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-end March 31, 2024. All participants are in a listen-only mode. A question and answer session will follow the company's formal remarks. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you should require operator assistance during the event, please press star 0 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 Mazzoli, head of investor relations for Barrings BDC.

Good morning and thank you for joining today's call. 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 those projected in 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 quarterly report on Form 10-Q for the quarter ended March 31st, 2024, as 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 first quarter 2024 earnings presentation that's posted on the investor relations section of our website. On the call today, I'm joined by Barings BDC's President Matt Freund, Chief Financial Officer Elizabeth Murray, and Barings Head of Global Private Finance and BBDC Portfolio Manager Brian High. We are happy to be in a position to share a variety of positive performance metrics at BBDC for the March quarter. But I will also spend a moment speaking of some of the developments at our manager, Barings LLC, that have occurred during the quarter. First, let me begin with BBDC's performance. BBDC exhibited stability and strong operating results during the quarter ended March 31st. Our focus on the top of the capital structure investments and sponsor-backed issuers continues to serve investors well. 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 invest throughout the market and deliver compelling returns to our shareholders. Net asset value per share was $11.44 compared to the prior quarter of $11.28, reflecting a year-over-year increase of 1.4%, and this is the highest NAV the portfolio has exhibited in the past two years. Net investment income for the quarter was $0.28 and out-earned our quarterly dividend by 7.6%. Perhaps most importantly, and a metric that we are particularly proud of, our non-accruals during the quarter declined to 0.3% of the fair market value of the portfolio, a level we consider to be best in class, especially in light of the inconsistent economic backdrop. Our performance is a 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. 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-Behring's originated assets now only amount to 11% of the portfolio at fair value, down from 24% at the beginning of 2022. And potential losses from these assets are protected by credit support agreements, limiting downside risk for BBDC investors. Our investment portfolio continued to perform well in the first quarter. There is no substitute for fundamental credit analysis, which has been core to Behring's underwriting style since the early 1990s. As reflected in the health of the BBDC portfolio today, including the acquired Sierra and NBC assets, our total non-accruals are industry leading 0.3% on a fair value basis and 1.5% of the portfolio on a cost basis. This is down from 1.5% on a fair value basis and 2.5% on a cost basis as of December 31st, 2023. 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 a fair value basis stabilizing at 11.3%, 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 9.1% yield on our net asset value of $11.44. We believe the best measure of the portfolio's performance, non-accruals, net asset value, and NII were extremely compelling for the March quarter and anticipate continued strength in the quarters ahead. I would now like to take a moment to acknowledge some recent developments and bearings. Before I do so, I want to begin by highlighting several key points. Barings is a global asset management firm with more than $400 billion of assets under management as of March 31st, 2024. Second, Barings directly employs more than 1,800 professionals dedicated to investing in our core strategies and driving long-term value for our clients and sponsors. Third, we are a wholly-owned subsidiary of MassMutual and have been investing in private credit on its behalf for more than three decades. I also want to emphasize that when it comes to private credit specifically, BBDC is just one part of the Barings global platform, which also includes its other BDCs and the entire private assets business, and which Barings remains fully committed to and is actively investing in. As you may be aware, on March 8, 2024, Barings received resignations of a number of members of the investment team within the global private finance organization. Six of these individuals were focused on the North American strategy, out of a total of North American investment team of 56. We have successfully executed a retention strategy across the entirety of the remaining global investment team. BBDC investors know that the principal investment strategies for the BBC portfolio include sponsored investments, non-sponsored investments, and platform investments. Furthermore, BBDC's status as a business development company, regulated under the 1940 Act, has always necessitated that the portfolio tilt primarily towards North American assets. As a result of the overwhelming stability of the global private finance North American investment team, an uninterrupted focus on North American investment opportunities, and in combination with the fact that the BBDC resource assets are from a variety of other investment teams within Barings, BBDC management believes we are well positioned to deliver compelling risk-adjusted returns for shareholders in the quarters ahead. The stability offered by the current team is important. but we also plan to augment this team by making strategic hires in the quarters to come. Our hiring efforts will target experienced origination professionals who maintain existing sponsor relationships and possess a strong fundamental credit approach. We look forward to sharing more as we recruit and onboard these hires in the quarters to come. Like us, MassMutual takes a long-term view when it comes to the asset class in the business. MassMutual intends to continue to actively invest with Barings in the middle market direct lending sector reflecting their ongoing confidence in both the value and performance of the asset class and our capabilities. With that said, we know that many of you have reached out with questions regarding the personnel changes. As we look ahead, we see incredible opportunity to leverage the strength of our scaled private credit franchise and leveraging the resources that support more than $300 billion of credit investments. Our investment process and philosophy remain unchanged, and our deep venture talent continues to leverage our origination network, and deploy capital consistent with our stated strategy. Most importantly, our commitment to our investors is unwavering and is as strong as it's ever been. I'll now turn the call over to Matt. Thanks, Eric.