Barings Bdc, Inc. · NYSE:BBDC
Barings Bdc — Q1 2020 Earnings Presentation
29 slides from Barings Bdc's earnings presentation, May 2, 2020
Slide 1: Barings BDC, Inc. First Quarter 2020 Earnings Presentation
Barings BDC, Inc. First Quarter 2020 Earnings Presentation April 30, 2020
Slide 2: Forward-Looking Statements
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 they are made and which reflect management's c
Slide 3: Agenda
Agenda ERIC LLOYD 1Q 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: 1Q 2020 Highlights
1Q 2020 Highlights BARINGS
Slide 5: Credit Spread Widening and BDC Equity Prices
Credit Spread Widening and BDC Equity Prices Spread widening in March of 2020 due to the unprecedented uncertainty caused by the COVID-19 pandemic translated into significant pressure on BDC equity prices BROADLY-SYNDICATED LOAN BROADLY-SYNDICATED LOAN BDC EQUITY PRICES SPREADS PRICES 1,000 $100 $90
Slide 6: First Quarter 2020 Highlights
First Quarter 2020 Highlights Total middle-market originations during Net asset value (NAV) as of March the quarter were $93 million (including 31, 2020 was $9.23 per share as $15 million of add-ons), while middle- NET ASSET VALUE ORIGINATIONS compared to $11.66 as of market sales and repayments tot
Slide 7: Selected Financial Highlights
Selected Financial Highlights Balance Sheet Highlights 1Q 2020 4Q 2019 3Q 2019 2Q 2019 1Q 2019 Investment Portfolio, at Fair Value $1,071.8 $1,173.6 $1,158.2 $1,200.6 $1,189.4 Total Debt Outstanding (Principal) $631.1 $670.7 $632.5 $633.8 $620.0 Total Net Assets (Equity) $445.7 $570.9 $572.4 $583.1
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 March 31, 2020 • Middle-Market Loans: • Net increase in investments of $52.0 million • Total MML fundings were $92.8 million • Includes $78.1 million in 10 new portfolio companies • Includes $14.7 million in 10 existing port
Slide 11: BBDC Portfolio
BBDC Portfolio A diverse portfolio of 97% senior secured first lien assets, with Middle Market now 59% of portfolio Aggregate Portfolio Characteristics (as of March 31, 2020) 1 Investment Portfolio BSL Middle Market Total Total Investments and Commitments ($mm) $385 $645 $1,085 Unfunded Commitments
Slide 12: Top 10 Investments
Top 10 Investments Top 10 Holdings (as of March 31, 2020) Principal % of Issuer Moody's Industry Segment Cost Fair Value Amount Portfolio Transportation Insight, LLC Transportation: Cargo MM $24,694,375 $24,505,303 $23,299,846 2.4% BDP International, Inc. Transportation: Cargo MM 24,687,500 24,282,8
Slide 13: Portfolio Bridge – 4Q19 to 1Q20
Portfolio Bridge – 4Q19 to 1Q20 In the first quarter, we originated $93mm of middle-market loans, made $39mm of opportunistic BSL and structured product investments, and had a combined $115mm of sales/paydowns. $ in millions; total may not foot due to rounding. 13
Slide 14: 1Q20 Unrealized Depreciation
1Q20 Unrealized Depreciation $83 million (69%) of total net unrealized deprecation for the quarter was attributable to BBDC’s liquid portfolio, while $8 million (7%) of total unrealized depreciation was related to the specific credit or fundamental performance of individual portfolio companies in th
Slide 15: The Middle-Market Landscape
The Middle-Market Landscape
Slide 16: All-In Senior Investment Spreads
All-In Senior Investment Spreads The direct lending market effectively closed in March, limiting the usefulness of the indices as a barometer of spreads (as they only capture new deals). Conversely, liquid spreads gapped out to 1,000+ bps due to COVID- 19-related concerns as investors looked to rais
Slide 17: Relative Value in Credit Asset Classes
Relative Value in Credit Asset Classes 3 Year Lookback (Wide/Tight/Current): 950 1,000 773 950 800 773 650 650 600 466 BBB 325 466 400 325 285 265 200 193 80 90 0 CLO Corp. Credit CMBS Subprime Auto U.S. Loans 1,514 1,600 1,514 1,200 691 655 800 621 BB 691 655 621 523 400 250 245 181 0 CLO Corp. Cre
Slide 18: BBDC Financials
BBDC Financials BARINGS
Slide 19: Net Asset Value Per Share (NAV) Bridge – 4Q19 to 1Q20
Net Asset Value Per Share (NAV) Bridge – 4Q19 to 1Q20 Since December 31, 2019, BBDC’s NAV per share decreased to $9.23 from $11.66 primarily due to portfolio depreciation related to COVID-19 impacts on market conditions Total may not foot due to rounding. CONFIDENTIAL 19
Slide 20: BBDC Income Statement
BBDC Income Statement 1Q20 4Q19 3Q19 2Q19 1Q19 Investment income: Interest income $17,674,402 $17,913,613 $18,448,942 $19,074,824 $18,034,014 Dividend income — 35,812 4,221 4,711 — Fee and other income 960,993 447,001 848,792 519,970 301,057 Payment-in-kind interest income 43,572 5,413 — — — Interes
Slide 21: BBDC Balance Sheet
BBDC Balance Sheet Debt-to-equity at March 31, 2020 was 1.42x, or 1.20x(1) after adjusting for cash, short-term investments and unsettled transactions. Pro forma for the BSL credit facility and CLO debt repayments in April totaling $84 million, debt-to-equity was 1.23x(1) March 31, December 31, Sept
Slide 22: Debt Summary and Maturity Profile
Debt Summary and Maturity Profile As BBDC opportunistically sells BSLs, it also continues to periodically reduce the size of its BSL revolver line; effective April 23, 2020, the size was reduced to $30 million As of 3/31/2020 As of 12/31/2019 As of 9/30/2019 Principal Principal Principal Principal P
Slide 23: Liquidity Summary
Liquidity Summary BBDC has available liquidity under its senior secured revolving credit agreement to borrow up to its regulatory leverage limit, 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-t
Slide 24: Quarterly Dividends
Quarterly Dividends BBDC has declared a second quarter dividend of $0.16 per share BBDC DIVIDENDS DECLARED PER SHARE $0.18 $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 24
Slide 25: 2Q 2020 Origination Pipeline
2Q 2020 Origination Pipeline
Slide 26: Investment Activity Since Quarter End and Investment Pipeline
Investment Activity Since Quarter End and Investment Pipeline • From April 1, 2020 through April 29, 2020, BBDC: • Made new investments in one middle-market portfolio company totaling $10.0 million, consisting of a minority equity investment and senior secured debt with an origination margin (DM-3)
Slide 27: Appendix
Appendix
Slide 28: 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 Ratios March 31, December 31, September 30, June 30, March 31, 2020 2019 2019 2019 2019 Total debt (principal) $631,061,734 $670,698,595 $632,548,859 $633,750,000 $620,000,000 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