Bain Capital Specialty Finance has received the go-ahead from its shareholders to increase its leverage capacity, joining the ranks of business development companies opting to take advantage of additional borrowing capacity.
The Boston-based mid-market lender won approval at a Friday shareholder meeting to lever up to a 2:1 debt-to-equity ratio, the new maximum after the US Congress passed the Small Business Credit Availability Act last year.
In addition, the BDC, advised by Bain Capital, lowered its management fee from 1.5 percent to 1 percent on funds above the previous 1:1 leverage limit. It instituted a three-year return lookback with a cap on incentive fee income. BCSF charges a 17.5 percent performance fee over a 6 percent hurdle.
“We appreciate the continued support of our stockholders as we look to prudently grow assets in BCSF while remaining focused on our strategy of investing primarily in senior debt tranches in private equity sponsor-backed companies,” the BDC’s chief executive, Michael Ewald, said in a statement.
The firm has 75.2 percent of its book in first-lien and second-lien senior secured loans, a number that rises to 94.3 percent if the BDC’s equity investment in a unitranche joint venture with Antares Capital is taken into account.
With its heavy tilt of senior secured loans, the firm believes its portfolio could be levered slightly more without posing a problem, according to a source familiar with the matter.
Bain’s BDC went public last year, listing on the New York Stock Exchange in November at $20.25 a share and raising $145.4 million.