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, 2026.

Key Financial Metrics

Material Changes vs. Prior Period

• Net Income Decline: Net increase in net assets from operations for the six months ended June 30, 2026, was $28.0 million, a decrease of approximately 41% compared to $47.1 million in the same period in 2025. This was primarily driven by net realized losses of $14.5 million and net unrealized losses of $13.6 million, contrasting with gains in the prior year.
• Realized Losses: Significant realized losses in Q2 2026 included a $9.4 million loss on the liquidation of Sundance Holdings Group, LLC, a $2.0 million loss on the restructure of Regiment Security Partners LLC, and a $1.9 million loss from rotating out broadly syndicated loans.
• Unrealized Losses: The largest contributor to unrealized losses for the six months ended June 30, 2026, was American Soccer Company, Incorporated (SCORE), with a $12.1 million decline in value. Siegel Egg Co., LLC contributed a $3.1 million unrealized loss.
• Debt Utilization: Total debt outstanding increased from $1.13 billion at December 31, 2025, to $1.238 billion at June 30, 2026, reflecting increased borrowing under credit facilities to fund new investments.
• Portfolio Composition: The portfolio consists of 92.8% first-lien senior secured loans, 5.3% subordinated debt, and 1.9% equity investments. The weighted average yield on debt investments was 10.2% based on fair value.

Guidance, Outlook, and Risks

• Dividend Policy: The Board declared a regular dividend of $0.40 per share on August 5, 2026, payable October 16, 2026. The company maintains a quarterly dividend policy.
• Share Repurchases: The company continues its 10b5-1 share repurchase plan. As of June 30, 2026, $98.2 million remained available for repurchase. Between July 1 and August 5, 2026, the company repurchased an additional 178,752 shares.
• Liquidity: The company had $437 million of undrawn commitments available on credit facilities as of June 30, 2026. Management expects cash and available capacity to be sufficient for anticipated investment activities over the next twelve months.
• Risks: Key risks include the illiquid nature of investments, credit risk associated with portfolio companies, interest rate volatility, and the ability to maintain RIC status. The company has 9 portfolio companies on its "watch list," representing 5.4% of the debt portfolio's fair value.
• Unusual Items: The company recognized non-recurring interest income of $0.9 million in Q2 2026. Additionally, $6.8 million of PIK interest was included in investment income for the six months ended June 30, 2026.

Investor Verification Checklist

• Realized Loss Drivers: Verify the specific details and future outlook for the liquidation of Sundance Holdings Group and the restructure of Regiment Security Partners, which drove significant realized losses.
• Unrealized Loss Concentration: Review the credit status and recovery prospects of American Soccer Company (SCORE) and Siegel Egg Co., LLC, which were the largest contributors to unrealized losses.
• Debt Covenants: Confirm continued compliance with the 150% asset coverage ratio requirement under the 1940 Act, currently at 186%.
• PIK Interest Sustainability: Assess the collectability of the $6.8 million in PIK interest recognized YTD 2026, particularly regarding Arborworks Acquisition, LLC which returned to accrual status.
• Share Repurchase Impact: Monitor the remaining $95.8 million authorization under the 10b5-1 plan and its potential impact on NAV per share.