Bain Capital Specialty Finance, Inc.

Good day and welcome to the Bain Capital Specialty Finance second quarter ended June 30th, 2021 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Catherine Schneider, Investor Relations. Please go ahead.

Thanks, Holly. Good morning and welcome to the Bain Capital Specialty Finance second quarter ended June 30th, 2021 conference call. Yesterday after market close, we issued our earnings press release and investor presentation of our quarterly results, a copy of which is available on Bain Capital Specialty Finances 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 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 Form 10-Q 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. With that, I'd like to turn the call over to our Chief Executive Officer, Michael Ewald.

Thanks, Catherine, and good morning, everyone. Thank you for joining us on our earnings call here. I'm joined today by Mike Boyle, our President, and our Chief Financial Officer, Sally Dornis. I'll start with an overview of our second quarter and the June 30, 2021 results, and then provide some thoughts on the overall market environment and our positioning. Thereafter, Mike and Sally will discuss our investment portfolio and financial results in greater detail. Yesterday, after market close, we delivered another consecutive quarter of positive results for our shareholders. Q2 net investment income per share was $0.34 and produced an attractive net investment income annualized yield of 8% on equity. Our net investment income covered our dividend level by 100%. The health and strength of our portfolio continue to trend positively this quarter as we witnessed improving credit quality trends across our diversified portfolio of middle market companies. We continue to maintain no investments on non-accrual status. These results drove strong earnings and NAV growth for our shareholders as Q2 earnings per share were $0.66 as a result of net gains across our portfolio. Net asset value per share was $17.01 as of June 30th. reflecting a 1.9% increase from our NAV as of March 31st. Subsequent to quarter end, our board declared a third quarter dividend equal to $0.34 per share and tabled the record date holders as of September 30th, 2021. This represents an 8% annualized yield and ending book value as of June 30th. During the second quarter, we witnessed favorable macroeconomic trends as financial markets continued to rally, notwithstanding inflationary pressures as economies fully reopened. Spreads in the broadly syndicated loan market continue to tighten for larger companies, while spreads within the direct lending market were relatively stable quarter over quarter, and largely back to pre-COVID levels. These market conditions drove strong levels of sponsored loan volume in the middle market, driven by increased LBO and add-on activities. Against this backdrop, we continue to execute on our middle market direct lending strategy, consistent with the longstanding tenets of our approach. Our balance sheet was well positioned going into the second quarter as a result of the sequential improvements that we made in recent past quarters to better position the company to take advantage of investing in attractive new lending opportunities. Q2 gross originations were $213 million, down from first quarter 2021 volumes of $384 million, but higher than Q4 2020 levels of $173 million. Our originations during the second quarter were relatively split between commitments to new portfolio companies and commitments to existing companies through our incumbency advantage across the Bain Capital Credit platform. This platform's focus remains on the core of the middle market, which we define as companies between $25 and $75 million of EBITDA. The median EBITDA of our new originations in Q2 was approximately $43 million, consistent with our overall median of $42 million. We continue to favor this segment of the market as these are scaled middle market companies with diversified end market revenue streams that lack access to the broadly syndicated loan market due to their size. We benefit from an illiquidity premium in this market segment and are able to structure securities that provide us with strong lender controls such as financial covenants. We believe the Bain Capital Credit platform has significant competitive advantages in this segment of the market given our longstanding presence there. that's entrenched with our deep sourcing relationships that have been curated over two decades. Furthermore, Bain Capital Credit's global team and resources allow us to source a wider funnel of opportunities and remain selective in the investment opportunities that we pursue on behalf of BCSF. In fact, throughout the year and continuing during the second quarter, we have seen robust activity out of our European offices. We have found many of these investment opportunities to be increasingly attractive relative to opportunities sourced through our North American offices, given a seemingly higher level of euphoria in the U.S. that has driven spreads here tighter. These trends allow us to increase the size of our loan portfolio within the International Senior Loan Program, or ISLP, which is our joint venture focused on direct lending opportunities to European and Australian borrowers. Quarter over quarter, ISLP's investment portfolio at fair value grew by 23%. Our investment in the ISLP has the potential to drive our earnings higher for our shareholders over time as we grow that portfolio. Turning to our capitalization, we ended the second quarter at a net leverage ratio of 1.12 times, which reflects the midpoint of our target net leverage ratio of between 1 and 1.25 times. We believe the company is on the strong financial footing to take advantage of new, high, of new yielded creative investment opportunities to grow earnings, even while remaining disciplined in our credit selection. Subsequent to quarter end, we optimized the company's liability structure through repurchasing $37.5 million of the company's $150 million 8.5% notes due 2023. We were able to take advantage of an opportunity to reduce a portion of the company's 2023 notes at a discounted price to our make-hold premium prior to maturity. Looking forward, we remain focused on making continued improvements to our liability structure over time and believe the company has a stronger balance sheet than ever before as we fortified it through diverse and flexible financing structures. I will now turn the call over to Mike Boyle, our president, to walk through our investment portfolio in greater detail.