Bain Capital Specialty Finance, Inc.

Greetings. Welcome to the Bain Capital Specialty Finance Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Should anyone 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 Bolin, Investor Relations. You may begin.

Good morning. Last night, we issued our third quarter earnings press release and investor 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 the webcast are property of Bain Capital Specialty Finance, and any unauthorized broadcast in any form is strictly prohibited. Any forward-looking statements we make 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'd like to turn the call over to our President and Chief Executive Officer, Michael Ewald.

Good morning, and thank you for joining us for our third quarter 2019 earnings call. As Sloan mentioned, my name is Michael Ewald, and I'm joined today by our Vice President and Treasurer, Mike Boyle, and our Chief Financial Officer, Sally Dornis. I'm going to start with a brief snapshot of the portfolio and we'll provide some higher level comments on our strategy in the market. Then both Mike and Sally will give some additional detail on the investment book and our results. At the end of the third quarter, the BCSF portfolio represented $2.5 billion invested across 30 different industries and 126 portfolio companies, with a current weighted average yield of 7.7%. In the quarter, we originated $275 million of new investments, and had sales or repayments of $184 million. Excluding the impact of the ABCS balance sheet consolidation in the second quarter, our new originations year-to-date total $953 million against sales or repayments of $755 million. As for the makeup of the portfolio, it's relatively unchanged by loan type and industry exposure. At quarter end, approximately 88% of our portfolio is invested in first-dollar risk, is made up of traditional first lien loans and unit tranches. Credit in the portfolio is still very strong and there remain zero non-accruals. We are again pleased to announce that our board declared a fourth quarter dividend of 41 cents per share. The quarterly dividend will be payable on January 30th, 2020 to stockholders of record on December 31st, 2019. Overall, we remain cautious with regard to credit and believe the portfolio is well positioned for a weakening economy if that eventually occurs. Our portfolio remains overweight in resilient sectors like technology and healthcare. Before I discuss what we're seeing in the markets, let me take a moment to speak to our capital structure. As you can see, we ended the quarter with leverage of 1.6 times gross debt to equity, but it is 1.5 times net of cash. As we continue to operate at the high end of our stated one to one and a half times range, we continue to be focused on expanding the core earnings of the company through thoughtful portfolio construction. In short, we continue to believe that the natural rotation of the portfolio into higher spread assets, further expansion of Unitranche loans under the ABCS program, and access to strategic partnerships and verticals such as our aviation efforts will drive continued earnings growth over the near term. Mike Boyle will expand on this in a bit. From a market perspective, since the beginning of the year, while we have seen periods of fits and starts, the market has generally remained more subdued versus recent years as evidenced by lower new issue volumes published by various providers. This is particularly evident in the broadly syndicated markets where we have seen an increase in flex pricing, spread widening, and general terms and documentation pushback. This is most obvious at the lower end of the credit quality spectrum where there continues to be further bifurcation on who can access the market and at what terms. Such an environment is well-suited for an experienced middle market lender such as ourselves. The ability to remain selective, dictate terms and pricing, and work alongside trusted private equity partners who we have seen execute in the past, all the while overlaying our senior secured focus, creates the opportunity to originate high-quality loans. So without painting an overly rosy picture, this is our way of saying that we continue to find compelling investment opportunities and expect we will be able to continue to execute on our direct lending strategy. Sally will now provide a more detailed financial review.