KBDC

Business Context and Reporting Period

Kayne Anderson BDC, Inc. (KBDC) is an externally managed, closed-end, non-diversified business development company (BDC) regulated under the Investment Company Act of 1940. The company invests primarily in first-lien senior secured loans to middle-market companies. This report covers the quarterly period ended June 30, 2025.

Key Financial Metrics

Material Changes vs. Prior Period

• Investment Income Growth: Total investment income increased 9.2% year-over-year for the six months ended June 30, 2025, driven by a larger portfolio and accretion of discounts.
• Net Income Decline: Net increase in net assets from operations decreased 20.0% year-over-year ($47.1M vs. $58.9M). This was primarily due to a net change in unrealized losses of $10.0 million in 2025 compared to unrealized gains of $0.9 million in 2024.
• Expense Increases: Net expenses rose to $55.1 million for the six months ended June 30, 2025, from $40.8 million in the prior year period. This increase is attributed to higher interest expense ($35.5M vs. $28.9M) due to increased leverage and the expiration of incentive fee waivers in the current period.
• Portfolio Expansion: Total investments at fair value grew to $2.205 billion as of June 30, 2025, from $2.044 billion at December 31, 2024. The portfolio consists of 98.0% first-lien senior secured loans.
• Share Repurchases: The company repurchased 585,671 shares for $9.2 million during the first six months of 2025 under its 10b5-1 plan.

Guidance, Outlook, and Risks

• Recent Investment Activity: On July 15, 2025, the company invested $126 million in SG Credit Partners, Inc., including an $80 million term loan, a $34 million delayed draw term loan, and a $12 million equity investment.
• Dividends: The Board declared a regular dividend of $0.40 per share on August 5, 2025, payable October 16, 2025. A regular dividend of $0.40 per share was paid on July 16, 2025.
• Liquidity and Leverage: The company targets an asset coverage ratio of 200% to 180%. As of June 30, 2025, the ratio was 210%. The company has $346 million of undrawn commitments available on credit facilities, subject to borrowing base restrictions.
• Interest Rate Risk: The company is sensitive to interest rate changes. A hypothetical 100 basis point increase in rates would increase net investment income by approximately $11.4 million annually, while a 100 basis point decrease would reduce it by $11.4 million.
• Non-Accrual Status: As of June 30, 2025, five debt investments were on non-accrual status, representing 1.6% of total debt investments at fair value.

Investor Verification Checklist

• Unrealized Losses: Verify the specific portfolio companies contributing to the $10.0 million net unrealized loss for the six months ended June 30, 2025 (notably Sundance Holdings Group, LLC and Siegel Egg Co., LLC).
• Fee Waiver Expiration: Confirm the impact of the expiration of the incentive fee waiver on future expense ratios and net investment income.
• Debt Maturity Profile: Review the maturity schedule of the $1.054 billion in debt, noting that $75 million in senior unsecured notes mature in 2027 and 2028, while credit facilities mature between 2027 and 2030.
• Non-Qualifying Assets: Monitor the percentage of non-qualifying assets (6.5% as of June 30, 2025) to ensure compliance with the 70% qualifying asset requirement under the Investment Company Act of 1940.
• Share Repurchase Plan: Track the remaining $96.6 million authorization under the amended 10b5-1 plan and the average price of repurchases relative to NAV.