Barings Bdc, Inc. · NYSE:BBDC
Barings Bdc — Q2 2020 Earnings Presentation
29 slides from Barings Bdc's earnings presentation, Aug 8, 2020
Slide 1: Barings BDC, Inc. Second Quarter 2020 Earnings Presentation
Barings BDC, Inc. Second Quarter 2020 Earnings Presentation August 5, 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 2Q 2020 HIGHLIGHTS (Lloyd) What were the summary points of the quarter? BBDC INVESTMENT PORTFOLIO (Fowler) Update on the portfolio ramp and performance. IAN FOWLER THE MIDDLE-MARKET LANDSCAPE (Fowler) What are the current conditions in the middle market? BBDC FINANCIALS (Bock) A wa
Slide 4: 2Q 2020 Highlights
2Q 2020 Highlights BARINGS
Slide 5: Credit Spreads and BDC Equity Prices
Credit Spreads and BDC Equity Prices The rebound in BDC equity prices mirrored that of BSL prices following the unprecedented volatility in March caused by the COVID-19 pandemic BROADLY-SYNDICATED LOAN BROADLY-SYNDICATED LOAN BDC EQUITY PRICES SPREADS PRICES 1,000 $100 $900 $850 $98 900 $800 $96 $75
Slide 6: Second Quarter 2020 Highlights
Second Quarter 2020 Highlights Total middle-market originations during Net asset value (NAV) as of June the quarter were $23 million (including 30, 2020 was $10.23 per share as NET ASSET VALUE compared to $9.23 as of March 31, ORIGINATIONS $6 million of add-ons and $5 million JV investment), while m
Slide 7: Selected Financial Highlights
Selected Financial Highlights Balance Sheet Highlights 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 Investment Portfolio, at Fair Value $1,034.0 $1,071.8 $1,173.6 $1,158.2 $1,200.6 Total Debt Outstanding (Principal) $569.3 $631.1 $670.7 $632.5 $633.8 Total Net Assets (Equity) $490.5 $445.7 $570.9 $572.4
Slide 8: BBDC Repurchase Program Update
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 the amoun
Slide 9: BBDC Investment Portfolio
BBDC Investment Portfolio BARINGS
Slide 10: Investment Activity
Investment Activity Summary of investment activity during the quarter ended June 30, 2020 • Middle-Market Loans: • Net increase in investments of $20.9 million • Total MML fundings were $22.5 million • Includes $11.9 million in two new portfolio companies • Includes $5.0 million additional investmen
Slide 11: BBDC Portfolio
BBDC Portfolio A diverse portfolio of 95% senior secured first lien assets, with Middle Market now 61% of portfolio Aggregate Portfolio Characteristics (as of June 30, 2020) Investment Portfolio BSL Middle Market Total1 Total Investments and Commitments ($mm) $351 $668 $1,091 Unfunded Commitments ($
Slide 12: Top 10 Investments
Top 10 Investments Top 10 Holdings (as of June 30, 2020) Principal % of Issuer Moody's Industry Segment Cost Fair Value Amount Portfolio Transportation Insight, LLC Transportation: Cargo MM $24,638,036 $24,458,135 $23,854,549 2.4% BDP International, Inc. Transportation: Cargo MM 24,625,000 24,239,93
Slide 13: Portfolio Bridge – 1Q20 to 2Q20
Portfolio Bridge – 1Q20 to 2Q20 In the second quarter, we originated $18mm of middle-market loans, made $10mm of opportunistic BSL investments, contributed $5mm to Jocassee Partners, and had a combined $80mm of sales/paydowns $ in millions; total may not foot due to rounding. 13
Slide 14: 2Q and YTD 2020 Unrealized Appreciation (Depreciation)
2Q and YTD 2020 Unrealized Appreciation (Depreciation) Total unrealized appreciation in the second quarter of $65 million helped offset the unrealized depreciation of $119 million experienced in the first quarter, with improvements across all asset categories. Total net unrealized appreciation of $3
Slide 15: The Middle-Market Landscape
The Middle-Market Landscape
Slide 16: All-In Senior Investment Spreads
All-In Senior Investment Spreads As new deal activity slowly resumed in the middle market, direct lending spreads on new deals were ~50-100 bps wider (though new deal activity was inherently biased toward non-COVID impacted names). Single-B liquid spreads gapped tighter, though remain wide to middle
Slide 17: Relative Value in Credit Asset Classes
Relative Value in Credit Asset Classes 3 Year Lookback (Wide/Tight/Current): 1,400 1,200 1,200 1,000 875 800 773 BBB 600 488 466 400 325 285 339 265 200 145 193 80 0 CLO Corp. Credit CMBS U.S. Loans 1,600 1,514 1,200 962 BB 800 691 655 621 523 501 400 415 250 323 245 181 0 CLO Corp. Credit U.S. Loan
Slide 18: BBDC Financials
BBDC Financials BARINGS
Slide 19: Net Asset Value Per Share (NAV) Bridge – 1Q20 to 2Q20
Net Asset Value Per Share (NAV) Bridge – 1Q20 to 2Q20 Since March 31, 2020, BBDC’s NAV per share increased to $10.23 from $9.23 primarily due to portfolio appreciation on improvements in broad market conditions Total may not foot due to rounding. CONFIDENTIAL 19
Slide 20: BBDC Income Statement
BBDC Income Statement 2Q20 1Q20 4Q19 3Q19 2Q19 Investment income: Interest income $15,295,679 $17,674,402 $17,913,613 $18,448,942 $19,074,824 Dividend income 2,603 — 35,812 4,221 4,711 Fee and other income 650,433 960,993 447,001 848,792 519,970 Payment-in-kind interest income 191,049 43,572 5,413 —
Slide 21: BBDC Balance Sheet
BBDC Balance Sheet Debt-to-equity at June 30, 2020 was 1.16x, or 1.00x(1) after adjusting for cash, short-term investments and unsettled transactions. Pro forma for the CLO debt repayment in July totaling $48 million, debt-to-equity was 1.06x(1) June 30, March 31, December 31, September 30, June 30,
Slide 22: Debt Summary and Maturity Profile
Debt Summary and Maturity Profile BBDC executed a $100 million private placement of unsecured notes in August, with plans to draw on the commitment over the next year; given continued portfolio rotation, the BSL credit facility was voluntarily terminated on June 30, 2020 As of 6/30/2020 As of 3/31/2
Slide 23: 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 $114 million as well as make new investments as the market opportunity evolves Debt / Net Debt-to-Equity Ratio S
Slide 24: Quarterly Dividends
Quarterly Dividends BBDC has declared a third quarter dividend of $0.16 per share BBDC DIVIDENDS DECLARED PER SHARE $0.18 $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 24
Slide 25: 3Q 2020 Origination Pipeline
3Q 2020 Origination Pipeline
Slide 26: Investment Activity Since Quarter End and Investment Pipeline
Investment Activity Since Quarter End and Investment Pipeline • From July 1, 2020 through August 4, 2020, Barings BDC made approximately $60.6 million of new private debt commitments, of which approximately $15.7 million closed and funded. In addition, BBDC funded $5.7 million of previously-committe
Slide 27: Appendix
Appendix BARINGS
Slide 28: Reconciliation of Debt to Net Debt and Net Debt-to-Equity Ratios
Appendix: Reconciliation of Debt to Net Debt and Calculation of Net Debt-to- Equity and Pro Forma Debt-to-Equity Ratios June 30, March 31, December 31, September 30, June 30, 2020 2020 2019 2019 2019 Total debt (principal) $569,341,828 $631,061,734 $670,698,595 $632,548,859 $633,750,000 minus: Cash
Slide 29: 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 of BBDC Board, Chief Executive Officer Chief Executive Officer MERRILL LYNCH Su