Greetings. At this time, I would like to welcome everyone to the Barings BDC, Inc. Conference Call for the Quarter and Year Ended December 31, 2021. [Operator Instructions] Today's call is being recorded, and a replay will be available approximately 2 hours after the conclusion of the call on the company's website at www.baringsbdc.com under the Investor Relations section. Please note that this call may contain forward-looking statements that include statements regarding the company's goals, beliefs, strategies, future operating results and cash flows. Although the company believes these statements are reasonable, actual results could differ materially from those projected in forward-looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the section titled Risk Factors and Forward-Looking Statements in the company's annual report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission. Barings BDC undertakes no obligation to update or revise any forward-looking statements unless required by law. At this time, I will turn the call over to Eric Lloyd, Chief Executive Officer of Barings BDC.

Thank you, Hilary, and good morning, everyone. We appreciate you joining us for today's call, and I hope you and your families are doing well and staying healthy. Please note that throughout today's call, we'll be referring to our fourth quarter 2021 earnings presentation that is posted on the Investor Relations section of our website. On the call today, I'm joined by Barings BDC's President and Barings' Co-Head of Global Private Finance, Ian Fowler; Bryan High, Barings' Head of U.S. Special Situations and Co-Portfolio Manager; and the BDC's Chief Financial Officer, Jonathan Bock. As we typically do, Ian, Bryan and Jon will review details of our portfolio and fourth quarter results in a moment, but I'll start off with some high-level comments about the quarter. As you may have guessed, with our reported dividend increase on February 1 from yesterday's filings, it was an extremely active quarter. We experienced record originations, issued our first private -- our first public investment-grade bond issuance, announced a dividend increase and continued to work towards close of the Sierra Income Corporation acquisition by the end of this month. And the timing of this call also affords us the opportunity to provide greater visibility into the first quarter of 2022, and you'll see that the strong finish to 2021 continues into the New Year. Let's begin with the market backdrop shown on Slide 5 of the presentation. The backdrop remained largely the same in the fourth quarter with elevated broadly syndicated loan prices, tighter credit spreads and strengthening BDC equity prices. Markets remain competitive, and we expect these competitive forces to intensify as demand for floating rate assets increases, particularly as a result of rising interest rate environment. Come to the fourth quarter highlights on Slide 6. Net asset value per share was $11.36 a…

Thanks, Eric, and good morning, everyone. If you turn to Slide 9, you can see additional details on the investment activity that Eric mentioned. Our middle-market portfolio increased by $66 million on a net basis in the quarter with gross fundings of $503 million, offset by sales and repayments of $437 million. New middle-market investments included 44 new platform investments totaling $375 million and $128 million of follow-on investments and delayed-draw term loan fundings. We also had $152 million of net new cross-platform investments in the quarter. We continue to believe portfolio repayments will remain elevated across the market and in the fourth quarter. Barings BDC experienced an increase in repayments along with associated fee income acceleration. Of our $437 million in middle-market sales and prepayments, $86 million was associated with full repayments this quarter, $2 million was from partial paydowns and the remaining $346 million were sales. Recall, joint venture sales enable us to increase portfolio diversification while maintaining a prudent leverage profile at Barings BDC. Slide 10 updates the data we show you each quarter on middle-market spreads across the capital structure. As Eric mentioned, the potential for a rising interest rate environment leads to an increased demand for floating rate private credit assets. As one would expect, market conditions remain competitive as evidenced by spread compression, loosening terms and higher leverage levels, all while the private credit markets experienced record investment originations. Turning to Slide 11. As we outlined last quarter and continuing in the fourth quarter, unitranche executions remain near all-time spread tights when compared to first lien, second lien traditional structures, and the level of Cov-Lite unitranche volume again was an all-time record. This is simply a symptom to the wider problem associated with substantial capital inflows into private credit, and I don't expect it…

Thanks, Ian. And turning to Slide 17, here's a full bridge of net asset value per share movement in the third quarter. Our net investment income outpaced our dividend by $0.01 per share, net realized gains and losses on our investment portfolio and foreign currency transactions drove a decrease of $0.03 per share, while our unrealized depreciation totaled $0.03 per share. Additional details on this net unrealized appreciation, depreciation are shown on Slide 18. On the middle-market portfolio, price appreciation and credit performance netted to a $2 million of appreciation. Our cross-platform investments saw total appreciation of approximately $8 million, largely driven by very strong operating performance in Thompson Rivers joint venture and Eclipse, our wholly owned asset-based lender. Recall, in an effort to drive both dividend income and NAV appreciation, Barings chooses to target an 8% dividend distribution on both of these investments despite earning a ROE well above that level, which results in current NAV and price appreciation. The legacy MVC portfolio saw total net unrealized depreciation of $11 million associated with the expected restructuring of 2 investments on nonaccrual. Near the bottom of Slide 18, you could see the credit support agreement increased approximately $1 million from last quarter. A logical question would be, why did we have $11 million of unrealized depreciation on the legacy MVC portfolio and only $1 million of appreciation on the credit support agreement as the CSA is intended to offset the losses in the legacy MVC portfolio? The value of the CSA is determined based on a long-term view of potential outcomes for the legacy MVC portfolio. And while at any quarter end, the value of those investments can fluctuate, particularly in positions that we plan to restructure, the longer-term view of the portfolio could lead to a different valuation outcome.…

[Operator Instructions] Our first question is from Ryan Lynch of KBW.

The first one just has to do with your cross-platform investments. Obviously, that has been growing pretty meaningfully over the last year, and you really saw it really grow significantly this quarter and as a percentage of your overall portfolio. Those investments have a different yield profile than your core middle-market investment. So my question is, longer term, like do you guys have any sort of preference on what percentage of your portfolio you'd expect to have in these cross-platform investments versus kind of your core middle-market portfolio? Now I know closing this year is going to reduce that exposure. But just any thoughts on kind of that long-term exposure preferences of cross-platform investments as a percentage of your portfolio versus kind of the core middle market.

Sure, Ryan. This is Bock. I'll take a stab and then lateral to my colleague, Bryan. But what I'd say is, think of the cross-platform investments truly as a complement, right? There's 2 types of premium that exists in the market today, illiquidity premium, right, and also a level of complexity premium. And Barings has a scaled platform that prosecutes for both origination premiums. The actual amount can vary. It always depends on the current environment. But you could say around 30%, give or take, it's very close to where we're at now. And clearly, as the book increases in size, you can see that level of cross-platform investments on a dollar basis grow. But it really comes to how these 2 types of investments interplay off of each other. And so oftentimes, you find the inside of asset value type investment strategy to be very complementary. And for that, I'll just lateral it to my colleague, Bryan.

Yes. Thanks, Jon. I think that was pretty well said. I don't have a lot to add other than it is episodic. We are looking at opportunities in the marketplace and turning them down, well, a lot more than actually pursuing some of these deals. But as Jon said, if we can find an interesting investment where we believe we're investing inside of asset value, but we can get paid a complexity premium by coming up with a capital solution that makes sense for that particular issuer, that's where we'll spend a lot of effort and time to generate that complexity premium that Jon was referencing.

Okay. That makes sense. And then diving into one of those cross-platform investments, your second largest holding on your balance sheet is Thompson Rivers. Thompson Rivers has multiple-billion dollars of Ginnie Mae loans, and so I would just love for you guys to provide a little color. Obviously, interest rates have increased significantly over the last several months and the expectation that they may continue to rise. Can you just talk about how we should be thinking about that portfolio and how the expectations are for that to perform in a rising mortgage rate environment?

Sure. I'll try to be brief on the explanation. But essentially, the Ginnie Mae EBO market, think of it as a government-guaranteed home mortgage, right, under the FHA program. And these are originated and effectively managed by large servicers. And one of those home loans, when they default, they effectively get kicked out and have to get into a workout program that's run by the mortgage servicer. We and our affiliates have invested inside this mortgage program for many years across the platform. And what's particularly attractive about it is you're not taking long-term rate risk. What you're effectively taking is the time frame from one government-guaranteed loan to effectively return to paying status and then go back into the Ginnie Mae program. And so that can generate a significant return because there is a high degree of velocity of turn on those mortgage assets, and you're not owning those for long periods. Or in the event that there was a default on the FHA alone, you effectively collect on the government guarantee with limited loss to principal value. And so really, the focus here is short-duration, government-guaranteed paper and collateral that generates a high return on our investment. Now you'll notice, Ryan, we pulled an 8% dividend distribution out of the program, right? And you can see that as the fair value of that program continues to increase, even as a result of the rising rate investment environment, what you're finding is that our return on that investment program far exceeds our distribution, hence the NAV increase. So it's a very attractive complement, right, as you start to think about the number of different markets and complexity premiums that complement our illiquidity portfolio. Does that give you a brief explanation, I hope, with that?

No, Jon, that's a really great [federal] explanation, so I appreciate that. Appreciate the time today.

Our next question is from Robert Dodd of Raymond James.

This is kind of a follow-up to Ryan. On the cross-platform investments, I mean you said you'd like them to be about, call it, a target maybe 1/3, 30%. Would you say that the ones you currently have between Jocassee, Thompson Rivers, Eclipse, are those the ones that are going to make up that 1/3 and it'll just move around the mix between them over time? Or do you think you'll be adding more legs to the stool? I mean, obviously, it's got more than 3 legs already. But would you be expanding the number of verticals within that cross-platform while these kind of settled in where they're going to be within the business.

Yes. So I'll give one additional shot and then also, I think, we can lateral to Bryan on ABL and also kind of cross-platform investments as a complement more broadly. The vehicles that we have, Robert, are fairly, I'd say, a vast majority of what you could consider as our cross-platform makeup in addition to some of the episodic financings that we'll make as a result of our [crack] specialty situations investment franchise. What I would say is each of those verticals has a different type of risk return. You have our asset-based lender, right, in Eclipse. You have our mortgage investment unit or SPV, that's called Thompson Rivers. And then effectively, there is a focus on underlying consumer complexity premium that exists -- invest inside of Waccamaw. That's a very wide investment frame, but you see some additional type of inside asset value type investments to be originated that are not actively listed here. The answer is, of course, but we're very focused on ensuring that you don't hobby, as Eric outlined, in any type of investment. And so the goal here is Barings and, of course, our parent has a very, very wide-reaching range of origination capability inside these complexity premium investments. And we're very pleased with the investments that we have, and we can see them continue to grow on a dollar basis. But it really does match nicely, and I'll lateral this to Bryan for a discussion on Eclipse as well as how the cross-platform investments matches nicely to our enterprise value or illiquidity premium lending. Bryan?

Yes. Thanks, Jon. I think as it relates to some of the key pillars that you referenced, those investment vehicles, if you will, will certainly pivot with the market along with ourselves and we're going to stick to our core knitting. As Jon said, we're not looking to hobby in something new, but where Barings already has an expertise and the market provides an opportunity, particularly if we're moving into a more volatile session of the overall investment profile and investment universe, we'll go where the opportunity is. And the way that we've kind of described it is, if you think about enterprise value investing and the analogy that I've used in the past is kind of, if you think about the ocean, right, the top of the ocean, there's a lot of volatility being impacted by wind, weather, things we can't control. But underneath the surface, there is a level of stability you can kind of predict how the water is going to move. And that's where we like to play, particularly in markets like today, where there's a lot of volatility in terms of where the enterprise value of some of these entities are. But from an asset value perspective, we try to stay where there is some stability. It's less volatile. You can kind of predict a little bit more what the outcomes can be. And that's where we're looking to move within our investment frame of reference across Barings, where do we have interesting opportunities that we see in different silos at Barings that we can go leverage in this portfolio, again, as a complement to what Ian and his team are building on the middle-market side.

I appreciate that color. It's very helpful. I mean one -- my second question, if I can, reading between the lines on your comment, Jon, about the CSA versus, obviously, they had a new nonaccrual, got marked down a little bit this quarter. The CSA didn't move that much. Is it fair to say then that while there was a markdown this quarter, it does not reflect the long-term probability weight with your asset -- the Barings assessment of the long-term probability weighted outcome for that asset in particular?

That's a great way to state it, Robert. I try to think of the CSA. So what we have to be careful is try not to measure something at a point in time as a proxy for the entire journey. The CSA provides that opportunity to be patient and to effectively ensure that we are restructuring for the maximum value to Barings' investors over the long term, which we will intend to do and will and intend to do. And so our long-term perspective, while you might see one asset move in or out as we continue to look at some of the underlying businesses that have a great reason to exist to develop strong returns in the future, that you'll see as a point in time. But then there are also a number of control equity investments, which you can find we're always impacted by COVID or take your geopolitical force, that still have very strong reasons to exist with our view, potential forward -- long-term appreciation potential that likely can offset what you start to see as a point in time mark-to-market depreciation. So we see that intact. And the benefit of the CSA is we have the patience to do this right without providing any type of underlying volatility to our end investor in terms of NAV because I think, as a number of analysts have outlined, the best valuation that are fetched by BDCs or are those BDCs that have both steady and stable dividend profiles and increasing and stable net asset values.

We have reached the end of the question-and-answer session. I will now turn the call back over to Eric Lloyd for closing remarks.

Thank you, Hilary. Thanks again for everybody joining. And everybody, stay positive and healthy out there.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.