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    Bain Capital Specialty Finance, Inc. Announces December 31, 2023 Financial Results and Declares First Quarter 2024 Dividend of $0.42 per Share and Additional Dividends Totaling $0.12 per Share for 2024

    By: via Business Wire

    Bain Capital Specialty Finance, Inc. (NYSE: BCSF, the “Company”, “our” or “we”) today announced financial results for the fourth quarter and fiscal year ended December 31, 2023, and that its Board of Directors (the “Board”) has declared a dividend of $0.42 per share for the first quarter of 2024 and has also declared additional dividends totaling $0.12 per share for 2024.

    “BCSF reported strong quarterly and full year 2023 results as we benefited from attractive levels of interest income, net asset value growth and continued stable credit performance across our primarily senior secured portfolio,” said Michael Ewald, Chief Executive Officer of BCSF. “As a result of our strong 2023 performance, we declared additional dividends totaling $0.12 per share to be paid in equal quarterly amounts during the year, bringing our total annualized dividend yield to 10.2% at ending book value, inclusive of our regular quarterly dividend of $0.42 per share.”

    QUARTERLY HIGHLIGHTS

    • Net investment income (NII) per share was $0.54, equating to an annualized NII yield on book value of 12.3%(1);
    • Net income per share was $0.48, equating to an annualized return on book value of 10.9%(1);
    • Net asset value per share as of December 31, 2023 was $17.60, as compared to $17.54 as of September 30, 2023;
    • Gross and net investment fundings were $206.4 million and $(101.8) million, respectively; Ending net debt-to-equity was 1.02x, as compared to 1.12x as of September 30, 2023(2);
    • Investments on non-accrual remained low at 1.9% and 1.2% of the total investment portfolio at amortized cost and fair value, respectively, as of December 31, 2023;
    • Subsequent to quarter-end, the Company’s Board of Directors declared a dividend of $0.42 per share for the first quarter of 2024 payable to stockholders of record as of March 28, 2024 and has also declared additional dividends totaling $0.12 per share for 2024, to be distributed in four consecutive quarterly payments of $0.03 per share per quarter. The first additional dividend is payable to stockholders of record as of March 28, 2024(3); and
    • In February 2024, Kroll Bond Rating Agency, LLC (KBRA) affirmed the Company’s investment grade rating of BBB and stable outlook.

    SELECTED FINANCIAL HIGHLIGHTS

    ($ in millions, unless otherwise noted)

    Q4 2023

    Q3 2023

    Net investment income per share

    $0.54

    $0.55

    Net investment income

    $34.9

    $35.6

    Earnings per share

    $0.48

    $0.52

    Dividends per share declared and payable

    $0.42

    $0.42

     

     

     

    ($ in millions, unless otherwise noted)

    As of

    December 31, 2023

    As of

    September 30, 2023

    Total fair value of investments

    $2,298.3

    $2,390.2

    Total assets

    $2,472.3

    $2,566.5

    Total net assets

    $1,136.5

    $1,132.5

    Net asset value per share

    $17.60

    $17.54

    PORTFOLIO AND INVESTMENT ACTIVITY

    For the three months ended December 31, 2023, the Company invested $206.4 million in 43 portfolio companies, including $56.1 million in two new companies, $145.3 million in 40 existing companies and $5.0 million in ISLP. The Company had $308.2 million of principal repayments and sales in the quarter, resulting in net investment fundings of $(101.8) million.

    Investment Activity for the Quarter Ended December 31, 2023:

    ($ in millions)

    Q4 2023

    Q3 2023

    Investment Fundings

    $206.4

    $109.5

    Sales and Repayments

    $308.2

    $102.8

    Net Investment Activity

    $(101.8)

    $6.7

    As of December 31, 2023, the Company’s investment portfolio had a fair value of $2,298.3 million, comprised of investments in 137 portfolio companies operating across 31 different industries.

    Investment Portfolio at Fair Value as of December 31, 2023:

    Investment Type

    $ in Millions

    % of Total

    First Lien Senior Secured Loans

    $1,464.4

    63.8%

    Second Lien Senior Secured Loans

    68.4

    3.0

    Subordinated Debt

    45.9

    2.0

    Structured Products

    22.6

    1.0

    Preferred Equity

    104.4

    4.5

    Equity Interests

    221.4

    9.6

    Warrants

    0.5

    0.0

    Investment Vehicles

    370.7

    16.1

    Subordinated Note in ISLP

    190.7

    8.3

    Equity Interest in ISLP

    66.2

    2.9

    Subordinated Note in SLP

    116.0

    5.0

    Preferred and Equity Interest in SLP

    (2.2)

    (0.1)

    Total

    $2,298.3

    100.0%

    As of December 31, 2023, the weighted average yield on the investment portfolio at amortized cost and fair value were 13.0% and 13.1%, respectively, as compared to 12.9% and 13.1%, respectively, as of September 30, 2023(4). 93.8% of the Company’s debt investments at fair value were in floating rate securities.

    As of December 31, 2023, three portfolio companies were on non-accrual status, representing 1.9% and 1.2% of the total investment portfolio at amortized cost and fair value, respectively.

    As of December 31, 2023, ISLP’s investment portfolio had an aggregate fair value of $709.8 million, comprised of investments in 37 portfolio companies operating across 17 different industries. The investment portfolio on a fair value basis was comprised of 93.7% first lien senior secured loans, 2.9% second lien senior secured loans and 3.4% equity interests. 100% of ISLP’s debt investments at fair value were in floating rate securities.

    As of December 31, 2023, SLP’s investment portfolio had an aggregate fair value of $879.9 million, comprised of investments in 62 portfolio companies operating across 21 different industries.(5) The investment portfolio on a fair value basis was comprised of 97.7% first lien senior secured loans and 2.3% second lien senior secured loans. 99.3% of SLP’s debt investments at fair value were in floating rate securities.

    RESULTS OF OPERATIONS

    For the three months ended December 31, 2023 and September 30, 2023, total investment income was $74.9 million and $72.4 million, respectively. The increase in investment income was primarily due to an increase in dividend and other income.

    Total expenses (before taxes) for the three months ended December 31, 2023 and September 30, 2023 were $39.0 million and $36.1 million, respectively.

    Net investment income for the three months ended December 31, 2023 and September 30, 2023 was $34.9 million or $0.54 per share and $35.6 million or $0.55 per share, respectively.

    During the three months ended December 31, 2023, the Company had net realized and unrealized gains (losses) of $(3.8) million.

    Net increase in net assets resulting from operations for the three months ended December 31, 2023 was $31.1 million, or $0.48 per share.

    CAPITAL AND LIQUIDITY

    As of December 31, 2023, the Company had total principal debt outstanding of $1,263.5 million, including $311.0 million outstanding in the Company’s Sumitomo Credit Facility, $352.5 million outstanding of the debt issued through BCC Middle Market CLO 2019-1 LLC, $300.0 million outstanding in the Company’s senior unsecured notes due March 2026 and $300.0 million outstanding in the Company’s senior unsecured notes due October 2026.

    For the three months ended December 31, 2023, the weighted average interest rate on debt outstanding was 5.3%, as compared to 5.4% for the three months ended September 30, 2023.

    As of December 31, 2023, the Company had cash and cash equivalents (including foreign cash) of $49.4 million, restricted cash and cash equivalents of $63.1 million, $(7.1) million of unsettled trades, net of receivables and payables of investments, and $343.3 million of capacity under its Sumitomo Credit Facility. As of December 31, 2023, the Company had $266.1 million of undrawn investment commitments.

    As of December 31, 2023, the Company’s debt-to-equity and net debt-to-equity ratios were 1.11x and 1.02x, respectively, as compared to 1.22x and 1.12x, respectively, as of September 30, 2023(2).

    Endnotes

    1. Net investment income yields and net income returns are calculated on average net assets, or book value, for the respective periods shown.
    2. Net debt-to-equity represents principal debt outstanding less cash and cash equivalents and unsettled trades, net of receivables and payables of investments.
    3. The first quarter dividend is payable on April 30, 2024 to stockholders of record as of March 28, 2024.
    4. The weighted average yield is computed as (a) the annual stated interest rate or yield earned on the relevant accruing debt and other income producing securities plus amortization of fees and discounts on the performing debt and other income producing investments, divided by (b) the total relevant investments at amortized cost or fair value. The weighted average yield does not represent the total return to our stockholders.
    5. SLP acquired 70% of the member equity interests of the Company’s 2018-1 portfolio (“2018-1”). The Company retained 30% of the 2018-1 membership interests as a non-controlling equity interest.

    CONFERENCE CALL INFORMATION

    A conference call to discuss the Company’s financial results will be held live at 8:30 a.m. Eastern Time on February 28, 2024. Please visit BCSF’s webcast link located on the Events & Presentations page of the Investor Resources section of BCSF’s website at http://www.baincapitalspecialtyfinance.com for a slide presentation that complements the Earnings Conference Call.

    Participants are also invited to access the conference call by dialing one of the following numbers:

    • Domestic: 1-888-886-7786
    • International: 1-416-764-8658
    • Conference ID: 46709784

    All participants will need to reference “Bain Capital Specialty Finance - Fourth Quarter and Fiscal Year Ended December 31, 2023 Earnings Conference Call” once connected with the operator. All participants are asked to dial in 10-15 minutes prior to the call.

    Replay Information:

    An archived replay will be available approximately three hours after the conference call concludes through March 6, 2024 via a webcast link located on the Investor Resources section of BCSF’s website, and via the dial-in numbers listed below:

    • Domestic: 1-844-512-2921
    • International: 1-412-317-6671
    • Conference ID: 46709784

    Bain Capital Specialty Finance, Inc.

     

    Consolidated Statements of Assets and Liabilities

    (in thousands, except share and per share data)

     

    As of

    As of

    December 31, 2023

    December 31, 2022

     

    Assets

     

     

    Investments at fair value:

     

     

    Non-controlled/non-affiliate investments (amortized cost of $1,615,061 and $1,846,172, respectively)

    $

    1,593,360

    $

    1,774,947

    Non-controlled/affiliate investment (amortized cost of $132,650 and $133,808, respectively)

    147,971

    173,400

    Controlled affiliate investment (amortized cost of $554,123 and $439,958, respectively)

    557,012

    438,630

    Cash and cash equivalents

    42,995

    30,205

    Foreign cash (cost of $6,865 and $34,528, respectively)

    6,405

    29,575

    Restricted cash and cash equivalents

    63,084

    65,950

    Collateral on forward currency exchange contracts

    7,613

    9,612

    Deferred financing costs

    2,802

    3,742

    Interest receivable on investments

    37,169

    34,270

    Receivable for sales and paydowns of investments

    4,310

    18,166

    Prepaid Insurance

    210

    194

    Unrealized appreciation on forward currency exchange contracts

    —

    62

    Dividend receivable

    9,417

    13,681

    Total Assets

    $

    2,472,348

    $

    2,592,434

     

     

     

    Liabilities

     

     

    Debt (net of unamortized debt issuance costs of $7,567 and $10,197, respectively)

    $

    1,255,933

    $

    1,385,303

    Interest payable

    13,283

    12,130

    Payable for investments purchased

    11,453

    34,292

    Unrealized depreciation on forward currency exchange contracts

    2,260

    —

    Base management fee payable

    8,929

    8,906

    Incentive fee payable

    7,327

    9,216

    Accounts payable and accrued expenses

    9,581

    2,954

    Distributions payable

     

    27,116

     

    23,242

    Total Liabilities

    1,335,882

    1,476,043

     

     

     

     

     

     

     

     

    Commitments and Contingencies (See Note 10)

     

     

     

     

    Net Assets

     

     

    Common stock, par value $0.001 per share, 100,000,000,000 and 100,000,000,000 shares authorized, 64,562,265 and 64,562,265 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

    65

    65

    Paid in capital in excess of par value

    1,168,384

    1,168,384

    Total distributable loss

    (31,983)

    (52,058)

    Total Net Assets

    1,136,466

    1,116,391

    Total Liabilities and Total Net Assets

    $

    2,472,348

    $

    2,592,434

     

     

     

    Net asset value per share

    $

    17.60

    $

    17.29

     

    See Notes to Consolidated Financial Statements

    Bain Capital Specialty Finance, Inc.

     

    Consolidated Statements of Operations

    (in thousands, except share and per share data)

     

    For the Year Ended December 31,

    2023

     

    2022

     

    2021

    Income
    Investment income from non-controlled/non-affiliate investments:
    Interest from investments $

    184,921

    		$

    138,984

    		$

    153,703

    Dividend income

    62

    634

    514

    PIK income

    20,536

    13,495

    4,475

    Other income

    10,561

    15,091

    6,173

    Total investment income from non-controlled/non-affiliate investments

    216,080

    168,204

    164,865

     
    Investment income from non-controlled/affiliate investments:
    Interest from investments

    9,890

    7,470

    1,818

    Dividend income

    4,815

    4,109

    —

    PIK income

    2,308

    1,542

    5,622

    Total investment income from non-controlled/affiliate investments

    17,013

    13,121

    7,440

     
    Investment income from controlled affiliate investments:
    Interest from investments

    33,739

    19,819

    11,822

    Dividend income

    30,957

    18,401

    12,601

    PIK income

    —

    —

    666

    Total investment income from controlled affiliate investments

    64,696

    38,220

    25,089

    Total investment income

    297,789

    219,545

    197,394

     
    Expenses
    Interest and debt financing expenses

    80,008

    52,318

    51,345

    Base management fee

    36,095

    34,669

    34,888

    Incentive fee

    25,456

    19,572

    24,028

    Professional fees

    2,561

    2,959

    2,854

    Directors fees

    716

    707

    725

    Other general and administrative expenses

    7,981

    5,777

    5,038

    Total expenses before fee waivers

    152,817

    116,002

    118,878

    Base management fee waiver

    —

    —

    (4,837)

    Incentive fee waiver

    —

    —

    (4,519)

    Total expenses, net of fee waivers

    152,817

    116,002

    109,522

    Net investment income before taxes

    144,972

    103,543

    87,872

    Income tax expense, including excise tax

    3,357

    837

    134

    Net investment income

    141,615

    102,706

    87,738

     
    Net realized and unrealized gains (losses)
    Net realized loss on non-controlled/non-affiliate investments

    (62,903)

    (1,725)

    25,084

    Net realized gain (loss) on non-controlled/affiliate investments (net of taxes of $4,064, $0 and $0, respectively)

    19,006

    (1,355)

    —

    Net realized loss on controlled affiliate investments

    —

    —

    (3,858)

    Net realized gain (loss) on foreign currency transactions

    (5,134)

    5,292

    (3,496)

    Net realized gain (loss) on forward currency exchange contracts

    (407)

    20,894

    (23,773)

    Net realized loss on extinguishment of debt

    —

    (747)

    (4,859)

    Net change in unrealized appreciation on foreign currency translation

    4,050

    (3,644)

    (936)

    Net change in unrealized appreciation on forward currency exchange contracts

    (2,322)

    (5,259)

    27,935

    Net change in unrealized appreciation on non-controlled/non-affiliate investments

    49,524

    (50,309)

    (568)

    Net change in unrealized appreciation on non-controlled/affiliate investments

    (24,271)

    27,190

    12,576

    Net change in unrealized appreciation on controlled affiliate investments

    4,217

    12,437

    3,964

    Total net gains (losses)

    (18,240)

    2,774

    32,069

    Net increase in net assets resulting from operations $

    123,375

    		$

    105,480

    		$

    119,807

     
    Basic and diluted net investment income per common share $

    2.19

    		$

    1.59

    		$

    1.36

    Basic and diluted increase in net assets resulting from operations per common share $

    1.91

    		$

    1.63

    		$

    1.86

    Basic and diluted weighted average common shares outstanding

    64,562,265

    64,562,265

    64,562,265

    About Bain Capital Specialty Finance, Inc.

    Bain Capital Specialty Finance, Inc. is an externally managed specialty finance company focused on lending to middle market companies. BCSF is managed by BCSF Advisors, LP, an SEC-registered investment adviser and a subsidiary of Bain Capital Credit, LP. Since commencing investment operations on October 13, 2016, and through December 31, 2023, BCSF has invested approximately $7.0 billion in aggregate principal amount of debt and equity investments prior to any subsequent exits or repayments. BCSF’s investment objective is to generate current income and, to a lesser extent, capital appreciation through direct originations of secured debt, including first lien, first lien/last out, unitranche and second lien debt, investments in strategic joint ventures, equity investments and, to a lesser extent, corporate bonds. BCSF has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended.

    Forward-Looking Statements

    This letter may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this letter may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the U.S. Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this letter.

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