Barings(BBDC) - 2020 Q3 - Quarterly Report

Financial Performance - Total investment income for the nine months ended September 30, 2020, was $51,148,504, a decrease from$57,245,553 for the same period in 2019, reflecting a decline in LIBOR and average portfolio size[251]. - Total operating expenses for the nine months ended September 30, 2020, were $29,365,140, down from$33,888,209 in 2019, indicating improved cost management[253]. - Net investment income for the nine months ended September 30, 2020, was $21,783,364, compared to$23,357,344 in 2019, showing a slight decline[251]. - The company reported net realized losses of $37,323,454 for the nine months ended September 30, 2020, compared to losses of$1,063,250 in the same period of 2019, indicating increased volatility in investment performance[251]. - Total investment income for the three months ended September 30, 2020, was $16,329,142, a decrease of 15.5$19,304,107 for the same period in 2019[252]. - Total operating expenses for the three months ended September 30, 2020, were $8,368,976, down 26.3$11,316,932 in the prior year[253]. - Net realized losses for the three months ended September 30, 2020, amounted to $20,506,085, compared to$983,499 in the same period of 2019[258]. - The decrease in investment income was primarily due to a reduction in LIBOR and the average size of the portfolio[252]. Investment Portfolio - As of September 30, 2020, the total value of the investment portfolio was $1,116.3 million, down from$1,173.6 million as of December 31, 2019[242]. - The investment portfolio consisted of 115 portfolio companies as of September 30, 2020, compared to 147 as of December 31, 2019[242]. - The company made 47 new investments totaling $263.9 million during the nine months ended September 30, 2020[245]. - The company sold$307.4 million of loans during the nine months ended September 30, 2020, recognizing a net realized loss of $36.4 million[245]. - The company had 15 loans repaid at par totaling$58.5 million during the nine months ended September 30, 2020[245]. - The company had no non-accrual assets as of September 30, 2020, and December 31, 2019, indicating strong credit quality in the loan portfolio[249]. - The company had investments in senior debt and 1st lien notes valued at $833.1 million, representing 75$325.0 million under the February 2019 Credit Facility with a weighted average interest rate of 2.188%[275]. - The total fair value of the borrowings outstanding under the February 2019 Credit Facility was $463.7 million as of September 30, 2020[276]. - The company completed a term debt securitization of$449.3 million on May 9, 2019, which included $296.8 million of AAA(sf) Class A-1 Senior Secured Floating Rate 2019 Notes[277]. - The company issued$50.0 million in Series A senior unsecured notes due August 2025 with a fixed interest rate of 4.66% per year[282]. - The company repaid the 2019 Notes in full on October 15, 2020[292]. - The company is obligated to offer to repay the August 2025 Notes at par if certain change in control events occur[282]. - The total unused commitments to extend financing as of September 30, 2020, amounted to $134,303,981, an increase from$89,496,985 on December 31, 2019[316]. COVID-19 Impact - The COVID-19 pandemic may lead to financial distress for certain portfolio companies, potentially resulting in defaults and impairments on investments[225]. - The company cannot predict the full impact of the COVID-19 pandemic on its financial condition and results of operations in the future[229]. - The company is monitoring the impacts of the COVID-19 pandemic, which may adversely affect future net investment income and the fair value of portfolio investments[229]. - The company has been operating under a 100% remote-working model due to COVID-19, ensuring service levels to partners and clients are maintained[222]. Merger Agreement - The merger agreement with MVC Capital, Inc. includes a cash consideration of $0.39492 per share and an exchange ratio of 0.94024 shares of the company's common stock[236]. - The company anticipates the consummation of the first step of the merger with MVC Capital during the fourth quarter of fiscal year 2020[239]. - The merger agreement includes termination rights, with potential fees of approximately$2.94 million payable to the company under certain conditions[241]. - The merger agreement prohibits MVC from soliciting alternative transaction proposals without certain conditions being met[238]. - The total value of the consideration to be received by MVC stockholders is subject to adjustments based on various factors, including outstanding shares and tax dividends[236]. Valuation and Commitments - The company utilizes an Income Approach model for valuing its private debt investment portfolio, primarily consisting of middle-market senior secured loans with floating reference rates[311]. - The fair value of investments is determined using Level 3 inputs when quoted prices or other inputs from Level 1 and Level 2 are not available[301]. - The company engages an independent valuation firm to perform limited procedures for third-party valuation consulting services at the end of each fiscal quarter[305]. - The independent valuation firm performed procedures on 66 senior secured, middle-market investments, representing 100% of the total investments at fair value as of September 30, 2020[306]. - The company has committed to monitoring market interest rate changes, which could impact gross investment income due to a prolonged reduction in interest rates[228].