[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents unaudited consolidated financial statements and management's discussion and analysis [Item 1. Consolidated Financial Statements](index=2&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents unaudited consolidated financial statements, cash flows, and investment schedules [Consolidated Statements of Assets and Liabilities](index=2&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities%20as%20of%20September%2030%2C%202022%20(unaudited)%20and%20December%2031%2C%202021) Total assets and liabilities decreased slightly from 2021 to 2022, leading to a minor reduction in net assets | Metric | As of Sep 30, 2022 (in thousands) | As of Dec 31, 2021 (in thousands) | Change (in thousands) | | :----- | :-------------------------------- | :-------------------------------- | :-------------------- | | Total Assets | $2,521,383 | $2,571,193 | $(49,810) | | Total Liabilities | $1,425,269 | $1,471,187 | $(45,918) | | Total Net Assets | $1,096,114 | $1,100,006 | $(3,892) | | Net Asset Value per Share | $16.98 | $17.04 | $(0.06) | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20nine%20months%20ended%20September%2030%2C%202022%20and%202021%20(unaudited)) Net investment income increased in 2022, but net assets from operations decreased due to realized and unrealized losses | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Total Investment Income | $62,815 | $49,545 | $161,190 | $145,864 | | Total Expenses, net of fee waivers | $28,712 | $27,784 | $78,669 | $80,014 | | Net Investment Income | $34,103 | $21,761 | $82,521 | $65,850 | | Net Realized Gain (Loss) | $13,962 | $(5,992) | $18,742 | $(9,681) | | Net Change in Unrealized Appreciation (Depreciation) | $(37,014) | $7,573 | $(39,302) | $41,359 | | Net Increase in Net Assets from Operations | $11,051 | $23,342 | $61,961 | $97,528 | | Basic and Diluted Net Investment Income per Share | $0.53 | $0.34 | $1.28 | $1.02 | | Basic and Diluted Increase in Net Assets per Share | $0.17 | $0.36 | $0.96 | $1.51 | [Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets%20for%20the%20three%20and%20nine%20months%20ended%20September%2030%2C%202022%20and%202021%20(unaudited)) Total net assets decreased in 2022, driven by unrealized depreciation and stockholder distributions, despite increased net investment income | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Net Investment Income | $34,103 | $21,761 | $82,521 | $65,850 | | Net Realized Gain (Loss) | $13,962 | $(5,992) | $18,742 | $(9,681) | | Net Change in Unrealized Appreciation (Depreciation) | $(37,014) | $7,573 | $(39,302) | $41,359 | | Net Increase in Net Assets from Operations | $11,051 | $23,342 | $61,961 | $97,528 | | Stockholder Distributions | $(21,951) | $(21,951) | $(65,853) | $(65,853) | | Total Increase (Decrease) in Net Assets | $(10,900) | $1,391 | $(3,892) | $31,675 | | Net Assets at End of Period | $1,096,114 | $1099,679 | $1,096,114 | $1099,679 | | Net Asset Value per Common Share | $16.98 | $17.03 | $16.98 | $17.03 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20nine%20months%20ended%20September%2030%2C%202022%20and%202021%20(unaudited)) Operating activities shifted from cash provision in 2021 to usage in 2022, while financing activities provided substantial cash | Metric | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :----------------------------------------- | :----------------------------------------- | | Net Cash Provided by (Used in) Operating Activities | $(379,883) | $196,452 | | Net Cash (Used in) Provided by Financing Activities | $235,543 | $(182,302) | | Net Increase (Decrease) in Cash, Foreign Cash, Restricted Cash and Cash Equivalents | $(144,340) | $14,150 | | Cash, Foreign Cash, Restricted Cash and Cash Equivalents, End of Period | $58,829 | $92,908 | [Consolidated Schedules of Investments](index=6&type=section&id=Consolidated%20Schedules%20of%20Investments%20as%20of%20September%2030%2C%202022%20(unaudited)%20and%20December%2031%2C%202021) This section details the investment portfolio by type, region, and industry, including joint ventures Investment Type (as of Sep 30, 2022) | Investment Type (as of Sep 30, 2022) | Amortized Cost (in thousands) | Fair Value (in thousands) | % of Total Portfolio (Fair Value) | | :----------------------------------- | :---------------------------- | :------------------------ | :-------------------------------- | | First Lien Senior Secured Loans | $1,674,322 | $1,594,469 | 69.5% | | Subordinated Note Investment Vehicles | $224,284 | $224,284 | 9.8% | | Equity Interest | $208,853 | $208,755 | 9.1% | | Second Lien Senior Secured Loans | $97,984 | $96,054 | 4.2% | | Preferred Equity | $50,990 | $71,738 | 3.1% | | Equity Interest Investment Vehicles | $60,486 | $58,647 | 2.6% | | Subordinated Debt | $38,734 | $39,478 | 1.7% | | Warrants | $480 | $530 | 0.0% | | Preferred Equity Interest in Investment Vehicles | $10 | $(433) | 0.0% | | **Total Investments** | **$2,356,143** | **$2,293,522** | **100.0%** | Geographic Region (as of Sep 30, 2022) | Geographic Region (as of Sep 30, 2022) | Amortized Cost (in thousands) | Fair Value (in thousands) | % of Total Portfolio (Fair Value) | | :------------------------------------- | :---------------------------- | :------------------------ | :-------------------------------- | | United States | $2,054,218 | $2,005,137 | 87.4% | | Cayman Islands | $114,115 | $113,796 | 5.1% | | United Kingdom | $81,284 | $74,077 | 3.2% | | Germany | $26,833 | $25,984 | 1.1% | | Canada | $18,833 | $18,847 | 0.8% | | Ireland | $19,146 | $16,838 | 0.7% | | Belgium | $11,036 | $12,024 | 0.5% | | Australia | $12,087 | $10,512 | 0.5% | | Luxembourg | $8,125 | $6,671 | 0.3% | | Netherlands | $5,160 | $4,646 | 0.2% | | Guernsey | $4,780 | $4,503 | 0.2% | | Israel | $341 | $344 | 0.0% | | Sweden | $185 | $143 | 0.0% | | **Total** | **$2,356,143** | **$2,293,522** | **100.0%** | Industry (as of Sep 30, 2022) | Industry (as of Sep 30, 2022) | Amortized Cost (in thousands) | Fair Value (in thousands) | % of Total Portfolio (Fair Value) | | :---------------------------- | :---------------------------- | :------------------------ | :-------------------------------- | | Aerospace & Defense | $398,665 | $380,118 | 16.6% | | Investment Vehicles | $284,780 | $282,498 | 12.3% | | High Tech Industries | $220,512 | $217,497 | 9.5% | | Services: Business | $170,902 | $163,918 | 7.1% | | Consumer Goods: Non-Durable | $130,849 | $129,695 | 5.7% | | Construction & Building | $117,017 | $113,634 | 5.0% | | Healthcare & Pharmaceuticals | $101,715 | $99,633 | 4.3% | | Transportation: Cargo | $86,852 | $91,874 | 4.0% | | Automotive | $78,189 | $78,215 | 3.4% | | Transportation: Consumer | $81,733 | $78,151 | 3.4% | | Energy: Oil & Gas | $57,002 | $74,898 | 3.3% | | Consumer Goods: Durable | $84,266 | $74,692 | 3.3% | | FIRE: Insurance | $64,944 | $62,954 | 2.7% | | Retail | $60,350 | $53,266 | 2.3% | | FIRE: Finance | $49,741 | $47,545 | 2.1% | | Telecommunications | $46,415 | $47,204 | 2.1% | | Hotel, Gaming, & Leisure | $37,159 | $36,068 | 1.6% | | Environmental Industries | $35,140 | $34,538 | 1.5% | | Media: Diversified & Production | $36,721 | $34,136 | 1.5% | | Capital Equipment | $31,046 | $30,728 | 1.3% | | Media: Advertising, Printing & Publishing | $54,169 | $27,819 | 1.2% | | Wholesale | $26,426 | $27,640 | 1.2% | | Media: Publishing | $21,507 | $20,356 | 0.9% | | Services: Consumer | $17,585 | $17,823 | 0.8% | | Containers, Packaging & Glass | $16,372 | $16,071 | 0.7% | | Beverage, Food & Tobacco | $7,359 | $14,702 | 0.6% | | Chemicals, Plastics, & Rubber | $14,177 | $14,065 | 0.6% | | Banking | $7,736 | $7,980 | 0.3% | | Consumer goods: Wholesale | $8,839 | $7,086 | 0.3% | | Hospitality Holdings | $5,000 | $5,841 | 0.3% | | Media: Broadcasting & Subscription | $2,825 | $2,717 | 0.1% | | Banking, Finance, Insurance & Real Estate | $150 | $160 | 0.0% | | **Total** | **$2,356,143** | **$2,293,522** | **100.0%** | - The company formed International Senior Loan Program, LLC (ISLP) on February 9, 2021, an unconsolidated joint venture with Pantheon, primarily investing in non-US first lien senior secured loans. As of September 30, 2022, the Company's investment in ISLP was **$173.3 million** in subordinated notes and **$54.6 million** in equity interests[125](index=125&type=chunk) - The company formed Bain Capital Senior Loan Program, LLC (SLP) on February 9, 2022, a joint venture with Amberstone Co., Ltd., primarily investing in senior secured first lien loans of U.S. borrowers. As of September 30, 2022, the Company's investment in SLP consisted of **$51.0 million** in subordinated notes, **($0.4) million** in preferred equity interests, and **$4.1 million** in equity interests[150](index=150&type=chunk) [Notes to Consolidated Financial Statements](index=33&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) This section explains financial statements, covering organization, accounting policies, investment valuation, and debt [Note 1. Organization](index=35&type=section&id=Note%201.%20Organization) BCSF, formed in 2015, operates as an externally managed BDC, focusing on senior direct lending - BCSF was formed on October 5, 2015, and commenced investment operations on October 13, 2016[68](index=68&type=chunk) - The company operates as a Business Development Company (BDC) and intends to qualify as a Regulated Investment Company (RIC) for tax purposes[68](index=68&type=chunk) - BCSF is externally managed by BCSF Advisors, LP, focusing on senior investments (first or second lien) in middle-market companies with **$10.0 million to $150.0 million** in EBITDA[68](index=68&type=chunk)[70](index=70&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=35&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note details accounting practices, including US GAAP, investment valuation, revenue recognition, and non-accrual loans - The company's financial statements are prepared in accordance with US GAAP for investment companies (ASC Topic 946)[72](index=72&type=chunk) - Investments are valued using a fair value hierarchy (Level 1, 2, 3), with Level 3 valuations relying on unobservable inputs and subject to Advisor and Board oversight[78](index=78&type=chunk)[80](index=80&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - Revenue recognition includes interest income (accrual basis, effective interest method for discounts/premiums), PIK income, and dividend income (accrual or record date basis); loans are placed on non-accrual status when principal or interest collection is doubtful[86](index=86&type=chunk)[88](index=88&type=chunk)[90](index=90&type=chunk) - As of September 30, 2022, there were **four loans from two issuers** on non-accrual status, compared to none as of December 31, 2021[90](index=90&type=chunk) [Note 3. Investments](index=41&type=section&id=Note%203.%20Investments) This note details the investment portfolio's composition by type, region, industry, and joint ventures Investment Type (as of Sep 30, 2022) | Investment Type (as of Sep 30, 2022) | Amortized Cost (in thousands) | Fair Value (in thousands) | % of Total Portfolio (Fair Value) | | :----------------------------------- | :---------------------------- | :------------------------ | :-------------------------------- | | First Lien Senior Secured Loans | $1,674,322 | $1,594,469 | 69.5% | | Subordinated Note Investment Vehicles | $224,284 | $224,284 | 9.8% | | Equity Interest | $208,853 | $208,755 | 9.1% | | Second Lien Senior Secured Loans | $97,984 | $96,054 | 4.2% | | Preferred Equity | $50,990 | $71,738 | 3.1% | | Equity Interest Investment Vehicles | $60,486 | $58,647 | 2.6% | | Subordinated Debt | $38,734 | $39,478 | 1.7% | | Warrants | $480 | $530 | 0.0% | | Preferred Equity Interest in Investment Vehicles | $10 | $(433) | 0.0% | | **Total Investments** | **$2,356,143** | **$2,293,522** | **100.0%** | - ISLP, an unconsolidated joint venture with Pantheon, had **$623.0 million** in debt and equity investments at fair value as of September 30, 2022, with a weighted average yield of **8.0%**; the Company had **$19.7 million** in unfunded capital contributions to ISLP[130](index=130&type=chunk)[132](index=132&type=chunk) - SLP, a newly formed joint venture with Amberstone, had **$570.6 million** in investments at fair value as of September 30, 2022, with a weighted average yield of **9.3%**; SLP acquired **70%** of the Company's 2018-1 portfolio membership interests, leading to its deconsolidation[150](index=150&type=chunk)[154](index=154&type=chunk)[157](index=157&type=chunk) [Note 4. Fair Value Measurements](index=58&type=section&id=Note%204.%20Fair%20Value%20Measurements) This note details fair value measurements using the ASC 820 hierarchy, including Level 3 investments and their unobservable inputs Fair Value Hierarchy (as of Sep 30, 2022) | Fair Value Hierarchy (as of Sep 30, 2022) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Measured at Net Asset Value (in thousands) | Total (in thousands) | | :---------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :----------------------------------------- | :------------------- | | Total Investments | $0 | $77,232 | $2,158,076 | $58,214 | $2,293,522 | | Cash Equivalents | $31,249 | $0 | $0 | $0 | $31,249 | | Forward Currency Exchange Contracts (asset) | $0 | $12,886 | $0 | $0 | $12,886 | - For Level 3 assets, valuation techniques include discounted cash flows (using comparative yields and discount rates) and comparable company multiples (using EBITDA and revenue multiples)[179](index=179&type=chunk) Level 3 Asset Type (as of Sep 30, 2022) | Level 3 Asset Type (as of Sep 30, 2022) | Fair Value (in thousands) | Significant Unobservable Inputs | Range (Weighted Average) | | :-------------------------------------- | :------------------------ | :------------------------------ | :----------------------- | | First Lien Senior Secured Loan | $1,168,359 | Comparative Yields | 6.9% - 22.1% (12.2%) | | First Lien Senior Secured Loan | $65,089 | EBITDA Multiple | 4.8x - 8.5x (7.1x) | | Second Lien Senior Secured Loan | $96,054 | Comparative Yields | 13.3% - 20.8% (14.8%) | | Subordinated Note Investment Vehicles | $224,284 | Recovery Rate | 100% | | Equity Interest | $124,005 | Discount Rate | 10.0% - 16.4% (15.2%) | [Note 5. Related Party Transactions](index=62&type=section&id=Note%205.%20Related%20Party%20Transactions) This note details related party transactions, including management fees, incentive fees, and the Revolving Advisor Loan - The Base Management Fee is **1.5%** (**0.375%** per quarter) of gross assets, tiered to **1.0%** (**0.25%** per quarter) for assets attributable to leverage decreasing asset coverage below **200%**[188](index=188&type=chunk) Fee Type | Fee Type | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Base Management Fee (gross) | $8,853 | $8,776 | $25,673 | $26,096 | | Base Management Fee Waiver | $0 | $0 | $0 | $(4,837) | | Incentive Fee (gross) | $2,976 | $4,531 | $10,356 | $19,301 | | Incentive Fee Waiver | $0 | $0 | $0 | $(4,519) | - The incentive fee has two parts: an income-based fee calculated quarterly with a three-year lookback and a capital gains incentive fee determined annually based on realized capital gains[190](index=190&type=chunk)[192](index=192&type=chunk)[201](index=201&type=chunk) - The company has an unsecured Revolving Advisor Loan with BCSF Advisors, LP, with a maximum credit limit of **$50.0 million** and a maturity date of March 27, 2023; as of September 30, 2022, there were no borrowings under this loan[210](index=210&type=chunk)[254](index=254&type=chunk) [Note 6. Debt](index=68&type=section&id=Note%206.%20Debt) This note details debt obligations, including principal, interest, maturities, covenant compliance, and note deconsolidation Debt Instrument | Debt Instrument | Total Aggregate Principal Amount Committed (in thousands) | Principal Amount Outstanding (as of Sep 30, 2022, in thousands) | Carrying Value (as of Sep 30, 2022, in thousands) | | :-------------- | :-------------------------------------------------------- | :-------------------------------------------------------------- | :------------------------------------------------ | | 2019-1 Notes | $352,500 | $352,500 | $351,066 | | Revolving Advisor Loan | $50,000 | $0 | $0 | | March 2026 Notes | $300,000 | $300,000 | $296,106 | | October 2026 Notes | $300,000 | $300,000 | $294,467 | | Sumitomo Credit Facility | $635,000 | $418,000 | $418,000 | | **Total Debt** | **$1,637,500** | **$1,370,500** | **$1,359,639** | - The company's asset coverage ratio was **180.0%** as of September 30, 2022, exceeding the **150%** requirement for BDCs[216](index=216&type=chunk) - The 2018-1 Notes were deconsolidated from the Company's financial statements on March 7, 2022, following the sale of **70%** of its membership equity interests to SLP[232](index=232&type=chunk) - The Sumitomo Credit Facility's total commitments increased from **$300.0 million to $635.0 million** through amendments in July and August 2022, and its benchmark provisions were replaced with SOFR[283](index=283&type=chunk)[284](index=284&type=chunk) [Note 7. Derivatives](index=78&type=section&id=Note%207.%20Derivatives) This note discusses forward currency exchange contracts to manage foreign exchange risk, detailing exposure and impact - The company uses forward currency exchange contracts to reduce exposure to foreign currency exchange rate fluctuations[291](index=291&type=chunk)[292](index=292&type=chunk) Metric | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Net Realized Gains (Losses) on Forward Currency Exchange Contracts | $17,633 | $(2,085) | $20,894 | $(23,773) | | Net Change in Unrealized Appreciation on Forward Currency Exchange Contracts | $(2,210) | $6,080 | $7,565 | $26,685 | | Total Net Realized and Unrealized Gains (Losses) on Forward Currency Exchange Contracts | $15,423 | $3,995 | $28,459 | $2,912 | - For the three and nine months ended September 30, 2022, the company's average U.S. dollar notional exposure to forward currency exchange contracts was **$160.6 million** and **$139.9 million**, respectively[293](index=293&type=chunk) [Note 8. Distributions](index=80&type=section&id=Note%208.%20Distributions) This note summarizes distributions declared to common stockholders, totaling **$65.853 million** (**$1.02 per share**) for both 2022 and 2021 Date Declared | Date Declared | Record Date | Payment Date | Amount Per Share | Total Distributions (in thousands) | | :------------ | :---------- | :----------- | :--------------- | :--------------------------------- | | Feb 16, 2022 | Mar 31, 2022 | Apr 29, 2022 | $0.34 | $21,951 | | Apr 26, 2022 | Jun 30, 2022 | Jul 29, 2022 | $0.34 | $21,951 | | Jul 26, 2022 | Sep 30, 2022 | Oct 28, 2022 | $0.34 | $21,951 | | **Total** | | | **$1.02** | **$65,853** | - Distributions are determined by the Board and are generally based on estimated earnings, with the final tax characterization determined at fiscal year-end[91](index=91&type=chunk)[309](index=309&type=chunk) [Note 9. Common Stock/Capital](index=81&type=section&id=Note%209.%20Common%20Stock%2FCapital) This note details common stock and capital structure, including authorized shares, issuances, and share repurchase authorizations - The company has **100,000,000,000** authorized common shares (**$0.001** par value) and **10,000,000,000** authorized preferred shares (none issued)[310](index=310&type=chunk) - As of September 30, 2022, **64,562,265.27** common shares were outstanding[9](index=9&type=chunk) - In June 2020, the company completed a transferable subscription rights offering, issuing **12,912,453 shares** at **$10.2163 per share**, generating **$129.6 million** in net proceeds[315](index=315&type=chunk) - The Board authorized a **$50 million** share repurchase program in May 2019, but no repurchases have been made as of September 30, 2022[314](index=314&type=chunk)[424](index=424&type=chunk) [Note 10. Commitments and Contingencies](index=82&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) This note outlines **$307.3 million** in unfunded commitments under loan agreements and confirms no material legal proceedings Category | Category | Unfunded Commitments (as of Sep 30, 2022, in thousands) | | :------- | :------------------------------------------------------ | | Total Unfunded Commitments | $307,312 | - Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and operational metrics[321](index=321&type=chunk) - The company is not currently subject to any material legal proceedings and is not aware of any threatened claims[324](index=324&type=chunk) [Note 11. Financial Highlights](index=85&type=section&id=Note%2011.%20Financial%20Highlights) This note presents key financial highlights, including per-share data, total returns, and financial ratios Metric | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :----- | :-------------------------- | :-------------------------- | | Net Asset Value at Beginning of Period | $17.04 | $16.54 | | Net Investment Income per Share | $1.28 | $1.02 | | Net Realized Gain (Loss) per Share | $0.29 | $(0.15) | | Net Change in Unrealized Appreciation (Depreciation) per Share | $(0.61) | $0.64 | | Net Increase in Net Assets from Operations per Share | $0.96 | $1.51 | | Stockholder Distributions from Income per Share | $(1.02) | $(1.02) | | Net Asset Value at End of Period | $16.98 | $17.03 | | Per Share Market Value at End of Period | $12.00 | $14.84 | | Total Return Based on Market Value | (15.03)% | 30.87% | | Total Return Based on Net Asset Value | 5.69% | 9.30% | | Ratio of Net Investment Income to Average Net Assets | 10.29% | 8.45% | | Ratio of Total Net Expenses to Average Net Assets | 9.19% | 9.58% | [Note 12. Subsequent Events](index=86&type=section&id=Note%2012.%20Subsequent%20Events) Management evaluated subsequent events through November 9, 2022, identifying no items requiring disclosure or adjustment - No material subsequent events were identified through November 9, 2022, requiring disclosure or adjustment[329](index=329&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=87&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition, operations, and cash flows, covering business overview, investment strategy, revenue, expenses, leverage, and portfolio performance - Bain Capital Specialty Finance, Inc. operates as an externally managed BDC, focusing on senior direct lending to middle-market companies with **$10.0 million to $150.0 million** in EBITDA[332](index=332&type=chunk)[334](index=334&type=chunk) - The company primarily generates revenue from interest income on debt investments and distributions on equity investments, with **93.6%** of debt investments bearing floating rates as of September 30, 2022[335](index=335&type=chunk)[340](index=340&type=chunk) - As of September 30, 2022, the company's asset coverage ratio was **180.0%**, meeting regulatory requirements[348](index=348&type=chunk) - During the nine months ended September 30, 2022, the company invested **$1,292.2 million** in **94 portfolio companies**, resulting in a net increase in investments of **$42.3 million**[358](index=358&type=chunk) Metric | Metric | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :----------------------------------------- | :----------------------------------------- | | Total Investment Income | $161,190 | $145,864 | | Total Expenses, net of fee waivers | $78,669 | $80,014 | | Net Investment Income | $82,521 | $65,850 | | Net Realized Gain (Loss) | $18,742 | $(9,681) | | Net Change in Unrealized Appreciation (Depreciation) | $(39,302) | $41,359 | | Net Increase in Net Assets from Operations | $61,961 | $97,528 | - As of September 30, 2022, **90.2%** of the investment portfolio was rated 2 (performing as expected), while **8.0%** was rated 3 (performing below expectations) and **1.7%** was rated 4 (performing materially below expectations)[380](index=380&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=106&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses market risks, including interest rate and foreign currency fluctuations, providing hypothetical interest rate impact analysis and mentioning hedging strategies - The company is subject to financial market risks, including changes in interest rates and foreign currency exchange rates, primarily due to investments in illiquid loans and securities[455](index=455&type=chunk)[457](index=457&type=chunk) Change in Interest Rates | Change in Interest Rates | Increase (Decrease) in Interest Income (in thousands) | Increase (Decrease) in Interest Expense (in thousands) | Net Increase (Decrease) in Net Investment Income (in thousands) | | :----------------------- | :---------------------------------------------------- | :----------------------------------------------------- | :-------------------------------------------------------------- | | Down 25 basis points | $(4,915) | $(1,926) | $(2,989) | | Up 100 basis points | $19,130 | $7,705 | $11,425 | | Up 200 basis points | $39,484 | $15,410 | $24,074 | | Up 300 basis points | $59,241 | $23,115 | $36,126 | - The company may use hedging techniques, such as forward contracts, to minimize risks from fluctuations in foreign exchange rates[457](index=457&type=chunk)[458](index=458&type=chunk) [Item 4. Controls and Procedures](index=107&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal controls over financial reporting - Management concluded that disclosure controls and procedures were effective as of September 30, 2022, providing reasonable assurance for timely and accurate reporting[459](index=459&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022[460](index=460&type=chunk) [PART II. OTHER INFORMATION](index=107&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information, including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=107&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings, nor are any threatened - The company is not currently subject to any material legal proceedings, nor is any material legal proceeding threatened against it[461](index=461&type=chunk) [Item 1A. Risk Factors](index=107&type=section&id=Item%201A.%20Risk%20Factors) This section refers to risk factors from the 2021 Annual Report, noting no material changes but highlighting Ukraine invasion risks - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021, were identified as of September 30, 2022[462](index=462&type=chunk) - Risks include potential political, social, and economic disruptions and uncertainties caused by the military invasion of Ukraine, affecting business operations of the company and its portfolio companies[463](index=463&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=108&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds to report[465](index=465&type=chunk) [Item 3. Defaults Upon Senior Securities](index=108&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the reporting period - Not applicable[465](index=465&type=chunk) [Item 4. Mine Safety Disclosures](index=108&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period - Not applicable[465](index=465&type=chunk) [Item 5. Other Information](index=108&type=section&id=Item%205.%20Other%20Information) No other information is reported for the period - No other information to report[465](index=465&type=chunk) [Item 6. Exhibits](index=109&type=section&id=Item%206.%20Exhibits) This section lists all exhibits included or incorporated by reference, such as corporate documents and agreements - The report includes various exhibits such as the Amended and Restated Certificate of Incorporation, Bylaws, Dividend Reinvestment Plan, Investment Advisory Agreement, Administration Agreement, and several debt-related agreements (e.g., Indentures, Revolving Credit Agreements)[468](index=468&type=chunk)[469](index=469&type=chunk)[470](index=470&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer, pursuant to the Sarbanes-Oxley Act, are filed herewith[470](index=470&type=chunk) [Signatures](index=113&type=section&id=Signatures) The report is duly signed by the Chief Financial Officer and Chief Executive Officer on November 9, 2022 - The report was signed by Sally F. Dornaus, Chief Financial Officer, and Michael A. Ewald, Chief Executive Officer, on November 9, 2022[473](index=473&type=chunk)[474](index=474&type=chunk)

Financial Data and Key Metrics Changes - Q2 net investment income per share was $0.41, an increase from $0.34 in the previous quarter, driven by higher investment income across the portfolio [6][23] - Net asset value (NAV) as of June 30 was $17.15 per share, a decrease of approximately 40 basis points quarter-over-quarter [6][24] - Total investment income for Q2 was $52.4 million, up from $46 million in Q1 [22] - Total expenses for Q2 were $25.6 million, compared to $24.3 million in Q1 [22] Business Line Data and Key Metrics Changes - New investment fundings in Q2 totaled $482 million across 50 portfolio companies, including $254 million in 11 new companies [14] - The investment portfolio at fair value was $2.3 billion, diversified across 122 companies in 31 industries [16] - 94% of new fundings were first lien senior secured loans, with a focus on U.S. domiciled companies [15] Market Data and Key Metrics Changes - The company experienced higher market volatility, particularly in syndicated loan and equity markets, due to macroeconomic uncertainties [7] - The weighted average yield on the investment portfolio increased to 8.5% at amortized cost and 8.8% at fair value, compared to 7.9% and 8.1% in the previous quarter [16][17] Company Strategy and Development Direction - The company focuses on downside risk management and curating a diversified portfolio of middle market borrowers [8] - The higher interest rate environment is seen as an opportunity to generate excess net investment income [11] - The formation of a senior loan program joint venture aims to drive attractive risk-adjusted returns while maintaining exposure to first lien loans [11][12] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the health of middle market borrowers despite economic uncertainties [27] - The company is monitoring inflationary impacts and believes that many portfolio companies can pass through costs without losing demand [9] - Future earnings growth is expected due to the timing lag of rate resets across loans [11] Other Important Information - The company declared a third quarter dividend of $0.34 per share, representing a 7.9% annualized yield [7] - Approximately 57% of outstanding debt was in fixed rate and 43% in floating rate, positioning the company well for higher interest income [25] Q&A Session Summary Question: What was the driver of the big increase in other income? - The increase was primarily due to new origination fees from a record high of over $400 million in new investments during the quarter [28][29] Question: Can you break down the ISLP portfolio exposure? - About 90% of the ISLP portfolio exposure is in Europe [31][32] Question: How does the company evaluate the risk of the European portfolio? - The European portfolio is similar to the U.S. portfolio, with a skew towards technology-related companies, which are less impacted by the energy crisis [33][34] Question: Are new investments still being made in Europe? - The company is more U.S.-focused currently but continues to see deal flow in Europe, particularly in companies not affected by the energy crisis [36]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 814-01175 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Tradi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 814-01175 BAIN CAPITAL SPECIALTY FINANCE, INC. (Exact name of registrant as specified in its charter) Delaware 81-2878769 (State or other jurisdiction of (I.R.S. Emp ...

Bain Capital Specialty Finance, Inc. (NYSE:BCSF) Q4 2021 Earnings Conference Call February 24, 2022 8:30 AM ET Company Participants Katherine Schneider - Investor Relations Michael Ewald - Chief Executive Officer Mike Boyle - President Sally Dornaus - Chief Financial Officer Conference Call Participants Ryan Lynch - KBW Operator Good day, and welcome to the Bain Capital Specialty Finance Fourth Quarter and Fiscal Year Ended December 31, 2021 Earnings Conference Call. Today's conference is being recorded. At ...

PART I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) BCSF operates as an externally managed, closed-end business development company (BDC) and regulated investment company (RIC), primarily investing in senior direct lending to middle-market companies - BCSF was formed on October 5, 2015, commenced investment operations on October 13, 2016, and completed its initial public offering (IPO) on November 19, 2018, with shares trading on the NYSE under 'BCSF'[14](index=14&type=chunk) - The company is regulated as a Business Development Company (BDC) under the 1940 Act and has elected to be treated as a Regulated Investment Company (RIC) for U.S. federal income tax purposes[14](index=14&type=chunk) - Primary investment focus is on senior direct lending to middle-market companies with **$10.0 million to $150.0 million** in annual EBITDA, concentrating on first or second lien secured investments and seeking effective voting control[14](index=14&type=chunk)[27](index=27&type=chunk) - The company's asset coverage requirement under the 1940 Act was reduced from **200% to 150%** effective February 2, 2019, following stockholder approval[15](index=15&type=chunk)[98](index=98&type=chunk)[102](index=102&type=chunk) General The Investment Advisor About Bain Capital Credit The Board of Directors Investment Decision Process Investment Strategy Investment Focus Competition Investment Advisory Agreement; Administration Agreement Fees and Expenses Capital Resources and Borrowings BCSF Revolving Credit Facility 2018-1 Notes Citibank Revolving Credit Facility JPM Credit Facility 2019-1 Debt Revolving Advisor Loan 2023 Notes March 2026 Notes October 2026 Notes Sumitomo Credit Facility Dividend Reinvestment Plan Administration Regulation as a Business Development Company Qualifying Assets Limitations on Leverage Managerial Assistance to Portfolio Companies Monitoring Investments Temporary Investments Senior Securities Code of Ethics Compliance Policies and Procedures Sarbanes-Oxley Act of 2002 Proxy Voting Policies and Procedures Privacy Principles Information Available Certain U.S. Federal Income Tax Consequences Portfolio Composition as of December 31, 2021 (Fair Value) | Investment Type | Fair Value ($ thousands) | Percentage of Total Portfolio | | :-------------------------------- | :----------------------- | :---------------------------- | | First Lien Senior Secured Loans | 1,774,675 | 77.5 % | | Equity Interest | 151,844 | 6.6 % | | Subordinated Note Investment Vehicles | 125,437 | 5.5 % | | Second Lien Senior Secured Loans | 118,561 | 5.2 % | | Preferred Equity | 53,991 | 2.4 % | | Equity Interest Investment Vehicles | 44,444 | 1.9 % | | Subordinated Debt | 20,027 | 0.9 % | | Warrants | 126 | 0.0 % | | **Total** | **2,289,105** | **100.0 %** | Portfolio Composition as of December 31, 2020 (Fair Value) | Investment Type | Fair Value ($ thousands) | Percentage of Total Portfolio | | :-------------------------------- | :----------------------- | :---------------------------- | | First Lien Senior Secured Loans | 2,164,910 | 87.1 % | | Second Lien Senior Secured Loans | 161,960 | 6.6 % | | Equity Interests | 119,905 | 4.8 % | | Preferred Equity | 37,713 | 1.5 % | | Warrants | — | 0.0 % | | **Total** | **2,484,488** | **100.0 %** | Investment Performance Rating as of December 31, 2021 | Rating | Fair Value ($ thousands) | Percentage of Total | Number of Companies | Percentage of Total | | :----- | :----------------------- | :------------------ | :------------------ | :------------------ | | 1 | 42,233 | 1.9 % | 4 | 3.8 % | | 2 | 2,017,059 | 88.1 | 95 | 89.6 | | 3 | 229,813 | 10.0 | 7 | 6.6 | | 4 | — | 0.0 | — | 0.0 | | **Total** | **2,289,105** | **100.0 %** | **106** | **100.0 %** | Investment Performance Rating as of December 31, 2020 | Rating | Fair Value ($ thousands) | Percentage of Total | Number of Companies | Percentage of Total | | :----- | :----------------------- | :------------------ | :------------------ | :------------------ | | 1 | 42,942 | 1.7 % | 3 | 2.9 % | | 2 | 2,121,057 | 85.4 | 87 | 82.8 | | 3 | 315,383 | 12.7 | 14 | 13.3 | | 4 | 5,106 | 0.2 | 1 | 1.0 | | **Total** | **2,484,488** | **100.0 %** | **105** | **100.0 %** | [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks associated with investing in BCSF common stock, covering business, market, investment, and tax-related factors - Investing in BCSF common stock involves a high degree of risk, including potential partial or total loss of capital, as the company primarily invests in illiquid, privately negotiated debt and junior investments[121](index=121&type=chunk)[122](index=122&type=chunk) - The company's ability to achieve investment objectives is highly dependent on the financial and managerial expertise of its Advisor and Bain Capital Credit, with the loss of key individuals posing a material adverse effect[123](index=123&type=chunk) - Conflicts of interest may arise due to the Advisor's management and incentive fee structure, which is based on gross assets and can incentivize the use of leverage and speculative investments, potentially misaligning with stockholder interests[134](index=134&type=chunk) - The expected discontinuation of LIBOR could significantly impact BCSF's business, leading to operational challenges in amending existing loan agreements and potential mismatches in interest rates, affecting net investment income and distributions[147](index=147&type=chunk)[149](index=149&type=chunk) - A majority of BCSF's portfolio investments are recorded at fair value determined in good faith by the Board, often using unobservable inputs (Level 3), leading to inherent uncertainty and potential material differences from actual liquidation values[153](index=153&type=chunk)[155](index=155&type=chunk) - The COVID-19 pandemic has caused and continues to cause disruptions in global debt and equity markets, negatively impacting portfolio companies' operating results, increasing default risks, and potentially limiting BCSF's investment income and distributions[187](index=187&type=chunk)[189](index=189&type=chunk)[191](index=191&type=chunk) - BCSF invests in middle-market companies, which inherently involve higher risks due to shorter operating histories, narrower product lines, smaller market shares, and greater vulnerability to economic downturns compared to larger corporations[197](index=197&type=chunk)[199](index=199&type=chunk) - Failure to maintain RIC tax qualification would subject BCSF to corporate-level income tax, substantially reducing net assets and income available for distribution to stockholders[249](index=249&type=chunk)[251](index=251&type=chunk)[258](index=258&type=chunk) Risks Relating to Our Business and Structure Risks Relating to COVID-19 and General Market Conditions Risks Relating to Our Investments Federal Income Tax and Other Tax Risks Risks Relating to Our Common Stock Effect of Leverage on Returns (as of December 31, 2021) | Assumed Return on our Portfolio (Net of Expenses) | Corresponding return to common stockholder assuming actual asset coverage (177%) | Corresponding return to common stockholder assuming 150% asset coverage | | :------------------------------------------------ | :----------------------------------------------------------------------------- | :--------------------------------------------------------------------- | | (10.00%) | (27.34%) | (36.47%) | | (5.00%) | (15.66%) | (21.29%) | | 0.00% | (3.97%) | (6.10%) | | 5.00% | 7.72% | 9.08% | | 10.00% | 19.40% | 24.26% | [Item 1B. Unresolved Staff Comments](index=81&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[295](index=295&type=chunk) [Item 2. Properties](index=81&type=section&id=Item%202.%20Properties) The company's principal executive office is located in Boston, Massachusetts, and it does not own any real estate - The principal executive office is at 200 Clarendon Street, 37th Floor, Boston, Massachusetts 02116[295](index=295&type=chunk) - The company does not own any real estate and believes current facilities are adequate, with additional space available at competitive prices if required[295](index=295&type=chunk) [Item 3. Legal Proceedings](index=81&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings, nor is it aware of any threatened against it - The company is not currently subject to any material legal proceedings, nor is any material legal proceeding threatened against it[296](index=296&type=chunk) - The company may be a party to certain legal proceedings in the ordinary course of business, including those related to enforcing rights under loans or contracts with portfolio companies[296](index=296&type=chunk) [Item 4. Mine Safety Disclosures](index=81&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[297](index=297&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=82&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) BCSF common stock trades on the NYSE under 'BCSF', with quarterly dividends intended to maintain RIC tax treatment and a dividend reinvestment plan in place - BCSF common stock is traded on the New York Stock Exchange under the symbol 'BCSF'[298](index=298&type=chunk) - As of February 11, 2022, there were approximately **113** holders of record of the common stock[299](index=299&type=chunk) - The company intends to distribute quarterly dividends to stockholders to maintain its RIC tax treatment, requiring distributions of at least **90%** of net ordinary income and net short-term capital gains in excess of net long-term capital losses[300](index=300&type=chunk) - A Dividend Reinvestment Plan (DRIP) automatically reinvests cash distributions into additional common stock for stockholders who do not opt out[301](index=301&type=chunk)[303](index=303&type=chunk) - On May 7, 2019, the Board authorized repurchases of up to **$50 million** of common stock, but as of December 31, 2021, no repurchases had occurred[399](index=399&type=chunk) - In June 2020, BCSF completed a transferable subscription rights offering, issuing **12,912,453** shares at **$10.2163** per share, generating net proceeds of **$129.6 million**[401](index=401&type=chunk) Market Information Holders Distribution Policy Dividend Reinvestment Plan Performance Graph Recent Sales of Unregistered Securities and Use of Proceeds SENIOR SECURITIES Senior Securities Outstanding (in millions) | Class and Year/Period | Total Outstanding | Asset Coverage Per Unit ($ per $1,000 of indebtedness) | | :-------------------- | :---------------- | :----------------------------------------------------- | | **2018-1 Notes** | | | | December 31, 2021 | $365.7 | $6,920.2 | | December 31, 2020 | $365.7 | $6,927.8 | | December 31, 2019 | $365.7 | $7,103.1 | | December 31, 2018 | $365.7 | $4,480.7 | | **2019-1 Debt** | | | | December 31, 2021 | $352.5 | $7,179.3 | | December 31, 2020 | $398.8 | $6,352.8 | | December 31, 2019 | $398.8 | $6,513.6 | | **2023 Notes** | | | | December 31, 2021 | $112.5 | $22,495.2 | | December 31, 2020 | $150.0 | $16,890.1 | | **March 2026 Notes** | | | | December 31, 2021 | $300.0 | $8,435.7 | | **October 2026 Notes**| | | | December 31, 2021 | $300.0 | $8,435.7 | | **Total Senior Securities** | | | | December 31, 2021 | $1,430.7 | $1,768.9 | | December 31, 2020 | $1,465.5 | $1,728.8 | | December 31, 2019 | $1,579.3 | $1,644.8 | | December 31, 2018 | $637.0 | $2,572.4 | | December 31, 2017 | $451.0 | $2,124.1 | | December 31, 2016 | $59.1 | $2,867.1 | [Item 6. Selected Consolidated Financial Data](index=85&type=section&id=Item%206.%20Selected%20Consolidated%20Financial%20Data) This section presents selected consolidated historical financial data for BCSF from 2017 to 2021, including statements of operations, per share data, and balance sheet highlights Selected Consolidated Statements of Operations Data (in thousands) | Metric | 2021 | 2020 | 2019 | 2018 | 2017 | | :---------------------------------------- | :-------- | :-------- | :-------- | :------- | :------ | | Total investment income | $197,394 | $194,460 | $197,945 | $99,294 | $24,605 | | Total expenses, net of waivers | 109,522 | 108,397 | 113,078 | 43,364 | 10,396 | | Net investment income (loss) before taxes | 87,872 | 86,063 | 84,867 | 55,930 | 14,209 | | Excise tax expense | 134 | 232 | — | — | 5 | | Net investment income (loss) after taxes | 87,738 | 85,831 | 84,867 | 55,930 | 14,204 | | Net realized and unrealized gain (loss) | 32,069 | (77,553) | 13,218 | (29,285) | 5,096 | | Net increase in net assets from operations| $119,807 | $8,278 | $98,085 | $26,645 | $19,300 | Selected Per Share Data | Metric | 2021 | 2020 | 2019 | 2018 | 2017 | | :---------------------------------------- | :---- | :---- | :---- | :--- | :--- | | Net investment income (loss) | $1.36 | $1.46 | $1.64 | $1.45 | $0.73 | | Net increase in net assets from operations| $1.86 | $0.14 | $1.90 | $0.69 | $0.99 | | Distributions declared | $1.36 | $1.43 | $1.64 | $1.52 | $0.70 | Selected Consolidated Statements of Assets and Liabilities Data (at period end, in thousands) | Metric | 2021 | 2020 | 2019 | 2018 | 2017 | | :---------------------------------------- | :---------- | :---------- | :---------- | :---------- | :-------- | | Total assets | $2,571,193 | $2,603,492 | $2,645,554 | $1,791,014 | $988,251 | | Total investments, at fair value | 2,289,105 | 2,484,488 | 2,527,055 | 1,727,806 | 831,578 | | Total liabilities | 1,471,187 | 1,535,488 | 1,627,154 | 789,385 | 481,288 | | Total debt, net of unamortized debt costs | 1,414,982 | 1,458,360 | 1,574,635 | 634,925 | 451,000 | | Total net assets | 1,100,006 | 1,068,004 | 1,018,400 | 1,001,629 | 506,963 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=86&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section details BCSF's financial condition, operations, and cash flows for 2019-2021, covering investment strategy, revenue, expenses, leverage, and the impact of COVID-19 - BCSF is an externally managed specialty finance company focused on lending to middle market companies, operating as a BDC and managed by BCSF Advisors, LP[316](index=316&type=chunk) - From October 13, 2016, through December 31, 2021, BCSF invested approximately **$5,019.3 million** in aggregate principal amount of debt and equity investments[316](index=316&type=chunk) - The company's primary revenue sources are interest income from debt investments and distributions on equity investments, with a majority (**97.8% in 2021, 99.2% in 2020**) of debt investments bearing floating rates[320](index=320&type=chunk) - BCSF's asset coverage ratio was **177%** as of December 31, 2021, and **173%** as of December 31, 2020, exceeding the **150%** regulatory requirement[327](index=327&type=chunk)[396](index=396&type=chunk) - The COVID-19 pandemic has led to increased draw requests on credit facilities and requests for loan modifications from portfolio companies, but BCSF has maintained compliance with asset coverage and financial covenants[328](index=328&type=chunk) - During 2021, BCSF invested **$1,185.3 million** and had **$1,431.4 million** in repayments/sales, resulting in a net decrease of **$246.1 million** in investments[337](index=337&type=chunk) - The International Senior Loan Program, LLC (ISLP) joint venture was formed on February 9, 2021, with Pantheon, investing primarily in non-US first lien senior secured loans. BCSF contributed **$317.1 million** in debt investments for a **70.5%** stake and received **$190.2 million** in cash[363](index=363&type=chunk)[576](index=576&type=chunk) Overview Investments Revenues Expenses Leverage Impact of COVID-19 Investment Decision Process Environmental, Social and Governance Portfolio and Investment Activity Antares Bain Capital Complete Financing Solution International Senior Loan Program, LLC Results of Operations Financial Condition, Liquidity and Capital Resources Equity Debt Distribution Policy Commitments and Off-Balance Sheet Arrangements Significant Accounting Estimates and Critical Accounting Policies Recent Accounting Pronouncements Contractual Obligations Subsequent Events Total Investment Income (in thousands) | Year | Total Investment Income | | :--- | :---------------------- | | 2021 | $197,394 | | 2020 | $194,460 | | 2019 | $197,945 | Composition of Investment Income (in thousands) | Income Type | 2021 | 2020 | 2019 | | :---------------- | :------- | :------ | :------ | | Interest income | $167,343 | $174,197 | $179,917 | | Dividend income | 13,115 | 9,324 | 16,741 | | PIK income | 10,763 | 8,778 | 478 | | Other income | 6,173 | 2,161 | 809 | | **Total** | **$197,394** | **$194,460** | **$197,945** | Total Expenses, Net of Waivers (in thousands) | Year | Total Expenses, Net of Waivers | | :--- | :----------------------------- | | 2021 | $109,522 | | 2020 | $108,397 | | 2019 | $113,078 | Net Realized and Unrealized Gains and Losses (in thousands) | Category | 2021 | 2020 | 2019 | | :-------------------------------------------------------------------- | :---------- | :---------- | :-------- | | Net realized gains (losses) | $(10,902) | $(27,222) | $7,785 | | Net unrealized appreciation (depreciation) | 42,971 | (50,331) | 5,433 | | **Net increase in net assets resulting from operations** | **$119,807**| **$8,278** | **$98,085** | Cash, Foreign Cash, Restricted Cash and Cash Equivalents (in thousands) | Date | Amount | | :--------------- | :-------- | | December 31, 2021| $203,581 | | December 31, 2020| $81,702 | | December 31, 2019| $68,846 | Debt Outstanding (in thousands) | Debt Type | 2021 Principal Outstanding | 2020 Principal Outstanding | | :--------------------- | :------------------------- | :------------------------- | | 2018-1 Notes | $365,700 | $365,700 | | 2019-1 Debt | $352,500 | $398,750 | | 2023 Notes | $112,500 | $150,000 | | March 2026 Notes | $300,000 | — | | October 2026 Notes | $300,000 | — | | Sumitomo Credit Facility | — | — | | **Total Debt** | **$1,430,700** | **$1,465,507** | Distributions Declared (in thousands) | Year | Total Distributions Declared | | :--- | :--------------------------- | | 2021 | $87,805 | | 2020 | $87,029 | | 2019 | $84,636 | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=128&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) BCSF is exposed to financial market risks, primarily interest rate fluctuations, due to its illiquid loan investments and fair value measurements, with potential hedging strategies for foreign currency - BCSF is subject to financial market risks, including changes in interest rates, due to its investments in illiquid loans and securities of middle-market companies[466](index=466&type=chunk)[469](index=469&type=chunk) - Many portfolio investments are valued at fair value using unobservable inputs (Level 3), leading to significant uncertainty in valuation[469](index=469&type=chunk) - The company may employ hedging techniques, such as forward contracts, to minimize exposure to foreign currency exchange rate fluctuations, but their effectiveness is not assured[470](index=470&type=chunk) Annualized Impact of Hypothetical Base Rate Changes on Interest Income and Expense (in thousands) | Change in Interest Rates | Increase in (Decrease) Interest Income | Increase in (Decrease) Interest Expense | Net Increase (Decrease) in Net Investment Income | | :----------------------- | :------------------------------------- | :-------------------------------------- | :----------------------------------------------- | | Down 25 basis points | $(729) | $(1,502) | $773 | | Up 100 basis points | $7,556 | $7,182 | $374 | | Up 200 basis points | $28,935 | $14,364 | $14,571 | | Up 300 basis points | $50,477 | $21,546 | $28,931 | [Item 8. Consolidated Financial Statements and Supplementary Data](index=128&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents BCSF's audited consolidated financial statements for 2019-2021, including statements of assets, operations, changes in net assets, cash flows, and detailed notes - The consolidated financial statements for Bain Capital Specialty Finance, Inc. and its subsidiaries as of and for the years ended December 31, 2021, 2020, and 2019 are included, along with the report of the independent registered public accounting firm[471](index=471&type=chunk)[475](index=475&type=chunk) - The financial statements are prepared in accordance with US GAAP and follow accounting and reporting guidance for investment companies (ASC Topic 946)[457](index=457&type=chunk)[533](index=533&type=chunk) Consolidated Statements of Assets and Liabilities (as of December 31, in thousands) | Asset/Liability | 2021 | 2020 | | :-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | :---------- | :---------- | | **Assets** | | | | Investments at fair value | $2,289,105 | $2,484,488 | | Cash and cash equivalents | 87,443 | 53,704 | | Foreign cash | 29,979 | 972 | | Restricted cash and cash equivalents | 86,159 | 27,026 | | Collateral on forward currency exchange contracts | 2,815 | 4,934 | | Deferred financing costs | 2,178 | 3,131 | | Interest receivable on investments | 19,269 | 15,720 | | Receivable for sales and paydowns of investments and other investment transactions | 30,334 | 5,928 | | Prepaid Insurance | 193 | — | | Unrealized appreciation on forward currency exchange contracts | 5,321 | — | | Dividend receivable | 18,397 | 7,589 | | **Total Assets** | **$2,571,193**| **$2,603,492**| | **Liabilities** | | | | Debt (net of unamortized debt issuance costs) | $1,414,982 | $1,458,360 | | Interest payable | 7,058 | 8,223 | | Payable for investments purchased | 7,594 | 10,991 | | Unrealized depreciation on forward currency exchange contracts | — | 22,614 | | Base management fee payable | 8,792 | 6,289 | | Incentive fee payable | 4,727 | 3,799 | | Accounts payable and accrued expenses | 6,083 | 3,261 | | Distributions payable | 21,951 | 21,951 | | **Total Liabilities** | **$1,471,187**| **$1,535,488**| | **Net Assets** | | | | Common stock, par value $0.001 per share, 100,000,000,000 shares authorized, 64,562,265 and 64,562,265 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively | 65 | 65 | | Paid in capital in excess of par value | 1,168,384 | 1,166,453 | | Total distributable earnings (loss) | (68,443) | (98,514) | | **Total Net Assets** | **$1,100,006**| **$1,068,004**| | **Total Liabilities and Total Net assets** | **$2,571,193**| **$2,603,492**| | Net asset value per share | $17.04 | $16.54 | Consolidated Statements of Operations (for the years ended December 31, in thousands) | Income/Expense Category | 2021 | 2020 | 2019 | | :------------------------------------------------------------------------------------ | :---------- | :---------- | :---------- | | **Income** | | | | | Total investment income from non-controlled/non-affiliate investments | $164,865 | $180,928 | $179,453 | | Total investment income from non-controlled/affiliate investments | 7,440 | 2,068 | — | | Total investment income from controlled affiliate investments | 25,089 | 11,464 | 18,492 | | **Total investment income** | **$197,394**| **$194,460**| **$197,945**| | **Expenses** | | | | | Interest and debt financing expenses | 51,345 | 63,309 | 66,330 | | Base management fee | 34,888 | 35,215 | 32,702 | | Incentive fee | 24,028 | 4,473 | 17,418 | | Professional fees | 2,854 | 2,626 | 2,297 | | Directors fees | 725 | 726 | 546 | | Other general and administrative expenses | 5,038 | 5,398 | 4,772 | | Total expenses before fee waivers | 118,878 | 111,747 | 124,065 | | Base management fee waiver | (4,837) | (2,676) | (8,242) | | Incentive fee waiver | (4,519) | (674) | (2,745) | | **Total expenses, net of fee waivers** | **$109,522**| **$108,397**| **$113,078**| | Net investment income before taxes | 87,872 | 86,063 | 84,867 | | Excise tax expense | 134 | 232 | — | | **Net investment income** | **$87,738** | **$85,831** | **$84,867** | | **Net realized and unrealized gains (losses)** | | | | | Net realized gain (loss) on non-controlled/non-affiliate investments | 25,084 | (33,824) | (3,487) | | Net realized gain (loss) on controlled affiliate investments | (3,858) | — | 265 | | Net realized gain (loss) on foreign currency transactions | (3,496) | 130 | (36) | | Net realized gain (loss) on forward currency exchange contracts | (23,773) | 6,472 | 11,043 | | Net realized loss on extinguishment of debt | (4,859) | — | — | | Net change in unrealized appreciation (depreciation) on foreign currency translation | (936) | 108 | (130) | | Net change in unrealized appreciation (depreciation) on forward currency exchange contracts | 27,935 | (22,396) | (9,540) | | Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate investments | (568) | (6,744) | 13,308 | | Net change in unrealized appreciation (depreciation) on non-controlled/affiliate investments | 12,576 | (174) | — | | Net change in unrealized appreciation (depreciation) on controlled affiliate investments | 3,964 | (21,125) | 1,795 | | **Total net gains (losses)** | **$32,069** | **$(77,553)**| **$13,218** | | **Net increase in net assets resulting from operations** | **$119,807**| **$8,278** | **$98,085** | | Basic and diluted net investment income per common share | $1.36 | $1.46 | $1.64 | | Basic and diluted increase in net assets resulting from operations per common share | $1.86 | $0.14 | $1.90 | | Basic and diluted weighted average common shares outstanding | 64,562,265 | 58,670,518 | 51,603,415 | Consolidated Statements of Changes in Net Assets (for the years ended December 31, in thousands) | Category | 2021 | 2020 | 2019 | | :--------------------------------------------------------------------- | :---------- | :---------- | :---------- | | **Operations:** | | | | | Net investment income | $87,738 | $85,831 | $84,867 | | Net realized gain (loss) | (10,902) | (27,222) | 7,785 | | Net change in unrealized appreciation (depreciation) | 42,971 | (50,331) | 5,433 | | **Net increase (decrease) in net assets resulting from operations** | **$119,807**| **$8,278** | **$98,085** | | **Stockholder distributions:** | | | | | Distributions from distributable earnings | (87,805) | (87,029) | (84,636) | | **Net decrease in net assets resulting from stockholder distributions**| **$(87,805)**| **$(87,029)**| **$(84,636)**| | **Capital share transactions:** | | | | | Issuance of common stock, net | — | 128,355 | — | | Reinvestment of stockholder distributions | — | — | 3,322 | | **Net increase in net assets resulting from capital share transactions**| **—** | **$128,355**| **$3,322** | | **Total increase in net assets** | **$32,002** | **$49,604** | **$16,771** | | Net assets at beginning of year | 1,068,004 | 1,018,400 | 1,001,629 | | **Net assets at end of year** | **$1,100,006**| **$1,068,004**| **$1,018,400**| | Net asset value per common share | $17.04 | $16.54 | $19.72 | | Common stock outstanding at end of period | 64,562,265 | 64,562,265 | 51,649,812 | Consolidated Statements of Cash Flows (for the years ended December 31, in thousands) | Cash Flow Category | 2021 | 2020 | 2019 | | :-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | :------------ | :------------ | :------------ | | **Cash flows from operating activities** | | | | | Net increase in net assets resulting from operations | $119,807 | $8,278 | $98,085 | | Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities: | | | | | Purchases of investments | (1,177,339) | (516,234) | (1,413,662) | | Proceeds from principal payments and sales of investments | 1,399,163 | 538,494 | 1,069,492 | | Net realized (gain) loss from investments | (21,226) | 33,824 | 3,222 | | Net realized loss on foreign currency transactions | 3,496 | (130) | 36 | | Net realized loss on extinguishment of debt | 4,859 | — | — | | Net change in unrealized (appreciation) depreciation on forward currency exchange contracts | (27,935) | 22,396 | 9,540 | | Net change in unrealized (appreciation) depreciation on investments | (15,972) | 28,043 | (15,103) | | Net change in unrealized (appreciation) depreciation on foreign currency translation | 936 | (108) | 130 | | Increase in investments due to PIK | (10,763) | (8,779) | (479) | | Accretion of discounts and amortization of premiums | (5,674) | (5,905) | (4,476) | | Amortization of deferred financing costs and debt issuance costs | 5,731 | 2,675 | 1,497 | | Changes in operating assets and liabilities: | | | | | Collateral on forward currency exchange contracts | 2,119 | (4,934) | 4 | | Interest receivable on investments | (3,549) | 6,762 | (16,233) | | Prepaid Insurance | (193) | — | 1 | | Dividend receivable | (10,808) | (6,628) | 7,748 | | Interest payable | (1,165) | (7,311) | 10,699 | | Collateral payable on forward currency exchange contracts | — | (331) | 331 | | Base management fee payable | 2,503 | (976) | 4,315 | | Incentive fee payable | 928 | (714) | 1,213 | | Accounts payable and accrued expenses | 636 | 996 | 874 | | **Net cash provided by (used in) operating activities** | **$265,554** | **$89,418** | **$(242,766)**| | **Cash flows from financing activities** | | | | | Borrowings on debt | 1,425,050 | 597,262 | 1,249,048 | | Repayments on debt | (1,461,826) | (710,802) | (884,529) | | Payments of financing costs | — | (1,447) | (409) | | Payments of offering costs | — | (3,545) | (1,820) | | Payments of debt issuance costs | (14,053) | (3,648) | (2,795) | | Proceeds from issuance of common stock | — | 131,917 | — | | Stockholder distributions paid | (87,805) | (86,254) | (81,246) | | **Net cash (used in) provided by financing activities** | **$(138,634)**| **$(76,517)** | **$278,249** | | Net increase in cash, foreign cash, restricted cash and cash equivalents | 126,920 | 12,901 | 35,483 | | Effect of foreign currency exchange rates | (5,041) | (45) | 92 | | Cash, foreign cash, restricted cash and cash equivalents, beginning of year | 81,702 | 68,846 | 33,271 | | **Cash, foreign cash, restricted cash and cash equivalents, end of year** | **$203,581** | **$81,702** | **$68,846** |

Bain Capital Specialty Finance, Inc. (NYSE:BCSF) Q3 2021 Earnings Conference Call November 4, 2021 8:00 AM ET Company Participants Katherine Schneider - Investor Relations Michael Ewald - Chief Executive Officer Michael Boyle - President Sally Dornaus - Chief Financial Officer Conference Call Participants Paul Johnson - Keefe, Bruyette, & Woods, Inc. Finian O'Shea - Wells Fargo Securities, LLC Operator Good day, and welcome to the Bain Capital Specialty Finance Third Quarter Ended September 30, 2021 Earning ...

Portfolio Composition - The investment portfolio's fair value as of September 30, 2021, was $2,356.7 million[27] - The portfolio is highly diversified across 105 companies in 29 industries[12, 14] - The portfolio is primarily composed of first lien senior secured loans, accounting for 80.1% of the total[12, 20] - Floating rate investments constitute 98.9% of the portfolio[12, 17] - Investments with financial covenants represent 95.0% of the portfolio[12] Financial Performance - Net investment income (NII) for Q3 2021 was $21.8 million, or $0.34 per share[12] - The return on equity (ROE) for Q3 2021 was 7.9%[12] - The weighted average yield at amortized cost was 7.5%[14, 17] - The weighted average yield at fair value was 7.6%[17, 34] Balance Sheet - Net assets totaled $1,099.7 million as of Q3 2021[18] - The debt-to-equity ratio (net of cash) was 1.15x as of September 30, 2021[12]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 814-01175 BAIN CAPITAL SPECIALTY FINANCE, INC. (Exact name of registrant as specified in its charter) Delaware 81-2878769 (State or other jurisdiction of (I.R.S. ...