Hello, and welcome to Kayne Anderson BDC, Inc.'s Fourth Quarter 2024 Earnings Call. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to Terry Hart, Chief Financial Officer of KBDC.

Good morning, and welcome to Kayne Anderson BDC, Inc.'s Fourth Quarter 2024 Earnings Call. Today, I'm joined by Doug Goodwillie and Ken Leonard, co-CEOs of KBDC; as well as Frank Karl, Senior Vice President of KBDC. Following our prepared remarks, we will be available to take your questions. Today's call may include forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about the company, our current and prospective portfolio investments, our industry, our beliefs in our opinions and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict. Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask you to refer to the company's most recent filings with the SEC for important risk factors. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time. Our earnings release, 10-K and supplemental earnings presentation are available on the Financial section of our website at kaynebdc.com. Now, I'd like to turn the call over to Ken Leonard.

Thank you, Terry, and thank you, everyone, for joining us on the call today. I'd like to start with a short overview of our financial results before discussing our investment activity during the quarter and portfolio makeup and performance. I'll then provide some voice over on current market conditions before Terry Hart discusses KBDC's financial results in more detail. During the fourth quarter, we're pleased to report that we generated net investment income of $0.48 per share and net income of $0.50 a share. During the quarter, we distributed our $0.40 of regular dividend and $0.10 per share of special dividend, the latter of which was declared around the time of our IPO. As a reminder, at year-end 2024, KBDC held approximately $0.32 per share of spillover income. Turning to our private middle market investment activity in the fourth quarter of 2024. We made $231 million of total commitments across 16 different businesses during the period, of which $175 million was funded. This compares favorably to the fourth quarter of 2023, where we made new commitments of $153 million, of which $141 million was funded. In addition, $34 million of our existing unfunded commitments were funded or partially funded during the quarter. Compared to fourth quarter 2023, where $43 million of our existing unfunded commitments were funded or partially funded. Combined, we made fundings in fourth quarter of 2024 of $209 million. Again, this compares favorably to the fourth quarter of 2023, where gross fundings were $184 million. We had repayments of $139 million during the period. That's up from $97 million in the fourth quarter of 2023, but still only around 7% of the average funded investments. During the fourth quarter, our broadly syndicated loan portfolio experienced no new fundings, that's in line with our plan, and $18 million…

Thanks, Ken. Let's first review results of operations. During the fourth quarter, we earned net income per share $0.50, compared to $0.53 during the third quarter, and net investment income per share was $0.48 or $0.49, excluding excise taxes, compared to $0.52 in the prior quarter. Total investment income for the fourth quarter was $56.3 million as $57.8 million in the prior quarter. The decrease to investment income was primarily driven by the reduction to SOFR and the $0.7 million impact of placing Sundance on non-accrual status during the quarter. These reductions were partially offset by net additions to the portfolio during the fourth quarter. It's worth noting that over 80% of the decrease to our portfolio yield was related to lower reference rate and that only 1.1% of interest income for the quarter related to PIK interest. Additionally, during the fourth quarter, we had approximately $1.1 million of accelerated amortization of OID as a result of realization activity. Total expenses for the fourth quarter were $22.3 million compared to $20.8 million for the prior quarter. The increase was primarily related to $0.8 million of excise tax expense on undistributed income and higher interest expense, resulting from additional borrowings on our credit facilities to fund investment activity during the quarter. As a reminder, in connection with our IPO, Kayne Anderson instituted a 25 basis point fee waiver of our base management fee through May 23rd, 2025, and a full waiver of income-based incentive fees that expired on December 31st, 2024. During the fourth quarter, we had a realized gain of $0.7 million on the sale of an equity co-investment and we had net unrealized gains on the portfolio of $1.4 million compared to unrealized gains of $0.5 million in the prior quarter. The unrealized gains were a result of upfront…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question today comes from the line of Derek Hewett from Bank of America. Your line is open.

Good morning everyone. In terms of the expectation that you'll achieve your target leverage near the low end during either the second quarter or third quarter of this year, does that include the rotating the broadly syndicated loan portfolio? Is that that included in forecast?

Derek, this is Doug Goodwillie. Thank you for the question. That does not. It assumes that we're investing at the pace we are, that we've established thus far in Q1. To-date, I think, as Ken mentioned in his presentation, we funded over $200 million of commitments and are in process for close to another $100 for just Q1 of 2025. And so with that and the robust pipeline into Q2, we would expect to achieve that target ratio towards the end of Q2 or at the latest, early Q3.

Okay. Thank you. And then my follow-up question is, have you assessed kind of the risk for either kind of dose-related types of exposure from your borrowers or tariffs, especially since the portfolio is more kind of old economy types of corporates?

Yes. I think across all portfolios, you need to assess those risks, also obviously tariff risk at the moment, obviously relevant today. We don't have many companies that are invested with what we call stroke of the pen risk. So where there's a lot of government funding as a key element to the cash flow. So for us, I think that the dose risk is relatively minimal. And as we evaluate the portfolio, again, there's very few companies where government funding is a key source of the business.

And this is Frank. I think just to address tariffs. Clearly, I think for both these topics, uncertainty sort of feels like the name of the game, though, obviously some news in the last few days around moving forward with some of the previously communicated tariffs. I think we think about tariffs specifically in two ways: first, clearly top of mind on new underwriting. So we're being very careful there. I will note that we've not seen much of the way -- much in the way of transactions that are, let's say, importers from tariff-impacted countries. I think the market is sort of pulling back a bit on a pure seller right now, hard to bring a business with that sort of exposure to market. And then second, we did just complete the analysis on KBDC's portfolio, looking at all of our borrowers and where they had substantial exposure. What we found is it's something like one-fourth of our portfolio imports more than 10% of COGS, which, again, is a low bar at 10% of COGS from China and then another, call it, 20%, imports more than 10% of COGS, again, a low bar from Canada or Mexico. Of these, the vast majority, nearly all, have some reasonable level of ability to flex pricing. They're not into fixed-price contracts with large customers, for example. We also saw this in 2018, very few of the businesses where we're invested, were impacted directly. Of course, tariffs and trade wars create uncertainty and unpredictability. So hard to see all the way around the corner. But we do think that US focused portfolio like ours in conservative senior secured loans is well positioned, even if there is some lumpiness here.

Yes. And Derek, don't want to be dismissive of the dose question at all. And I think I tried to hit it from the -- head on in terms of funding into businesses that are relying on directly in government funding. They are kind of the second derivative of that would be something like healthcare, where Medicaid and other government spending programs to fund healthcare come into question. And I think for us, we have roughly 8% of the portfolio in healthcare providers and services. And within that, it typically is in companies that have relatively low reimbursement risk. But there's always going to be some second level risk in any portfolio when you get down to what dose could potentially do. And I think we're continuing to monitor that on a daily and monthly basis and assess our portfolio risk as the changes occur in Washington.

Thank you.

[Operator Instructions] And there are no further -- I do apologize. We have a last-minute question from the line of Paul Johnson from KBW. Your line is open.

Hey. Good morning. Thanks for taking my questions. Just with the new activity. I'm curious how have leverage multiples held up as well as just kind of covenants and the bands around those -- have those improved at all from kind of the more refinancing heavy market last year or that kind of continued to pressure terms this year?

Thank you, Paul. This is Doug Goodwillie. Again, leverage has been relatively consistent for us. As we looked at 2024, sub-four times for our new investment activity. As we look at the first quarter of this year, still again, weighted average right around four times. So leverage has been very consistent. As you may recall, Paul, for us, that tends to be the KC vintage by vintage. You may have a period where it's in the 3.8s or one where it's in the low-4s, but that's a very consistent part of what we do with our value lending strategy. Where we've seen a bit of movement has been more on price. I think the mid-market has been pretty disciplined on leverage and structure as it relates to not just leverage but also LTV. To give you a feel, I think Ken mentioned it, in his part of the presentation earlier, spreads were around 575 for the year in 2024. What we've seen thus far in 2025 has been closer to 550. Closing fees around 2% last year, slightly below that in the first quarter of 2025. So where we've seen a bit of give, if you will, from the lending market is going more on price. That said, if you consider that over a 12 to 18-month period, something to the effect of 50 basis points to 75 basis points in our market, which is relatively muted to what I think you would have seen during that same time period in the upper mid-market and the broadly syndicated market.

Thank you very much.

And that concludes our question-and-answer session. I will now turn the call back over to Doug for closing remarks.

Thank you. So with that, I'd just like to thank everyone on the call for their time and continued interest in KBDC. We look forward to a continued strong first quarter and to our next earnings call in May. Thank you very much.

This concludes today's conference call. Thank you for your participation. You may now disconnect.