Barings Participation Investors

At this time, I would like to welcome everyone to the Barings BDC, Inc. conference call for the quarter ended and year ended December 31st, 2023. All participants are on a listen only mode. A question and answer session will follow the company's formal remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Today's call is being recorded and a replay will be available approximately two hours after the conclusion of the call. on the company's website at www.barringsbdc.com under the Investor Relations section. At this time, I will turn the call over to Joe Manzoli, Head of Investor Relations for Barrings BDC.

Please note that this call may contain forward-looking statements that include statements regarding the company's goals, beliefs, strategies, future operating results, and cash flows. Although the company believes These statements are reasonable. Actual results could differ materially from these projected and forward-looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the sections titled Risk Factors and Forward-Looking Statements in the company's annual report on Form 10-K for the fiscal year ended December 31, 2023. filed with the Securities and Exchange Commission. Barings BDC undertakes no obligation to update or revise any forward-looking statements unless required by law. I'll now turn the call over to Eric Lloyd, Chief Executive Officer of Barings BDC.

Thanks, Joe, and good morning, everyone. We appreciate you joining us for today's call. Please note that throughout today's call, we'll be referring to our fourth quarter 2023 earnings presentation, that was posted on the investor relations section of our website. On the call today, I'm joined by Barings Co-Head of Global Private Finance and President of Barings BDC, Ian Fowler, the BDC's Chief Financial Officer, Elizabeth Murray, and BDC's Co-Portfolio Managers, Brian High and Matt Freund. We will dive into some quarterly results momentarily, but first I would like to comment on some of the successes we experienced during the entirety of 2023. Investing in illiquid assets is often poorly suited for short-term investors. Measuring performance in a single quarter rarely gives investors the appropriate lens to measure a manager's performance. Net investment income, total dividends paid to shareholders, and NAV for BBDC all increased during 2023. While these items are important, we are equally focused on some developments not immediately captured in these metrics. During 2023, We continued executing on our commitment to rotate out of non-core assets, including three legacy NBC capital positions and more than $25 million of investments to legacy Sierra income positions. We again demonstrated our best-in-class alignment with shareholders, repurchasing more than 1.8 million shares for nearly $15 million. The number of issuers on non-accrual declined from seven at December 2022 to to four as of December 2023. We manage our portfolio based on operational metrics that drive stability of returns, and we expect that in the coming quarters, the commitment to our core strategies will continue to deliver for shareholders. Successful financial results, such as those measured by NAB and distributions over time, are the outputs, not the inputs, to a successful asset manager. BBDC exhibited stability and strong operating results during the quarter ended December 31st. Our focus on the top of the capital structure, investments in sponsor-backed issuers, is serving investors well in these uncertain times. Our portfolio is predominantly sponsor-backed and is complemented by a selection of non-sponsored and platform investments. Our portfolio strategy is outlined in greater detail on slide five. This strategy serves as our guiding light as we continue to successfully in-depth throughout the market and deliver compelling returns to our shareholders. Net asset value for share was $11.28 compared to the prior quarter of $11.25 and $11.05 at December 2022, reflecting a year-over-year increase of 2.1%. Net investment income for the quarter was $0.31, unchanged from prior quarter. Our performance is the result of our focus on the top of the capital structure and within more defensive industries. We believe BBDC remains well positioned for any further volatility and uncertainty in the market going forward. Investment activity during the quarter reflected a modest degree of net repayments driven by light transaction activity during the quarter and balancing the use of our share repurchase program with other opportunities. As our shareholders know, we are actively working to maximize the value in the legacy holdings acquired from NBC Capital and Sierra Income and rotate them into compelling bearings originated positions. Non-bearings originated assets now only amount to 11% of the portfolio at fair value. That's down from 24% at the beginning of 2022. And potential losses from these assets are protected by the credit support agreements, limiting downside risk for BBDC investors. Our investment portfolio continued to perform well in the third quarter. Including the acquired Sierra and MVC assets, our total amount of accruals are 2.5% of the portfolio on a cost basis, and 1.5% on a fair value basis, with three assets being removed from non-accrual during the quarter. With the exception of two investments, all of our non-accrual assets were from acquired portfolios and therefore covered by our credit support agreements. Subsequent to year end, we removed our investment in Core Scientific Inc. from non-accrual status in connection with its January 2024 exit from Chapter 11 bankruptcy and our receipt of shares of its common stock, in exchange for the debt investments that we previously held in part of the bankruptcy proceedings. On a pro forma basis, removing core scientifics, that takes non-accruals down to 0.6% on a fair value basis and 1.3% on a cost basis. Turning to the earnings power of the portfolio, the increase in base rates has largely been reflected within the portfolio, with weighted average yields on floating rate investments stabilizing at 11.2%, substantially comparable to the prior quarter's figures. We remain conservative on our base dividend policy, and our board declared a fourth quarter dividend of $0.26 per share, consistent with the prior quarter. On an annualized basis, the dividend level equates to a 9.2% yield on our net asset value of $11.28. Now I'll turn the call over to Ian.