Bain Capital Specialty Finance Q4 Earnings Call Highlights

Key Points

• Q4 NII was $0.46 per share (annualized yield 10.6%), covering the $0.42 base dividend by 110%; full‑year NII was $1.88 per share and management declared a Q1 dividend of $0.42.
• Management reported $1.29 per share of spillover income but said NAV fell to $17.23 mainly due to $0.18 per share of special distributions paid in the quarter.
• BCSF emphasized senior‑secured middle‑market lending (year‑end portfolio 64% first‑lien) with stable credit metrics—non‑accruals at 1.5% of cost (0.8% of fair value) and median borrower leverage of 4.7x—while new first‑lien spreads were attractive (535 bps in Q4; 560 bps for 2025) and the firm issued $350M of 5.95% notes to extend maturities, leaving $690M liquidity.

Bain Capital Specialty Finance NYSE: BCSF reported fourth-quarter and full-year 2025 results highlighting net investment income that exceeded its regular dividend and what management described as resilient credit performance across its middle-market portfolio.

Quarterly and full-year results

For the fourth quarter ended December 31, 2025, Bain Capital Specialty Finance generated net investment income (NII) of $0.46 per share, which management said represented an annualized yield of 10.6% on equity. NII covered the company’s base dividend of $0.42 per share by 110%.

Earnings per share for the quarter were $0.43, which the company said equated to an annualized return on equity of 9.9%.

For full-year 2025, the company reported NII of $1.88 per share (an 11.1% return on equity) and earnings per share of $1.53 (a 9.0% return on equity). CEO Michael Ewald said the company has “consistently delivered an annualized ROE of 10%” over the prior three- and five-year periods, supported by earnings and “healthy credit performance and fundamentals” across the portfolio.

Dividend update and spillover income

Subsequent to quarter-end, the board declared a first-quarter dividend of $0.42 per share, payable to holders of record as of March 16, 2026. Management said this represented a 9.8% annualized rate on ending book value as of December 31.

On the balance sheet, CFO Amit Joshi said net asset value was $17.23 per share at December 31, 2025, down $0.17 from $17.40 at September 30, 2025. Joshi attributed the decline primarily to special dividends paid from spillover income. During the quarter, the board declared a $0.15 per share special dividend payable to holders of record as of December 31, plus an additional $0.03 per share special fourth-quarter dividend that had been previously announced. Excluding the $0.18 per share of special distributions, he said NAV was “relatively stable” quarter over quarter.

Ewald also noted the company had spillover income totaling $1.29 per share, which he said was more than three times the regular dividend level.

Market environment and underwriting focus

Management said new deal activity picked up in the second half of 2025 and into the fourth quarter, driven by higher new leveraged buyout activity and continued add-on acquisitions. Ewald said BCSF continued to focus on the “core middle market,” where the company believes it can achieve a spread premium while maintaining tighter underwriting standards and control of its debt tranches.

During the quarter, the weighted average spread on new first-lien originations was 535 basis points, with 4.6x net leverage. For full-year 2025, the weighted average spread on new originations was approximately 560 basis points. Management compared those levels to an average of approximately 500 basis points for sponsored middle-market first-lien loans during both the quarter and the year.

Portfolio composition, activity, and credit metrics

President Mike Boyle said fourth-quarter new investment fundings were $167.9 million across 93 portfolio companies, including $68 million into 11 new companies and $99.6 million into 82 existing companies. Sales and repayments totaled approximately $193.2 million, resulting in net sales and repayments of negative $25.3 million for the quarter.

For the full year, investment fundings were $1.3 billion and total sales and repayment activity was $1.2 billion, leaving the portfolio “relatively stable” year over year. Boyle said fundings were split between new and existing portfolio companies, with new companies representing 41% of total fundings and existing companies 59%.

BCSF continued to emphasize senior secured lending: 89% of new fundings were first-lien structures, with 1% in subordinated debt and 10% in preferred and common equity. Boyle said the company favored “defensive industries” such as healthcare and pharmaceuticals and business services, as well as “niche sectors” including environmental industries and aerospace and defense. The median and weighted average EBITDA of new companies during the quarter were approximately $31 million and $41 million, respectively.

At December 31, the portfolio stood at approximately $2.5 billion at fair value across 203 portfolio companies in 30 industries. The company said its average position size was about 40 basis points per single-name portfolio company. Portfolio allocation at fair value as of year-end was:

• 64% first-lien debt
• 1% second-lien debt
• 4% subordinated debt
• 6% preferred equity
• 9% equity and other interests
• 16% joint ventures (including 9% International Senior Loan Program and 7% Senior Loan Program)

The weighted average yield on the investment portfolio was 10.8% at cost and 10.9% at fair value, down from 11.1% and 11.2% at September 30, 2025. Boyle said the decrease was primarily driven by lower reference rates, noting that 92% of investments bear floating interest rates.

Credit metrics were described as stable. Median net leverage across borrowers was 4.7x at year-end (unchanged from the prior quarter), while median interest coverage was cited at 2.0x. Watch list investments (risk ratings 3 and 4) comprised approximately 5% of the portfolio at fair value, consistent with recent quarters. Non-accruals remained low at 1.5% of amortized cost and 0.8% of fair value as of December 31, with no new non-accruals added during the fourth quarter.

Software and AI disruption discussion

Ewald addressed investor concerns around software and AI disruption risk, noting that “high-tech industries” represented approximately 11% of the total portfolio. He said the company’s technology exposure has focused on systems-of-record software and specialized vertical software, and that management re-evaluated each portfolio company using qualitative criteria related to AI replacement risk. Management said it believes its portfolio has “low risk” to AI disruption and may be more likely to benefit from AI functionality than other software types.

Within the software portfolio, Ewald cited year-end median loan-to-value of approximately 34% (including adjustments for current enterprise value multiples since close) and interest coverage of 1.7x.

On the financing side, Joshi said that as of December 31, approximately 59% of outstanding debt was floating rate and 41% was fixed rate. Subsequent to year-end, the company issued $350 million of 5.95% notes due in 2031. Management said these issuances helped pre-fund and mitigate 2026 maturities while extending the debt maturity profile. Liquidity at quarter-end totaled $690 million, including $604 million of undrawn revolver capacity and $58.9 million of cash and cash equivalents.

The call concluded without a question-and-answer session, as no participants entered the queue.

About Bain Capital Specialty Finance NYSE: BCSF

Bain Capital Specialty Finance NYSE: BCSF is a closed-end interval fund organized as a specialty finance company. Since commencing operations in March 2017, the company has focused on originating and acquiring debt and equity investments in middle-market companies. It is structured to offer investors access to private credit and special situations strategies that are typically unavailable through traditional public debt markets.

The firm's core business activities include direct lending to U.S.

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