KBRA Affirms Ratings for Bain Capital Specialty Finance, Inc.

KBRA affirms the issuer and senior unsecured debt ratings of BBB for Bain Capital Specialty Finance, Inc. ("BCSF" or "the company"). The rating Outlook is Stable.

Key Credit Considerations

The ratings and Stable Outlook are supported by BCSF’s ties to the ~$60 billion Bain Capital Credit ("BCC") credit platform, including ~$20 billion dedicated to private credit as of September 30, 2025, along with SEC exemptive relief to co-invest in other funds managed by BCSF’s adviser and its affiliates. BCC's solid management team has a long track record working in private credit markets dating back to the mid-1990s, with BCC’s platform providing a 28-year history of strong credit performance through economic cycles. Also supporting the rating is BCSF’s well-diversified investment portfolio comprised largely of senior secured first lien loans at 64.6% (84.7% on a look-through to the joint ventures ("JV")) to 195 portfolio companies across 30 sectors, exclusive of investments in JVs, most in the core middle market with median EBITDA of $46 million as of 3Q25. The top three portfolio sectors, when excluding JV investments, are High Tech Industries (14.0%), Business Services (11.9%), and Aerospace & Defense (10.9%). Credit quality is solid with non-accrual investments of 1.5% and 0.7% at cost and fair value, respectively, at 3Q25, consistent with rated peers.

The company’s funding profile is well diversified, consisting of a secured revolving bank facility, a CLO, and unsecured notes. Unsecured debt to total debt was 63.4% as of 3Q25, providing the company with financial flexibility and less asset encumbrance for the benefit of senior unsecured noteholders. As of September 30, 2025, liquidity was adequate with $457 million of bank credit availability and $86.8 million of cash and cash equivalents, including cash denominated in foreign currency, including short-term restricted cash for purposes of investment, set against $600 million of near-term senior unsecured debt ($300 million due in March 2026 and $300 million in October 2026) and $493.6 million of unfunded commitments. A proportion of the unfunded commitments are tied to transactions and/or negative covenants and are not expected to be drawn. BCSF intends to use proceeds from its two recent senior unsecured issuances (January 2025 and January 2026) and the revolver to pay down the senior unsecured notes with 2026 maturities.

The strengths are counterbalanced by BCSF’s somewhat elevated leverage at 1.33x (1.25x net of cash, within the company's 1.0x-1.25x target net range) which the company anticipates will decline with loan repayments over the next several quarters. Furthermore, leverage is further increased when accounting for the company’s JV investments but is somewhat offset by the high proportion of first lien senior secured loans within the JVs (98+%). Further counterbalancing strengths are retained earnings constraints as a regulated investment company ("RIC") and uncertain economic environment with high base rates, inflation, and geopolitical risks.

BCSF is an externally managed, non-diversified, investment management company that elected to be treated as a Business Development Company (BDC) under the 1940 Act and as a RIC, which, among other things, must distribute to its shareholders at least 90% of the company’s investment taxable income. The company was formed as a Delaware Corporation in October 2015 and was publicly listed on the NYSE in November 2018. The company is managed by BCSF Advisors LP, a wholly owned subsidiary of Bain Capital Credit, which is a wholly owned subsidiary of Bain Capital, LP, which had $215+ billion of AUM as of September 30, 2025.

Rating Sensitivities

Given the Stable Outlook, a rating upgrade is not expected over the medium term. Negative rating action is possible if leverage remains elevated for a sustained period with declining credit metrics, including within joint ventures, that could pressure capital and liquidity. A prolonged downturn in the U.S. economy that has impact on performance and non-accrual investments that significantly affect capital, leverage, and liquidity metrics would also negatively impact the rating/Outlook.

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