Barings(BBDC) - 2022 Q2 - Quarterly Report

Debt Investments and Yield - As of June 30, 2022, the weighted average yield on the principal amount of outstanding debt investments was approximately 7.6%, up from 7.2% as of December 31, 2021[353] - The weighted average yield on all outstanding debt investments, including non-accrual debt, was approximately 7.2% as of June 30, 2022, compared to 6.9% as of December 31, 2021[353] - The weighted average yield on outstanding debt investments was 7.6% as of June 30, 2022, compared to 7.4% as of June 30, 2021[383] - The weighted average yield of the debt investments made was 8.2%[434] Investment Portfolio and Strategy - The investment portfolio is primarily focused on senior secured private debt investments in established middle-market businesses across various industries[350] - The company has shifted its investment strategy to focus on syndicated senior secured loans and bonds since August 2018[350] - The total value of the investment portfolio increased to $2,389.1 million as of June 30, 2022, from$ 1,800.6 million as of December 31, 2021, representing a growth of approximately 32.6%[364] - As of June 30, 2022, the company had investments in 294 portfolio companies with an aggregate cost of $2,439.1 million, compared to 212 companies with a cost of$ 1,787.8 million as of December 31, 2021[364] - Senior debt and 1st lien notes accounted for 65% of the total fair value of the portfolio as of June 30, 2022, with a fair value of $1,550.2 million[365] Financial Performance - Total investment income for the three months ended June 30, 2022, was$ 55.6 million, a 67.5% increase from $33.2 million in the same period of 2021[382] - Total operating expenses for the three months ended June 30, 2022, were$ 23.8 million, up 28.5% from $18.6 million in the same period of 2021[385] - Net investment income before taxes for the three months ended June 30, 2022, was$ 31.8 million, compared to $14.6 million for the same period in 2021, representing a 117.6% increase[382] - The outstanding debt investments increased to$ 2,162.5 million as of June 30, 2022, from $1,463.6 million as of June 30, 2021, reflecting a 47.8% growth[383] - Dividends from portfolio companies for the three months ended June 30, 2022, were$ 7.2 million, significantly higher than $0.4 million in the same period of 2021[383] Losses and Depreciation - The company recognized a net realized loss of$ 6.1 million from the sale of $101.7 million of loans during the same period[366] - The company recognized net realized losses totaling$ 10.2 million, primarily from a net loss on the loan portfolio of $6.7 million and foreign currency transactions of$ 2.7 million[391] - During the six months ended June 30, 2022, the company recorded net unrealized depreciation of $41.2 million, driven mainly by the impact of foreign currency exchange rates on investments of$ 29.2 million and broad market moves of $55.4 million[395] - The net unrealized depreciation on the current portfolio for the three months ended June 30, 2022, was$ 62.7 million, primarily due to credit performance issues and foreign currency impacts[394] Cash and Borrowings - As of June 30, 2022, the company had $197.8 million in cash and foreign currencies on hand, with a net increase in cash of$ 113.5 million for the six months ended June 30, 2022[399] - The February 2019 Credit Facility was increased to $1.1 billion as of April 1, 2022, allowing for total commitments to reach$ 1.5 billion subject to certain conditions[401] - As of June 30, 2022, the company had U.S. dollar borrowings of $537.5 million outstanding under the February 2019 Credit Facility with an interest rate of 3.198%[404] - The company had net cash provided from financing activities of$ 126.2 million for the six months ended June 30, 2022, primarily from net borrowings under the February 2019 Credit Facility[399] Shareholder Returns and Distributions - The company declared a quarterly distribution of $0.24 per share on August 9, 2022, payable on September 14, 2022, to stockholders of record as of September 7, 2022[434] - The company has adopted a dividend reinvestment plan (DRIP) allowing stockholders to reinvest dividends in shares of common stock unless they opt for cash[429] - The company must distribute at least 90% of its investment company taxable income (ICTI) annually to maintain its tax treatment as a RIC[431] - The company monitors its distribution requirements to ensure compliance with the Code and has historically met its minimum distribution requirements[430] Interest Rate Risk - The company has no interest rate hedging arrangements as of June 30, 2022, exposing it to interest rate volatility risks[468] - The transition from LIBOR to SOFR or other benchmark rates presents uncertainties that could affect the cost of capital and net investment income[470] - The company’s net investment income is sensitive to the difference between borrowing rates and investment rates, with rising interest rates potentially increasing costs[475] - A hypothetical 200 basis point increase or decrease in interest rates on variable-rate debt investments could impact investment income by a maximum of$ 38.4 million annually[472] Fee Income - Recurring fee income for the three months ended June 30, 2022, was $2,122,000, compared to$ 1,711,000 for the same period in 2021, representing a 24% increase[453] - Total fee income for the six months ended June 30, 2022, was $6,268,000, up from$ 4,701,000 in the same period of 2021, indicating a 33% growth[453] - Non-recurring fee income for the three months ended June 30, 2022, was $2,950,000, significantly higher than$ 857,000 in the same period of 2021, reflecting a 244% increase[453] - The company reported a total of $5,072,000 in fee income for the three months ended June 30, 2022, compared to$ 2,568,000 in the same period of 2021, indicating a 97% increase[453]