Kayne Anderson BDC, Inc. (KBDC) Earnings

Management highlights

- Overall Financial Performance * Generated net investment income of $0.42 per share, with a 40 cents per share quarterly dividend declared for Q3 2026, resulting in a 105% dividend coverage ratio and 10.5% annualized return on equity based on net investment income * Net asset value (NAV) per share as of June 30, 2026 was $16, a 1.4% (23 cent) decline from Q1 2026's $16.23, driven by $0.26 per share in net realized and unrealized losses partially offset by excess net investment income and accretive share repurchases * Total net income per share was $0.16, total investment income was $55.7 million, and total expenses were $28.2 million for the quarter * Ended the quarter with a 1.17x debt-to-equity ratio, within the company's 1.0x to 1.25x target range, and total liquidity of $476.7 million - Investment Activity * Closed $138.7 million in new private credit commitments and $146.4 million in total fundings (including draws on existing unfunded commitments) * New floating rate originations averaged 566 basis points over SOFR, 17 basis points wider than Q1 2026, reflecting favorable pricing for KBDC amid broader market changes * Completed full strategic rotation out of all remaining BSL positions this quarter, generating $29.8 million in repayment proceeds; the BSL position was always planned as temporary following the IPO * Realized $67.9 million in total repayment activity during the quarter - Portfolio Composition and Credit Quality * Portfolio holds 104 portfolio companies, highly diversified with average position size of ~1% of fair value and the top 10 investments representing only ~20% of total portfolio value * Non-accrual rate is 2.7%, up 20 basis points quarter over quarter: 4over and the last out tranche of Diversify were added to non-accrual, while Sundance was removed after full realization * Excluding watch list positions, portfolio investments have a weighted average leverage of 4.5x, interest coverage of 2.4x, and loan-to-enterprise value of ~43%, aligned with KBDC's conservative underwriting standards * Weighted average yield on fair value (excluding non-accruals) was 10.2%, up 10 basis points from Q1 2026, driven by rotation out of lower-yielding BSL into higher-yielding private credit

Guidance

- Management reaffirmed confidence in its ability to sustain the 40 cent per share quarterly dividend through the end of 2026 - Prepayment and realization activity for the second half of 2026 is expected to be roughly 5% of the total portfolio, consistent with recent historical levels, with several realizations delayed from Q2 2026 to Q3 2026 - No significant change in portfolio leverage is expected in Q3 2026, and the company plans to continue operating around the midpoint of its 1.0x to 1.25x debt-to-equity target range with normal quarterly fluctuations based on realization timing - Management expects performance divergence among BDC managers to continue, with higher quality operators with consistent returns and disciplined underwriting seeing valuation compression reverse over time

Segment performance

Kane Anderson BDC (KBDC) is a business development company focused on private middle market value lending, with all performance discussed at the consolidated portfolio level. The total investment portfolio had a fair value of $2.3 billion as of June 30, 2026, plus $293 million in unfunded commitments. 95% of debt investments are floating rate private credit, matching the company's predominantly floating rate liability structure. The only material fixed rate investment is the SG credit loan (11% coupon), which represents a small portion of the total portfolio. The exited broadly syndicated loan (BSL) segment held $29.8 million in assets sold this quarter, down from a small remaining position of 3-4 names in Q1 2026, and now KBDC has fully exited this segment. Top 5 industry segments (healthcare, commercial services and supplies, distributors, food products, containers and packaging) account for 55% of total portfolio fair value, with no single sector holding a concentrated position.

Risks & headwinds

- Forward-looking statements are subject to material unknown risks and uncertainties, and actual results may differ materially from forecasts; key risks are detailed in KBDC's recent SEC filings - Macroeconomic and geopolitical risks continue to create pressure on credit markets, with early signs of increased credit stress, shallow economic slowdown, and wider risk premiums across the private credit sector - Redemption pressures at large non-traded BDCs have created broad sector valuation discounts that disconnect from the strong operational performance of higher quality public BDCs like KBDC - The company maintains discipline to avoid deals that fail to meet risk-adjusted return targets, have concerning sector exposure, or excessive leverage that exceeds internal comfort levels

Analyst Q&A

• Q: Analyst Kenneth Lee asked for a near-term outlook on prepayment levels and an update on the size and trend of KBDC's credit watch list. /

  A: Management stated prepayment levels are hard to predict, but expects roughly 5% of the portfolio to mature or prepay in the second half of 2026, which is a reasonable baseline. The watch list currently sits at a mid-single-digit percentage of the portfolio (inclusive of non-accruals), consistent with long-term historical averages. Management noted broad, mild credit stress across the market but emphasized the watch list has remained relatively stable amid the shallow slowdown.

• Q: Analyst Paul Johnson asked about the spread pickup from the BSL rotation and why the company completed the full exit in Q2 2026. /

  A: Management confirmed the exited BSL positions yielded roughly SOFR plus 300 basis points, so rotating into new middle market private credit gave a 250 basis point spread pickup. The BSL position was always a temporary holding planned for exit after the IPO, and the timing aligned with available attractive opportunities to redeploy capital into KBDC's core value lending business. KBDC is now fully out of all BSL positions.

• Q: Analyst Finian O'Shea asked how competition is impacting KBDC's core middle market segment, and what the company's outlook is for stressed healthcare practice management investments. /

  A: Management noted competition is intense in the lower middle market (EBITDA under $15-$20 million), where spreads can clear at very tight levels. Conversely, there is less available capital in the upper middle market segment KBDC focuses on, leading to wider spreads and more attractive risk-adjusted returns. For healthcare practice management, KBDC avoided aggressive high-leverage roll-ups in prior cycles, and current opportunities have normalized leverage (4x to 5x) with conservative structuring that remains viable; none of KBDC's current healthcare practice positions are on the watch list.

• Q: Analyst Melissa Waddell asked whether the BSL rotation timing created any near-term yield drag on the portfolio. /

  A: Management confirmed the total BSL principal sold in Q2 2026 was less than $30 million, a fairly small amount that was not material to overall portfolio results. Most BSL exits and new private credit deployments closed early in the quarter, limiting any potential drag, and the spread pickup from the rotation will be accretive to long-term yields.