Kayne Anderson BDC, Inc. Q3 FY2025 earnings call

• Highlighted third quarter performance with net investment income up, dividend coverage at 108%, and NAV details.
• Portfolio activities: $296M gross new private credit investments, $274M funded, $74M repayments. Average spread on new floating rate loans improved.
• Market backdrop: public market pressure but private credit fundamentals strong, nonaccrual rate at 1.4%.
• Strategic positioning: 94% in first lien senior secured loans, reduced BSL exposure with $113M sold, plan to wind down remaining $67M BSL. Closed $200M private placement of unsecured notes.

Net investment income rose $0.03 per share to $0.43 per share, representing a 10.5% annualized return on equity. Net income was stable at $0.35 per share. The portfolio had approximately 94% of investments in first lien senior secured loans, with 99% of private middle market investments backed by private equity sponsors, 96% floating rate debt. Net asset value at quarter end was $16.34, a $0.03 decline QoQ. Gross new private credit investments were $296 million, funded $274 million, with average spread on new floating rate loans 568 basis points over SOFR.

• Net investment income rose $0.03 per share.
• Target leverage range 1x to 1.25x, debt-to-equity ratio at 1.01x.
• Anticipate modest excess net investment income in Q4, continuation of share repurchases.
• SG Credit investment expected to grow with unfunded delayed draw term loan and equity call option.

• Public market concerns like dividend cuts, spread compression, credit quality, and AI impact on software sector.
• Private credit risks mentioned but KBDC has no exposure to high-profile bankruptcies or highly levered software financings.

Q: Thoughts on SG Credit investment growth potential?

A: Frank Karl said SG Credit has an unfunded delayed draw term loan commitment and equity call option, expecting growth in asset-backed lending. Doug Goodwillie added ownership of 22.5% equity in SG Credit.

Q: Interest income related to repayments despite prepayments down?

A: Terry Hart said $1.4M of additional income from accelerated OID and prepayment fees related to realizations.

Q: M&A activity recovery?

A: Kenneth Leonard said M&A activity is modest but pipeline strong, expects uptick as SOFR comes down.

Q: Dividend coverage?

A: Kenneth Leonard said Q4 expects modest excess net income, well-positioned to maintain dividend, share repurchases accretive, spillover income as buffer.