Barings Bdc, Inc. · NYSE:BBDC
Barings Bdc — Q4 2020 Earnings Presentation
33 slides from Barings Bdc's earnings presentation, Mar 24, 2021
Slide 1: Barings BDC, Inc. Fourth Quarter 2020 Earnings Presentation
Barings BDC, Inc. Fourth Quarter 2020 Earnings Presentation March 23, 2021
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 4Q 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: 4Q 2020 Highlights
4Q 2020 Highlights BARINGS
Slide 5: Credit Spreads & BDC Equity Prices
Credit Spreads & BDC Equity Prices BSL spreads and prices returned to pre-COVID levels in Q4, though BDC prices remained 21% lower YoY 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 6
Slide 6: Fourth Quarter 2020 Highlights
Fourth Quarter 2020 Highlights Total originations during the quarter were Net asset value (NAV) as of $566 million, while sales and repayments December 31, 2020 was $10.99 per totaled $234 million; MVC portfolio acquisition NET ASSET VALUE ORIGINATIONS share as compared to $10.97 as of totaled $185
Slide 7: Selected Financial Highlights
Selected Financial Highlights Balance Sheet Highlights 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 Investment Portfolio, at Fair Value $1,495.8 $1,116.3 $1,034.0 $1,071.8 $1,173.6 Total Debt Outstanding (Principal) $944.7 $692.0 $569.3 $631.1 $670.7 Total Net Assets (Equity) $717.8 $526.0 $490.5 $445.7
Slide 8: BBDC Market Update & Investment Portfolio
BBDC Market Update & Investment Portfolio
Slide 9: Investment Activity
Investment Activity Summary of investment activity during the quarter ended December 31, 2020 • Middle-Market Loans: • Net increase in investments of $393 million • Total MML fundings were $528 million • Includes $418 million in twenty-four new portfolio companies • Includes $110 million in seventee
Slide 10: All-In Senior Investment Spreads
All-In Senior Investment Spreads Direct lending spreads on new deals tightened further in Q4, particularly in the institutional and bank subsectors, as activity picked up dramatically. Single-B liquid spreads continued to tighten, and are back inside of Middle-Market levels QUARTERLY MIDDLE-MARKET S
Slide 11: Portfolio Bridge – 3Q20 to 4Q20
Portfolio Bridge – 3Q20 to 4Q20 In the fourth quarter we originated $528 million of Middle-Market Loans, made $38 million of Cross-Platform Investments, acquired $185 million of assets from MVC, and had a combined $239 million of sales/paydowns Note: $ in millions. Total may not foot due to rounding
Slide 12: Aggregate Portfolio Characteristics (as of December 31, 2020)
Aggregate Portfolio Characteristics (as of December 31, 2020) Middle Market MVC Cross Platform Total Total Investments and Commitments ($mm) $1,186 $180 $223 $1,589 Unfunded Commitments ($mm) $129 $0 $30 $159 Total Investments at Fair Value ($mm) $1,057 $180 $193 $1,430 Assets on Non-Accrual $0 $3 $
Slide 13: MVC Portfolio Rotation
MVC Portfolio Rotation While the MVC Capital acquisition diversified the Barings BDC portfolio, our core focus remains first lien investments $1,250MM $180MM $1,430MM 100% 5% 90% 80% 70% 65% 60% 82% First Lien 93% Second Lien & Mezz 50% Structured Equity & JV 40% 30% 20% 30% 10% 10% 2% 2% 3% 6% 0% 3
Slide 14: Top 10 Investments
Top 10 Investments Top 10 Holdings (as of December 31, 2020) Principal % of Issuer Moody's Industry Segment Cost Fair Value Amount Portfolio Security Holdings B.V. Services: Business MVC $13,935,061 $35,197,962 $35,263,332 2.5% Custom Alloy Corporation Construction and Building MVC 43,137,108 34,662
Slide 15: BBDC Financials
BBDC Financials BARINGS
Slide 16: Net Asset Value Per Share (NAV) Bridge – 3Q20 to 4Q20
Net Asset Value Per Share (NAV) Bridge – 3Q20 to 4Q20 BBDC’s NAV per share stayed relatively flat through 4Q, increasing to $10.99 from $10.97, as the MVC transaction largely offset unrealized appreciation on investments Total may not foot due to rounding. 16
Slide 17: 4Q20 Unrealized Appreciation (Depreciation)
4Q20 Unrealized Appreciation (Depreciation) 4Q 2020 Portfolio Summary 4Q Unrealized 4Q Unrealized 4Q Unrealized 4Q 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 $886,511 $872,176 $863,704 $3,
Slide 18: BBDC Income Statement
BBDC Income Statement 4Q20 3Q20 2Q20 1Q20 4Q19 Investment income: Interest income $17,433,263 $15,217,547 $15,295,679 $17,674,402 $17,913,613 Dividend income — — 2,603 — 35,812 Fee and other income 1,700,084 769,126 650,433 960,993 447,001 Payment-in-kind interest income 749,217 342,469 191,049 43,5
Slide 19: BBDC Balance Sheet
BBDC Balance Sheet Debt-to-equity at December 31, 2020 was 1.32x, or 1.04x(1) after adjusting for cash and foreign currencies (excluding restricted), short-term investments and unsettled transactions December 31, September 30, June 30, March 31, December 31, 2020 2020 2020 2020 2019 Assets: Investme
Slide 20: Asset and Liability Mix
Asset and Liability Mix Barings BDC seeks to match its assets with a diversified mix of secured and unsecured debt FUNDING MIX BY SENIORITY FUNDING MIX BY ASSET CLASS $1,750,000 $1,750,000 Cash, Receivables, Cash, Receivables, Prepaids & Deferreds Prepaids & Deferreds $1,500,000 $246,801 $1,500,000
Slide 21: Debt Summary and Maturity Profile
Debt Summary and Maturity Profile BBDC issued new unsecured notes in February 2021 totaling $150 million Pro Forma As of 12/31/2020 As of 9/30/2020 Principal Principal Principal Principal Principal Principal Interest Amount Amount Amount Amount Amount Amount Borrower Rate Collateral Maturity Date Co
Slide 22: 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 $159 million as well as make new investments Debt / Net Debt-to-Equity Ratio Scenarios Debt / Net Debt Debt / Ne
Slide 23: Quarterly Dividends
Quarterly Dividends BBDC declared a 1Q21 dividend of $0.19 per share, up from $0.17 in 4Q20 BBDC DIVIDENDS DECLARED PER SHARE $0.20 $0.19 $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 3Q
Slide 24: 1Q 2021 Origination Pipeline
1Q 2021 Origination Pipeline
Slide 25: U.S. Loan Market & BDC Prepayment Activity
U.S. Loan Market & BDC Prepayment Activity Lack of new money M&A means refinancings are driving over 70% of activity; this increases the potential for repayments relative to previous refinancing cycles in 2010 and 2016 LOAN REPAYMENTS AND SALES INSTITUTIONAL LOAN ISSUANCE 300 90% 100% 10.0 Trailing
Slide 26: 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 $113.1 B • Corporate Credit PUBLIC • Hig
Slide 27: 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 773 600 500 425 466 371 325 285 270 244 86 175 193 0 80 CLO Corp. Credit CMBS EETC U.S. Loans 2,000 1,500 1,514 BB 1,000 765 691 655 500 523 621 181 342 300 250 245 278 0 CLO Corp. Credit U.S. Lo
Slide 28: 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 • In 4Q20, BBDC deployed $566 million at an all-in spread1 (inclusive of upfronts/OID) of 760 bps over LIBO
Slide 29: Investment Activity Since Quarter End and Investment Pipeline
Investment Activity Since Quarter End and Investment Pipeline • From January 1, 2021 through March 18, 2021, Barings BDC made approximately $224 million of new commitments, of which approximately $202 million closed and funded; in addition, BBDC funded $27 million of previously-committed delayed dra
Slide 30: Appendix
Appendix
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, June 30, March 31, December 31, 2020 2020 2020 2020 2019 Total debt (principal) $944,660,707 $692,016,256 $569,341,828 $631,061,734 $670,698,595 minus: Cash and foreign currencies (ex
Slide 32: Appendix: BBDC Repurchase Program
Appendix: BBDC Repurchase Program In connection with the closing of the acquisition of MVC Capital, Inc., BBDC’s board of directors affirmed BBDC’s commitment to repurchase up to $15.0 million of common stock • Under the 2021 repurchase program, BBDC expects to repurchase an aggregate amount of up t
Slide 33: 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