Barings Participation Investors · NYSE:MPV
Barings Participation Investors — Barings BDC — Q3 2018 Earnings Presentation
30 slides from Barings Participation Investors's earnings presentation, Nov 9, 2018
Slide 1: Barings BDC, Inc. Third Quarter 2018 Earnings Presentation
Barings BDC, Inc. Third Quarter 2018 Earnings Presentation November 9, 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements Cautionary Notice: Certain statements contained in this presentation may be "forward-looking" statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management'
Slide 3: Agenda
Agenda ERIC LLOYD 3Q 2018 HIGHLIGHTS (Bock) “What were the summary points of the quarter?” THE BARINGS BRAND AND BBDC STRATEGY (Lloyd) “Who is Barings? “How does Barings fit in the wider private finance spectrum?” IAN FOWLER BBDC INVESTMENT PORTFOLIO (McDonnell/Fowler) “Walk us through the current i
Slide 4: Third Quarter 2018 Highlights
Third Quarter 2018 Highlights Post-close of the externalization, new Net investment income for the investments during the quarter were NET INVESTMENT period from August 3rd, 2018 $1.23 billion for broadly syndicated ORIGINATIONS INCOME through September 30th, 2018 was credit and $75 million for midd
Slide 5: The Barings Brand and BBDC Strategy
The Barings Brand and BBDC Strategy
Slide 6: Who We Are
Who We Are Barings is a $310+ BILLION global financial services firm dedicated to meeting the evolving investment and capital needs of our clients. We build LASTING PARTNERSHIPS that leverage our distinctive expertise across traditional and alternative asset classes to deliver innovative solutions a
Slide 7: Global High Yield Investments – Organization
Global High Yield Investments – Organization MARTIN HORNE HEAD OF THE GLOBAL HIGH YIELD INVESTMENT GROUP $69.4 BILLION IN GLOBAL HIGH YIELD AUM EUROPEAN HIGH YIELD INVESTMENTS U.S. HIGH YIELD INVESTMENTS STRUCTURED CREDIT MARTIN HORNE DAVID MIHALICK MATT NATCHARIAN HEAD OF EUROPEAN HIGH YIELD INVEST
Slide 8: Global Private Finance Team & Barings BDC Executives
Global Private Finance Team & Barings BDC Executives Over 200 team members globally, with over 70 investment professionals located in 7 offices on 4 continents. Barings BDC’s executive team is outlined below. CHIEF EXECUTIVE OFFICER PRESIDENT CHIEF FINANCIAL OFFICER ERIC LLOYD IAN FOWLER JONATHAN BO
Slide 9: Defining Barings Global Private Finance
Defining Barings Global Private Finance Over the last twelve months, invested over $3.5 billion in private debt investments across the capital structure. GLOBAL PRIVATE FINANCE SOLUTIONS Key Tenets of Our Approach Aligned Interests with MassMutual capital invested alongside our clients SENIOR SECURE
Slide 10: Selected 3Q Financial Highlights
Selected 3Q Financial Highlights Balance Sheet Highlights1 Investment Portfolio, at Fair Value $1,081.2 Total Debt Outstanding $210.0 Net Assets $611.0 Debt to Equity 0.34x Net Debt to Equity Adjusted for Unsettled 0.69x Transactions2 Income Statement Highlights3 Total Investment Income $4.4 Net Inv
Slide 11: Investment Activity
Investment Activity Below is a summary of investment activity during the quarter ended September 30th, 2018. • Broadly syndicated credit: • Net new investments totaled $951 million • Purchases totaled $1,228 million • Sales and repayments totaled $277 million • Realized gain on sales of $0.6 million
Slide 12: BBDC Investment Portfolio
BBDC Investment Portfolio BARINGS
Slide 13: Total Portfolio Composition
Total Portfolio Composition A diverse portfolio of 100% senior secured first lien assets. Portfolio Characteristics (as of September 30, 2018) Investment Portfolio BSL Middle Market Total Total Investments and Commitments ($MM) $952 $86 $1,038 Unfunded Commitments ($MM) $0 $11 $11 Total Investments
Slide 14: Top 10 Investments
Top 10 Investments Top 10 Holdings (as of September 30, 2018) Principal Portfolio Company Industry Cost ($) Fair Value ($) % of Portfolio Amount ($) Trystar, Inc. Energy: Electricity 17,894,509 17,942,860 17,942,860 1.7% JS Held, LLC Services: Business 17,593,912 17,395,669 17,395,347 1.7% Reynolds
Slide 15: The Middle Market Landscape
The Middle Market Landscape BARINGS
Slide 16: Middle Market Yields Across the Capital Structure
The Middle Market Landscape Institutional Middle Market yields saw the biggest quarterly rise to 7.32% from 6.64%. Banks saw yields rise to 6.83% from 6.79%. Non-bank traditional 1st lien players saw yields drop to 7.45% from 7.48%. High octane 1st lien yields were flat at 9.58%. Unitranche yields d
Slide 17: Leverage by Capital Structure
The Middle Market Landscape Leverage follows upward trajectory on an annual basis; all structures at new highs, fewer bifurcated unis are being submitted, but for those that are tranched out, first out leverage averages 3.13x in 2018. ANNUAL: LEVERAGE BY CAPITAL STRUCTURE 6.5x 6.0x 5.5x 0.0 0.1 0.1
Slide 18: Purchase Price Multiples by Sector
The Middle Market Landscape Valuations hit record highs across popular sectors with technology leaping to the 14x context so far this year. PURCHASE PRICE FINANCING FOR MM LBO DEALS BY SECTOR 15.0x 14.0x 13.0x 12.0x 11.0x Purchase Price Multiple (x) 10.0x 8.9 9.0x 8.0 6.3 6.2 8.0x 5.9 6.2 6.6 5.6 4.
Slide 19: All Senior and Unitranche Spread vs. Leverage
The Middle Market Landscape All senior deals and unitranche deals are converging and looking more similar. Some “all senior” deals may not be compensating investors for embedded junior risk. 1H18 ALL SENIOR CAPITAL STRUCTURES: 3Q18 ALL SENIOR CAPITAL STRUCTURES: SPREAD VS. LEVERAGE SPREAD VS. LEVERA
Slide 20: BBDC Financials
BBDC Financials BARINGS
Slide 21: Net Asset Value (NAV) Bridge – TCAP to BBDC
Net Asset Value (NAV) Bridge – TCAP to BBDC As of June 30th, 2018, TCAP’s NAV was $13.70/share. BBDC assumed a NAV of $11.72/share following the asset sale. Since the externalization, BBDC has increased NAV by 1.6% via (1) accretion from tender offer, (2) NII in excess of the dividend, and (3) net r
Slide 22: BBDC Income Statement
BBDC Income Statement Less: BBDC Three Months Legacy TCAP August 3, 2018 Ended July 1, 2018 through September 30, through September 30, 20181 August 2, 2018 2018 Investment income: Interest income $10,065,666 $6,189,301 $3,876,365 Dividend income 303,062 102,285 200,777 Fee and other income 377,726
Slide 23: BBDC Balance Sheet
BBDC Balance Sheet September 30, 2018 Assets: Investments at fair value: Non-Control / Non-Affiliate investments $1,036,189,705 Short-term investments 45,000,000 Total investments at fair value 1,081,189,705 Cash and cash equivalents 116,678,976 Receivable from unsettled transactions 172,801,396 Oth
Slide 24: Quarterly Dividends
Quarterly Dividends Barings BDC has declared a fourth quarter dividend of $0.10 per share. BARINGS BDC DIVIDENDS DECLARED PER SHARE $0.12 $0.10 $0.10 $0.08 $0.06 $0.04 $0.03 $0.02 $0.00 3Q18 4Q18 24
Slide 25: 4Q 2018 Origination Pipeline
4Q 2018 Origination Pipeline
Slide 26: Investment Activity Since Quarter End
Investment Activity Since Quarter End Below is a summary of Barings BDC’s investment activity since September 30th, 2018. • From October 1st, 2018 through November 7th, 2018, Barings BDC made approximately $79.9 million of new Middle Market private debt and equity commitments, of which approximately
Slide 27: Investment Pipeline
Investment Pipeline Below is a summary of Barings North America Private Finance probability weighted pipeline. • As of November 1st, 2018, Barings North America Private Finance group had a probability weighted pipeline of approximately $859 million1 • The following is a breakdown of the pipeline by
Slide 28: Alignment
Alignment
Slide 29: Barings’ Commitment to Long-Term Alignment
Barings’ Commitment to Long-Term Alignment BARINGS DEMONSTRATED SIGNIFICANT ALIGNMENT OF INTERESTS WITH SHAREHOLDERS IN EXECUTING THE EXTERNALIZATION TRANSACTION, AND WE ARE COMMITTED TO UPHOLDING A PHILOSOPHY OF ALIGNMENT GOING FORWARD 1 2 3 COMMITMENT TO MANAGER WITH ALIGNED FEE TRANSACTION ‘SKIN
Slide 30: Barings BDC Corporate Data
Barings BDC Corporate Data Board of Directors Investment Committee Corporate Officers Research Coverage Corporate Counsel MICHAEL FRENO ERIC LLOYD ERIC LLOYD BANK OF AMERICA Dechert Chairman of BBDC Board, Chief Executive Officer Chief Executive Officer MERRILL LYNCH Head of Global Markets at Derek