced upon the filing of the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2021, which occurred on May 6, 2021, and will be made in accordance with applicable legal, contractual and regulatory requirements. The MVC repurchase program terminated on May 6, 2022. During the three months ended June 30, 2022, the Company did not purchase any shares of its common stock in the open market under the authorized program.

In connection with the completion of the Company's acquisition of Sierra 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 will occur during the 12-month period commencing on April 1, 2022 and are expected to be 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 August 9 2022, the Company repurchased a total of 1,867,543 shares of its common stock in the open market under the authorized program at an average price of $9.81 per share, including broker commissions.

Dividend Information

The Board declared a quarterly cash dividend of $0.24 per share.

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

Third Quarter 2022 Dividend:

Amount per share:           

$0.24

Record date:                         

September 7, 2022

Payment date:                   

September 14, 2022

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 June 30, 2022, the Company made approximately $215.4 million of new commitments, of which $171.5 million closed and funded. The $171.5 million of investments consists of $159.8 million of first lien senior secured debt investments, $10.6 million of second lien senior secured and subordinated debt investments and $1.1 million of equity investments. The weighted average yield of the debt investments was 8.2%. In addition, the Company funded $11.6 million of previously committed delayed draw term loans.

Conference Call to Discuss Second Quarter 2022 Results

Barings BDC has scheduled a conference call to discuss second quarter 2022 financial and operating results for Wednesday, August 10, 2022, 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 August 24, 2022. To access the replay, please dial 877-660-6853 or 201-612-7415 and enter conference ID 13731195.

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 August 24, 2022.

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 ability of Barings LLC to manage Barings BDC and identify investment opportunities, are subject to change at any time based upon economic, market or other conditions, including with respect to the impact of the COVID-19 pandemic and its effects on Barings BDC's and its portfolio companies' results of operations and financial condition, and may not be relied upon as investment advice or an indication of Barings BDC's trading intent. More information on these 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 total debt less unrestricted cash and foreign currencies (excluding restricted cash) and net 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 $349+ billion* of AUM firm-wide. For more information, visit www.baringsbdc.com.

About Barings LLC

Barings is a $349+ 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 June 30, 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)



June 30,
2022


December 31,
2021


(Unaudited)



Assets:




Investments at fair value:




Non-Control / Non-Affiliate investments (cost of $2,025,944 and $1,494,031 as of
June 30, 2022 and December 31, 2021, respectively)

$        1,928,010


$        1,490,113

Affiliate investments (cost of $307,332 and $267,967 as of June 30, 2022 and
December 31, 2021, respectively)

322,321


288,069

Control investments (cost of $105,791 and $25,826 as of June 30, 2022 and
December 31, 2021, respectively)

138,745


22,412

Total investments at fair value

2,389,076


1,800,594

Cash

138,092


49,987

Foreign currencies (cost of $60,029 and $34,069 as of June 30, 2022 and December 31,
2021, respectively)

59,678


34,266

Interest and fees receivable

77,235


33,645

Prepaid expenses and other assets

14,180


4,297

Credit support agreements (cost of $58,000 and $13,600 as of June 30, 2022 and
December 31, 2021, respectively)

46,040


15,400

Deferred financing fees

3,982


2,985

Receivable from unsettled transactions

101,195


219,732

Total assets

$        2,829,478


$         2,160,906

Liabilities:




Accounts payable and accrued liabilities

$             12,300


$                2,341

Interest payable

6,731


5,704

Administrative fees payable

860


750

Base management fees payable

7,381


5,422

Incentive management fees payable


4,067

Derivative liabilities

2,135


1,160

Payable from unsettled transactions

14,594


26,786

Borrowings under credit facilities

814,380


655,189

Notes payable (net of deferred financing fees)

718,222


717,556

Total liabilities

1,576,603


1,418,975

Commitments and contingencies




Net Assets:




Common stock, $0.001 par value per share (150,000,000 shares authorized, 109,785,892
and 65,316,085 shares issued and outstanding as of June 30, 2022 and December 31,
2021, respectively)

110


65

Additional paid-in capital

1,584,076


1,027,687

Total distributable earnings (loss)

(331,311)


(285,821)

Total net assets

1,252,875


741,931

Total liabilities and net assets

$         2,829,478


$         2,160,906

Net asset value per share

$                11.41


$                11.36

 

 

Barings BDC, Inc.
Unaudited Consolidated Statements of Operations 
(in thousands, except share and per share data)



Three Months

Ended


Three Months

Ended


Six Months
Ended


Six Months
Ended


June 30,
2022


June 30,
2021


June 30,
2022


June 30,
2021

Investment income:








Interest income:








Non-Control / Non-Affiliate investments

$        40,010


$        26,597


$        71,634


$         51,694

Affiliate investments

411


109


584


109

Control investments

363


109


636


216

Short-term investments


4



15

Total interest income

40,784


26,819


72,854


52,034

Dividend income:








Non-Control / Non-Affiliate investments

63


33


186


33

Affiliate investments

7,183


362


14,753


433

Total dividend income

7,246


395


14,939


466

Fee and other income:








Non-Control / Non-Affiliate investments

4,924


2,412


7,147


4,385

Affiliate investments

26


1


39


1

Control investments

122


155


(918)


315

Total fee and other income

5,072


2,568


6,268


4,701

Payment-in-kind interest income:








Non-Control / Non-Affiliate investments

2,070


3,068


4,358


6,106

Affiliate investments

93


303


137


439

Control investments

311



778


Total payment-in-kind interest income

2,474


3,371


5,273


6,545

Interest income from cash

16



16


1

Total investment income

55,592


33,153


99,350


63,747

Operating expenses:








Interest and other financing fees

13,168


7,994


24,829


15,279

Base management fee

7,381


4,891


13,253


8,821

Incentive management fees


3,510


4,754


6,232

General and administrative expenses

3,269


2,200


5,727


4,501

Total operating expenses

23,818


18,595


48,563


34,833

Net investment income before taxes

31,774


14,558


50,787


28,914

Income taxes, including excise tax expense



6


(18)

Net investment income after taxes

31,774


14,558


50,781


28,932

Barings BDC, Inc

Unaudited Consolidated Statements of Operations — (Continued)

(in thousands, except share and per share data)


Three Months

Ended


Three Months

Ended


Six Months
Ended


Six Months
Ended


June 30,
2022


June 30,
2021


June 30,
2022


June 30,
2021

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

(6,701)


553


(6,951)


3,444

Affiliate investments



101


(77)

Control investments

(813)



(813)


Net realized gains (losses) on investments

(7,514)


553


(7,663)


3,367

Foreign currency transactions

(2,709)


(210)


(4,002)


(1,185)

Net realized gains (losses)

(10,223)


343


(11,665)


2,182

Net unrealized appreciation (depreciation):








Non-Control / Non-Affiliate investments

(65,428)


4,304


(94,016)


9,661

Affiliate investments

(13,435)


7,087


(440)


9,532

Control investments

17,050


1,368


31,696


(2,602)

Net unrealized appreciation (depreciation) on investments

(61,813)


12,759


(62,760)


16,591

Credit support agreements

(13,361)


2,300


(13,760)


700

Foreign currency transactions

30,520


(650)


35,332


3,392

Net unrealized appreciation (depreciation)

(44,654)


14,409


(41,188)


20,683

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

(54,877)


14,752


(52,853)


22,865

Provision for taxes

(1,890)


(2)


(1,890)


(1)

Net increase (decrease) in net assets resulting from operations

$

(24,993)


$           29,308


$

(3,962)


$                  51,796

Net investment income per share—basic and diluted

$

0.29


$               0.22


$

0.52


$                      0.44

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

$

(0.23)


$               0.45


$

(0.04)


$                      0.79

Dividends/distributions per share:








Total dividends/distributions per share

$

0.24


$               0.20


$

0.47


$                      0.39

Weighted average shares outstanding—basic and diluted

110,759,443


65,316,085


96,785,517


65,316,085

 

 


Barings BDC, Inc.
Unaudited Consolidated Statements of Cash Flows 
(in thousands)



Six Months Ended


Six Months Ended


June 30, 2022


June 30, 2021

Cash flows from operating activities:




Net increase in net assets resulting from operations

$                       (3,962)


$                        51,797

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to




net cash provided by (used in) operating activities:




Purchases of portfolio investments

(708,703)


(538,012)

Net cash acquired from mergers (cash consideration paid)

101,896


Transaction costs from mergers

(6,804)


Repayments received/sales of portfolio investments

603,169


322,357

Purchases of short-term investments


(217,559)

Sales of short-term investments


272,542

Loan origination and other fees received

11,492


10,024

Net realized (gain) loss on investments

7,663


(3,367)

Net realized loss on foreign currency transactions

4,002


1,185

Net unrealized (appreciation) depreciation on investments

62,760


(16,591)

Net unrealized (appreciation) depreciation of CSAs

13,760


(700)

Net unrealized appreciation on foreign currency transactions

(35,332)


(3,392)

Payment-in-kind interest

(5,273)


(6,545)

Amortization of deferred financing fees

1,498


713

Accretion of loan origination and other fees

(5,313)


(3,513)

Amortization / accretion of purchased loan premium / discount

(1,240)


(3,822)

Changes in operating assets and liabilities:




Interest and fees receivables

(50,492)


(6,513)

Prepaid expenses and other assets

253


254

Accounts payable and accrued liabilities

(3,077)


142

Interest payable

1,033


2,011

Net cash used in operating activities

(12,670)


(138,989)

Cash flows from financing activities:




Borrowings under credit facilities

184,657


110,731

Repayments of credit facilities


(157,861)

Proceeds from notes


150,000

Financing fees paid

(1,829)


(191)

Purchases of shares in repurchase plan

(15,113)


Cash dividends / distributions paid

(41,528)


(25,473)

Net cash provided by (used in) financing activities

126,187


77,206

Net increase (decrease) in cash and foreign currencies

113,517


(61,783)

Cash and foreign currencies, beginning of period

84,253


92,487

Cash and foreign currencies, end of period

$                    197,770


$                        30,704

Supplemental Information:




Cash paid for interest

$                      21,766


$                        12,186

Supplemental non-cash information




Acquisitions:




Fair value of Sierra net assets acquired, net of cash

$                   (435,811)


$                               —

Transaction Costs

3,756


Common stock issued in acquisition of Sierra net assets

499,418


Credit support agreement

(44,400)


Deemed contribution -from Adviser

27,729


Deemed contributions - CSA

44,400


 

 

Barings BDC, Inc.
Unaudited Reconciliation of Debt to Net Debt and Calculation of Net Debt-to-Equity Ratio
(in thousands)




June 30, 2022


March 31, 2022


December 31, 2021

Total debt (principal)


$             1,539,380


$             1,482,217


$             1,380,189

minus: Cash and foreign currencies (excluding restricted cash)


(197,770)


(154,431)


(84,254)

plus: Payable from unsettled transactions


14,594


21,195


26,786

minus: Receivable from unsettled transactions


(101,195)


(182,294)


(219,732)

Total net debt(1)


$             1,255,009


$             1,166,687


$             1,102,989

Total net assets


$             1,252,875


$             1,317,556


$                741,931

Total net debt-to-equity ratio(1)


                         1.00 x


                         0.89 x


                         1.49 x

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

 

 

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SOURCE Barings BDC, Inc.

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