Barings(BBDC) - 2019 Q2 - Quarterly Report

Investment Portfolio and Transactions - The company sold its investment portfolio for gross proceeds of $981.2 million in cash as part of the Asset Sale Transaction[192]. - Barings invested$100.0 million in newly issued shares at net asset value, and purchased an additional $50.0 million in shares over a two-year period[192]. - As of June 30, 2019, Barings owned 13,639,681 shares, representing 27.1$1,200.6 million, an increase from $1,121.9 million as of December 31, 2018[212]. - During the six months ended June 30, 2019, the company made new middle-market debt investments totaling$130.1 million and purchased $3.6 million in syndicated senior secured loans[214]. - The company sold$10.8 million in money market fund investments during the six months ended June 30, 2019[214]. - As of June 30, 2019, the investment portfolio consisted of 142 portfolio companies, with no single investment exceeding 10% of the total fair value[212]. - During the six months ended June 30, 2019, Barings BDC repurchased a total of 969,789 shares of common stock at an average price of $9.95 per share[253]. - Subsequent to June 30, 2019, Barings BDC made approximately$70.1 million of new middle-market private debt commitments, with $33.0 million closed at a weighted average yield of 8.9$37.9 million, compared to $51.5 million for the same period in 2018[220]. - Net investment income for the six months ended June 30, 2019, was$15.4 million, down from $22.8 million in the prior year[220]. - The company recognized a net realized loss of$79,751 during the six months ended June 30, 2019, compared to a net realized loss of $44.5 million in the same period of 2018[220]. - Total investment income for the three months ended June 30, 2019, was$19.6 million, a decrease of 23.3% compared to $25.5 million for the same period in 2018[221]. - The weighted average yield on investments decreased to 6.0$50,024, compared to net realized losses of $37.2 million for the same period in 2018[228]. - Net unrealized appreciation for the three months ended June 30, 2019, was$1.9 million, compared to $43.0 million for the same period in 2018[232]. Debt and Financing - As of June 30, 2019, Barings BDC had borrowings of$210.5 million outstanding under the August 2018 Credit Facility with an interest rate of 3.612%[240]. - The February 2019 Credit Facility had initial commitments totaling $800.0 million, with an accordion feature allowing for an increase of up to$400.0 million[241]. - As of June 30, 2019, Barings BDC had borrowings of $75.0 million outstanding under the February 2019 Credit Facility with a weighted average interest rate of 4.963$296.8 million of AAA(sf) Class A-1 Senior Secured Floating Rate 2019 Notes[246]. - As of June 30, 2019, Barings BDC had borrowings of $296.8 million under the Class A-1 2019 Notes with an interest rate of 3.544$4.2 million with a 200 basis point interest rate shift, based on outstanding borrowings as of June 30, 2019[290]. - The February 2019 Credit Facility could result in a maximum annual interest expense change of $1.5 million from a 200 basis point interest rate change, based on outstanding borrowings as of June 30, 2019[291]. - The Class A-1 and Class A-2 2019 Notes have floating rate interest provisions based on three-month LIBOR, with a potential annual interest expense fluctuation of$7.0 million from a 200 basis point change in interest rates[294]. Cash Flow and Liquidity - Cash on hand as of June 30, 2019, was $12.9 million, a significant decrease from$216.5 million as of June 30, 2018[235]. - Operating activities used $32.7 million in cash during the six months ended June 30, 2019, primarily due to portfolio investments of$171.4 million[235]. - Financing activities provided $33.2 million of cash during the six months ended June 30, 2019, mainly from net proceeds of$348.3 million from debt securitization[235]. - The company anticipates that current cash and cash equivalents, along with available borrowing capacity, will be adequate to meet cash needs for daily operations for at least the next twelve months[234]. Valuation and Accounting Estimates - The company has identified investment valuation and revenue recognition as its most critical accounting estimates[260]. - As of June 30, 2019, the total number of senior secured, middle-market investments reviewed by an independent valuation firm was 22, representing 100% of the total investments at fair value[272]. - The company utilizes Level 3 inputs for fair value measurements of certain debt and equity instruments of privately held companies, which may differ significantly from fair values in an active market[265][266]. - The fair value of investments is determined using an Income Approach model, which considers changes in the credit profile of the borrower and the discount margin of the baseline index[277][278]. - The Enterprise Value Waterfall model is used to estimate the fair value of equity securities, relying on transaction multiples and financial performance measures such as Adjusted EBITDA[279][281]. - The company maintains internal controls and procedures for pricing and valuation, with an annual review conducted by the Pricing Committee[268]. - The independent valuation firm concluded that the fair value of investments subjected to their procedures appeared reasonable[273]. - The company’s valuation methodologies are reviewed and updated regularly to adapt to changes in the marketplace[268]. Market Risks - The company's debt portfolio investments, totaling approximately $1,191.2 million, bear interest at variable rates, primarily LIBOR-based, with a potential annual investment income fluctuation of$23.8 million from a hypothetical 200 basis point change in interest rates[289]. - The company is exposed to market risks including interest rate fluctuations, which could materially affect net investment income if not matched by corresponding increases in interest income[295]. - The company may have foreign currency exposure related to certain investments, which are translated into U.S. dollars based on spot rates at each balance sheet date[296].