Bain Capital Specialty Finance, Inc. Q4 FY2024 earnings call

• 2024 was a more active year for middle-market loan volumes, with Bain Capital Specialty Finance and its platform having highest calendar year originations in 2024, over $6 billion and $1.7 billion respectively, more than double 2023 volumes. • Remain selective in underwriting, favoring higher spread premiums and stronger lending controls. • Credit quality and fundamentals strong; non-accrual investments decreased quarter-over-quarter. • In Q4, new fundings were $547 million in 88 portfolio companies, sales and repayment activity totaled ~$505 million. • 95% of Q4 new investment fundings were in first lien structures, 1% in subordinated debt, 4% in preferred and common equity. • Portfolio at fair value was $2.4 billion across 168 portfolio companies in 30 industries; 64% in first lien debt, 1% in second lien, 2% in subordinated debt, etc. • Weighted average yield on investment portfolio decreased due to lower base rates and spread compression from new investments.

In the fourth quarter, Q4 net investment income per share was $0.52, representing an annualized yield on book value of 11.8%. Q4 earnings per share were $0.34. For the full year 2024, net investment income per share was $2.09, equal to an 11.8% return on equity. 2024 earnings per share were $1.85. The net asset value ended the year at $17.65 per share. The company paid out record dividends in 2024 totaling $1.80 per share, an increase of 13% from 2023. The Board declared a first quarter dividend of $0.42 per share and additional dividends of $0.12 per share for 2025. The investment portfolio at fair value was approximately $2.4 billion across 168 portfolio companies in 30 industries. The weighted average yield on the investment portfolio at amortized cost and fair value was 11.7% and 11.8% respectively as of December 31, 2024.

• Board declared a first quarter dividend of $0.42 per share. • Declared additional dividends of $0.12 per share for 2025 to be distributed in four consecutive quarterly payments of $0.03 per share. • First quarter dividends payable on March 31, 2025, total dividends $0.45 per share. • Optimistic about capitalizing on attractive growth opportunities in 2025 given well-positioned market presence.

Q: Can you talk about real-time spread deployment and spread dynamics. How much is stabilized perhaps or still tightening? And then what level the core middle market gets you as a premium to large market now versus historically?

A: In Q4 originations, spread over SOFR was about 560 basis points, 20 basis points tighter than Q2 originations. Term sheets are in 525 to 550 level depending on credit risk. End of 2022 and beginning of 2023 had highest spreads, now back to levels seen in 2017-2019, with spreads similar to more historical averages.

Q: How does it compare to new LBO or platform, real new money opportunity versus follow-on?

A: Generically, new LBOs might be lower end of spreads (525 deals), follow-on add-on activity could be 550 or 575. Historically, end of 2022/beginning of 2023 had highest spreads, now back to averages seen in 2017-2019.