Bain BDC ups second lien loan investments

The firm also made initial investments in corporate bonds, first lien last out loans and equities.

Bain Capital Specialty Finance decreased its portfolio’s exposure to first lien senior secured loans by 12 percentage points at fair value, as it added several other investment types to the mix, according to the firm’s second-quarter report filed with the US Securities and Exchange Commission.

The business development company particularly upped its exposure to second lien senior secured loans, which made up 11.9 percent of the portfolio by fair value as of 30 June against 7.1 percent as of 31 March. For those same dates, Bain’s first lien senior secured loan by fair value exposure stood at 80.3 percent, down from 92.9 percent at the end of the preceding quarter.

The Boston-based mid-market lender made its first commitment of a first lien last out loans in Adler & Allan Group, a business services company, with a £15.14 million ($19.47 million; €16.59 million) investment. Bain also made its first corporate bond investment by putting $8.48 million into Capital Services, an energy company. Those security types comprise 4.6 percent and 2.1 percent, respectively, of the portfolio.

A firm representative could not be reached for comment.

Bain also made its first equity investments in a cargo transportation company and a healthcare and pharmaceuticals company, consisting of 1.2 percent of the BDC’s book.

The firm’s net asset value per share stood at $20.25, up 1 cent from the first quarter’s NAV per share of $20.24. The BDC posted net investment income $2.79 million for the second quarter, compared to the $989,652 of NII reported for the first quarter.

The second quarter is only the second full quarter the BDC has been in operations. It began investment activities in mid-October of last year. In late June, the firm disclosed in an SEC filing it had pulled in $1.26 billion, which is about where stood at the end of the second quarter.

A source familiar with the situation said Bain launched the BDC to access two classes of investors: offshore investors looking to access mid-market direct lending while avoiding commingled funds for regulatory reasons; and onshore tax-exempt investors limited by the use of leverage at the fund level, as Private Debt Investorpreviously reported.

The BDC targets companies posting between $10 million and $150 million in EBITDA, according to the registration statement. The venture may also invest in mezzanine and other junior debt, along with snapping up debt in the secondary market.