Bain Capital Specialty Finance, Inc 8-K, filed May 4, 2020
Bain Capital Specialty Finance, Inc. (BCSF)
About this 8-K
Bain Capital Specialty Finance, Inc filed this 8-K on May 4, 2020.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 4, 2020
BAIN CAPITAL SPECIALTY FINANCE, INC.
(Exact name of Registrant as Specified in Its Charter)
| 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 Since Last 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 7.01. Regulation FD Disclosure.
On May 4, 2020, Bain Capital Specialty Finance, Inc. issued a press release and stockholder letter, included herewith as Exhibit 99.1 and 99.2, respectively, and by this reference incorporated herein.
The information disclosed under Item 7.01 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, or otherwise subject to the liabilities of such Section.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1 Bain Capital Specialty Finance, Inc. Press Release, dated May 4, 2020
99.2 Bain Capital Specialty Finance, Inc. Stockholder Letter, dated May 4, 2020
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: May 4, 2020 | By: | /s/ Michael Treisman | ||
| Name: | Michael Treisman | |||
| Title: | Secretary | |||
Exhibit 99.1
Bain Capital Specialty Finance, Inc. Announces Transferable Rights Offering
BOSTON – May 4, 2020 – Bain Capital Specialty Finance, Inc. (NYSE: BCSF, the “Company”, “our” or “we”) announced today that its Board of Directors has approved the terms of a transferable rights offering to purchase shares of its common stock.
The Company will issue to stockholders of record on May 13, 2020 transferable rights to subscribe for an aggregate of up to 12,912,453 shares of the Company’s common stock. Record stockholders will receive one right for each share of common stock owned on the record date. The rights will entitle the holders to purchase one new share of common stock for every four rights held, and record stockholders who fully exercise their rights will be entitled to subscribe, subject to certain limitations and allotment, for additional shares that remain unsubscribed as a result of any unexercised rights.
“Consistent with Bain Capital Credit’s prudent and disciplined approach, we are focused on safeguarding the shareholder capital entrusted to us,” said Michael Ewald, President and Chief Executive Officer of BCSF. “As the current economic environment remains uncertain in light of COVID-19, including the duration of the economic shutdown and its full impact on the economy, we are taking the appropriate steps to properly position and equip the Company to navigate uncertain and volatile periods ahead in order to maximize long-term shareholder value.” Michael Ewald further described the Company’s rationale for the rights offering in a letter to stockholders issued concurrently with this press release.
The rights will be listed for trading on the New York Stock Exchange under the symbol “BCSF RT” and are expected to begin trading on May 15, 2020. Stockholders may exercise their rights at any time during the subscription period, which commences on May 14, 2020 and ends at 5:00 p.m., Eastern Standard Time (EST), on June 5, 2020, unless extended by the Company in its sole discretion (the “Expiration Date”). Rights holders who fully exercise all rights issued to them are entitled to subscribe for additional shares of the Company’s common stock that were not subscribed for by other holders (the “Over-Subscription Privilege”).
Certain affiliates of BCSF Advisors, LP (the “Advisor”) have indicated that they intend to fully exercise their rights to over-subscribe in order to make an aggregate investment of up to $50 million in shares of our common stock. Any over-subscription by affiliates of the Advisor will be effected only after the pro rata allocation of shares to (i) record date holders (other than affiliates of the Advisor) who fully exercise all rights issued to them and (ii) any non-record date rights holder (other than an affiliate of the Advisor) who exercises rights. Accordingly, there can be no assurance that certain affiliates of the Advisor will acquire any shares of our common stock through their exercise of over-subscription privileges.
The subscription price for the shares to be issued pursuant to the rights offering will be 92.5% of the volume-weighted average of the market price of the Company’s shares of common stock on the New York Stock Exchange (NYSE) for the five consecutive trading days ending on the Expiration Date.
Important Dates to Remember
| Record Date | May 13, 2020 (unless the offer is extended) | |
| Subscription Period | From May 14, 2020 – June 5, 2020 | |
| Expiration Date | June 5, 2020 (unless the offer is extended) | |
| Deadline for Delivery of Subscription Certificate and Payment for Shares | June 5, 2020 at 5:00 p.m. EST (unless the offer is extended) | |
| Deadline for Delivery of Notice of Guaranteed Delivery | June 5, 2020 at 5:00 p.m. EST (unless the offer is extended) | |
| Deadline for Delivery of Subscription Certificate and Payment for Shares pursuant to Notice of Guaranteed Delivery | June 9, 2020 at 5:00 p.m. EST (unless the offer is extended) |
The Company expects to use the net proceeds of this offering to (i) repay outstanding indebtedness, including indebtedness under the BCSF Revolving Credit Facility and the JPM Credit Facility, in an aggregate amount equal to at least $100 million, in order to continue to maintain an appropriate level of debt in a challenging market environment, (ii) support our existing portfolio companies, particularly in light of current market conditions, and (iii) make opportunistic investments, in accordance with our investment objectives and policies, in assets that the Advisor believes have become undervalued due to the current extreme market volatility, and on more attractive terms than we would otherwise be able to obtain under typical, less volatile market conditions.
J.P. Morgan Securities LLC, BofA Securities, Inc. and Morgan Stanley & Co. LLC are acting as Dealer Managers for the offering.
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, L.P., an SEC-registered investment adviser and a subsidiary of Bain Capital Credit, L.P. Since commencing investment operations on October 13, 2016, and through March 31, 2020, BCSF has invested approximately $3,675.5 million 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.
Investors are advised to carefully consider the investment objectives, risks and charges and expenses of Bain Capital Specialty Finance, Inc. before investing. The prospectus contains this and other important information you should know before investing in the rights. Please read it before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. This information will be available by written or oral request and free of charge by contacting us at Bain Capital Specialty Finance, Inc., 200 Clarendon Street, 37th Floor, Boston, Massachusetts 02116, Attention: Investor Relations, on our website at http://www.baincapitalbdc.com, or by calling us collect at (617) 516-2350. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider that information to be a part of the prospectus. The SEC also maintains a website at http://www.sec.gov that contains this information.
Rights Offering Information Subject to Completion
The information in this letter and the N-2 registration statement regarding the rights offering is not complete and may be changed. We may not sell these securities until the N-2 registration statement filed with the U.S. Securities and Exchange Commission is effective. This letter is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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.
Investor Contact:
Katherine Schneider
Tel. +1 212 326 9613
investors@baincapitalbdc.com
Media Contact:
Charlyn Lusk
Tel. +1 646 502 3549
clusk@stantonprm.com
Exhibit 99.2
May 4, 2020
Dear Stockholder,
Bain Capital Specialty Finance, Inc.’s (“BCSF”) investment philosophy is rooted in Bain Capital’s heritage of a disciplined and thoughtful approach to investing through rigorous bottom-up, fundamental analysis. Consistent with this approach, we are focused on safeguarding the stockholder capital entrusted to us. While we believe our investment portfolio is defensively positioned in first lien investments comprised of a highly diversified set of individual companies in durable sectors, the current economic environment remains uncertain, including the duration of the economic shutdown and the full impact on the economy.
After careful consideration with BCSF’s Board of Directors, we today announced a rights offering to our stockholders. We believe strengthening BCSF’s balance sheet is a prudent and necessary course of action in the uncertain market environment in which we are operating as it will allow us to maximize long-term stockholder value. The capital raised in the rights offering will allow BCSF to strengthen its balance sheet during these uncertain times by:
| · | De-Leveraging the Company’s Balance Sheet: The new equity capital will initially be used to repay outstanding indebtedness in order to continue to maintain an appropriate level of debt in a challenging environment. While the Company is currently in compliance with its debt requirements under its existing credit facilities and regulatory debt requirements, the capital will provide for greater cushion and increased flexibility. |
| · | Capital Resources to Support Existing Portfolio Companies: Given the global pandemic, many businesses are shut down. As such, even companies with strong balance sheets and value propositions may be in need of capital support as a result of COVID-19. We are focused on liquidity measures to position BCSF to support these portfolio companies and not impact their long-term value propositions. We believe having capital to support existing portfolio companies can help optimize outcomes for stockholders. |
| · | New Opportunistic Investments Resulting from Dislocation: In periods of extreme market volatility and dislocations, there are often undervalued investments that become available on more attractive terms than we would otherwise be able to obtain under typical, less volatile market conditions. Having additional capital to take advantage of these opportunities can provide for compelling risk-adjusted return opportunities. Depending on the Company’s leverage profile, and if excess capital permits, we may seek to opportunistically pursue new investment opportunities to grow the Company’s net investment income and expand return on equity. |
We strived to structure the rights offering to be as stockholder friendly as possible. We, and our Board of Directors, considered several factors, including other capital raising options and believe the terms of the rights offering provide for the best structure due to the following net benefits:
| · | A rights offering minimizes the dilution impact for existing stockholders as it allows for existing stockholders to subscribe for their pro rata rights; otherwise, equity offerings can be further dilutive as new stockholders are diluting existing stockholders. |
| · | The rights offering has been structured as a 1:4 offering (e.g. one share of common stock for every four rights held). The size of this offering minimizes the dilution impact for stockholders and currently provides sufficient liquidity for the Company to navigate these uncertain times. |
| · | The rights offering has been structured with a transferable right, allowing for stockholders to monetize, in part, the value of their rights if they do not exercise their rights. |
| · | Bain Capital and its affiliates have indicated that they intend to over-subscribe and to make a total investment of up to $50 million in shares of our common stock pursuant to the over-subscription privilege. Bain Capital and its affiliates will allow other investors to receive over-subscription allocations prior to their own. |
In the current environment, the Bain Capital Credit platform has been efficiently operating at full capacity with our global team working remotely. The Private Credit Group has taken additional steps in actively overseeing and managing BCSF’s portfolio. These measures include:
| · | Communicating frequently with our portfolio company management teams and related private equity sponsors to understand the expected financial performance impact of this crisis; |
| · | Re-underwriting and re-modeling our portfolio company investments to understand the impact on each portfolio company’s operations if the current economic environment persists for a longer period; and |
| · | Establishing an internal working group focused on understanding the potential financial needs of our portfolio companies and engaging with these companies and their private equity sponsors, as needed. Our working group is comprised of investment professionals across the firm who contribute deep expertise in multiple market environments and diverse viewpoints. |
As the current market environment has presented uncertain times, our focus is on capital preservation and equipping BCSF with the tools necessary to navigate through this unchartered territory ahead. We thank you for your continued support and entrusting us with your capital.
We hope you and your loved ones remain safe and healthy during this time.
Sincerely,
Michael Ewald
President & CEO and Board Member, BCSF
Managing Director, Bain Capital Credit, LP
Investors are advised to carefully consider the investment objectives, risks and charges and expenses of Bain Capital Specialty Finance, Inc. before investing. The prospectus contains this and other important information you should know before investing in the rights. Please read it before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. This information will be available by written or oral request and free of charge by contacting us at Bain Capital Specialty Finance, Inc., 200 Clarendon Street, 37th Floor, Boston, Massachusetts 02116, Attention: Investor Relations, on our website at http://www.baincapitalbdc.com, or by calling us collect at (617) 516-2350. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider that information to be a part of the prospectus. The SEC also maintains a website at http://www.sec.gov that contains this information.
Rights Offering Information Subject to Completion
The information in this press release and the N-2 registration statement regarding the rights offering is not complete and may be changed. We may not sell these securities until the N-2 registration statement filed with the U.S. Securities and Exchange Commission is effective. This letter is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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.