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Operator: Ladies and gentlemen, hello and welcome to Kayne Anderson BDC, Inc. First Quarter 2025 Earnings Call. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. And it is now my pleasure to turn the conference over to Terry Hart, Chief Financial Officer of KBDC.

Terry Hart : Good morning and welcome to Kayne Anderson BDC Inc’s first quarter 2025 earnings call. Today I’m joined by Doug Goodwillie and Ken Leonard, co-CEOs of KBDC and Lee Feingold, our Private Credit Managing Director. Following our prepared remarks, we will be available to take your questions. Today’s call may include forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed there on. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates, and projections about the company, our current and prospective portfolio investments, our industry, our beliefs, and our opinions, and our assumptions.

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict. Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask that you refer to the company’s most recent filings with the SEC for important risk factors. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time. Our earnings release, 10-Q, and supplemental earnings presentation are available on the financial section of our website at kaynebdc.com. Now I’d like to turn the call over to Doug Goodwillie.

Doug Goodwillie : Thank you, Terry. And thank you, everyone, for joining us on the call today. I would like to start with an overview of our financial results before discussing investment activity during our strongest first quarter of deployment since inception. I will then turn to our portfolio makeup and performance. And finally, I will close out with some thoughts on current market conditions, including the constantly evolving market backdrop, or turning it over to Terry Hart to discuss KBDC’s financial results in more detail. During the first quarter of 2025, we generated net investment income of $0.40 per share and net income of $0.31 per share. During the quarter, we distributed our $0.40 per share regular dividend and $0.10 per share special dividend.

As of March 31st, our estimated spillover of net investment income was $0.22 per share. In February, we also had our second of three lockup releases, the last of which will occur on May 21st. Turning to our private middle market investment activity, as highlighted in our last earnings call, our first quarter actively benefited from a robust pipeline and supportive market conditions, highlighting our ability to originate high quality deal flow. We made 340 million of total commitments across 16 different businesses during the period, of which 264 million was funded. This number is 113% increase from the 160 million of commitments made in the first quarter of 2024. We also thought it was important to highlight that we were able to maintain an average spread over SOFR of 5.49% and a weighted average net senior leverage ratio of 4 times.

When we add in our existing unfunded commitments funded during the quarter, we invested $294 million. Again, this compares favorably to the first quarter of 2024 where gross fundings were $148 million. Repayment activity during the quarter totaled $86 million of gross repayments up from $32 million in the first quarter of 2024, but still only 4% of average funded investments. During the quarter, our broadly syndicated loan portfolio experienced no new fundings in-line with our plan and $27 million of repayments for the total portfolio of approximately $113 million. We plan to continue to wind down our broadly syndicated loan portfolio over the course of the year. When considering all funding and repayment activity, net funded deployment for the quarter was approximately $181 million.

This increase raised our debt to equity ratio, the 0.86 times above our fourth quarter, 2024 debt to equity ratio of 0.72 times, and also on pace to hit our target range of [1 to 1.25 times] (ph) in the next 2 quarters. Turning to our portfolio composition, as of March 31st, KBDC’s portfolio includes 116 individual portfolio companies representing $2.2 billion of fair market funded value investments. We have another $236 million of unfunded commitments comprised of a mix of unfunded revolvers and delayed draw term loans. Our total portfolio commitments are in excess of $2.4 billion. Since March 31st, 2025, KBDC has closed or is in the final closing process on an additional 150 million of funding, highlighting the continued strong start to originations for 2025 and evidencing our continued ability to scale our portfolio even during periods of market uncertainty.

As of March 31, 2025 investments in KBDC’s portfolio, excluding those on our watch list, have a weighted average leverage of 4.2 times, interest coverage of 3.2 times, and an LTV of approximately 43%, evidencing our conservatism and loan structuring. We have also built a diversified portfolio with an average position size of 0.9% of fair value and where our top 10 investments represent only 18% of the portfolio. Outside of the specific credit statistics associated with the portfolio, our investments are well-structured with over 90% of our portfolio invested in first lien securities and 99% of our private middle market investments being backed by private equity sponsors. Additionally, all of our core first lien private middle market investments have financial covenants.

100% of our debt investments are floating rate, which mirrors our liabilities where the vast majority of our debt funding utilizes floating rate borrowings as well. Credit performance across our portfolio remains strong to-date, but only 1.6% of total debt investments at fair value are non-accrual, represented by only 4 positions out of 116. Lastly, we have built this conservative portfolio with a healthy weighted average yield of approximately 10.4% in fair value of investments. This yield has been achieved with approximately 10% of our portfolio invested in broadly syndicated loans, but we are well-positioned for upside and spreads relative to our competitors over the next few quarters as we continue to rotate out of these lower spread for all these syndicated investments.

Our private credit strategy has remained consistent through various cycles, making investments in senior secured loans to middle market sponsor backed businesses. Over 14 years at Kayne Anderson and a prior plus 2 decades at other platforms, we have one of the longest tenure partnerships in middle market direct lending. During our time at KAPC alone, we have invested over $13 billion into nearly 230 businesses through nearly 430 discrete transactions, which is a testament to the value our platform delivers for our sponsor partners. We think the quality of the team and our experience managing through volatile markets is important to highlight given the recent market disruption caused by tariff discussions and other political uncertainties. As loan activity across the debt markets has declined sharply, we believe core mid-market private credit is still providing attractive total return opportunities with significant equity cushions supporting our debt investments.

We also believe that we are less impacted by spread tightening seen in the larger markets given our differentiated focus on more stable defensive core mid-market companies. Despite a more benign M&A market and current macro uncertainties, we continue to review opportunities that have a spread over SOFR typically in the 500 to 600 basis points range. Our Q1 middle market loans have a spread of approximately 550 basis points. We will of course remain highly selective and disciplined in our capital allocation in all market environments. And since liberation day, the market has been in more of a discovery mode with lower M&A volumes and if anything, spreads and fees have seen a slight increase in the smaller data set of deals priced over the last month.

With a rapidly evolving policy landscape, we undertook a company-by-company analysis to gauge potential exposure to disruptions from tariff implementations. This analysis included parameters such as revenue generation and cost of goods sold by geography, direct or indirect care of exposure, and pricing power. Our portfolio was diversified by end-market and industry with a focus on stable, slower growing segments of the U.S. economy. As you can see in our earnings presentation, our largest industries are distribution, commercial services, food products, containers and packaging, and healthcare providers, with the largest representing only 15.4% of the total portfolio. Our [Deal teams] (ph) have been in close dialogue with our private equity partners, as well as each of the management teams around the impact of the current operating conditions.

While a limited subset of our portfolio has direct exposure to tariff policies, we believe that the majority of companies possess sufficient pricing power to pass through increased costs to customers, due in large part to their importance in supply chains and lack of viable alternative products. We are and will continue to monitor the portfolio as trade agreements are formalized. Despite the uncertain market backdrop, the portfolio is performing very well and we continue to be pleased with the quality of our loan book. In Q1, we added one position in non-accrual, which represents only 0.6% of the fair market value of our portfolio. As mentioned, that brings our total non-accrual to 1.6% of the fair value of the portfolio. KBDC’s portfolio generally exhibits lower leverage and higher interest coverage ratios than our peers, a critical advantage in today’s elevated rate environment and during periods of economic uncertainty.

We feel very comfortable about the types of issuers that we are underwriting, those with strong cash flow stability and minimal direct tariff exposure. We think that this period of volatility will continue in the near term and we will opportunistically look to add attractive loans that enhance the returns of the portfolio while also increasing the quality and stability of our holdings. As a reminder, KBDC’s investment team conducts direct hands-on diligence to the management teams of prospective portfolio companies and visits all critical operating facilities. This comprehensive diligence process includes detailed business diligence inclusive of multiple management meetings and plant sites and tours. Interviews with key stakeholders, including customers, suppliers, and competitors.

Expansive industry diligence inclusive of industry expert interviews. In-depth quality of earnings and accounting reviews conducted by trusted third-party providers with whom the team has an established track record, and engagement of additional third-party advisors when appropriate. In conclusion, while there is some turmoil in the market, we feel confident that by capitalizing on our long-standing relationships, providing thoughtful solutions for our partners, and supporting our portfolio companies, we have the financial flexibility to continue to grow the portfolio and to provide a steady dividend for our investors. And with that, I’ll turn it over to Terry Hart to discuss KBDC’s first quarter 2025 financial results.

Terry Hart : Thanks, Doug. Let’s first review results of operations. During the first quarter, we earned net income per share of $0.31 and net investment income per share was $0.40 compared to $0.48 in the prior quarter. The decline in net investment income was mainly due to the expiration of the incentive management fee waiver. As a reminder, in conjunction with our IPO, Kayne Anderson instituted a 25 basis point fee waiver of our base management fee through May 23rd, 2025, and a full waiver of our income based incentive fees that expired on December 31st, 2024. Total investment income for the first quarter was $55.2 million as compared to $56.3 million in the prior quarter. The decrease to investment income was primarily driven by the reduction to SOFR and the $0.6 million impact of placing Siegel Egg on non-accrual status during the quarter.

These reductions were partially offset by income generated from net additions to the portfolio during the first quarter. It’s worth noting that the majority of the decrease to our portfolio yield was related to lower reference rates and that only 0.6% of our interest income for the quarter related to PIK interest. Additionally, during the first quarter, we had approximately $0.9 million of accelerated amortization of OID as a result of realization activity. Total expenses for the first quarter were $26.5 million compared to $22.3 million for the prior quarter. The increase was primarily related to the expiration of the incentive fee waiver, a $4.5 million impact. During the quarter, our incentive fee was reduced by the 12th quarter look back incentive fee cap.

During the first quarter, we had a realized gain of $0.6 million on the sale of an equity co-investment, and we had net unrealized losses on the portfolio of $6.5 million compared to unrealized gains of $1.4 million in the prior quarter. The unrealized losses were primarily the result of negative fair value changes related to our investments in Sundance, Siegel Egg, and our broadly syndicated loan portfolio. Additionally, we had $0.6 million of deferred income tax expense related to unrealized gains on equity investments held in our taxable subsidiary. As of March 31, total assets were $2.2 billion and net assets were $1.2 billion. As of that date, our net asset value was $16.51 per share. The decrease of $0.19 from $16.70 per share as of December 31st was primarily a result of paying the second of three special dividends of $0.10 per share during the quarter and [$0.9] (ph) per share related to net realized gains and unrealized losses during the first quarter.

At the end of the first quarter, we had debt outstanding of [$1.016 billion] (ph) and our debt to equity ratio was 0.86 times, which was an increase from 0.72 times at the end of the fourth quarter. We anticipate achieving the low end of our debt to equity range of 1 times to 1.25 times in the second or third quarter of 2025. During the first quarter of 2025, we continued to increase credit facility borrowings, improving the utilization of the facilities, and we amended both SPV credit facilities to extend the maturity dates, increase capacity, and decrease the interest rates on the facilities. The reduction to our borrowing cost and higher utilization of our credit facilities, resulting from robust origination, should be beneficial to net investment income over the balance of the year.

Looking forward, as we increase leverage on our credit facilities to achieve the low end of our debt-to-equity target range, we plan to opportunistically issue unsecured notes to provide additional credit facility flexibility and capacity. Turning now to our distributions, on May 1st, our board of directors declared a regular dividend for the second quarter of 2025 of $0.40 per share to shareholders of record on June 30th, 2025. In addition, on June 24th, we will distribute the final special dividend of $0.10 per share that was previously declared in conjunction with our IPO. As a reminder, these special dividends were established to help support the stock price around share lockup release dates and to pay out excess income earned in 2024. As of March 31, our undistributed net investment income was approximately $0.22 per share.

Of this amount, $0.10 per share will be distributed to shareholders through the final special dividend in June. For the balance in 2025, we anticipate relatively modest excess net investment income above our base dividend, reflecting the timing of the continued ramp of our portfolio to achieve target leverage ranges and the strategic rotation out of our lower yielding broadly syndicated loan investments into middle market loans. We believe our total dividend yield and dividend coverage will more accurately reflect our steady state operations when KBDC is operating at its leveraged target with the portfolio fully invested in middle market loans. In closing, we are pleased to announce that we have renewed our $100 million share repurchase plan for an additional year following the anniversary of our IPO.

We are encouraged by the performance of our stock to-date and want to continue to support our shareholders by extending the plan. With that, Operator, please open the line for questions.

Operator: Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Doug Harter with UBS. Your line is open.

Doug Harter: Thanks. So hoping you could just give a little more clarity, comfort around, you know, kind of that timeline you gave to achieve your target leverage, you know, kind of what you’re seeing in the pipeline today, you know, and kind of how those spreads on those deals you’re looking at today might compare to kind of three months or six months ago?

Ken Leonard: Yeah, thanks Doug. This is Ken. As mentioned, Q1 was very strong origination quarter for us. Our new investment spreads were around [549] (ph) over SOFR, which is a pretty nice premium to the market at large. The markets obviously pulled back to some degree in the second quarter in terms of deal activity, just given the certain macro environment that we’re all seeing in terms of what’s gone on with tariffs in the administration. But we still expect Q2 to be net positive in terms of portfolio growth. To achieve that growth, we’re not having to change our investment parameters. We’re still seeing good opportunities in the 500 to 600 over SOFR, and we’re continuing to see closing fees and spreads that are indicative of what we’ve been able to achieve over the last few quarters. So I’d say we’re reasonably optimistic right now about being able to achieve our target, as we’ve said, to get to that target leverage over the next two quarters.

Doug Harter: Great. Thank you.

Operator: [Operator Instructions] And with no additional questions, I will now turn the conference back over to Mr. Ken Leonard for closing remarks.

Ken Leonard: Great, thank you, operator. I want to thank everyone for their participation today and support over the last year as we approach our one-year anniversary, next week of being a public company. We’re very proud of what KBDC has achieved and the market position we’ve earned as a value-oriented risk-reward driven company. We remain excited and opportunistic about the remainder of 2025 and we look forward to sharing our continued progress on future calls. Thank you very much.

Operator: And ladies and gentlemen, this concludes today’s call and we thank you for your participation. You may now disconnect.