Bain Capital Specialty Finance, Inc. Announces December 31, 2023 Financial Results and Declares First Quarter 2024 Dividend of $0.42 per Share and Additional Dividends Totaling $0.12 per Share for 2024
Bain Capital Specialty Finance, Inc. (NYSE:BCSF, the "Company", "our" or "we"))) today announced financial results for the fourth quarter and fiscal year ended December 31, 2023, and that its Board of Directors (the "Board") has declared a dividend of $0.42 per share for the first quarter of 2024 and has also declared additional dividends totaling $0.12 per share for 2024.
"BCSF reported strong quarterly and full year 2023 results as we benefited from attractive levels of interest income, net asset value growth and continued stable credit performance across our primarily senior secured portfolio," said Michael Ewald, Chief Executive Officer of BCSF. "As a result of our strong 2023 performance, we declared additional dividends totaling $0.12 per share to be paid in equal quarterly amounts during the year, bringing our total annualized dividend yield to 10.2% at ending book value, inclusive of our regular quarterly dividend of $0.42 per share."
QUARTERLY HIGHLIGHTS
- Net investment income (NII) per share was $0.54, equating to an annualized NII yield on book value of 12.3%(1);
- Net income per share was $0.48, equating to an annualized return on book value of 10.9%(1);
- Net asset value per share as of December 31, 2023 was $17.60, as compared to $17.54 as of September 30, 2023;
- Gross and net investment fundings were $206.4 million and $(101.8) million, respectively; Ending net debt-to-equity was 1.02x, as compared to 1.12x as of September 30, 2023(2);
- Investments on non-accrual remained low at 1.9% and 1.2% of the total investment portfolio at amortized cost and fair value, respectively, as of December 31, 2023;
- Subsequent to quarter-end, the Company's Board of Directors declared a dividend of $0.42 per share for the first quarter of 2024 payable to stockholders of record as of March 28, 2024 and has also declared additional dividends totaling $0.12 per share for 2024, to be distributed in four consecutive quarterly payments of $0.03 per share per quarter. The first additional dividend is payable to stockholders of record as of March 28, 2024(3); and
- In February 2024, Kroll Bond Rating Agency, LLC (KBRA) affirmed the Company's investment grade rating of BBB and stable outlook.
SELECTED FINANCIAL HIGHLIGHTS
($ in millions, unless otherwise noted) |
Q4 2023 |
Q3 2023 |
||
Net investment income per share |
$0.54 |
$0.55 |
||
Net investment income |
$34.9 |
$35.6 |
||
Earnings per share |
$0.48 |
$0.52 |
||
Dividends per share declared and payable |
$0.42 |
$0.42 |
||
|
|
|
||
($ in millions, unless otherwise noted) |
As of December 31, 2023 |
As of September 30, 2023 |
||
Total fair value of investments |
$2,298.3 |
$2,390.2 |
||
Total assets |
$2,472.3 |
$2,566.5 |
||
Total net assets |
$1,136.5 |
$1,132.5 |
||
Net asset value per share |
$17.60 |
$17.54 |
PORTFOLIO AND INVESTMENT ACTIVITY
For the three months ended December 31, 2023, the Company invested $206.4 million in 43 portfolio companies, including $56.1 million in two new companies, $145.3 million in 40 existing companies and $5.0 million in ISLP. The Company had $308.2 million of principal repayments and sales in the quarter, resulting in net investment fundings of $(101.8) million.
Investment Activity for the Quarter Ended December 31, 2023:
($ in millions) |
Q4 2023 |
Q3 2023 |
||
Investment Fundings |
$206.4 |
$109.5 |
||
Sales and Repayments |
$308.2 |
$102.8 |
||
Net Investment Activity |
$(101.8) |
$6.7 |
As of December 31, 2023, the Company's investment portfolio had a fair value of $2,298.3 million, comprised of investments in 137 portfolio companies operating across 31 different industries.
Investment Portfolio at Fair Value as of December 31, 2023:
Investment Type |
$ in Millions |
% of Total |
||
First Lien Senior Secured Loans |
$1,464.4 |
63.8% |
||
Second Lien Senior Secured Loans |
68.4 |
3.0 |
||
Subordinated Debt |
45.9 |
2.0 |
||
Structured Products |
22.6 |
1.0 |
||
Preferred Equity |
104.4 |
4.5 |
||
Equity Interests |
221.4 |
9.6 |
||
Warrants |
0.5 |
0.0 |
||
Investment Vehicles |
370.7 |
16.1 |
||
Subordinated Note in ISLP |
190.7 |
8.3 |
||
Equity Interest in ISLP |
66.2 |
2.9 |
||
Subordinated Note in SLP |
116.0 |
5.0 |
||
Preferred and Equity Interest in SLP |
(2.2) |
(0.1) |
||
Total |
$2,298.3 |
100.0% |
As of December 31, 2023, the weighted average yield on the investment portfolio at amortized cost and fair value were 13.0% and 13.1%, respectively, as compared to 12.9% and 13.1%, respectively, as of September 30, 2023(4). 93.8% of the Company's debt investments at fair value were in floating rate securities.
As of December 31, 2023, three portfolio companies were on non-accrual status, representing 1.9% and 1.2% of the total investment portfolio at amortized cost and fair value, respectively.
As of December 31, 2023, ISLP's investment portfolio had an aggregate fair value of $709.8 million, comprised of investments in 37 portfolio companies operating across 17 different industries. The investment portfolio on a fair value basis was comprised of 93.7% first lien senior secured loans, 2.9% second lien senior secured loans and 3.4% equity interests. 100% of ISLP's debt investments at fair value were in floating rate securities.
As of December 31, 2023, SLP's investment portfolio had an aggregate fair value of $879.9 million, comprised of investments in 62 portfolio companies operating across 21 different industries.(5) The investment portfolio on a fair value basis was comprised of 97.7% first lien senior secured loans and 2.3% second lien senior secured loans. 99.3% of SLP's debt investments at fair value were in floating rate securities.
RESULTS OF OPERATIONS
For the three months ended December 31, 2023 and September 30, 2023, total investment income was $74.9 million and $72.4 million, respectively. The increase in investment income was primarily due to an increase in dividend and other income.
Total expenses (before taxes) for the three months ended December 31, 2023 and September 30, 2023 were $39.0 million and $36.1 million, respectively.
Net investment income for the three months ended December 31, 2023 and September 30, 2023 was $34.9 million or $0.54 per share and $35.6 million or $0.55 per share, respectively.
During the three months ended December 31, 2023, the Company had net realized and unrealized gains (losses) of $(3.8) million.
Net increase in net assets resulting from operations for the three months ended December 31, 2023 was $31.1 million, or $0.48 per share.
CAPITAL AND LIQUIDITY
As of December 31, 2023, the Company had total principal debt outstanding of $1,263.5 million, including $311.0 million outstanding in the Company's Sumitomo Credit Facility, $352.5 million outstanding of the debt issued through BCC Middle Market CLO 2019-1 LLC, $300.0 million outstanding in the Company's senior unsecured notes due March 2026 and $300.0 million outstanding in the Company's senior unsecured notes due October 2026.
For the three months ended December 31, 2023, the weighted average interest rate on debt outstanding was 5.3%, as compared to 5.4% for the three months ended September 30, 2023.
As of December 31, 2023, the Company had cash and cash equivalents (including foreign cash) of $49.4 million, restricted cash and cash equivalents of $63.1 million, $(7.1) million of unsettled trades, net of receivables and payables of investments, and $343.3 million of capacity under its Sumitomo Credit Facility. As of December 31, 2023, the Company had $266.1 million of undrawn investment commitments.
As of December 31, 2023, the Company's debt-to-equity and net debt-to-equity ratios were 1.11x and 1.02x, respectively, as compared to 1.22x and 1.12x, respectively, as of September 30, 2023(2).
Endnotes
- Net investment income yields and net income returns are calculated on average net assets, or book value, for the respective periods shown.
- Net debt-to-equity represents principal debt outstanding less cash and cash equivalents and unsettled trades, net of receivables and payables of investments.
- The first quarter dividend is payable on April 30, 2024 to stockholders of record as of March 28, 2024.
- The weighted average yield is computed as (a) the annual stated interest rate or yield earned on the relevant accruing debt and other income producing securities plus amortization of fees and discounts on the performing debt and other income producing investments, divided by (b) the total relevant investments at amortized cost or fair value. The weighted average yield does not represent the total return to our stockholders.
- SLP acquired 70% of the member equity interests of the Company's 2018-1 portfolio ("2018-1"). The Company retained 30% of the 2018-1 membership interests as a non-controlling equity interest.
CONFERENCE CALL INFORMATION
A conference call to discuss the Company's financial results will be held live at 8:30 a.m. Eastern Time on February 28, 2024. Please visit BCSF's webcast link located on the Events & Presentations page of the Investor Resources section of BCSF's website at http://www.baincapitalspecialtyfinance.com for a slide presentation that complements the Earnings Conference Call.
Participants are also invited to access the conference call by dialing one of the following numbers:
- Domestic: 1-888-886-7786
- International: 1-416-764-8658
- Conference ID: 46709784
All participants will need to reference "Bain Capital Specialty Finance - Fourth Quarter and Fiscal Year Ended December 31, 2023 Earnings Conference Call" once connected with the operator. All participants are asked to dial in 10-15 minutes prior to the call.
Replay Information:
An archived replay will be available approximately three hours after the conference call concludes through March 6, 2024 via a webcast link located on the Investor Resources section of BCSF's website, and via the dial-in numbers listed below:
- Domestic: 1-844-512-2921
- International: 1-412-317-6671
- Conference ID: 46709784
Bain Capital Specialty Finance, Inc. |
||||||
Consolidated Statements of Assets and Liabilities |
||||||
(in thousands, except share and per share data) |
||||||
As of |
As of |
|||||
December 31, 2023 |
December 31, 2022 |
|||||
|
||||||
Assets |
|
|
||||
Investments at fair value: |
|
|
||||
Non-controlled/non-affiliate investments (amortized cost of $1,615,061 and $1,846,172, respectively) |
$ |
1,593,360 |
$ |
1,774,947 |
||
Non-controlled/affiliate investment (amortized cost of $132,650 and $133,808, respectively) |
147,971 |
173,400 |
||||
Controlled affiliate investment (amortized cost of $554,123 and $439,958, respectively) |
557,012 |
438,630 |
||||
Cash and cash equivalents |
42,995 |
30,205 |
||||
Foreign cash (cost of $6,865 and $34,528, respectively) |
6,405 |
29,575 |
||||
Restricted cash and cash equivalents |
63,084 |
65,950 |
||||
Collateral on forward currency exchange contracts |
7,613 |
9,612 |
||||
Deferred financing costs |
2,802 |
3,742 |
||||
Interest receivable on investments |
37,169 |
34,270 |
||||
Receivable for sales and paydowns of investments |
4,310 |
18,166 |
||||
Prepaid Insurance |
210 |
194 |
||||
Unrealized appreciation on forward currency exchange contracts |
— |
62 |
||||
Dividend receivable |
9,417 |
13,681 |
||||
Total Assets |
$ |
2,472,348 |
$ |
2,592,434 |
||
|
|
|
||||
Liabilities |
|
|
||||
Debt (net of unamortized debt issuance costs of $7,567 and $10,197, respectively) |
$ |
1,255,933 |
$ |
1,385,303 |
||
Interest payable |
13,283 |
12,130 |
||||
Payable for investments purchased |
11,453 |
34,292 |
||||
Unrealized depreciation on forward currency exchange contracts |
2,260 |
— |
||||
Base management fee payable |
8,929 |
8,906 |
||||
Incentive fee payable |
7,327 |
9,216 |
||||
Accounts payable and accrued expenses |
9,581 |
2,954 |
||||
Distributions payable |
|
27,116 |
|
23,242 |
||
Total Liabilities |
1,335,882 |
1,476,043 |
||||
|
|
|
|
|
||
|
|
|
||||
Commitments and Contingencies (See Note 10) |
|
|
||||
|
|
|||||
Net Assets |
|
|
||||
Common stock, par value $0.001 per share, 100,000,000,000 and 100,000,000,000 shares authorized, 64,562,265 and 64,562,265 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively |
65 |
65 |
||||
Paid in capital in excess of par value |
1,168,384 |
1,168,384 |
||||
Total distributable loss |
(31,983) |
(52,058) |
||||
Total Net Assets |
1,136,466 |
1,116,391 |
||||
Total Liabilities and Total Net Assets |
$ |
2,472,348 |
$ |
2,592,434 |
||
|
|
|
||||
Net asset value per share |
$ |
17.60 |
$ |
17.29 |
||
See Notes to Consolidated Financial Statements |
||||||
Bain Capital Specialty Finance, Inc. |
|||||||||
Consolidated Statements of Operations |
|||||||||
(in thousands, except share and per share data) |
|||||||||
For the Year Ended December 31, |
|||||||||
2023 |
|
2022 |
|
2021 |
|||||
| Income | |||||||||
| Investment income from non-controlled/non-affiliate investments: | |||||||||
| Interest from investments | $ | 184,921 |
$ | 138,984 |
$ | 153,703 |
|||
| Dividend income | 62 |
634 |
514 |
||||||
| PIK income | 20,536 |
13,495 |
4,475 |
||||||
| Other income | 10,561 |
15,091 |
6,173 |
||||||
| Total investment income from non-controlled/non-affiliate investments | 216,080 |
168,204 |
164,865 |
||||||
| Investment income from non-controlled/affiliate investments: | |||||||||
| Interest from investments | 9,890 |
7,470 |
1,818 |
||||||
| Dividend income | 4,815 |
4,109 |
— |
||||||
| PIK income | 2,308 |
1,542 |
5,622 |
||||||
| Total investment income from non-controlled/affiliate investments | 17,013 |
13,121 |
7,440 |
||||||
| Investment income from controlled affiliate investments: | |||||||||
| Interest from investments | 33,739 |
19,819 |
11,822 |
||||||
| Dividend income | 30,957 |
18,401 |
12,601 |
||||||
| PIK income | — |
— |
666 |
||||||
| Total investment income from controlled affiliate investments | 64,696 |
38,220 |
25,089 |
||||||
| Total investment income | 297,789 |
219,545 |
197,394 |
||||||
| Expenses | |||||||||
| Interest and debt financing expenses | 80,008 |
52,318 |
51,345 |
||||||
| Base management fee | 36,095 |
34,669 |
34,888 |
||||||
| Incentive fee | 25,456 |
19,572 |
24,028 |
||||||
| Professional fees | 2,561 |
2,959 |
2,854 |
||||||
| Directors fees | 716 |
707 |
725 |
||||||
| Other general and administrative expenses | 7,981 |
5,777 |
5,038 |
||||||
| Total expenses before fee waivers | 152,817 |
116,002 |
118,878 |
||||||
| Base management fee waiver | — |
— |
(4,837) |
||||||
| Incentive fee waiver | — |
— |
(4,519) |
||||||
| Total expenses, net of fee waivers | 152,817 |
116,002 |
109,522 |
||||||
| Net investment income before taxes | 144,972 |
103,543 |
87,872 |
||||||
| Income tax expense, including excise tax | 3,357 |
837 |
134 |
||||||
| Net investment income | 141,615 |
102,706 |
87,738 |
||||||
| Net realized and unrealized gains (losses) | |||||||||
| Net realized loss on non-controlled/non-affiliate investments | (62,903) |
(1,725) |
25,084 |
||||||
| Net realized gain (loss) on non-controlled/affiliate investments (net of taxes of $4,064, $0 and $0, respectively) | 19,006 |
(1,355) |
— |
||||||
| Net realized loss on controlled affiliate investments | — |
— |
(3,858) |
||||||
| Net realized gain (loss) on foreign currency transactions | (5,134) |
5,292 |
(3,496) |
||||||
| Net realized gain (loss) on forward currency exchange contracts | (407) |
20,894 |
(23,773) |
||||||
| Net realized loss on extinguishment of debt | — |
(747) |
(4,859) |
||||||
| Net change in unrealized appreciation on foreign currency translation | 4,050 |
(3,644) |
(936) |
||||||
| Net change in unrealized appreciation on forward currency exchange contracts | (2,322) |
(5,259) |
27,935 |
||||||
| Net change in unrealized appreciation on non-controlled/non-affiliate investments | 49,524 |
(50,309) |
(568) |
||||||
| Net change in unrealized appreciation on non-controlled/affiliate investments | (24,271) |
27,190 |
12,576 |
||||||
| Net change in unrealized appreciation on controlled affiliate investments | 4,217 |
12,437 |
3,964 |
||||||
| Total net gains (losses) | (18,240) |
2,774 |
32,069 |
||||||
| Net increase in net assets resulting from operations | $ | 123,375 |
$ | 105,480 |
$ | 119,807 |
|||
| Basic and diluted net investment income per common share | $ | 2.19 |
$ | 1.59 |
$ | 1.36 |
|||
| Basic and diluted increase in net assets resulting from operations per common share | $ | 1.91 |
$ | 1.63 |
$ | 1.86 |
|||
| Basic and diluted weighted average common shares outstanding | 64,562,265 |
64,562,265 |
64,562,265 |
||||||
About Bain Capital Specialty Finance, Inc.
Bain Capital Specialty Finance, Inc. is an externally managed specialty finance company focused on lending to middle market companies. BCSF is managed by BCSF Advisors, LP, an SEC-registered investment adviser and a subsidiary of Bain Capital Credit, LP. Since commencing investment operations on October 13, 2016, and through December 31, 2023, BCSF has invested approximately $7.0 billion in aggregate principal amount of debt and equity investments prior to any subsequent exits or repayments. BCSF's investment objective is to generate current income and, to a lesser extent, capital appreciation through direct originations of secured debt, including first lien, first lien/last out, unitranche and second lien debt, investments in strategic joint ventures, equity investments and, to a lesser extent, corporate bonds. BCSF has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended.
Forward-Looking Statements
This letter may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this letter may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the U.S. Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this letter.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240227254296/en/