Bain Capital Specialty Finance Inc (BCSF) 2018 Q4 法說會逐字稿

Greetings. Welcome to the Bain Capital Specialty Finance Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to your host, [Sloan Bolen], Investor Relations. Mr. Bolen, you may begin.

Good evening. Today we issued our earnings press release and presentation of our quarterly results, a copy of which is available on Bain Capital Specialty Finances 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 Annual Report and 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.

And with that, I'd like to turn the call over to our President and Chief Executive Officer, Michael Ewald.

Good evening, and thank you for joining us for our Fourth Quarter and Full Year 2018 Earnings Call. As Sloan mentioned, my name is Michael Ewald, and today I'm joined by our Vice President and Treasurer, Mike Boyle; and our Chief Financial Officer, Sally Dornaus. As many of you know, this is our first earnings call as a publicly traded company, so I would like to take a moment to provide an introduction to the company, what we do and how our advisor in Bain Capital Credit approaches investing in the middle market.

Bain Capital Specialty Finance, or BCSF, began investing in October 2016. And since inception, has been advised and managed by an affiliate of Bain Capital Credit. Bain Capital Credit is a debt investing arm of Bain Capital, a large privately held alternative asset manager with over $100 billion of assets under management. The credit business represents over $39 billion of those assets, and the Private Credit Group, which I head and which manages BCSF, manages over $7 billion.

The credit business was founded in 1998 and has been investing in the middle market, which we define as companies with $10 million to $75 million -- sorry, with $10 million to $150 million of EBITDA, since its inception. Over these past 20-plus years, we've invested over $10 billion in over 375 middle market companies across 35 industries, mostly lending to companies owned and controlled by private equity sponsors.

Our goal for BCSF, consistent with Bain Capital Credit's senior direct lending strategy, is to generate superior risk-adjusted returns through rigorous underwriting that leverages the breadth and depth of the full Bain Capital Credit team and it seeks to identify investments with first or second liens against collateral and strong credit structures that insulate us as lenders and you as shareholders.

BCSF assets currently represent $1.8 billion of the total $7 billion in AUM managed by the Private Credit Group of Bain Capital Credit. Our portfolio is invested across 31 different industries, with a current weighted average yield of 8.7%. Approximately 79% of our book is invested in what we refer to as first dollar risk. 63% of that in traditional first lien loans, with another 16% in unitranche loans through our ABCS partnership with Antares Capital. Importantly, we have no nonaccruing loans in our portfolio, a testament to our consistent underwriting standards.

2018 was a transformative year for the company. On November 15, our shares began trading publicly on the New York Stock Exchange. This strategic decision was informed by our view that benefits provided to shareholders of operating as a public company outweighed the costs of doing so. Some of those include access to liquidity via the secondary market, greater transparency is provided on calls such as this, and access to greater financial flexibility is provided through regulatory relief under the Small Business Credit Availability Act. Pursuant to that Act, on November 28, 2018, our Board of Directors recommended that shareholders approve of proposal to reduce the company's required minimum asset coverage from 200% to 150%.

In addition, the Board recommended the amendment of our advisory agreement to reduce the company's annual base management fee from 1.5% to 1% on any amount of assets attributable to leverage that decreases the company's asset coverage ratio below 200%.

Subsequent to quarter-end, on February 1, 2019, we announced the approval by shareholders to operate under the reduced asset coverage ratio requirement and to adopt a tiered management fee structure.

As Mike Boyle will discuss later, we believe we have created a liability structure well aligned with this increased flexibility. Importantly, this change in available leverage does not at all change our core strategy of investing primarily in senior tranches of middle market sponsor-owned companies, which has been our consistent strategy for over 20 years. In fact, we believe, it is just such a portfolio, primarily first dollar risk loans, that lends itself to modestly more leverage in the first place.

Before I turn the call over to Sally and Mike to review our financial results and investment activity for the quarter, let me spend a few minutes on the market and what we observed over the course of the fourth quarter of 2018 and year-to-date 2019.

Much has been said in the financial press as well as prior BDC earnings calls about the volatility in the syndicated leveraged loan market in the fourth quarter. The average price of the LSTA index, an index of broadly syndicated loans, dropped from 99 at the end of September to approximately 94 at the end of December.

For a market where the underlying assets typically carry a coupon of 4% to 6% and are expected to pay back their principal, this represented a meaningful move in the return expectations for the loan asset class. Interestingly enough, this dislocation was not driven by any lesser expectation of eventual payback or a higher default rate, it was mainly technical in nature.

Importantly, we took advantage of this choppiness in the broader loan markets to drive our highest rate of new investing in BCSF since our inception in 2016, with over $450 million of gross new investment activity over the course of the fourth quarter.

We have seen an uptick in private equity sponsors seeking direct lending solutions, which offers certainty and a predictable close timing, rather than deals underwritten and syndicated by a bulge bracket investment firm. As a reminder, nearly 100% of our portfolio is lending into sponsor-backed transactions.

As a secondary benefit of the market dislocation in the fourth quarter, we found a number of interesting discount investment opportunities in middle market companies struggling to price a syndicated deal in a volatile market environment. We were able to action these opportunities, given the expansive reach of Bain Capital Credit. In addition the dedicated global Private Credit Group, we have an industry research team primarily focused on more liquid markets. And with their help, we were able to construct a well-diversified portfolio with 132 different companies at the end of 2018.

We feel this is particularly important as we continue to feel we're towards the end of that credit cycle and are positioning ourselves accordingly. Senior in the capital structure and diversified across companies.

The downside of the market volatility in the fourth quarter was spread widening in our reference markets, driving unrealized losses in our portfolio at year-end.

Our portfolio evaluation process is very objective. We focus on obtaining third-party marks for our assets on a quarterly basis. Often, especially in the case of pricing services or third-party valuation providers, one of the bigger inputs uses a proxy as the spread level [of] broadly syndicated loans. Mike Boyle will talk more to the magnitude of this impact on our portfolio, specifically, but as I mentioned earlier, our portfolio remains without any loans on nonaccrual status. In fact, 98% for our investments have a rating of 1 or 2, meaning as they are performing at or above our expectations at the time of underwriting. This is in line with our results at the end of the third quarter last year.

Since the end of the year, we have seen the leveraged loan market normalize a bit with the settling down of concerns around macro developments, specifically, imminent rate hikes and a tariff war. Though we're mindful those considerations could change quickly.

In the meantime, the LSTA index has climbed back up to 97 as of today. Private equity sponsors continue to look to deploy their own dry powder, which has led to a steady flow of investment opportunities.

Before I turn the call over to Sally to review the fourth quarter and full year financial highlights, allow me a moment to emphasize how excited we are to grow our investment strategy as a public BDC, and how we believe there is a bright future for us, both in terms of market opportunity, but also based on a successful platform and broad capability set we have here at Bain Capital Credit.

Sally?

Thank you, Mike, and good evening. We are pleased to report our 2018 results. I will first discuss our fourth quarter results as well as our full year results for 2018, and then I will discuss the balance sheet and its changes year-over-year.

Our net investment income was $19.8 million or $0.41 per share for the fourth quarter of 2018, which is an increase in net investment income of 42% compared to the third quarter net investment income of $13.9 million. The quarter-over-quarter increase was due to total investment income increasing approximately $7 million or 26%, from $26.7 million to $33.7 million. This is primarily driven by the investment funding in the quarter of $452 million, which increased interest income to $24.7 million, and dividend income to approximately $9 million, primarily from our joint venture Antares Bain Capital Complete Financing Solution.

Our total expenses for the quarter increased $1.2 million to approximately $14 million compared to $12.8 million in the third quarter. Included in this is interest expense that increased due to our uses of our credit facilities to fund our growth and the first full quarter of interest expense for our 2018-1 Notes. Additionally, during the quarter, we used IPO proceeds to retire our SMBC facility, which resulted in a onetime charge due to the acceleration of unamortized fees. I also want to note that from the date of the IPO, through December 31, our advisor voluntarily waived its right to receive the base management fee in excess of 75 basis points and its right to receive the incentive fee in excess of 15%.

Our GAAP earnings per share for the fourth quarter of 2018 were negative $0.21 per share compared to $0.46 per share for the third quarter of 2018. This was driven by the net change in unrealized depreciation of $31.2 million due to the declines in fair value, which was partially offset by net realized gains of $1.6 million.

Now looking at the full year, 2018 net investment income per share was $1.45 compared to $0.73 per share for 2017, or a 98.6% increase year-over-year. GAAP earnings per share for 2018 was $0.69 compared to $0.99 per share for 2017. This decrease was mainly driven by the fourth quarter market value movements mentioned earlier.

Now moving over to our balance sheet. As of December 31, our investment portfolio at fair value totaled $1.7 billion, which is 108% increase from December 31, 2017. The yields on the portfolio remained relatively flat quarter-over-quarter, the weighted average portfolio yield was 8.7% and the weighted average portfolio yield excluding ABCS was 7.7%, as of December 31, 2018.

Moving to the right side of the balance sheet, total net assets were $1 billion, as of December 31, 2018.

As Mike mentioned, we completed our initial public offering on November 15, issuing 7.5 million shares for gross proceeds of $151.9 million. As of December 31, NAV per share was $19.46 compared to $20.17 in the third quarter. The decrease was primarily due to the net realized and unrealized investment activity during the period. The net change in unrealized depreciation of $31.2 million is market driven and not related to any specific credit within the portfolio. Mike Boyle will discuss our portfolio positioning and outlook next.

As I briefly mentioned earlier, we used $83.6 million of the IPO proceeds to retire our SMBC facility. In addition, IPO proceeds of approximately $62 million were used to pay down a portion of our Goldman Sachs facility during the quarter. As of December 31, our debt-to-equity ratio including trade payables was 0.75x, our regulatory debt-to-equity ratio was 0.64x.

To reiterate what Mike mentioned in his remarks and in our press release on February 1, the shareholders approved reducing our asset coverage requirement to 150%, and approved the amended advisory agreement which reduced the base management fee from 1.5% to 1% on assets attributable to leverage, decreasing the asset coverage ratio below 200%. The amended advisory agreement includes an incentive fee cap and a 3-year look back provision with respect to incentive fee income.

Finally, we are pleased to announce that our Board declared a first quarter dividend of $0.41 per share. The first quarter dividend is payable on April 12, 2019, to stockholders of record on March 29, 2019.

I appreciate your time and attention. I will now turn the call over to Mike Boyle, our Vice President and Treasurer to walk through our investment portfolio in more detail.

Thanks, Sally. Good evening, everyone. I'll start by spending a few minutes reviewing our fourth quarter and full year investment activity. I will also -- I would also like to provide an overview of our current investment portfolio and our views on portfolio construction. Lastly, I will provide some more details about our liabilities, including our current financing facility and liquidity resources.

In the fourth quarter, we invested approximately $452 million across 27 new portfolio companies. During the same period, we realized approximately $43 million through repayments and realizations. This net investment pace of approximately $409 million marks the highest quarter of originations since the inception of Bain Capital Specialty Finance, beating out the fourth quarter of 2017, during which our net investment activity was approximately $345 million.

As Mike highlighted earlier, our fourth quarter investment pace benefited from the volatility in the broadly syndicated loan market, driving many sponsors to seek the certainty of a direct lending financing partner versus the volatility of a syndicated loan deal. Although there has been increased capital raised by direct lenders in recent years, we believe that our heritage as a direct lender and over $7 billion in direct lending assets under management allows us to continue to source compelling investment opportunities. For the full fiscal year-end 2018, we invested approximately $1.2 billion in BCSF, which was offset by approximately $235 million of realizations and repayments. As of the end of the fourth quarter, the fair value of our investments was $1.7 billion versus $832 million at December 31, 2017.

Turning now to the portfolio composition, 79% of our portfolio is invested in first lien loans. This includes our equity investments in ABCS, where the portfolio consists of investments in first lien unitranche loans to middle market businesses. Our focus on constructing our portfolio with primarily first dollar risk reflects our current views that we are late in the credit cycle. We believe that the best way to mitigate downside risk as a lender in today's economy is to prioritize investments representing this first dollar of risk. Also, to maintain strong lender protection, 75% for our portfolio has financial maintenance covenants.

Also, we focused on retaining effective voting control of the debt tranches where we're invested. And lastly, we favor industries that do not cycle with the broader economy. Our top 3 industry exposures as of the end of the year are high tech, business services, and healthcare.

Diversification is a central tenet of our portfolio construction with 132 companies in the portfolio at the end of fiscal 2018. In our hunt for attractive risk/return, we look at developed economies across the globe to drive investment ideas. Currently, 8% of the portfolio is invested across Europe, with a current focus in the U.K., Ireland and Scandinavia. These investments are sourced from our London office, which was established in 2002, and our Dublin office, establish in 2014. With the breadth of Bain Capital Credit, we are consistently evaluating the attractiveness of the U.S. direct lending market relative to others and capitalizing on these global opportunities within the confines of a 30% nonqualifying asset bucket permitted for BDC.

Turning to yield. The weighted average growth yields at fair value of our investments was 8.7% at quarter-end, compared to the same 8.7% on September 30, 2018, with 96% of investments in floating-rate debt and the remaining 4% is -- are on fixed rate debt. We believe our focus in floating-rate asset positions, positions the company well for various interest rate environments.

From a portfolio quality perspective, there were no investments on nonaccrual status at quarter-end. We rate the investments in our portfolio at least quarterly on a scale of 1 to 4, with 1 being the highest possible rating and 4 the lowest.

As of quarter-end, 98% of our portfolio at fair value was rated 1 or 2, reflecting that the majority of our portfolio continues to perform in line or above our expectations at underwriting. Over the course of the fourth quarter, we did mark the assets in the portfolio down to reflect widening spreads in the broadly syndicated loan and high-yield market. The average price of a loan in BCSF's portfolio was marked down by 2.2 points, from 99.6 to 97.4 on average.

Over a comparable period, the index of broadly syndicated loans declined to 4.8 points and high-yield bonds declined 6.4%. We have already seen a meaningful technical release in these liquid reference markets, with the LSTA up 3 points and high yields up 5 points since the beginning of 2018. With no new credit concerns in our portfolio, we anticipate that a comparable correction will flow through our portfolio in the first quarter of 2019.

Now turning to liabilities for the company. At quarter-end, the company had $637 million in principle debt outstanding. As a ratio to the net asset value of the company, our leverage was 0.75x, which includes trade payables. To this end, we have thought to construct a long-dated floating-rate liability profile that is well aligned with our investment strategy.

In October 2017, we closed a revolving credit facility with Goldman Sachs, which provides us flexibility and liquidity needed to meet ongoing funding needs of the company. In September 2018, we issued the 2018-1 Notes through BCC and middle market CLO 2018-1, accessing the securitization market for the first time by BCSF.

We believe the CLO and securitization markets provide compelling financing solutions as we look to diversify our funding sources given the long-dated maturity profile, low weighted average cost of debt and attractive financing terms of that CLO. We are uniquely positioned to access the CLO market, with Bain Capital Credit managing 40 CLOs over the last 20 years. Subsequent to quarter-end, we announced on February 19, 2019, the closing of a new $350 million credit facility with Citibank as the administrative agent, priced at LIBOR plus 1.60%. With this new facility, we believe we have provided a solid foundation for the company to operate within our target leverage profile. We are pleased with our continued progress in constructing this well-diversified funding base.

With that, I'll turn the call back over to Mike Ewald.

Thanks, Mike and Sally. I'd also like to point out that the partnership at Bain Capital, I, alongside Mike Boyle, Jeff Hawkins, BCSF's Chairman of the Board; and Jonathan Lavine and John Connaughton, each a co-managing partner of Bain Capital, have collectively invested in an incremental $20 million in shares of Bain Capital Specialty Finance over the last 3 months through a programmatic purchasing plan that we believe further reflects our continued conviction in the strategy and return profile of BCSF.

Lastly, I would like to reiterate our announcement of a $0.41 dividend for the first quarter and emphasize that throughout 2019, we will continue to work toward our goals of maintaining a stable dividend for our shareholders, driving performance from our portfolio, managing prudent growth in our investment activity and optimizing our capital structure.

In the meantime, thanks for your support, and now we're happy to answer any questions you may have.

(Operator Instructions) Our first question comes from the line of Ryan Lynch from KBW.

First one, just want to talk about the very strong capital deployment you all had in the fourth quarter. Obviously, the broadly syndicated loan market saw some volatility but the middle market was a little more consistent. Did you guys change your investment approach at all? And maybe kind of move up to some maybe dislocated broadly syndicated loans? Or was it just kind of a -- happen to be the timing of the really strong originations in the fourth quarter? And also, were there any loans that we were maybe pulled forward? And what is kind of your outlook so far in Q1 as far as originations and repayments go?

Sure, and thanks for the question, Ryan. In terms of whether we really doubled down with our existing investment strategy and the middle market versus shifting to broadly syndicated loans, we did focus primarily on our existing strategy of lending to companies with $10 million to $150 million of EBITDA, so 80% of those new originations in the fourth quarter were those middle market companies. And our pace was actually quite steady through the quarter, so we did add some incremental loan throughout October, November and December, many of which were those privately negotiated transactions that we do most often. But there were some, as Mike Ewald mentioned earlier, some syndications that ended up getting hung and we ended up being able to participate in those transactions at attractive pricing.

Okay. That makes sense. And then, given now that shareholders have approved the increased leverage, have you guys provided any sort of target leverage range you guys plan on operating going forward?

Yes, good question, Ryan. I think it's going really be dependent on market opportunities. It certainly doesn't change our core strategy at any rate. So it's not going to, all of a sudden, open up a whole new set of opportunities for us, but we do think that there is continued growth available for us there. And I think we're at 0.75 now, I could see us growing over 1 turn, but whether we end up at 1.5 or 1, hard to tell based on where the market is today.

Okay. And I know, as you mentioned, you guys -- you yourselves, personally, have been active in purchasing shares. Obviously, there was a pretty big dislocation in the fourth quarter, and obviously, the credit markets, but also some stock prices, I think including your guys' stock price. What is your thoughts or philosophy around implementing a repurchase program at the company level to potentially take advantage of those dislocations, particularly in light of the increased leverage limitation, where now you guys can actually have quite a bit of capacity for additional leverage? And can I actually leverage up reversing by actually repurchasing shares?

Sure. So as I mentioned earlier, the $20 million 10b5-1 plan that we'd announced as part of the IPO actually wrapped up earlier this week. So I think the natural next step in showing that support to the company is to consider a share buyback program at the company level like you mentioned. It was a topic at our last Board meeting, we'll continue to evaluate our next steps, but certainly, it would seem to make sense to us if we want to continue to drive ROE, that there may be situations where, if we're trading a significant discount, it may well make sense to buy back some shares.

Okay. And then just one last one if I can, just a housekeeping one. I'm not sure if you guys have this. But do you guys have -- I didn't see it anywhere in the 10-K -- the ROE generated at ABCS JV in the fourth quarter versus the ROE in the third quarter? I was just kind of looking to see what that was and if it grew at all.

We don't have it right in front of us, but we'll get back to you on that.

Our next question come from the line of Chris York from JMP Securities.

So, Mike Ewald, I was hoping we could get a little bit more color on some of your prepared remarks. Where are you seeing the most competition today in some of these larger deals that you're winning through your JV with sponsors? And then secondly, are you syndicating any commitments when you lead these large deals, or are they entirely being taken at the JV?

Sure. So look, second to the JV, the -- it can play in some of the larger EBITDA companies. The -- there's a competitive set there of other players like ourselves that have [an amount] of capital and can provide unitranche as well, but you're also competing against first lien and second lien structures, which would typically come from some of the more syndication-oriented folks. So the competitive set hasn't really changed there, it's the same players that you would know. So I wouldn't say it's any different there. I'm blanking on the second part of the question. What was the...

Syndication. Are you syndicating on a year-to-date?

Oh, sure. So occasionally, yes. It'll depend on the size of the investment. Look, there's also situations where the sponsor might say, hey, you guys win but we want to get somebody else in there too or cut somebody else in there as well. So sometimes it's 4 syndications, sometimes it's us potentially speaking for more than our eventual hold levels. So there are situations where we would syndicate, yes.

Okay. And then staying somewhat on my topic, I'm aware of some nice wins at Bain quarter-to-date. Can you provide investors with an update on the pipeline numbers?

So we aren't prepared to give specifics around the pipeline, but I would say it has been a strong start to the year with new transactions coming through the pipeline.

Fair enough. And then Mike Boyle, similarly, with your prepared remarks, it touched on one of my prepared questions. So investors know that you occasionally invest opportunistically internationally and it's part of your strategy and it's part of your differentiation relative to other BDCs. So I'm curious where you're seeing the best relative value opportunities in direct lending in Europe versus the United States today?

Sure. So I would say the overall market in the U.S., in our view, presents better relative value than the market overall in Europe. We have seen a number of interesting idiosyncratic opportunities. I mentioned we have some exposure in Ireland, have a team on the ground in Dublin. We've found that to be a particularly interesting niche that's driven some really interesting risk/return, but across Europe overall, it really is idiosyncratic situations, whether it's a company that requires incremental diligence or some of our knowledge to get comfortable with that end price, or whether it's something like a geography as I noted in Ireland. So systemically, the U.S. is more attractive in our view, but the opportunities we are seeing in Europe are a good complement to that.

Got it. That's helpful. And then last question from me. Given the receipt of approval from shareholders for additional leverage earlier this month, is it realistic for shareholders and investors to expect BCSF to consolidate the JV with Antares in the near-term?

So you're certainly right. With the ability to increase leverage, bringing ABCS onto the balance sheet since it's levered more than a 1 to 1, may well be in the interest of shareholders, and so it's something we're actively evaluating. And we'll report back to you if we do make any such changes.

Congrats, guys, on coming up.

Our next question come from the line of Douglas Harter from Crédit Suisse.

Can you just talk about the underlying health of your portfolio companies? Kind of, what you're seeing there in terms of operating performance?

Sure. So we don't give specific portfolio stats in terms of operating performance or deleveraging, but we have noted that 98% are still performing in line or above our budget. So I think the broad read through is that performance has been strong across the portfolio and with no nonaccruals that further reiterates that fact.

Great. And then just given this large sequential growth in the quarter, can you just talk about kind of the pacing of kind of when those loans were added? Just so we can get a sense of what average balances might have been for the quarter?

Sure. So we had the largest month of originations across the fourth quarter was November, with about 39% of the exposure that we added was done in November. December was the second highest with about 35%, so that leaves the remaining balance for October. So it was a fairly steady deployment pace across the fourth quarter.

(Operator Instructions) Our next question come from the line of Arren Cyganovich from Citi.

The yields quarter-over-quarter were relatively flat despite the increase in LIBOR. Did you experience some loan spread compression during the quarter? And what's your outlook for your loan spreads in your current pipeline?

Sure. So really the change in terms of -- over the quarter, LIBOR did increase as you noted. But as we continue to underwrite first dollar risk, there are times where we're focusing more senior, and thereby getting paid slightly less from a credit spread perspective. That's really something as we do the math for risk/return, we're always focused on. And what's happened is, we had a slightly higher balance of first lien and unitranche loans that did drive that down slightly. But I wouldn't say there is marked spread compression across the middle market overall. And in terms of outlook, what we saw in December, introducing volatility into the market, we think was somewhat favorable for spreads as well as documentation. And so -- and what we're seeing in our pipeline, we think we'll be able to maintain that -- the spread profile that we have, if not improve it in the coming quarters.

Okay. And your repayment in sales activity is a little bit slower than prior quarters and a little slower than we had expected. What's your outlook for the repayments going forward from this point?

Yes, look, it's still a relatively young portfolio since we've just been ramping it over the last 2-plus years. So in our experience, our hold times are typically about 2 to 3 years, so we would expect the rate of repayments to increase at some point, probably during the course of 2019.

Okay. And then the very small amount, but you did have a couple of portfolio companies listed as category 3 at your risk rating. You're still 0 on 4, but were there anything in particular driving those changes from the existing portfolio?

Yes, the short story is that both the companies that added -- that got added to the 3 rating had made significant acquisitions during the quarter and therefore, added incremental debt. Since we haven't seen the additional EBITDA actually flow through yet, that we sort of expect we will, obviously, right? We moved them to a 3 more out of an abundance of caution than any immediate credit concerns. So we don't think their prospects have been impaired in any way. But we just thought given the new stats there, that it would make sense to move them to 3 for now.

Our next question comes from the line of Fin O'Shea from Wells Fargo Securities.

Just a first one on the platform. Reading about Bain Capital, $7.1 billion deployed, and it's about 20-year history, and over 1/4 of that was in 2018. So can you help us grasp sort of the gears that were shifted perhaps in your origination? Was it simply more volume? Was it larger hold size? Whatever color you can offer there.

Yes, so just to be clear, the $7 billion is how much we actually manage today. So that's a static number. And then the BDC, on a net basis, we invested about $1 billion over the course of the year. So over our history, we've invested over $10 billion. That's over 20 years. So as we've continued to grow the underlying business, that annual pace has increased. Clearly, the first couple of years we weren't investing $1 billion a year back 20 years ago. So that has just increased over time.

Sure. Thank you will clarifying that. And then just a second question on the Antares joint venture. Would we think of this as sort of a single -- singular funnel where you both kind of bring inflow and are sort of arm-in-arm the whole way? Or is it more of a divide-and-conquer in terms of sourcing, underwriting, structuring, and so forth?

Yes, look, the short answer is, I think it's the coming together of 2 pretty big middle market players. If you think of most JV programs that are out there, you typically pair that with one platform and one leverage provider. Here we've got 2 very well-known platforms in the middle market who then basically combine their efforts and have a leverage provider on top of that. And so it very much is in collaboration with them, where we do diligence and think about the structure and come to investment conclusions collaboratively, but importantly, we each have the right to make decisions about -- in particular investment by ourselves as well. So on the one hand we collaborate, on the other hand, we also maintain the ability to make sure that we go through our various credit approval processes independently.

Our next question comes from the line of Derek Hewett from Bank of America Merrill Lynch.

Given the recovery in leverage loan prices, could you provide any additional color in terms of the potential positive benefit to NAV per share as of today?

Yes, look, the -- clearly, the market has traded back up again in terms of reference rates and that sort of thing. We haven't gone through to do the math to see what the actual impact might be because as I think you know, our valuation process is pretty involved in terms of having third parties do a lot of the work or have pricing services come out with the numbers, and then we do our own internal analysis, then we've got to get Board approval as well. Plus, while those index rates have come back up again today, we don't know what's going to happen in the next month and so we won't be revaluing it until the end of the month anyway. So we haven't looked at it, but I think Mike Boyle mentioned it in his prepared remarks, that given that a lot of the losses have reversed themselves, we would expect a similar type of flow through to our first quarter valuations as well.

We have reached the end of the question-and-answer session. And I will now turn the call over to Michael Ewald, President and Chief Executive Officer, for closing remarks.

Great. Well, listen, thanks, again, everyone, for your time. We certainly appreciate your support. And we look forward to our next call in a few months here. Assuming if you have any further questions in the interim, please feel free to reach out to investors@baincapitalbdc.com. Thanks.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.