Greetings. At this time, I would like to welcome everyone to the Barings BDC, Inc. Conference Call to announce Barings BDC's planned acquisition of Sierra Income Corporation. All participants are in a listen only mode. A question and answer session will follow the company's formal remarks.
Today's conference is being recorded. Please note that this call may contain forward looking statements that include statements regarding the proposed acquisition of Sierra Income Corporation, including statements regarding the completion and timing of the transaction and bearing BDCs and the combined company's goals, beliefs, strategies, future operating results and cash flows. Although Barings BDC believes these statements are reasonable, actual results and events 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 sections titled Risk Factors and Forward Looking Statements in Behring BDC's annual report and quarterly reports as filed with the Securities and Exchange Commission and as will be disclosed in the company's joint proxy statement relating to the transaction. Behring BDC's and the combined company's actual results could differ materially from those expressed in any forward looking statements for any reason, including those listed in their respective SEC filings.
Bearings BDC assumes no obligation to update or revise any such forward looking statement unless required by law. Please also note that past performance is not a guarantee of future results. At this time, I will turn the call over to Eric Lloyd, Chief Executive Officer of Barings BDC. Thank you, sir. Please go ahead.
Thank you, Donna, and good morning, everyone. We appreciate everyone joining us for today's call. We are really excited to announce that we have entered into an agreement to purchase Sierra Income Corporation. This combination will create a scaled top 10 BDC with an enhanced earnings profile and economies of scale. We believe the transaction provides significant immediate and long term value for all shareholders.
Please note that throughout this call, we'll be referring to the strategic acquisition deck 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 Barings BDC's Vice President and Head of U. S. Special Situations, Brian Hai and the BDC's Chief Financial Officer, Jonathan Bach. We plan to review the details and benefits of the proposed transaction shortly.
But before we do, we recognize that some of you on the call may not be familiar with Barings BDC or its investment advisor, Barings LLC. Turn with me to Slide seven of the presentation, where we show a high level overview of Barings, which has over 1,700 professionals across 16 countries worldwide. Importantly, Barings is a wholly owned subsidiary of MassMutual, and this relationship provides a level of support and long term stability that is unique to the BDC marketplace. Also, Barings is a deep and experienced credit manager with over $382,000,000,000 of investments under management worldwide as of 06/30/2021. Turning to Slide eight.
You can see the scale across both private and public markets and across geographies. I'll quickly summarize by saying we are a large, experienced global platform with the flexibility to provide financing up and down the capital stack in direct lending and in special situations. Slide nine outlines the depth of this platform and another very important asset, our people. Investing and lending across the credit markets, Barings has over 150 investment professionals with unique origination, underwriting and workout expertise, designed to drive and maintain strong return outcomes. Slide 10 shows how Barings BDC fits within this dynamic platform.
As you can see, Bearings BDC benefits from the scale and depth of investment across both market leading public and private investment platforms. We believe this wide investment frame of reference is both unique and distinct. Furthermore, there is an additional advantage I would like to highlight and that gets to the matters of shareholder alignment. As we go through the details of the Sierra transaction and its underlying shareholder benefits, we hope you will take away Barings' commitment to shareholders through unique financial and credit support to facilitate this transaction, our improved fee structure and most importantly, we are the largest investor in Barings BDC with over $150,000,000 invested in stock. This transaction further positions Barings BDC as a diverse, dynamic and distinct company in both private credit and BDCs.
I look forward to the months and years ahead. Now let's turn to Barings BDC's strategic merger with Sierra Income Corporation, which begins on Slide 12 of the presentation. And for that, I'll turn it over to Jonathan Bach.
Thank you, Eric. And as Eric said on Slide 12, if you could turn there for the presentation. Now as you saw in yesterday's press release, Barings BDC has entered into a definitive merger agreement with Sierra Income Corporation. And we believe this combination provides many strategic and financial benefits to the combined company that remain consistent with our commitment to shareholder alignment. I'll walk through six of these anticipated benefits, but first, let me outline the transaction itself.
In this transaction, Sierra shareholders will receive book value consideration of 6 and $23,700,000 or $6.1 a share consisting of two components: one, cash of $100,000,000 or approximately $0.98 per share paid directly to the Sierra shareholders by Barings LLC and $2.05 and 23,700,000.0 of Barings BDC common stock valued at its NAV per share as of June 30 at a fixed exchange ratio of 0.44973 Barings BDC shares for every Sierra share. As a manager, Barings LLC is stepping up in two significant ways to support this transaction for the benefit of all shareholders. First, Barings LLC is providing $100,000,000 of distinct credit support in the form of a credit support agreement, or CSA, to limit the potential net cumulative realized and unrealized losses on the acquired Sierra portfolio over the next ten years. The CSA will be fair valued quarterly by an independent third party and recorded on Barings BDC's balance sheet during the life of the CSA. The CSA is designed to provide an offset to potential unrealized and realized losses on legacy Sierra assets.
Now just to be clear as to what that actually means, effectively, the first 100,000,000 of potential cumulative realized and unrealized losses on the Sierra portfolio during the ten years following closing, if any, will be covered by Barings LLC. So the downside exposure to the combined company shareholders is reduced. And any upside from portfolio appreciation, however, that will go entirely to the combined company shareholders. Now second, and although not a closing condition to this transaction, right, Barings BDC intends to amend its current investment advisory agreement with Barings LLC to increase the incentive fee hurdle rate from 8% to 8.25% for purposes of calculating the NII incentive fee. Now finally, in connection with the merger, Barings BDC also committed up to $30,000,000 in secondary market post closing support for the shares of the combined company stock when shares trade at certain levels below net asset value.
Now these accretive share repurchases will occur over a twelve month period post pursuant to a large share repurchase plan and subject to covenant and regulatory constraints. Now we anticipate closing this transaction by the end of the 2022, subject to shareholder approvals, regulatory approvals and other customary closing conditions. Turn to Slide 13. Here, you can see a graphical depiction of our offer. And based on Sierra's reported net asset value as of sixthirty, right, of $5.43 Bearings BDC is acquiring Sierra at 94% of its net asset value.
Now when you take into account the $100,000,000 credit support agreement from Bearings LLC designed to provide downside protection to investors against cumulative realized or unrealized losses, right, Barings BDC shareholders have net invest have downside NAV protection on Sierra assets to roughly 74% of their original cost. Slide 15 outlines the specific transaction benefits on matters of investment scale, right? The transaction increases Barings BDC's scale and liquidity, enhances portfolio diversification and improves access to capital markets for growth and financing. But also on the ROIC side, this transaction results in both NII and NAV accretion due to a higher incentive fee hurdle rate, further cost synergies and access to potentially lower cost sources of financing. And what's important in considering the underlying merits of any BDC transaction is truly the sense of balance between both scale improvement offered, right, liquidity, diversification, resilience through enhanced investment grade funding, and also the underlying improvement in BBDC shareholder risk adjusted return, right, accretion, dividend growth, cost synergies, enhanced alignment.
Starting with the first point of accretion, turn to Slide 16. Now we anticipate this transaction to be both NII and NAV accretive at closing. We expect NII accretion to the zero two four dollars per share level, which is influenced primarily by the increase in the Part one incentive fee hurdle rate and two, additional cost synergies tied to both financing and G and A line items. As you've seen in the past, as our earnings power increases, so too does our dividend payout at net asset value, which we now target to be 8.25%. And additionally, we estimate roughly 4% of NAV accretion at close, driven by the estimated fair value of our credit support agreement as well as underlying Sierra portfolio trends.
Slide seventeen and eighteen outline the benefit of both improved BBDC share liquidity and enhanced portfolio diversification. As you can see on Slide 17, Barings BDC will become a top 10 BDC with a pro form a market cap of approximately $1,200,000,000 and the addition of an increased share count has the potential to increase liquidity in the underlying shares. Now speaking on the diversification point on Slide 18, you can see that our combined investment portfolio will be approximately $2,200,000,000 in size invested across two forty five portfolio companies. And as investors might recall, Barings BDC's portfolio is heavily invested in senior secured debt. And pro form a for the transaction, Barings BDC will have over 71% of its portfolio in first lien senior secured assets.
And over time, we'd like the combined portfolio to more closely resemble our current mix and maintain a focus on first lien senior secured loans. Now turning to Slide 19, I want to highlight the enhanced resilience offered to Barings BDC's funding profile associated with this transaction, particularly how it allows for more efficient access and pricing of an index eligible investment grade bond issuance. As many of you know, Barings BDC is currently rated Baa3 by Moody's and has enjoyed the benefits of unsecured issuance in the private placement market. And as this transaction increases Barings BDC's underlying equity base to roughly $1,300,000,000 it places Barings BDC amongst a unique set of scaled BDCs with the wherewithal to do a $300,000,000 or larger index eligible bond issuance. And with current BDC IG bond spreads ranging from 145 to 185 basis points, efficient access to this market likely drives improved stability and resilience to the Barings BDC earnings profile.
Now Slide 20 hits the important point of cost synergy as Barings BDC has the ability to spread fixed operating expenses across a wider asset base. And in total, we anticipate approximately $8,100,000 of near term potential expense savings for the combined entity following our combination. And finally, turn to Slide 21. This is where we'll finish with the benefit of enhanced alignment. As Eric mentioned previously, achieving proper alignment between shareholders and the external manager is a core philosophy at Barings, and investors see this philosophy put into practice in the Sierra transaction.
First, Barings will seek to amend its fee structure to increase its hurdle rate from 8% to 8.25%, the highest in the BDC space, which allows Barings BDC investors to earn a higher stable dividend yield of 8.25% prior to the manager collecting any incentive fees. Second, the hurdle rate low this higher hurdle rate lowers Barings BDC's required return on asset or required spread to meet our 8.25% ROE expectation relative to others in the BDC industry, and that allows us to focus on higher quality assets while still generating attractive investor return. And third, the $100,000,000 credit support agreement for Barings LLC means that the manager limits investor downside for net cumulative realized and unrealized marks on the acquired portfolio, while also allowing shareholders to retain the upside associated with those same assets. All in all, this transaction provides us an enhanced scale and alignment to ensure Barings originates the right loan at the proper spread in this environment to drive return. And to speak about those return opportunities, I'll now turn it over to my colleagues, Ian Fowler and Brian Hai.
Ian?
Thank you, John. I'll speak to the current market environment, starting with a familiar slide to many. Jump to Slide 23. Since entering the BDC space in 2018, BBDC remains unique in its focus to drive investment choice and diversification across private and public investment asset classes in the portfolio. The scale of this platform allows for unique investment opportunities ranging from Boring Is Beautiful direct lending to select special situations and joint ventures to strategic BDC combinations that drive investment value just as we did in 2020 with the MVC Capital acquisition.
Here, we outline our net growth in middle market and cross platform investments since Barings LLC took over as adviser to the BDC. In total, we've deployed $1,870,000,000 in 147 portfolio companies in the middle market since we began managing the BDC in August 2018, and over $350,000,000 has been deployed into cross platform investments. Turn to Slide 24. Here, we outline the data we show you each quarter on middle market spreads across the capital structure. As we stated on our August 5 conference call, we saw continued tightening and single B liquid spreads remain inside middle market levels, putting further pressure on the middle market spreads.
Of course, this spread tightening also reflects the improved economic outlook for both public and private markets overall. And as a result, we continue to see a significant build of investment activity among our core private equity sponsor clients and deals being brought to the market. The market today provides similar overtures to years past where a combination of low rates, economic growth and tax related selling drove meaningful investment volume. Still even in environments of increased investment volume, I always outlined to our originators that one must never let confidence drive complacency. And in my years of experience, one of the best mitigants to avoid complacency is rigorous underwriting discipline in our core areas of expertise as well as a wide frame of reference to ensure sufficient choice across asset classes.
This translates into the results shown on Slide 25. Here, we outlined the premium spread on our new investments over the trailing twelve months relative to liquid credit benchmarks as we sought attractive liquidity illiquidity and complexity, premium spread and return. Barings BDC deployed approximately $1,300,000,000 at an all in spread of seven eighty two basis points, which represents a three thirty nine basis points spread 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 two seventy nine basis point spread relative to liquid market indices. As we continue to keep our focus on true middle of the middle market, targeting issuers with an average of $30,000,000 EBITDA.
This core area of focus highlights our strategy of Boring is Beautiful lending as it allows for a level of enhanced spread relative to the upper end of the middle market, but also retaining discipline on leveraging covenants for our investors. Now I'll turn it to my colleague, Brian Hai, who leads our special situations team to outline our wide frame of investment reference as it relates to our cross platform opportunities. Brian?
Thank you, Ian. I'll continue where Ian left off and further accentuate the benefits of choice that a scaled asset manager like Bearings sees across the investment landscape. Many of you are familiar with the term cross platform investments, which encompasses our non middle market lending or special situation centric investments. On a trailing twelve month basis, Barings cross platform investments totaled $226,000,000 with an average spread relative to liquid market indices at seven fourteen basis points. These results are inclusive of our joint ventures and special situation opportunities as well as our strategic investment in the asset based lending space with the acquisition of Eclipse Business Capital, which we highlighted on our last earnings call.
Overall, we believe that the investment choice and uncorrelated return offered by the BDC through our cross platform investments remains a key differentiator for the combined Sierra Bearings BDC in this lending environment. As outlined on Slide 26, where we list the top 10, cross platform investments are projected to generate 19% of revenue pro form a for the investment in Eclipse Business capital. In addition to investment income, the roughly $310,000,000 of fair value of our cross platform investments is valued at a roughly $20,000,000 gain to its costs, which provides further uplift to net asset value. In a comment similar to Ian's, our team continues to see attractive cross platform investment opportunities ranging from infrastructure investments to asset based loans. These complement our core middle market lending investment profile at Barings BDC and also provide Barings BDC with enhanced diversification and product choice when compared to other middle market lenders.
The increased scale resulting from the Sierra Barings BDC combination allows for additional capital and financial flexibility to invest in these opportunities to drive strong risk adjusted returns. And now I'll turn it back over to Bok. John?
Thanks, Brian. Slide 28 provides a detailed summary of the benefits of the proposed transaction in both the category of scale, right, such as increased liquidity and diversification as well as in the category of ROIC, such as improved cost synergies and NOI and NAV accretion. But let me finish with Slide 29. And I'd be remiss if I didn't recall a lesson from my prior career as a sell side analyst in BDCs. Here, you can see Barings BDC's historical path as it relates to historical dividend yield at NAV and price to NAV valuation compared to the BDC industry.
What investors will notice is the slow and steady climb in both dividends and price to NAV, consistent with our Boring is Beautiful investment style. Our unique focus on investor alignment allows us to offer an attractive dividend distribution without the temporary need for base or incentive fee waivers. And most importantly, our steady and deliberate focus on increasing our dividend distribution to meet our hurdle rate, which is now 8.25%, drives an improved long term stock valuation. In my years in the BDC space, right, investors and analysts know that the steady, consistent and aligned investment performance drives the best possible investor return outcome over the long term. We believe this transaction offers those trades as all shareholders benefit from a larger, more scaled combined company with strong competitive advantages, shareholder alignment and the resources provided by Barings LLC.
So in closing, I want to thank the Sierra Special Committee for their confidence in us. And on behalf of Barings BDC team, we appreciate your time and interest today. We'd be happy to take your questions. And please understand that we may be limited in some answers due to the upcoming proxy filing. And with that, operator, gladly open the line for questions.
Thank you. The floor is now open for questions. You. Our first question today is coming from Finian O'Shea of Wells Fargo. Please go ahead.
Hi, everyone. Good morning. Congratulations on this announced agreement and appreciate the manager support. First question on that matter. This is effectively the third BDC that you will be or would be bringing under the umbrella.
Can you talk at a high level if you view or strive to see Bearings as a consolidator in the space? And if so, what the potential opportunity still out there is for you?
Tim, this is Bok. I'll take that question. So in terms of industry consolidation, that's not the end goal. The end goal is to make smart investments. And so if you think of the past two BDCs, what we would have entered into agreements on, both had were selling below book value, right?
Both were underlevered. And in an environment where credit is effectively solitary and performing, those can be very attractive investments purchasing items at a discount when the market trades at par plus. So happy to stay where we are. There's no philosophy of just getting big. Goal is to always focus on big enough, but recognize at the end of the day, it's about investor return.
So really, both are smart investments. You could expect to do more, if more available, but there are also very few of these types of transactions that come to market.
Got it. Makes sense. And just a follow-up for perhaps Ian and Brian. On the Sierra portfolio, it looks like there's some more liquid or structured product type stuff, but the mainstay of Sierra looks like a lower middle market club book. Do you see opportunity on the portfolio side to perhaps become the primary lender for a lot of companies here?
Or is this something you would more actively seek to rotate out of and into the sponsors and names you're more familiar with?
Sam. So it's Ian. So I'll start and then I'll throw it over to Brian. So the short answer is both. I think when you look at this portfolio, and as John said, again, I mean, we're looking at this in terms of being a smart investment.
It's a diversified pool of loans. As you said, there's a fair amount of middle market club deals in this portfolio, not a lot of overlap with us, but it's in a market that we know and we know the players. And so we feel very comfortable about these types of transactions. And so if you just look at the general market right now with how quickly things are prepaying and recycling, and we've definitely seen that with MVC, We expect the same thing to happen here. And so that will give us an opportunity on a deal by deal basis.
We like the asset. Now that we're in, we can actually play to win and lead the financing likely to the next sponsor. And for those that we want to rotate out of, then we'll let them go, and we'll be able to redeploy that capital in our foundational strategy of Boring is Beautiful. And the other thing strategically is increasing the size of the BDC allows us to increase our hold sizes too, which is a competitive advantage. So those are the benefits that we see.
And I'll toss it over to Brian to make some additional comments.
Yes. I think Ian hit all the relevant points there. There's not a whole lot to add other than, I would say, the portfolio. We did a deep dive on the individual names within the portfolio, but we look forward to learning more about these credits over time. And as Ian said, if they fit our investment profile on a go forward, we would be excited to continue lending to these companies.
And Kennen, it's Eric.
So I initially mentioned that, Eric, you briefly mentioned structured some of the structured credit that they have in there. If you reference Page eight of our investor deck, we have over $20,000,000,000 under management in structured credit. It's something we're very familiar with. We've been doing for many, many years. We have a really deep team on that.
So as part of the due diligence, that team was able to review that part of the portfolio also.
Great. Thank you, everybody.
Our next question is coming from Brian Lynch of KBW.
Congrats on the merger. Think the way this is structured with both the cash payment from the manager as well as the credit support agreement is, again, another unique way that you guys are structuring mergers, which is really positive for the state. My first question, though, has to do with Sierra's portfolio. Obviously, from a historical standpoint, portfolio as well as the whole Medley platform has struggled significantly from a credit standpoint. So can you just walk us through the due diligence that you all performed and how you guys got comfortable with the credit risk in those assets?
Obviously, BBDC shareholders have an additional layer of protection with the credit support agreement, but just walk through your due diligence that you guys performed and the level of comfort you guys have around that portfolio.
I'll start with one item as it relates to overlap and then toss it to Brian, which to say, Brian, the level of overlap of like true direct origination opportunities with a sister BDC managed by the same advisor is relatively low. And in fact, what you find is there was a level of club debt participation, as Ian kind of outlined, where you can easily understand and underwrite and also find that there is a high degree of quality. But Brian, as it relates to the underlying portfolio and trends, maybe there'd be some additional color to offer both on the diligence process and the differentiation between some direct as well as, you call it, club debt that existed as a result of the fact that this was a private BDC.
Sure. Yes. In terms of the diligence, I think first, Ryan, you were right to point out the credit support, which is very relevant to this conversation. But in terms of our diligence, there's 122 issuers in the portfolio. We worked with the team closely, and Sierra's team did an excellent job walking us through each portfolio company and understanding the underlying risks of those portfolio companies.
And then based on a profile that we sort of categorized each investment, we did deeper dives depending on the level of stress or distress in some of those situations. And so we feel like we have a pretty good grasp on what the underlying risks are within those situations, and we have strategies outlined in terms of what we would like to do going forward and working out some of those investments. I would say, generally speaking, as John was alluding to, the level of risk in terms of assets within the portfolio was not necessarily what we would have expected going in. And we were pleasantly surprised to sort of get a view in terms of the underlying risk profile of the overall portfolio. So we do think that there is a pretty decent chunk of the portfolio that's, what I would say, sort of regular way down the middle of fairway credit opportunity with a normal middle market lending profile.
And of course, there are some troubled assets in the portfolio that we'll have to deal with. But we think that we've priced our purchase of this portfolio at a level that builds in a little bit of flexibility. And there are some assets, frankly, that we think there's some upside in the portfolio as well.
Okay. That's helpful. And then my follow-up. Sierra has a senior loan JV that's pretty sizable, although it has a pretty meaningful write down at fair value. So I would assume that it's probably not been the strongest performing asset.
You guys obviously have multiple JVs and are very familiar with that. Do you guys have any preliminary thoughts on what you guys would like to do with Sierra's JV that you guys will be taking over?
So we'll want to continue to ensure that we have the proper discussions with the JV partner, Ryan, but I would argue that this is a good generator of return. Sometimes the volatility as it relates to perhaps some of the losses relative to cost might have been tied a little bit more to the type of collateral and what you went through, meaning it has a heavy liquid focus that went through a level of COVID volatility. And so that is what it is. But long term, we do like to manage these types of strategies, and we can find that there would be a place for it. Granted, we would always do so in consultation with the joint venture partner.
Understood. I appreciate the time today.
Thanks, Ryan.
Thank you. Our next question is coming from Robert Dodd of Raymond James. Please go ahead.
Hi, guys. Yes, congratulations on another transaction. I feel like I should I might queen another one bites the dust in the background. But on the investment grade that you talked about, obviously, or issuance, what should we expect on that front? Obviously, you've got Moody's rating.
I mean are there plans to get the other two? There does seem to be some evidence that having S and P, in particular, might have some benefits. And what's the time line and expectations of structure on that. Obviously, it's a little speculative, right, and it's longer term into next year. But what should we expect for unsecured as a percentage, Mitch, on the new structure?
And are you looking to expand the number of not meaning to insult some of them, but top tier credit ratings?
Sure. We would most definitely look to expand the ratings profile and angle. You'd also expect us to see an increase in the level of unsecured debt as a part of the capital structure. And just a notable development that we've all seen that also I know you've mentioned, Robert, in your research and others, is you're finding unsecured levels in terms of spread on par with that of where folks who borrow on a senior secured basis. And that shouldn't be lost on anybody in the BDC space based on the importance of having that as a part of your financing strategy.
You can expect it to increase. In terms of timing, always hard to predict the timing of ratings releases, etcetera. But you can expect a level of sooner rather than later based on the attractive environment to finance oneself with this type of financing structure in the future.
Got it. And do you is there any should we expect any change of target leverage for the overall business once is complete either in the short term while the Sierra assets are on the books or in the longer term once all that's rotated to your desired mix?
No, you can expect us to stay at 1.25x. We believe that profile, even with a higher mix of unsecured debt, is the proper one, and you'll see us continue to stick by
accretion is a pretty good outcome for shareholders. Thank you.
Thanks, Robert. Thanks, Robert.
Thank you. Our next question is coming from Casey Alexander of Compass Point. Please go ahead.
Hi, good morning. I have three questions. I'll give them all to you at once. One is, can you put better specificity on the NAV appreciation that you're projecting 4% and the components of where that's coming from? Two, what percentage of the Sierra portfolio is currently nonperforming?
And three, the performing portion of Sierra's portfolio,
what
is its average price relative to its par value?
Price relative to par, I'm going to make sure that I have that confirmed here. So I'll have that here in a moment. On the first one, Casey, so on a pro form a basis it relates to nonaccruals. I think the combined portfolio would be roughly 5% as it relates to nonaccruals in total, right, pro form a for everyone. And then previously, Casey, your first question, as I was also getting the cost on, what was the first one, buddy?
The first one was more specificity around the components that relate to your 4% NAV accretion guidance.
Got Got you. So you'd find that a healthy percentage of that increase comes from the value added of the CSA, which we've had experience in valuing others in the past and that expected improvement. And then also given Brian's commentary as it relates to the underlying health of the portfolio, things have been and you can imagine as we entered into an agreement, things have gotten better relative to our expectations. So there's additional upside. I'd say the majority comes from the CSA.
So we're not going to discount the fact that we've been pleasantly surprised and likely would expect to be on the value of certain investments in the portfolio.
Ben.
I think we got one last one, Donna.
Okay, perfect.
And that is
coming from Kyle Joseph of Jefferies. Please go ahead. Kyle, your line is live. Sure, you're not muted.
Oh, yes, apologies. Let me echo everyone's congratulations, exciting deal. Most of my questions have been answered, but just really wanted to talk about kind of the bidding process and how Barings differentiated itself in this process. How were you guys able to win this transaction?
I'd probably say that's a great question for a thrilling read of a combined proxy statement. But I would argue what we believe are key differentiators for us in the marketplace and whether it's for an investor, right, or for a potential merger candidate, sometimes those key themes that we put forth often are seen as differentiators for the company overall. And one key focus here was the level of alignment offered in the focus of our fee structure, our credit support, our repurchases and more importantly, the cash payment that comes from an external manager, allowing the combined entity to effectively purchase and merge a portfolio at a discounted valuation, right? So that's good for BBDC shareholders. But at the same time, Target shareholders receive a price above net asset value, right, which is also important for them.
That alignment point is one that we believe over time continues to separate the industry. It's important, and it will continue. And in our view, that gets weighted heavily. That being said, the proxy statement will lay out the competitiveness of the process and it's a thrilling read with a glass of wine, I would imagine.
Thanks very much. Eagerly anticipating reading it. Thanks, guys.
Thanks, Kyle.
Thank you. At this time, I'd like to turn the floor back over to Mr. Lloyd for closing comments.
Just want to finish by saying thank you for everybody for dialing in for the Sierra shareholders, in particular for you dialing in to hear about the Barings platform and what we believe we're going to offer in this transaction to our current shareholders as well as the prospective shareholders going forward. Our thanks to the Sierra Special Committee for their support in this transaction, and we look forward to hopefully closing this transaction in the 2022. And with that, we will wrap up. Thank you, everybody. Stay positive and stay safe out there.
Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time, and enjoy the rest
of
your day.