Bain Capital Specialty Finance, Inc. Q3 FY2025 earnings call

Recognition: Recognized those on the call who have served or are serving in the armed services on Veterans Day. ### Q3 Results: Q3 net investment income per share was $0.45, EPS $0.29, NAV $17.40. Board declared fourth quarter dividend $0.42 per share plus $0.03 special dividend. ### Market Activity: New deal activity picked up in middle market; private credit group has strong pipeline. ### Credit Events: No exposure to First Brands and Tricolor; these are outside core middle market focus, and recent events reinforce rigorous due diligence. ### Credit Quality: Credit fundamentals healthy, non-accruals relatively stable, investments on non-accrual at 1.5% (amortized cost) and 0.7% (fair value). ### Outlook: Can maintain regular $0.42 per share dividend; levers include higher earnings from joint ventures/ABL, prepayment-related income, core middle market spreads, and junior debt investments. ### Portfolio Details: New investments $340 million, sales/repayments $296 million, portfolio at fair value $2.5 billion, 64% first lien debt, weighted average yield down due to lower reference rates. ### Financials: Total investment income $67.2 million, expenses $37.2 million, net investment income $29.2 million, NAV $17.40, debt to equity ratio 1.33, liquidity $570 million.

In the third quarter, Bain Capital Specialty Finance reported Q3 net investment income per share was $0.45, representing an annualized yield on book value of 10.3% and exceeding the regular quarterly dividend by 7%. Earnings per share were $0.29, with an annualized return on book value of 6.6%. Net asset value per share was $17.40, a decline of $0.16 per share from the prior quarter end. Gross originations were $340 million, with a weighted average spread on originations to new companies of approximately 550 basis points and weighted average leverage of 4.5 times. The portfolio at fair value was approximately $2.5 billion across 195 portfolio companies, with 64% of the investment portfolio at fair value in first lien debt. Investments on non-accrual were 1.5% at amortized cost and 0.7% at fair value as of September 30.

Dividend: Believes can maintain regular $0.42 per share dividend. ### Earnings Levers: Higher earnings from select joint venture and ABL investments through SLP and legacy corporate lending. Higher levels of prepayment-related income and other income as new M&A deal volumes increase. Leveraging private credit group platform focus on core middle market to drive attractive spreads on new investments and selectively invest in junior debt.

Credit Events: Bankruptcies of First Brands and Tricolor are idiosyncratic but reinforce need for rigorous investment due diligence process. ### Interest Rate: Market expectations for lower interest rate environment and fixed rate debt maturities in 2026 beginning in March pose potential headwinds.

Q: To what extent the push for more spreads, leverage, off-balance sheet leverage, etc., brings on more risk and expected loss rate on the go forward?

A: Focus on on-balance sheet leverage ratio between one and one and a quarter; diversified portfolio with almost 200 companies means individual loss won't meaningfully impact BDC performance.

Q: Talk about the aircraft mark and asset-backed investments?

A: Small write down on some aircraft, but not reflecting meaningful change in underwriting thesis; underwriting hard assets is a differentiator, with stability from asset-backed segment and continued search for new investments.

Q: NII earnings, incentive fee, joint venture financing, and junior capital opportunities?

A: Expect levers to keep above regular dividend; continuously have discussions with banking partners regarding joint venture financing; junior capital is part of private credit group's calling card, can be leveraged when appropriate for middle market borrowers with flexible capital needs