Financial Data and Key Metrics Changes - The company's net asset value (NAV) increased from 11.52pershareatMarch31to11.59 per share on June 30 [9] - Net investment income decreased slightly to 0.15pershareforthesecondquarterfrom0.16 in the first quarter [9][10] - The leverage ratio remained consistent at 1.09x, with net unrealized appreciation on the portfolio of 1.9million[12][25]BusinessLineDataandKeyMetricsChanges−Themiddle−marketportfoliogrewto352 million, primarily consisting of 28 first lien debt investments and 2 second lien term loans [17] - Seven new middle-market debt investments totaling 67millionweremadeduringthequarter,withtotalinvestmentsof80 million [10][15] - The average yield for the middle-market portfolio decreased from 7.8% to 7.5% [17] Market Data and Key Metrics Changes - Liquid credit spreads were relatively flat from March 31 to June 30, leading to consistent BDC stock prices [8] - Average spreads for broadly syndicated loans were down slightly to 327 basis points, with yields at 5.8% [16] - The illiquidity premium for middle-market lenders is at all-time lows, affecting competitive dynamics in the market [19] Company Strategy and Development Direction - The company aims to maintain a focus on quality investments and has set a reasonable expectation for average quarterly deployments around 100million[11]−AjointventurewiththeStateofSouthCarolinaRetirementSystemisexpectedtoenhanceshareholderreturnsthrougheffectiveassetmanagement[7][27]−Thecompanyemphasizesadisciplinedapproachtocreditanddiversificationinitsinvestmentstrategy[19][20]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatthelatterhalfofthesecondquartersawslowerdealactivitybutanticipatesincreaseddealflowassummerprogresses[15]−Thecompetitiveenvironmenthasintensified,withmoreprivatedebtmanagersenteringthemarket,makingitchallengingtosecureattractivedeals[46]−Managementremainscommittedtodeliveringsteadyandstableoperatingresultstobuildinvestortrust[7]OtherImportantInformation−Thesharerepurchaseprogramaimstobuybackupto2.50.14 per share, marking the fourth consecutive increase [26] Q&A Session Summary Question: On portfolio rotation and refinancing pipeline - Management indicated that the market has improved post-quarter end, with fewer outflows from mutual funds and strong CLO demand boosting prices [31] - The improvement in BSL prices will not necessarily lead to enhanced allocations for middle-market investments due to the allocation policy being based on gross commitments [32] Question: On upfront fees for capital structuring services - The advisor does not retain a portion of upfront fees; these fees are passed on to investors as part of the economic consideration [34] Question: On asset yields and competitive behavior - The decrease in total yield is primarily driven by LIBOR movements rather than spread compression [42] - The competitive environment has become more challenging, with an increase in the number of managers competing for deals [46] Question: On joint venture ramp-up and expected ROE - The joint venture is expected to ramp up slowly over 10 quarters, with a focus on generating good returns without rushing [62] Question: On the mix of commitments and yields - The commitments made were primarily due to timing, with expectations for closing within a short timeframe [58] - The yield on new commitments was influenced by a unique capital structure opportunity, not indicative of a broader market shift [60]
Barings(BBDC)2019-08-03 09:30