Barings(BBDC) - 2024 Q4 - Annual Report

Financial Performance - The company paid $0.2 million in brokerage commissions during the fiscal year ended December 31, 2024, compared to no commissions in the previous two fiscal years[73]. - The company intends to distribute substantially all of its income to stockholders to minimize U.S. federal income taxes, having met distribution requirements for 2022, 2023, and 2024[103]. - The company may face challenges in meeting the Annual Distribution Requirement if it recognizes taxable income without corresponding cash receipts[145]. - If the company fails to satisfy the Annual Distribution Requirement, it will be subject to corporate-level U.S. federal income tax on all taxable income[153]. - The company is authorized to borrow funds and sell assets to satisfy distribution requirements, but this may limit its ability to make advantageous investment decisions[152]. Investment Management - The Base Management Fee paid to Barings is calculated at an annual rate of 1.25% based on the company's gross assets, excluding cash and cash equivalents[89]. - The Income-Based Fee is calculated quarterly based on the Pre-Incentive Fee Net Investment Income exceeding a Hurdle Amount, which is 2.0625% of the NAV at the beginning of each quarter[90]. - The Catch-Up Amount is determined quarterly as 2.578125% of the NAV, allowing Barings to receive a 20% incentive fee on Pre-Incentive Fee Net Investment Income once it reaches this threshold[91]. - If Pre-Incentive Fee Net Investment Income exceeds the Catch-Up Amount, the Income-Based Fee equals 20% of the excess amount[92]. - The Capital Gains Fee is calculated annually, equal to 20% of cumulative realized capital gains minus cumulative realized capital losses, starting from the year ended December 31, 2018[92]. Compliance and Regulation - The company is regulated as a Business Development Company (BDC) under the 1940 Act, requiring a majority of directors to be non-interested persons[110]. - The company must ensure that qualifying assets represent at least 70.0% of total assets at the time of acquisition[112]. - The company is required to maintain a coverage ratio of total assets to total senior securities of at least 150% due to its BDC status[106]. - The company must provide significant managerial assistance to portfolio companies to count portfolio securities as qualifying assets[119]. - The company is subject to compliance with the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act, including filing quarterly and annual reports[131]. Corporate Governance - The company has adopted a Global Code of Ethics Policy and corporate governance guidelines applicable to its directors and employees[122]. - The Barings BDC Advisory Agreement was re-approved for an additional one-year term ending June 24, 2025, and can be terminated with 60 days' notice[96]. - The Administration Agreement allows Barings to perform necessary administrative services, with costs reimbursed by the company, capped at a mutually agreed quarterly amount[98]. - The company is prohibited from making certain negotiated co-investments with affiliates without prior SEC approval[128]. - The company is required to review its compliance policies and procedures annually for adequacy and effectiveness[124]. Investment Strategy - The company assists portfolio companies in developing exit strategies, including sales or mergers[70]. - The company competes with various investment funds and financial services companies, some of which have greater resources and fewer regulatory restrictions[71]. - The company estimates the fair value of investments in certain entities using the NAV and ownership percentage as a practical expedient[68]. - The company has wholly-owned taxable subsidiaries to hold certain portfolio investments, preserving its RIC status and tax advantages[104]. - The company has qualified and elected to be treated as a RIC under Subchapter M of the Code since the taxable year ended December 31, 2007[138]. Debt and Financing - As of December 31, 2024, approximately$ 1,881.9 million of the debt portfolio investments bore interest at variable rates, primarily SOFR-based[543]. - Approximately 50.5% of total borrowings, amounting to $738.6 million, bore interest at variable rates under the February 2019 Credit Facility and the February 2029 Notes[543]. - A hypothetical increase of 300 basis points in interest rates would result in an increase in net income by$ 34,299 thousand[545]. - A hypothetical decrease of 50 basis points in interest rates would result in a decrease in net income by $5,717 thousand[545]. - The balance of unused commitments to extend financing as of December 31, 2024, was reported, indicating adequate financial resources to satisfy unfunded commitments[548]. Shareholder Returns - A new 12-month share repurchase program was authorized, allowing the company to repurchase up to$ 30.0 million of its common stock starting March 1, 2025[557]. - The Board declared a quarterly distribution of $0.26 per share, payable on March 12, 2025, along with three special dividends totaling$ 0.15 per share throughout 2025[558]. - The first special dividend of $0.05 per share will be paid on March 12, 2025, with subsequent payments scheduled for June 11 and September 10, 2025[559].