Bain Capital Specialty Finance, Inc.

Good day and welcome to the Bain Capital Specialty Finance third quarter ended September the 30th, 2022 earnings conference call. Today's conference is being recorded and at this time I'd like to turn the conference over to Catherine Schneider from Investor Relations. Please go ahead.

Thanks, Cecilia. Good morning and welcome everyone to the Bain Capital Specialty Finance third quarter ended September 30th, 2022 conference call. Yesterday after market closed, 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 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 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. So with that, I'd like to turn the call over to our CEO, Michael Ewald.

Thanks, Catherine. Good morning, and thank you all for joining us on our earnings call. I'm joined again today by Mike Boyle, our president, and our chief financial officer, Sally Dornis. Start with an overview of our third quarter and the September 30th, 2022 results, and then provide some thoughts on our performance, 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 closed, we reported third quarter net investment income per share of 53 cents, driven by very strong levels of income earned from our portfolio investments during the quarter. Our Q3 net investment income return represented a 12.4% annualized yield on book value and covered our dividend by 156%. This is the highest quarterly level of NII that we have earned since our inception. The significant growth in our NII this quarter was driven by the benefits of rising interest rates, higher income related to fees earned on certain new originations, and greater dividend income related to an equity co-investment payoff. Our board has increased our regular quarterly dividend by approximately 6%, or 2 cents per share, to 36 cents per share, to shareholders of record as of December 31, 2022. This represents an annualized yield of 8.5% on ending book value as of September 30, and an 11% annualized yield at BCSF's current trading levels. Over the course of the year, we have observed base rates, namely SOFR and LIBOR, significantly increase. As we have previewed with our shareholders during prior earnings calls, we expected to see earnings growth during the second half of this year, given the timing lag of rate resets across our portfolio. We are pleased to see this begin to contribute to higher earnings this quarter, and we are well positioned to benefit further from any future rate increases. The increase in the regular dividend rate reflects our view of the company's earnings power under various interest rate and economic scenarios. Our board will continue to evaluate further dividend increases on a quarterly basis. Net asset value as of September 30th was $16.98 per share, a decrease of approximately 1% quarter over quarter. Our NAV decline was primarily driven by net unrealized losses across our portfolio. During the third quarter, we continued to observe high levels of market volatility in the broadly syndicated loan and public equity markets. given concerns of slowing growth in the macro economy. In a potential recessionary environment, we believe our portfolio is on strong footing to endure a more challenging market backdrop. Across our portfolio, the median EBITDA of our companies is just under $50 million. These are companies that are big enough to matter in their ecosystem and have staying power. Their customers and suppliers would be demonstrably worse off if they ceased operations. In uncertain times like today, these are the types of companies that have multiple growth levers to pull to be nimble. We have largely avoided smaller businesses as they tend to be less resilient during economic downturns. Importantly, we demand and receive strong documentation as 93% of our debt investments are structured with lender-friendly terms such as financial covenants tied to management's forecasts. This puts in place near-term goalposts related to company financial performance. providing us with a seat early in any discussions to mitigate our potential risk in a downside scenario. We also have majority control positions in 80% of our debt tranches, allowing us to drive eventual outcomes at our discretion. Our middle market borrowers operate across a wide range of industries, driven by our longstanding focus on investing in defensive industries, as we're represented by our top exposures, being aerospace and defense, high tech, and business services. We have been shying away from direct consumer-facing industries that could experience more volatile demand during periods like today. Lastly, the majority of our structures are in first lien senior secured loans supported by significant equity cushions provided by private equity sponsors behind our loans. Our focus on sponsor-backed companies provides them with the professional management, capital, and depth of personnel, resources, oversight, and alignment necessary to guide them throughout choppy macroeconomic periods. In the current environment, our portfolio companies continue to perform well and have proven to be durable thus far in light of the macro headwinds related to inflationary pressures and higher interest rates. We have not seen a wave of amendments across our portfolio companies like we last saw in 2020 related to the COVID-19 pandemic, nor do we expect to during our forecast periods. Our portfolio management team has been focused on stress testing interest rate sensitivities across our investments. to ensure sufficient cash flow coverage within our portfolio companies. We are pleased to see ample cushion for the vast majority of our companies, and only very few names fall below the one times interest coverage level, and we have put these on our focus list. Looking ahead, we believe we are well positioned to navigate the expected challenging economic and geopolitical times ahead. Our platform at Bain Capital Credit is comprised of deep resources and expertise owned over many market cycles, going back to our inception in 1998. And we can and do tap into the broader bank capital network for additional support as needed. I will now turn the call over to Mike Boyle, our president, to walk through our investment portfolio in greater detail.