Barings BDC, Inc. (NYSE: BBDC) (“Barings BDC” or the “Company”)
today reported its financial and operating results for the second
quarter of 2023 and announced that the Company’s Board of Directors
(the “Board”) declared a quarterly cash dividend of $0.26 per
share.
Highlights
Income
Statement
Three Months Ended June
30, 2023
Three Months Ended
March 31, 2023
(dollars in millions, except per share
data)
Total Amount
Per Share(1)
Total Amount
Per Share(2)
Net investment income
$33.6
$0.31
$27.5
$0.25
Net realized losses
$(48.5)
$(0.45)
$(9.7)
$(0.09)
Net unrealized appreciation
$55.1
$0.51
$22.0
$0.20
Net increase in net assets resulting from
operations
$40.1
$0.37
$39.7
$0.37
Dividends paid
$0.25
$0.25
(1) Based on weighted average shares
outstanding during the period of 107,381,276.
(2) Based on weighted average shares
outstanding during the period of 107,916,166.
Investment Portfolio
and Balance Sheet
(dollars in millions, except per share
data)
As of June 30,
2023
As of March 31,
2023
As of December 31,
2022
Investment portfolio at fair value
$2,506.0
$2,556.1
$2,448.9
Weighted average yield on performing debt
investments (at principal amount)
10.4%
10.2%
9.7%
Total assets
$2,730.4
$2,726.9
$2,710.0
Debt outstanding (principal)
$1,497.1
$1,494.1
$1,454.1
Total net assets (equity)
$1,207.6
$1,205.0
$1,192.3
Net asset value per share
$11.34
$11.17
$11.05
Debt-to-equity ratio
1.24x
1.24x
1.22x
Net debt-to-equity ratio (adjusted for
unrestricted cash and net unsettled transactions)
1.15x
1.19x
1.12x
Second Quarter 2023
Results
Commenting on the quarter, Eric Lloyd, Chief Executive Officer
of Barings BDC, stated, “We continued to deliver strong results for
our shareholders through the second quarter, led by increased
investment income combined with strong credit characteristics
within our holdings. BBDC’s diversified portfolio of directly
originated middle market loans, conservatively underwritten to
withstand the effects of higher base rates, have contributed to a
1.5% increase in net asset value per share compared to the prior
quarter.”
During the three months ended June 30, 2023, the Company
reported total investment income of $75.3 million, net investment
income of $33.6 million, or $0.31 per share, and a net increase in
net assets resulting from operations of $40.1 million, or $0.37 per
share.
Net asset value (“NAV”) per share as of June 30, 2023 was
$11.34, as compared to $11.17 as of March 31, 2023. The increase in
NAV per share from March 31, 2023 to June 30, 2023 was primarily
attributed to net unrealized appreciation on the Company’s
investment portfolio, credit support agreements and foreign
currency transactions of approximately $0.51 per share, net
investment income exceeding the Company’s second quarter dividend
by $0.06 per share and share repurchases of $0.05 per share,
partially offset by a net realized loss on investments and foreign
currency transactions of $0.45 per share.
Elizabeth Murray, Chief Financial Officer and Chief Operating
Officer of Barings BDC, stated, “During the second quarter, we were
pleased to extend the maturity of our senior secured credit
facility with ING to February 2026, which aligns with the continued
strength of our balance sheet. Significant growth in net investment
income, coupled with our stable funding profile, led our Board of
Directors to declare a dividend increase of 4.0% to $0.26 per share
for the third quarter, further benefiting our shareholders.”
Recent Portfolio
Activity
During the three months ended June 30, 2023, the Company made
four new investments totaling $11.7 million, made investments in
existing portfolio companies totaling $41.6 million, made a $10.0
million add-on equity co-investment alongside certain affiliates in
a portfolio company that specializes in providing financing to
plaintiff law firms engaged in mass tort and other civil litigation
and made additional investments in joint venture equity portfolio
companies totaling $2.5 million. During the three months ended June
30, 2023, the Company had five loans repaid totaling $31.6 million
and received $25.6 million of portfolio company principal payments,
recognizing a loss on these repayments of $0.7 million. The Company
received $7.1 million of return of capital from its joint ventures
and equity investments. In addition, the Company sold $24.4 million
of loans, recognizing a net realized loss on these transactions of
$43.7 million and sold $46.5 million of middle-market portfolio
debt investments to its joint ventures realizing a gain on these
transactions of $0.1 million. Lastly, investments in two portfolio
companies were restructured, which resulted in a loss of $2.0
million.
During the three months ended June 30, 2023, the Company
recorded net unrealized appreciation totaling $55.1 million,
consisting of net unrealized appreciation on its current portfolio
of $5.4 million, unrealized appreciation of $2.4 million on the MVC
credit support agreement with Barings and unrealized appreciation
reclassification adjustments of $48.3 million related to the net
realized losses on the sales / repayments of certain investments,
net of unrealized depreciation of $0.4 million on the Sierra credit
support agreement with Barings and net unrealized depreciation
related to foreign currency transactions of $0.6 million. The net
unrealized appreciation on our current portfolio of $5.4 million
was driven primarily by credit or fundamental performance of
investments of $2.5 million and the impact of foreign currency
exchange rates on investments of $3.8 million partially offset by
broad market moves for investments of $0.9 million.
Liquidity and
Capitalization
As of June 30, 2023, the Company had cash and foreign currencies
of $80.3 million, $772.1 million of borrowings outstanding under
its $1.1 billion senior secured revolving credit agreement, $725.0
million aggregate principal amount of unsecured notes outstanding
and a net receivable from unsettled transactions of $27.6 million.
On May 9, 2023 the Company closed an extension to its senior
secured revolving credit facility, with the revolving period now
scheduled to expire on February 21, 2025 and the maturity date now
scheduled to occur on February 21, 2026.
Share Repurchase Program
On February 23, 2023, the Board authorized a new 12-month share
repurchase program. Under the program, the Company may repurchase,
during the 12-month period that commenced on March 1, 2023, up to
$30.0 million in the aggregate of its outstanding common stock in
the open market at prices below the then-current NAV per share. The
timing, manner, price and amount of any share repurchases will be
determined by the Company, in its discretion, based upon the
evaluation of economic and market conditions, the Company’s stock
price, applicable legal, contractual and regulatory requirements
and other factors. The program is expected to be in effect until
March 1, 2024, unless extended or until the aggregate repurchase
amount that has been approved by the Board has been expended. The
program does not require the Company to repurchase any specific
number of shares, and the Company cannot assure stockholders that
any shares will be repurchased under the program. The program may
be suspended, extended, modified or discontinued at any time. As of
August 9, 2023, the Company had repurchased a total of 1,400,000
shares of its common stock in the open market under the authorized
program at an average price of $7.75 per share, including broker
commissions.
Dividend Information
The Board declared a quarterly cash dividend of $0.26 per
share.
The Company’s third quarter dividend is payable as follows:
Third Quarter 2023
Dividend:
Amount per share:
$0.26
Record date:
September 6, 2023
Payment date:
September 13, 2023
Dividend Reinvestment
Plan
Barings BDC has adopted a dividend reinvestment plan (“DRIP”)
that provides for reinvestment of dividends and distributions on
behalf of its stockholders, unless a stockholder elects to receive
cash. As a result, when the Company declares a cash dividend or
distribution, stockholders who have not opted out of the DRIP will
have their cash dividends or distributions automatically reinvested
in additional shares of the Company’s common stock, rather than
receiving cash.
When the Company declares and pays dividends and distributions,
it determines the allocation of the distribution between current
income, accumulated income, capital gains and return of capital on
the basis of accounting principles generally accepted in the United
States (“GAAP”). At each year end, the Company is required for tax
purposes to determine the allocation based on tax accounting
principles. Due to differences between GAAP and tax accounting
principles, the portion of each dividend distribution that is
ordinary income, capital gain or return of capital may differ for
GAAP and tax purposes. The tax status of the Company’s
distributions can be found on the Investor Relations page of its
website.
Subsequent Events
Subsequent to June 30, 2023, the Company made approximately
$35.7 million of new commitments, of which $23.6 million closed and
funded. The $23.6 million of investments consists of $23.2 million
of first lien senior secured debt investments and $0.4 million of
equity investments. The weighted average yield of the debt
investments was 11.6%. In addition, the Company funded $8.4 million
of previously committed delayed draw term loans.
Conference Call to Discuss Second
Quarter 2023 Results
Barings BDC has scheduled a conference call to discuss second
quarter 2023 financial and operating results for Thursday, August
10, 2023, at 9:00 a.m. ET.
To listen to the call, please dial 877-407-8831 or 201-493-6736
approximately 10 minutes prior to the start of the call. A taped
replay will be made available approximately two hours after the
conclusion of the call and will remain available until August 17,
2023. To access the replay, please dial 877-660-6853 or
201-612-7415 and enter conference ID 13739831.
This conference call will also be available via a live webcast
on the investor relations section of Barings BDC’s website at
https://ir.barings.com/ir-calendar. Access the website 15 minutes
prior to the start of the call to download and install any
necessary audio software. An archived webcast replay will be
available on the Company's website until August 17, 2023.
Forward-Looking
Statements
Statements included herein or on the webcast/conference call may
constitute “forward-looking statements,” which relate to future
events or Barings BDC’s future performance or financial condition.
Investors are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date on
which they are made, which reflect management’s current estimates,
projections, expectations or beliefs, and which are subject to
risks and uncertainties that may cause actual results to differ
materially. Forward-looking statements include, but are not limited
to, the Company’s projected net investment income and earnings, the
Company’s distribution levels and frequency of distributions, the
Company’s share repurchase activity, and the ability of Barings LLC
to manage Barings BDC and identify investment opportunities, all of
which are subject to change at any time based upon economic, market
or other conditions, and may not be relied upon as investment
advice or an indication of Barings BDC’s trading intent. More
information on the risks and other potential factors that could
affect Barings BDC’s financial results and future events, including
important factors that could cause actual results or events to
differ materially from plans, estimates or expectations included
herein or discussed on the webcast/conference call, is included in
Barings BDC’s filings with the SEC, including in the “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” sections of Barings BDC’s most recently
filed annual report on Form 10-K, as well as in subsequent filings,
including Barings BDC’s quarterly reports on Form 10-Q. In
addition, there is no assurance that Barings BDC or any of its
affiliates will purchase additional shares of Barings BDC at any
specific discount levels or in any specific amounts. There is no
assurance that the market price of Barings BDC’s shares, either
absolutely or relative to NAV, will increase as a result of any
share repurchases, or that any repurchase plan will enhance
stockholder value over the long term.
Non-GAAP Financial
Measures
To provide additional information about the Company’s results,
the Company’s management has discussed in this press release the
Company’s net debt (calculated as (i) total debt less (ii)
unrestricted cash and foreign currencies (excluding restricted
cash) net of net payables/receivables from unsettled transactions)
and its net debt-to-equity ratio (calculated as net debt divided by
total net assets), which are not prepared in accordance with GAAP.
These non-GAAP measures are included to supplement the Company’s
financial information presented in accordance with GAAP and because
the Company uses such measures to monitor and evaluate its leverage
and financial condition and believes the presentation of these
measures enhances investors’ ability to analyze trends in the
Company’s business and to evaluate the Company’s leverage and
ability to take on additional debt. However, these non-GAAP
measures have limitations and should not be considered in isolation
or as a substitute for analysis of the Company’s financial results
as reported under GAAP.
These non-GAAP measures are not in accordance with, or an
alternative to, measures prepared in accordance with GAAP and may
be different from non-GAAP measures used by other companies. In
addition, these non-GAAP measures are not based on any
comprehensive set of accounting rules or principles. These measures
should only be used to evaluate the Company’s results of operations
in conjunction with their corresponding GAAP measures. Pursuant to
the requirements of Item 10(e) of Regulation S-K, as promulgated
under the Securities Exchange Act of 1934, as amended, the Company
has provided a reconciliation of these non-GAAP measures in the
last table included in this press release.
About Barings BDC
Barings BDC, Inc. (NYSE: BBDC) is a publicly traded, externally
managed investment company that has elected to be treated as a
business development company under the Investment Company Act of
1940. Barings BDC seeks to invest primarily in senior secured loans
in middle-market companies that operate across a wide range of
industries. Barings BDC’s investment activities are managed by its
investment adviser, Barings LLC, a leading global asset manager
based in Charlotte, NC with $351+ billion* of AUM firm-wide. For
more information, visit www.baringsbdc.com.
About Barings LLC
Barings is a $351+ billion* global investment manager sourcing
differentiated opportunities and building long-term portfolios
across public and private fixed income, real estate, and specialist
equity markets. With investment professionals based in North
America, Europe and Asia Pacific, the firm, a subsidiary of
MassMutual, aims to serve its clients, communities and employees,
and is committed to sustainable practices and responsible
investment. Learn more at www.barings.com.
*Assets under management as of June 30, 2023
Barings BDC, Inc.
Consolidated Balance
Sheets
(in thousands, except share
and per share data)
June 30, 2023
December 31, 2022
(Unaudited)
Assets:
Investments at fair value:
Non-Control / Non-Affiliate investments
(cost of $2,138,921 and $2,191,345 as of June 30, 2023 and December
31, 2022, respectively)
$
2,053,044
$
2,052,614
Affiliate investments (cost of $317,916
and $275,482 as of June 30, 2023 and December 31, 2022,
respectively)
345,990
289,993
Control investments (cost of $97,868 and
$95,571 as of June 30, 2023 and December 31, 2022,
respectively)
106,958
106,328
Total investments at fair value
2,505,992
2,448,935
Cash
63,410
96,160
Foreign currencies (cost of $16,811 and
$42,627 as of June 30, 2023 and December 31, 2022,
respectively)
16,920
43,255
Interest and fees receivable
46,582
42,738
Prepaid expenses and other assets
1,576
1,079
Credit support agreements (cost of $58,000
as of both June 30, 2023 and December 31, 2022, respectively)
60,650
53,086
Derivative assets
2,644
1,508
Deferred financing fees
4,859
3,224
Receivable from unsettled transactions
27,780
19,972
Total assets
$
2,730,413
$
2,709,957
Liabilities:
Accounts payable and accrued
liabilities
$
1,856
$
971
Interest payable
8,193
7,635
Administrative fees payable
486
677
Base management fees payable
8,134
7,981
Incentive management fees payable
10,086
—
Derivative liabilities
2,049
16,677
Payable from unsettled transactions
135
35,565
Borrowings under credit facilities
772,087
729,144
Notes payable (net of deferred financing
fees)
719,790
718,978
Total liabilities
1,522,816
1,517,628
Commitments and contingencies
Net Assets:
Common stock, $0.001 par value per share
(150,000,000 shares authorized, 106,516,166 and 107,916,166 shares
issued and outstanding as of June 30, 2023 and December 31, 2022,
respectively)
107
108
Additional paid-in capital
1,845,122
1,855,975
Total distributable earnings (loss)
(637,632
)
(663,754
)
Total net assets
1,207,597
1,192,329
Total liabilities and net
assets
$
2,730,413
$
2,709,957
Net asset value per share
$
11.34
$
11.05
Barings BDC, Inc.
Unaudited Consolidated
Statements of Operations
(in thousands, except share
and per share data)
Three Months
Ended
Three Months
Ended
Six Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Investment income:
Interest income:
Non-Control / Non-Affiliate
investments
$
54,561
$
40,010
$
105,729
$
71,634
Affiliate investments
459
411
839
584
Control investments
404
363
746
636
Total interest income
55,424
40,784
107,314
72,854
Dividend income:
Non-Control / Non-Affiliate
investments
831
63
1,658
186
Affiliate investments
9,419
7,183
16,466
14,753
Total dividend income
10,250
7,246
18,124
14,939
Fee and other income:
Non-Control / Non-Affiliate
investments
4,232
4,924
7,314
7,147
Affiliate investments
37
26
204
39
Control investments
32
122
83
(918
)
Total fee and other income
4,301
5,072
7,601
6,268
Payment-in-kind interest income:
Non-Control / Non-Affiliate
investments
4,782
2,070
8,317
4,358
Affiliate investments
48
93
251
137
Control investments
292
311
496
778
Total payment-in-kind interest income
5,122
2,474
9,064
5,273
Interest income from cash
205
16
403
16
Total investment income
75,302
55,592
142,506
99,350
Operating expenses:
Interest and other financing fees
20,811
13,168
40,127
24,829
Base management fee
8,134
7,381
15,987
13,253
Incentive management fees
10,086
—
19,691
4,754
General and administrative expenses
2,447
3,269
5,183
5,727
Total operating expenses
41,478
23,818
80,988
48,563
Net investment income before
taxes
33,824
31,774
61,518
50,787
Income taxes, including excise tax
expense
200
—
395
6
Net investment income after
taxes
33,624
31,774
61,123
50,781
Barings BDC, Inc.
Unaudited Consolidated
Statements of Operations — (Continued)
(in thousands, except share
and per share data)
Three Months
Ended
Three Months
Ended
Six Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Realized gains (losses) and unrealized
appreciation (depreciation) on investments, credit support
agreements and foreign currency transactions:
Net realized gains (losses):
Non-Control / Non-Affiliate
investments
$
(46,218
)
$
(6,701
)
(45,446
)
(6,951
)
Affiliate investments
—
—
—
101
Control investments
—
(813
)
—
(813
)
Net realized gains (losses) on
investments
(46,218
)
(7,514
)
(45,446
)
(7,663
)
Foreign currency transactions
(2,320
)
(2,709
)
(12,837
)
(4,002
)
Net realized gains (losses)
(48,538
)
(10,223
)
(58,283
)
(11,665
)
Net unrealized appreciation
(depreciation):
Non-Control / Non-Affiliate
investments
45,334
(65,428
)
52,771
(94,016
)
Affiliate investments
2,722
(13,435
)
13,563
(440
)
Control investments
5,602
17,050
(1,667
)
31,696
Net unrealized appreciation (depreciation)
on investments
53,658
(61,813
)
64,667
(62,760
)
Credit support agreements
1,978
(13,361
)
7,564
(13,760
)
Foreign currency transactions
(577
)
30,520
4,798
35,332
Net unrealized appreciation
(depreciation)
55,059
(44,654
)
77,029
(41,188
)
Net realized gains (losses) and unrealized
appreciation (depreciation) on investments, credit support
agreements and foreign currency transactions
6,521
(54,877
)
18,746
(52,853
)
Benefit from (provision for) income
taxes
(28
)
(1,890
)
(101
)
(1,890
)
Net increase (decrease) in net assets
resulting from operations
$
40,117
$
(24,993
)
$
79,768
$
(3,962
)
Net investment income per share—basic and
diluted
$
0.31
$
0.29
$
0.57
$
0.52
Net increase (decrease) in net assets
resulting from operations per share—basic and diluted
$
0.37
$
(0.23
)
$
0.74
$
(0.04
)
Dividends/distributions per
share:
Total dividends/distributions per
share
$
0.25
$
0.24
$
0.50
$
0.47
Weighted average shares outstanding—basic
and diluted
107,381,276
110,759,443
107,647,243
96,785,517
Barings BDC, Inc.
Unaudited Consolidated
Statements of Cash Flows
(in thousands)
Six Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
Cash flows from operating
activities:
Net increase (decrease) in net assets
resulting from operations
$
79,768
$
(3,962
)
Adjustments to reconcile net increase
(decrease) in net assets resulting from operations to net cash
provided by (used in) operating activities:
Purchases of portfolio investments
(255,744
)
(708,703
)
Net cash acquired from mergers (cash
consideration paid)
—
101,896
Transaction costs from mergers
—
(6,804
)
Repayments received/sales of portfolio
investments
188,422
603,169
Loan origination and other fees
received
2,876
11,492
Net realized (gain) loss on
investments
45,446
7,663
Net realized (gain) loss on foreign
currency transactions
12,837
4,002
Net unrealized (appreciation) depreciation
on investments
(64,667
)
62,760
Net unrealized (appreciation) depreciation
of CSAs
(7,564
)
13,760
Net unrealized (appreciation) depreciation
on foreign currency transactions
(4,798
)
(35,332
)
Payment-in-kind interest / dividends
(11,567
)
(5,273
)
Amortization of deferred financing
fees
1,565
1,498
Accretion of loan origination and other
fees
(4,094
)
(5,313
)
Amortization / accretion of purchased loan
premium / discount
(946
)
(1,240
)
Payments for derivative contracts
(19,437
)
(2,901
)
Proceeds from derivative contracts
2,526
2,877
Changes in operating assets and
liabilities:
Interest and fees receivable
(2,730
)
(50,492
)
Prepaid expenses and other assets
651
(2,624
)
Accounts payable and accrued
liabilities
9,702
(176
)
Interest payable
558
1,033
Net cash provided by (used in) operating
activities
(27,196
)
(12,670
)
Cash flows from financing
activities:
Borrowings under credit facilities
35,000
184,657
Financing fees paid
(2,389
)
(1,829
)
Purchases of shares in repurchase plan
(10,854
)
(15,113
)
Cash dividends / distributions paid
(53,646
)
(41,528
)
Net cash provided by (used in) financing
activities
(31,889
)
126,187
Net increase (decrease) in cash and
foreign currencies
(59,085
)
113,517
Cash and foreign currencies, beginning of
period
139,415
84,253
Cash and foreign currencies, end of
period
$
80,330
$
197,770
Supplemental Information:
Cash paid for interest
$
37,354
$
21,766
Excise taxes paid during the period
$
800
$
—
Supplemental non-cash
information
Acquisitions:
Fair value of net assets acquired, net of
cash
$
—
$
(435,811
)
Transaction costs
—
3,756
Common stock issued in acquisition of net
assets
—
499,418
Credit support agreement
—
(44,400
)
Deemed contribution - from Adviser
—
27,729
Deemed contributions - CSA
—
44,400
Barings BDC, Inc.
Unaudited Reconciliation of
Debt to Net Debt and Calculation of Net Debt-to-Equity
Ratio
(in thousands, except
ratios)
June 30, 2023
March 31, 2023
December 31, 2022
Total debt (principal)
$
1,497,087
$
1,494,112
$
1,454,144
minus: Cash and foreign currencies
(excluding restricted cash)
(80,330
)
(55,395
)
(139,415
)
plus: Payable from unsettled
transactions
135
649
35,565
minus: Receivable from unsettled
transactions
(27,780
)
(1,519
)
(19,972
)
Total net debt(1)
$
1,389,112
$
1,437,847
$
1,330,322
Total net assets
$
1,207,597
$
1,205,001
$
1,192,329
Total net debt-to-equity ratio(1)
1.15 x
1.19 x
1.12 x
(1) See the “Non-GAAP Financial Measures”
section of this press release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808128050/en/
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