Barings BDC, Inc.

At this time, I'd like to welcome everyone to the Barings BDC, Inc. conference call for the quarter-ended March 31st, 2025. All participants are in listen-only mode. A question and answer session will follow the company's formal remarks. If you'd like to be placed into question queue, you could do so at any time by pressing star 1 on your telephone keypad, and we ask that you please ask one question and one follow-up, and then return to the queue. Today's call is being recorded, and a replay will be available approximately two hours after the conclusion of the call on the company's website at www.barringsbdc.com. On to the investor relations section. At this time, I'll turn the call over to Joe Mazzoli, head of investor relations for Barrings BDC. Please go ahead, Joe.

Good morning, and thank you for joining today's call. Please note that this call may contain forward-looking statements that include statements regarding the company's goals, beliefs, strategies, future operating results, and cash flows. Although the company believes these statements are reasonable, actual results could differ materially from those projected in forward-looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks including those disclosed under the sections titled Risk Factors and Forward-Looking Statements in the company's quarterly report on Form 10-Q for the quarter-ended March 31, 2025, as filed with the Securities and Exchange Commission. Barings BDC undertakes no obligation to update or revise any forward-looking statements unless required by law. I will now turn the call over to Eric Lloyd, Chief Executive Officer of Barings BDC.

Thanks, Joe, and good morning, everyone. We appreciate you joining us for today's call. Please note that throughout today's call, we'll be referring to our first quarter 2025 earnings presentation that is posted on the investor relations section of our website. On the call today, I'm joined by Barings BDC's President Matt Freund, Chief Financial Officer Elizabeth Murray, and Barings Head of Global Private Finance and DBDC Portfolio Manager, Brian High. In the first quarter, DBDC delivered another strong and consistent set of results, fueled by leading credit performance and supported by the scale and stability of our franchise. The uptick in origination activity that we noted during the fourth quarter continued into the first three months of 2025, with net originations of more than $100 million during the period. Strong deployment combined with a benign credit environment and our focus on the top of the capital structure investments and middle market issuers combine to serve our investors well. Our focus on the core of the middle market is driven by the sector's low leverage levels and more attractive risk-adjusted returns, which is why we find this to be the best segment of the market for BBDC and our shareholders. Further, we have strong alignment with the broader Barings LLC ecosystem, focusing on sectors that will perform with resilience across economic environments. This combination of senior secured financing solutions, core middle market focus, and defensive non-cyclical sectors worldwide offers our investors strong relative value and portfolio differentiation compared to the broader BDC sector. Consistent with how we have defined our strategy in the past discussions, our portfolio strategy is outlined in greater detail on slide five, and we continue to successfully invest throughout the market and deliver compelling returns to our shareholders. As you will have seen in our press release, the Board of BBDC has accepted a proposal from Barings LLC to terminate the credit support agreement related to the MVC capital transaction for the maximum consideration of $23 million. We have outlined some of the key benefits of this transaction on slide 14. Our manager's proactive measure to settle this obligation is another clear demonstration of their and our alignment with fellow BBDC shareholders and our focus on simplifying the portfolio. The payment to settle the CSA will be made from Barings to BBDC during the second quarter and will be available for deployment into attractive income-producing private credit opportunities immediately, demonstrating the accretive nature of this transaction. In short, this move will rotate capital into income-producing investments and enhance the core earnings power of our portfolio. As Nat will touch on in a moment, we believe that volatility is on the horizon, and as such, we believe BDC shareholders should be more focused on alignment with their investment advisor more than ever before. Private credit managers have proliferated over the recent years. In our view, we have very strong economic alignment. Our ownership structure is unequaled in the asset management ecosystem. We are anchored by patient, long-term capital that has seen this industry grow for decades, and we have built portfolios that can weather a variety of economic cycles because of our long-term horizon and experience across multiple decades. Additionally, we are proud of the fact that BBDC has the highest hurdle rate of any listed BDC, demonstrating that we hold ourselves to a high standard in terms of delivering value to shareholders. Barings is a $440 billion credit-focused asset management franchise. Credit is not simply a vertical at Barings, it is a specialty, and we have developed an expertise across countless strategies. We believe our focus on credit with scale and track record that outstrips the broader BDC landscape will deliver superior and consistent risk-adjusted returns for shareholders. Turning to our expectations for deployment in the current environment, We articulated during the first quarter that the pace of buyout opportunities was subject to a number of variables that were difficult to predict. As we move further into 2025, we will take the opportunity to reiterate that forecasting origination activity in the current environment is more of an art than science. We continue to selectively underwrite new opportunities, but we anticipate a reduction in transaction activity during the second quarter compared to strong deployment experienced during the early part of 2025. Add-on transactions will remain a compelling way for private equity firms to enhance the value of portfolio companies and allow us bearings to deploy capital into those companies we already know. Additionally, our strategic investments in Rokade and Eclipse offer us consistent, differentiated credit exposure across a range of verticals beyond our sponsor-backed corporate lending. Turning to BBDC's financial performance in the quarter, Net asset value per share was $11.29, unchanged compared to prior quarter, and a testament to the portfolio's stability. Net investment income for the quarter was 25 cents per share. Now digging a bit deeper into the portfolio, we continue to actively maximize the value in legacy holdings acquired from MVC Capital and Sierra. We are seeking to divest these assets at attractive valuations, as we did in the first quarter. As of quarter end, Barron's originated positions now make up 94% of the BBDC portfolio at fair value, up from 76% at the beginning of 2022. Our investment portfolio performed well in the first quarter, with non-accrual rate of 60 basis points at fair value as of March 31st, well below industry averages and comfortably below our long-term expectations. There is no substitute for fundamental credit analysis. which has always been at the core of our investment philosophy and is reflected in the health of the BBDC portfolio today. Turning to the earnings power of the portfolio, the weighted average yield at fair value was 10.1%, down from 10.4% during the prior quarter. The decline in yield is predominantly a function of reductions in reference rates within the portfolio and to a lesser extent repricing activity that occurred during the period. Our board declared a second quarter dividend of 26 cents per share, consistent with the prior quarter. On an annualized basis, the dividend level equates to a 9.2% yield on our net asset value of $11.29. As we have previously announced, our board declared 15 cents of supplemental dividends that will be paid in three quarterly installments during the calendar year of 2025. Taken together with our regular scheduled base dividends, The dividend level equates to 11% yield based on March's net asset value. We believe our portfolio is on strong footing and we're advancing our strategic imperatives. As Matt will cover momentarily, BBC is well positioned to navigate the current market volatility and deliver consistent risk-adjusted returns in the quarters ahead. I'll now turn the call over to Matt.