UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K 

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): August 5, 2020

  

 

BAIN CAPITAL SPECIALTY FINANCE, INC.

(Exact name of Registrant as Specified in Its Charter)

 

  

DELAWARE   814-01175  

81-2878769 

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

200 Clarendon Street, 37th Floor, Boston, MA 02116__

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code: (617) 516-2000

 

                      N/A                    

(Former Name or Former Address, if Changed Since Last Report)

 

  

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $.001 par value   BCSF   New York Stock Exchange

 

 

  

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On August 5, 2020, Bain Capital Specialty Finance, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2020. A copy of the press release is attached hereto as Exhibit 99.1.

 

The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for any purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such Section. The information in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 8.01 – Other Events

 

On August 5, 2020, the Company issued a press release announcing the declaration of a third fiscal quarter 2020 dividend of $0.34 per share for stockholders of record as of September 30, 2020, payable on October 30, 2020. A copy of the press release is attached hereto as Exhibit 99.1.

  

Item 9.01. Financial Statements and Exhibits.

 

(d)       Exhibits.

 

99.1                  Press Release, dated August 5, 2020

  

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, Bain Capital Specialty Finance, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    BAIN CAPITAL SPECIALTY FINANCE, INC.
     
Date: August 5, 2020 By:         /s/ Michael Treisman
    Name:      Michael Treisman
    Title: Secretary

 

 

Exhibit 99.1

 

 

 

Bain Capital Specialty Finance, Inc. Announces June 30, 2020 Financial Results and Declares Third Quarter 2020 Dividend of $0.34 per Share

 

BOSTON – August 5, 2020 – Bain Capital Specialty Finance, Inc. (NYSE: BCSF, the “Company”, “our” or “we”) announced today its financial results for the second quarter June 30, 2020 and that its Board of Directors has declared a dividend of $0.34 per share for the third quarter of 2020.

 

“Despite the continued challenging economic backdrop, we delivered solid financial results driven by stable credit quality across our diversified portfolio of primarily first lien senior secured loans,” said Michael Ewald, President and Chief Executive Officer of BCSF. “We also strengthened our balance sheet during the quarter as our demonstrated access to capital markets further positioned the Company to better withstand continued market uncertainty and volatility.”

 

QUARTERLY HIGHLIGHTS

 

· Net investment income per share was $0.37, as compared to $0.44 for the quarter ended March 31, 2020;

 

· Net income (loss) per share was $0.40 as compared to $(2.02) for the quarter ended March 31, 2020;

 

· Net asset value per share as of June 30, 2020 was $15.81 as compared to $15.82 as of March 31, 2020 pro-forma adjusted for the rights offering;(1)

 

· Credit quality remained stable during the quarter with no new investments placed on non-accrual. Non-accrual investments represented 1.1% of the total investment portfolio at fair value as of June 30, 2020;

 

· During the quarter, the Company completed a rights offering issuing 12.9 million common shares with total gross proceeds of $131.9 million. This new equity capital allowed the Company to strengthen its balance sheet as demonstrated by the significant decrease in the Company’s leverage ratio quarter-over-quarter. The Company’s ending debt-to-equity (net of cash) ratio was 1.42x as of June 30, 2020 as compared to 1.78x as of March 31, 2020;

 

· In June 2020, the Company completed an offering of $150.0 million aggregate principal amount of 8.50% senior unsecured notes due 2023 (the “2023 Notes”). The 2023 Notes are subject to a two-year non-call period, unless redeemed earlier at par plus a “make-whole” premium. The proceeds from the offering were used to pay down existing indebtedness under the Company’s secured credit facilities and enhanced the Company’s available liquidity; and

 

· Subsequent to quarter-end, the Company’s Board of Directors declared a dividend of $0.34 per share for the third quarter of 2020 payable to stockholders of record as of September 30, 2020.(2)

 

SELECTED FINANCIAL HIGHLIGHTS

 

($ in millions, unless otherwise noted)   Q2 2020     Q1 2020  
Net investment income per share   $ 0.37     $ 0.44  
Net investment income   $ 20.0     $ 22.5  
Earnings (loss) per share   $ 0.40     $ (2.02 )
Dividends per share declared and payable   $ 0.34     $ 0.41  

 

($ in millions, unless otherwise noted)   As of
June 30, 2020 		    As of
March 31, 2020 		 
Total fair value of investments   $ 2,476.0     $ 2,484.5  
Total assets   $ 2,610.0     $ 2,604.3  
Total net assets   $ 1,021.0     $ 892.8  
Net asset value per share   $ 15.81     $ 17.29 (1)

 

 

 

 

PORTFOLIO AND INVESTMENT ACTIVITY

 

For the three months ended June 30, 2020, the Company invested $49.2 million in 16 portfolio companies across 10 different industries. New investments were primarily driven by fundings to existing portfolio companies. The Company had $67.1 million of principal repayments and sales in the quarter. On a net basis, our investments in the quarter totaled $(17.9) million.

 

Investment Activity for the Quarter Ended June 30, 2020:

 

($ in millions)   Q2 2020     Q1 2020  
Investment Fundings   $ 49.2     $ 276.1  
Sales and Repayments   $ 67.1     $ 180.7  
Net Investment Activity   $ (17.9 )   $ 95.4  

 

As of June 30, 2020, the Company’s investment portfolio had a fair value of $2,476.0 million, comprised of investments in 109 portfolio companies operating across 30 different industries.

 

Investment Portfolio at Fair Value as of June 30, 2020:

 

Investment Type   $ in Millions     % of Total  
First Lien Senior Secured Loans   $ 2,145.8       86.7 %
First Lien Last Out Loans     22.0       0.9  
Second Lien Senior Secured Loans     156.8       6.3  
Subordinated Debt     15.0       0.6  
Equity Interest     113.0       4.6  
Preferred Equity     23.3       0.9  
Warrants     0.1       0.0  
Total   $ 2,476.0       100.0 %

 

As of June 30, 2020, the weighted average yield on the investment portfolio at amortized cost and fair value were 6.6% and 6.9%, respectively.(3) 99.2% of the Company’s debt investments at fair value were in floating rate securities.

 

As of June 30, 2020, two portfolio companies were on non-accrual status, representing 1.8% and 1.1% of the total investment portfolio at cost and fair value, respectively.

 

RESULTS OF OPERATIONS

 

For the three months ended June 30, 2020 and March 31, 2020, total investment income was $47.9 million and $51.5 million, respectively. The decrease in investment income was primarily driven by a decrease in interest income due to a decrease in the applicable London Interbank Offered Rate (LIBOR).

 

Total expenses before taxes for the three months ended June 30, 2020 and March 31, 2020 were $27.9 million and $29.0 million, respectively. The decrease was primarily driven by lower interest and debt financing expenses and lower other operating expenses.

 

Net investment income after taxes for the three months ended June 30, 2020 and March 31, 2020 was $20.0 million, or $0.37 per share and $22.5 million or $0.44 per share, respectively.

 

During the three months ended June 30, 2020, the Company had net realized and unrealized gains of $1.8 million.

 

Net increase in net assets resulting from operations for the three months ended June 30, 2020 was $21.8 million, or $0.40 per share.

 

   

 

 

CAPITAL AND LIQUIDITY

 

As of June 30, 2020, the Company had total principal debt outstanding of $1,550.2 million, including $323.3 million outstanding in the Company’s revolving credit facility with Goldman Sachs Bank USA (the “BCSF Revolving Credit Facility”), $312.4 million outstanding in the Company’s credit facility with JPMorgan Chase Bank, National Association (the “JPM Credit Facility”), $365.7 million outstanding of the notes issued through BCC Middle Market CLO 2018-1 LLC, $398.8 million outstanding of the 2019-1 Debt and $150.0 million outstanding in the Company’s 2023 Notes.

 

For the three months ended June 30, 2020, the weighted average interest rate on debt outstanding was 3.7%, as compared to 4.1% for the three months ended March 31, 2020.

 

As of June 30, 2020, the Company had cash and cash equivalents (including foreign cash) of $76.7 million and $364.3 million of aggregate capacity under its credit facilities, including $176.7 million in the BCSF Revolving Credit Facility, $137.6 million in the JPM Credit Facility and $50.0 million in the Revolving Advisor Loan. As of June 30, 2020, the Company had $119.1 million of undrawn investment commitments.

 

As of June 30, 2020, the Company’s debt-to-equity and debt-to-equity (net of cash) ratios were 1.52x and 1.42x, respectively. These leverage ratios were down significantly quarter-over-quarter primarily driven by the equity capital raised in the rights offering; as of March 31, 2020, the Company’s debt-to-equity and debt-to-equity (net of cash) ratios were 1.86x and 1.78x, respectively.

 

As of June 30, 2020, the Company was in compliance with all terms under its secured credit facilities.

 

CONFERENCE CALL INFORMATION

 

A conference call to discuss the Company’s financial results will be held live at 8:00 a.m. Eastern Time on August 6, 2020. Please visit BCSF’s webcast link located on the Events & Presentations page of the Investor Resources section of BCSF’s website http://www.baincapitalbdc.com for a slide presentation that complements the Earnings Conference Call.

 

Participants are also invited to access the conference call by dialing one of the following numbers:

 

· Domestic: 1-877-300-8521

· International: 1-412-317-6026

· Conference ID: 10146185

 

All participants will need to enter the Conference ID followed by the # sign and reference “Bain Capital Specialty Finance” once connected with the operator. All participants are asked to dial in 10-15 minutes prior to the call.

 

Replay Information:

 

An archived replay will be available approximately three hours after the conference call concludes through August 13, 2020 via a webcast link located on the Investor Resources section of BCSF’s website, and via the dial-in numbers listed below:

 

· Domestic: 1-844-512-2921

· International: 1-412-317-6671

· Conference ID: 10146185

 

   

 

 

 

Bain Capital Specialty Finance, Inc.
           
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share data)

 

    As of     As of  
    June 30, 2020     December 31, 2019  
      (Unaudited)          
Assets                
Investments at fair value:                
Non-controlled/non-affiliate investments (amortized cost of $2,467,545 and $2,416,854, respectively)   $ 2,334,972     $ 2,403,250  
Non-controlled/affiliate investment (amortized cost of $6,720 and $6,720, respectively)     9,728       6,720  
Controlled affiliate investment (amortized cost of $136,127 and $113,689, respectively)     131,287       117,085  
Cash and cash equivalents     76,364       36,531  
Foreign cash (cost of $520 and $854, respectively)     305       810  
Restricted cash and cash equivalents     26,230       31,505  
Collateral receivable on forward currency exchange contracts     1,604       -  
Deferred financing costs     3,562       3,182  
Interest receivable on investments     16,214       22,482  
Receivable for sales and paydowns of investments     2,468       21,994  
Unrealized appreciation on forward currency exchange contracts     3,070       1,034  
Dividend receivable     4,214       961  
Total Assets   $ 2,610,018     $ 2,645,554  
                 
Liabilities                
Debt (net of unamortized debt issuance costs of $7,876 and $4,584, respectively)   $ 1,542,281     $ 1,574,635  
Offering costs payable     1,286       -  
Interest payable     10,888       15,534  
Payable for investments purchased     95       293  
Collateral payable on forward currency exchange contracts     -       331  
Unrealized depreciation on forward currency exchange contracts     32       1,252  
Base management fee payable     8,640       7,265  
Incentive fee payable     -       4,513  
Accounts payable and accrued expenses     3,892       2,155  
Distributions payable     21,951       21,176  
Total Liabilities     1,589,065       1,627,154  
                 
Commitments and Contingencies                
                 
Net Assets                
Preferred stock, $0.001 par value per share, 10,000,000,000 shares authorized, none issued and outstanding as of June 30, 2020 and December 31, 2019, respectively   $ -     $ -  
Common stock, par value $0.001 per share, 100,000,000,000 and 100,000,000,000 shares authorized, 64,562,265 and 51,649,812 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively     65       52  
Paid in capital in excess of par value     1,166,685       1,038,343  
Total distributable earnings (loss)     (145,797 )     (19,995 )
Total Net Assets     1,020,953       1,018,400  
Total Liabilities and Total Net assets   $ 2,610,018     $ 2,645,554  
                 
Net asset value per share   $ 15.81     $ 19.72  

  

 

 

 

 

Bain Capital Specialty Finance, Inc.
                       
Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)

 

    For the Three Months Ended
June 30, 		    For the Three Months Ended
June 30, 		    For the Six Months Ended
June 30, 		    For the Six Months Ended
June 30, 		 
    2020     2019     2020     2019  
Income                                
Investment income from non-controlled/non-affiliate investments:                                
Interest from investments   $ 44,147     $ 44,938     $ 92,018     $ 75,326  
Dividend income     681       -       714       16  
Other income     59       369       499       391  
Total investment income from non-controlled/non-affiliate investments     44,887       45,307       93,231       75,733  
                                 
Investment income from controlled affiliate investments:                                
Interest from investments     738       135       1,510       242  
Dividend income     2,246       5,152       4,626       14,510  
Other income     -       4       -       4  
Total investment income from controlled affiliate investments     2,984       5,291       6,136       14,756  
Total investment income     47,871       50,598       99,367       90,489  
                                 
Expenses                                
Interest and debt financing expenses     17,312       16,619       35,188       27,165  
Base management fee     8,639       7,983       17,365       14,734  
Incentive fee     -       4,490       -       8,575  
Professional fees     643       275       1,613       826  
Directors fees     171       106       346       211  
Other general and administrative expenses     1,084       1,587       2,333       2,430  
Total expenses before fee waivers     27,849       31,060       56,845       53,941  
Base management fee waiver     -       (1,617 )     -       (3,867 )
Incentive fee waiver     -       -       -       (1,982 )
Total expenses, net of fee waivers     27,849       29,443       56,845       48,092  
Net investment income     20,022       21,155       42,522       42,397  
                                 
Net realized and unrealized gains (losses)                                
Net realized gain (loss) on non-controlled/non-affiliate investments     52       (571 )     (10,404 )     (1,421 )
Net realized gain on controlled affiliate investments     -       265       -       265  
Net realized gain (loss) on foreign currency transactions     66       (318 )     (349 )     (312 )
Net realized gain on forward currency exchange contracts     5,097       7,063       6,602       10,696  
Net change in unrealized appreciation (depreciation) on foreign currency translation     104       499       (105 )     300  
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts     (9,865 )     (5,866 )     3,256       (9,149 )
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate investments     10,418       275       (118,969 )     14,642  
Net change in unrealized appreciation on non-controlled/affiliate investments     3,008       -       3,008       -  
Net change in unrealized appreciation (depreciation) on controlled affiliate investments     (7,130 )     (3,280 )     (8,236 )     1,116  
Total net gains (losses)     1,750       (1,933 )     (125,197 )     16,137  
                                 
Net increase (decrease) in net assets resulting from operations   $ 21,772     $ 19,222   $ (82,675 )   $ 58,534  
                                 
Basic and diluted net investment income per common share   $ 0.37     $ 0.41     $ 0.81     $ 0.82  
Basic and diluted increase in net assets resulting from operations per common share   $ 0.40     $ 0.37     $ (1.57 )   $ 1.14  
Basic and diluted weighted average common shares outstanding     53,778,239       51,629,544       52,714,025       51,556,248  

  

 

 

 

 

Endnotes

 

(1) Adjusted net asset value per share is a non-GAAP measure and is provided in addition to, but not as a substitute for, net asset value per share. Adjusted net asset value per share represents the dilution impact of the rights offering. As of March 31, 2020, adjusted and GAAP net asset value per share was $15.82 and $17.29, respectively. BCSF believes this non-GAAP financial measure is useful to investors as an additional tool to evaluate the quarter-over-quarter effect of the rights offering that occurred during the quarter ended June 30, 2020.

 

(2) The third quarter dividend is payable on October 30, 2020 to holders of record as of September 30, 2020.

 

(3) Information as of June 30, 2020. Weighted average yields are computed as (a) the annual stated interest rate or yield earned on the relevant accruing debt and other income producing securities, divided by (b) the total relevant investments at amortized cost or at fair value, as applicable.

 

About Bain Capital Specialty Finance, Inc.

 

Bain Capital Specialty Finance, Inc. is an externally managed specialty finance company focused on lending to middle-market companies. BCSF is managed by BCSF Advisors, L.P., an SEC-registered investment adviser and a subsidiary of Bain Capital Credit, L.P. Since commencing investment operations on October 13, 2016, and through June 30, 2020, BCSF has invested approximately $3,704.7 million in aggregate principal amount of debt and equity investments prior to any subsequent exits or repayments. BCSF’s investment objective is to generate current income and, to a lesser extent, capital appreciation through direct originations of secured debt, including first lien, first lien/last out, unitranche and second lien debt, investments in strategic joint ventures, equity investments and, to a lesser extent, corporate bonds. BCSF has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended.

 

Forward-Looking Statements

 

This letter may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this letter may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the U.S. Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this letter.

 

Investor Contact: 

Katherine Schneider 

Tel. +1 212 803 9613 

investors@baincapitalbdc.com

 

Media Contact: 

Charlyn Lusk 

Tel. +1 646 502 3549 

clusk@stantonprm.com