Barings Capital Investment Financial Report Summaries

Risks

• Our business model depends to a significant extent upon strong referral relationships, and our inability to maintain or develop these relationships, as well as the failure of these relationships to generate investment opportunities, could adversely affect our business.
• Our financial condition and results of operations will depend on our ability to manage and deploy capital effectively.
• We invest in revolving credit facilities or may make other similar financial commitments.
• Our investment portfolio is and will continue to be recorded at fair value as determined in accordance with the Adviser’s valuation policies and procedures and, as a result, there is and will continue to be uncertainty as to the value of our portfolio investments.
• We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
• There are potential conflicts of interest, including the management of other investment funds and accounts by Barings, which could impact our investment returns.
• Barings may exercise significant influence over us in connection with MassMutual’s direct and indirect ownership of our common stock.
• Barings, its Investment Committee, or its affiliates may, from time to time, possess material non-public information, limiting our investment discretion.
• Our ability to enter into transactions with Barings and its affiliates is restricted.
• We are subject to risks associated with investing alongside other third parties.
• The fee structure under the Advisory Agreement may induce Barings to pursue speculative investments and incur leverage, which may not be in the best interests of our stockholders.
• The structure of the Income-Based Fee may allow the hurdle rate to be more easily achieved in future periods.
• Barings’ liability is limited under the Advisory Agreement, and we are required to indemnify Barings against certain liabilities, which may lead Barings to act in a riskier manner on our behalf than it would when acting for its own account.
• Barings is able to resign as our investment adviser and/or our administrator upon 90 days’ notice, and we may not be able to find a suitable replacement within that time, or at all, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
• Our long-term ability to fund new investments and make distributions to our stockholders could be limited if we are unable to renew, extend, replace or expand our current borrowing arrangements, or if financing becomes more expensive or less available.
• We may be subject to PIK interest payments.
• Regulations governing our operation as a BDC will affect our ability to, and the way in which we, raise additional capital.
• Our financing agreements contain various covenants, which, if not complied with, could accelerate our repayment obligations thereunder, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.
• We are exposed to risks associated with changes in interest rates.
• Incurring additional leverage may magnify our exposure to risks associated with changes in leverage, including fluctuations in interest rates that could adversely affect our profitability.
• We may invest in derivatives or other assets that expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
• Our Board of Directors may change our investment objectives, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
• We will be subject to corporate-level U.S. federal income tax if we are unable to maintain our tax treatment as a RIC under Subchapter M of the Code, which will adversely affect our results of operations and financial condition.
• There may be a possibility of the need to raise additional capital.
• We may not be able to pay distributions to our stockholders, our distributions may not grow over time, a portion of distributions paid to our stockholders may be a return of capital and investors in any debt securities we may issue may not receive all of the interest income to which they are entitled.
• We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
• Because we intend to distribute substantially all of our income to our stockholders to maintain our tax treatment as a RIC, we will continue to need additional capital to finance our growth, and regulations governing our operation as a BDC will affect our ability to, and the way in which we, raise additional capital and make distributions.
• There may be withholding of U.S. federal income tax on dividends for non-U.S. stockholders.
• There may be potential adverse tax consequences as a result of not being treated as a “publicly offered regulated investment company.”
• Cybersecurity risks and cyber incidents may adversely affect our business or the business of our portfolio companies by causing a disruption to our operations or the operations of our portfolio companies, a compromise or corruption of our confidential information or the confidential information of our portfolio companies and/or damage to our business relationships or the business relationships of our portfolio companies, all of which could negatively impact the business, financial condition and operating results of us or our portfolio companies.
• We are subject to risks associated with artificial intelligence and machine learning technology.
• We are currently operating in a period of capital markets disruption and economic uncertainty.
• Inflation could adversely affect the business, results of operations, and financial condition of our portfolio companies.
• Our investments in portfolio companies may be risky, and we could lose all or part of our investment.
• The lack of liquidity in our investments may adversely affect our business.
• Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our NAV through increased net unrealized depreciation.
• Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
• Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies and such portfolio companies may not generate sufficient cash flow to service their debt obligations to us.
• There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
• Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
• Covenant-Lite Loans may expose us to different risks, including with respect to liquidity, price volatility, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.
• Our investments in foreign companies may involve significant risks in addition to the risks inherent in U.S. investments.
• We may expose ourselves to risks if we engage in hedging transactions.
• If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to our current business strategy.
• We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.
• We generally do not control our portfolio companies.
• Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
• Any unrealized losses we experience on our loan portfolio may be an indication of future realized losses, which could reduce our income available for distribution.
• Defaults by our portfolio companies may harm our operating results.
• Changes in interest rates may affect our cost of capital, the value of our investments and results of operations.
• We may not realize gains from our equity investments.
• Our investments in asset-backed securities are subject to additional risks.
• Our investments in collateralized loan obligation vehicles are subject to additional risks.
• We may be subject to risks associated with syndicated loans.
• Our special situations investments involve a high degree of credit and market risk.
• There is no public market for shares of our common stock, and we do not expect there to be a market for our shares.
• Investing in our securities may involve an above average degree of risk.
• There are restrictions on the ability of holders of our common stock to transfer shares in excess of the restrictions typically associated with a private placement of securities under Regulation D and other exemptions from registration under the Securities Act, including restrictions to prevent all or any portions of our assets to constitute “plan assets” under ERISA or Section 4975 of the Code.
• Global capital markets may experience periods of disruption and instability or an economic recession in the future. These conditions have historically affected and could again materially and adversely affect debt and equity capital markets in the United States and around the world and could impair our portfolio companies and harm our operating results.
• Terrorist attacks, acts of war, national disasters, or public health crises (such as outbreaks or pandemics) may affect any market for our securities, impact the businesses in which we invest and harm our business, operating results and financial condition.
• We are subject to risks related to corporate social responsibility.
• We may experience fluctuations in our quarterly results.
• Economic recessions or downturns could impair our portfolio companies and harm our operating results.
• Uncertainty about presidential administration initiatives could negatively impact our business, financial condition and results of operations.
• Changes to U.S. tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us.
• Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
• We, the Adviser, and our portfolio companies may maintain cash balances at financial institutions that exceed federally insured limits and may otherwise be materially affected by adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties.