Barings BDC Inc (BBDC) 2025 Q4 法說會逐字稿

At this time I'd like to welcome everyone to the Barings BDC Inc. Conference call for the quarter and year ended December 31, 2025. All participants are in listen-only mode. (Operator Instructions)

Today's call is being recorded and replay will be available approximately two hours after the conclusion of the call on the company's website at www.Bingsbdc.com on the investor relations section. At this time, I'll turn the call over to Joe Mazzoli, Head of Investor Relations for Barings BDC.

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 that are subject to numerous uncertainties and risks, including those disclosed under the sections titled Risk Factors and forward-looking Statements. In the company's annual report on Form 100 for the fiscal year ended December 31, 2025 as filed with the Securities and Exchange Commission.

Beings BDC undertakes no obligation to update or revise any forward-looking statements unless required by law. I will now turn the call over to Tom McDonnell, Chief Executive Officer of Barings BDC.

Thanks, Joe, and good morning, everyone. On the call today, I'm joined by Barings BDC's President, Matt Freund, Chief Financial Officer; Elizabeth Murray, Baring's Head of Global Private finance and BDC Portfolio Manager, Bryan High.

Before I discuss our quarterly and annual results, I'd like to take a moment to speak about the leadership transition that we recently implemented and my involvement with the BDC franchise going forward. As many of I assumed the role of CEO of Barings BDC effective January 1. Prior to stepping into this position, I spent most of my career deeply rooted in fundamental credit research and underwriting, portfolio management, and investor alignment across multiple strategies within Barings. Having navigated multiple credit cycles and managed leveraged credit businesses for decades, I bring a perspective that reinforces my conviction in the strength and durability of our investment process.

And importantly, in our continued ability to deliver value for our shareholders. What has been immediately clear in my early months is what I long believed to be true. Being's BDC benefits from a best in class direct origination platform focused on the core middle market. This differentiated sourcing capability paired with our disciplined underwriting and strong alignment with shareholders represents a powerful combination.

One that positions us well to drive attractive long-term risk adjusted returns. While I bring a fresh perspective, the strategy, process, and philosophy that define BBDC remain firmly intact. Our approach is working, and my focus is on enhancing the processes that already operate effectively and complementing the strengths of an exceptional existing team. It is my intention to accelerate existing initiatives and implement additional initiatives, all with a clear focus on ultimately improving ROE.

I've had the privilege of connecting with many of our stakeholders following the leadership transition, and I look forward to continuing that dialogue in the weeks and months ahead.

In the fourth quarter, BBDC delivered strong net investment income accompanied by excellent credit performance within the bearings originated portion of the portfolio. Origination activity across the platform during the fourth quarter reflected continued success in our core strategies. Net deployment was influenced by fund level leverage, and the 4th quarter reflected a period of net repayments consistent with our prior guidance.

A strong and highly diversified portfolio combined with a benign credit environment and our focus on top of the capital structure investments in middle market issuers has continued to serve our investors well. We focus on the core middle market given its lower leverage and stronger risk adjusted returns, making it the most compelling segment for BBDC and our shareholders.

In addition, our emphasis on sectors that perform resiliently across economic environments provides an additional level of stability to our portfolio. This combination of senior secured financing solutions, core middle market focus, defensive non-cyclical sectors, and a global footprint offers our investors strong relative value and a meaningful differentiation within the broader BBDC landscape.

BBDC's portfolio has performed largely as designed. Our defensive, diversified issuer base is built as an all-weather portfolio. We believe this approach serves investors well regardless of the broader macroeconomic conditions, which, as Matt will touch on momentarily, we feel are broadly favorable. At the same time, we are beginning to see increased dispersion across managers in the space. Our experience suggests that underwriting rigor often reveals itself over multi-year periods rather than quarters. As investors in private credit know, it can take 34, or even 5 years for the portfolios to season and for credit performance to materialize.

Importantly, we have avoided ARR loans, deeply cyclical issuers, and creative financing structures that appear to be presenting headwinds to the sector as we continue through 2026 and into 2027. We are confident that BBDC will continue to demonstrate the merits of rigorous credit underwriting, fundamental credit analysis, and a long-term, long track record within the asset class.

Turning to our results, net asset per value was $11.09 per share, substantially unchanged from the prior quarter. Net investment income for the quarter was $0.27 per share compared to $0.32 per share in the prior quarter. These results reflect continued strength in bearings originated investments, ongoing credit stability, and disciplined capital allocation.

Now digging a bit deeper into the portfolio, we continue to actively maximize the value in legacy holdings acquired from [MVC Capital and Sierra]. During the fourth quarter. We accelerated the rotation of the Sierra portfolio, exiting approximately $50 million of legacy positions on a combined basis between directly owned assets and assets held in the [Sierra JV], as Elizabeth will comment on shortly.

As of quarter end, Barings originated positions now make up 96% of the BBDC portfolio at fair value, up from 76% at the beginning of 2022.

Turning to the earnings power of the portfolio, the weighted average yield at fair value was 9.6%, reflecting a slight reduction from the prior quarter due to a reduction in base rates. Our board declared a first quarter dividend of $0.26 per share consistent with the prior quarter. On an annualized basis, the dividend level equates to a 9.4% yield on our net asset value of $11 of $11.09.

As Matt will cover it momentarily, BBDC is well positioned to navigate the current market volatility and deliver consistent risk adjusted returns in the quarters ahead. I'll now turn the call over to Matt.

Thanks, Tom. I would first like to comment on my excitement to have you as part of our team. Barings manages nearly $0.5 trillion of capital, primarily in credit and credit related investments. We recognize the increasing convergence between various markets and know that your significant experience in high yield, stressed, and distressed markets augments the capabilities of our team and enhances our portfolio management efforts that will benefit our investors in the quarter to come.

Turning to the topic on many investors' minds, software and the prospects of AI impacting underlying credit portfolios. Software accounts for approximately 14% of the fair market value of the BBDC portfolio.

For those who follow our public filings, you will notice that we have long used the [Moody's] industry hierarchy for our industry classifications, which does not separate software as a distinct industry. Nevertheless, after reviewing our information, 14% of the portfolio is invested in issuers, primarily providing software to their underlying customers.

Our portfolio is under-indexed relative to other private credit portfolios, as we have historically avoided both annual recurring revenue loans as well as highly leveraged software issuers. We rarely provided the most aggressive leverage packages as a consequence, were often not perceived to be competitive in the eyes of the issuers and sponsors for these software assets. We stuck to our historical knitting, and the resulting software exposure reflects this approach.

With that said, we believe the rhetoric related to an existential crisis within the software vertical is overblown. The current market tone is reminiscent of a few other periods in recent memory. During 2018, the US initiated a trade war with China with justified concerns that industrial and manufacturing businesses would experience headwinds causing bankruptcies across the country.

At the onset of the COVID pandemic during 2020, logical arguments were made that healthcare companies would be forever transformed and loans to healthcare issuers would face a reckoning. And in March of 2022, interest rates began a historical rise, ultimately leveling off at more than 500 basis points by mid-2023. The rapid rise in interest rates caused many investors to express concern about indebted companies and the confidence and sustainability of various industries.

Within the context of bearings managed portfolios, we did not experience a wave of industrial defaults, healthcare defaults, or general industry defaults due to any of these events. What we did witness, however, was that during these periods of rapid industry change, businesses with weak management, poor business models, and questionable value propositions did experience stress, and some companies did fail. But it was not the macroeconomic events that drove losses. It was the fact that macroeconomic events exacerbated weaknesses that already existed.

We believe we stand on the precipice of another period of rapid industry evolution and in this case within the software ecosystem. Business models will be tested and some may ultimately fade away, but well-run businesses managed by smart and capable people are expected to continue exhibiting success. Poorly run businesses will experience the same business cycle that all poorly run businesses ultimately experience. Products will become obsolete, customers will leave, and the relevance will be diminished.

One area we are most interested to follow in the months to come is the performance of ARR related businesses, as both Tom and I have commented on, and in particular those that were expected to transition to cash flow or EBITDA-based covenants but have not.

While we do not have exposure to issuers such as these, we would encourage investors to try and stratify their risk to these kinds of financings, as we anticipate headwinds will be overindexed in this segment of the software ecosystem in the quarters to come.

Turning now to the state of originations, we ended 2025 with sequential improvement in deployment as compared to the prior three quarters. Our outlook in 2026 takes a more measured tone. As the new year is upon us. We are again hearing early indications that 2026 will represent a banner year for M&A opportunities in the coming 12 months.

Given our strategy to focus on the core of the middle market, large market transactions, which we define as financings for issuers with more than $100 million of EBITDA, are less relevant to our business. And while financings of this size may materialize, it will have a muted impact on our overall deployment at bearings. Our continued commitment to the core of the middle market will benefit from our incumbent positions, which is likely to provide compelling deployment opportunities regardless of what the future may hold.

We are highly focused on the trends in both base rates and interest rate spreads. Base rates continue to gradually migrate lower from post-covid highs, while narrowing spreads have begun to show some level of support. The benefits of the active portfolio rotation we have previously discussed are coming into sharper focus. BBDC shareholders benefit from a largely invested portfolio that can selectively redeploy capital into the most attractive middle market opportunities from across the Barings franchise.

Given the size of the portfolio and the illiquid nature of the underlying positions, our ability to rotate the portfolio takes quarters, not months, but we are continuing to see the benefits of this effort.

Turning to an overview of our current portfolio, 75% consists of secured investments, with approximately 70% of investments constituting first lien securities. Interest coverage within the portfolio remains strong, with weighted average interest coverage this quarter of 2.4 times above industry averages and consistent with the prior quarter.

We believe strong interest coverage demonstrates the merits of our approach of focusing on leading companies in defensive sectors and thoroughly underwriting their ability to weather a range of economic conditions.

The portfolio remains highly diversified, with the top two positions within the portfolio, Eclipse Business Capital and Rocade Holdings, being strategic platform investments. These investments provide BBDC shareholders with access to differentiated, compelling opportunities to invest in asset-backed loans and litigation funding solutions, two specialized areas we believe provide attractive total returns and diversification benefits.

Turning to the portfolio quality, risk ratings exhibited stability during the quarter, as our issuers exhibiting the most stress, classified as risk rating 4% and 5%, were 7% on a combined basis and unchanged from the immediately preceding quarter.

Non-accruals excluding the assets that are covered by the Sierra CSA accounted for 0.2% of assets on a fair value basis versus 0.4% of assets on a fair value basis in the immediately preceding quarter.

During the quarter we exited one non-accrual investment, removed one asset from non-accrual status that was restructured, and moved one additional asset on to non-accrual.

We remain confident in the credit quality of the underlying portfolio. We expect BBDC's differentiated reach and scale, coupled with its core focus on middle market credit and unmatched alignment with shareholders, to continue driving positive outcomes in the quarters and years to come. As previously noted, BBDC is a through the cycle portfolio designed to withstand a variety of macroeconomic conditions.

With that, I'd now like to turn the call over to Elizabeth.

Thanks Matt. As both Tom and Matt highlighted, BBDC continues to deliver strong, consistent earnings, maintain exceptional credit quality, and provide attractive risk adjusted returns for our fellow shareholders. Turning to our results for the fourth quarter, NAV per share ended the year at $11.09 which was essentially flat compared to the third quarter at $11.10.

Less than 0.1% decrease quarter over quarter, the slight quarter over quarter movement reflects a combination of modest realized losses of $0.05 per share offset by $0.02 per share of unrealized appreciation, $0.01 per share from share repurchases, and continued stable earnings generation from the portfolio, over earning the dividend for the fourth quarter by $0.01 per share.

The net relied loss on the portfolio was driven primarily by the loss on the exit of our investments in [Ruffalo and Avanti] and the restructuring of our investments in [Eurofins], partially offset by the sale of our equity investments in Jones Fish and CJS Global. These exits and restructures were predominantly reclassed from net unrealized depreciation.

The valuation of the Sierra Credit Support Agreement increased by approximately $7.7 million from $52.8 million in the third quarter to $60.5 million as of December 30. This increase was primarily driven by the sales, repayment, and return of capital within the underlying portfolio, as well as updated assumptions around the maturity profile of the remaining Sierra investments.

During the fourth quarter, the Sierra portfolio generated approximately $24.3 million of sales and repayments, along with a $21.9 million return of capital distribution from the [Sierra JB].

At year end, we had 12 positions remaining in the portfolio with a value of approximately $32 million down from 16 positions and $79 million as of September 30. On a year over year basis, we reduced the Sierra portfolio by roughly 75%, including about $70 million of repayments, sales, and return capital.

In addition, during the year we completed the early termination of the [NBCredi]t Sport agreement, resulting in a one-time $23 million payment from Barings to BBDC.

This strategic action reduced structural complexity within the BDC and further concentrated our portfolio with income producing assets. We reported net investment income of $0.27 per share for the quarter versus NII of $0.32 per share in the prior quarter and $0.28 per share for the fourth quarter of 2024.

For the year, net investment income was $1.12 per share compared to $1.24 per share for 2024. Net investment income was primarily driven by recurring interest income across our diversified senior secured portfolio complemented by contributions from our joint ventures and our platform investments in Eclipse and Rocade. The decrease in net investment income year over year was primarily due to sales and repayments on the portfolio and declining base rates. It's important to note that net investment income exceeded our regular dividend of $1.04 per share.

Our net leverage ratio, which is defined as regulatory net leverage of unrestricted cash and net unsettled transactions, was 1.15 times at quarter end, down from 1.26 times as of September 30, well within our long-term leverage target of 0.9 times to 1.25 times. This reflects our intentional positioning to support origination activity and planned asset transfers to our [Jakasi joint venture].

Our capital structure continued to strengthen in 2025 as we repaid $112.5 million of private placement unsecured notes, completed the annual extension of our corporate revolver in November, and further diversified our funding sources with the issuance of $300 million of senior unsecured notes in September.

More broadly, our funding profile remains strong and thoughtfully aligned with our disciplined approach to asset liability management. Our liabilities are well diversified by duration, seniority, and structure, with an industry leading share of unsecured debt in our capital structure at roughly 84% of our outstanding debt balances.

Liquidity remains robust and well diversified, supported by undrawn capacity on our revolving credit facility and incremental flexibility from our joint venture with Jakasi. Near term maturities remain limited, and our continued access to a broad set of funding markets positions us to proactively navigate refinancing needs while maintaining balance sheet strength.

Subsequent to quarter end on February 26, we will fully repay $50 million of private placement notes at par, including accrued and unpaid interest. Now on to capital allocation, our net investment income for the quarter of $0.27 per share covered our regular dividend of $0.26 per share. As previously mentioned, the board continued its strong focus on returning capital shareholders and declared a first quarter dividend of $0.26 per share, representing a 9.4% distribution yield on NAV.

Looking ahead to 2026, we expect that declining base rates reflected in the trajectory of the forward Stouffer curve will likely put downward pressure on net investment income, and as a result, our regular dividend may decrease from current levels while our earnings profile remains resilient and benefits from an industry-leading 8.25% hurdle rate.

Low base rates naturally reduce the income generated on our floating rate portfolio. Even so, our diversified portfolio of senior secured investments, well [lattered] capital structure, and disciplined underwriting continue to provide meaningful support to earnings. In addition, we currently hold spillover income of approximately $0.80 per share, representing about three quarters of our regular dividend and offering flexibility as rates normalize.

Taken together, although a literal regular dividend in 2026 is possible given the rate backdrop, the durability of our earnings and the strength of our balance sheet positions us well to navigate this transition and continue delivering attractive risk adjusted returns. Share repurchase activity continued during the year and contributed $0.02 per share to NP.

We repurchased over 450,000 shares in the fourth quarter for a total of over 700,000 shares for 2025. In addition, the board authorized a new $30 million share repurchase plan for 2026, underscoring our commitment to enhancing shareholder value.

Stepping back, 2025 was a year of steady earnings, strong liquidity, and active portfolio rotation. Despite lower base rates, we continued to produce durable NII, maintain solid credit performance, and execute on our balanced approach to capital allocation, including consistent dividends and meaningful share repurchases.

As we look ahead to 2026, we remain confident in the resilience of the portfolio and the strength of our platform, and we are well positioned to continue delivering attractive risk adjusted returns for our shareholders. And with that, I'll turn the call back to the operator for questions.

Thank you. (Operator Instructions) Finian O'Shea, Wells Fargo Securities.

Hey everyone, good morning. Start with, I guess, Tom, some interesting opening remarks on initiatives. Anything you're you find yourself working on in terms of the you know accelerating existing initiatives part and then also on the new ones to you know improve ROE as you outlined any sort of heavy lifting or big changes we might anticipate there.

Yeah thanks Fin. So yeah, a number of initiatives, that that we've undertaken here, I think part in part really they are sort of a continuation of what the team has already done. So as we've got many sort of assets on the balance sheet, legacy assets that have come over from.

Some of the integration of the other companies we have acquired, so my focus has been really on trying to accelerate exits of those. Many of those, as don't earn interest. So as we can redeploy some of those proceeds into interest earning assets and accelerate our exit from those, obviously that's an immediate enhancement, for ROE. So that's been a big focus of mine. I think within the CSA, another area where, we've tried to make an effort to wind down the assets there to the extent that we can.

We know that the CSA's clearly been a story for us for quite some time. I think it's been very beneficial for shareholders and protecting them, from losses, but you know that thing is beginning to grow in size and so, as earlier this year we did terminate one of those and so while we can't guarantee anything, it is our effort, it's going to be a strong effort of ours as a team to make sure we address that in a timely manner and again to try to have some sort of an event around that where we could potentially, realize proceeds there and again redeploy those into interest earning assets along the same lines, we continue to wind down, some of the JV's, that some of them have been problematic for us, we're focused on [Jokassi] obviously as a JV that's worked to our benefit. We continue to believe that that's actually a great partnership and look to continue to potentially expand, on that one as well.

So those are a couple of the initiatives, I would say initiatives we don't have to take but exist are, that I think are going to be very, shareholder friendly, ROE friendly are going to be the, hurdle rate, as is quite high relative to our peers, and I think as, base rates come down, that's going to be an immediate, benefit to our earnings to our ROE.

So those are a couple of the initial ones. I would also, sort of like to point out, as you all know, I've been here for, bearings for 20 plus years. There's just many other parts of bearings, other private asset things that we can consider. Clearly our core is always going to be GPF in this strategy, but there are a number of things I think that we can explore that we have expertise in across the platform here at Barings.

And so I think that we will bring some of those to bear as potential investment opportunities, as we can continue to look to enhance ROE and returns to shareholders.

Okay, a lot there, yeah, interesting on expanding [Joe Cassy]. Would that look any different because, so some I've had some discussions with investors and there's a view that you sort of don't get enough of the pie there.

You're something like 9% and--of the equity and the partner also gets the equity like return it's not a preferred return. And it looks like something that could be better that's not to say it's bad it's doing what it's supposed to do in mid teens, but it looks like you know the person you want to be is the account that gets that for free so is there a way that this might tilt more return toward BDC shareholders?

Yeah, no, I think that, I don't know that we increase the percentage ownership, but I certainly think we can increase our investment there and direct more activity down there. So, and therefore increase absolute dollars back in sort of the form of the dividends. So, as we consolidate the other JVs and wind those down, and they're virtually at this point wound down, I think we redirect, investment into that entity and again I know we share all the same risks at the BDC level, as we do down at Jokasi and. Get the benefit of the leverage down there and the enhanced return to shareholders so I think that will be a focus as we move forward, and I think it's been very successful for us over time and you know we continue to believe it will be.

Appreciate that. Thanks, but. Do one final sort of market question. I'm not sure if the esteemed Joe Mazzoli is microphone eligible, but a lot of news in the non-traded, BDC market, it feels like the ground is shaking again, this week. Anything you all are seeing or feeling on the ground of Private retail investor sort of reluctance or hesitation or jitters on on that sort of product format.

Thank you. Yes, yeah, so Joe's not mic'd up, but I, I'll certainly take that, we're working hand in hand on that as a team as well, and so obviously the headlines have not been our friends really for 4 months now, and, clearly news this week is not helping on that front at all, so for us it's up to us really to, reach out to investors and be a little more front footed as we address some of the issues in the market and I think we've done a good job with that, our flows there have been good, we haven't seen any material degradation. In the pace of flows, relative to what we saw last year, so we continue to believe that that's the case moving forward in the first couple of months of this year. I guess everybody will see at the end of the first quarter here on what redemptions might look like, but as of now, we're just sort of fighting the battle of the headlines, and we do believe that that is what it is. And so, I think everybody here who's knowledgeable about the space and truly understands private credit understands, that it is very viable, and I think we're In a good position there, but it's it's on us really to get that message out and to make sure that we alleviate investor concerns, on that front.

Thanks, Tom.

You're Welcome.

Thank you.

Casey Alexander, Compass Point.

Yeah, good morning, and Matt, I appreciate your comments trying to bring some relative perspective to the software market, but I do have a follow-up question to that that I'm actually going to direct at Tom because Tom, you have long history in the liquid credit markets and.

An issue that, investors continue to raise and would like to hear some commentary on is that in the liquid credit markets, the average price for a software loan is actually trading in recent reports around 90. And so I'd like to hear how much you think that matters and how much you think that influences bearings and the third-party independent valuation firms when they go to mark the books at the end of the first quarter. Is that a relevant comp? Does it come into it? How much does it influence it and what should investors expect?

Yeah, that's a great question. So I believe that, in the broadly syndicated loan space, the predominant player there are CLOs, and, CLOs are very ratings sensitive.

They're also somewhat price sensitive, but, the reality is there has just been so much noise around it that I think people are just sort of hitting the sell button where they can. $2 million to $3 million dollar position, you have four or five people doing that immediately you're going to see a 2% to 3% backup in that loan. It'll be a perfectly good credit.

There'll be no issues with it reasonable leverage, good cash flow. The businesses, in our opinion, are good. We've got a great analyst that covers that up there. So I think that a lot of that has to do with, not necessarily forced selling but repositioning ahead of potential downgrades, and I don't even see that really as something that's coming in the near term. We're going to have to see multiple quarters of results to see if some of this.

The negative headlines come to fruition. Our personal belief is that it does not happen and the way that we have crossed the bearings platform underwrite software, is that the recurring nature. It's got to be, sort of vertically integrated enterprise value stuff. It's sort of really integral to the company's core operations and so where we are invested is in companies like that.

So unfortunately, the headlines just force people into that sort of sell mode, sell first and sort of ask questions later, especially if it's only a $2 million to $3 million dollar position as many CLOs, sort of have.

So then, so that sort of then leads to who's going to buy that and so with all the headlines, folks don't necessarily want to back up the truck on names like that that are just trading at a 2% or 3% or 4% discount, it just doesn't really make sense from a 33 or DM perspective that they would look at on buying and then also just increasing software exposure becomes more of a story that managers have to tell their investor base.

So with that, you get the price GAAP when you see sellers move in like that, and again, not based on fundamentals in my opinion because it just doesn't warrant that so. So how does that translate into our space, I don't know necessarily that it does because these are broadly syndicated loans that again they're liquid but only to a certain point and to a certain depth and then you begin just to see marks that don't make sense.

So I don't know how that's going to translate into evaluation, again with our platform and the way that we look at it, we don't see any need at all, and I don't view there need to be, any reason for us and our software exposure to be making any marks down associated with that, so. So we feel pretty good about our exposure.

There'll clearly be a knock-on effect from that. It's the sort of topic of the hour, if you will, and what's going on in the space. But again, we believe that it's overblown and people are just reacting to headlines and it's our job to get in front of that with our investors and make sure that they understand the stability of the underlying credits in our portfolio, particularly as it relates to software.

Oh, that, well, that's a great answer. Thank you for that. My follow on would be in the past when the liquid credit markets have offered a better risk adjusted rate of return than the directly originated, markets have, Barings has been willing to step into that market and try to take advantage of it to create, some positive NAV accretion.

As some of those opportunities present themselves, is that something that you're watching, thinking about? Is that a possibility at some point down time down the road if the mismatch between the liquid credit markets and the directly originated private credit markets gets too wide?

Yes, yeah, absolutely, we would, consider that, we are, we have, a lot, we do a lot of work with our high yield team, obviously, I came from that group, and so, a lot of respect for the team up there and so, they do a lot of work around this and we will step into it, where we think there's opportunity there and so that is something that is clearly on our screen and you know the way we approach BSLs will be very tactical about it and so.

I do think there's an opportunity there is when you just see some of this air pocket and some of the names or if they're just a general selloff and BSLs, we do know what sort of the top picks up there are and so you can move in there, take very little credit risk, and just take advantage of the volatility in some of those names and so you could see us potentially do that. It is a strategy that we're considering as we see that spacing or, see the market evolve in terms of pricing there.

Thank you for taking my question.

All right, thank you.

Thank you.

Robert Dodd, Raymond James.

Hi, morning, everyone. Congratulations on the recording. You're one of the few green names on my screen today. On, the kind of like, strategic initiatives. I mean, you talk about ideally liking to crystallize the Sierra CSA as well. But, I mean, where would you like, if that, if you did, right, in the, not too distant future, well, what are the areas that you'd like to put that cap to? I mean, obviously you're talking about, putting more intoca.

That's an equity, strategic equity effectively, Eclipse and have been great, but they are, they do show up as equity. They are income producing, very different thing from what normal equity is. I mean, how would you like to allocate incremental capital across, The different types of strategies you've done between straight lending, some strategic equity, I mean, what's kind of the vision for the mix over the next, couple of years, so to speak.

Yeah, so I mean again across the platform bearings, we've got great origination platforms everywhere. I think, we've leaned into sort of our capital suite, the complexity piece of private credit and got excellent returns there. You reference Rocade and Eclips, those are two. We continue to work with the group there. I'm actually on that investment committee as well and so there are some really interesting risk adjusted return.

Investment opportunities on that platform that you know we'll continue to do. I think that is definitely one area that we'll look to do that, as I'm a big believer in diversification and credit so as more opportunities come there, I think you could see us diversify holdings in some of those names that have the complexity premium and very interesting opportunities there that come at 200 basis points to 300 basis points wider on spread than what you know you can get right now in in in private credit so that would be sort of one area of focus, as well across the platform, some of the asset based lending opportunities I think that we may have, as well could be interesting, as well as being tactical like as we see more volatility in the space.

Clearly the BSL piece would be an area where we could see some interesting opportunities. I think, WBCLOs is an opportunity for us.

So I think what you'll see us do is be just a little more tactical in areas like that. And then, again, always focused on the core of our GPF assets, but I think looking at. A number of the origination platforms here on the private credit side at bearings, there's just a lot of opportunity for us, so we'll continually evaluate where they stack up, relative to GPF spreads and and opportunities on there. So there's a lot of sort of choices we can make along that and so that is part of my focus one of the. Strategic initiatives again is to utilize the entire bearings origination platform to find the best sort of risk adjusted return opportunities and put them to work here.

Got it. Thank you. And let me flip it to software if I can. I mean, to get this point, I mean, the average liquid bids at 90, but that's not a uniform [90], right? I mean, it's, there's a lot trading higher than that, and there's a few trading much lower than that. For example, when you look at your book, the 14%, that you said is software, I mean. Obviously you've avoided the types of or tried to avoid the types of businesses that are particularly vulnerable to AI displacement and those are the ones that are trading with the ones the market is concerned about the one in the liquid market, those are the ones that trading in the big discounts.

Much exposure, if any, do you have to the same kind of businesses that the liquid market has really, taken out behind the woodshed, so to speak. I mean, obviously, I think it's low, you've been avoiding it, but do you have any?

Yeah, no, we don't have any that are, so you're talking about the liquid loans that are trading now in the low 80s, those are the ones that are more highly levered, names that are clearly the ability for AI to disrupt some of those models is much more evident and I think those are the ones. So there's been massive dispersion.

So good high-quality names in software and broadly syndicated are probably in the mid 90s at this point to 98. And just trading because of the they're associated with software and then the ones that actually have real credit concerns as you mentioned are in the mid 80s and even lower, and so those are the ones that have been legacy investments for quite some time have been sitting around, four or five years, many of them have already faced or are facing LME type events and so then you'll see the trading price really GAAP down, significantly so. We don't have exposure to those on the GPF platform. We have, AI has not come along as something that is a risk that recently we identified. It's been something that's been a core part of the underwriting for the team, going back years now.

So I think that's always something that has been considered, and we just don't have anything on our radar screens that would indicate that we have issues like that where AI is an immediate disruptor and. And and therefore I'll have, future impacts on quarterly earnings and EBITDA, etc. So we feel pretty good about our investments in that space within the 14% exposure we have there.

Got it. Thank you for that. One more if I can to make, Elizabeth's life may be more awful. Any consideration to shift through, categorization to mean, [GIs] is increasingly com the standard. Most BDCs use it. The fact that you don't, does make it harder to compare, between, BBDC and, the, most of the universe, the liquid loan markets even disclosed in GIs, categories now. I mean, so, yes, [Moody's] has been your industry categorization for a long time, but, Would there be value in your view to actually switching to what's becoming more the industry standard?

Yeah Robert thanks for the question and it's something that you know we have been talking about internally again especially with the software piece right I know Matt kind of alluded to it in his in his commentary so it is something that we are constantly looking at and and discussing especially from an SEC reporting perspective but you know thank you for your question.

Okay, thank you.

Thank you. (Operator Instructions)

We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Okay, thank you, operator, and thank you to all who participated today. As I began my tenure as CEO, I look forward to deepening our engagement with investors and advancing our strategic priorities with a full BDC leadership team. BBDC is strongly positioned for the future, and we remain focused on delivering consistent value for our shareholders.

Thank you.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.