Earnings call transcript Q2 2023

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Operator

At this time, I would like to welcome everyone to the Barings BDC Inc. Conference Call for the Quarter ended June 30th, 2023. All participants are in a listen-only mode. A question-and-answer session will follow the company's formal remarks. [Operator Instructions] Today's call is being recorded and a replay will be available approximately two hours after the conclusion of the call on the company's website at www.baringsbdc.com under the Investor Relations section of the website.

now Investor call Relations I’ll Chillag, to time, of Head for this turn over the Jeff At Barings BDC. proceed. Please

Jeff Chillag

on operator that statements you, the for that and morning, call the operating us this everyone. note call. strategies, contain include goals, statements Thank results may Please and beliefs, Thank flows. good company's joining forward-looking you future regarding cash

from statements. statements Although reasonable, actual materially believes differ forward-looking the these are those company in the could projected results

assumptions obligation for underlying the Securities and revise subject statements any Factors are to various filed Form These including company's quarter by XXth, June under forward-looking with statements on the uncertainties numerous disclosed unless and XXXX and the risks, sections Barings are and report the in based Commission. to required Risk on is no quarterly update XX-Q forward-looking Exchange those statements law. or ended undertakes BDC titled

to Officer call Executive Eric the Chief turn now over I’ll Lloyd, BDC. Barings of

Eric Lloyd

morning, want quite the Good I having in North Charlotte, Jeff. also here We're if Carolina. to you some noise. thunderstorm everyone. Thanks, hear background apologize

our some everybody you note throughout the we posted noise, our to today's earnings that do the So we'll XXXX anything presentation website. background, of I obviously hear any Please is of on if stuff that and apologize Relations but it. about referring be can joining not thunder them. appreciate for in call, that section second quarter Investor

about. BDC, Officer, BDC's today and the of Financial and Head thunder Elizabeth call Solutions Bryan I'm Barings’s of of President Barings the was Chief Murray. lightning Barings Manager I that’s the On Fowler; and by High; of talking and Co-Portfolio Private Ian And Co-Head Global joined BDC, Finance Capital

quarter. on moment, in enthusiasm Bryan by weakness. measured and the I'll results to of metrics. Really will investors quarter level but BBDC’s like results During start about a economic in continues environment. our to very portfolio for for today's clear comments that challenging expressing strong details concerned BBDC. a remain with Even about off It's financial my this and number strong shareholders. and I'd high a start second as at quarter some deliver portfolio call of inflation rates, review Ian, Elizabeth

quarter. Net was the a as $X.XX to $XX.XX. Net net $XX.XX share in asset was from from the value quarter quarter credit strong investment Strong performance by and dividends $X.XX continue yields per rates of to fueled of three flowing rising and NII to portfolio. within combination for prior compared the increase platform was of a the favorable That's elevated really prior income X.X%. investments base compared JVs

the top the Investment Our in degree as of of a net the going -- the uncertainty the on any defensive during originations. of and result believe capital further quarter We as a for activity volatility performance repayments exceeded returns within of and BBDC during the remains structure focus more modestly positioned well reserves is capital forward. quarter reflected industries. market modest

Income Sierra holdings we're and the in positions. rotate working and MVC value know, maximize shareholders our into from As originated the actively legacy acquired Barings’ them compelling to Capital

basis, continued first the the the and during booked portfolio portfolio new portfolio second nonaccruals nonaccrual removed of portfolio. X.X% acquired the the basis. our fair no to on are reflecting X% nonaccruals assets, cost the from value perform quarter. to were investment Our Three a and compared of Sierra status, well quarter, MVC assets including on the total cost a a X.X% in strength That's basis the on in quarter of were and

by support by credit the from acquired portfolios to agreements nonaccrual BBDC support our benefit and therefore one the the our credit of exception continue assets With investment, agreements. provided from covered of shareholders manager. all were

$XX approximately from million portfolios. For year the was losses designed realized current insulate MVC combined are support in on CSA basis which to for and shareholders agreements, this a quarter, those credits the valuation

of less believed wide trade within of liquid, Today, discounts spread than that semi the losses syndicated been portfolio that million to portfolio acquirer across portfolios, $XX remaining the in and the number anticipated than Recall comprised have are reflect issuers, frequently. par a the bulk net a realized mark impairments. Sierra to mark-to-market broadly rather losses of at loans of was

predominantly five Turning relative per X% new investment floating average of On highest years our dividend the X.X% level base value on basis, an income on declared prior investments in of share, our Increasing a increased to Total the quarter and base declared reflecting income our delivered increasing a with to weighted to dividend dividend. on yields net rates the to annualized the portfolio. a power yields dividend the rate $XX.XX. floating managing equates BDC We conservative earnings policy, the asset rate continue to lift board quarter second we on portfolio, BBDC ago. XX.X%. yield the $X.XX remain our began quarter’s since was generated by of

first to delivered X% this to ended volatility June we began range. late quarter yield telegraph XX%. results focused Barings remind -- syndicated with employ this to we loans seek XXXX, return that to was what When low managing have a of of we the lien the wanted strategy Through stated inside dividend we strong demonstrated a quarter, and triangle we XXXX, target previously rotated would providing the a broadly in have we of we investors out With capital. message

of The committed will the alignment shareholders. We the years work to our with outperform come. is these in goals to course months and BBDC to

average we of quarter X.X price of repurchase an million shares at stock $X.XX. second the During

create repurchase simply even maintained trading provides shares ability discount. is the that BBDC have We share can when price plan that we We share quality the appreciation consistently when strategically in from a the to a price by the investing dislocated is assets, recognize repurchase at stock NAV.

are opportunities. shares, we judicious to For and when balance considerations deployment leverage be against repurchasing this reason, it we and work

cash leverage, This net X.XXx. of which range net and Looking of leveraged X.XXx. was transactions to within unsettled at X.Xx is target leverage our has liquidity,

capital deployment what a private management of to attractive balancing continue become while for and We environment credit. prioritize the has risk very

to I'll the call now over Ian. turn

Ian Fowler

BBDC’s solutions have reasonably in valuations XXx prices the thumbnail offset Thanks, Xx bulk LLC, management. million as of manager million as $XX XXXX, the middle by Eric. sales private has located financial basis declined $XX by buyers companies leverage to included pause a And providing an Jocassee. private first a by quarter buyers which as the half million team, have regardless financing been companies equity with BBDC rising changed. modestly, the funding market $XX range. preeminent than Xx, professionals on around increased to firms. managed on rough decreased the of equity billion from a rates at Activity under private could asset million this in valuations, of the $XXX to rate dramatically, in in globe has which leverage $XXX a net impact gross sponsored more to of of take purchase Casa investment year equity The XXx with portfolio at X% environment likely models during any Barings with sales reference credit of repayments and determine of private focus tempered to assets supported more with that finance portfolio Recall by is global than is the sourced organization XX

higher purchase to portion bridge of between a deal that is and The in on businesses the multiples, sponsor financing today's transaction the significant same Purchase base X.Xx range in valuation market supports of the sponsor to range, based the with on support rates Xx range. a Today, gap those sponsor in the to leverage increase slightly reality back appear volume XXx spreads, to can Sponsors XXXX reticent Price which prices XXx is costs. and flow.

effect, However, execute on enabling continue platform multiples basis, sponsors reduce purchase below which exit compression cost as their prices, portfolio and acquisitions, and sponsors hedge makes any to are original to against sense multiples. add-on in

deployment private in the half Recall the but ahead track in global vintages tracking one XXXX of produce we've deployment XXXX, currently first active COVID XXXX on Nevertheless, ever significantly of is the the from roughly and finance most with activity XXXX. hampered of team of impacts that seen. ultimately Barings

of now The trans say, private our assets. is picked an managing negative global past of the rotation net year-to-date intentional the BBDC’s $X.X acquired BBDC probability witness months, of investment pipeline weighted billion. conscious has joint a up to cannot via leverage and future on of few this venture at stands at indicator and result activity. reliable finance deployment a The to of be All the significantly over sales a basis

first on issuers XX% North interest quarterly coverage XXXX. surprisingly, the interest coverage track XX, to portfolio side our nearly median XXXX With constituting quarter American the first XX coverage investments. XX% investments interest XXXX Slide first secured prior approximately consists in our of was we rise Not basis. of And ratios recorded the the strong quarter private lien The global end very interest the securities. X.Xx. in finance rates. in We of at of median of the a portfolio in

scheduled stands underwriting proxy coverage they of private make the issuers the the interest are BDC’s of and still median have at impact, for finance reference impact our global rates, nine approximately say year issuers to payments. terminates that a interest interest rate to As portfolio higher before disciplined for That that one later, in XXX the points reporting, cushion franchise of regularly X.Xx. months with is reflected considerable unable basis

of Our gas, oil the sound retail, backdrop to economic them, metals be predictability. strategy less restaurants, avoidance among prone and various industries economic a of proven volatility, to against has

feel earlier, proven in the several pressures metric degree American finance are to gross gives combined margin the up businesses, sponsor XX% in volume adjusted backed from one comparable of from increases multiples. margins are capital portfolio. comfortable economy. five in we in year market euros finance One stood largest and year margin The the believed base and same right activity focus median the of strategy funded and earlier, entirely predominantly We of transaction with XX private assets metrics The what out the Well, the companies the were gross BBDC predominantly this of issuers with price period-to-period financing, middle that million deploy us Recall performance some a gains reason that or somewhat. on XX has the successfully perfectly is investing and The global on expansion our through sample the Barings our flexibility reflection in of pushing as team going XX% past reasonable backed believe EBITDA benefits investment be private most have the to in solutions confidence team. have will to value global over a combat dollars is to from portfolio throughout on not the fact The North lien that believe the global quarters portion consumed sourced compelling capital sponsor for focuses XX%, in a issuers inflationary noted. focused skew million leverage feels we at appropriate. past wage to the previously these first that relative quarters, team their broader team where allows the targets finance with to of private

in market assets the the within addition Barings as forced accounts the assets investments, the and in any may we in be structures. and/or We these of portfolio uncorrelated But XXXX. investments from loans, such Investment over middle Eclipse originated the market assets and to of credit enter flexible portfolio, the of The Capital of of is Rocade time transactions majority remaining bolster confident does by and are nature middle volatility Eclipse the other long return finance making associated investments. platform the of conforming team BBDC shareholders event and for vary but Capital Solutions led global are recession. having The a portfolio. the buyer heading into see half the do quality a expected horizon, middle the the investors capital non-sponsored for are we market underwriting remain Rocade into delivering private more adjusted We environment. have should strategy, that private underlying second uncorrelated value increased Solutions in of the team committed long not to economy companies. to majority credit market and an The a risk attractive in

market across scale significant gives risk ability But BBDC to what compared and we managers. unique our credit to select reach classes at return global other middle and core, is asset Our a the do.

agreements credits, capital our one support and one assets originate asset, remain with Barings MVC assets by the Turning to and The MVC are four covered stress manager. asset our Sierra Sierra nonaccrual.

decreased nonaccrual turn Elizabeth. to mentioned, over previously quarter. from Eric call six nine I'll previous on And As investments in to the the

Elizabeth Murray

Ian. Thanks,

business bridge XX, the of can see to quarter. per share full the second in the NAV you Turning slide

per by realized this from exceeded share loss per income CSAs Net investment which FX fees. net $X.XX portfolio unrealized debt The which net share Our of per partially higher the exit appreciation depreciation. NAV was with XX% even incentive to dividend unrealized quarter’s $X.XX the lifted already was by predominantly to custom $X.XX, per by and investments share. from reclassified due outway, the of losses on realized share and $X.XX investments our was offset

We with this backdrop to a highlights approach are amid underwriting conservative economic our portfolio and and very construction. pleased portfolio's performance our uncertainty of

timeline driven see expected the Near exiting credit of investments. appreciation on support slide Additional details of the $X slide, which by the approximately is shown unrealized on XX. the of increased MVC are acceleration you net agreements the bottom can the the million,

show income balance statement XX and five for quarters. and XX sheet our last Slide the

per quarter-over-quarter some Our offset driven look income incentive in the the calculation. XX% investment fees incentive quarter quarter total to increase the lift a for back revenue share and net of the $X.XX unrealized income. in gains was by due fee by investment With higher

From debt June at XX, slide X.XXx a to was balance XX. equity perspective on total sheet

view Our of position the currently down this X.Xx of of within ratio vehicle, net leveraged X.XXx. the sits from as target which to reflective we more was leverage X.XXx And X.XXx. long-term our true measure

partners previously facility is in our structure pleased being the with we XXXX. of disclosed extend lending the in will as all our to addition, included February to May, capital grade that In extension, in of secured the were our revolving existing investment With continue we senior credit manner a after manage maturity rating profile. consistent

debt of you and how Details our each of XX, both last mix level class, can by of the ties the slide the support are of our unsecured year. evolution the seniority funding debt significant on including asset of profile provided million to capital structure. $XXX see in borrowings included our slide mix in is to our on which Turning asset our XX, terms over

over next As of with we unsecured the fixed August rate, of was of maturity a of And weighted average in have our two roughly X.XXX%. the end funding XXXX. debt comprised years coupon the half bond of first quarter, until

capital liquidity as million of to to slide $XX outstanding to our XX, impact BDC fund companies, our can commitment. has Turning the Barings portfolio net our you using to our million currently commitments available our see leverage well commitments of $XXX joint unused of as unfunded to venture investments.

commitments against We these BDC. as limit entirety Barings since to to over took our have available leverage advisor Slide cushion meet the XX, called upon. paid dividends the if are the updates announced of and

above earnings the dividend remained a a benefit fact share, dividend of have As should third shareholders the asset board earlier, quarterly Eric level increased higher expect our portfolio our X.X% to quarter $X.XX We on joint share. per $X.XX distribution that as generate and for a our in dividend our we declared will mentioned as longer, to income. and per well value, the given of investments have environment. believe normalized continue from hurdle rates Rocade, we Eclipse Jocassee and net base will rate the higher share venture And continue per high significant $X.XX platform to earn

and shareholders a our believe that and help of our capital role importance can assets with important of highlight to course long value play investments the at and that discounts continue business less term share the of are allocation aligned we this the We we portfolio. an book repurchases benefits diverse to in significant approach These policy. correlated way

equity of in or on new pipeline. and $XX X.X% investments. it's $X closed lien our of far have predominantly Barings on Thus have commitments million and is up and we of $X.X $XX with margin The commitments, Finance Global also weighted million a previously remarks which first origination which new funded made investment funded. basis, I'll secured QX, Investment average note our of wrap The million was prepared debt those probability a DM-X current pipeline weighted committed senior facilities. Private approximately billion

rights deals is this our our all As on reminder, investment closing in a based expected for estimated pipeline pipeline.

operator, that, the questions. line we'll for With open

Operator

[Operator Instructions]

Kyle Our line from of first Jefferies. comes with Joseph question the

Kyle Joseph

thanks you if Appreciate just color all repayment, Hey, a outlook good And trying the deal a gave the Fed to morning, we're for on get environment, particularly guys. pause. on for sense my but questions. for the the of cusp taking potential

Ian Fowler

hey, then So, start Ian. Kyle, in. jump anyone It’s I'll Morning, and with that let

prices, in just activities obviously, And with a getting rather equity rising I second rate environment, this going to firms volume and there's a hold year. that see year, half rate taking mean, of modest a that like, what mean, sort of been decline my thaw this rising So iBank a the M&A only happens to might I in as anemic multiples But is occur. we're have it's of discussed, the we we're who saying lot as And out. are private reason see enterprise cycle, are been pause breath, think that and look, I but we to this to to end I the soft going think purchase come through to books terms are for to of expect of in the in going as values.

end at time As year, of we starts about everyone work. money the it's the and to look year remainder also putting thinking

So deals lot do a of put there's and I think be, going pressure work to deals. to to

of the the putting highly, terms cautious being to So year deals of about work. remainder I'm cautious. in We're

Eric Lloyd

share repurchases, number the given really so Kyle, and us leverage leverage, given deployment were net, were, did with also where the it’s things of part all managing we repurchases And we share that. of part the is Eric, with net balancing

from what that's part a never versus deployments. science but of our net that, kind of impacted it's number perfect repayments So within

Ian Fowler

just chase portfolio as mean, companies to lot our out that to other would not coming been adding portfolio has we a is of throw And, not credits. the this, a forced any as these mentioned mature become been creating And deals, portfolio. diverse risky I not to we're going see is active. we're thing and that's activity manager do know I helping from And Kyle, stronger, value there companies going our look, Yes, to large, of very they're the acquisitions right, and that, and we're end think deals, I going going a have to add-on because and thesis. XX% into those part source better, of from bigger, that more of volume a deals, main we investment has less are, portfolio, understand, we

And other. no going brainer. Our And, or the truck back in comes not even up and that not is woods the economists recession. one of so of to out the time anything it now? way decision that's terms market But a really kind of kind do wrong, think like that. to and of bet to to I a I'm right was we're But are do the just

Kyle Joseph

for very And regional follow that. then that's with on up, Thanks a Yes, gone everything with banks. helpful.

how Just take, a the material of Where impacts it's Thanks. back. catalyst? wanted a industry banks do theme kind the more think Barings of you it but also, that just your the of get to continuation kind of is broadly, pulling more

Bryan High

credit not just clearly, smaller some that a would markets, across in they're, but vehicle know I a Kyle, say capital various a Hey, think, has regional have would we've far we've what would banks, private Barings the I we've pullback Barings say, Bryan. I what broader for be BDCs. fit necessarily I guess, BDC. seen markets with a the But ratings like of general, seen become great alternative the it's benefit theme so pipeline, that that actions broader Moody's that taken in don't I seen in across would

Eric Lloyd

perspective our from of And a we bank our group as extended partners, group our and just highlight bank is with Elizabeth us. I referenced, liability XXX% extended

testament We in XXX% and of it's we're it. challenging an environment, viewed we're support from we real to from more us what a exposure we've doing. perspective as And of kind we're banks and this the see have And that. have liability to a how done so to side, what them, done don't financing just perspective, we've continue on

Operator

Our Finian next question comes Fargo. with from Wells O'Shea

Finian O'Shea

those it least Hey, and more, On is few But part Rivers good down like for. sounded all running the ventures, on Rocade Thank a everyone, as more of seeing game that the long were brocade of morning. take. as you. Jocassee the Question looks And plan Eclipse, Thompson it at what down. plan future the key game is other Thompson central SLP. you if are differentiation. there sort highlighted the tofuture like running joint ones Waccamaw, would how and are

Eric Lloyd

part a best did is in simplify Thanks, a what we little from a to complexity things a to Fin, could. team of management the out the of it we was when the here reboot of of committed bit we take kind BDC some and perspective

second, for what say JVs. the I'd now yes, of vehicle. believe and that over running take years Bryan Jocassee here over to of is that attractive those to it shown We for down the of a years, Rocade So returns recently, out generated we some are complexity a turn That's and have within Eclipse number I’ll just number really BDC. intentional, do the in some time, a for of it's

environment, assets going challenged of to economic we type we for to correlated what say certain view cashflow an they're them what and example we be to a wouldn't as I as that is that central not when do, one what as as they're in in or core do. as we increase see say certain where credit do, Eclipse so more complementary other lending an I'd could to business. to And much very opportunities

not on more we the quarter within taking then will do that near So attractive parts BDC, the believe should JVs I've or you other incrementally And core be we simplifying deals Ian's really rather really, the as what us other focusing or underwritten private then Eclipse on first the that be secured like look the senior but really and those couple global do generated the out are have that these complementary, be is deals time. what between is area. managing Rocade to that down going communicated, finance anything And team to by over ago, and lien and expect think in will We're Eclipse. Jocassee, Rocade we complexity, yes, term. or we see

time what to JVs As like. takes. that sense But a It's time, each predict that over see hard add time. the looks of really you continue as don’t much anything? shareholders for far you do makes over to I could as should in to that how those it decrease know, Bryan if

Bryan High

day, similar the down it to to portfolio Eric loans. to what just No, Barings end debt liquidity provides sell that I those those by Eclipse market portfolio, think would be we're lien thing then add that And if only the doing outlined. about what in would at being think and Rocade able in are those I secured was loans facilities well very said, is the you the and looks the of and first Jocassee strategy portfolios the underlying middle BDC

those those and look portfolio Rivers So like what would to and over looks we as Thompson time. it wind relates to look overall Waccamaw, BDC’s like down don't Barings

Operator

from Dodd Our James. next of comes question the Raymond Robert with line

Robert Dodd

morning. Hello, everybody. Good

distribution. [inaudible] So any us kind should could -- we the just base you the return level the to on What that. like internal Not the dividend BDC? follow necessarily give to of a

is or Jocassee the of quarter mean, little others, go level For to around? of right some been I Or more ROE the something the a kind last year like to distribution? smaller now. have others large going of stack bit little it fourth more is a volatile XX% bit it's for that forward quarter that XX% the XX% one distribution than ROE than this bounce the continue some that? quite from Eclipse, kind been which A to in a Is of more [inaudible]? a bit

Bryan High

want tried we've it’s hey, what of lien diversify the the dividend more, it plain from dividend with middle line -- to in a what platform Bryan. portfolio, is, we're so more portfolio. And out grow And with what rest well. market, was the performed first we're to to reality a Eclipse, getting them could but allow the Yes, we've that to incredibly continue loans we as recently, we from it receiving and felt XX%, to mirror it's lot relates Robert, their

portfolio, we it, would the keep like the keep platform I our guess, would to consistent the would to from to rest And it. goal way dividend the try I with that try so to describe is yield that be of

So change, as but sense. it rest portfolio may volatile to that makes change, be base if that shouldn't of relative rates the the

Robert Dodd

MVC I said That's valuation mean it. does. It really actual realization is I acceleration the expected you unexpected the guess, is by commented that that you. estimate CSA Thank acceleration impacted is in was Elizabeth, an in real helpful. I driven you just or during, the assets? how how mean, that by activity? you put

Elizabeth Murray

Yes.

XX down lessor So assets. exit the we Robert, the now are way to last up the we or we either investment, think years, about it it's is the when CSA, four

talking mark, MVC should that next say. couple exit help end I team, years, should really, that the Fund, of winddown to five sooner or we that it's hired the over holding. somebody should that that is seven the should at than it’s the we One in will us we mode, with close that year, in and next -- just to of security exit have left believe Auto, so point over exit say five what's to PE years the And the we And which years. likely a XX we year sell exit

and acceleration where from. timeline that came So really that's

Robert Dodd

SOFR mean coverage, steep we over obviously like can climb on I mean, on I been et if coverage, the has And you. portfolio, it. down, higher they've nonaccruals the if pretty appreciate went interest, months, that but forward Ian, what's interest your et the the a of quality Thank cetera. cetera. on then credit overall But Got for go been can, interest last comment But the duration. XX SOFR maybe paying

below if look interest of expected asking has coverage portfolio what's So coverage? proportion been tied you interest And what your I've people, one? your of that today forward, also kind into

Ian Fowler

Yes.

majority is quarterly. because looking question, we probably our The monthly There's great are that are reality of borrowers backwards provide XX% So obviously, right. investors, reporting. our and

we're received -- packages we reporting quarterly for So the second haven't and all quarter looking yet.

we're So past, back in increasing or what those about first and I then for about started early factoring are, we're we've that are quarterly today talked quarter obviously, we're at looking this those we way that the the in and to in numbers But talking doing we're are rates X%. for stress think reporters, testing the the I'm portfolio monthly. year taking

of quarter. portfolio things the been couple majority a second that vast important So this, by impacted minimally And of just it's terms for think I'd the is highlight that performance. is I have I the and one inflation. in a referenced portfolio Number

So look our portfolio when lot that past of our at important price over have a of talked the goes we've businesses because is versus also think about to we that most the through pass been increases, one, in of composition this able portfolio, number I margins, XX% service which manufacturing, is you CapEx. to don't have the with companies borrowers of

our less GPF, one. And EBITDA those of number so less have that that than five than portfolio time, in that's issuers. is growth. XX% terms generating So Over it's in of are one

year companies lenders sponsors, we are this same and good you good put and teams sponsors and in where the to more equity, we liquidity another these XX the that second of right one basis a full under We'll and will some which to that see, at through are and rate have being companies like long that think have needs. doing of little of we of think I indicated this, of management the if there at the premium to are the terms day, But cycle, is, look to Robert, a get points quarter. company in going our in increases, rowing in probably minority businesses our consider to impact coming going the through one, year, and been as be with other of time, around we'll a all a direction, it's get do volatility interests the some a half I and as end have the expect end. I've to I So may some picking now, at

Eric Lloyd

build hits you in what one in from didn't if something Ian the Right? to at If if cut is look the know face, half Robert, portfolio. I that nonaccrual that what were environment you us from quarter. acquire nonaccruals only said, look the we that's on within that that is prior we right, today, mean, at almost all

run flow, and within Ian are at coverage. at you we that. Xx Barings, those just at perform a out the of well. running, And the have so so of less that And average typically if in Barings ease to you, And and Barings or you the call portfolio. referenced, with as portfolio, look MVC service of point looking if talked leverage within interest the XX% X.Xx from have if coverage we Sierra kind about evaluate everything, still And free lot assets. portfolio you communicated to more. Even businesses, extremely Xx rotating as interest it to we've perspective, if the type assets and of the cash it's assets they to other we you're CapEx look and And it you continue Ian’s into

is your the coverage very interest stays flow free importantly, very cash on to still attractive the So relative company.

Operator

next Casey Compass Our with Alexander Point. from comes question

Casey Alexander

warn noise. Charlotte's, all, storm sitting let And me so morning. in first Good if the of you here hear Yes. in same I'm background

You'll have me. forgive to

are you you at NAV JVs. that And a loans earning mean JVs? those higher and Does income excellent is those dividend to repurchase still what in JVs -- ask program. share the building portfolio. you're on believe I the shareholders material through. setting the the are follow earning was hope execution Secondly, through appreciate want That of it Bryan; retention like on ROE that saying to want that to and sounds what me I acknowledge about the

Bryan High

Casey. thanks for question, Yes, the

relates it and trying Yes. and the Eclipse correct. portfolio with teens As to to type Rocade, NAV build is that ROE. that within capital. that retaining And we're high Think

Casey Alexander

Jocassee so mark, would at be the sort of And then.

Elizabeth Murray

Correct.

Casey Alexander

Yes.

Okay.

what's individual of was marked Secondly, are is review date? CSA each, caps wondering to the MVC a the at of you more could currently to each are mark-to-market to specific, if What blocks on loss of business? those gave CSAs SIC on of the sort what each be But cumulative the date, it. you I

Elizabeth Murray

marked at and it's is XX.X, XX. so CSA Yes, MVC, that for currently

MVC are now XX. right losses the With at

losses around fully again, And the that is So, mark $XXX million. are is XX. the on around XX. covered, Sierra And to up

Eric Lloyd

XX. not are losses The

Elizabeth Murray

I'm sorry. Oh,

Eric Lloyd

X losses realized like These million. are losses like are actual

Elizabeth Murray

XX unrealized. And includes

Eric Lloyd

is Incremental XX unrealized.

mark-to-market apply be XXX, of if to about the any that. And and you you'd good will XX feel so that you mark-to-market, the relative some total be We said, so take covered stuff. full that of the as Elizabeth on the more than

feel there CLO with syndicated going XXX what's were XXX. their, from that type things. those that's of So but basis, it impacted the had existing some given acquired by and to But underlying relatives long CLO where collateral mark-to-market or were stuffs that. a what is within to there again, was Obviously, X XX some impacted rates base JV and loans, the recovery we we of those, equity, they of around happened both to of good think there, equity a broadly within about term relative at be

Operator

We have Wells O'Shea a follow up question Fargo. with Finian from

Finian O'Shea

much. so thanks Hi,

Topic Just du one JVs. more jour. on the

on retained You and Eclipse mentioned earnings Rocade. building

guess I wise, extent those and what's of within about you distribute thinking see to to earnings? And the Just distributing today? the what are you. it scale that opportunity size Is opportunity you returns getting starting right sort the before returns? sized path to Thank the what and

Bryan High

around Yes. to we to we continue of Fin, from distributed momentum. those that be think that to And we long can certainly as do that have as we're But get extent tactical -- ROEs, I want can those portfolio perspective. we generate we a types going to the think platforms more.

for to time. we of so And over sort overall NAV the create continue portfolio to want

a them long take get can that. that change earning the let don't retain. to ROE, as we special point, timeline to so strategy continue that are to as And we dividends think to in of they to income or bolster that will I to do extent sort we BBDC of there's that the a And want

use that the if in are portfolio, So there other issues to help we the can extent to kind it of makes sense.

Eric Lloyd

but of investment because Yes, attractive And the think again, Any growth of BDC the we distribute of rest consistently off we I to think core mean, senior for we're that kind lien that investment within other questions? it's that something high is the something I really ROE, said, which prudent, a return. consistent continue mean teens extremely high Bryan be going to want it's teens first secured of I portfolio, retaining just build support part flow it's that to type portfolio, to the where with cash a on some going is assets. is as Fin. the complementary of also of the to that,

Operator

We Miyazaki from have Investment David one question with Confluence more Management.

David Miyazaki

you for some Hi, to good CSAs place. the morning. I that have appreciation just in wanted share

both that at that acquisitions I losses, the view you it to are higher was, given through especially proven versus that the of winddown how toward possible and marching surprised consolidation very your I'm I'd shape think are Sierra, expected. MVC what going you than that does is or something underwriting? be has it's And helpful, your as how future what forward? MVC, or curious

Eric Lloyd

them providing assets we MVC, we And the shareholders. at had we, the referenced we're appreciate the the would for the is glad that the we say to debt transparency bears underwrote was CSA position, and and that are a that said, Barings your not we're part referenced to risk of went CSA. question. hold debt into which more I on as realized large what one there that thanks positions. are David, that you that losses relative still Elizabeth significant, that equity We of are Hey, had And were losses one it's that's was three We two which MVC. position. recognition customer around

the on And didn't you severity day certain that not we a type is when two process when information, so portfolio of them, but Elizabeth extent we loss that a you TBD. was, underwrite you on of it, underwrite, the to expect equity whether positions, of the and now of it would the that, beginning originate that we certain of as an kind have referenced right full the type and underwrote that that obviously, process have exit at in timeline to normally didn't the to amount we're look underwriting. of The a one be

happens back can date But had will will will will we've infrastructure, equity not. other MPC one, some hold that offset basically, benefit for basically those the believe, of area to we and European reasons The that a obviously are occurring and we on the the positions whether kind some of or come support that them, on, think little time portfolio. losses longer that macro that tell

at led so impact the increase equity the it I'd the JV it should guess, value So is significant line we loan realized just that we think of there, CLO it's it's as think got position almost that referenced, is losses, of of in this million was it kind defaulted. in in dollar MVC, or thing of therefore but half-ish tell as it the diversified be with is We in thought On But will that at The equity that. was was look would there, really CSA. net-net, the it X-ish general, or today, what by the the the I we perfectly two basis. custom of way, really XX-ish unrealized or equity down, they of to I half-ish to of as this you higher say primary within as equity fully if I'd just the performing portfolio. XX-ish more loss -- it part one we underwrote, at on rates, the assets really extent kind look short it to Elizabeth drive the on of time were the of surprise, referenced performed it kind it's which inside so perform. impacted to believe underlying syndicated kind the not what are that than CLO broadly which JV. a that your thought I in be, underlying the we that's would what million severity, will and we it from those you of asset, that which line think equity on Sierra, value were prices answer When And million of base of Both look we say your number equity to realized outway are that. coming above the say going positions underwrote, or of a

bit in what we've base only surprise underwrote, been So the in of realized the portfolios, unrealized say the stress the I we which perspective, kind just than rates, frankly, of would we impact there that. a the referenced, actual rise portfolio expected assuming better, of as an then maybe tested we, has is be with part little think what Ian part don't underwriting that from even I'd the line

us base would or have increases months of have a I the think underwritten in pace of we've on increase XX all that base it rate seen them case had XX wouldn't type kind this the to them. over of significant last of

earlier, the underlying assets, which It's not focus, year over of what hit really next in didn't shareholders. a basics that that anything. will Bryan, would time, a I MVC. getting M&A, Barings. with assets out type out we bears true from BDC. Sierra, different that Same and believe the say in the again, the value back on that one referenced here as believe refocusing don’t just But really and about rotating continue we BDC BDC, some be Thanks, We kind that really perspective, believe and add focusing to lien the that the to I got portfolio at the and acquisition We and on expect shouldn't the of that's MVC for to senior secured than be portfolio. about focusing and risk you year of us balance what historically with would assets this the to was of time, I'd risk line we I but on when for Future if attractive realized one. probably and Dave, we At M&A going feel Barings MVC on really there. the value bear referenced reminding. really combined team be XXXX. for an say are does would with equity story, that all the sorry, CSA I'd do earlier. good are know the generate Simplifying Barings was simplifying you assets Sierra particularly attractive I taking that shareholders. complexity the first

at our look entire portfolio, other every originate of assets one Barings you nonaccruals, from If right, the nonaccrual step what represent we acquired.

of really our the shareholders so will our benefit deals going originated over quality believe we that that's time focus. And to be and

David Miyazaki

itself complexity. is expression a parent that's own And I of the of in to I say, have would all very And think And our with helpful. of CSA good also aligning us at repurchases, that share it also shareholders its I all have alignment. place. echo the comments interests. following good to it is But know that's on the on to protection through Well, day, as creates the of the certainly a end helps the to remind

So thanks the for answering all questions.

Eric Lloyd

a Absolutely, as we alignment how we sends to business David. million how to and shareholders, doing again, about we that really not BDC got everything two of risks over the with recognizing to, communicate think Barings protect that to insulate that making do go message are can I over align time appreciate we've risk and and perspective. believe shareholder insulate we think an from tried about we $XXX between we CSAs, we we've shareholders. sure I And think you

for questions back CEO further no time. to Eric the at would like over are to this There comments. turn Lloyd, closing floor you. Mr. Thank I

Eric Lloyd

with stuff during Yes. year. grateful the We're done. of benefit were shareholders the to everybody these to and we take time sure in the hear too from you for call and Number get say we our and Albert that story are, want where and anytime and Thanks the team for to the thunder that the and with of now I putting Ian calls. have time really a lot over have course join Elizabeth I because you stock the we Bryan price there's just wanted do thanks. believe you up feel over for call. the willing forward. invites busy right And and want there you're everything here between and the sirens appreciate we've story thank lightning and we with about first and will to us and us time ask to listen end to taking questions now invest attributes some to some shareholder the of it's to time we're I and we the and of that I a Matt, really did. great communicating and the our Jeff you I the time. compelling and like I guess everything us make the behind feel going And seen to invest we in that team, out to have telling know

that, with I'll be well hope So and say also I everybody, you, everyone's having thank great summer. a

Operator

teleconference. today's concludes This

your Thank disconnect at may lines time. you You this for your participation.

Barings BDC (BBDC) 10 Aug 232023 Q2 Earnings call transcript