Good day, and welcome to the Bain Capital Specialty Finance Fourth Quarter and Fiscal Year Ended December 31, 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Katherine Schneider, Investor Relations. Please go ahead, madam.

Thanks, Irina. Good morning, everyone, and welcome to the Bain Capital Specialty Finance Fourth Quarter and Year ended December 31 Conference Call. Yesterday, after market closed, we issued our earnings press release and investor presentation of our quarterly results, a copy of which is available on Bain Capital Specialty Finance's Investor Relations website. Following our remarks today, we will hold a question-and-answer session for analysts and investors. This call is being webcast and a replay will be available on our website. This call and the webcast are property of Bain Capital Specialty Finance and any unauthorized broadcast in any form is strictly prohibited. Any forward-looking statements made today do not guarantee future performance and actual results may differ materially. These statements are based on current management expectations, which include risks and uncertainties which are identified in the Risk Factors section of our Form 10-K that could cause actual results to differ materially from those indicated. Bain Capital Specialty Finance assumes no obligation to update any forward-looking statements at this time, unless required to do so by law. Lastly, past performance does not guarantee future results. So with that, I'd like to turn the call over to our Chief Executive Officer, Michael Ewald.

Thanks, Katherine, and good morning to all of you, and thanks for calling in today. I'm joined here by Mike Boyle, our President; and our Chief Financial Officer, Sally Dornaus. I'll start with an overview of the results of our fourth quarter and the year-ended December 31, 2021 and then provide some thoughts on our performance, the market environment, and the recently announced Bain Capital senior loan program. Thereafter, Mike and Sally will discuss our investment portfolio and financial results in greater detail. So beginning with our results, Q4 net investment income per share was $0.34 bringing net investment income per share for the full year to $1.36 or an 8.1% return on average net assets for 2021. Our net investment income covered our dividend by 100% for the full year 2021. Earnings per share were $0.35 for the fourth quarter and $1.86 per share for the full year. This represents a total return on equity of 11.5% that we generated for our shareholders in 2021. Our returns were driven by the stable interest income earned from our middle market borrowers and net realized and unrealized gains across the portfolio. Net asset value per share was $17.04 as of December 31, up $0.01 from our NAV as of September 30. Subsequent to quarter end, our Board declared a first quarter dividend equal to $0.34 per share, and payable to record date holders as of March 31, 2022. This represents, an 8% annualized yield on ending book value as of December 31. So during the fourth quarter and looking back on the year, we remain focused on the execution of our investment strategy and strategic initiatives that we've set forth for our shareholders back at the beginning of 2021. Looking at the asset side first. We witnessed improved and continued stable…

Thanks Mike. Good morning. I'll start with our investment activity for the fourth quarter and then provide an update in more detail on our investment portfolio. Q4 new investment fundings were $291 million across 39 portfolio companies, including $173 million in nine new portfolio companies $92 million in 29 existing companies and $26 million to the ISLP. Sales and repayment activity totaled $369 million in the quarter. Our new investments benefited from Bain Capital Credit's industry research team which provides us with deep sector expertise across many verticals and allow us to uncover companies in niche industries that are expected to be strong performers over the coming years. During the quarter, we continue to invest across various industry themes such as, business services, aerospace and defense and Hi-Tech. We continue to favor middle market companies within the core of the middle market. This is a segment where we find attractive companies to invest in given their diversity of revenue streams and multiple levers driving growth over our investment period. Furthermore, as we have witnessed a trend of direct lenders moving further up market as they have grown in size, we prefer to remain in the core middle market where it is possible to win deals based on sponsor relationships and diligence capabilities which we believe, are part of Bain Capital's value proposition for its shareholders and driving attractive risk-adjusted returns. Looking across our new platform originations during the quarter, the weighted average EBITDA across our new borrowers was approximately $50 million right in the middle of the $25 million to $75 million core segment. For the full year, investment fundings were $1.2 billion. Total sales and repayment activity for the year were $1.4 billion. While our portfolio experienced a modest decline in the size during the year as a result…

Thank you, Mike, and good morning, everyone. I'll start the review of our fourth quarter 2021 results with our income statement. Total investment income was $51.5 million for the three months ended December 31, 2021 as compared to $49.5 million for the three months ended September 30, 2021. The increase in investment income was primarily due to an increase in dividend income. Total expenses for the fourth quarter were $29.6 million as compared to $27.8 million in the third quarter. The increase was driven by an increase in interest and debt financing expenses, primarily due to the termination of our JPMorgan credit facility in December. There were no fee waivers during the quarter by the adviser for a second consecutive quarter. As we have discussed with our shareholders in prior quarters, we have been focused on driving higher net investment income without the need for fee waivers to cover our regular dividend. The continued improvements on the asset side as well as the liabilities that Mike Ewald touched on earlier have positioned us well to achieve this for our shareholders. Net investment income for the quarter was $21.9 million or $0.34 per share as compared to $21.8 million or $0.34 per share for the prior quarter. Net investment income per share for the full year 2021 was $1.36 per share. During the three months ended December 31, 2021, the company had net realized and unrealized gains of $400,000, while our portfolio exhibited $2.7 million of net gains across investments this was offset by a $2.3 million realized loss from the extinguishment of our JPMorgan credit facility. GAAP income per share for the three months ended December 31, 2021 was $0.35 per share bringing earnings per share for 2021 to $1.86. Moving to our balance sheet. As of December 31st, our…

Thanks Sally. In closing here, we are pleased with our execution of our investment strategy and initiatives on behalf of our shareholders during the fourth quarter and the entirety of 2021, consistent with many of the priorities that we discussed earlier last year. We demonstrated improving credit quality trends across our portfolio and our platform's ability to source attractive new middle market direct lending opportunities on a global basis. We also positioned our liability stack to focus more on unsecured debt and took advantage of locking in an overall lower cost of capital in the face of rising rates. As we look forward into 2022, we believe the company is well positioned to capitalize on attractive growth opportunities. We thank you for the privilege of managing our shareholders' capital. Irina, please open the line for questions.

Thank you. And we will take our first question from Ryan Lynch in KBW. Please go ahead.

Hey, good morning all. Thanks for taking my questions. First one is maybe just a housekeeping one for you Sally. I'm not sure if I missed it, but what drove the big increase in dividend income in the quarter?

So there were two things but the ISLP as you remember is structured as a debt investment and an equity investment. And so, there was -- the primary driver was the dividend income from the ISLP.

Okay. So that -- so if the primary driver is dividend income from the ISLP that increase, should we expect that roughly that level to be sustainable going forward then?

Yes. That's -- and actually I would expect it and Mike Boyle can comment on this. I would expect some increase in that as well given that. It's likely that the size of the ISLP is bigger.

Okay, great. And then moving to the other JV, the SLP. I was just wondering if you could provide any more details on that. First it sounds like the strategy of the SLP, is it basically the same as sort of your -- the strategy of assets that go on your balance sheet and this just allows you to basically provide more scale and a larger commitment sizes to potential borrowers. Is that correct?

Yes that's correct. And another key part of it is really middle market securitization. We have historically done middle market CLOs directly off the balance sheet of BCSF. And I think this opportunity allows us to do more middle market CLOs or middle-market securitizations with the AAA ratings that we can get in the CLO market that are done with that JV rather than doing them all directly on balance sheet.

Okay. Understood. And then with the SLP, do you guys have any preliminary thoughts on the expected leverage in that in the JV, expected time frame to ramp that up targeted overall dividend yield or return profile to yourselves from that entity? And then has there been any thoughts or discussions of dropping down a pool of assets from your balance sheet into that, or do you expect that to just basically start from scratch and just grow organically?

Sure. So the investment will be structured similar to the international senior loan program and where there'll be a debt component as well as an equity component. The debt component for the SLP will accrue at a 10% interest rate. And then we think overall ROEs from the program should be in the double-digits so I think 12% to 15% or so just given our expectation for the assets versus liabilities in that structure. We have sized it so that it could ramp to 5% to 7% of the portfolio over the course of 2022. And we do think that that's achievable given what we see from the market environment today. We could drop down some assets. We have contemplated that but have not yet decided whether that makes sense at this point in time.

Okay. And then last question for me. What drove the overall strong growth in the ISLP that underlying portfolio grew substantially in the quarter. Meanwhile, your balance sheet portfolio actually strong. So what was the opportunity set that you guys were seeing in their contracts with the opportunities that you guys are seeing for loans that go on your balance sheet.

Sure. So we did find really attractive risk return across Europe, particularly in countries like the UK and Germany, when we were out investing in the ISLP. I'd say that the industries that we were investing in internationally were quite similar to what we were doing in the US. So technology healthcare were two of the key segments we were investing in the senior – in the international senior loan program. We think the risk return in Europe is particularly interesting today. We noted that about 45% of the investments we made over the course of 2021 were outside of the US so across Europe or in Australia. And we think there's strong potential that that persists in 2022, where there's really attractive risk-adjusted return beyond just the US when we're ramping the portfolio.

Okay. Understood. Appreciate the time this morning. Thank you.

Thank you, Ryan.

Thanks, Ryan.

Thank you. There's no other questions at this time.

Okay. Well, thank you Irina and thank you everyone for dialing in today. As I mentioned earlier, certainly appreciate your support, historically and going forward as well and we're looking forward to a successful 2022 here – 2022 going forward. Thanks very much.

Thank you. And this will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.