31 slides from Barings Participation Investors's earnings presentation, Feb 28, 2019
Slide 1: Barings BDC, Inc. Fourth Quarter 2018 Earnings Presentation
Barings BDC, Inc. Fourth Quarter 2018 Earnings Presentation February 28, 2019
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 MIKE FRENO 4Q 2018 HIGHLIGHTS (Lloyd) What were the summary points of the quarter? BBDC INVESTMENT PORTFOLIO (Fowler) Update on the portfolio ramp. ERIC LLOYD THE MIDDLE-MARKET LANDSCAPE (Fowler) What are the current conditions in the middle market? BBDC FINANCIALS (Bock) A walk through the b
Slide 4: 4Q 2018 Highlights
AQ 2018 Highlights BARINGS
Slide 5: Credit Spread Widening and BDC Equity Prices
Credit Spread Widening and BDC Equity Prices Spread widening at the end of 2018 translated into significant pressure on BDC equity prices BROADLY-SYNDICATED LOAN BROADLY-SYNDICATED LOAN BDC EQUITY PRICES SPREADS PRICES 700 $100 $900 650 $850 $98 600 $800 $96 550 $750 $94 500 $700 $92 450 $650 $90 40
Slide 6: Fourth Quarter 2018 Highlights
Fourth Quarter 2018 Highlights New investments during the quarter were $87 million for broadly-syndicated Net asset value (NAV) as of loans (BSL) and $162 million for NET ASSET VALUE December 31st, 2018 was $10.98 ORIGINATIONS middle-market loans (MML) (including per share one $7 million add-on), wh
Slide 7: Selected Financial Highlights
Selected Financial Highlights Balance Sheet Highlights 4Q 2018 3Q 2018 Investment Portfolio, at Fair Value $1,121.9 $1,081.2 Total Debt Outstanding $570.0 $210.0 Net Assets $563.0 $611.0 Debt-to-Equity Ratio 1.01x 0.34x Net Debt-to-Equity Ratio1 0.92x 0.69x Income Statement Highlights Total Investme
Slide 8: BBDC Investment Portfolio
BBDC Investment Portfolio BARINGS
Slide 9: Investment Activity
Investment Activity Summary of investment activity during the quarter ended December 31st, 2018 • Middle-market loans: • Principal value of new investment commitments1 and fundings were $169 million and $162 million, respectively • Includes one add-on investment for $7 million • No sales or repaymen
Slide 10: Total Portfolio Composition
Total Portfolio Composition A diverse portfolio of 99% senior secured, first lien assets Aggregate Portfolio Characteristics (as of December 31, 2018) Investment Portfolio BSL Middle Market Total Total Investments and Commitments ($mm) $846 $249 $1,096 Unfunded Delayed Draw Commitments ($mm) $1 $18
Slide 11: Top Investments
Top 10 Investments Top 10 Holdings (as of December 31, 2018) Principal % of Issuer Moody's Industry Segment Cost ($) Fair Value ($) Amount ($) Portfolio BDP International, Inc. Transportation: Cargo MM 25,000,000 24,502,972 24,347,685 2.3% Accurus Aerospace Aerospace and Defense MM 25,000,000 24,636
Slide 12: The Middle-Market Landscape
The Middle-Market Landscape
Slide 13: The Middle-Market Landscape
The Middle-Market Landscape In 4Q18, senior and unitranche spreads were little changed, while mezz continued to tighten as it diverged from second lien spreads QUARTERLY MIDDLE-MARKET SPREADS ACROSS THE CAPITAL STRUCTURE 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2Q13 4Q13 2Q14
Slide 14: Leverage (Debt to EBITDA)
The Middle-Market Landscape Leverage follows an upward trajectory, with all structures at new highs in 2018 ANNUAL LEVERAGE BY CAPITAL STRUCTURE 6.5x 6.0x 5.5x 0.0 0.1 0.1 0.1 1.6 5.0x 1.4 0.1 1.5 1.5 4.5x 1.2 1.3 Leverage (Debt to EBITDA) 1.4 1.4 1.3 1.2 2.1 2.2 4.0x 1.3 1.2 2.8 2.6 3.5x 2.7 3.0x 2
Slide 15: Average Leverage by Industry
Leverage (Debt to EBITDA) 3.0x 3.3x 3.5x 3.8x 4.0x 4.3x 4.5x 4.8x 5.0x 5.3x 5.5x 5.8x 6.0x 2017 1Q18 Source: LPC Automotive 2Q18 3Q18 4Q18 2017 1Q18 Business 2Q18 Services 3Q18 4Q18 2017 1Q18 Chemicals / 2Q18 Plastics 3Q18 4Q18 2017 1Q18 Consumer 2Q18 Services 3Q18 4Q18 The Middle-Market Landscape 2
Slide 16: BBDC Financials
BBDC Financials BARINGS
Slide 17: Net Asset Value (NAV) Bridge – 3Q18 to 4Q18
Net Asset Value (NAV) Bridge – 3Q18 to 4Q18 As of December 31st, BBDC NAV was $10.98/share, down from $11.91/share last quarter. The vast majority of the book value decline came from net unrealized losses on the portfolio due to the market volatility in December (1) (1) 1. Adjusted to exclude the im
Slide 18: BBDC Income Statement
BBDC Income Statement 4Q18 3Q18 Total Since Externalization Period from August 3, 2018 Period from August 3, 2018 Three Months Ended through through December 31, 2018 September 30, 2018 December 31, 2018 Investment income: Interest income $16,355,639 $3,876,365 $20,232,004 Dividend income — 200,777
Slide 19: BBDC Balance Sheet
BBDC Balance Sheet December 31, September 30, 2018 2018 Assets: Investments at fair value: Non-Control / Non-Affiliate investments $1,076,631,804 $1,036,189,705 Short-term investments 45,223,941 45,000,000 Total investments at fair value 1,121,855,745 1,081,189,705 Cash 12,426,982 116,678,976 Receiv
Slide 20: Debt Summary
Debt Summary On February 21st, 2019, BBDC closed an $800 million 5-year revolving credit facility, and subsequently terminated $150 million of the SPV revolving credit facility Current (As of 2/27/2019) As of 12/31/2018 Principal Principal Principal Principal Maturity Amount Amount Amount Amount (do
Slide 21: Quarterly Dividends
Quarterly Dividends Barings BDC has declared a first quarter dividend of $0.12 per share BARINGS BDC DIVIDENDS DECLARED PER SHARE $0.14 $0.12 $0.12 $0.10 $0.10 $0.08 $0.06 $0.04 $0.03 $0.02 $0.00 3Q18 4Q18 1Q19 21
Slide 22: 1Q 2019 Origination Pipeline
1Q 2019 Origination Pipeline
Slide 23: Investment Activity Since Quarter End
Investment Activity Since Quarter End Below is a summary of Barings BDC’s investment activity since December 31st, 2018 • From January 1st, 2019 through February 26th, 2019, Barings BDC made approximately $44 million of new middle- market private debt commitments, of which approximately $16 million
Slide 24: Investment Pipeline
Investment Pipeline Below is a summary of Barings North America Private Finance probability-weighted pipeline • As of February 25th, 2019, Barings North America Private Finance group had a probability-weighted pipeline of approximately $543 million1 • The following is a breakdown of the pipeline by
Slide 25: The Barings Brand and Share Repurchase Philosophy
The Barings Brand and Share Repurchase Philosophy
Slide 26: Who We Are
Who We Are Barings is a $303+ BILLION global financial services firm dedicated to meeting the evolving investment and capital needs of our clients and customers. Through ACTIVE ASSET MANAGEMENT and DIRECT ORIGINATION, we provide innovative solutions and access to differentiated opportunities across
Slide 27: BBDC Trading Discount
BBDC Trading Discount Barings BDC traded at 0.83x NAV as of February 26th BARINGS BDC PRICE TO NET ASSET VALUE 1 0.95x 0.90x 0.85x 0.80x 0.75x 0.70x Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 1. Calculated using NAV of $11.72 per share from August 2nd through November 8th and $11.91 per share
Slide 28: Barings' View on Capital Allocation & Shareholder Value
Barings’ View on Capital Allocation & Shareholder Value Permanent capital management requires a “best in class” permanent approach #1 BENEFIT - SHARE REPURCHASES BELOW NET ASSET VALUE IMPROVE SHAREHOLDER RETURN #2 BELIEF - IF SHAREHOLDERS ARE BEING ASKED TO BELIEVE IN FOUR CORE BELIEFS A MANAGER’S U
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 4 COMMITMENT TO MANAGER WITH ALIGNED FEE SHARE REPURCHASE
Slide 30: Barings BDC Corporate Data
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 of BBDC Board, Chief Executive Officer Chief Executive Officer MERRILL LYNCH 25th Floor H
Slide 31: Appendix: Reconciliation of Debt to Net Debt and Net Debt-to-Equity Ratio
Appendix: Reconciliation of Debt to Net Debt and Calculation of Net Debt-to- Equity Ratio December 31, September 30, 2018 2018 Borrowings under credit facility (debt) $570,000,000 $210,000,000 minus: Cash (12,426,982) (116,678,976) minus: Short-term investments (45,223,941) (45,000,000) plus: Payab