Sierra Income — Merger or Acquisition (September 2021)
31 slides from Sierra Income's merger presentation, Sep 22, 2021
Slide 1: Strategic Acquisition of Sierra Income Corp.
BARINGS Barings BDC, Inc. Strategic Acquisition of Sierra Income Corp.
Slide 2: Disclaimers and Cautionary Note Regarding Forward-Looking Statements
Disclaimers and Cautionary Note Regarding Forward-Looking Statements Cautionary Notice: Certain statements contained in this presentation are "forward-looking" statements. Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “migh
Slide 3: Disclaimers and Cautionary Note Regarding Forward-Looking Statements
Disclaimers and Cautionary Note Regarding Forward-Looking Statements Additional Information and Where to Find It This communication relates to a proposed business combination involving Barings BDC and Sierra, along with related proposals for which stockholder approval will be sought (collectively, t
Slide 4: Disclaimers and Cautionary Note Regarding Forward-Looking Statements
Disclaimers and Cautionary Note Regarding Forward-Looking Statements No Offer or Solicitation This investor presentation is not, and under no circumstances is it to be construed as, a prospectus or an advertisement, and the communication of this investor presentation is not, and under no circumstanc
Slide 5: Agenda
Agenda ERIC LLOYD Chairman and Chief Executive Officer Barings BDC, Inc. BARINGS OVERVIEW (Lloyd) Who is Barings? IAN FOWLER What are our investment capabilities? President Barings BDC, Inc. BARINGS BDC’S STRATEGIC ACQUISTION OF SIERRA (Bock) How is the acquisition structured? What are the strategic
Slide 6: Barings Overview
Barings Overview
Slide 7: Barings Overview
Barings Overview + Barings isa GLOBAL INVESTMENT MANAGER sourcing differentiated opportunities and building portfolios across public and private fixed income, real estate and specialist equity markets + Asubsidiary of MASSMUTUAL, we have the financial stability and flexibility to take a long-term ap
Slide 8: Global Investment Capabilities
Global Investment Capabilities Barings leverages its DEPTH AND BREADTH OF EXPERTISE across public and private markets to help meet our clients’ evolving investment needs PUBLIC PUBLIC FIXED INCOME" PUBLIC EQUITIES & MULTI ASSET? Provides access to strategies ranging from investment grade Aims to del
Slide 9: Leveraging Best-In-Class Global Credit Resources
Leveraging Best-In-Class Global Credit Resources Barings BDC harnesses the depth and breadth of four best-in-class research platforms giving the team a distinct information / competitive advantage in the marketplace U.S. HIGH YIELD David Mihalick* US$34.7 BILLION IN AUM 40 investment professionals:
Slide 10: A Wide Investment Frame of Reference Drives Improved Return Outcomes
A Wide Investment Frame of Reference Drives Improved Return Outcomes Barings BDC is uniquely positioned alongside a full range of investment strategies, public and private, in the Fixed Income markets Core / Core Plus INVESTMENT GRADE! Active Short Duration iA Ella Corporate Credit PUBLIC High Yield
Slide 11: Transaction Overview
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Slide 12: Transaction Details
Transaction Details Summary of Certain Transaction Terms Sierra shareholders will receive a book value consideration of $623.7 million, or $6.10 per share" of total consideration, consisting of: * Cash of $100.0 million, or approximately $0.98 per share, directly from Barings LLC BBDC common stock o
Slide 13: Consideration from BBDC Perspective
Consideration from BBDC Perspective BBDC’s share consideration of $5.12 per Sierra share represents 94% of Sierra’s 6/30/21 NAV of $5.43 per share. Additionally, the Barings LLC CSA provides combined entity investors additional downside protection of $100 million, or approximately 16% of the current
Slide 14: Transaction Benefits
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Slide 15: Transaction Benefits
ansac Benefits The combination of BBDC and Sierra will create one of the top 10 largest BDCs and generate significant, immediate and long-term value for all shareholders aa — s) ACCRETION LIQUIDITY DIVERSIFICATION Estimated to be both short- Improved share liquidity and F ar term and long-term accre
Slide 16: Accretion
Accretion Transaction estimated to result in ~14% dividend accretion from $0.21 to 0.24 per share, estimated NIl Yield expansion from 8.00% to 8.25%, and 4% estimated NAV accretion on fair value recognition of $100 million Credit Support Agreement DIVIDEND PER SHARE +14% NIl Yield: 8.25% NET ASSET V
Slide 17: Liquidity
Liquidity BBDC’s pro forma trading liquidity profile after closing as implied by the public BDC peer set suggests a ~80% increase in BBDC’s current 3-month average daily trading volume $10,000 $45.0 Wu $9,000 $75 $40.0 = 3 $8,000 > 2 +~80% $35.0 ° 2 $7,000 z | $6,202 $300 43 Fi $6,000 $5,620 Implied
Slide 18: Diversification
Diversification We believe that the combination of BBDC and Sierra will create one of the top 10 largest BDCs and generate significant, immediate and long-term value for all shareholders ENHANCED PORTFOLIO SIZE ($MM)' DIVERSIFIED PORTFOLIO MIX 245 Portfolio Companies Asset Yield of Asset Yield of TA
Slide 19: Resilience
Resilience BDCs with meaningful scale, greater than $1 billion of market capitalization, have consistently accessed the index eligible investment grade bond market at increasingly favorable terms PRO FORMA NET ASSET VALUE AND LEVERAGE" BDC BOND SPREAD TIGHTENING 41.14x TSLX 2026's (Baa3/BBB-/BBB-) 1
Slide 20: Cost Synergies
Cost Synergies BBDC estimates ~$8.1 million in near-term expense synergies associated with the combination, driven by redundant general & administrative expenses across the two platforms POTENTIAL OPERATING EXPENSE SYNERGY DRIVERS ESTIMATED ANNUAL OPERATING EXPENSE REDUCTIONS'* HB seoc | J sierra ¢
Slide 21: BBDC: the Gold Standard in Shareholder Alignment
BBDC: the Gold Standard in Shareholder Alignment The proposed acquisition of Sierra is accompanied by a number of structural attributes that will further align the interests of Barings LLC and BBDC shareholders, including current Sierra shareholders Y Improved Asset Risk Profile LOWER REQUIRED ASSET
Slide 22: Investment Opportunity
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Slide 23: BBDC Investment Activity
BBDC Investment Activity Summary of investment activity since Barings LLC became the external investment advisor on August 3, 2018 + Middle-Market Loans: * Total MML fundings were $1.87 billion since August 3, 2018 + Barings BDC currently has $1.12 billion invested across 124 portfolio companies * C
Slide 24: All-In Senior Investment Spreads
All-In Senior Investment Spreads Spreads in the direct lending market continued to tighten in the second quarter, however the pace has generally slowed compared to the prior four quarters. The bank subsector continues to diverge from the non- bank subsectors QUARTERLY MIDDLE-MARKET SPREADS ACROSS TH
Slide 25: Focus on Capital Deployment At Attractive Return
Focus on Capital Deployment At Attractive Return Market Indices Over the previous four quarters, BBDC deployed $1.3 billion at an all-in spread’ (inclusive of upfronts/OID) of 782 bps over LIBOR. This equates to a 339-bp spread premium to comparable liquid market indices at the same credit risk prof
Slide 26: BBDC: Top Cross Platform Investments
BBDC: Top 10 Cross Platform Investments Cross Platform investments are projected to generate 19% of BBDC’s revenue on a pro forma basis’ p 10 Cross Platform Investments by Fair value (as of June 30 , 2021)" Een Gm Fair Value Unrealized Unrealized me? G/(L) ($) G/(L) (%) Eclipse Business Capital $94,
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Slide 28: Transaction Summary & Benefits
Transaction Summary & Benefits In summary, we believe this combination provides strategic and financial benefits to the combined company, including the following anticipated benefits: BARINGS * Pro forma NII per share estimated to be $0.24 in the first full quarter post-close compared Net Investment
Slide 29: ROE Expansion and Valuation
ROE Expansion and Valuation Valuation levels (Price-to-NAV) are highly correlated with Dividend Yield and ROE levels; since the TCAP externalization, BBDC has consistently been rewarded for its dividend yield expansion, Sierra being the next step in ROE expansion to 8.25% 1.15x 9 Indicates BDC has s
Slide 30: Appendix: Barings BDC Corporate Data
Appendix: Barings BDC Corporate Data Board of Directors ERIC LLOYD Chairman and CEO of BBDC, Head of Private Assets at Barings BERNARD HARRIS Managing Partner of Vesalius Ventures DAVID MIHALICK Head of U.S. Public Fixed Income at Barings ROBERT C. KNAPP Founder and CIO of Ironsides Partners LLC TOM
Slide 31: Appendix: Reconciliation of Debt to Net Debt and Net Debt-to-Equity
Appendix: Reconciliation of Debt to Net Debt and Calculation of Net Debt-to- Equity and Pro Forma Debt-to-Equity and Net Debt-to-Equity Ratios June 30, 2021 + Transaction = Pro Forma (as Reported) Adjustments Combined at Close Total debt (principal) $1,043.5 $87.1 $1,130.5 minus: Cash and foreign cu
Sierra Income — Merger or Acquisition (September 2021) on 6ix