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): November 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 November 5, 2020, Bain Capital Specialty Finance, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended September 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 November 5, 2020, the Company issued a press release announcing the declaration of a fourth fiscal quarter 2020 dividend of $0.34 per share for stockholders of record as of December 31, 2020, payable on January 29, 2021. 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 November 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: November 5, 2020 By: /s/ Michael Treisman
    Name: Michael Treisman
    Title: Secretary

 

 

 

Exhibit 99.1

 

 

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

 

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

 

“We delivered strong earnings results this quarter driven by the stable performance of our portfolio company investments as broader credit market conditions improved,” said Michael Ewald, President and Chief Executive Officer of BCSF. “We continue to demonstrate meaningful progress in further de-leveraging our balance sheet, positioning us with greater asset coverage and increased flexibility to maximize long-term shareholder value.”

 

QUARTERLY HIGHLIGHTS

 

· Net investment income per share was $0.33, as compared to $0.37 for the quarter ended June 30, 2020;

 

· Net income per share was $0.80 as compared to $0.40 for the quarter ended June 30, 2020;

 

· Net asset value per share as of September 30, 2020 was $16.27 as compared to $15.81 as of June 30, 2020;

 

· Gross and net new investment fundings were $29.2 million and $(60.7) million, respectively. As a result of the principal repayments and sales activity that occurred during the quarter, and together with the increase in net assets, the Company’s ending debt-to-equity (net of cash) ratio was 1.33x as of September 30, 2020, as compared to 1.42x as of June 30, 2020;

 

· Credit quality improved as demonstrated by the number and percentage of non-accrual investments declining quarter-over-quarter. Non-accrual investments represented 0.2% of the total investment portfolio at both cost and fair value as of September 30, 2020; and

 

· Subsequent to quarter-end, the Company’s Board of Directors declared a dividend of $0.34 per share for the fourth quarter of 2020 payable to stockholders of record as of December 31, 2020.(1)

 

SELECTED FINANCIAL HIGHLIGHTS

 

($ in millions, unless otherwise noted)   Q3 2020     Q2 2020  
Net investment income per share   $ 0.33     $ 0.37  
Net investment income   $ 21.5     $ 20.0  
Earnings per share   $ 0.80     $ 0.40  
Dividends per share declared and payable   $ 0.34     $ 0.34  

 

($ in millions, unless otherwise noted)   As of
September 30,
2020 		    As of
June 30,
2020 		 
Total fair value of investments   $ 2,459.7     $ 2,476.0  
Total assets   $ 2,621.1     $ 2,610.0  
Total net assets   $ 1,050.5     $ 1,021.0  
Net asset value per share   $ 16.27     $ 15.81  

 

 

 

 

PORTFOLIO AND INVESTMENT ACTIVITY

 

For the three months ended September 30, 2020, the Company invested $29.2 million in 16 portfolio companies across 10 different industries. New investments were primarily driven by fundings to existing portfolio companies. The Company had $89.9 million of principal repayments and sales in the quarter. On a net basis, our investments in the quarter totaled $(60.7) million.

 

Investment Activity for the Quarter Ended September 30, 2020:

 

($ in millions)   Q3 2020     Q2 2020  
Investment Fundings   $ 29.2     $ 49.2  
Sales and Repayments   $ 89.9     $ 67.1  
Net Investment Activity   $ (60.7 )   $ (17.9 )

 

As of September 30, 2020, the Company’s investment portfolio had a fair value of $2,459.7 million, comprised of investments in 107 portfolio companies operating across 30 different industries.

 

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

 

Investment Type   $ in Millions     % of Total  
First Lien Senior Secured Loans   $ 2,128.6       86.5 %
First Lien Last Out Loans     17.2       0.7  
Second Lien Senior Secured Loans     155.5       6.3  
Subordinated Debt     15.0       0.6  
Equity Interest     107.4       4.4  
Preferred Equity     36.0       1.5  
Total   $ 2,459.7       100.0 %

 

As of September 30, 2020, the weighted average yield on the investment portfolio at amortized cost and fair value were 6.9% and 7.1%, respectively, as compared to 6.6% and 6.9%, respectively, as of June 30, 2020.(2) 99.2% of the Company’s debt investments at fair value were in floating rate securities.

 

As of September 30, 2020, one portfolio company was on non-accrual status, representing 0.2% and 0.2% of the total investment portfolio at cost and fair value, respectively.

 

RESULTS OF OPERATIONS

 

For the three months ended September 30, 2020 and June 30, 2020, total investment income was $46.8 million and $47.9 million, respectively. The decrease in investment income was primarily due to a contraction in the size of the investment portfolio as a result of net repayments.

 

Total expenses for the three months ended September 30, 2020 and June 30, 2020 were $25.4 million and $27.9 million, respectively. The decrease was primarily driven by lower interest and debt financing expenses.

 

Net investment income for the three months ended September 30, 2020 and June 30, 2020 was $21.5 million or $0.33 per share and $20.0 million or $0.37 per share, respectively.

 

During the three months ended September 30, 2020, the Company had net realized and unrealized gains of $30.0 million.

 

Net increase in net assets resulting from operations for the three months ended September 30, 2020 was $51.5 million, or $0.80 per share.

 

 

 

 

 

CAPITAL AND LIQUIDITY

 

As of September 30, 2020, the Company had total principal debt outstanding of $1,521.4 million, including $307.8 million outstanding in the Company’s revolving credit facility with Goldman Sachs Bank USA (the “BCSF Revolving Credit Facility”), $299.1 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 senior unsecured notes due 2023.

 

During the quarter, the Company entered into a second amended and restated credit agreement within its BCSF Revolving Credit Facility to, among other things, (i) decrease the financing limit from $500.0 million to $425.0 million, (ii) decrease the interest rate on financing from LIBOR plus 3.25% per annum to LIBOR plus 3.00% per annum, and (iii) provide enhanced flexibility to contribute and borrow against revolving and delayed draw loans and modify certain other terms relating to collaterals.

 

For the three months ended September 30, 2020, the weighted average interest rate on debt outstanding was 3.3%, as compared to 3.7% for the three months ended June 30, 2020.

 

As of September 30, 2020, the Company had cash and cash equivalents (including foreign cash) of $45.0 million and $318.0 million of aggregate capacity under its credit facilities, including $117.2 million in the BCSF Revolving Credit Facility, $150.8 million in the JPM Credit Facility and $50.0 million in the Revolving Advisor Loan. As of September 30, 2020, the Company had $153.0 million of undrawn investment commitments.

 

As of September 30, 2020, the Company’s debt-to-equity and debt-to-equity (net of cash) ratios were 1.45x and 1.33x, respectively, as compared to 1.52x and 1.42x, respectively, as of June 30, 2020.

 

As of September 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 8:30 a.m. Eastern Time on November 6, 2020. Please visit BCSF’s webcast link located on the Events & Presentations page of the Investor Resources section of BCSF’s website at 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: 10148764

 

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 November 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: 10148764

 

 

 

 

 

Bain Capital Specialty Finance, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

 

    As of     As of  
    September 30,
2020 		    December 31,
2019 		 
    (Unaudited)        
Assets                
Investments at fair value:                
Non-controlled/non-affiliate investments (amortized cost of $2,361,890 and $2,416,854, respectively)   $ 2,303,209     $ 2,403,250  
Non-controlled/affiliate investment (amortized cost of $28,852 and $6,720, respectively)     33,549       6,720  
Controlled affiliate investment (amortized cost of $137,924 and $113,689, respectively)     122,899       117,085  
Cash and cash equivalents     43,020       36,531  
Foreign cash (cost of $2,029 and $854, respectively)     2,009       810  
Restricted cash and cash equivalents     78,895       31,505  
Collateral on forward currency exchange contracts     3,604       -  
Deferred financing costs     3,493       3,182  
Interest receivable on investments     20,232       22,482  
Receivable for sales and paydowns of investments     4,633       21,994  
Unrealized appreciation on forward currency exchange contracts     23       1,034  
Dividend receivable     5,573       961  
Total Assets   $ 2,621,139     $ 2,645,554  
                 
Liabilities                
Debt (net of unamortized debt issuance costs of $7,555 and $4,584, respectively)   $ 1,513,852     $ 1,574,635  
Offering costs payable     518       -  
Interest payable     11,783       15,534  
Payable for investments purchased     2,956       293  
Collateral payable on forward currency exchange contracts     -       331  
Unrealized depreciation on forward currency exchange contracts     8,162       1,252  
Base management fee payable     8,885       7,265  
Incentive fee payable     -       4,513  
Accounts payable and accrued expenses     2,573       2,155  
Distributions payable     21,951       21,176  
Total Liabilities     1,570,680       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 September 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 September 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)     (116,291 )     (19,995 )
Total Net Assets     1,050,459       1,018,400  
Total Liabilities and Total Net assets   $ 2,621,139     $ 2,645,554  
                 
Net asset value per share   $ 16.27     $ 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
September 30, 		    For the Nine Months Ended
September 30, 		 
    2020     2019     2020     2019  
Income                                
Investment income from non-controlled/non-affiliate investments:                                
Interest from investments   $ 43,558     $ 50,710     $ 135,576     $ 126,037  
Dividend income     34       46       748       62  
Other income     607       236       1,106       627  
Total investment income from non-controlled/non-affiliate investments     44,199       50,992       137,430       126,726  
                                 
Investment income from non-controlled, affiliate investments:                                
Investment income from non-controlled/affiliate investments:                                
Interest from investments     56       -       56       -  
Total investment income from non-controlled/affiliate investments     56       -       56       -  
                                 
Investment income from controlled affiliate investments:                                
Interest from investments     715       781       2,225       1,023  
Dividend income     1,847       915       6,473       15,425  
Other income     -       -       -       4  
Total investment income from controlled affiliate investments     2,562       1,696       8,698       16,452  
Total investment income     46,817       52,688       146,184       143,178  
                                 
Expenses                                
Interest and debt financing expenses     14,426       19,427       49,614       46,592  
Base management fee     8,885       8,910       26,250       23,644  
Incentive fee     -       4,330       -       12,905  
Professional fees     296       789       1,909       1,615  
Directors fees     209       159       555       370  
Other general and administrative expenses     1,545       1,243       3,878       3,672  
Total expenses before fee waivers     25,361       34,858       82,206       88,798  
Base management fee waiver     -       (2,582 )     -       (6,450 )
Incentive fee waiver     -       (763 )     -       (2,745 )
Total expenses, net of fee waivers     25,361       31,513       82,206       79,603  
Net investment income     21,456       21,175       63,978       63,575  
                                 
                                 
Net realized and unrealized gains (losses)                                
Net realized gain (loss) on non-controlled/non-affiliate investments     (24,263 )     27       (34,667 )     (1,394 )
Net realized gain on controlled affiliate investments     -       -       -       265  
Net realized gain (loss) on foreign currency transactions     (19 )     122       (368 )     (190 )
Net realized gain (loss) on forward currency exchange contracts     (130 )     346       6,472       11,042  
Net change in unrealized appreciation on foreign currency translation     194       162       89       461  
Net change in unrealized appreciation (depreciation) on forward currency exchange contracts     (11,177 )     9,135       (7,921 )     (14 )
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate investments     73,892       (12,373 )     (45,077 )     2,269  
Net change in unrealized appreciation on non-controlled/affiliate investments     1,689       -       4,697       -  
Net change in unrealized appreciation (depreciation) on controlled affiliate investments     (10,185 )     (395 )     (18,421 )     720  
Total net gains (losses)     30,001       (2,976 )     (95,196 )     13,159  
                                 
Net increase (decrease) in net assets resulting from operations   $ 51,457     $ 18,199     $ (31,218 )   $ 76,734  
                                 
Basic and diluted net investment income per common share   $ 0.33     $ 0.41     $ 1.13     $ 1.23  
Basic and diluted increase (decrease) in net assets resulting from operations per common share   $ 0.80     $ 0.35     $ (0.55 )   $ 1.49  
Basic and diluted weighted average common shares outstanding     64,562,265       51,649,812       56,692,267       51,587,779  

 

 

 

 

 

Endnotes

 

(1) The fourth quarter dividend is payable on January 29, 2021 to holders of record as of December 31, 2020.

 

(2) Information as of September 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, LP, an SEC-registered investment adviser and a subsidiary of Bain Capital Credit, LP. Since commencing investment operations on October 13, 2016, and through September 30, 2020, BCSF has invested approximately $3,712.9 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