What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-13 compared with 2022-03-10 · 16 added, 463 removed, 64 unchanged (88% of the section changed)

MARKET FOR REGISTRANT’S

COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

5 unchanged sentences

Because Shares are being acquired by investors

in one or more transactions “not involving a public offering,”

they are “restricted securities”

and may be required

in one or more transactions “not involving a public offering,” they are “restricted securities” and may be required

to be held indefinitely.

10 unchanged sentences

required by us.

see “Part III—Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”

for disclosure regarding the holders.

Please see “Part III—Item

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for disclosure regarding the

As of March 9, 2023, we had 403 holders of

1 unchanged sentence

Distributions

The following table reflects the distributions declared and payable

for the year ended December 31, 2021 (dollars in thousands, except per share amounts).

The following table reflects the distributions

declared and payable for the year ended December 31, 2022 (dollars in thousands, except per share amounts).

Date Declared

1 unchanged sentence

April 20, 2022

April 26, 2022

July 19, 2022

3 unchanged sentences

October 13, 2022

November 2, 2021

October 25, 2022

December 16, 2022

7 unchanged sentences

Dividend payment date

shares issued

December 29, 2021

January 18, 2022

April 20, 2022

April 26, 2022

July 20, 2022

1 unchanged sentence

October 13, 2022

November 2, 2021

October 25, 2022

For the dividend declared on December 16, 2022 and paid on January

13, 2023, there were 57,860 shares issued with a DRIP value of $955.

These shares are excluded from the table above, as the DRIP shares were

issued after December 31, 2021.

These shares are excluded from the table above, as the DRIP shares

were issued after December 31, 2022.

All of the dividends declared during the year ended December 31, 2022

9 unchanged sentences

shares issued

February 5, 2021

April 23, 2021

January 24, 2022

July 22, 2022

6 unchanged sentences

Financial Data, and Supplementary Financial Information.

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should

be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere

in this Annual Report on Form 10-K.

Overview and Investment Framework

Kayne Anderson BDC, LLC was formed in May

2018 as a Delaware limited liability company.

We were formed to make investments in middle-market companies and commenced operations

on February 5, 2021.

On this same date, prior to our election to be regulated as a BDC under the 1940 Act, we 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.

We are an externally managed, closed-end, non-diversified management investment company that has elected

to be regulated as a BDC under the 1940 Act.

In addition, for U.S.

federal income tax purposes, we intend to qualify, annually, as a

RIC under Subchapter M of the Code.

We are managed by KA Credit Advisors, LLC

(the “Advisor”) which 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.

Our investment objective is to generate current

income and, to a lesser extent, capital appreciation primarily through debt investments in middle-market companies.

We define “middle-market

companies”

as U.S.-based companies that, in general, generate between $10 million and $150 million of annual earnings

before interest, taxes, depreciation and amortization, or EBITDA.

We refer to companies that generate between $10 million and $50 million

of annual EBITDA as “core middle-market companies”

and companies that generate between $50 million and $150 million

of annual EBITDA as “upper middle-market companies.”

We intend to achieve our investment objective

by investing primarily in first lien senior secured, unitranche and split-lien loans (collectively, “secured middle market loans”)

to privately held middle-market companies.

Similar to first lien senior secured loans, unitranche loans typically have a first lien on

all assets of the borrower, but provide leverage at levels similar to a combination of first lien and second lien and/or subordinated

Split-lien loans are loans that otherwise satisfy the criteria of a first lien loan but which have been structured with a credit

facility that is senior in right of payment with respect to working capital assets of the borrower and a term loan that is collateralized

by all other assets of the borrower.

Depending on market conditions, we expect that at least 90% of our portfolio (including investments

purchased with proceeds from borrowings) will be invested in secured middle market loans.

It is anticipated that most of these investments

will be in core middle market companies, with the remainder in upper middle market companies.

The remaining 10% of our portfolio may be

invested in higher-returning investments, including, but not limited to, equity securities purchased in conjunction with secured middle

market loans and other opportunistic investments (collectively “Opportunistic Investments”), including junior debt, real estate

debt and infrastructure credit investments.

We expect that the secured middle market loans we invest in will generally have stated maturities

of no more than six years.

We intend to implement our investment objective

by (1) accessing the established loan sourcing channels developed by Kayne Anderson’s middle market private credit team, which

includes an extensive network of private equity firms, other middle-market lenders, financial advisors and intermediaries, and management

teams, (2) selecting investments within our middle-market company focus, (3) implementing Kayne Anderson’s middle market

private credit team’s proven underwriting process, and (4) drawing upon the experience and resources of our Advisor’s

investment team and the broader Kayne Anderson network.

We believe our Advisor’s disciplined approach to origination,

credit analysis, portfolio construction and risk management should allow us to achieve attractive risk-adjusted returns while preserving

investor capital.

We anticipate the portfolio will be comprised of a broad mix of loans, with diversity among investment size, industry

focus and geography.

The Advisor’s team of professionals will conduct in-depth due diligence on prospective investments during the

underwriting process and will be heavily involved in structuring the credit terms of each investment.

Once an investment has been made,

our Advisor will closely monitor portfolio investments and take a proactive approach identifying and addressing sector or company specific

The Advisor maintains a regular dialogue with portfolio company management teams (as well as their financial sponsors, where applicable),

reviews detailed operating and financial results on a regular basis (typically monthly or quarterly) and monitors current and projected

liquidity needs, in addition to other portfolio management activities.

Recent Developments

On January 24, 2022, we sold 4.2 million shares

of common stock at a price of $16.36 per share for an aggregate offering amount of $68.6 million.

As of the same date, we have subscription

agreements with investors for an aggregate capital commitment of $701.5 million (including a $33.3 million capital commitment that is

contingent on the Company meeting certain conditions) to purchase shares of common stock ($333.4 million of the commitments are undrawn).

On January 31, 2022, we increased our Subscription

Credit Agreement commitment amount from $150 million to $175 million.

All other terms of the Subscription Credit Agreement remain substantially

On February 18, 2022, we and KABDCF refinanced

the senior secured credit facility (the “Loan and Security Agreement”

or “LSA”) with two new credit facilities

the Corporate Credit Facility and the Revolving Funding Facility.

Financial Condition, Liquidity and Capital Resources

Credit Facilities .”

Portfolio and Investment Activity

As of December 31, 2021, we had 99 debt investments and one equity

investment in 47 portfolio companies with an aggregate fair value of approximately $578.4 million and an amortized cost of $566.6 million

consisting of first lien senior secured debt and equity investments.

Listed below are our top ten portfolio companies and industries represented

as a percentage of total long-term investments as of December 31, 2021:

Portfolio Company

($ in millions)

4 Over International, LLC

Commercial & professional services

Corbett Technology Solutions, Inc.

Telecommunication services

American Equipment Holdings LLC

Commercial & professional services

Eastern Wholesale Fence

Capital goods

Centerline Communications, LLC

Telecommunication services

Arborworks Acquisition LLC

Commercial & professional services

Home Brands Group Holdings, Inc.

Household & personal products

Images Acquisition, LLC

Capital goods

CGI Automated Manufacturing, LLC

Capital goods

As of December 31, 2021, our weighted average

total yield to maturity of debt and income producing securities at fair value was 7.5%, and our weighted average total yield to

maturity of debt and income producing securities at amortized cost was 7.7%.

Our investment activity for the year ended December 31, 2021 is presented

below (information presented herein is at par value unless otherwise indicated).

For the year ended

($ in millions)

New investments:

Gross investments

sold investments

Total new investments

Principal amount of investments funded:

Private credit investments

Liquid credit investments

Total principal amount of investments funded

Principal amount of investments sold:

Private credit investments

Liquid credit investments

Total principal amount of investments sold or repaid

Number of new investment commitments

Average new investment commitment amount

Weighted average maturity for new investment commitments

Percentage of new debt investment commitments at floating rates

Percentage of new debt investment commitments at fixed rates

Weighted average interest rate of new investment commitments

Weighted average spread over LIBOR of new floating rate investment commitments

Weighted average interest rate on investment sold or paid down

The table below describes long-term investments

by industry composition based on fair value as of December 31, 2021:

Commercial & professional services

Capital goods

Consumer durables & apparel

Telecommunication services

Health care equipment & services

Household & personal products

Automobiles & components

Food & beverage

Software & services

Pharmaceuticals, biotech & life sciences

Diversified financials

Results of Operations

We commenced investment operations on February 5, 2021.

ended December 31, 2021, our total investment income was derived from our initial portfolio of investments.

All investments were income

producing, and there were no loans on non-accrual status as of December 31, 2021.

The following table represents the operating

results for the years ended December 31, 2021 and 2020:

For the years ended

($ in millions)

Total investment income

Net investment income

Net realized gains (losses) on investments

Net change in unrealized gains (losses) on investments

Net increase (decrease) in net assets resulting

from operations

Investment Income

Investment income for the year ended December

31, 2021 totaled $18.8 million and consisted primarily of interest income on our debt investments.

We commenced investment operations on

February 5, 2021.

Operating expenses for the years ended December 31, 2021 and 2020, were as follows:

For the years ended

($ in millions)

Interest and debt financing expenses

Management fees

Other operating expenses

Directors fees

Initial organization costs

Deferred offering costs

Incentive fees

Total expenses

Total expenses for the years ended December 31, 2021 and 2020 included

$0.2 million and $0.8 million of initial organization expenses, respectively, and $0.2 million and zero of deferred offering costs, respectively.

Net Unrealized Gains (Losses) on Investments

We fair value our portfolio investments quarterly and any changes in

fair value are recorded as unrealized gains or losses.

We commenced investment operations on February 5, 2021.

As such, there are no unrealized

gains or losses for the year ended December 31, 2020.

During the year ended December 31, 2021, net unrealized gains (losses) on our investment

portfolio were comprised of the following:

For the year ended

($ in millions)

Unrealized gains on investments

Unrealized (losses) on investments

Net change in unrealized gains (losses) on investments

The change in unrealized appreciation for

the year ended December 31, 2021 totaled $11.8 million, which primarily related to our investments in the following table:

For the year ended

($ in millions)

Portfolio Company

Eastern Wholesale Fence

4 Over International, LLC

Corbett Technology Solutions, Inc.

Arborworks Acquisition LLC

American Equipment Holdings LLC

Curio Brands, LLC

EIS Legacy, LLC

CGI Automated Manufacturing, LLC

Centerline Communications, LLC

Home Brands Group Holdings, Inc.

SGA Dental Partners Holdings, LLC

Guardian Dentistry Partners

Sundance Holdings Group, LLC

PH Beauty Holdings III, Inc.

Siegel Egg Co., LLC

Vehicle Accessories, Inc.

BCI Burke Holding Corp.

Broder Bros., Co.

United Safety & Survivability Corporation (USSC)

Other portfolio companies

Total Unrealized Appreciation

Financial Condition, Liquidity and Capital

Our liquidity and capital resources are generated

primarily from the net proceeds of any offering of our Shares, proceeds from borrowing on our credit facilities and from cash flows from

interest and fees earned from our investments and principal repayments and proceeds from sales of our investments.

Our primary use of

cash will be investments in portfolio companies, payments of our expenses, repayments of borrowed amounts and payment of cash distributions

to our stockholders.

In accordance with the 1940 Act, we are required

to meet a coverage ratio of total assets (less total liabilities other than indebtedness or other senior securities) to total indebtedness

and other senior securities of at least 150%.

If this ratio declines below 150%, we cannot incur additional leverage and could be required

to sell a portion of our investments to repay some leverage when it is disadvantageous to do so.

As of December 31, 2021, our asset coverage

ratio was 217%.

We currently intend to target asset coverage of 200% to 180% (which equates to a debt-to-equity ratio of

1.0x to 1.25x) but may alter this target based on market conditions.

Over the next twelve months, we expect that cash and cash equivalents,

taken together with our undrawn capital commitments and available capacity under our credit facilities, will be sufficient for our investing

activities to conduct our operations.

In the long term beyond twelve months, we expect that our cash and liquidity needs will continue

to be met by cash generated from our ongoing operations as well as financing activities.

As of December 31, 2021, we had $267 million

borrowed under our credit facilities and cash and cash equivalents of $5.7 million (including short-term investments).

As of March 4,

2022, we had $235 million borrowed under our credit facilities and cash and cash equivalents of $4.5 million (including short-term investments).

Capital Contributions

As of March 4, 2022, we had aggregate capital

commitments of $701.5 million (including a $33.3 million capital commitment that is contingent on us meeting certain conditions).

March 4, 2022, we had undrawn capital commitments (excluding the $33.3 million capital commitment that is contingent on us meeting certain

conditions) of $300.1 million from investors ($368.1 million or 55.1% funded).

Credit Facilities

From February 5, 2021 to February 17, 2022,

Kayne Anderson BDC Financing, LLC, (“KABDCF”), our wholly owned, special purpose financing subsidiary, had a senior secured

credit facility (the “Loan and Security Agreement”

or “LSA”) with a maximum commitment amount of up to $200 million.

On February 18, 2022, we and KABDCF refinanced the LSA with two new credit facilities described below (the Corporate Credit Facility and

the Revolving Funding Facility).

Corporate Credit Facility:

to a senior secured revolving credit facility (the “Corporate Credit Facility”), that has a total commitment of $275 million.

The 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 us, under certain circumstances, to increase the overall size of

the Corporate Credit Facility to a maximum of $550 million.

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”

defined in the agreements governing the Corporate Credit Facility) plus an applicable spread of 1.25%.

We are also required to pay a commitment

fee of 0.375% per annum on any unused portion of the Corporate Credit Facility.

Revolving Funding Facility:

We and our wholly owned, special

purpose financing subsidiary, KABDCF, are party to a senior secured revolving funding facility (the “Revolving Funding Facility”),

that has a total commitment of $250 million.

The Revolving Funding Facility is secured by all of the assets held by, and the membership

interest in, 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.

Subscription Credit Agreement:

party to a senior secured revolving credit agreement that includes a capital call facility (the “Subscription Credit Agreement”).

The Subscription Credit Agreement permits us to borrow up to $175 million, subject to availability under the borrowing base which

is calculated based on the unused capital commitments of the investors meeting various eligibility requirements.

The Subscription Credit

Agreement has a maximum commitment of $175 million and the interest rate under the facility is equal to Term SOFR plus 1.975% (subject

to a 0.275% floor).

We are also required to pay a commitment fee of 0.25% per annum on the unused portion of the Subscription Credit Agreement.

The Subscription Credit Agreement will expire on December 31, 2022.

Contractual Obligations

A summary of our significant contractual principal

payment obligations related to the repayment of our outstanding indebtedness at December 31, 2021 is as follows:

Payments Due by Period ($ in millions)

Loan and Security Agreement (LSA)

Subscription Credit Agreement

Total contractual obligations

Off-Balance Sheet Arrangements

As of December 31, 2021, we had an aggregate

$97.8 million of unfunded commitments to provide debt financing to our portfolio companies.

Such commitments are generally subject to

the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of

the amount recognized in our financial statements.

Other than contractual commitments and other legal contingencies incurred in the normal

course of our business, we do not have any other off-balance sheet financings or liabilities.

Critical Accounting Estimates

The preparation of our consolidated financial

statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual

results to differ.

Our critical accounting policies, including those relating to the valuation of our investment portfolio, are described

The critical accounting policies should be read in conjunction with our risk factors in this Annual Report.

See Note 2 to

our consolidated financial statements for the year ended December 31, 2021, for more information on our critical accounting policies.

Investment Valuation

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 our Advisor, fair market value will be determined using our valuation process for investments

that are privately issued or otherwise restricted as to resale.

We may also invest, to a lesser extent, in

equity securities purchased in conjunction with debt investments.

While we anticipate these equity securities to be issued by privately

held companies, we 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.

Non-Traded Investments

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 our Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides a price that in

the judgment of our 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.

We expect that a significant majority of our investments will be Level 3 investments.

Unless otherwise determined by the Board, the following valuation process is used for our Level 3 investments:

Investment Team Valuation .

The applicable

investments are valued by senior professionals of Kayne Anderson who are responsible for the portfolio investments.

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 .

valuation conclusions will be determined by our executive officers.

Such valuation and supporting documentation is submitted to the

Audit Committee (a committee of our Board) and our 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,

our executive officers are authorized to make valuation determinations.

All valuation determinations of the Audit Committee are subject

to ratification by our Board at its next regular meeting.

Valuation Firm .

Quarterly, third-party valuation

firms engaged by our Board review the valuation methodologies and calculations employed for each of our investments that we have

placed on the “watch list”

and approximately 25% of our 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.

We expect 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 .

Our Board meets quarterly

to consider the valuations provided by our executive officers and the Audit Committee and ratify valuations for the applicable investments.

Our 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 is ultimately responsible

for the determination, in good faith, of the fair value of our portfolio investments.

Refer to Note 5 –

Fair Value –

for more information on

the Company’s valuation process.

Revenue Recognition

We record interest income on an accrual basis

to the extent that we expect to collect such amounts.

For loans and debt securities with contractual PIK interest, which represents contractual

interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio

company valuation indicates that such PIK interest is not collectible.

We do not accrue as a receivable interest on loans and debt securities

for accounting purposes if we have reason to doubt our ability to collect such interest.

OIDs, market discounts or premiums are accreted

or amortized using the effective interest method as interest income.

We record prepayment premiums on loans and debt securities as interest

Related Party Transactions

Investment Advisory Agreement .

February 5, 2021, we entered into the Investment Advisory Agreement with our Advisor.

Our Advisor will agree to serve as our investment

advisor in accordance with the terms of our Investment Advisory Agreement.

Payments under our Investment Advisory Agreement in each reporting

period will consist of the base management fee equal to a percentage of the fair market value of 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 as well as an incentive fee based on our performance.

For services rendered under the Investment

Advisory Agreement, we will pay a base management fee quarterly in arrears to our Advisor based on the of the fair market value of our

investments including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S.

securities and commercial paper instruments maturing within one year of purchase.

We will also pay an incentive fee on income and an

incentive fee on capital gains to our Advisor.

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 proceeds from a Company Liquidation payable to the Company’s common

stockholders have been distributed to such stockholders.

Administration Agreement.

5, 2021, we entered into an Administration Agreement with our Advisor, which serves as our Administrator pursuant to which the Administrator

will furnish us with administrative services necessary to conduct our day-to-day operations.

The Administrator will be reimbursed for

administrative expenses it incurs on our behalf in performing its obligations.

Such reimbursement may be made for our allocable portion

(subject to the review and approval of our independent directors) of office facilities, overhead, and compensation paid to or compensatory

distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and their respective staff

who provide services to us.

As we reimburse the Administrator for its expenses, we will indirectly bear such cost.

The Administrator

Bank Global Fund Services under a sub-administration agreement to assist the Administrator in performing certain of its

administrative duties.

The Administrator may enter into additional sub-administration agreements with third-parties to perform other

administrative and professional services on behalf of the Administrator.

On February 5, 2021, we purchased our

initial portfolio of investments for $103 million from an affiliate of our Advisor (the “Warehousing Entity”) with a portion

of the proceeds from the sale of common stock together with borrowings under our credit facility.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity