Barings Bdc, Inc. · NYSE:BBDC
Barings Bdc — Q3 2020 Earnings Presentation
32 slides from Barings Bdc's earnings presentation, Nov 11, 2020
Slide 1: Barings BDC, Inc. Third Quarter 2020 Earnings Presentation
Barings BDC, Inc. Third Quarter 2020 Earnings Presentation November 9, 2020
Slide 2: Disclaimers and Cautionary Notes Regarding Forward-Looking Statements
Disclaimers and Cautionary Notes Regarding Forward-Looking Statements Cautionary Notice: Certain statements contained in this presentation are "forward-looking" statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which the
Slide 3: Agenda
Agenda ERIC LLOYD 3Q 2020 HIGHLIGHTS (Lloyd) What were the summary points of the quarter? IAN FOWLER BBDC MARKET UPDATE & INVESTMENT PORTFOLIO (Fowler) Update on the portfolio ramp and performance. TOM MCDONNELL BBDC FINANCIALS (Bock) A walk through the balance sheet, income statement, NAV bridge an
Slide 4: 3Q 2020 Highlights
3Q 2020 Highlights BARINGS
Slide 5: Credit Spreads & BDC Equity Prices
Credit Spreads & BDC Equity Prices BDC prices flatlined in 3Q even as BSL spreads continued to tighten BROADLY-SYNDICATED LOAN BROADLY-SYNDICATED LOAN BDC EQUITY PRICES SPREADS PRICES 1,000 $100 $900 $850 $98 900 $800 $96 $750 800 $94 $700 $650 $92 700 $600 $90 $550 600 $88 $500 $450 500 $86 $400 $8
Slide 6: Third Quarter 2020 Highlights
Third Quarter 2020 Highlights Total originations during the quarter Net asset value (NAV) as of were $145 million, while sales and September 30, 2020 was $10.97 NET ASSET VALUE per share as compared to $10.23 ORIGINATIONS repayments totaled $252 million, predominately from the Initial Broadly- as of
Slide 7: Selected Financial Highlights
Selected Financial Highlights Balance Sheet Highlights 3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 Investment Portfolio, at Fair Value $1,116.3 $1,034.0 $1,071.8 $1,173.6 $1,158.2 Total Debt Outstanding (Principal) $692.0 $569.3 $631.1 $670.7 $632.5 Total Net Assets (Equity) $526.0 $490.5 $445.7 $570.9
Slide 8: Barings Platform — A Culture of Credit & Private Assets
Barings Platform — A Culture of Credit & Private Assets Barings BDC is uniquely positioned alongside a full range of investment strategies, public and private, in the Fixed Income and Private markets • Core / Core Plus INVESTMENT GRADE • Active Short Duration $131.7 B • Corporate Credit PUBLIC • Hig
Slide 9: BBDC Market Update & Investment Portfolio
BBDC Market Update & Investment Portfolio
Slide 10: U.S. Middle Market Activity Down Year-over-Year
U.S. Middle Market Activity Down Year-over-Year Sponsored lending volume was down 39% on a YTD basis compared to 2019, with add-on acquisitions and DDTLs being active ANNUAL MM SPONSORED LOAN MM PE DEAL COUNT: LBOS VS. VOLUME ($BILS.) ADD-ONS 200 1400 140 1300 180 1200 120 160 1100 140 1000 100 103
Slide 11: All-In Senior Investment Spreads
All-In Senior Investment Spreads Direct lending spreads on new deals were generally ±25 bps across the various subsectors, as activity continued to pick up. Single-B liquid spreads continued to tighten, and are now back inside of middle-market levels QUARTERLY MIDDLE-MARKET SPREADS ACROSS THE CAPITA
Slide 12: Investment Activity
Investment Activity Summary of investment activity during the quarter ended September 30, 2020 • Middle-Market Loans: • Net increase in investments of $53.1 million • Total MML fundings were $95.7 million • Includes $79.9 million in seven new portfolio companies • Includes $15.8 million in eight exi
Slide 13: Portfolio Bridge – 2Q20 to 3Q20
Portfolio Bridge – 2Q20 to 3Q20 In the third quarter we originated $96 million of Middle-Market Loans, made $50 million of Cross-Platform Investments, and had a combined $252 million of sales/paydowns, mostly from Initial BSLs $ in millions; total may not foot due to rounding. 13
Slide 14: Aggregate Portfolio Characteristics (as of September 30, 2020)
Aggregate Portfolio Characteristics (as of September 30, 2020) Initial BSL Middle Market Cross Platform Total Total Investments and Commitments ($mm) $96 $758 $186 $1,040 Unfunded Commitments ($mm) $0 $92 $42 $134 Total Investments at Fair Value ($mm) $96 $666 $144 $906 Assets on Non-Accrual $0 $0 $
Slide 15: New Investment Illiquidity and Complexity Premiums
New Investment Illiquidity and Complexity Premiums Barings BDC seeks to generate excess shareholder return via illiquidity and complexity premiums across its wide investment frame of reference 3Q20 Premium/ Discount Dollars Deployed Asset Class All-in Spread (bps)1 To Market Indices ($mm) (bps) US I
Slide 16: Relative Value in Credit Asset Classes
Relative Value in Credit Asset Classes 3 Year Lookback (Wide/Tight/Current): 1,500 1,400 1,200 1,000 BBB 773 650 500 458 500 466 265 325 285 292 116 175 193 0 80 CLO Corp. Credit CMBS EETC U.S. Loans 2,000 1,500 1,514 BB 1,000 910 691 655 621 500 523 435 351 310 181 250 245 0 CLO Corp. Credit U.S. L
Slide 17: Top 10 Investments
Top 10 Investments Top 10 Holdings (as of September 30, 2020) Principal % of Issuer Moody's Industry Segment Cost Fair Value Amount Portfolio UKFast Leaders Limited Telecommunications Middle Market $29,160,897 $28,154,910 $28,286,070 3.1% BDP International, Inc. (BDP Transportation: Cargo Middle Mar
Slide 18: BBDC Financials
BBDC Financials BARINGS
Slide 19: Net Asset Value Per Share (NAV) Bridge – 2Q20 to 3Q20
Net Asset Value Per Share (NAV) Bridge – 2Q20 to 3Q20 Since June 30, 2020, BBDC’s NAV per share increased to $10.97 from $10.23 (+7.2%) primarily due to portfolio appreciation on improvements in broad market conditions Total may not foot due to rounding. 19
Slide 20: 3Q20 Unrealized Appreciation (Depreciation)
3Q20 Unrealized Appreciation (Depreciation) 3Q 2020 Portfolio Summary 3Q Unrealized 3Q Unrealized 3Q Unrealized 3Q Unrealized App (Dep) - App (Dep) - App (Dep) - App (Dep) - Per Par Cost Fair Value Price Credit For. Curr. Total Share Middle-Market Lending North America $571,124 $563,107 $552,469 $12
Slide 21: BBDC Income Statement
BBDC Income Statement 3Q20 2Q20 1Q20 4Q19 3Q19 Investment income: Interest income $15,217,547 $15,295,679 $17,674,402 $17,913,613 $18,448,942 Dividend income — 2,603 — 35,812 4,221 Fee and other income 769,126 650,433 960,993 447,001 848,792 Payment-in-kind interest income 342,469 191,049 43,572 5,4
Slide 22: BBDC Balance Sheet
BBDC Balance Sheet Debt-to-equity at September 30, 2020 was 1.32x, or 0.74x(1) after adjusting for cash, short-term investments and unsettled transactions. Pro forma for the full CLO debt repayment in October totaling $178 million, debt-to- equity was 0.98x(1) September 30, June 30, March 31, Decemb
Slide 23: Debt Summary and Maturity Profile
Debt Summary and Maturity Profile BBDC fully repaid the CLO Class A-1 and CLO Class A-2 notes in October, and executed a new $175 million private placement of unsecured notes in November Pro Forma As of 9/30/2020 As of 6/30/2020 Principal Principal Principal Principal Principal Principal Interest Am
Slide 24: Liquidity Summary
Liquidity Summary BBDC has available liquidity under its senior secured revolving credit agreement and unsecured debt commitment, with cushion to support its unused capital commitments of $134 million as well as make new investments Debt / Net Debt-to-Equity Ratio Scenarios Debt / Net Debt Debt / Ne
Slide 25: Quarterly Dividends
Quarterly Dividends BBDC has declared a 4Q20 dividend of $0.17 per share, up from $0.16 in 3Q20 BBDC DIVIDENDS DECLARED PER SHARE $0.18 $0.17 $0.16 $0.16 $0.16 $0.16 $0.15 $0.14 $0.14 $0.13 $0.12 $0.12 $0.10 $0.10 $0.08 $0.06 $0.04 $0.03 $0.02 $0.00 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
Slide 26: 4Q 2020 Origination Pipeline
4Q 2020 Origination Pipeline
Slide 27: Investment Activity Since Quarter End and Investment Pipeline
Investment Activity Since Quarter End and Investment Pipeline • From October 1, 2020 through November 3, 2020, Barings BDC made approximately $155.4 million of new commitments, of which approximately $130.6 million closed and funded. In addition, BBDC funded $8.7 million of previously-committed dela
Slide 28: Incentive Fee Alignment, “Investment Math”
Incentive Fee Alignment, “Investment Math” Pro Forma for the MVC Transaction, Barings will lower its base management fee to 1.25% on gross assets, down from 1.375%. This enhanced alignment allows BBDC to invest at better risk adjusted returns for investors relative to other fee structures SPREADS NE
Slide 29: Appendix
Appendix BARINGS
Slide 30: Appendix: Reconciliation of Debt to Net Debt and Calculation of Net Debt-to-Equity
Appendix: Reconciliation of Debt to Net Debt and Calculation of Net Debt-to- Equity and Pro Forma Debt-to-Equity Ratios September 30, June 30, March 31, December 31, September 30, 2020 2020 2020 2019 2019 Total debt (principal) $692,016,256 $569,341,828 $631,061,734 $670,698,595 $632,548,859 minus:
Slide 31: Appendix: BBDC Repurchase Program Update
Appendix: BBDC Repurchase Program Update In 1Q20, BBDC began executing on its 2020 share repurchase program, as we believe share repurchases remain an important part of any long-term capital allocation philosophy • Under the 2020 repurchase program, BBDC aims to repurchase up to a maximum of 5.0% of
Slide 32: Appendix: Barings BDC Corporate Data
Appendix: Barings BDC Corporate Data Board of Directors Investment Committee Corporate Officers Research Coverage Corporate Headquarters MICHAEL FRENO ERIC LLOYD ERIC LLOYD BANK OF AMERICA 300 South Tryon Street Chairman, CEO, and Chief Executive Officer Chief Executive Officer MERRILL LYNCH Suite 2