Kayne Anderson BDC, Inc.

Hello and welcome to Kane Anderson BDC Inc's fourth quarter 2024 earnings call. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to Terry Hart, Chief Financial Officer of KBDC.

Good morning and welcome to Kane Anderson BDC Inc's fourth quarter 2024 earnings call. Today I'm joined by Doug Goodwillie and Ken Leonard, co-CEOs of KBDC, as well as Frank Carl, Senior Vice President of KBDC. Following our prepared remarks, we will be available to take your questions. Today's call may include forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates, and projections about the company, our current and prospective portfolio investments, our industry, our beliefs, and our opinions and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict. Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask you to refer to the company's most recent filings with the SEC for important risk factors. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time. Our earnings release, 10-K, and supplemental earnings presentation are available on the financial section of our website at canebdc.com. Now I'd like to turn the call over to Ken Leonard.

Thank you, Terry, and thank you, everyone, for joining us on the call today. I'd like to start with a short overview of our financial results before discussing our investment activity during the quarter and portfolio makeup and performance. I'll then provide some voiceover on current market conditions before Terry Hart discusses KBDC's financial results in more detail. During the fourth quarter, we're pleased to report that we generated net investment income of 48 cents per share and net income of 50 cents a share. During the quarter, we distributed our 40 cents of regular dividend and 10 cents for shares of a special dividend, the latter of which was declared around the time of our IPO. As a reminder, at year end 2024, KBDC held approximately 32 cents per share of spillover income. Turning to our private middle market investment activity in the fourth quarter of 2024, We made $231 million of total commitments across 16 different businesses during the period, of which $175 million was funded. This compares favorably to the fourth quarter of 2023, where we made new commitments of $153 million, of which $141 million was funded. In addition, $34 million of our existing unfunded commitments were funded or partially funded during the quarter. compared to fourth quarter 2023, where 43 million of our existing unfunded commitments were funded or partially funded. Combined, we made fundings in the fourth quarter of 2024 of 209 million. Again, this compares favorably to the fourth quarter of 2023, where gross fundings were 184 million. We had repayments of 139 million during the period, That's up from $97 million in the fourth quarter of 2023, but still only around 7% of the average funded investments. During the fourth quarter, our broadly syndicated loan portfolio experienced no new fundings. That's in line with our plan and $18 million of repayments for the total portfolio repayments of approximately $157 million. We plan to continue to wind down our broadly syndicated loan portfolio over the course of the year. When considering all funding and repayment activity, net funded deployment for the quarter was $52 million. This increase in fundings increased our debt to equity ratio to 0.72 times, still below our target range of one to one and a quarter times, but above our third quarter 2024 debt to equity ratio 0.66 times. Turning to our portfolio composition, As of December 31st, KBDC's portfolio includes 110 individual portfolio companies representing $2 billion of fair value funded investments. We have another $186 million of unfunded commitments comprised of a mix of unfunded revolvers and delayed draw term loans for total commitments in excess of $2.2 billion. Of note, Since December 31st, 2024, KBDC has closed or is in the final closing process on an additional 200 million of fundings, evidencing a very strong start to originations for 2025. In fact, first quarter 2025 is on track to be one of KBDC's largest origination quarters since its inception in 2021, evidencing our continued ability to scale our portfolio over time. As of December 31st, 2024, investments in KBDC's portfolio, excluding investments on our watch list, had weighted average leverage of 4.2 times, interest coverage of 3.1 times, and MTV of approximately 42%, evidencing our practice of conservatism in loan structuring. We've also built a diversified portfolio with average position size of 0.9% of fair value and where our top 10 investments represent only 18% of our portfolio. Outside of the specific credit statistics associated with our portfolio, our investments are very well structured. 98% of our portfolio is invested in first wing securities and 99% of our private middle market investments are backed by private equity sponsors. Additionally, all of our core first lien private middle market investments have financial covenants. 100% of our investments are floating rate, and that mirrors our liability, where the vast majority of our debt funding utilizes floating rate borrowings. Our portfolio has performed very well to date, with only 1.3% of total debt investments at fair value are non-accrual, representing only three positions out of 110. We have built this conservative portfolio with a healthy weighted average yield of approximately 10.6% on fair value of investments. This yield has been achieved with approximately 13% of our portfolio invested in broadly syndicated securities such that we have positioned the portfolio for upside in spreads relative to our competitors over the next few quarters as we rotate out of these lower spread broadly syndicated investments. Finally, our portfolio is diversified by end market and industry with a focus on stable, slower growing segments of the U.S. economy. As you can see in our earnings presentation, our largest industries are distribution, commercial services, food products, healthcare providers, and containers and packaging, with the largest representing only 15.1% of the total portfolio. With respect to overall credit quality, our perspective is that middle market private credit as an asset class is well insulated and should continue to perform well even during bumpier economic times, as it has over multiple decades, enduring most of the recent periods of distress, including COVID-19, supply chain disruptions, geopolitical conflicts, and associated uncertainty, substantial inflationary pressures, and increased reference rates. We see this in our portfolio. The vast majority of our investments are performing well, and we're extremely pleased with the quality of our loan book. In the quarter, we added one position to non-accrual, which represents 0.4% of the total fair market value of our portfolio. As mentioned, that brings our total non-accruals to 1.3% of fair value of our portfolio. Turning to market conditions broadly, we feel the market enjoyed relatively robust levels of activity in the fourth quarter of 2024, at least relative to the last six to eight quarters. Sponsor middle market volumes were up 96% versus the fourth quarter of 2023. For 2024, middle market sponsor loan volumes were up 86% versus fiscal year 2023. We believe a substantial driver in this uptick in activity has been the private equity community moving to transact, rebounding from lower M&A volumes over the prior one to two years. KBDC's existing portfolio of private middle market investments has a weighted average spread over SOFR of approximately 609 basis points. While we've seen some market compression, most of the new transactions we're reviewing today have a spread over SOFR of 500 to 600 basis points, and our private middle market investments in 2024 had an average spread of approximately 575 basis points. We're encouraged that as we sit here today, we continue to see very good risk-adjusted lending opportunities in the upper half of that range. In addition, while no one can predict where spreads will go in the future, we've seen some signs that spreads have begun to stabilize, driven in part by accelerating loan volumes. With that, I'll turn it over to Thierry Hart to discuss KBDC's fourth quarter 2024 financial results.