A credit support agreement is a legal arrangement that makes a borrower’s promises more reliable by adding a safety net — typically collateral, a guarantee, or other pledge — that the lender can use if the borrower fails to pay. For investors, it matters because such agreements lower the chance of loss, improve a borrower’s borrowing terms, and change the likely recovery if a company runs into financial trouble, which affects credit risk and valuation.
fair valuefinancial
Fair value is an estimate of what an asset or company is really worth today, derived from expected future earnings, comparable market prices and other relevant facts—like agreeing a price for a used car after checking mileage, condition and similar listings. Investors use fair value to decide whether a stock looks overpriced or undervalued, which helps guide buy, hold or sell decisions and sets expectations for potential returns and risk.
An unrealized loss is the drop in value of an investment that you still own — it's a loss on paper, not one you've locked in by selling. It matters to investors because it changes the reported worth of a portfolio and can influence decisions about holding, selling, or rebalancing; like seeing a car’s resale value fall while you still drive it, the loss only becomes permanent if you sell.
business development companyfinancial
A business development company is a publicly traded investment vehicle that lends to and buys stakes in smaller or privately held companies, acting like a combination of a lender, investor, and business partner. It matters to investors because BDCs offer the potential for higher regular income through dividends and diversified exposure to growing businesses, but they can also carry greater credit and liquidity risk than typical stocks or bonds—think higher-yielding but riskier income instruments.
assets under managementfinancial
Assets under management (AUM) is the total value of all the investments that a financial company or fund is responsible for overseeing on behalf of its clients. It’s like a big bucket that shows how much money the firm is managing for people or organizations. A higher AUM often indicates a larger, more trusted company, and it can influence how much money they earn and the services they can offer.
senior secured loansfinancial
Senior secured loans are debt agreements where lenders have first claim on specific assets as collateral and are paid back before other creditors if a borrower defaults. For investors, that priority and collateral generally make these loans less risky than unsecured or junior debt while still offering higher income than cash, like holding a first mortgage on a property rather than an unsecured IOU, and they often carry floating interest that helps protect against rising rates.
Investment Company Act of 1940regulatory
A U.S. federal law that sets the rulebook for pooled investment vehicles such as mutual funds, exchange-traded funds and similar money managers, requiring them to register with regulators, disclose holdings and fees, limit conflicts of interest, and follow governance standards. It matters to investors because these protections and transparency rules act like a referee and scoreboard, helping people compare funds, trust that managers follow fair practices, and spot hidden costs or risks.
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CHARLOTTE, N.C.--(BUSINESS WIRE)--
Barings BDC, Inc. (NYSE: BBDC) (“Barings BDC” or the “Company”) today announced the early termination of its existing credit support agreement (“original CSA”) associated with the Company’s acquisition of Sierra Income Corporation (“Sierra”), and the implementation of a new credit support agreement covering the remaining investments in two Sierra legacy portfolio companies.
The original CSA, entered into on February 25, 2022 in connection with the Sierra merger, provided up to $100 million of credit protection to Barings BDC shareholders against losses on the investments acquired by Barings BDC in the Sierra merger. Under the terms of the termination and cancellation agreement executed May 29, 2026, Barings LLC (“Barings”), the Company’s investment advisor, will make a cash payment of $67.0 million to Barings BDC with respect to investments covered by the CSA that (i) have been realized, (ii) have a fair value of $500,000 or less (treating them as if they have a fair value of zero), or (iii) are in an unrealized loss position (with the cash payment equaling the aggregate unrealized losses recorded), in each case, as of the execution date. All unrealized investments covered by the CSA are currently in an unrealized loss position. The cash payment will be made on or before June 30, 2026. This cash payment fully satisfies the credit support obligation for those investments (or, in the case of investments in an unrealized loss position, the unrealized loss portions thereof) and results in the termination and extinguishment of the original CSA.
Concurrently, Barings BDC and Barings entered into a new, more targeted credit support agreement, which provides continued downside protection for the remaining investments in two Sierra legacy portfolio companies that have not yet been realized in an amount equal to the fair value of such investments as of the execution date (i.e., given that the cash payment covered all unrealized losses on such investments as of such date).
“This transaction represents a meaningful milestone in the successful resolution of the Sierra portfolio and further simplifies our capital structure,” said Tom McDonnell, Chief Executive Officer of Barings BDC. “Importantly, the receipt of approximately $67.0 million of proceeds provides us with incremental capital that we can redeploy into income producing investments consistent with our strategy now, rather than waiting until after the original CSA’s settlement date in 2032. We believe this reinvestment opportunity will enhance our earnings power and support improved return on equity for our shareholders, while maintaining targeted downside protection on the remaining Sierra assets.”
Forward-Looking Statements
Statements included herein may constitute “forward-looking statements,” which relate to future events or Barings BDC’s future performance or financial condition. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management’s current estimates, projections, expectations or beliefs, and which are subject to risks and uncertainties that may cause actual results to differ materially. Forward-looking statements include, but are not limited to, the Company’s ability to efficiently and prudently redeploy the cash payment from Barings into income producing investments to enhance the Company’s earnings power and support improved return on equity for its shareholders. More information on the risks and other potential factors that could affect Barings BDC’s financial results and future events, including important factors that could cause actual results or events to differ materially from plans, estimates or expectations included herein is included in Barings BDC’s filings with the Securities and Exchange Commission, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Barings BDC’s most recently filed annual report on Form 10-K, as well as in subsequent filings, including Barings BDC’s quarterly reports on Form 10-Q.
About Barings BDC
Barings BDC, Inc. (NYSE: BBDC) is a publicly traded, externally managed investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. Barings BDC seeks to invest primarily in senior secured loans in middle-market companies that operate across a wide range of industries. Barings BDC’s investment activities are managed by its investment adviser, Barings, a leading global alternative asset manager based in Charlotte, NC with $481 billion* of AUM firmwide. For more information, visit www.baringsbdc.com.
About Barings
Barings is a $481 billion* global alternative asset manager that partners with institutional, insurance, and wealth clients, and supports leading businesses with flexible financing solutions. The firm, which is owned by insurance companies MassMutual and MS&AD, seeks to deliver excess returns by leveraging its global scale and capabilities across credit, real assets, capital solutions and emerging markets. Learn more at www.barings.com.
