Barings Bdc, Inc. · NYSE:BBDC
Barings Bdc — Merger or Acquisition (September 2021)
31 slides from Barings Bdc's merger presentation, Sep 21, 2021
Slide 1: Strategic Acquisition of Sierra Income Corp.
Barings BDC, Inc. Strategic Acquisition of Sierra Income Corp. September 21, 2021
Slide 2: Disclaimers and Cautionary Note Regarding Forward-Looking Statements
Disclaimers and Cautionary Note Regarding Forward-Looking Statements Cautionary Notice: Certain statements contained in this presentation are "forward-looking" statements. Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “migh
Slide 3: Disclaimers and Cautionary Note Regarding Forward-Looking Statements
Disclaimers and Cautionary Note Regarding Forward-Looking Statements Additional Information and Where to Find It This communication relates to a proposed business combination involving Barings BDC and Sierra, along with related proposals for which stockholder approval will be sought (collectively, t
Slide 4: Disclaimers and Cautionary Note Regarding Forward-Looking Statements
Disclaimers and Cautionary Note Regarding Forward-Looking Statements No Offer or Solicitation This investor presentation is not, and under no circumstances is it to be construed as, a prospectus or an advertisement, and the communication of this investor presentation is not, and under no circumstanc
Slide 5: Agenda
Agenda ERIC LLOYD BARINGS OVERVIEW (Lloyd) Who is Barings? IAN FOWLER What are our investment capabilities? BARINGS BDC’S STRATEGIC ACQUISTION OF SIERRA (Bock) How is the acquisition structured? What are the strategic benefits of the transaction? JONATHAN BOCK INVESTMENT OPPORTUNITY (Fowler/High) Wh
Slide 6: Barings Overview
Barings Overview BARINGS
Slide 7: Barings Overview
Barings Overview • Barings is a GLOBAL INVESTMENT MANAGER sourcing differentiated opportunities and building portfolios across public and private fixed income, $382+B real estate and specialist equity markets ASSETS UNDER MANAGEMENT • A subsidiary of MASSMUTUAL , we have the financial stability and
Slide 8: Global Investment Capabilities
Global Investment Capabilities Barings leverages its DEPTH AND BREADTH OF EXPERTISE across public and private markets to help meet our clients’ evolving investment needs PUBLIC PUBLIC FIXED INCOME 1 PUBLIC EQUITIES & MULTI ASSET 2 Provides access to strategies ranging from investment grade Aims to d
Slide 9: Leveraging Best-In-Class Global Credit Resources
Leveraging Best-In-Class Global Credit Resources Barings BDC harnesses the depth and breadth of four best-in-class research platforms giving the team a distinct information / competitive advantage in the marketplace GLOBAL PRIVATE U.S. HIGH YIELD EUROPEAN HIGH YIELD STRUCTURED CREDIT FINANCE David M
Slide 10: A Wide Investment Frame of Reference Drives Improved Return Outcomes
A Wide Investment Frame of Reference Drives Improved Return Outcomes Barings BDC is uniquely positioned alongside a full range of investment strategies, public and private, in the Fixed Income markets • Core / Core Plus INVESTMENT GRADE • Active Short Duration $124.9 Billion • Corporate Credit PUBLI
Slide 11: Transaction Summary
Transaction Summary BARINGS
Slide 12: Transaction Details
Transaction Details Summary of Certain Transaction Terms Sierra shareholders will receive a book value consideration of $623.7 million, or $6.10 per share1 of total consideration, consisting of: • Cash of $100.0 million, or approximately $0.98 per share, directly from Barings LLC • BBDC common stock
Slide 13: Consideration from BBDC Perspective
Consideration from BBDC Perspective BBDC’s share consideration of $5.12 per Sierra share represents 94% of Sierra’s 6/30/21 NAV of $5.43 per share. Additionally, the Barings LLC CSA provides combined entity investors additional downside protection of $100 million, or approximately 16% of the current
Slide 14: Transaction Benefits
Transaction Benefits BARINGS
Slide 15: Transaction Benefits
Transaction Benefits The combination of BBDC and Sierra will create one of the top 10 largest BDCs and generate significant, immediate and long-term value for all shareholders ACCRETION LIQUIDITY DIVERSIFICATION Estimated to be both short- Improved share liquidity and term and long-term accretive pr
Slide 16: Accretion
Accretion Transaction estimated to result in ~14% dividend accretion from $0.21 to 0.24 per share, estimated NII Yield expansion from 8.00% to 8.25%, and 4% estimated NAV accretion on fair value recognition of $100 million Credit Support Agreement DIVIDEND PER SHARE NET ASSET VALUE +14% +4% NII Yiel
Slide 17: Liquidity
Liquidity BBDC’s pro forma trading liquidity profile after closing as implied by the public BDC peer set suggests a ~80% increase in BBDC’s current 3-month average daily trading volume 3-MONTH AVERAGE DAILY TRADING VOLUME +~80% MARKET CAPITALIZATION Implied 3M ADTV by PF Market Capitalization1: $4.0
Slide 18: Diversification
Diversification We believe that the combination of BBDC and Sierra will create one of the top 10 largest BDCs and generate significant, immediate and long-term value for all shareholders ENHANCED PORTFOLIO SIZE ($MM) 1 DIVERSIFIED PORTFOLIO MIX 245 Portfolio Companies Asset Yield of Asset Yield of 7
Slide 19: Resilience
Resilience BDCs with meaningful scale, greater than $1 billion of market capitalization, have consistently accessed the index eligible investment grade bond market at increasingly favorable terms PRO FORMA NET ASSET VALUE AND LEVERAGE 1 BDC BOND SPREAD TIGHTENING 1.14x 0.74x $1,268 $744 BBDC Net Ass
Slide 20: Cost Synergies
Cost Synergies BBDC estimates ~$8.1 million in near-term expense synergies associated with the combination, driven by redundant general & administrative expenses across the two platforms POTENTIAL OPERATING EXPENSE SYNERGY DRIVERS ESTIMATED ANNUAL OPERATING EXPENSE REDUCTIONS 1 BBDC SIERRA • Adminis
Slide 21: BBDC: the Gold Standard in Shareholder Alignment
BBDC: the Gold Standard in Shareholder Alignment The proposed acquisition of Sierra is accompanied by a number of structural attributes that will further align the interests of Barings LLC and BBDC shareholders, including current Sierra shareholders Incentive Fee Alignment Improved Asset Risk Pr
Slide 22: Investment Opportunity
Investment Opportunity BARINGS
Slide 23: BBDC Investment Activity
BBDC Investment Activity Summary of investment activity since Barings LLC became the external investment advisor on August 3, 2018 • Middle-Market Loans: • Total MML fundings were $1.87 billion since August 3rd, 2018 • Barings BDC currently has $1.12 billion invested across 124 portfolio companies •
Slide 24: All-In Senior Investment Spreads
All-In Senior Investment Spreads Spreads in the direct lending market continued to tighten in the second quarter, however the pace has generally slowed compared to the prior four quarters. The bank subsector continues to diverge from the non- bank subsectors QUARTERLY MIDDLE-MARKET SPREADS ACROSS TH
Slide 25: Focus on Capital Deployment At Attractive Return
Focus on Capital Deployment At Attractive Return Over the previous four quarters, BBDC deployed $1.3 billion at an all-in spread1 (inclusive of upfronts/OID) of 782 bps over LIBOR. This equates to a 339-bp spread premium to comparable liquid market indices at the same credit risk profile2 BBDC DEPLO
Slide 26: BBDC: Top Cross Platform Investments
BBDC: Top 10 Cross Platform Investments Cross Platform investments are projected to generate 19% of BBDC’s revenue on a pro forma basis1 Top 10 Cross Platform Investments by Fair value (as of June 30 , 2021)1 Unrealized Unrealized Issuer Cost Fair Value Yield2 G/(L) ($) G/(L) (%) Eclipse Business Ca
Slide 27: Summary
Summary
Slide 28: Transaction Summary & Benefits
Transaction Summary & Benefits In summary, we believe this combination provides strategic and financial benefits to the combined company, including the following anticipated benefits: • Pro forma NII per share estimated to be $0.24 in the first full quarter post-close compared Net Investment Income
Slide 29: ROE Expansion and Valuation
ROE Expansion and Valuation Valuation levels (Price-to-NAV) are highly correlated with Dividend Yield and ROE levels; since the TCAP externalization, BBDC has consistently been rewarded for its dividend yield expansion, Sierra being the next step in ROE expansion to 8.25% Indicates BDC has supported
Slide 30: Appendix: Barings BDC Corporate Data
Appendix: Barings BDC Corporate Data Board of Directors Corporate Officers Research Coverage Corporate Headquarters ERIC LLOYD ERIC LLOYD BANK OF AMERICA 300 South Tryon Street Chairman and CEO of BBDC, Chief Executive Officer MERRILL LYNCH Suite 2500 Head of Private Assets at Derek Hewett Charlotte
Slide 31: Appendix: Reconciliation of Debt to Net Debt and Net Debt-to-Equity
Appendix: Reconciliation of Debt to Net Debt and Calculation of Net Debt-to- Equity and Pro Forma Debt-to-Equity and Net Debt-to-Equity Ratios June 30, 2021 + Transaction = Pro Forma (as Reported) Adjustments Combined at Close Total debt (principal) $1,043.5 $87.1 $1,130.5 minus: Cash and foreign cu