Bain Capital Specialty Finance(US:BCSF)2025-05-05 20:32Investment Overview - The company has invested approximately $9,060.8 million in aggregate principal amount of debt and equity investments since operations commenced on October 13, 2016, through March 31, 2025 [306]. - The company focuses on middle-market companies with annual EBITDA between $10.0 million and $150.0 million, but may invest in larger or smaller companies [308]. - The company may invest up to 30% of its portfolio in non-qualifying investments, including non-U.S. companies [315]. - The company may invest in distressed debt and other junior securities on an opportunistic basis, although this is not the principal focus of its investment strategy [308]. - In Q1 2025, the company invested $277.2 million in 89 portfolio companies, with a net increase in investments of $30.8 million after $246.4 million in principal repayments and sales [331]. - In Q1 2024, the company invested $403.1 million in 83 portfolio companies, resulting in a net increase of $107.1 million after $296.0 million in principal repayments and sales [332]. - The company had 175 portfolio companies as of March 31, 2025, up from 168 as of December 31, 2024 [334]. Financial Performance - The primary revenue source is interest income from debt investments, with additional income from loan origination fees and capital gains [309]. - As of March 31, 2025, the total investment income was $66.8 million, a decrease from $74.5 million in the same period of 2024 [347]. - Net investment income before taxes for the three months ended March 31, 2025, was $33.2 million, compared to $35.0 million for the same period in 2024 [347]. - The net realized loss for the three months ended March 31, 2025, was $26.6 million, contrasting with a net realized gain of $3.9 million in the same period of 2024 [347]. - For the three months ended March 31, 2025, the net realized losses on investments were $24.0 million, compared to net realized gains of $2.2 million for the same period in 2024 [356]. - The increase in net assets resulting from operations was $28.5 million for the three months ended March 31, 2025, down from $35.1 million in 2024 [362]. Investment Portfolio - As of March 31, 2025, the investment portfolio's total amortized cost was $2,456.1 million, with 98.6% classified as performing investments [335]. - The fair value of performing investments as of March 31, 2025, was $2,446.9 million, representing 99.3% of the total fair value [335]. - The company reported a total investment portfolio value of $2,550.3 million as of March 31, 2025 [336]. - The weighted average yield of the investment portfolio as of March 31, 2025, was 11.5% [333]. - The weighted average yield of the investment portfolio decreased to 11.5% as of March 31, 2025, down from 12.9% as of March 31, 2024 [348]. Debt and Financing - Total debt as of March 31, 2025, was $1,458.5 million, compared to $1,395.2 million as of December 31, 2024 [374]. - The company had approximately $699.0 million of availability on its Sumitomo Credit Facility as of March 31, 2025, an increase from $412.3 million at December 31, 2024 [366]. - Total debt obligations amount to $1,458,500, with $300,000 due within one year and $506,000 due in 3-5 years [402]. - Interest and debt financing expenses increased to approximately $18.9 million for the three months ended March 31, 2025, compared to $18.1 million for the same period in 2024 [351]. Asset Coverage and Risk Management - The company's asset coverage was 178.2% as of March 31, 2025, indicating a strong leverage position [322]. - The asset coverage ratio was 178.2% as of March 31, 2025, down from 181.7% at December 31, 2024 [364]. - The investment decision-making process includes sourcing, due diligence, credit committee approval, portfolio construction, and risk management [323]. - The company invests in illiquid loans and securities, exposing it to financial market risks including interest rate changes [403]. Dividends and Distributions - Total distributions declared for the three months ended March 31, 2025, amounted to $29,191,000, with a per share distribution of $0.45 [376]. - For the same period in 2024, total distributions declared were $29,053,000, also with a per share distribution of $0.45 [377]. - The company intends to distribute dividends to stockholders of at least 90% of net ordinary income and net short-term capital gains to maintain RIC tax treatment [379]. - The company has adopted a dividend reinvestment plan allowing stockholders to reinvest cash dividends into additional shares of common stock [381]. Related Party Transactions and Management Fees - The company has entered into related party transactions, including an Amended Advisory Agreement and an Administration Agreement [384]. - The base management fee under the Amended Advisory Agreement is set at 1.5% of the average value of gross assets, decreasing to 1.0% if the asset coverage ratio falls below 200% [398]. Currency and Market Risks - The net change in unrealized appreciation on investments due to foreign currency was $4.2 million for the three months ended March 31, 2025, compared to a loss of $2.2 million in 2024 [360]. - The company reported a net realized loss on foreign currency transactions of $0.2 million for the three months ended March 31, 2025, compared to a gain of $0.0 million in 2024 [356]. - A hypothetical 100 basis points increase in interest rates would result in a net increase in investment income of $7,320 [404]. - A hypothetical 200 basis points decrease in interest rates would lead to a net decrease in investment income of $14,371 [404]. - The company may employ hedging techniques to minimize foreign exchange risks but cannot assure effectiveness [404]. Valuation and Investment Strategy - The valuation of portfolio investments is overseen by the Board, with preliminary valuations conducted by the Advisor and periodic reviews by an independent valuation firm [401]. - The company expects to value many portfolio investments at fair value, which may differ significantly from market values due to lack of readily available market [403].