UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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): November 3, 2021

 

 

 

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 2.02. Results of Operations and Financial Condition.

 

On November 3, 2021, Bain Capital Specialty Finance, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2021. 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 November 3, 2021, the Company issued a press release announcing the declaration of a fourth fiscal quarter 2021 dividend of $0.34 per share for stockholders of record as of December 31, 2021, payable on January 28, 2022. A copy of the press release is attached hereto as Exhibit 99.1.

 

Item 9.01.Financial Statements and Exhibits.

 

(d)            Exhibits.

 

99.1Press Release, dated November 3, 2021

 

 

 

 

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: November 3, 2021 By: /s/ Michael Treisman
    Name: Michael Treisman
    Title: Secretary

 

 

 

 

Exhibit 99.1

 

 

Bain Capital Specialty Finance, Inc. Announces September 30, 2021 Financial Results and Declares Fourth Quarter 2021 Dividend of $0.34 per Share

 

BOSTON – November 3, 2021 – Bain Capital Specialty Finance, Inc. (NYSE: BCSF, the “Company”, “our” or “we”) today announced financial results for the third quarter ended September 30, 2021, and that its Board of Directors has declared a dividend of $0.34 per share for the fourth quarter of 2021.

 

“Our positive third quarter earnings results were driven by higher interest income and continued stable credit quality across our diversified portfolio,” said Michael Ewald, Chief Executive Officer of BCSF. “We also had a strong quarter of new origination activity, demonstrating the strength of Bain Capital Credit’s Private Credit Group in sourcing compelling new investment opportunities in the middle market.”

 

QUARTERLY HIGHLIGHTS

 

·Net investment income per share was $0.34, as compared to $0.34 for the quarter ended June 30, 2021;

 

·Net income per share was $0.36, as compared to $0.66 for the quarter ended June 30, 2021;

 

·Net asset value per share as of September 30, 2021 was $17.03, as compared to $17.01 as of June 30, 2021;

 

·Gross and net investment fundings were $286.4 million and $31.5 million, respectively. Ending debt-to-equity (net of cash) ratio was 1.15x, as compared to 1.12x as of June 30, 2021;

 

·No investments were on non-accrual status as of September 30, 2021;

 

·Subsequent to quarter-end, the Company’s Board of Directors declared a dividend of $0.34 per share for the fourth quarter of 2021 payable to stockholders of record as of December 31, 2021(1); and

 

·On October 13, 2021, the Company closed an offering of $300.0 million aggregate principal amount of 2.55% unsecured notes due 2026. The net proceeds of the offering were primarily used to pay down debt under the Company’s revolving credit facilities.

 

SELECTED FINANCIAL HIGHLIGHTS

 

($ in millions, unless otherwise noted)  Q3 2021   Q2 2021 
Net investment income per share  $0.34   $0.34 
Net investment income  $21.8   $21.9 
Earnings per share  $0.36   $0.66 
Dividends per share declared and payable  $0.34   $0.34 

 

($ in millions, unless otherwise noted)   As of
 September 30, 2021		     As of
 June 30, 2021		  
Total fair value of investments   $ 2,356.7     $ 2,319.5  
Total assets   $ 2,498.7     $ 2,449.3  
Total net assets   $ 1,099.7     $ 1,098.3  
Net asset value per share   $ 17.03     $ 17.01  

 

 

 

 

PORTFOLIO AND INVESTMENT ACTIVITY

 

For the three months ended September 30, 2021, the Company invested $286.4 million in 39 portfolio companies, including $229.1 million in 10 new companies, $46.2 million in 28 existing companies and $11.1 million in the ISLP. The Company had $254.9 million of principal repayments and sales in the quarter. On a net basis, our investments in the quarter totaled $31.5 million.

 

For the three months ended September 30, 2021, the ISLP invested $63.5 million in five portfolio companies. The ISLP had $62.3 million of principal repayments and sales in the quarter. On a net basis, ISLP’s investments in the quarter totaled $1.2 million.

 

Investment Activity for the Quarter Ended September 30, 2021:

 

($ in millions)  Q3 2021   Q2 2021 
Investment Fundings  $286.4   $213.2 
Sales and Repayments  $254.9   $257.7 
Net Investment Activity  $31.5   $(44.5)

 

As of September 30, 2021, the Company’s investment portfolio had a fair value of $2,356.7 million, comprised of investments in 105 portfolio companies operating across 29 different industries.

 

Investment Portfolio at Fair Value as of September 30, 2021:

 

Investment Type  $ in Millions   % of Total 
First Lien Senior Secured Loans  $1,887.2    80.1%
Second Lien Senior Secured Loans   116.2    4.9 
Subordinated Debt   16.8    0.7 
Equity Interest   160.9    6.8 
Preferred Equity   32.2    1.4 
Warrants   0.1    0.0 
Investment Vehicles   143.3    6.1 
Subordinated Note in ISLP   105.9    4.5 
Equity Interest in ISLP   37.4    1.6 
Total  $2,356.7    100.0%

 

As of September 30, 2021, the weighted average yield on the investment portfolio at amortized cost and fair value were 7.5% and 7.6%, respectively, as compared to 7.5% and 7.7%, respectively, as of June 30, 2021.(2) 98.9% of the Company’s debt investments at fair value were in floating rate securities.

 

As of September 30, 2021, no investments were on non-accrual status.

 

As of September 30, 2021, ISLP’s investment portfolio had an aggregate fair value of $395.8 million, comprised of investments in 23 portfolio companies operating across 10 different industries. The investment portfolio on a fair value basis was comprised of 96.7% first lien senior secured loans and 3.3% second lien senior secured loans. 100% of ISLP’s debt investments at fair value were in floating rate securities.

 

RESULTS OF OPERATIONS

 

For the three months ended September 30, 2021 and June 30, 2021, total investment income was $49.5 million and $46.5 million, respectively. The increase in investment income was primarily due to an increase in prepayment related income and other income.

 

Total expenses (before taxes), net of fee waivers for the three months ended September 30, 2021 and June 30, 2021 were $27.8 million and $24.6 million, respectively. The increase was primarily driven by an increase in investment advisory fees as a result of no fee waivers by the Advisor given the Company’s net investment income coverage of the dividend during the quarter ended September 30, 2021.

 

 

 

 

 

Net investment income for the three months ended September 30, 2021 and June 30, 2021 was $21.8 million or $0.34 per share and $21.9 million or $0.34 per share, respectively.

 

During the three months ended September 30, 2021, the Company had net realized and unrealized gains of $1.6 million.

 

Net increase in net assets resulting from operations for the three months ended September 30, 2021 was $23.3 million, or $0.36 per share.

 

CAPITAL AND LIQUIDITY

 

As of September 30, 2021, the Company had total principal debt outstanding of $1,356.7 million, including $179.7 million outstanding in the Company’s credit facility with JPMorgan Chase Bank, National Association (the “JPM Credit Facility”), $365.7 million outstanding of the notes issued through BCC Middle Market CLO 2018-1 LLC, $398.8 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 and $300.0 million outstanding in the Company’s senior unsecured notes due 2026.

 

For the three months ended September 30, 2021, the weighted average interest rate on debt outstanding was 3.0%, as compared to 3.2% for the three months ended June 30, 2021.

 

As of September 30, 2021, the Company had cash and cash equivalents (including foreign cash) of $35.1 million, $270.3 million of capacity under its JPM Credit Facility and $50.0 million of capacity under the Revolving Advisor Loan. As of September 30, 2021, the Company had $225.3 million of undrawn investment commitments.

 

As of September 30, 2021, the Company’s debt-to-equity and debt-to-equity (net of cash) ratios were 1.23x and 1.15x, respectively, as compared to 1.20x and 1.12x, respectively, as of June 30, 2021.

 

As of September 30, 2021, the Company was in compliance with all terms under its secured credit facilities.

 

During the quarter, the Company repurchased $37.5 million of its senior 8.50% unsecured notes due 2023 at a total cost of $39.5 million.

 

Endnotes

 

(1)The fourth quarter dividend is payable on January 28, 2022 to holders of record as of December 31, 2021.

 

(2)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. The weighted average yield does not represent the total return to our stockholders.

 

CONFERENCE CALL INFORMATION

 

A conference call to discuss the Company’s financial results will be held live at 8:00 a.m. Eastern Time on November 4, 2021. 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: 1-800-458-4121
·International: 1-323-794-2597
·Conference ID: 7785735

 

 

 

 

All participants will need to reference “Bain Capital Specialty Finance - Third Quarter Ended September 30, 2021 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 November 11, 2021 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: 7785735#

 

 

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data

 

   As of   As of 
   September 30, 2021   December 30, 2021 
   (Unaudited)     
Assets          
Investments at fair value:          
Non-controlled/non-affiliate investments (amortized cost of $2,023,858 and $2,281,809, respectively)  $2,005,635   $2,261,461 
Non-controlled/affiliate investment (amortized cost of $99,438 and $93,089, respectively)   107,576    92,915 
Controlled affiliate investment (amortized cost of $256,766 and $147,841, respectively)   243,460    130,112 
Cash and cash equivalents   34,277    53,704 
Foreign cash (cost of $1,033 and $976, respectively)   829    972 
Restricted cash and cash equivalents   57,802    27,026 
Collateral on forward currency exchange contracts   4,564    4,934 
Deferred financing costs   864    3,131 
Interest receivable on investments   20,943    15,720 
Receivable for sales and paydowns of investments   3,850    5,928 
Prepaid Insurance   376    - 
Unrealized appreciation on forward currency exchange contracts   4,071    - 
Dividend receivable   14,417    7,589 
Total Assets  $2,498,664   $2,603,492 
           
Liabilities          
Debt (net of unamortized debt issuance costs of $10,500 and $7,147, respectively)  $1,346,183   $1,458,360 
Interest payable   8,471    8,223 
Payable for investments purchased   5,400    10,991 
Unrealized depreciation on forward currency exchange contracts   -    22,614 
Base management fee payable   8,776    6,289 
Incentive fee payable   4,531    3,799 
Accounts payable and accrued expenses   3,673    3,261 
Distributions payable   21,951    21,951 
Total Liabilities   1,398,985    1,535,488 
Commitments and Contingencies          
Net Assets          
Preferred stock, $0.001 par value per share, 10,000,000,000 shares authorized, none issued and outstanding
as of September 30, 2021 and December 31, 2020, respectively		  $-   $- 
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 September 30, 2021 and December 31, 2020, respectively		   65    65 
Paid in capital in excess of par value   1,166,453    1,166,453 
Total distributable earnings (loss)   (66,839)   (98,514)
Total Net Assets   1,099,679    1,068,004 
Total Liabilities and Total Net assets  $2,498,664   $2,603,492 
Net asset value per share  $17.03   $16.54 

 

1

 

 

Bain Capital Specialty Finance, Inc.
                               
Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)

 

   For the Three Months Ended September 30   For the Three Months Ended September 30   For the Three Months Ended September 30   For the Three Months Ended September 30 
   2021   2020   2021   2020 
Income                    
Interest from investments  $37,821   $43,558   $114,439   $135,576 
Dividend income   38    34    38    748 
PIK income   1,046    -    3,108    - 
Other income   1,181    607    5,512    1,106 
Total investment income from non-controlled/non-affiliate investments   40,086    44,199    123,097    137,430 
                     
Investment income from non-controlled/affiliate investments:                    
Interest from investments   455    56    1,355    56 
PIK income   1,421    -    4,173    - 
Total investment income from non-controlled/affiliate investments   1,876    56    5,528    56 
                     
Investment income from controlled affiliate investments:                    
Interest from investments   4,983    715    9,192    2,225 
Dividend income   2,600    1,847    7,564    6,473 
PIK income   -    -    483    - 
Total investment income from controlled affiliate investments   7,583    2,562    17,239    8,698 
                     
Total investment income   49,545    46,817    145,864    146,184 
Expenses                    
Interest and debt financing expenses   12,265    14,426    37,115    49,614 
Base management fee   8,776    8,885    26,096    26,250 
Incentive fee   4,531    -    19,301    - 
Professional fees   581    296    2,254    1,909 
Directors fees   186    209    529    555 
Other general and administrative expenses   1,445    1,545    4,075    3,878 
Total expenses before fee waivers   27,784    25,361    89,370    82,206 
Base management fee waiver   -    -    (4,837)   - 
Incentive fee waiver   -    -    (4,519)   - 
Total expenses, net of fee waivers   27,784    25,361    80,014    82,206 
Net investment income   21,761    21,456    65,850    63,978 
                     
Net realized and unrealized gains (losses)                    
Net realized gain (loss) on non-controlled/non-affiliate investments   (668)   (24,263)   22,589    (34,667)
Net realized loss on controlled affiliate investments   (621)   -    (3,858)   - 
Net realized gain (loss) on foreign currency transactions   (72)   (19)   (2,093)   (368)
Net realized gain (loss) on forward currency exchange contracts   (2,085)   (130)   (23,773)   6,472 
Net realized loss on extinguishment of debt   (2,546)   -    (2,546)   - 
Net change in unrealized appreciation (depreciation) on foreign currency translation   (508)   194    (186)   89 
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   6,080    (11,177)   26,685    (7,921)
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate investments   922    73,892    2,125    (45,077)
Net change in unrealized appreciation on non-controlled/affiliate investments   2,905    1,689    8,312    4,697 
Net change in unrealized appreciation (depreciation) on controlled affiliate investments   (1,826)   (10,185)   4,423    (18,421)
Total net gains (losses)   1,581    30,001    31,678    (95,196)
Net increase (decrease) in net assets resulting from operations  $23,342   $51,457  $97,528   $(31,218)
 Basic and diluted net investment income per common share  $0.34   $0.33   $1.02   $1.13 
 Basic and diluted increase (decrease) in net assets resulting from operations per common share  $0.36   $0.80   $1.51   $(0.55)
 Basic and diluted weighted average common shares outstanding   64,562,265    64,562,265    64,562,265    56,692,267 

  

 

 

 

Bain Capital Specialty Finance, Inc.

 

Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

   For the Three
Months Ended
June 30,		   For the Three
Months Ended
June 30,		   For the Six
Months Ended
June 30,		   For the Six
Months Ended
June 30,		 
   2021   2020   2021   2020 
Income                    
Investment income from non-controlled/non-affiliate investments:                    
Interest from investments  $36,706   $44,147   $76,619   $92,018 
Dividend income   -    681    -    714 
PIK income   1,082    -    2,062    - 
Other income   875    59    4,331    499 
Total investment income from non-controlled/non-affiliate investments   38,663    44,887    83,012    93,231 
                     
Investment income from non-controlled/affiliate investments:                    
Interest from investments   477    -    900    - 
PIK income   1,366    -    2,752    - 
Total investment income from non-controlled/affiliate investments   1,843    -    3,652    - 
                     
Investment income from controlled affiliate investments:                    
Interest from investments   2,572    738    4,209    1,510 
Dividend income   2,929    2,246    4,964    4,626 
PIK income   483    -    483    - 
Total investment income from controlled affiliate investments   5,984    2,984    9,656    6,136 
Total investment income   46,490    47,871    96,320    99,367 
                     
Expenses                    
Interest and debt financing expenses   13,017    17,312    24,850    35,188 
Base management fee   8,623    8,639    17,320    17,365 
Incentive fee   8,042    -    14,771    - 
Professional fees   714    643    1,673    1,613 
Directors fees   171    171    343    346 
Other general and administrative expenses   1,241    1,084    2,629    2,333 
Total expenses before fee waivers   31,808    27,849    61,586    56,845 
Base management fee waiver   (2,723)   -    (4,837)   - 
Incentive fee waiver   (4,519)   -    (4,519)   - 
Total expenses, net of fee waivers   24,566    27,849    52,230    56,845 
Net investment income   21,924    20,022    44,090    42,522 
                     
Net realized and unrealized gains (losses)                    
Net realized gain (loss) on non-controlled/non-affiliate investments   4,845    52    23,258    (10,404)
Net realized loss on controlled affiliate investments   -    -    (3,237)   - 
Net realized gain (loss) on foreign currency transactions   1,005    66    (2,021)   (349)
Net realized gain (loss) on forward currency exchange contracts   (18,396)   5,097    (21,688)   6,602 
Net change in unrealized appreciation (depreciation) on foreign currency translation   (65)   104    322    (105)
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts   16,028    (9,865)   20,604    3,256 
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate investments   4,426    10,418    1,202    (118,969)
Net change in unrealized appreciation on non-controlled/affiliate investments   5,780    3,008    5,407    3,008 
Net change in unrealized appreciation (depreciation) on controlled affiliate investments   6,886    (7,130)   6,249    (8,236)
Total net gains (losses)   20,509    1,750    30,096    (125,197)
                     
Net increase (decrease) in net assets resulting from operations  $42,433   $21,772#  $74,186   $(82,675)
                     
Basic and diluted net investment income per common share  $0.34   $0.37   $0.68   $0.81 
Basic and diluted increase (decrease) in net assets resulting from operations per common share  $0.66   $0.40   $1.15   $(1.57)
Basic and diluted weighted average common shares outstanding   64,562,265    53,778,239    64,562,265    52,714,025 

 

 

 

 

 

 

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 September 30, 2021, BCSF has invested approximately $4.7 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.

 

Investor Contact:

Katherine Schneider

Tel. +1 212 803 9613

[email protected]

 

Media Contact:

Charlyn Lusk

Tel. +1 646 502 3549

[email protected]