Bain Capital Specialty Finance, Inc.

Greetings. Welcome to the Bain Capital Specialty Finance First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listening mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Sloan Bowen, Investor Relations. Mr. Bowen, you may begin.

Thank you. Good morning. Last night we issued our earnings press release and presentation of our quarterly results, a copy of which is available on Bain Capital Specialty Finance's investor relations website. Following our remarks today, we will hold a question and answer session for analysts and investors. This call is being webcast and a replay will be available on our website. This call and webcast are the property of Bain Capital Specialty Finance and any unauthorized broadcast in any form is strictly prohibited. Any forward-looking statements made today do not guarantee future performance and actual results may differ materially. These statements are based on current management expectations, which include risks and uncertainties, which are identified in the risk factors section of our annual report in Form 10-K that could cause actual results to differ materially from those indicated. Bain Capital Specialty Finance assumes no obligation to update any forward-looking statements at this time unless required to do so by law. Lastly, past performance does not guarantee future results. And with that, I'll turn the call over to our President and Chief Executive Officer, Michael Ewald.

Good morning, and thank you for joining us for our first quarter 2019 earnings call. As Sloan mentioned, my name is Michael Ewald, and today I'm joined by our Vice President and Treasurer, Mike Boyle, and our Chief Financial Officer, Sally Dornis. As we discussed on our inaugural public earnings call last quarter, our goal for BCSF is consistent with Bain Capital Credit's Senior Direct Lending Strategy. which is to generate superior risk-adjusted returns through rigorous underwriting that leverages the breadth and depth of the full Bain Capital Credit team and that seeks to identify investments with first or second liens against collateral and strong credit structures that insulate us as lenders and you as shareholders. As most of you know, Bain Capital Credit is the debt investing arm of Bain Capital, a large privately held alternative asset manager with over $100 billion of assets under management. The credit business represents over $39 billion of those assets, and the private credit group, which I head and which includes BCSF, manages over $7 billion. The credit business was founded in 1998 and has been investing in the middle market, which we define as companies with $10 to $150 million of EBITDA since its inception. At the end of the first quarter of 2019, BCSF's portfolio represented $1.8 billion invested across 32 different industries, and 133 portfolio companies with a current weighted average yield of 8.8%. Approximately 82% of our portfolio is invested in what we refer to as first dollar risk. 64% of that is in traditional first lien loans with another 18% in Unitranche loans through our ABCS partnership with Antares Capital. Similar to last quarter, we continue to have no non-accruing loans in our portfolio. As you'll recall, we received shareholder approval in February to reduce the company's required minimum asset coverage from 200% to 150%. Further to this point, on Monday we announced that we completed the consolidation of our interest in the ABCS Unitron Joint Venture onto our balance sheet on April 30, 2019. We believe this change is in the best interest of our shareholders and a recognition of the success of the program to date. I would like to provide some additional background on the rationale for this decision. First, given the reduced asset coverage requirement provided under the SPCAA, we believe the utility of an off-balance sheet financing vehicle for these assets has been diminished. Second, as we outlined in our press release and 8 , consolidating the assets and liabilities of our interest in the JV onto our balance sheet removes our equity interest in ABCS from the 30% non-qualifying basket of our assets. a threshold that we have nearly been limited by in the past, and places these qualifying assets onto our balance sheet. Freeing up this capacity allows us the ability to grow other investment opportunities that would fall into the 30% bucket. In particular, we intend to continue to invest in deals sourced by our European and Australian offices, improving the geographic diversification of the portfolio. In addition, we may continue to expand into other strategic partnerships within the direct lending realm. Both of these initiatives, we believe, will provide attractive risk-adjusted returns for our investors. Third, as you may recall, Bain Capital Specialty Finance has received exemptive relief from the SEC, allowing us to invest alongside other funds and other accounts managed by Bain Capital Credit. Following the consolidation of our interest in the JV, other Bain Capital Credit funds and accounts will be able to invest alongside the program in Unitranche loans. Given the success of the program and our view of where we see risk-adjusted returns that are attractive, we believe the ability to speak for larger hold sizes, currently the program can speak for loans of up to about $350 million, will allow us to lead some bigger deals while still influencing terms and conditions. Lastly, we plan for this transaction to be fee-neutral for our shareholders. As you'll recall, we already amended our annual base management fee from 1.5% to 1%, on any amount of assets attributable to leverage that decreases the company's asset coverage ratio below 200%. Furthermore, we intend to waive management fees on assets acquired in conjunction with the ABCS joint venture consolidation throughout 2019. As of the end of the first quarter, our debt-to-equity leverage ratio increased to 0.9 times compared to 0.75 times at the end of 2018. Mike Boyle will provide some additional color on our debt and liability management. We are also pleased to announce that our Board of Directors has approved a $50 million company-sponsored share repurchase program. Under the new program, we can repurchase up to $50 million of outstanding common stock in the open market. We believe this program can be an effective approach to driving shareholder returns and is a further demonstration of our commitment to shareholder alignment. Before I turn the call over to Sally and Mike to go through our financial results and investment Let me comment briefly on the market environment and what we're seeing there. Following the volatility experienced in the fourth quarter, the broadly syndicated loan market, one of our reference markets, retraced part of its decline, returning to 96.4 at the end of March from a low of 94 at the end of December and a baseline of 98.6 as of September 2018. In comparison to the fourth quarter, where financing activity continued, albeit at wider spreads, given the long timeline for existing deals in the pipeline, Activities slowed in the beginning of the first quarter as participants took stock and re-evaluated market consensus. For us, this trend manifested itself as strong net new fundings in January and February, but net repayments in March. Mike Boyle will also provide greater detail on our originations, but looking forward, our pipeline of investment opportunities remains robust. Now on to Sally.