Bain Capital Specialty Finance, Inc.

Greetings. Welcome to the Bain Capital Specialty Finance 4th Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Kyle Nagarkar, Investor Relations. Mr. Nagarkar, you may begin.

Good morning and welcome to the Bain Capital Specialty Finance conference call for the fourth quarter and full year 2019. Last night, we issued our 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 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 and 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.

Thanks, Kyle, and good morning, and thank you all for joining us for our fourth quarter of 2019 earnings column. As Kyle 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. As usual, I will start with a brief review of the quarter and provide some thoughts on our strategy and the market. Then both Mike and Sally will give some additional detail on the investment book and our results. Let me start by saying that 2019 was a solid year for us. During our first full fiscal year as a public company, I believe we have continued to take the necessary steps to position the company to achieve long-term, sustainable returns for our shareholders. We have maintained our disciplined and highly selective investment approach by focusing on first lien senior secured investments in the current economic cycle. We have further bolstered the right side of the balance sheet with an eye towards long-term stability, flexibility, and overall low cost. Lastly, we have positioned the company for further growth following the consolidation of the ABCS joint venture. allowing for future growth of yield-enhancing strategic partnerships, as well as bespoke investment strategies such as aviation finance. All of these actions, we believe, put us in a strong position at the end of the year and poised for continued success. In an illustration of our consistency, our board has declared a first-quarter base dividend of $0.41 per share. This quarter's dividend will be payable on April 30, 2020, to stockholders of record as of March 31, 2020. At the end of the year, the portfolio represented $2.5 billion invested across 30 different industries and 114 portfolio companies, with a current weighted average yield of 7.8%. Approximately 87% of our portfolio is invested in first dollar risk, including traditional first lien loans and unit tranches. During the fourth quarter, we originated $341 million of new investments and experienced sales or repayments of $331 million. This brought new originations for the entire fiscal year to $1.295 billion against sales or repayments of $1.088 billion. Similarly to the end of the third quarter, we continue to operate near the top end of our leverage range. However, we proactively reduced our leverage during the quarter from 1.63 times debt to equity at the end of the third quarter to 1.55 times gross and 1.48 times net of cash at the end of the fourth quarter. We remain comfortable at this level given our conservative investment book, and we continue to be focused on expanding the core earnings of the company through thoughtful portfolio construction. From a market perspective, in our view, the fourth quarter was neither distinguished by high new deal and M&A volume, nor the choppiness we experienced during the fourth quarter of last year. Simply said, it was a rather fine quarter for an experienced lender such as ourselves. We made five commitments to new portfolio companies backed by private equity sponsors with whom we've had longstanding relationships. The weighted average spread of new investments was LIBOR plus 580 basis points in line with our investment objectives. As exhibited by our activity in the quarter, we remain highly selective and are pleased with the current opportunity set. As we continue investing here in 2020, we are mindful of myriad current events impacting the markets broadly and individual portfolio company performance specifically. For instance, the presidential election in the U.S. could well have an impact not only for growth going forward in that market, but also potentially result in new regulations across multiple industries. The expansion of coronavirus concerns beyond China into Europe as recently as this week has also prompted us to review potential impacts to our existing portfolio companies, as well as adjustments to our underwriting going forward. In any event, we do expect a slowdown in deal flow over the next few months. Lastly, I will note that over the last year, our advisors have shown a willingness to support the dividend as we continue to orient the company for further profitability growth. We are pleased that voluntary waivers of management and or incentive fees were at a minimum in the fourth quarter. In fact, the majority of fourth quarter waivers related to the previously announced actions from the ABCS consolidation earlier in the year. While we hope that this trend will continue, it is our expectation that advisory support will be present as needed going forward. Sally will now provide a more detailed financial review.