Michael Ewald - Chief Executive Officer Mike Boyle - President Sally Dornaus - Chief Financial Officer Katherine Schneider - Director, Investor Relations

Good morning and welcome to the Bain Capital Specialty Finance Fourth Quarter and Fiscal Year Ended December 31, 2020 Earnings Conference Call. . Please note, this event is being recorded. I would now like to turn the conference over to Katherine Schneider, Director, Investor Relations. Please go ahead.

’: 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.

Thank you, Katherine, and good morning to all of you. Thanks for joining us today on our earnings call. Also with me are Mike Boyle, our President; and our Chief Financial Officer, Sally Dornaus. I’ll start with an overview of our fourth quarter and year ended December 31, 2020 results and provide some thoughts on our portfolio performance, the market environment as well as our recently announced strategic joint venture partnership. Thereafter, Mike and Sally will discuss our investment portfolio, credit quality and financial results in greater detail. Yesterday, after market close, we reported solid fourth quarter results that were consistent with the preliminary figures that we provided back on February 11. Our results were a reflection of solid net investment income earned from our investment portfolio and strong earnings as we demonstrated our third consecutive quarter of producing net gains across our investment portfolio. Q4 net investment income per share was $0.34. Q4 earnings per share were $0.61. This brings net investment income per share to $1.46 for the full year 2020, representing an 8.6% NII return on average net assets. Our net investment income per share results for 2020 were above our distributions of $1.43 per share for the full year. Earnings per share for 2020 were $0.14. Net asset value per share as of December 31 was $16.54, reflecting a 1.7% increase from our NAV as of September 30. While we have recaptured a large portion of the unrealized depreciation experienced across our portfolio in Q1, due to the significant market volatility following the initial outbreak of the pandemic, we expect a gradual recovery of the remaining unrealized depreciation over time, given our belief that the portfolio is largely comprised of high quality companies with demonstrated value propositions. Subsequent to quarter end, our Board declared first quarter…

Thanks Mike and good morning. I’ll kick it off with our investment activity for the fourth quarter and then provide an update on the credit quality of our portfolio. Q4 new investment fundings were $173 million in 26 portfolio companies, including $121 million in six new companies and $52 million in 20 existing companies. Sales and repayment activity totaled $188 million in the quarter. During the fourth quarter we were pleased to see investment activity levels revert back to healthy levels as a result of pent-up demand from the slower quarters experienced earlier in the year due to the market disruption. While our Q4 activity levels were skewed to lending to new platforms, we also remained active throughout the year in capitalizing on our incumbency advantage with existing borrowers. Our new investment funding activity was split approximately 60/40 between new and existing borrowers during the six months ended December 31. Throughout 2020 we were able to invest with confidence in new platforms and to existing portfolio companies, given Bain Capital Credit’s investing experience that has been honed over multiple market cycles. In addition, we aligned ourselves to invest alongside sponsors that we view to be high quality and whom we saw as highly supportive of their portfolio companies during the most recent period of market disruption. Lastly, BCSF benefits from Bain Capital Credit’s industry research team, providing us with even deeper sector expertise across many verticals. This allowed us to pivot to identify companies and sectors that are expected to be strong performers over the coming years.

Thank you, Mike, and good morning everyone. I’ll start the review of our fourth quarter 2020 results with our income statement. Total investment income was $48.3 million for the three months ended December 31, 2020, as compared to $46.8 million for the three months ended September 30, 2020. The increase in investment income was primarily due to an increase in prepayment related income and other income. For the year ended December 31, 2020 we had total investment income of $194.5 million. Our 2020 investment income was comprised primarily of contractual, cash paying interest income. PIK income or payment-in-kind represented only 3.2% of our total interest income for the year ended December 31. We believe the quality of our income is high given less reliance on the one-time fee income. Total net expenses for the fourth quarter were $26.2 million as compared to $25.4 million in the third quarter. The increase was primarily driven by higher incentive fees, partially offset by voluntary based management fees and incentive fee waivers and lower interest and debt financing expenses. Our advisers’ fee waivers demonstrate our alignment of interest with our shareholders in supporting the regular dividend level. Net investment income for the quarter was $21.9 million or $0.34 per share as compared to $21.5 million or $0.33 per share for the prior quarter. As a result, net investment income per share for the full year 2020 was $1.46 per share. During the three months ended December 31, 2020, the company had net realized and unrealized gains of $17.6 million, driven by the continued spread tightening and improving fundamental performance trends across our portfolio of investments. GAAP income per share for the three months ended December 31, 2020 was $0.61, bringing earnings per share for 2020 to $0.14. Moving over to our balance sheet, as…

Thanks Sally, and before concluding the call, we want to remind our shareholders that the company has a $50 million share repurchase program. This was authorized by our Board of Directors in May of 2019 and continues to be in place today. While we believe BCSF shares offered a very attractive value to shareholders throughout 2020, our primary focus was on deleveraging and preserving the liquidity of the company. We’ve been pleased to see the positive performance of our stock in recent months and believe BCSF shares continue to offer an attractive yield and value for shareholders. Given the improved strength of our balance sheet in 2021, we will look to evaluate additional investment opportunities during the year, while weighing a number of considerations, such as evaluating the company’s liquidity position and leverage level, the portfolio’s continued performance and credit quality and general market conditions, all while remaining disciplined in our credit selection approach. Thank you for your continued support. Debbie, if you could please open the line for questions.

The first question comes from Finian O’Shea with Wells Fargo Securities. Finian O’Shea: Hey everyone, good morning. First question on a little bit of an interest rate pickup or spread pickup you experienced this quarter, can you expand on I guess first what happened there was this more low yield exits or are you picking up more spread? And if so, if you’re picking up more spread, is that sort of a 2020 phenomenon or do you anticipate continued spread pickup now that the market is more competitive? Any outlook there?

Sure, so on the exits that we did talk about, the weighted average yield on the exited positions in the portfolio was about 6.6%, and those reflect securities that we had underwritten two or three years ago. Companies had de-levered and their cost of capital was reduced as the risk profile was reduced and then ultimately paid us down. And so the fact that we’re able to pick up about 20 basis points of weighted average yield while still staying in first lien-focused investments was really a product of exiting those deleveraged companies and underwriting new deals that are fresh M&A activity in the middle market.

And then your question about whether it’s a 2020 phenomenon, I think what we’re observing is that there was definitely a spike in returns in 2020 and it’s come back down, but it’s still higher today than it was pre-COVID. So we are certainly benefiting from that. Whether that’s a new normal, you know we’ll wait and see, but certainly it’s been a strong market from a lender perspective within that core middle market segment where we play. Finian O’Shea: ’:

Yes, so Fin, what we’ve talked about certainly over the course of the last year is wanting to increase the unsecured part of our liability structure. We did that a little bit obviously in the middle of last year. The IG rating is certainly the first step in that process, and we find the market conditions really attractive right now, so I think that we would expect something in line with that certainly. Finian O’Shea: Okay, great. That’s all for me, thank you.

The next question comes from Ryan Lynch with KBW. Please go ahead.

Hey, good morning. Following up on Fin’s last question regarding kind of the unsecured notes, does this change the way you think about your 8.5% 2023 notes? I mean I believe that those are redeemable anytime, but can you remind us – I don’t remember to recall, what the pricing would be on those if they were redeemed. So can you remind us what their pricing would be if those – if you did redeem those now and any thoughts on kind of replacement of those high cost notes?

Sure, so those notes are callable at par starting summer of 2022. So we are always looking at the opportunities to potentially refinance those out, recognizing that we are still in, not in call period there. So it is math – we’re always looking at and evaluating.

Okay, and then on your JV, one question about that and you mentioned the low double digit yield. Is that a yield that you guys expect to achieve right on the gate on the formation of it or is that something that you will achieve over time as it fully ramps up? And if that’s not going to be the yield kind of right out of the gate type of formation, what do you expect to generate kind of day one and then ramp that up to low double digits?

Sure. So Ryan, thanks for the question. We are very excited about the ISLP and we think the double digit yields are something that will be achieved over time. I’d say on day one, probably closer to 10%, 11% yields, and that steps up to 12% or 13% yields as we continue to originate into international markets and generate incremental fee income and have repayments, etc. So we are on the double digits on day one, but we do expect a continued ramp to the mid double digits as we operate that program.

Okay, and then could you provide a little bit of background on what – how does the lending opportunities compare in Europe and Australia? And then of course those could be different themselves, but how would those opportunities compare to opportunities today in the U.S. in terms of leverage, spreads, terms on those deals you’re looking at?

You know Ryan, I would think about it in a few different ways. One is just from a company size perspective, you know again focused on that core middle market, companies with $25 million to $75 million EBITDA. You could find yourself lending with a $30 million, $40 million company in the U.S. that might dominate the tri-state area around New York, but not be particularly relevant to its overall industry or is that company might be the country champion in Norway for example, right? So if you think about the size of company we invest in, there are a lot of opportunities like that abroad for sure. The second point I would make is that the markets function differently internationally than they do here. You know healthcare for example could be more regulated in the European country where capacity and the constraint, pricing is much more stable for different services like radiology, for example and so we might be more inclined to invest in a company like that in Germany than we would be in the U.S. where pricing has competed down at the actual company level. So I think there’s those two just generic, you know what does the company look like questions. And then the third point, which is what you were really asking around terms of conditions that can certainly change over time. It doesn’t change week-to-week, but it changes quarter-to-quarter and certainly year-to-year. I’d say currently Europe is probably from the yield perspective marginally lower than the U.S., although marginally higher from an OID perspective. Australia is probably marginally higher from a spread perspective and about the same from an OID perspective. So that again is a snapshot today. That can certainly change over time. But you know we certainly hedge everything back to U.S. dollars and the nice thing is we actually have a multicurrency revolver set up for that JV to help mitigate some of those FX issues there as well.

Okay, that’s helpful color and backdrop on those different markets. Thanks for taking my questions and congrats on the nice quarter and especially the investment grade rating. That should be I think really helpful for your guys business.

Thanks Ryan, I appreciate that.

Great! Well, it sounds like there’s no more questions. We certainly thank everybody for their time and attention this morning. If any questions, reach out. You know certainly feel free – or any questions come up, certainly feel free to reach out. You know where to find us; certainly on baincapitalbdc.com as well. So, thanks again for the time and we look forward to speaking with you again soon. Cheers!

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.