Greetings. At this time, I would like to welcome everyone to the Barings BDC, Inc. conference call for the quarter and year ended December 31, 2021. All participants are in a listen-only mode. A question and answer session will follow the company's formal remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Today's call is being recorded, and a replay will be available approximately two hours after the conclusion of the call on the company's website at www.baringsbdc.com under the investor relations section. Please note that this call may contain forward-looking statements that include statements regarding the company's goals, beliefs, strategies, future operating results, and cash flows. Although the company believes these statements are reasonable, actual results could differ materially from those projected in forward-looking statements.
These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the sections titled Risk Factors and Forward-Looking Statements in the company's annual report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission. Barings BDC undertakes no obligation to update or revise any forward-looking statements unless required by law. At this time, I will turn the call over to Eric Lloyd, Chief Executive Officer of Barings BDC.
Thank you, Hillary, and good morning, everyone. We appreciate you joining us for today's call, and I hope you and your families are doing well and staying healthy. Please note that throughout today's call, we'll be referring to our fourth quarter 2021 earnings presentation that is posted on the investor relations section of our website. On the call today, I'm joined by Barings BDC's President and Barings Co-Head of Global Private Finance, Ian Fowler; Bryan High, Barings Head of U.S. Special Situations and Co-Portfolio Manager; and the BDC's Chief Financial Officer, Jonathan Bock. As we typically do, Ian, Bryan, and Jon will review details of our portfolio and fourth quarter results in a moment. I'll start off with some high-level comments about the quarter. As you may have guessed with our reported dividend increase on February 1 in yesterday's filings, it was an extremely active quarter.
We experienced record originations, issued our first public investment-grade bond issuance, announced a dividend increase, and continued to work towards close of the Sierra Income Corporation acquisition by the end of this month. The timing of this call also affords us the opportunity to provide greater visibility into the first quarter of 2022, and you'll see that the strong finish to 2021 continues into the new year. Let's begin with the market backdrop shown on slide five of the presentation. The backdrop remained largely the same in the fourth quarter, with elevated broadly syndicated loan prices, tighter credit spreads, and strengthening BDC equity prices. Markets remain competitive, and we expect these competitive forces to intensify as demand for floating rate assets increases, particularly as a result of rising interest rate environment. Jump to the fourth quarter highlights on slide six.
Net asset value per share was $11.36 a share, compared to the prior quarter of $11.40 a share. Our net investment income remained $0.23 per share, driven by strong capital deployments as well as accelerated fees and OID from prepayments. It's important to note the underlying stability of our net interest income is further enhanced by our incentive fee structure as our earnings continue to exceed our 8% hurdle and remain in the investment catch-up. As a result of these trends, our board elected to increase our fourth quarter dividend to $0.23 per share, equating to an 8.1% yield on our net asset value of $11.36. Regarding new investments, we had originations of $671 million in the fourth quarter.
This was offset by $453 million of sales and prepayments, $198 million of which were sold to one of the JVs. Our investment portfolio continued to perform well in the fourth quarter, with no new Barings loans on nonaccrual, and remains valued above original cost. We had one new nonaccrual investment from the acquired MVC portfolio, equating to approximately 2.2% of cost. Ian will highlight later our focus on select asset sales and restructurings in the acquired MVC portfolio as we continue to maximize shareholder value while benefiting from the protection added by the credit support agreement. Slide seven outlines summary financial highlights for the quarter. In the fourth quarter, heightened investment activity, increased dividend distributions, and associated portfolio velocity continued to drive total investment income and net investment income higher, both on an absolute and a per share basis.
Net unrealized appreciation was $1.9 million associated with select marks on the investment portfolio, and realized losses totaled $1.8 million, which was primarily driven by our foreign currency hedges. Net leverage, which is leverage net of cash, short-term investments, and unsettled transactions, was 1.49x and remained above our target range of 0.9x-1.25x . Our announced merger with Sierra is scheduled to close this quarter. In pro forma for the Sierra transaction, net leverage will be approximately 1x. I will not outline details of that transaction on this call today and would direct any interested investors to our proxy statement that was filed on October 29.
That said, this transaction is on track to close inside the time period we have discussed, and it further advances Barings BDC towards the strong growth opportunities we have at Barings globally. We remain a leader in our core markets with an extremely wide frame of reference that allows us to be selective when competitive forces increase. Our commitment to investor alignment exhibited by our incentive fee structure provides an earnings cushion against unforeseen events when our net investment income exceeds our soon-to-be-increased 8.25% hurdle rate. Recall, a decline in earnings caused by nonaccrual loans or having to refinance assets at lower yields would first result in a lower incentive fee, insulating investors from those negative items. I'll now turn the call over to Ian to provide an update on the market and our investment portfolio.
Thanks, Eric, and good morning, everyone. If you turn to slide nine, you can see additional details on the investment activity that Eric mentioned. Our middle market portfolio increased by $66 million on a net basis in the quarter, with gross fundings of $503 million, offset by sales and repayments of $437 million. New middle market investments included 44 new platform investments totaling $375 million and $128 million of follow-on investments and delayed draw term loan fundings. We also had $152 million of net new cross-platform investments in the quarter. We continue to believe portfolio repayments will remain elevated across the market and in the fourth quarter. Barings BDC experienced an increase in repayments along with associated fee income acceleration.
Of our $437 million in middle market sales and repayments/prepayments, $86 million was associated with full repayments this quarter, $2 million was from partial pay downs, and the remaining $346 million were sales. Recall joint venture sales enable us to increase portfolio diversification while maintaining a prudent leverage profile at Barings BDC. Slide 10 updates the data we show you each quarter on middle market spreads across the capital structure. As Eric mentioned, the potential for a rising interest rate environment leads to an increased demand for floating rate private credit assets. As one would expect, market conditions remain competitive as evidenced by spread compression, loosening terms and higher leverage levels, all while the private credit markets experience record investment originations. Turn to slide 11.
As we outlined last quarter and continuing in the fourth quarter, unitranche executions remain near all-time spread tights when compared to first lien, second lien traditional structures, and the level of cov-lite unitranche volume again was an all-time record. This is simply a symptom to the wider problem associated with substantial capital inflows into private credit, and I don't expect it to slow down anytime soon. A bridge of our investment portfolio from September 30 to December 31 is shown on slide 12. On slide 13, you will see a breakdown of the key components of our investment portfolio on December 31. As we have discussed in the past, the goal of this slide is to provide details on the three key categories of our portfolio, which are now middle market portfolio, the legacy MVC Capital portfolio, and our cross-platform investments.
The middle market portfolio remains our core focus and continues to grow. It makes up 66% of our portfolio in terms of total investments at fair value and 66% of our portfolio in terms of revenue contribution. Our middle market exposure is heavily diversified among obligors of 168 portfolio companies with a geographic diversification across the U.S., Europe and APAC regions. Underlying yields on our middle market investment portfolio of 6.8% and weighted average first lien leverage of 5.5x remain reflective of our boring is beautiful approach to credit.
In addition to our middle market exposure, we continue to draw upon Barings' wide investment frame of reference and complement our core portfolio with $150 million of investments in the legacy MVC Capital portfolio and $470 million of cross-platform investments, which have yields at fair value of 10.4% and 9.2% respectively. As mentioned earlier, two of the legacy MVC assets were on nonaccrual at quarter end. Additionally, we report first quarter results, so Sierra assets will be included here. However, let me give you some high-level data points on the Sierra portfolio. Recall as of June 30, Sierra had $630 million of investments. As a result of elevated M&A activity in 2021, the portfolio experienced total repayments of $153 million since we announced the transaction.
The repayments were first used to eliminate all Sierra debt outstanding and subsequently added to the acquired cash balance. The current $460 million portfolio spread across 66 obligors, the majority of which is first lien. The average spread is 687 basis points for a total yield of 7.7%. The total portfolio had approximately $16 million at fair value on nonaccrual and will be supported by a $100 million CSA. Turning to the Barings portfolio, no Barings directly originated loans are on nonaccrual, and the total portfolio had no material modifications to cash payment terms of our debt investments during the quarter. Our investment portfolio is now made up of 68% first lien assets. Slide 14 provides a further breakdown of the portfolio from a seniority perspective.
The core Barings originated portfolio, which makes up 92% of our funded investments, is 74% first lien. This is down from 80% last quarter, driven largely by investments into income-producing equity and joint ventures. The MVC portfolio is comprised primarily of equity, second lien and mezzanine debt investments, which brings the first lien component of the total portfolio down to 68%. Our top 10 investments are shown on slide 15. Our largest investment is 5.5% of the total portfolio, and the top 10 investments represent 24% of the total portfolio. Pro forma for the Sierra acquisition, we estimate the top 10 investments will represent 19% of the portfolio. Recall our largest investment, Eclipse Business Capital, is backed by a large portfolio of asset-backed loans conservatively structured inside of the collateral net liquidation value.
The overall portfolio remains diverse from an industry perspective as well, with 212 investments spread across 29 industries. I'll summarize my market comments by saying Barings' broad investment scope across geographies and our scaled origination platform further drive our ability to generate attractive direct lending returns. Since the formation transaction in 2018, Barings BDC has deployed $2.5 billion into Barings-originated middle market transactions with no nonaccruals. That's an achievement we are particularly proud of when one considers the COVID-related pressures of 2020. This isn't to say we simply want to rest on our laurels. As the private and direct lending competition elevates, we will continue to drive unique risk-adjusted return investing inside of our asset or collateral value with our cross-platform investments.
Furthermore, our cross-platform investments allow Barings BDC to create an optimal and unique asset mix that is not replicable in the current market. We complement this unique portfolio with our aligned fee structure to drive strong shareholder returns. As I've said before, being unique is endemic to our culture and our platform, and I believe it is a key ingredient to achieving long-term success. I'll now turn the call over to Jon to provide additional color on our financial results. Jon?
Thanks, Ian. Turning to slide 17, here's a full bridge of net asset value per share movement in the third quarter. Our net investment income outpaced our dividend by $0.01 per share. Net realized gains and losses on our investment portfolio and foreign currency transactions drove a decrease of $0.03 per share, while our unrealized depreciation totaled $0.03 per share. Additional details on this net unrealized appreciation depreciation are shown on slide 18. On the middle market portfolio, price appreciation and credit performance netted to $2 million of appreciation. Our cross-platform investments saw total appreciation of approximately $8 million, largely driven by very strong operating performance in Thompson Rivers' joint venture and Eclipse, our wholly owned asset-based lender.
Recall in an effort to drive both dividend income and NAV appreciation, Barings chooses to target an 8% dividend distribution on both of these investments despite earning a ROE well above that level, which results in current NAV and price appreciation. The legacy MVC portfolio saw total net unrealized depreciation of $11 million associated with the expected restructuring of two investments on nonaccrual. Near the bottom of slide 18, you can see the credit support agreement increased approximately $1 million from last quarter. A logical question would be, why do we have $11 million of unrealized depreciation on the legacy MVC portfolio and only $1 million of appreciation on the credit support agreement as the CSA is intended to offset the losses in the legacy MVC portfolio? The value of the CSA is determined based on a long-term view of potential outcomes for the legacy MVC portfolio.
While at any quarter end, the value of those investments can fluctuate, particularly in positions that we plan to restructure, the longer-term view of the portfolio could lead to a different valuation outcome. The valuation of the CSA this quarter not only takes into account the current valuations of the debt investments, but also the benefits of future equity realization above our cost. Slide 19 and 20 show our income statement and balance sheet for the last five quarters. As we've discussed, our net investment income per share increased to $0.23 for the quarter, driven by a $1.6 million increase in total investment income. Higher dividend income associated with our investment in Eclipse Business Capital and two of our joint venture investments, as well as increase in accelerated fees and OID on repayments drove this increase.
The increase in total investment income was partially offset by higher interest and financing fees, which rose as a result of the increased borrowing levels. The fourth quarter also saw the payment of an incentive fee to the manager as pre-incentive fee net investment income exceeded our 8% hurdle rate. From a balance sheet perspective on slide 20, total debt to equity was 1.86x at December 31. Now, although this level was artificially high, given the timing of certain asset sales and was 1.49x after adjusting for cash equivalents, and unsettled transactions. Turning to slide 21, you can see how our funding mix ties to our asset mix, both in terms of seniority and asset class.
Compared to the end of 2020, our reliance on secured bank debt has decreased, coinciding with increases to our unsecured debt and private placements, which now are over $700 million as we've continued to diversify the balance sheet to match our diverse portfolio of assets. Details on each of our borrowings are shown on slide 22, which show the evolution of our debt profile over the last three quarters. We continue to have an additional commitment to raise up to 25 million of unsecured debt, plus we have available borrowing capacity under $875 million senior secured credit facility. Furthermore, on November 18, Barings BDC issued its first public unsecured investment grade bond, raising $350 million at a T+225 spread.
Jumping to slide 23, you can see the impact to our net leverage using our available liquidity to fund our unused capital commitments. Barings BDC currently has $203 million of delayed draw term loan commitments to our portfolio companies, as well as $31 million of commitments to our joint venture investments. This table shows how we have the available capacity to meet the entirety of these commitments, if called upon, while maintaining cushion against our regulatory leverage limit. Now, pro forma for our merger with Sierra, which brings the additional issuance of an additional $524 million in equity, cash on the balance sheet and no debt outstanding, net leverage as of 12/31 would fall from 1.49x- 0.83x .
Based on continued deal activity this quarter, we expect to end the first quarter of 2022 with leverage around 1x. Slide 24 updates our paid and announced dividends since Barings took over as the advisor to the BDC. As Eric mentioned, we previously announced our first quarter 2022 dividend will be $0.23 per share, an increase of $0.01 per share compared to the second quarter, and an 8.1% distribution on our net asset value. Turn with me now to Slide 26, which shows the graphical depiction of relative value across the BBB, BB, and B asset classes. With spreads across the liquid spread spectrum at or near their three-year tights, investors rightly outlined that excess spread per unit of risk is increasingly hard to find.
This drives investments in large dollar sizes to the private marketplace, the negative effects of which Ian outlined earlier. Now, the best mitigants to competitive pressures remain, one, continued credit discipline in our core business, seeking out attractive direct lending illiquidity premium per unit of risk. Two, maintain an investment focus across a wide frame of differentiated cross-platform investments that invest inside of asset value, such as asset-based loans. Three, best-in-class shareholder alignment to ensure the manager can operate in all environments and make the right investment at the right price for the risk. We speak often of our pricing premiums relative to liquid credit, and this translates into the actual results shown on slide 27, which outlines the premium spread on our new investments relative to the liquid credit benchmarks.
Barings BDC deployed approximately $653 million at an all-in spread of 815 basis points, which represents a 375 basis point premium to comparable liquid market indices at the same risk profile. Diving deeper into our core middle market segment across Europe and North America, we averaged 304 basis points spread relative to liquid market indices. For cross-platform investments, the spread relative to liquid market indices was even greater at 705 basis points. We continue to believe our ability to invest across platforms and generate excess shareholder return via illiquidity and complexity premiums will be a key differentiator for Barings BDC in this upcoming cycle. I'll wrap our prepared remarks with slide 28, which summarizes our new investment activity so far during the first quarter of 2022 and our investment pipeline.
The pace of new investments remains steady compared to the last two quarters, with $126 million of new commitments, of which $105 million have closed and funded. Of those new commitments, 72% are first lien, 13% are cross-platform, and 26% are European or Asia Pacific originations. The weighted average origination margin or DM3 was 7.1%. We've also funded approximately $8 million of previously committed delayed draw term loans. The current Barings Global Private Finance investment pipeline is approximately $2.2 billion on a weighted average basis and is predominantly in first lien senior secured investments. As a reminder, this pipeline is estimated based on our expected closing rates for all deals in our investment pipeline. With that, Hillary, we'd like to open up the line for questions.
Thank you. At this time, we will be conducting a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please note we ask that you limit yourselves to one question and one follow-up per person. One moment, please, while we pull for questions. Our first question is from Ryan Lynch of KBW. Please proceed with your question.
Hey, good morning. Thanks for taking my questions. First one just has to do with your cross-platform investments. Obviously, that has been growing pretty meaningfully over the last year, and you really saw it really grow significantly this quarter and as a percentage of your overall portfolio. Those investments have a different yield profile than your core middle market investments. So my question is longer- term, like, do you guys have any sort of preference on what percentage of your portfolio you expect to have in these cross-platform investments versus kind of your core middle market portfolio? Now, I know closing the Sierra is gonna reduce that exposure.
Just any thoughts on kind of that long-term exposure preferences of cross-platform investments as a percentage of your portfolio versus kind of the core middle market.
Sure, Ryan. This is Bock. I'll take a stab and then lateral to my colleague, Bryan. What I'd say is think of the cross-platform investments truly as a complement, right? There's two types of premium that exist in the market today. Illiquidity premium, right? Also a level of complexity premium. Barings has a scaled platform that prosecutes both origination premiums. The actual amount, you know, it can vary. It always depends on the current environment. You could say around 30%, give or take. It's very close to where we're at now. Clearly, as the book increases in size, you can see that level of cross-platform investments on a dollar basis grow. It really comes to how these two types of investments interplay off of each other.
Oftentimes you find the inside of asset value type investment strategy to be very complementary. For that, I'll just lateral it to my colleague, Bryan.
Yeah. Thanks, Jon. I think that was pretty well said. I don't have a lot to add other than, you know, it is episodic. We are, you know, looking at opportunities in the marketplace and turning them down a lot more than, you know, actually pursuing some of these deals. But as Jon said, if we can find an interesting investment where we believe we're investing inside of asset value, but we can get paid a complexity premium by coming up with a capital solution that makes sense for that particular issuer, that's where we'll spend a lot of effort and time to generate that complexity premium that Jon's referencing.
Okay. That makes sense. Diving into one of those cross-platform investments your second largest holding on your balance sheet is Thompson Rivers. Thompson Rivers has multiple billion dollars of Ginnie Mae loans. I would just love for you guys to provide a little color. Obviously, interest rates have increased significantly over the last several months. The expectation is they may continue to rise. Can you just talk about how we should be thinking about that portfolio and how the expectations are for that to perform in a rising mortgage rate environment?
Sure. I'll try to be brief on the explanation. But essentially the Ginnie Mae EBO market, think of it as a government-guaranteed home mortgage, right? Under the FHA program. These are originated and effectively managed by large servicers. One of those home loans, when they default, they effectively get kicked out and have to get into a workout program that's run by the mortgage servicer. We and our affiliates have invested inside this mortgage program for many years across the platform. What's particularly attractive about it is you're not taking long-term rate risk. What you're effectively taking is the timeframe from one government-guaranteed loan to effectively return to paying status and then go back into the Ginnie Mae program.
That can generate a significant return because there's a high degree of velocity of turn on those mortgage assets, and you're not owning those for long periods. Or in the event that there was a default on the FHA loan, you effectively collect on the government guarantee with limited loss to principal value. Really the focus here is short duration, government-guaranteed paper and collateral that generates a high return on our investment. Now you'll notice, Ryan, we pulled an 8% dividend distribution out of the program, right? You can see that as the fair value of that program continues to increase, even as a result of the rising rate investment environment, what you're finding is that our return on that investment program far exceeds our distribution, hence the NAV increase. It's a very attractive complement, right?
As you start to think about the number of different markets and complexity premiums that complement our illiquidity portfolio. Does that give you a brief explanation, I hope, at that?
Jon, that's a really great thorough explanation, so I appreciate that. I appreciate the time today.
Thanks, Ryan.
Our next question is from Robert Dodd of Raymond James. Please proceed with your question.
Hi, guys. It's kind of a follow-up to Ryan. On the cross-platform investments, I mean, you said you'd like them to be about, call it a target, maybe a third, 30%. Would you say that the ones you currently have between Jocassee, Thompson Rivers, Eclipse, are those the ones that are gonna, you know, make up that third and it'll just move around, the mix between them over time? Or do you think you'll be adding more legs to the stool. I mean, obviously it's got more than three legs already. Would you be expanding the number of verticals within that cross-platform? Are these kind of settled in where they're gonna be within the BDC?
Yeah, so I'll give one additional shot, and then also I think we can lateral to Bryan on ABL and also kind of cross-platform investments as a complement more broadly. The vehicle that we have, Robert, are fairly, I'd say a vast majority of what you could consider as our cross-platform makeup, in addition to some of the episodic financings that we'll make as a result of our cross-specialty situations investment franchise. What I would say is each of those verticals has a different type of risk return. You have our asset-based lender, right, in Eclipse. You have our mortgage investment unit, our SPV, that's called Thompson Rivers.
Effectively, there is a focus on underlying consumer complexity premium that exists in investments inside of Waccamaw. That's a very wide investment frame. Could you see some additional type of inside asset value type investments be originated that are not actively listed here? The answer is, of course. We're very focused on ensuring that you don't hobby, as Eric outlines, in any type of investment. The goal here is Barings and, of course, our parent has a very, very wide-reaching range of origination capability inside these complexity premium investments. We're very pleased with the investments that we have, and we can see them continue to grow on a dollar basis.
It really does match nicely, and I'll lateral this to Bryan for a discussion on Eclipse as well as how the cross-platform investments matches nicely to our enterprise value or illiquidity premium lending. Bryan?
Yeah. Thanks, Jon, and good morning, Robert. I think as it relates to some of the key pillars that you referenced, those investment vehicles, if you will certainly pivot with the market along with ourselves. We're gonna stick to our core knitting. As Jon said, we're not looking to hobby in something new. Where Barings already has an expertise and the market provides an opportunity, particularly if we're moving into a more volatile session of the overall investment profile and investment universe, we'll go where the opportunity is. The way that we've kind of described it is, if you think about enterprise value investing, and the analogy that I've used in the past is kind of if you think about the ocean, right?
The top of the ocean, there's a lot of volatility being impacted by wind, weather, things we can't control. Underneath the surface, there is a level of stability. You can kind of predict how the water is gonna move. That's where we like to play, particularly in markets like today, where there's a lot of volatility in terms of where the enterprise value of some of these entities are. From an asset value perspective, we try to stay where there is some stability, it's less volatile. You can kind of predict a little bit more what the outcomes can be. That's where we're looking to move within our investment frame of reference across Barings.
Where do we have interesting opportunities that we see in different silos of Barings that we can go leverage in this portfolio, again, as a complement to what Ian and his team are building on the middle market side.
I appreciate that, color. Very helpful. Thank you. I mean, My second question, Eric, reading between the lines on your comment, Jon, about the CSA versus obviously, you know, had a Sierra got marked down a little bit, this quarter. The CSA didn't move that much. Is it fair to say then that while there was a markdown this quarter, it does not reflect the long-term, probability weight, what your asset that beat the Barings assessment of the long-term probability weighted outcome for that asset in particular?
That's a great way to state it, Robert. I try to think of the CSA. You know, what we have to be careful is try not to measure something as a point in time as a proxy for the entire journey. The CSA provides that opportunity to be patient and to effectively ensure that we are restructuring for the maximum value to Barings investors over the long term, which we will intend to do. Our long-term perspective, while you might see one asset move in or out as we continue to you know look at some of the underlying businesses that have a great reason to exist to develop a strong returns in the future, that you'll see as a point in time.
There are also a number of control equity investments which you can find, you know, were always impacted by COVID or take your geopolitical force that still have very strong reasons to exist with our view, potential forward, long-term appreciation potential that likely can offset what you start to see as a point in time, mark-to-market depreciation. We see that in tech. The benefit of the CSA is we have the patience to do this right without providing any type of underlying volatility to our end investor in terms of NAV.
Because I think as a number of analysts have outlined, the best valuation that are fetched by BDCs are those BDCs that have both steady and stable dividend profiles and increasing and stable net asset values.
I appreciate that response. Thank you. Very clear.
We have reached the end of the question- and- answer session. I will now turn the call back over to Eric Lloyd for closing remarks.
Thank you, Hillary. Thanks again for everybody joining. Everybody stay positive and healthy out there.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.