Barings(BBDC)2019-03-03 08:01Financial Data and Key Metrics Changes - The company's net asset value (NAV) decreased by 7.8% to 0.16 per share, an increase from 0.10 per share [12][21] - The investment portfolio totaled over 570 million in borrowings under the broadly syndicated loan portfolio [13][22] Business Line Data and Key Metrics Changes - The middle market portfolio saw significant growth, with 13 new investments totaling 230 million by year-end [12][14] - The company invested approximately 249 million in private middle market loans as of December 31 [15][16] - Over 20% of the total portfolio is now comprised of middle market loans, with 19 investments across 12 industries [16][17] Market Data and Key Metrics Changes - The fourth quarter experienced significant volatility, with liquid credit markets and BDC stock prices declining by approximately 4.5% and 15% respectively [7][9] - Senior and unit tranche spreads remained relatively flat, while mezzanine spreads tightened and second lien spreads widened due to market volatility [18] Company Strategy and Development Direction - The company aims to focus on quality investments with appropriate risk-adjusted returns, emphasizing a predominantly first lien, senior secured debt strategy [19][60] - A share repurchase plan was approved, targeting to repurchase 2.5% of outstanding shares when trading below NAV, and 5% if trading below 0.9 NAV [28][29] - The company is exploring a joint venture with an institutional investor, which could provide differentiated returns to shareholders [25] Management's Comments on Operating Environment and Future Outlook - Management noted that the underlying performance of portfolio companies remains strong despite market sell-offs, indicating resilience in fundamentals [9][10] - The company does not attempt to time the market but focuses on underwriting deals assuming economic and credit cycles [42] - Management expressed confidence in the ability to find quality transactions despite current market conditions [19][60] Other Important Information - The company has entered into an $800 million corporate revolving credit facility to support its middle market portfolio expansion [13][22] - Approximately 60% of unrealized losses from the fourth quarter have been recovered in early 2019 [13][21] Q&A Session Summary Question: Insights on new buybacks and market dislocation - Management discussed the mechanics of the buyback program and emphasized a long-term approach to purchasing shares below NAV [35][37] Question: Concerns about tech deals and leverage levels - Management acknowledged the high leverage levels in tech deals but highlighted the strong credit fundamentals of technology companies [39] Question: Economic outlook and underwriting strategy - Management stated that they do not time the market and focus on risk-adjusted returns, evaluating second lien opportunities based on multiple factors [42][43] Question: Portfolio structure and second lien growth - Management confirmed a focus on first lien investments but will opportunistically consider second lien investments if they present attractive risk-adjusted returns [60][61] Question: Impact of LIBOR increases on portfolio yield - Management emphasized the importance of portfolio diversification and maintaining LIBOR floors to manage downside risk [45][47] Question: Future funding sources and potential securitization - Management expressed openness to exploring securitization as a funding source to drive lower costs of liabilities [57]