8-K
Bain Capital Specialty Finance, Inc. (BCSF)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) ofthe
Securities Exchange Act of 1934
Date of report (Date of earliest event reported):August 3, 2022
BAIN CAPITAL SPECIALTY FINANCE, INC.
(Exact name of Registrant as Specified in ItsCharter)
| delaware | 814-01175 | 81-2878769 **** |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 200 Clarendon Street, 37th Floor, Boston, MA | 02116 | |
| --- | --- | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including
area code: (617) 516-2000
N/A
(Former Name or Former Address, if Changed SinceLast Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $.001 par value | BCSF | New York Stock Exchange |
Item 2.02. Results of Operations and Financial Condition.
On August 3, 2022, Bain Capital Specialty Finance, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for any purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such Section. The information in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 8.01 – Other Events
On August 3, 2022, the Company issued a press release announcing the declaration of a third fiscal quarter 2022 dividend of $0.34 per share for stockholders of record as of September 30, 2022, payable on October 28, 2022. A copy of the press release is attached hereto as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| 99.1 | Press Release, dated August 3, 2022 |
|---|---|
| 104 | Cover page interactive data file (formatted as Inline XBRL) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Bain Capital Specialty Finance, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BAIN CAPITAL SPECIALTY FINANCE, INC. | |||
|---|---|---|---|
| Date: August 3, 2022 | By: | /s/ Jessica Yeager | |
| Name: | Jessica<br> Yeager | ||
| Title: | Secretary |
Exhibit 99.1
Bain Capital SpecialtyFinance, Inc. Announces June 30, 2022 Financial Results and Declares Third Quarter 2022 Dividend of $0.34 per Share
BOSTON –August 3, 2022 – Bain Capital Specialty Finance, Inc. (NYSE: BCSF, the “Company”, “our” or “we”) today announced financial results for the second quarter ended June 30, 2022, and that its Board of Directors has declared a dividend of $0.34 per share for the third quarter of 2022.
“We remain focused on executing our strategy of investing in senior secured loans to high-quality middle-market companies, which generated higher net investment income for our shareholders this quarter,” said Michael Ewald, Chief Executive Officer of BCSF. “We believe the Company is well positioned to continue to deliver attractive earnings and shareholder value over the long-term driven by our diversified portfolio of senior secured, floating rate loans and the strength of our capital structure.”
QUARTERLYHIGHLIGHTS
| · | Net<br> investment income per share was $0.41, as compared to $0.34 for the quarter ended March 31,<br> 2022; |
|---|---|
| · | Net<br> income per share was $0.27, as compared to $0.52 for the quarter ended March 31, 2022; |
| --- | --- |
| · | Net<br> asset value per share as of June 30, 2022 was $17.15, as compared to $17.22 as of March 31,<br> 2022; |
| --- | --- |
| · | During<br> the quarter, the Company made new investment fundings of $481.9 million. Sales and repayment<br> activity totaled $332.4 million, resulting in net investment fundings of $149.5 million; |
| --- | --- |
| · | Ending<br> debt-to-equity and debt-to-equity (net of cash) ratios were 1.14x and 1.07x, respectively,<br> as compared to 0.99x and 0.89x, respectively, as of March 31, 2022; |
| --- | --- |
| · | As<br> of June 30, 2022, the Company had one portfolio company on non-accrual status, representing<br> 1.4% of the total investment portfolio at fair value; |
| --- | --- |
| · | Subsequent<br> to quarter-end, the Company’s Board of Directors declared a dividend of $0.34 per share<br> for the third quarter of 2022 payable to stockholders of record as of September 30, 2022^(1)^;<br> and |
| --- | --- |
| · | In<br> July, the Company increased the total commitments to its Sumitomo Credit Facility to $485.0<br> million, up from $300.0 million. |
| --- | --- |
SELECTEDFINANCIAL HIGHLIGHTS
| ( in millions, unless<br> otherwise noted) | Q1<br> 2022 | ||
|---|---|---|---|
| Net investment income per share | 0.41 | $ | 0.34 |
| Net investment income | 26.7 | $ | 21.7 |
| Earnings per share | 0.27 | $ | 0.52 |
| Dividends per share declared and<br> payable | 0.34 | $ | 0.34 |
| (<br> in millions, unless otherwise noted) | As of<br> <br>June 30, 2022 | As of<br> <br>March 31, 2022 | |
| Total fair value of investments | 2,287.0 | $ | 2,154.7 |
| Total assets | 2,426.0 | $ | 2,310.6 |
| Total net assets | 1,107.0 | $ | 1,111.7 |
| Net asset value per share | 17.15 | $ | 17.22 |
All values are in US Dollars.
PORTFOLIOAND INVESTMENT ACTIVITY
For the three months ended June 30, 2022, the Company invested $481.9 million in 50 portfolio companies, including $253.7 million in 11 new companies, $216.8 million in 38 existing companies and $11.4 million in International Senior Loan Program, LLC (“ISLP”). The Company had $332.4 million of principal repayments and sales in the quarter, resulting in net investment fundings of $149.5 million.
For the three months ended June 30, 2022, ISLP invested $74.5 million in six portfolio companies. ISLP had $27.7 million of principal repayments and sales in the quarter. On a net basis, ISLP’s investments in the quarter totaled $46.8 million.
For the three months ended June 30, 2022, SLP invested $82.3 million in 12 portfolio companies. SLP had $17.6 million of principal repayments and sales in the quarter. On a net basis, SLP’s investments in the quarter totaled $64.7 million.
Investment Activityfor the Quarter Ended June 30, 2022:
| ($ in millions) | Q2<br> 2022 | Q1<br> 2022 | |||
|---|---|---|---|---|---|
| Investment Fundings | $ | 481.9 | $ | 371.0 | |
| Sales and<br> Repayments | $ | 332.4 | $ | 521.0 | |
| Net Investment Activity | $ | 149.5 | $ | (150.0 | ) |
As of June 30, 2022, the Company’s investment portfolio had a fair value of $2,287.0 million, comprised of investments in 122 portfolio companies operating across 31 different industries.
Investment Portfolioat Fair Value as of June 30, 2022:
| Investment Type | in Millions | %<br> of Total | ||
|---|---|---|---|---|
| First Lien Senior Secured<br> Loans | 71.4 | % | ||
| Second Lien Senior Secured Loans | 4.2 | |||
| Subordinated Debt | 1.7 | |||
| Equity Interest | 9.4 | |||
| Preferred Equity | 3.3 | |||
| Warrants | 0.0 | |||
| Investment Vehicles | 10.0 | |||
| Subordinated<br> Note in ISLP | 6.2 | |||
| Equity Interest<br> in ISLP | 2.0 | |||
| Subordinated<br> Note in SLP | 1.6 | |||
| Preferred<br> and Equity Interest in SLP | 0.2 | |||
| Total | 100.0 | % |
All values are in US Dollars.
As of June 30, 2022, the weighted average yield on the investment portfolio at amortized cost and fair value were 8.5% and 8.8%, respectively, as compared to 7.9% and 8.1%, respectively, as of March 31, 2022.^(2)^ 94.8% of the Company’s debt investments at fair value were in floating rate securities.
As of June 30, 2022, one portfolio company was on non-accrual status, representing 2.2% and 1.4% of the total investment portfolio at amortized cost and fair value, respectively.
As of June 30, 2022, ISLP’s investment portfolio had an aggregate fair value of $541.3 million, comprised of investments in 31 portfolio companies operating across 14 different industries. The investment portfolio on a fair value basis was comprised of 96.4% first lien senior secured loans and 3.6% second lien senior secured loans. 100% of ISLP’s debt investments at fair value were in floating rate securities.
As of June 30, 2022, SLP’s investment portfolio had an aggregate fair value of $433.1 million, comprised of investments in 45 portfolio companies operating across 20 different industries.^(3)^ The investment portfolio on a fair value basis was comprised of 95.0% first lien senior secured loans and 5.0% second lien senior secured loans. 100% of SLP’s debt investments at fair value were in floating rate securities.
RESULTS OF OPERATIONS
For the three months ended June 30, 2022 and March 31, 2022, total investment income was $52.4 million and $46.0 million, respectively. The increase in investment income was primarily due to an increase in other income and dividend income.
Total expenses (before taxes) for the three months ended June 30, 2022 and March 31, 2022 were $25.6 million and $24.3 million, respectively. The increase was primarily driven by an increase in incentive fees and interest and debt financing expenses.
Net investment income for the three months ended June 30, 2022 and March 31, 2022 was $26.7 million or $0.41 per share and $21.7 million or $0.34 per share, respectively.
During the three months ended June 30, 2022, the Company had net realized and unrealized gains (losses) of $(9.5) million.
Net increase in net assets resulting from operations for the three months ended June 30, 2022 was $17.2 million, or $0.27 per share.
CAPITALAND LIQUIDITY
As of June 30, 2022, the Company had total principal debt outstanding of $1,256.7 million, including $191.7 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, $112.5 million outstanding in the Company’s senior unsecured notes due 2023, $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 June 30, 2022, the weighted average interest rate on debt outstanding was 3.2%, as compared to 2.9% for the three months ended March 31, 2022.
As of June 30, 2022, the Company had cash and cash equivalents (including foreign cash) of $43.0 million, $108.3 million of capacity under its Sumitomo Credit Facility and $50.0 million of capacity under the Revolving Advisor Loan. As of June 30, 2022, the Company had $283.3 million of undrawn investment commitments.
As of June 30, 2022, the Company’s debt-to-equity and debt-to-equity (net of cash) ratios were 1.14x and 1.07x, respectively, as compared to 0.99x and 0.89x, respectively, as of March 31, 2022.
Subsequent to quarter-end, the Company increased its total commitments to the Sumitomo Credit Facility from $300.0 million to $485.0 million.
Endnotes
| (1) | The<br> third quarter dividend is payable on October 28, 2022 to holders of record as of September<br> 30, 2022. |
|---|---|
| (2) | The<br> weighted average yield is computed as (a) the annual stated interest rate or yield earned<br> on the relevant accruing debt and other income producing securities plus amortization of<br> fees and discounts on the performing debt and other income producing investments, divided<br> by (b) the total relevant investments at amortized cost. The weighted average yield does<br> not represent the total return to our stockholders. |
| --- | --- |
| (3) | SLP<br> acquired 70% of the member equity interests of the Company’s 2018-1 portfolio (“2018-1”).<br> The Company retained 30% of the 2018-1 membership interests as a non-controlling equity interest. |
| --- | --- |
CONFERENCECALL INFORMATION
A conference call to discuss the Company’s financial results will be held live at 8:30 a.m. Eastern Time on August 4, 2022. Please visit BCSF’s webcast link located on the Events & Presentations page of the Investor Resources section of BCSF’s website at http://www.baincapitalbdc.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:<br> 1-800-289-0571 |
|---|---|
| · | International:<br> 1-323-794-2093 |
| --- | --- |
| · | Conference<br> ID: 9543241 |
| --- | --- |
All participants will need to reference “Bain Capital Specialty Finance - Second Quarter Ended June 30, 2022 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 August 11, 2022 via a webcast link located on the Investor Resources section of BCSF’s website, and via the dial-in numbers listed below:
| · | Domestic:<br> 1-844-512-2921 |
|---|---|
| · | International:<br> 1-412-317-6671 |
| --- | --- |
| · | Conference<br> ID: 9543241# |
| --- | --- |
Bain Capital SpecialtyFinance, Inc.
Consolidated Statementsof Assets and Liabilities
(inthousands, except share and per share data)
| As<br> of | |||||
|---|---|---|---|---|---|
| December<br> 31, 2021 | |||||
| Assets | |||||
| Investments at fair value: | |||||
| Non-controlled/non-affiliate<br> investments (amortized cost of 1,837,653 and 1,921,970, respectively) | 1,784,423 | $ | 1,901,054 | ||
| Non-controlled/affiliate investment<br> (amortized cost of 124,564 and 100,888, respectively) | 151,735 | 113,290 | |||
| Controlled affiliate investment (amortized<br> cost of 357,458 and 288,526, respectively) | 350,880 | 274,761 | |||
| Cash and cash equivalents | 38,013 | 87,443 | |||
| Foreign cash (cost of 8,902 and 30,877,<br> respectively) | 5,003 | 29,979 | |||
| Restricted cash and cash equivalents | 25,910 | 86,159 | |||
| Collateral on forward currency exchange<br> contracts | - | 2,815 | |||
| Deferred financing costs | 1,961 | 2,178 | |||
| Interest receivable on investments | 27,776 | 19,269 | |||
| Receivable for sales and paydowns of<br> investments | 13,863 | 30,334 | |||
| Prepaid Insurance | 559 | 193 | |||
| Unrealized appreciation on forward currency<br> exchange contracts | 15,095 | 5,321 | |||
| Dividend receivable | 10,826 | 18,397 | |||
| Total<br> Assets | 2,426,044 | $ | 2,571,193 | ||
| Liabilities | |||||
| Debt (net of unamortized debt issuance<br> costs of 12,440 and 15,718, respectively) | 1,244,283 | $ | 1,414,982 | ||
| Interest payable | 7,164 | 7,058 | |||
| Payable for investments purchased | 27,052 | 7,594 | |||
| Base management fee payable | 8,451 | 8,792 | |||
| Incentive fee payable | 4,069 | 4,727 | |||
| Collateral on forward currency exchange<br> contracts | 2,743 | - | |||
| Accounts payable and accrued expenses | 3,317 | 6,083 | |||
| Distributions payable | 21,951 | 21,951 | |||
| Total<br> Liabilities | 1,319,030 | 1,471,187 | |||
| Commitments and Contingencies (See Note<br> 10) | |||||
| Net Assets | |||||
| Common stock, par value 0.001 per share,<br> 100,000,000,000 and 100,000,000,000 shares authorized, 64,562,265 and 64,562,265 shares issued and outstanding as of June 30, 2022<br> and December 31, 2021, respectively | 65 | 65 | |||
| Paid in capital in excess of par value | 1,168,384 | 1,168,384 | |||
| Total distributable<br> earnings (loss) | (61,435 | ) | (68,443 | ) | |
| Total<br> Net Assets | 1,107,014 | 1,100,006 | |||
| Total Liabilities<br> and Total Net assets | 2,426,044 | $ | 2,571,193 | ||
| Net asset value per share | 17.15 | $ | 17.04 |
All values are in US Dollars.
See Notes to Consolidated Financial Statements
Bain Capital SpecialtyFinance, Inc.
Consolidated Statementsof Operations
(in thousands, exceptshare and per share data)
(Unaudited)
| For<br> the Three Months <br><br> Ended June 30 | For<br> the Three Months<br><br> Ended June 30 | For<br> the Six Months<br> Ended June 30 | For<br> the Six Months<br> Ended June 30 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Income | ||||||||||||
| Investment income from<br> non-controlled/non-affiliate investments: | ||||||||||||
| Interest<br> from investments | $ | 29,769 | $ | 36,706 | $ | 64,056 | $ | 76,619 | ||||
| Dividend income | - | - | 108 | - | ||||||||
| PIK income | 2,375 | 1,082 | 4,883 | 2,062 | ||||||||
| Other<br> income | 7,690 | 875 | 8,155 | 4,331 | ||||||||
| Total investment income<br> from non-controlled/non-affiliate investments | 39,834 | 38,663 | 77,202 | 83,012 | ||||||||
| Investment income from<br> non-controlled/affiliate investments: | ||||||||||||
| Interest from investments | 1,901 | 477 | 2,225 | 900 | ||||||||
| Dividend income | 1,851 | - | 1,851 | - | ||||||||
| PIK income | 45 | 1,366 | 1,449 | 2,752 | ||||||||
| Total investment income<br> from non-controlled/affiliate investments | 3,797 | 1,843 | 5,525 | 3,652 | ||||||||
| Investment income from<br> controlled affiliate investments: | ||||||||||||
| Interest from investments | 4,214 | 2,572 | 7,636 | 4,209 | ||||||||
| Dividend income | 4,519 | 2,929 | 8,012 | 4,964 | ||||||||
| PIK<br> income | - | 483 | - | 483 | ||||||||
| Total<br> investment income from controlled affiliate investments | 8,733 | 5,984 | 15,648 | 9,656 | ||||||||
| Total<br> investment income | 52,364 | 46,490 | 98,375 | 96,320 | ||||||||
| Expenses | ||||||||||||
| Interest and debt financing<br> expenses | 11,027 | 13,017 | 21,670 | 24,850 | ||||||||
| Base management fee | 8,451 | 8,623 | 16,820 | 17,320 | ||||||||
| Incentive fee | 4,069 | 8,042 | 7,380 | 14,771 | ||||||||
| Professional fees | 446 | 714 | 836 | 1,673 | ||||||||
| Directors fees | 179 | 171 | 354 | 343 | ||||||||
| Other<br> general and administrative expenses | 1,477 | 1,241 | 2,897 | 2,629 | ||||||||
| Total<br> expenses before fee waivers | 25,649 | 31,808 | 49,957 | 61,586 | ||||||||
| Base management fee<br> waiver | - | (2,723 | ) | - | (4,837 | ) | ||||||
| Incentive<br> fee waiver | - | (4,519 | ) | - | (4,519 | ) | ||||||
| Total<br> expenses, net of fee waivers | 25,649 | 24,566 | 49,957 | 52,230 | ||||||||
| Net<br> investment income | 26,715 | 21,924 | 48,418 | 44,090 | ||||||||
| Net realized and unrealized<br> gains (losses) | ||||||||||||
| Net realized gain (loss)<br> on non-controlled/non-affiliate investments | (2,576 | ) | 4,845 | (1,159 | ) | 23,258 | ||||||
| Net realized gain (loss)<br> on controlled affiliate investments | - | - | - | (3,237 | ) | |||||||
| Net realized gain (loss)<br> on foreign currency transactions | 3,166 | 1,005 | 2,678 | (2,021 | ) | |||||||
| Net realized gain (loss)<br> on forward currency exchange contracts | 2,018 | (18,396 | ) | 3,261 | (21,688 | ) | ||||||
| Net change in unrealized<br> appreciation (depreciation) on foreign currency translation | (2,051 | ) | (65 | ) | (1,705 | ) | 322 | |||||
| Net change in unrealized<br> appreciation on forward currency exchange contracts | 8,124 | 16,028 | 9,775 | 20,604 | ||||||||
| Net change in unrealized<br> appreciation (depreciation) on non-controlled/non-affiliate investments | (27,206 | ) | 4,426 | (32,314 | ) | 1,202 | ||||||
| Net change in unrealized<br> (depreciation) on non-controlled/affiliate investments | 9,102 | 5,780 | 14,769 | 5,407 | ||||||||
| Net<br> change in unrealized appreciation (depreciation) on controlled affiliate investments | (63 | ) | 6,886 | 7,187 | 6,249 | |||||||
| Total<br> net gains | (9,486 | ) | 20,509 | 2,492 | 30,096 | |||||||
| Net<br> increase in net assets resulting from operations | $ | 17,229 | $ | 42,433 | $ | 50,910 | $ | 74,186 | ||||
| Basic and diluted net investment income<br> per common share | $ | 0.41 | $ | 0.34 | $ | 0.75 | $ | 0.68 | ||||
| Basic and diluted increase in net assets<br> resulting from operations per common share | $ | 0.27 | $ | 0.66 | $ | 0.79 | $ | 1.15 | ||||
| Basic and diluted weighted average common<br> shares outstanding | 64,562,265 | 64,562,265 | 64,562,265 | 64,562,265 |
See Notes to Consolidated Financial Statements
About Bain CapitalSpecialty 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 June 30, 2022, BCSF has invested approximately $5.8 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-LookingStatements
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.
Investor Contact:
Katherine Schneider
Tel. +1 212 803 9613
investors@baincapitalbdc.com
Media Contact:
Charlyn Lusk
Tel. +1 646 502 3549
clusk@stantonprm.com
