Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to financial market risks,
including changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from changes in the
level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income will be affected by
the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant
change in market interest rates will not have a material adverse effect on our net investment income.
Assuming that the consolidated statement
of assets and liabilities as of December 31, 2021 were to remain constant and that we took no actions to alter our existing interest
rate sensitivity, the following table shows the annualized impact ($ in millions) of hypothetical base rate changes in interest rate
(considering interest rate floors for floating rate instruments).
Change in Interest Rates
Increase
(Decrease) in
Interest
Income
Increase
(Decrease) in
Interest
Expense
Net Increase
(Decrease) in
Net
Investment
Income
Down 25 basis points
$ -
$ -
$ -
Up 75 basis points
$ 0.6
$ 0.9
$ (0.3 )
Up 100 basis points
$ 2.0
$ 1.6
$ 0.4
Up 200 basis points
$ 7.8
$ 4.3
$ 3.5
Up 300 basis points
$ 13.5
$ 6.9
$ 6.6
The data in the table is based on the Company’s
current statement of assets and liabilities.
We may hedge against interest rate fluctuations
by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While
hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits
of lower interest rates with respect to our portfolio of investments with fixed interest rates.
62
ITEM 8. CONSOLIDATED
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting
Firm (PCAOB ID 238)
F-2
Consolidated Statements of Assets and Liabilities
as of December 31, 2021 and 2020
F-3
Consolidated Statements of Operations for the years
ended December 31, 2021 and 2020
F-4
Consolidated Statements of Changes in Net Assets for
the years ended December 31, 2021 and 2020
F-5
Consolidated Statement of Cash Flows for the years ended December 31, 2021 and 2020
F-6
Consolidated Schedule of Investments as of December 31,
2021
F-7
Notes to Consolidated Financial Statements
F-10
F- 1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Kayne Anderson BDC, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and
liabilities, including the consolidated schedule of investments, of Kayne Anderson BDC, Inc. (the “Company”) as of December
31, 2021, the consolidated statement of assets and liabilities as of December 31, 2020, the related consolidated statements of operations,
changes in net assets and cash flows for each of the two years in the period ended December 31, 2021, including the related notes, and
financial highlights for the year ended December 31, 2021 (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2021 and December 31, 2020, and the results of its operations, changes in its net assets and its cash flows for each
of the two years in the period ended December 31, 2021 and the financial highlights for the year ended December 31, 2021 in conformity
with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned
as of December 31, 2021 by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
March 10, 2022
We have served as the auditor of one or more investment companies
in the Kayne Anderson Funds Family since 2004.
F- 2
Kayne
Anderson BDC, Inc.
Consolidated
Statements of Assets and Liabilities
(amounts
in 000’s, except share and per share amounts)
December 31,
2021
December 31,
2020
Assets:
Investments, at fair value:
Long-term investments (amortized cost of $566,616)
$ 578,445
$ -
Short-term investments (amortized cost of $3,674)
3,674
-
Cash and cash equivalents
2,035
10
Deferred offering costs
29
231
Interest receivable
2,133
-
Prepaid expenses and other assets
148
177
Total Assets
$ 586,464
$ 418
Liabilities:
Loan and Security Agreement (Note 6)
$ 162,000
$ -
Unamortized Loan and Security Agreement issuance costs
(247 )
-
Subscription Credit Agreement (Note 6)
105,000
-
Unamortized Subscription Credit Facility issuance costs
(425 )
-
Accrued organizational and offering costs
6
141
Distributions payable
4,615
-
Payables to affiliates (Note 3)
-
1,075
Management fee payable
952
-
Incentive fee payable
65
-
Accrued expenses and other liabilities
2,529
-
Total Liabilities
$ 274,495
$ 1,216
Commitments and contingencies (Note 8)
Net Assets:
Common Shares, $0.001 par value; 100,000,000 shares authorized; 19,227,902 as
of December 31, 2021 issued and outstanding
$ 19
$ -
Additional paid-in capital
300,726
-
Total distributable earnings (deficit)
11,224
-
Total member’s capital (deficit)
-
(798 )
Total Net Assets
$ 311,969
$ (798 )
Total Liabilities
and Net Assets
$ 586,464
$ 418
Net Asset Value Per Common Share
$ 16.22
n/a
See
accompanying notes to consolidated financial statements.
F- 3
Kayne
Anderson BDC, Inc.
Consolidated
Statements of Operations
(amounts
in 000’s, except share and per share amounts)
For the years ended
December 31,
2021
2020
Income:
Investment income from investments:
Interest income
$
18,755
$
-
Total Investment Income
18,755
-
Expenses:
Management fees
2,095
-
Incentive fees
65
-
Interest expense
4,455
-
Professional fees
597
-
Directors fees
307
-
Offering costs
257
-
Initial organization costs
175
782
Other general and administrative expenses
677
26
Total Expenses
8,628
808
Net Investment Income (Loss)
10,127
(808
)
Realized and unrealized gains (losses) on investments
Net realized gains (losses):
Investments
332
-
Total net realized gains (losses)
332
-
Net change in unrealized gains (losses):
Investments
11,829
-
Total net change in unrealized gains (losses)
11,829
-
Total realized and unrealized gains (losses)
12,161
-
Net Increase (Decrease) in Net Assets Resulting from Operations
$
22,288
$
(808
)
Per Common Share Data:
Basic and diluted net investment income per common share
$
0.94
Basic and diluted net increase in net assets resulting from operations
$
2.08
Weighted Average Common Shares Outstanding - Basic and Diluted
10,718,083
See
accompanying notes to consolidated financial statements.
F- 4
Kayne
Anderson BDC, Inc.
Consolidated
Statements of Changes in Net Assets
(amounts
in 000’s)
For the years ended
December 31,
2021
2020
Increase (Decrease) in Net Assets Resulting from Operations:
Net investment income (loss)
$
10,127
$
(808
)
Net realized gains (losses) on investments
332
-
Net change in unrealized gains (losses) on investments
11,829
-
Net Increase (Decrease) in Net Assets Resulting from Operations
22,288
(808
)
Decrease in Net Assets Resulting from Stockholder Distributions
Dividends and distributions to stockholders
(10,514
)
-
Net Decrease in Net Assets Resulting from Stockholder Distributions
(10,514
)
-
Increase in Net Assets Resulting from Capital Share Transactions
Issuance of common shares
299,501
10
Reinvestment of distributions
1,492
-
Net Increase in Net Assets Resulting from Capital Share Transactions
300,993
10
Total Increase (Decrease) in Net Assets
312,767
(798
)
Net Assets, Beginning of Period
(798
)
-
Net Assets, End of Period
$
311,969
$
(798
)
See
accompanying notes to consolidated financial statements.
F- 5
Kayne
Anderson BDC, Inc.
Consolidated
Statements of Cash Flows
(amounts
in 000’s)
For the years ended
December 31,
2021
2020
Cash Flows from Operating Activities:
Net increase (decrease) in net assets resulting from operations
$
22,288
$
(808
)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities:
Net realized (gains)/losses on investments
(332
)
-
Net change in unrealized (gains)/losses on investments
(11,829
)
-
Net accretion of discount on investments
(1,175
)
-
Purchases of short-term investments, net
(3,674
)
-
Purchases of portfolio investments
(647,460
)
-
Proceeds from sales of investments and principal repayments
82,524
-
Paid-in-kind interest from portfolio investments
(173
)
-
Amortization of deferred financing cost
260
-
Increase/(decrease) in operating assets and liabilities:
(Increase)/decrease in interest and dividends receivable
(2,133
)
-
(Increase)/decrease in deferred offering costs
202
(231
)
(Increase)/decrease in prepaid expenses and other assets
29
(177
)
Increase/(decrease) in management fees payable
952
-
Increase/(decrease) in payable to affiliate
(1,075
)
1,075
Increase/(decrease) in accrued organizational and offering costs, net
(135
)
141
Increase/(decrease) in incentive fee payable
65
-
Increase/(decrease) in accrued other general and administrative expenses
2,529
-
Net cash used in operating activities
(559,137
)
-
Cash Flows from Financing Activities:
Borrowings on Loan and Security Agreement, net
162,000
-
Borrowings on Subscription Credit Facility, net
105,000
-
Payments of debt issuance costs
(932
)
-
Distributions paid in cash
(4,407
)
-
Proceeds from issuance of common shares
299,501
-
Net cash provided by financing activities
561,162
-
Net increase in cash and cash equivalents
2,025
-
Cash and cash equivalents, beginning of period
10
10
Cash and cash equivalents, end of period
$
2,035
$
10
Supplemental and Non-Cash Information:
Interest paid during the period
$
2,346
-
Non-cash financing activities not included herein consisted of reinvestment of dividends
$
1,492
-
See
accompanying notes to consolidated financial statements.
F- 6
Kayne Anderson BDC, Inc.
Consolidated
Schedule of Investments
As of December 31, 2021
(amounts in 000’s)
Maturity
Principal
/
Amortized
Fair
Percentage
Portfolio
Company (1)
Investment
Interest
Rate
Date
Par
Cost (2)(3)
Value
of Net Assets
Debt
and Equity Investments
Private
Credit Investments (4)
Automobiles
& components
Speedstar
Holding LLC
First lien senior
secured loan
8.00%
(L + 7.00%)
1/22/2027
$ 5,005
$ 4,906
$ 5,055
1.6 %
First lien senior secured delayed
draw loan
8.00%
(L + 7.00%)
1/22/2027
-
-
-
0.0 %
Vehicle
Accessories, Inc.
First lien senior secured loan
6.50%
(L + 5.50%)
11/30/2026
18,382
18,034
18,382
5.9 %
First
lien senior secured revolving loan
6.50%
(L + 5.50%)
11/30/2026
-
-
-
0.0 %
23,387
22,940
23,437
7.5 %
Capital
goods
Blade
(US) Holdings, Inc.
First lien senior secured loan
7.00%
(L + 6.00%)
8/31/2027
4,866
4,763
4,866
1.6 %
First lien senior secured delayed
draw loan
7.00%
(L + 6.00%)
3/3/2023
-
-
-
0.0 %
Broder
Bros., Co.
First lien senior secured loan
8.00%
(L + 7.00%)
12/2/2022
5,369
5,044
5,369
1.7 %
CGI Automated
Manufacturing, LLC
First lien senior secured loan
6.50%
(L + 5.50%)
12/17/2026
18,478
18,020
18,478
5.9 %
First lien senior secured delayed
draw loan
6.50%
(L + 5.50%)
12/17/2026
-
-
-
0.0 %
First lien senior secured revolving
loan
6.50%
(L + 5.50%)
12/17/2026
-
-
-
0.0 %
Eastern
Wholesale Fence
First lien senior secured revolving
loan
8.00%
(L + 7.00%)
10/30/2025
1,035
1,002
1,035
0.3 %
First lien senior secured loan
8.00%
(L + 7.00%)
10/30/2025
3,317
3,210
3,317
1.1 %
First lien senior secured loan
8.00%
(L + 7.00%)
10/30/2025
18,384
17,873
18,384
5.9 %
EIS Legacy,
LLC
First lien senior secured loan
6.50%
(L + 5.50%)
11/1/2027
18,462
17,998
18,462
5.9 %
First lien senior secured delayed
draw loan
6.50%
(L + 5.50%)
11/1/2027
-
-
-
0.0 %
First lien senior secured revolving
loan
6.50%
(L + 5.50%)
11/1/2027
-
-
-
0.0 %
Fastener
Distribution Holdings, LLC
First lien senior secured delayed
draw loan
8.00%
(L + 7.00%)
4/1/2022
2,205
2,194
2,205
0.7 %
First lien senior secured loan
8.00%
(L + 7.00%)
4/1/2022
1,942
1,939
1,942
0.6 %
I.D. Images
Acquisition, LLC
First lien senior secured delayed
draw loan
7.25%
(L + 6.25%)
1/30/2023
2,634
2,609
2,634
0.9 %
First lien senior secured revolving
loan
7.25%
(L + 6.25%)
7/30/2026
450
420
450
0.2 %
First lien senior secured loan
7.25%
(L + 6.25%)
7/30/2026
15,570
15,353
15,570
5.0 %
Refrigeration
Sales Corp.
First lien senior secured loan
7.50%
(L + 6.50%)
6/22/2026
6,945
6,835
6,945
2.2 %
United
Safety & Survivability Corporation (USSC)
First lien senior secured loan
7.00%
(L + 6.00%)
9/30/2027
12,690
12,439
12,690
4.1 %
First lien senior secured revolving
loan
7.00%
(L + 6.00%)
9/30/2027
402
379
402
0.1 %
First lien senior secured delayed
draw loan
7.00%
(L + 6.00%)
9/30/2023
-
-
-
0.0 %
112,749
110,078
112,749
36.2 %
Commercial
& professional services
4 Over
International, LLC
First lien senior secured loan
7.50%
(L + 6.50%)
10/29/2027
24,875
24,249
24,875
8.0 %
Advanced
Environmental Monitoring (5)
First lien senior secured loan
8.00%
(L + 7.00%)
1/29/2026
7,372
7,159
7,372
2.4 %
American
Equipment Holdings LLC
First lien senior secured delayed
draw loan
7.00%
(L + 6.00%)
11/3/2026
6,367
6,242
6,367
2.1 %
First lien senior secured revolving
loan
7.00%
(L + 6.00%)
11/3/2026
425
383
425
0.1 %
First lien senior secured loan
7.00%
(L + 6.00%)
11/3/2026
16,511
16,188
16,511
5.3 %
Arborworks
Acquisition LLC
First lien senior secured revolving
loan
7.00%
(L + 6.00%)
11/9/2026
1,469
1,378
1,469
0.5 %
First lien senior secured loan
8.00%
(L + 7.00%)
11/9/2026
20,312
19,914
20,312
6.5 %
Gusmer
Enterprises, Inc.
First lien senior secured delayed
draw loan
7.00%
(L + 6.00%)
5/7/2027
4,737
4,641
4,737
1.5 %
First lien senior secured revolving
loan
7.00%
(L + 6.00%)
5/7/2027
-
-
-
0.0 %
First lien senior secured loan
7.00%
(L + 6.00%)
5/7/2027
3,500
3,388
3,500
1.1 %
PMFC Holding,
LLC
First lien senior secured delayed
draw loan
7.50%
(L + 6.50%)
7/31/2023
2,847
2,829
2,847
0.9 %
First lien senior secured loan
7.50%
(L + 6.50%)
7/31/2023
5,676
5,639
5,676
1.8 %
First lien senior secured revolving
loan
7.50%
(L + 6.50%)
7/31/2023
-
-
-
0.0 %
Regiment
Security Partners LLC
First lien senior secured loan
8.00%
(L + 7.00%)
9/15/2026
6,539
6,389
6,539
2.1 %
First lien senior secured delayed
draw loan
8.00%
(L + 7.00%)
9/15/2023
-
-
-
0.0 %
First lien senior secured revolving
loan
8.00%
(L + 7.00%)
9/15/2026
-
-
-
0.0 %
The
Kleinfelder Group, Inc.
First
lien senior secured loan
6.25%
(L + 5.25%)
11/15/2027
12,889
12,766
12,889
4.1 %
113,519
111,165
113,519
36.4 %
Consumer
durables & apparel
BCI Burke
Holding Corp.
First lien senior secured loan
6.75%
(L + 5.75%)
12/14/2027
17,303
16,997
17,303
5.5 %
First lien senior secured revolving
loan
6.75%
(L + 5.75%)
6/14/2027
389
360
389
0.1 %
First lien senior secured delayed
draw loan
6.75%
(L + 5.75%)
12/14/2023
-
-
-
0.0 %
BEL USA,
LLC
First lien senior secured loan
9.50%
(L + 8.00%)
11/2/2023
148
147
146
0.0 %
First lien senior secured loan
8.50%
(L + 7.00%, includes 1.275% PIK)
11/2/2023
8,988
8,835
8,853
2.8 %
Curio
Brands, LLC
First lien senior secured loan
6.50%
(L + 5.50%)
12/21/2027
18,054
17,575
18,054
5.8 %
First lien senior secured delayed
draw loan
6.50%
(L + 5.50%)
12/21/2023
-
-
-
0.0 %
First lien senior secured revolving
loan
6.50%
(L + 5.50%)
12/21/2027
-
-
-
0.0 %
MacNeill
Pride Group
First lien senior secured revolving
loan
7.50%
(L + 6.50%)
4/22/2026
1,429
1,407
1,429
0.5 %
First lien senior secured delayed
draw loan
7.50%
(L + 6.50%)
4/22/2026
1,961
1,937
1,961
0.6 %
First lien senior secured loan
7.50%
(L + 6.50%)
4/22/2026
8,706
8,598
8,706
2.8 %
New Era
Cap Company, Inc.
First lien senior secured loan
7.50%
(L + 6.50%)
9/10/2023
12,724
12,624
12,724
4.1 %
Trademark
Global LLC
First lien senior secured loan
7.00%
(L + 6.00%)
7/30/2024
11,510
11,404
11,510
3.7 %
First lien senior secured revolving
loan
7.00%
(L + 6.00%)
7/30/2024
2,280
2,254
2,280
0.7 %
First lien senior secured delayed
draw loan
7.00%
(L + 6.00%)
7/30/2023
-
-
-
0.0 %
YS
Garments, LLC
First
lien senior secured loan
7.00%
(L + 6.00%)
8/9/2024
7,936
7,779
7,936
2.6 %
91,428
89,917
91,291
29.2 %
Diversified
financials
Atria
Wealth Solutions, Inc.
First
lien senior secured loan
7.00%
(L + 6.00%)
11/30/2022
5,191
5,156
5,191
1.7 %
5,191
5,156
5,191
1.7 %
See accompanying notes to
financial statements.
F- 7
Kayne Anderson BDC, Inc.
Consolidated
Schedule of Investments
As of December 31, 2021
(amounts in 000’s)
Maturity
Principal
/
Amortized
Fair
Percentage
Portfolio
Company (1)
Investment
Interest
Rate
Date
Par
Cost (2)(3)
Value
of Net Assets
Debt
and Equity Investments
Private
Credit Investments (4)
Automobiles
& components
Food
& beverage
Siegel
Egg Co., LLC
First lien senior secured loan
7.00%
(L + 6.00%)
12/29/2026
15,742
15,450
15,742
5.1 %
First
lien senior secured revolving loan
7.00%
(L + 6.00%)
12/29/2026
1,029
966
1,029
0.3 %
16,771
16,416
16,771
5.4 %
Health
care equipment & services
Brightview,
LLC
First lien senior secured loan
6.75%
(L + 5.75%)
4/12/2024
13,133
12,956
13,133
4.2 %
First lien senior secured delayed
draw loan
6.75%
(L + 5.75%)
4/12/2024
-
-
-
0.0 %
First lien senior secured revolving
loan
6.75%
(L + 5.75%)
4/12/2024
-
-
-
0.0 %
Dermatologists
of Southwestern Ohio, LLC
First lien senior secured loan
9.50%
(L + 8.50%)
4/20/2022
1,282
1,270
1,282
0.4 %
Guardian
Dentistry Partners
First lien senior secured loan
6.75%
(L + 5.75%)
8/20/2026
8,222
7,860
8,222
2.6 %
First lien senior secured delayed
draw loan
6.75%
(L + 5.75%)
8/20/2026
-
-
-
0.0 %
OMH-HealthEdge
Holdings, LLC
First lien senior secured loan
6.50%
(L + 5.25%)
10/24/2025
12,375
12,138
12,375
4.0 %
SGA Dental
Partners Holdings, LLC
First lien senior secured loan
6.50%
(L + 5.50%)
12/30/2026
12,069
11,681
12,069
3.9 %
First lien senior secured delayed
draw loan
6.50%
(L + 5.50%)
12/30/2026
-
-
-
0.0 %
First lien senior secured revolving
loan
6.50%
(L + 5.50%)
12/30/2026
-
-
-
0.0 %
West
Dermatology Management Holdings, LLC
First
lien senior secured loan
7.00%
(L + 6.00%)
2/11/2025
1,975
1,957
1,975
0.6 %
49,056
47,862
49,056
15.7 %
Household
& personal products
DRS Holdings
III, Inc. (Dr. Scholl’s)
First lien senior secured loan
6.75%
(L + 5.75%)
11/1/2025
12,129
12,014
12,129
3.9 %
First lien senior secured revolving
loan
6.75%
(L + 5.75%)
11/1/2025
-
-
-
0.0 %
Home Brands
Group Holdings, Inc. (ReBath)
First lien senior secured loan
6.00%
(L + 5.00%)
11/8/2026
20,988
20,537
20,988
6.7 %
First lien senior secured revolving
loan
6.00%
(L + 5.00%)
11/8/2026
-
-
-
0.0 %
PH
Beauty Holdings III, Inc.
First
lien senior secured loan
5.18%
(L + 5.00%)
9/28/2025
9,642
9,287
9,642
3.1 %
42,759
41,838
42,759
13.7 %
Materials
Cyalume
Technologies Holdings, Inc.
First lien senior secured loan
6.50%
(L + 5.50%)
8/30/2024
1,657
1,644
1,657
0.5 %
Drew Foam
Companies, Inc.
First lien senior secured loan
7.00%
(L + 6.00%)
11/5/2025
7,450
7,360
7,450
2.4 %
Fralock
Buyer LLC
First lien senior secured loan
6.50%
(L + 5.50%)
4/17/2024
9,251
9,091
9,251
3.0 %
First lien senior secured loan
6.50%
(L + 5.50%)
4/17/2024
2,453
2,413
2,453
0.8 %
First lien senior secured revolving
loan
6.50%
(L + 5.50%)
4/17/2024
-
-
-
0.0 %
USALCO,
LLC
First lien senior secured revolving
loan
7.00%
(L + 6.00%)
10/19/2026
191
142
191
0.1 %
First
lien senior secured loan
7.00%
(L + 6.00%)
10/19/2027
19,375
18,918
19,375
6.2 %
40,377
39,568
40,377
13.0 %
Pharmaceuticals,
biotech & life sciences
Foundation
Consumer Brands
First lien senior secured loan
7.38%
(L + 6.38%)
2/12/2027
8,485
8,407
8,485
2.7 %
First
lien senior secured revolving loan
7.38%
(L + 6.38%)
2/12/2027
-
-
-
0.0 %
8,485
8,407
8,485
2.7 %
Retailing
Sundance
Holdings Group, LLC (5)
First
lien senior secured loan
7.00%
(L + 6.00%)
5/1/2024
9,522
9,164
9,522
3.1 %
9,522
9,164
9,522
3.1 %
Software
& services
Improving
Acquisition LLC
First lien senior secured loan
7.50%
(L + 6.50%)
7/26/2024
603
598
603
0.2 %
Peak Technologies
First lien senior secured loan
8.09%
(L + 7.09%)
4/1/2026
12,800
12,678
12,800
4.1 %
First
lien senior secured loan
7.50%
(L + 6.50%)
4/1/2026
662
649
662
0.2 %
14,065
13,925
14,065
4.5 %
Telecommunication
services
Centerline
Communications, LLC
First lien senior secured loan
6.50%
(L + 5.50%)
8/10/2027
9,265
9,082
9,265
3.0 %
First lien senior secured delayed
draw loan
6.50%
(L + 5.50%)
8/10/2023
5,746
5,622
5,746
1.9 %
First lien senior secured revolving
loan
6.50%
(L + 5.50%)
8/10/2027
1,200
1,166
1,200
0.4 %
First lien senior secured loan
6.50%
(L + 5.50%)
8/10/2027
5,985
5,870
5,985
1.9 %
Corbett
Technology Solutions, Inc.
First lien senior secured revolving
loan
6.00%
(L + 5.00%)
10/29/2027
381
248
381
0.1 %
First lien senior secured delayed
draw loan
6.00%
(L + 5.00%)
4/29/2023
9,530
9,435
9,530
3.1 %
First lien senior secured loan
6.00%
(L + 5.00%)
10/27/2027
13,564
13,298
13,564
4.3 %
Network
Connex (f/k/a NTI Connect, LLC)
First
lien senior secured loan
6.00%
(L + 5.00%)
4/5/2026
5,302
5,209
5,302
1.7 %
50,973
49,930
50,973
16.4 %
Total
Private Credit Debt Investments
578,282
566,366
578,195
185.5 %
See accompanying notes to
financial statements.
F- 8
Kayne Anderson BDC, Inc.
Consolidated
Schedule of Investments
As of December 31, 2021
(amounts in 000’s)
Number
of
Units
Cost
Fair
Value
Percentage
of Net Assets
Equity Investments
Food & beverage
Siegel
Parent, LLC (6)
0.250
250
250
0.1 %
Total
Private Equity Investments
0.250
250
250
0.1 %
Total
Private Investments
$ 566,616
$ 578,445
185.6 %
Number of
Fair
Percentage
Shares
Cost
Value
of
Net Assets
Short-Term Investments
First
American Treasury Obligations Fund - Institutional Class Z, 0.01% (7)
3,674
3,674
3,674
1.2 %
Total Short-Term Investments
3,674
3,674
3,674
1.2 %
Total Investments
$ 570,290
$ 582,119
186.8 %
Liabilities in Excess of Other Assets
(270,150 )
(86.8 )%
Net Assets
$ 311,969
100.0 %
(1) As of December 31, 2021, all
investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated
investments are defined as investments in which the Company owns less than 5% of the portfolio
company’s outstanding voting securities and does not have the power to exercise control
over the management or policies of such portfolio company.
(2) The amortized cost represents
the original cost adjusted for the amortization of discounts and premiums, as applicable,
on debt investments using the effective interest method.
(3) As of December 31, 2021, the
tax cost of the Company’s investments approximates their amortized cost.
(4) Loan contains a variable rate
structure, that may be subject to an interest rate floor. Variable rate loans bear interest
at a rate that may be determined by reference to either the London Interbank Offered Rate
(“LIBOR” or “L”) (which can include one-, two-, three- or six-month
LIBOR) or an alternate base rate (which can include the Federal Funds Effective Rate or the
Prime Rate).
(5) The Company may be entitled
to receive additional interest as a result of an arrangement with other lenders in the syndication.
In exchange for the higher interest rate, the “last-out” portion is at a greater
risk of loss. Certain lenders represent a “first out” portion of the investment
and have priority to the “last-out” portion with respect to payments of principal
and interest.
(6) The
Company owns 50% of a pass-through LLC, KSCF IV Equity Aggregator, LLC (the “Aggregator”),
which holds 500 Class A units of Siegel Parent, LLC. The Aggregator’s
ownership of Siegel Parent, LLC is 1.1442%. Through the Company’s ownership of the
Aggregator, the Company owns 250 Class A units of Siegel Parent, LLC.
(7) The indicated rate is the
yield as of December 31, 2021.
See accompanying notes to
financial statements.
F- 9
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Note 1. Organization
Organization
Kayne Anderson BDC, Inc. (the “Company”)
is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as
a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”).
In addition, for U.S. federal income tax purposes, the Company intends to qualify as a regulated investment company (“RIC”)
under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
The Company was formed as a Delaware limited
liability company in May 2018. Prior to February 5, 2021, the Company was devoting substantially all of its efforts to establishing the
business and conducted organizational and marketing efforts. The Company began incurring costs related to these activities in the third
quarter of 2020. The Company was formed to make investments in middle-market companies and commenced operations on February 5, 2021.
On this same date, prior to the Company’s election to be regulated as a BDC under the 1940 Act, the Company completed a conversion
from a Delaware limited liability company into a Delaware corporation and Kayne Anderson BDC, Inc. succeeded to the business of Kayne
Anderson BDC, LLC.
As of December 31, 2021, the Company has entered
into subscription agreements with investors for an aggregate capital commitment of $607,950 to purchase shares of the Company’s
common stock (including a $64,250 capital commitment that is contingent on the Company meeting certain conditions). See Note 12 –
Subsequent Events.
KA Credit Advisors, LLC (the “Advisor”)
is an indirect subsidiary of Kayne Anderson Capital Advisors, L.P. (“KACALP” or “Kayne Anderson”). The Advisor
is registered with the Securities and Exchange Commission (“SEC”) as an investment advisor under the Investment Advisory
Act of 1940. Subject to the overall supervision of the Company’s board of directors (the “Board”), the Advisor is responsible
for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment
opportunities, negotiating and structuring investments and monitoring its investments and portfolio companies on an ongoing basis. The
Board consists of five directors, three of whom are independent (including the Board’s chairperson).
The Company’s investment objective
is to generate current income and, to a lesser extent, capital appreciation primarily through debt investments in middle-market companies.
The Company conducts private offerings of
its Common Stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the
“Securities Act”). At the closing of any private offering, each investor will make a capital commitment (a “Capital
Commitment”) to purchase shares of its Common Stock (“Shares”) pursuant to a subscription agreement entered into with
the Company. Investors will be required to fund drawdowns to purchase Shares up to the amount of their respective Capital Commitments
each time the Company delivers a notice to the investors. Following the initial closing of the private offering (the “Initial Closing”)
on February 5, 2021 and prior to any Liquidity Event (as defined below), the Advisor may, in its sole discretion, permit additional closings
of the private offering. A “Liquidity Event” is defined as (a) an initial public offering of Shares (the “Initial
Public Offering”) or the listing of Shares on an exchange (together with the Initial Public Offering, an “Exchange Listing”),
(b) the sale of the Company or (c) a disposition of the Company’s investments and distribution of the net proceeds (after repayment
of borrowed funds or other forms of leverage) to the Company’s investors.
F- 10
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Note 2. Significant Accounting Policies
A. Basis of Presentation —the
accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“GAAP”). The Company is an investment company and follows accounting and reporting guidance of the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 — “Financial Services — Investment
Companies.” In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the
fair statement of the consolidated financial statements for the periods presented, have been included.
B. Consolidation —As provided
under Regulation S-X and ASC Topic 946 – “Financial Services – Investment Companies”, the Company will generally
not consolidate its investment in a company other than a wholly-owned investment company or controlled operating company whose business
consists of providing services to the Company. Accordingly, the Company consolidated the accounts of the Company’s wholly-owned
subsidiaries, Kayne Anderson BDC Financing, LLC, (“KABDCF”) and KABDC Corp, LLC, in its consolidated financial statements.
All significant intercompany balances and transactions have been eliminated in consolidation.
C. Use of Estimates —the
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the
reported amounts of income and expenses during the period. Actual results could differ materially from those estimates.
D. Cash and Cash Equivalents —cash
and cash equivalents include short-term, liquid investments with an original maturity of three months or less and include money market
fund accounts.
E. Investment Valuation, Fair Value —the
Company conducts the valuation of its investments consistent with GAAP and the 1940 Act. The Company’s investments will be valued
no less frequently than quarterly, in accordance with the terms of Topic 820 of the Financial Accounting Standards Board’s Accounting
Standards Codification, Fair Value Measurement and Disclosures (“ASC 820”).
Traded Investments (Level 1 or Level 2)
Investments for which market quotations are
readily available will typically be valued at those market quotations. Traded investments such as corporate bonds, preferred stock, bank
notes, loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent broker,
the agent bank, syndicate bank or principal market maker. When price quotes for investments are not available, or such prices are stale
or do not represent fair value in the judgment of the Company’s Advisor, fair market value will be determined using the Company’s
valuation process for investments that are privately issued or otherwise restricted as to resale.
The Company may also invest, to a lesser
extent, in equity securities purchased in conjunction with debt investments. While the Company anticipates these equity securities to
be issued by privately held companies, the Company may hold equity securities that are publicly traded. Equity securities listed on any
exchange other than the NASDAQ Stock Market, Inc. (“NASDAQ”) are valued, except as indicated below, at the last sale price
on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the
mean of the most recent bid and ask prices on such day. Securities admitted to trade on the NASDAQ are valued at the NASDAQ official
closing price. Equity securities traded on more than one securities exchange are valued at the last sale price on the business day as
of which such value is being determined at the close of the exchange representing the principal market for such securities. Equity securities
traded in the over-the-counter market, but excluding securities admitted to trading on the NASDAQ, are valued at the closing
bid prices.
F- 11
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Non-Traded Investments (Level 3)
Investments that are privately issued or
otherwise restricted as to resale, as well as any security for which (a) reliable market quotations are not available in the judgment
of the Company’s Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides
a price that in the judgment of the Company’s Advisor is stale or does not represent fair value, shall each be valued in a manner
that most fairly reflects fair value of the security on the valuation date. The Company expects that a significant majority of its investments
will be Level 3 investments. Unless otherwise determined by the Board, the following valuation process is used for the Company’s
Level 3 investments:
●
Investment Team Valuation .
The applicable investments are valued by senior professionals of Kayne Anderson who are responsible for the portfolio investments.
The value of each portfolio company or investment will be initially reviewed by the investment professionals responsible for such
portfolio company or investment and, for non-traded investments (i.e., illiquid securities/instruments), a standardized
template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable
inputs will be used to determine a preliminary value. The investments will be valued no less frequently than quarterly, with new
investments valued at the time such investment was made.
●
Investment Team Valuation Documentation . Preliminary
valuation conclusions will be determined by the Company’s executive officers. Such valuation and supporting documentation is
submitted to the Audit Committee (a committee of the Board) and the Board on a quarterly basis.
●
Audit Committee . The Audit Committee meets to
consider the valuations submitted by our executive officers at the end of each quarter. Between meetings of the Audit Committee,
the executive officers of the Company are authorized to make valuation determinations. All valuation determinations of the Audit
Committee are subject to ratification by the Board at its next regular meeting.
●
Valuation Firm. Quarterly, third-party valuation
firms engaged by the Board review the valuation methodologies and calculations employed for each of the Company’s investments
that the Company has placed on the “watch list” and approximately 25% of its remaining investments. These third-party
valuation firms will review all of the Level 3 investments at least once per year, on a rolling twelve-month basis. The Company
expects the quarterly report issued by these third-party valuation firms will assist the Board in determining the fair values of
the investments reviewed.
●
Board Determination. The Company’s Board
meets quarterly to consider the valuations provided by the Company’s executive officers and the Audit Committee and ratify
valuations for the applicable investments. The Company’s Board considers the report provided by the third-party valuation firms
in reviewing and determining in good faith the fair value of the applicable portfolio investments.
The Board of Directors will be ultimately
responsible for the determination, in good faith, of the fair value of our portfolio investments. Determination of fair value involves
subjective judgments and estimates. Accordingly, the notes to our financial statements will express the uncertainty with respect to the
possible effect of such valuations, and any change in such valuations, on our financial statements.
F. Interest Income Recognition —
Interest income is recorded on an accrual basis and includes the accretion of discounts, amortization of premiums and payment-in-kind
(“PIK”) interest. Discounts from and premiums to par value on investments purchased are accreted/amortized into interest
income over the life of the respective security using the effective yield method. To the extent loans contain PIK provisions, PIK interest,
computed at the contractual rate specified in each applicable agreement, is accrued and recorded as interest income and added to the
principal balance of the loan. PIK interest income added to the principal balance is generally collected upon repayment of the outstanding
principal. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders in the form
of dividends for the year the income was earned, even though the Company has not yet collected the cash. The amortized cost of investments
represents the original cost adjusted for any accretion of discounts, amortization of premiums and PIK interest.
F- 12
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Loans are generally placed on non-accrual
status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest
will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments
received on non-accrual loans may be recognized as income or applied to principal depending upon the Company’s judgment regarding
collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid or there is no longer
any reasonable doubt that such principal or interest will be collected in full and, in the Company’s judgment, are likely to remain
current. The Company may make exceptions to this policy if the loan has sufficient collateral value (i.e., typically measured as enterprise
value of the portfolio company) or is in the process of collection.
G. Debt Issuance Costs —Costs
incurred by the Company related to the issuance of its debt (credit facilities) are capitalized and amortized over the period the debt
is outstanding. The Company has classified the costs incurred to issue its credit facilities as a deduction from the carrying value of
the credit facilities on the Statement of Assets and Liabilities. For the purpose of calculating the Company’s asset coverage ratios
pursuant to the 1940 Act, deferred issuance costs are not deducted from the carrying value of debt or preferred stock.
H. Dividends to Common Stockholders —Distributions
to common stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the Company’s
board of directors each quarter and is generally based upon the earnings estimated by management and considers the level of undistributed
taxable income carried forward from the prior year for distribution in the current year. Net realized capital gains, if any, are generally
distributed, although the Company may decide to retain such capital gains for investment.
I. Organizational Costs —organizational
expenses include costs and expenses relating to the formation and organization of the Company. The Company has agreed to reimburse the
Advisor for these costs which are expensed as incurred.
J. Offering Costs —offering
costs include costs and expenses incurred in connection with the offering of the Company’s common stock. These initial costs are
capitalized as deferred offering expenses and included in prepaid expenses and other assets on the Statement of Assets and Liabilities.
These costs are amortized over a twelve-month period beginning with the commencement of operations. These expenses consist primarily
of legal fees and other costs incurred in connection with the Company’s share offerings, the preparation of the Company’s
registration statement and registration fees. The Company has agreed to reimburse the Advisor for these costs.
K. Income Taxes —it is the
Company’s intention to continue to be treated as and to qualify each year for special tax treatment afforded a RIC under the Code.
As long as the Company meets certain requirements that govern its sources of income, diversification of assets and timely distribution
of earnings to stockholders, the Company will not be subject to U.S. federal income tax.
The Company must pay distributions equal
to 90% of its investment company taxable income (ordinary income and short-term capital gains) to qualify as a RIC and it must distribute
all of its taxable income (ordinary income, short-term capital gains and long-term capital gains) to avoid federal income taxes. The
Company will be subject to federal income tax on any undistributed portion of income. For purposes of the distribution test, the Company
may elect to treat as paid on the last day of its taxable year all or part of any distributions that are declared after the end of its
taxable year if such distributions are declared before the due date of its tax return, including any extensions (October 15th).
All RICs are subject to a non-deductible
4% excise tax on income that is not distributed on a timely basis in accordance with the calendar year distribution requirements. To
avoid the tax, the Company must distribute during each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income
for the calendar year, (ii) 98.2% of its net capital gains for the one-year period ending on December 31, the last day of our taxable
year, and (iii) undistributed amounts from previous years on which the Company paid no U.S. federal income tax. A distribution will be
treated as paid during the calendar year if it is paid during the calendar year or declared by the Company in October, November or December,
payable to stockholders of record on a date during such months and paid by the Company during January of the following year. Any such
distributions paid during January of the following year will be deemed to be received by stockholders on December 31 of the year the
distributions are declared, rather than when the distributions are actually received.
F- 13
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
The Company does not currently qualify as
a “publicly offered regulated investment company,” as defined in the Code. A “publicly offered regulated investment
company” is a RIC whose shares are either (i) continuously offered pursuant to a public offering, (ii) regularly traded
on an established securities market, or (iii) held by at least 500 persons at all times during the taxable year. The Company cannot
determine when it will qualify as a publicly offered RIC. If the Company does not qualify as a publicly offered RIC during the tax year, a non-corporate shareholder’s allocable
portion of the Company’s affected expenses, including its management fees, may be treated as an additional distribution to shareholders.
A non-corporate shareholder’s allocable portion of these expenses may be treated as miscellaneous itemized deductions
that are not currently deductible by such shareholders.
The Company evaluates tax positions taken
or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be
sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are
reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included
in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors
including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
L. LIBOR Transition — The
U.K. Financial Conduct Authority (“FCA”) has announced that certain London Interbank Offered Rate (“LIBOR”) tenors
in certain currencies will cease to be provided at the end of 2021 with all remaining tenors ceasing in June 2023. Alternatives to LIBOR
have been established, or are in development, in most major currencies including the Secured Overnight Financing Rate (“SOFR”)
that is intended to replace U.S. dollar LIBOR. Markets are developing in response to these new reference rates. Uncertainty exists related
to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the time of transition. Although SOFR appears
to be the preferred replacement rate for LIBOR, at this time, it is not possible to predict the full effect of any such changes or any
establishment of alternative reference rates.
M. Commitments and Contingencies —in
the normal course of business, the Company may enter into contracts that provide a variety of general indemnifications. Any exposure
to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist
or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.
Note 3. Agreements and Related Party Transactions
A. Administration Agreement —on
February 5, 2021, the Company entered into an Administration Agreement with its Advisor, which serves as its Administrator and will provide
or oversee the performance of its required administrative services and professional services rendered by others, which will include (but
not limited to), accounting, payment of our expenses, legal, compliance, operations, technology and investor relations, preparation and
filing of its tax returns, and preparation of financial reports provided to its stockholders and filed with the SEC.
The Company will reimburse the Administrator
for its costs and expenses incurred in performing its obligations under the Administration Agreement, which may include, after completion
of our Exchange Listing, its allocable portion of office facilities, overhead, and compensation paid to or compensatory distributions
received by its officers (including our Chief Compliance Officer and Chief Financial Officer) and its respective staff who provide services
to the Company. As the Company reimburses the Administrator for its expenses, the Company will indirectly bear such cost. The Administration
Agreement may be terminated by either party with 60 days’ written notice.
B. Investment Advisory Agreement —on
February 5, 2021, the Company entered into an Investment Advisory Agreement with its Advisor. Pursuant to the Investment Advisory Agreement
with its Advisor, the Company will pay its Advisor a fee for investment advisory and management services consisting of two components—a
base management fee and an incentive fee. The Advisor may, from time-to-time, grant waivers on the Company’s obligations, including
waivers of the base management fee and/or incentive fee, under the Investment Advisory Agreement. The Investment Advisory Agreement may
be terminated by either party with 60 days’ written notice.
F- 14
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
The Company has agreed to reimburse the Advisor
and its affiliates for the third-party costs incurred on its behalf in connection with the formation and the offering of shares of the
Company’s common stock. Amounts shown as payables to affiliates on the Statement of Assets and Liabilities represent organizational
expenses and offering costs of the Company that were paid by the Advisor and its affiliates on behalf of the Company.
Base Management Fee
Prior to an Exchange Listing, the base management
fee will be calculated at an annual rate of 0.90% of the fair market value of the Company’s investments including, in each case,
assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S. government securities and commercial paper
instruments maturing within one year of purchase. After an Exchange Listing, the base management fee will be calculated at an annual
rate of 1.50% of the fair market value of the Company’s investments. However, following an Exchange Listing, if borrowed funds
or other forms of leverage utilized to finance the Company’s investments is greater than a debt-to-equity ratio of 1.0x, the base
management fee will be 1.00% of the fair market value of the portion of the Company’s investments financed with borrowed funds
or other forms of leverage above a 1.0x debt-to-equity ratio.
The base management fee will be payable quarterly
in arrears and calculated based on the average of the Company’s fair market value of investments, at the end of the two most recently
completed calendar quarters, including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding
cash, U.S. government securities and commercial paper instruments maturing within one year of purchase. Base management fees for any
partial quarter will be appropriately pro-rated.
For the year ended December 31, 2021, the
Company incurred base management fees of $2,095.
Incentive Fee
The Company will also pay the Advisor an
incentive fee. The incentive fee will consist of two parts—an incentive fee on income and an incentive fee on capital gains. Described
in more detail below, these components of the incentive fee will be largely independent of each other with the result that one component
may be payable even if the other is not.
Incentive Fee on Income
The incentive fee based on income (the “income
incentive fee”) is determined and paid quarterly in arrears in cash. The Company’s quarterly pre-incentive fee net investment
income must exceed a preferred return of 1.50% of the Company’s NAV at the end of the immediately preceding calendar quarter (6.0%
annualized but not compounded) (the “Hurdle Amount”) in order for the Company to receive an income incentive fee. The income
incentive fee is calculated as follows:
●
Prior to an Exchange Listing :
100% of our pre-incentive fee net investment income for the immediately preceding calendar quarter in excess of 1.50% of
the Company’s NAV at the end of the immediately preceding calendar quarter until the Advisor has received 10% of the total
pre-incentive fee net income for that calendar quarter and, for pre-incentive fee net investment income in excess of 1.6667%,
10% of all remaining pre-incentive fee net investment income for that quarter.
●
After an Exchange Listing :
100% of the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter in excess
of 1.50% of the Company’s NAV at the end of the immediately preceding calendar quarter until the Advisor has received 15% of
the total pre-incentive fee net income for that calendar quarter and, for pre-incentive fee net investment income
in excess of 1.7647%, 15% of all remaining pre-incentive fee net investment income for that quarter.
F- 15
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial Statements
(amounts in
000’s, except share and per share amounts)
Incentive Fee on Capital Gains
The incentive fee on capital gains (the “capital gains incentive
fee”) will be calculated and payable in arrears in cash as follows:
●
Prior to an Exchange Listing :
10% of the Company’s realized capital gains, if any, on a cumulative basis from formation through (a) the day before
an Exchange Listing, (b) upon consummation of a Liquidity Event or (c) upon the termination of the Investment Advisory
Agreement, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis. For the purpose of computing the capital gain incentive fee, the calculation
methodology will look through derivative financial instruments or swaps as if the Company owned the reference assets directly.
●
After an Exchange Listing :
15% of the Company’s realized capital gains, if any, on a cumulative basis from formation through the end of a given calendar
year or upon termination of the Investment Advisory Agreement, computed net of all realized capital losses and unrealized capital
depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.
Payment of Incentive Fees
Prior to an Exchange Listing, any incentive fees earned by the Advisor
shall accrue as earned but only become payable in cash to the Advisor upon consummation of an Exchange Listing. To the extent the Company
does not complete an Exchange Listing, the incentive fees will be payable to the Advisor (a) upon consummation of a sale of the
Company or (b) once substantially all the proceeds from a Company Liquidation payable to the Company’s stockholders have been
distributed to such stockholders.
For the year ended December 31, 2021, the Company incurred incentive
fees on income of $31 and on realized gains $34 (total of $65).
C. Other— KACALP, an affiliate of the Advisor, made
an equity contribution of $10 to the Company on December 18, 2018.
On February 5, 2021, the Company purchased its initial portfolio
of investments for $103,031 from an affiliate of the Company’s Advisor (the “Warehousing Entity”). This purchase of
its initial portfolio of investments was funded with a portion of the proceeds from the sale of the Company’s common stock on this
same date (5,666,667 shares of our common stock to investors at a price of $15.00 per share for an aggregate offering amount of $85,000)
to investors and with borrowings under the Company’s credit facility.
The initial portfolio purchased from the Warehouse Entity consisted
of 18 loans, with an average outstanding balance of $5,876, an average purchase price of 97.4% of principal value and an average yield
on that date of 8.8%. None of these loans in the initial portfolio were in default or non-accrual status. All of the loans
are senior secured and the borrowers are middle and upper middle market companies. The purchase of the initial portfolio was completed
before the Company elected to be treated as a business development company under the 1940 Act. This initial acquisition and all related
transactions are referred to as the “Formation Transactions.”
F- 16
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Note 4. Investments
The following table presents the composition of the Company’s
investment portfolio at amortized cost and fair value as of December 31, 2021:
December 31,
2021
Amortized
Fair
Cost
Value
First-lien senior secured debt investments
$ 566,366
$ 578,195
Equity investments
250
250
Short-term investments
3,674
3,674
Total Investments
$ 570,290
$ 582,119
As of December 31, 2021, all of the Company’s investments were
qualifying assets as defined by Section 55(a) of the 1940 Act.
The industry composition of long-term investments based on fair value
as of December 31, 2021 was as follows:
December 31,
2021
Commercial & professional services
19.6 %
Capital goods
19.5 %
Consumer durables & apparel
15.8 %
Telecommunication services
8.8 %
Health care equipment & services
8.5 %
Household & personal products
7.4 %
Materials
7.0 %
Automobiles & components
4.1 %
Food & beverage
2.9 %
Software & services
2.4 %
Retailing
1.6 %
Pharmaceuticals, biotech & life sciences
1.5 %
Diversified financials
0.9 %
Total
100.0 %
F- 17
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Note 5. Fair Value
The Fair Value Measurement Topic of the FASB Accounting Standards
Codification (ASC 820) defines fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would
take place between market participants under current market conditions at the measurement date. As required by ASC 820, the Company has
performed an analysis of all investments measured at fair value to determine the significance and character of all inputs to their fair
value determination. Inputs are the assumptions, along with considerations of risk, that a market participant would use to value an asset
or a liability. In general, observable inputs are based on market data that is readily available, regularly distributed and verifiable
that the Company obtains from independent, third-party sources. Unobservable inputs are developed by the Company based on its own assumptions
of how market participants would value an asset or a liability.
The fair value hierarchy prioritizes the inputs to valuation techniques
used to measure fair value into the following three broad categories.
Level 1 — Valuations based
on quoted unadjusted prices for identical instruments in active markets traded on a national exchange to which the Company has access
at the date of measurement.
Level 2 — Valuations based
on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not
active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information
exists or instances where prices vary substantially over time or among brokered market makers.
Level 3 — Model derived
valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs
that reflect the Company’s own assumptions that market participants would use to price the asset or liability based on the best
available information.
In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate
for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment
of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific
to the financial instrument.
The following table presents the fair value hierarchy of investments
as of December 31, 2021. Note that the valuation levels below are not necessarily an indication of the risk or liquidity associated with
the underlying investment.
Fair Value Hierarchy as of December
31, 2021
Investments:
Level 1
Level 2
Level 3
Total
First-lien senior secured debt investments
$ -
$ -
$ 578,195
$ 578,195
Equity investments
-
-
250
250
Short-term investments
3,674
-
-
3,674
Total Investments
$ 3,674
$ -
$ 578,445
$ 582,119
For the year ended December 31, 2021, the Company did not recognize
any transfers to or from Level 3.
The following table presents changes in the fair value of investments
for which Level 3 inputs were used to determine the fair value as of and for year ended December 31, 2021:
First-lien senior secured debt investments
Equity investments
Total
For the year ended December 31, 2021
Fair value, beginning of period
$ -
$ -
-
Purchases of investments
626,555
250
626,805
Proceeds from sales of investments and principal repayments
(61,520 )
-
(61,520 )
Net change in unrealized gain (loss)
11,829
-
11,829
Realized gains
156
-
156
Net accretion of discount on investments
1,175
-
1,175
Transfers into (out of) Level 3
-
-
-
Fair value, end of period
$ 578,195
$ 250
$ 578,445
F- 18
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
The increase in unrealized gain (loss) relates to investments that
were held during the period. The Company includes these unrealized gains and losses on the Statement of Operations – Net Change
in Unrealized Gains (Losses).
Valuation Techniques
and Unobservable Inputs
Non-traded debt investments are typically valued using either
a market yield analysis or an enterprise value analysis. For debt investments that are not determined to be credit impaired, the Company
uses a market yield analysis to determine fair value. If the debt investment is credit impaired (which is determined by performing an
enterprise value analysis), the Company will use the enterprise value analysis or a liquidation basis analysis to determine fair value.
As of December 31, 2021, none of the Company’s non-traded debt investments were determined to be credit impaired, and the Company
used a market yield analysis to determine fair value on these investments.
To determine the estimated market yield for our debt investments,
the Company analyzes changes in the risk/reward (measured by yields and leverage) of middle market indices as compared to changes in
risk/reward for the underlying investment (the “Market Approach”) and estimates the appropriate credit spread for such debt
investment. In this context, the fair market value of the investment is impacted by the structure and pricing of the security relative
to current market yields and credit spreads for similar investments in similar businesses as well as the financial performance of such
business. In performing this analysis, the Company considers data sources including, but not limited to: (i) industry publications,
such as S&P Global’s High-End Middle Market Lending Review; Thomson Reuter’s Refinitiv Middle Market Monthly
Stats; CapitalIQ; Pitchbook News; The Lead Left, and other data sources; (ii) comparable investments reviewed or completed by affiliates
of the Advisor, and (iii) information obtained and provided by the Advisor’s independent valuation managers.
To determine if a debt investment is credit impaired, the Company
estimates the enterprise value of the business and compares such estimate to the outstanding indebtedness of such business. The Company
utilizes the following valuation methodologies to determine the estimated enterprise value of the company: (i) analysis of valuations
of publicly traded companies in a similar line of business (“public company analysis”), (ii) analysis of valuations of M&A
transaction valuations for companies in a similar line of business (“precedent transaction analysis”), (iii) discounted
cash flows (“DCF analysis”) and (iv) other valuation methodologies.
In determining the non-traded debt investment valuations,
the following factors are considered, where relevant: the nature and realizable value of any collateral; the company’s ability
to make interest payments, amortization payments (if any) and other fixed charges; call features, put features and other relevant terms
of the debt security; the company’s historical and projected financial results; the markets in which the company does business;
changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may
be valued; and other relevant factors.
Equity investments in private
companies are typically valued using one of or a combination of the following valuation techniques: (i) public company analysis,
(ii) precedent transaction analysis and (iii) DCF analysis.
Under all of these valuation techniques, the Company estimates operating
results of the companies in which we invest, including earnings before interest expense, income tax expense, depreciation and amortization
(“EBITDA”) and free cash flow. These estimates utilize unobservable inputs such as historical operating results, which may
be unaudited, and projected operating results, which will be based on operating assumptions for such company. Investment performance
data utilized will be the most recently available as of the measurement date which in many cases may reflect up to a one quarter lag
in information. These estimates will be sensitive to changes in assumptions specific to such company as well as general assumptions for
the industry. Other unobservable inputs utilized in the valuation techniques outlined above include: discounts for lack of marketability,
selection of publicly traded companies, selection of similar precedent transactions, selected ranges for valuation multiples and expected
required rates of return (discount rates).
Quantitative Table for Valuation Techniques
As of December 31, 2021
Valuation
Unobservable
Weighted
Fair Value
Technique
Input
Range
Average
First-lien senior secured debt investments
$ 578,195
Market
Approach -
Yield Analysis
Credit
Spreads
5.00% - 8.50%
6.00 %
Equity investments
$ 250
Precedent Transaction Analysis
Transaction Price
1.0
1.0
$ 578,445
F- 19
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Note 6. Debt
Loan and Security Agreement
On February 5, 2021, Kayne Anderson BDC Financing, LLC (“KABDCF”),
a newly-formed, wholly-owned, special purposes financing subsidiary, entered into a Loan and Security Agreement (the “LSA”)
with certain lenders party thereto, administrative agent, and the Advisor as collateral manager. The maximum commitment of the LSA is
up to $200,000. The Company did not pay an upfront fee for entering into the LSA. Advances under the facility bear an interest rate of
LIBOR plus 4.25% (subject to a 1.00% LIBOR floor). The facility has a term of three years maturing on February 5, 2023. See Note 12 –
Subsequent Events.
For the year ended December 31, 2021, the average amount of borrowings
outstanding under the LSA was $66,755 with a weighted average interest rate of 5.25%. As of December 31, 2021, the Company had $162,000
outstanding under the LSA at a weighted average interest rate of 5.25%.
Subscription Credit Agreement
As of December 31, 2021, the Company had a $150,000 credit agreement
(the “Subscription Credit Agreement”) with certain lenders party thereto. The Subscription Credit Agreement permits the Company
to borrow up to $150,000, subject to availability under the borrowing base which is calculated based on the unused capital commitments
of the investors meeting various eligibility requirements. The interest rate under the Subscription Credit Agreement is equal to SOFR
plus 1.975% (subject to a 0.275% SOFR floor). The Subscription Credit Agreement will expire on December 31, 2022. See Note 12 –
Subsequent Events.
For the year ended through December 31, 2021, the average amount of
borrowings outstanding under the Subscription Credit Agreement was $24,600 with a weighted average interest rate of 2.26%. As of December
31, 2021, the Company had $105,000 outstanding under the Subscription Credit Agreement at a weighted average interest rate of 2.25%.
Debt obligations consisted of the following as of December 31, 2021:
December 31, 2021
Aggregate Principal Committed
Outstanding Principal
Amount Available (1)
Net Carrying
Value (2)
Loan and Security Agreement (LSA)
$ 200,000
$ 162,000
$ 13,685
$ 161,753
Subscription Credit Agreement
150,000
105,000
45,000
104,575
Total debt
$ 350,000
$ 267,000
$ 58,685
$ 266,328
(1) The amount available reflects any limitations related to the credit
facility’s borrowing base as of December 31, 2021.
(2) The carrying value of the LSA and Subscription Credit Agreement are
presented net of deferred financing costs totaling $672.
For the year ended December 31, 2021, the components of interest expense
were as follows:
For the year ended
December 31,
2021
Interest expense
$ 4,195
Amortization of debt issuance costs
260
Total interest expense
$ 4,455
Average interest rate
5.4 %
Average borrowings
$ 91,355
F- 20
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Note 7. Share Transactions
Common Stock Issuances
The following table summarizes the number of common stock shares issued
and aggregate proceeds received from such issuances related to the Company’s capital drawdown notices pursuant to subscription agreements
with investors for the year ended December 31, 2021.
Common stock issue date
Offering price per share
Common stock
shares issued
Aggregate
offering
amount
February 5, 2021
$ 15.00
5,666,667
$ 85,000
April 23, 2021
$ 15.57
3,532,434
$ 55,000
July 23, 2021
$ 15.72
2,862,595
$ 45,000
October 28, 2021
$ 15.98
2,502,612
$ 40,000
December 2, 2021
$ 16.31
4,568,314
$ 74,501
Total common stock issued
19,132,622
$ 299,501
As of December 31, 2021, the Company had subscription agreements with
investors for an aggregate capital commitment of $607,950 to purchase shares of common stock (including a $64,250 capital commitment that
is contingent on the Company meeting certain conditions). Of this amount, and including the $64,250 contingent capital commitment noted
above, the Company had $308,449 of undrawn commitments at December 31, 2021. See Note 12 – Subsequent Events.
Dividends and Dividend Reinvestment
The following table summarizes the dividends
declared and payable by the Company for the year ended December 31, 2021. See Note 12 – Subsequent Events.
Dividend declaration date
Dividend
record date
Dividend
payment date
Dividend
per share
April 23, 2021
April 20, 2021
May 14, 2021
$ 0.15
July 14, 2021
July 20, 2021
July 27, 2021
$ 0.22
October 18, 2021
October 22, 2021
November 2, 2021
$ 0.25
December 2, 2021
December 29, 2021
January 18, 2022
$ 0.24
Total dividends declared
$ 0.86
The following table summarizes the amounts
received and shares of common stock issued to shareholders pursuant to the Company’s dividend reinvestment plan during the year
ended December 31, 2021. See Note 12 – Subsequent Events.
Dividend record date
Dividend
payment date
DRIP shares issued
DRIP value
April 20, 2021
May 14, 2021
1,361
$
21
July 20, 2021
July 27, 2021
37,460
$
585
October 22, 2021
November 2, 2021
55,792
$
886
94,613
$
1,492
For the dividend declared on December 2, 2021 and paid on January 18,
2022, there were 55,590 shares issued with a DRIP value of $902. These shares are excluded from the table above, as the DRIP shares were
issued after December 31, 2021.
Note 8. Commitments and Contingencies
The Company had an aggregate of $97,810 of
unfunded commitments to provide debt financing to its portfolio companies as of December 31, 2021. Such commitments are generally subject
to the satisfaction of certain financial and nonfinancial covenants and certain operational metrics; involve, to varying degrees, elements
of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities, and are not
reflected in the Company’s consolidated statements of assets and liabilities. These amounts may remain outstanding until the commitment
period of an applicable loan expires, which may be shorter than its maturity.
F- 21
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
A summary of the composition of the unfunded
commitments as of December 31, 2021 is shown in the table below:
As of
December 31,
2021
American Equipment Holdings LLC
$ 1,698
Arborworks Acquisition LLC
3,219
BCI Burke Holding Corp.
4,935
Blade (US) Holdings, Inc.
1,121
Brightview, LLC
4,647
Centerline Communications, LLC
2,040
CGI Automated Manufacturing, LLC
6,522
Corbett Technology Solutions, Inc.
1,525
Curio Brands, LLC
6,018
DRS Holdings III, Inc. (Dr. Scholl’s)
310
Eastern Wholesale Fence
666
EIS Legacy, LLC
6,538
Foundation Consumer Brands
577
Fralock Buyer LLC
749
Guardian Dentistry Partners
15,898
Gusmer Enterprises, Inc.
4,220
Home Brands Group Holdings, Inc. (ReBath)
2,099
I.D. Images Acquisition, LLC
1,570
MacNeill Pride Group
357
PMFC Holding, LLC
684
Regiment Security Partners LLC
7,200
SGA Dental Partners Holdings, LLC
12,931
Siegel Egg Co., LLC
2,102
Speedstar Holding LLC
694
Trademark Global LLC
1,182
United Safety & Survivability Corporation (USSC)
4,285
USALCO, LLC
2,352
Vehicle Accessories, Inc.
1,671
Total unfunded commitments
$ 97,810
From time to time, the Company may become
a party to certain legal proceedings incidental to the normal course of its business. As of December 31, 2021, management was not aware
of any material pending or threatened litigation that would require accounting recognition or financial statement disclosure.
Note 9. Earnings Per Share
In accordance with the provisions of
ASC Topic 260, Earnings per Share (“ASC 260”), basic earnings per share is computed by dividing earnings available
to common stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares,
and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. As of December 31, 2021, there
were no dilutive shares.
The following table sets forth the computation
of basic and diluted earnings per share of common stock for the year ended December 31, 2021. The Company commenced investment operations
on February 5, 2021, and basic and diluted earnings per share was not applicable for the year ended December 31, 2020 as the Company had
not issued shares.
For the year ended December 31,
2021
Net increase (decrease) in net assets resulting from operations
$ 22,288
Weighted average shares of common stock outstanding - basic and diluted
10,718,083
Earnings (loss) per share of common stock - basic and diluted
$ 2.08
Note 10. Income Taxes
The Company has elected to be treated as
a RIC under the Code beginning with the taxable year end December 31, 2021. As a RIC, the Company is not subject to federal income
tax on the portion of its taxable income and gains distributed currently to its stockholders as dividends. As a RIC, the Company is also
subject to a federal excise tax based on distributive requirements of its taxable income on a calendar year basis. Depending on the level
of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions
into the next tax year and pay a 4% excise tax on such income, to the extent required.
F- 22
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
The Company makes certain adjustments to the classification of net
assets as a result of permanent book-to-tax differences, which include differences in the book and tax basis of certain assets and
liabilities, and nondeductible federal taxes or losses among other items. To the extent these differences are permanent, they are charged
or credited to additional paid in capital, or total distributable earnings (losses), as appropriate.
The permanent differences for tax purposes
from distributable earnings to additional paid in capital were reclassified for tax purposes for the tax year ended December 31,
2021. These reclassifications have no impact on net assets.
For year ended
December 31,
2021
Increase (decrease) in distributable earnings
$ 257
Increase (decrease) in additional paid-in capital
$ (257 )
Taxable income generally differs from the net increase in net assets
resulting from operations for financial reporting purposes due to (1) unrealized appreciation (depreciation) on investments, as gains
and losses are generally not included in taxable income until these are realized; (2) income or loss recognition on exited investments;
(3) non-deductible U.S. federal excise taxes; and (4) other non-deductible expense.
The following reconciles net increase in net
assets resulting from operations to taxable income for the year ended December 31, 2021:
For the year ended
December 31,
2021
Net increase (decrease) in net assets resulting from operations
$ 22,288
Net change in unrealized losses (gains) from investments
(11,829 )
Non-deductible expenses, offering costs disallowed
257
Other book tax differences
117
Taxable income before deductions for distributions
$ 10,833
For income tax purposes, distributions made to stockholders are reported
as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The final determination of tax character will
not be made until the Company files its tax return for each tax year and the tax characteristics of all distributions will be reported
to stockholders on Form 1099 after the end of each calendar year. The tax character of distributions paid to stockholders during the tax
year ended December 31, 2021 was as follows:
For the year ended
December 31,
2021
Ordinary income
$ 10,514
Return of capital
-
Total
$ 10,514
F- 23
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
For the year ended December 31, 2021, the
components of accumulated earnings on a tax basis were as follows:
For the year ended
December 31,
2021
Undistributed net investment income (loss)
$ 319
Undistributed capital gains
-
Capital loss carryforward
-
Other accumulated gain (loss)
-
Other temporary book / tax differences
(924 )
Net unrealized appreciation (depreciation)
11,829
Total
$ 11,224
Capital losses can be carried forward indefinitely
to offset future capital gains. As of December 31, 2021, the Company had no capital loss carryforwards.
As of December 31, 2021, the Company’s
aggregate unrealized appreciation and depreciation on investments based on cost for U.S. federal income tax purposes was as follows:
December 31,
2021
Tax cost
570,290
Gross unrealized appreciation
11,829
Gross unrealized depreciation
-
Net unrealized appreciation/(depreciation) on investments
$ 11,829
KABDC Corp, LLC, a wholly owned subsidiary that was formed in December
2021, is a Delaware LLC which has elected to be treated as a corporation for U.S. tax purposes. As such, KABDC Corp, LLC is subject to
U.S. Federal, state and local taxes. For the Company’s tax year ended December 31, 2021, KABDC Corp, LLC did not have activity that
resulted in any provision for income taxes.
FASB ASC Topic 740, Accounting for Uncertainty
in Income Taxes (“ASC 740”) provides guidance for how uncertain tax positions should be recognized, measured, presented,
and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken
in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not”
of being sustained by the applicable tax authority. The Company recognizes the tax benefits of uncertain tax positions only where the
position is “more likely than not” to be sustained assuming examination by tax authorities. As of December 31, 2021,
management has analyzed the Company’s tax positions, and has concluded that no liability for unrecognized tax benefits should be
recorded related to uncertain tax positions taken in the Company’s current year tax return. The Company is not aware of any tax
positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12
months. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors
including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof.
F- 24
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Note 11. Financial Highlights
The following per share of common stock data has been derived from
information provided in the audited financial statements. The following is a schedule of financial highlights for the year ended December
31, 2021:
For the year ended
December 31,
2021
(amounts in
thousands, except
share and per share amounts)
Per Common Share
Operating Performance (1)
Net Asset Value, Beginning of
Period (2)
$ 14.86
Results of Operations:
Net Investment Income
0.94
Net Realized and Unrealized Gain
(Loss) on Investments (3)
1.28
Net Increase (Decrease) in Net
Assets Resulting from Operations
2.22
Distributions to Common Stockholders
Distributions
(0.86 )
Net Decrease in Net Assets Resulting
from Distributions
(0.86 )
Net Asset Value, End of Period
$ 16.22
Shares Outstanding, End of Period
19,227,902
Ratio/Supplemental
Data
Net assets, end of period
$ 311,969
Weighted-average shares outstanding
10,718,083
Total Return (4)
14.2 %
Portfolio turnover
31.3 %
Ratio of operating expenses
to average net assets (5)
5.8 %
Ratio of net investment
income (loss) to average net assets (5)
6.8 %
(1) The
per common share data was derived by using weighted average shares outstanding.
(2) The
initial offering price of $15.00 per share less $0.14 per share of organizational costs.
(3) Realized
and unrealized gains and losses per share in this caption are balancing amounts necessary
to reconcile the change in net asset value per share for the period, and may not reconcile
with the aggregate gains and losses in the Consolidated Statement of Operations due to share
transactions during the period.
(4) Total
return is calculated as the change in net asset value (“NAV”) per share during
the period, plus distributions per share (if any), divided by the beginning NAV per share.
The calculation also assumes reinvestment of dividends at actual prices pursuant to the Company’s
dividend reinvestment plan. Total return is not annualized.
(5) The
ratios reflect an annualized amount, except in the case of non-recurring expenses (e.g. initial
organizational expense of $175 for the period February 5, 2021 (commencement of operations)
through December 31, 2021).
F- 25
Kayne Anderson BDC, Inc.
Notes to Consolidated Financial
Statements
(amounts in
000’s, except share and per share amounts)
Note 12. Subsequent Events
The Company’s management
has evaluated subsequent events through the date of issuance of the financial statements included herein. There have been no subsequent
events that require recognition or disclosure in these financial statements except for the following described below.
On January 18, 2022, the Company
paid a distribution of $0.24 per share to each common stockholder of record as of December 29, 2021. The total distribution was $4,615
and $902 was reinvested into the Company through the purchase of 55,590 shares of common stock.
On January 24, 2022, the Company sold 4,191,292 shares of its common
stock at a price of $16.36 per share for an aggregate offering amount of $68,582. Following this capital close, the Company has subscription
agreements with investors for an aggregate capital commitment of $701,450 (including a $33,250 capital commitment that is contingent on
the Company meeting certain conditions) to purchase shares of common stock ($333,367 of the commitments are undrawn).
On January 31, 2022, the Company increased
its Subscription Credit Agreement commitment amount from $150,000 to $175,000. All other terms of the Subscription Credit Agreement remain
substantially the same.
On February 18, 2022, the Company and KABDCF,
a wholly-owned, special purpose financing subsidiary, established two new credit facilities (described below) and fully repaid the $150,000
outstanding balance on the Loan and Security Agreement. As of the same date, the Company had $78,000 and $8,000 borrowed on its Corporate
Credit Facility and Subscription Credit Agreement, and KABDCF had $150,000 borrowed on the Revolving Funding Facility.
Corporate Credit Facility
The Company entered into a senior secured
revolving credit facility (the “Corporate Credit Facility”), that has a total commitment of $275,000. The Corporate Credit
Facility’s commitment termination date and the final maturity date are February 18, 2026 and February 18, 2027, respectively. The
Corporate Credit Facility also provides for a feature that allows the Company, under certain circumstances, to increase the overall size
of the Corporate Credit Facility to a maximum of $550,000. The interest rate on the Corporate Credit Facility is equal to Term SOFR plus
an applicable spread of 2.35% per annum (which includes a SOFR adjustment spread of 0.10%) or an “alternate base rate” (as
defined in the agreements governing the Corporate Credit Facility) plus an applicable spread of 1.25%. The Company is also required to
pay a commitment fee of 0.375% per annum on any unused portion of the Corporate Credit Facility.
Under the Corporate Credit Facility, the Company is required to comply
with various covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including, without
limitation, covenants related to: (a) limitations on the incurrence of additional indebtedness and liens, (b) limitations on
certain investments, (c) limitations on certain restricted payments, (d) maintaining a certain minimum stockholders’ equity,
and (e) maintaining a ratio of total assets (less total liabilities not representing indebtedness) to total indebtedness of the Company
and its consolidated subsidiaries of not less than 1.5:1.0. These covenants are subject to important limitations and exceptions that are
described in the agreements governing the Corporate Credit Facility. Amounts available to borrow under the Corporate Credit Facility are
subject to compliance with a borrowing base that applies different advance rates to different types of assets (based on their value as
determined pursuant to the Corporate Credit Facility) that are pledged as collateral. The Corporate Credit Facility is secured by certain
assets in the Company’s portfolio and excludes investments held by KABDCF under the Revolving Funding Facility (as defined below).
Revolving Funding Facility
The Company and KABDCF, entered into a senior
secured revolving funding facility (the “Revolving Funding Facility”), that has a total commitment of $250,000. The Revolving
Funding Facility is secured by all of the assets held by KABDCF and the Company has agreed that it will not grant or allow a lien on the
membership interest of KABDCF. The end of the reinvestment period and the stated maturity date for the Revolving Funding Facility are
February 18, 2025 and February 18, 2027, respectively. The interest rate on the Revolving Funding Facility is equal to daily SOFR plus
2.35% per annum. KABDCF is also required to pay a commitment fee of between 0.50% and 1.50% per annum depending on the size of the unused
portion of the Revolving Funding Facility. Amounts available to borrow under the Revolving Funding Facility are subject to a borrowing
base that applies different advance rates to different types of assets held by KABDCF and is subject to limitations with respect to the
loans securing the Revolving Funding Facility, including restrictions on, loan size, payment frequency and status, as well as restrictions
on portfolio company leverage, all of which may also affect the borrowing base and therefore amounts available to borrow. The Company
and KABDCF are also required to comply with various covenants, reporting requirements and other customary requirements for similar facilities.
These covenants are subject to important limitations and exceptions that are described in the agreements governing the Revolving Funding
Facility.
F- 26
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements
between us and our accountant on any matter of accounting principles, practices or financial statement disclosure.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.