Barings(US:BBDC)2021-11-08 16:00Financial Performance - The total value of the investment portfolio increased to $1,652.5 million as of September 30, 2021, up from $1,495.8 million as of December 31, 2020, representing a growth of approximately 10.5%[312]. - Total investment income for the three months ended September 30, 2021, was $34,983,825, compared to $16,329,142 for the same period in 2020, representing a 114% increase[324]. - Net investment income after taxes for the nine months ended September 30, 2021, was $43,788,811, up from $21,775,803 in 2020, indicating a 101% year-over-year growth[324]. - Total recurring fee income for the three months ended September 30, 2021, was $1,686,060, compared to $677,530 for the same period in 2020, representing a 149% increase[389]. - Total fee income for the nine months ended September 30, 2021, was $9,189,976, up from $2,380,552 for the same period in 2020, reflecting a 285% growth[389]. Investment Activity - During the nine months ended September 30, 2021, the company made 59 new investments totaling $529.9 million, compared to 47 new investments totaling $263.9 million in the same period of 2020, indicating a significant increase in investment activity[315][316]. - The company had 24 loans repaid at par totaling $196.3 million during the nine months ended September 30, 2021, compared to 15 loans repaid totaling $58.5 million in the same period of 2020, reflecting improved loan performance[315][316]. - The company recognized a net realized gain of $3.3 million from the sale of loans during the nine months ended September 30, 2021, while in the same period of 2020, it experienced a net realized loss of $36.4 million from similar transactions[315][316]. Debt and Financing - The total amount of outstanding debt investments increased to $1,407.0 million as of September 30, 2021, from $929.3 million a year prior[325]. - The February 2019 Credit Facility has initial commitments totaling $800.0 million, with an accordion feature allowing for an increase of up to $400.0 million[341]. - As of September 30, 2021, U.S. dollar borrowings under the February 2019 Credit Facility amounted to $382.0 million at an interest rate of 2.125%[343]. - The company increased its aggregate commitments under the February 2019 Credit Facility to $875.0 million from $800.0 million[368]. Merger and Acquisition - The merger agreement with Sierra Income Corporation was entered into on September 21, 2021, with both boards approving the transaction[304]. - The merger agreement includes a cash consideration of $0.9783641 per share and an exchange ratio of 0.44973 shares of common stock for each share of Sierra common stock[305]. - The merger is anticipated to close in the first quarter of fiscal year 2022, subject to customary closing conditions including stockholder approvals and regulatory approvals[308]. - The company plans to raise the annualized hurdle rate from 8.0% to 8.25% following the merger closing[311]. Portfolio Management - The company primarily invests in senior secured private debt with interest rates generally between LIBOR plus 300 basis points and LIBOR plus 650 basis points[293]. - The company’s investment strategy focuses on well-established middle-market businesses with relatively low levels of cyclicality and operating risk[292]. - As of September 30, 2021, the investment portfolio consisted of 170 portfolio companies, with no single investment representing more than 10% of the total fair value[312]. - The company sold $338.4 million of middle-market portfolio company debt investments to a joint venture, realizing a gain of $0.3 million on these transactions[315]. Risk Factors - The impact of the COVID-19 pandemic on portfolio companies remains uncertain, with potential adverse effects on financial conditions and operations[298]. - Interest rate risk could materially affect net investment income, particularly in periods of rising interest rates[407]. - The company is exposed to market risks, including interest rate fluctuations and changes in commodity prices, which could impact investment performance[400]. Cash and Liquidity - Cash and cash equivalents as of September 30, 2021, were $41.4 million, compared to $14.8 million as of September 30, 2020[339][340]. - The company anticipates that its current cash, short-term investments, and available borrowing capacity will meet its cash needs for at least the next twelve months[338]. - Operating activities for the nine months ended September 30, 2021, used $115.9 million in cash, primarily due to portfolio investments totaling $816.8 million[339]. Shareholder Returns - On November 9, 2021, the Board declared a quarterly distribution of $0.22 per share payable on December 1, 2021[368]. - The company intends to distribute at least 90% of its investment company taxable income (ICTI) to maintain its tax treatment as a RIC[364]. - The company has adopted a dividend reinvestment plan (DRIP) for stockholders, allowing dividends to be reinvested in shares of common stock[362].