Bain Capital Specialty Finance(US:BCSF)2025-11-10 21:03Investment Overview - The company has invested approximately $9,688.5 million in aggregate principal amount of debt and equity investments since operations began on October 13, 2016[311]. - The company primarily generates revenue through interest income from debt investments and distributions on equity investments[321]. - The company focuses on middle-market companies with annual EBITDA between $10.0 million and $150.0 million[313]. - The company may invest up to 30% of its portfolio in non-qualifying portfolio investments, such as non-U.S. companies[320]. - The company’s investment decision-making process includes sourcing, due diligence, credit committee approval, portfolio construction, and risk management[329]. Portfolio Performance - As of September 30, 2025, the total amortized cost of the investment portfolio was $2,524.7 million, with 98.5% classified as performing investments[344]. - The weighted average yield of the investment portfolio as of September 30, 2025, was 11.1%[341]. - The company had 195 portfolio companies as of September 30, 2025, with 92.8% of the debt bearing a floating rate[341]. - The investment performance rating of 2 (performing as expected) accounted for 95.0% of the fair value of the portfolio as of September 30, 2025[349]. - The fair value of total investments in ISLP as of September 30, 2025, was $717.8 million, an increase from $655.8 million as of December 31, 2024[352]. Financial Results - The total investment income was $67.2 million, a decrease from $72.5 million in the same period of 2024[356]. - Net investment income for the three months ended September 30, 2025, was $29.2 million, down from $34.0 million in 2024[356]. - Total investment income decreased to $205.0 million for the nine months ended September 30, 2025, down from $219.3 million in 2024, primarily due to a decrease in interest and dividend income[358]. - Interest income decreased to $159.0 million for the nine months ended September 30, 2025, from $166.1 million in 2024, attributed to a decrease in yield of the investment portfolio[358]. - Dividend income fell to $15.8 million for the nine months ended September 30, 2025, down from $22.7 million in 2024, mainly due to reduced income from SLP and ISLP[358]. Expenses and Costs - The company incurred expenses related to the Administrator of $0.6 million for the three months ended September 30, 2025[325]. - The total expenses for the three months ended September 30, 2025, were $37.2 million, slightly lower than $37.5 million in 2024[356]. - Total operating expenses for the nine months ended September 30, 2025, were $110.2 million, a decrease from $115.1 million in 2024[359]. - Interest and debt financing expenses increased to $61.0 million for the nine months ended September 30, 2025, compared to $53.8 million in 2024, primarily due to an increase in debt outstanding[361]. - Management fees (net of waivers) increased to $27.8 million for the nine months ended September 30, 2025, from $26.5 million in 2024, due to an increase in total assets[364]. Debt and Leverage - The company utilizes leverage to increase total capital available for investment, subject to regulatory limits[315]. - The total debt outstanding as of September 30, 2025, was $1.50 billion, compared to $1.40 billion as of December 31, 2024, reflecting an increase in leverage[391]. - The weighted average principal debt balance outstanding for the nine months ended September 30, 2025, was $1.5 billion, up from $1.3 billion in 2024[361]. - Total debt obligations amount to $1,498,615,000, with $300,000,000 due within one year and $748,000,000 due in more than five years[420]. - The combined weighted average interest rate on borrowings decreased to 4.8% for the nine months ended September 30, 2025, from 5.1% in 2024[362]. Cash and Liquidity - Cash, foreign cash, restricted cash, and cash equivalents decreased by $12.3 million for the nine months ended September 30, 2025, while the decrease for the same period in 2024 was $52.7 million, indicating improved cash management[384][385]. - The company had $86.8 million in cash and cash equivalents as of September 30, 2025, compared to $99.1 million as of December 31, 2024, indicating a decrease in liquidity[383]. - The company provided $2.4 million in cash for operating activities during the nine months ended September 30, 2025, compared to $7.1 million used in the same period in 2024, indicating improved operational efficiency[384][385]. Dividends and Distributions - Total distributions declared for the nine months ended September 30, 2025, amounted to $87,573,000, with a per share distribution of $1.35[392]. - Total distributions declared for the nine months ended September 30, 2024, amounted to $87,159,000, with a per share distribution of $1.35[393]. - The company intends to distribute dividends to stockholders at least equal to 90% of the sum of net ordinary income and net short-term capital gains, in compliance with RIC tax treatment[395]. - The company has adopted a dividend reinvestment plan allowing stockholders to reinvest cash dividends into additional shares of common stock[397]. Market Risks - The company is exposed to financial market risks, including changes in interest rates and foreign exchange rates, which may significantly affect the fair value of investments[421]. - A hypothetical decrease of 100 basis points in interest rates would result in a net decrease in investment income of $7,404,000[424]. - An increase of 300 basis points in interest rates would lead to a net increase in investment income of $22,656,000[424]. - The company may employ hedging techniques to minimize foreign exchange risks but cannot assure their effectiveness[424]. - The fair value of investments may differ significantly due to the inherent uncertainty of determining values without a readily available market[421].