Barings BDC, South Carolina Retirement System launch JV to invest in corporate, real estate credit

The partnership will see a geographic mix across the US and Europe, which will let BBDC access investments with different levels of yield.

Barings BDC (BBDC) and the State of South Carolina Retirement System (SCRS) have entered into a $550 million joint venture that will target an array of debt investments, the Charlotte-based business development company said on Friday.

The partnership will target liquid and illiquid credit in the US and Europe along with structured products and real estate debt. BBDC will contribute $50 million, while SCRS will allocate $500 million to the JV. In addition, the vehicle will be levered “commensurately” across the asset mix, BBDC chief financial officer Jonathan Bock said on the firm’s first-quarter earnings call.

The JV allows BBDC to gain access to non-qualified investments, or investments other than US corporate mid-market loans, as well as US corporate loan investments that have different levels of yield, he added on the call. The ramp would likely be spread out around 10 quarters, pending several factors, including the investment environment.

“This wide investment mandate of the program allows Barings BDC to gain exposure to a diversified pool of investments, asset classes, yield profiles and geographies,” Bock said. “What this joint venture program allows one to do is not only invest in specific asset classes that are non-qualified, it also allows you to do qualified investments but do them with different yield profiles to drive return.”

SCRS chief investment officer Geoffrey Berg said in a statement: “The breadth of expertise across the Barings platform enables us to take advantage of opportunities across the liquid and private credit landscape.”

BBDC, which came to be after Barings bought Triangle Capital Corporation’s management contract, continued to build out its mid-market loan portfolio over the first quarter – a book that now stands at $317 million. Barings initially purchased a portfolio of broadly-syndicated loans and planned to transition to a portfolio of mid-market loans over time.

The firm’s largest investment sector is financial services, consisting of 13.68 percent of BBDC’s total $1.19 billion portfolio, according to LPC BDC Collateral. Healthcare and general manufacturing are the second and third largest business areas at 12.44 percent and 12.33 percent, respectively.

The company set a second-quarter dividend of $0.13 a share, its highest in four quarters, save the $1.78-a-share special dividend paid in August, according to the LPC database. That special dividend resulted from the sale of Triangle’s management contract and its loan portfolio to Benefit Street Partners.