Good morning, and welcome to Kayne Anderson BDC, Inc.' s fourth-quarter 2025 earnings call.

Today, I am joined by Ken Leonard and Doug Goodwillie, Co-CEOs of KBDC, Frank Karl, President, and Terry Hart, CFO. Following our prepared remarks, we will be available to take your questions.

Today's call may include forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors, and undue reliance should not be placed thereon.

These forward-looking statements are not historical facts, but rather are based on current expectations, estimates, and projections about the company, our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict.

Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask that you refer to the company's most recent filings with the SEC for important risk factors.

Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time.

Our earnings release, 10-K, and supplemental earnings presentation are available on the financial section of our website at kaynebdc.com. Now, I would like to turn the call over to Ken Leonard.

Good morning, and thank you for joining us today. I'll begin by providing an overview of our fourth-quarter results, and then share some thoughts on the current direct lending market conditions.

I plan to highlight how KBDC's value lending strategy has created a unique portfolio well positioned to weather any current headwinds associated with the market dislocation related to software and/or tariffs. Frank Karl will then provide a more detailed overview of our portfolio and performance before Terry Hart concludes with KBDC's financial results.

I'm pleased to report another solid quarter for KBDC as we closed out 2025 on a strong note. For the fourth quarter, we generated net investment income of 44 cents per share, representing an increase from 43 cents per share in the third quarter and a premium to the declared dividend.

This performance translates to an annualized return on equity of 10.8%, demonstrating our continued ability to generate attractive risk-adjusted returns for shareholders in what has otherwise been a noisy period for the BDC sector. Our net asset value per share was $16.32 at the quarter end, down slightly from $16.34 in the prior quarter, reflecting the impact of some marks on the portfolio, which was partially offset by new investment originations and our strategic share repurchase activity during the period.

Our dividend coverage ratio was 110%, supporting our regular quarterly distribution. Our board of directors has declared a regular dividend of 40 cents per share for the first quarter, payable on April 16th, 2026, to shareholders of record as of March 31st, 2026.

I would like to add that based on our current view of the market and our portfolio, we expect to be able to pay the 40-cent dividend for the entirety of 2026. Our portfolio continues to perform well from a credit perspective, with only 1.4% of the investments on nonaccrual status.

The portfolio's weighted average yield of approximately 10.3% on our income-producing investments positions us well to continue generating attractive returns in the current interest rate environment. These results underscore the resilience of our investment approach and the quality of our portfolio construction, with 93% of our portfolio structured as senior secured debt.

As mentioned in my introduction, our value lending strategy deliberately avoids highly leveraged loans, what we call deep-and-cheap, made to software businesses. While many BDC peers report more than 20% of their portfolios allocated to software and technology companies, our portfolio has approximately 2% to these sectors.

Instead, Kayne Anderson Private Credit has a long track record of providing loans to core middle-market companies operating in traditional, stable industry sectors, such as industrial and business services, distribution, and food products. Our underwriting emphasizes durable cash flows, tangible enterprise value, and disciplined leverage profiles.

Our new originations have had average leverage to the borrower between 3.8 and 4.2 times for the last 25 years. We believe this approach enhances downside protection and positions the portfolio to perform consistently across market cycles.

Turning to our investment activity in the fourth quarter, we maintained our disciplined approach to capital deployment while continuing to successfully source attractive opportunities in the private credit markets. During the quarter, we committed approximately $113 million to new private credit investments.

Our total fundings reached $99.3 million, of which $72.3 million represented new investments and $27 million represented existing previously unfunded commitments. The funding activity reflects our selective approach to capital deployment, focusing on high-quality opportunities that meet our stringent underwriting standards.

During the fourth quarter, we experienced repayments of $131.7 million, which represents a healthy level of portfolio turnover and activity within our core middle-market borrower base. Additionally, we continued our rotation out of broadly syndicated loans with sales of $19.8 million.

This repayment activity, combined with $99.3 million in new fundings, resulted in a reduction in net funded investment activity of $52.2 million for the quarter. Excluding one higher-yielding opportunistic investment, the average spread on our new floating-rate loans in the fourth quarter was 529 basis points over SOFR.

When including that opportunistic investment, the average spread on our new floating-rate loans was 593 basis points over SOFR. We continue to see a reasonably healthy premium in spreads in our core markets relative to the upper-middle and broadly syndicated markets, but we have continued to see pressure on spreads overall relative to longer-term historical averages, albeit more or less at these levels for the last year.

I'd like to provide just a quick reminder on our strategic positioning and some aspects of our investment philosophy that we think differentiates us in the current market landscape. First, our portfolio is highly defensive by nature, with 93% of our investments in first lien senior secured debt positions.

We also prioritize control and are agent or co-agent in 75% of the investments we make, providing us with higher closing fees, enhanced information rights, and greater control in potential workout situations. Second, we are particularly conservative and selective in our capital deployment, prioritizing transactions where we can emphasize downside protection while capturing appropriate returns for the risk we're taking.

This typically manifests itself in lower-than-market leverage levels across our portfolio. Third, 99% of our portfolio companies are backed by private equity sponsors, who tend to provide best-in-class governance, operational expertise, and additional capital to these businesses when necessary.

Our selective capital deployment philosophy also means we're willing to maintain lower leverage and higher liquidity when we don't see compelling opportunities that meet our risk-adjusted return thresholds. At quarter end, our debt-to-equity ratio was 1.02 times.

This positions us at the lower end of our target leverage range of 1 to 1 1/4 times. With total liquidity of $588.4 million, including $43.4 million in cash and $545 million in undrawn debt capacity, we maintain substantial flexibility for accretive capital deployment.

We have worked hard to create a foundation for consistent income generation and capital protection that we believe will continue to serve our shareholders well, regardless of where we are in the credit cycle. Turning to the current environment for private credit and BDCs, in Q4, conditions were characterized by a combination of lower base rates, relatively tight spreads, and somewhat muted M&A activity and continued concerns around credit performance.

These factors together have pressured industry returns and reduced sector-wide ROEs compared to recent years. This is before the recent pressure on most of the market for software-related exposure and associated AI risks, regardless of whether one feels those risks are overblown.

Despite the combination of headwinds, underlying credit fundamentals across middle-market portfolios remain generally stable. Nonaccrual levels remain low in absolute terms across the sector, although managers continue to reference an elevated but manageable level of idiosyncratic credit stress within certain borrowers.

I think it's fair to say that we and most of our peers feel that current public BDC valuations are not in line with the continued strong fundamentals we see in our businesses. Looking ahead, we believe the industry is entering a period that will likely be marked by increased dispersion in outcomes for managers across the sector.

As the potential for a prolonged AI software dislocation increases, capital will become tougher to raise in private credit. When you add in the perception of undisciplined underwriting causing the potential for increased losses in the upper-middle market, we think it is reasonably likely that spreads will widen over the next year or two as investors worry about a credit cycle.

We believe that this will actually create a good environment for new originations and an attractive opportunity for KBDC to invest while other BDCs and direct lending platforms are dealing with their software portfolios. On a relative basis, we believe KBDC is very well positioned to continue to be a strong-performing BDC, delivering attractive risk-adjusted returns to our shareholders.

I will now pass the call over to Frank Karl to discuss our portfolio.

Thank you, Ken. I'll now look to provide a comprehensive overview of our portfolio composition and key performance metrics as of December 31st, 2025.

Our portfolio consists of 107 companies with a total fair market value of $2.2 billion, representing a well-diversified collection of core middle-market investments. We maintain unfunded commitments of approximately $287 million across our existing portfolio companies, providing us with additional opportunities to support our borrowers' growth initiatives.

Since December 31st, 2025, KBDC has closed, or is in the final closing process, on $50 million of new commitments. We have seen a steady flow of opportunities so far this year, though it's too early to glean any sort of meaningful insights for total 2026 activity levels.

Investments in KBDC's portfolio, excluding those on watch lists and our opportunistic investments, have a weighted average leverage of 4.5 times, interest coverage of 2.4 times, and loan to enterprise value of approximately 43%. Weighted average EBITDA of our private middle-market portfolio companies is $52.7 million, reflecting our focus on established businesses with meaningful scale.

For the quarter, the number of companies in our portfolio declined by one, mainly due to our continued rotation out of the broadly syndicated loan portfolio. We continue to have a highly diversified portfolio with an average position size of approximately 0.9% of fair value, and where our top 10 investments represent only approximately 20% of our portfolio.

This approach allows us to maintain appropriate exposure to our best-performing assets while also maintaining prudent diversification across the broader investment base. 95.7% of our debt investments are floating rate, which mirrors our liabilities, where the vast majority of our debt funding utilizes floating-rate borrowings as well.

The only fixed-rate investment that we have is the SG Credit loan that closed in early Q3 2025 and has an 11% fixed coupon. Credit performance across our portfolio remains strong to date, with only 1.4% of total debt investments at fair value on nonaccrual, representing only five positions out of 107.

That's flat quarter-over-quarter. We continue to have financial covenants in all of our core first lien private middle-market investments.

Lastly, we've built this conservative portfolio with a healthy weighted average yield of approximately 10.3% on fair value of investments, excluding nonaccruals, and this reflects a small decline from 10.6% last quarter. This strong level of yield has been achieved with leverage levels at the borrower level that are considerably lower than many of our peers, and while we continue rotation out of broadly syndicated loans into higher-spread private credit investments.

Ken discussed the well-publicized headwinds affecting the sector and emphasized that we believe KBDC is well positioned to be a strong performer. While AI-related risks are difficult to fully mitigate, we are confident that the businesses in our portfolio are much more likely to benefit from the use of AI than they are to be displaced by the technology.

We remain firmly committed to the disciplined lending strategy that our management team has executed and refined successfully across multiple market cycles for more than two decades. Our credit performance metrics continue to demonstrate the strength and quality of our portfolio construction.

As mentioned earlier, nonaccruals are flat quarter-over-quarter at 1.4% of total debt investments. We did see an uptick in PIK in the fourth quarter, predominantly due to one investment, where Terry will provide more detail on that situation later.

We view this as consistent with normal course credit management in a diversified portfolio. As a quick reminder, our portfolio construction philosophy has always emphasized a conservative approach to borrower-level leverage and capital structure design.

As I mentioned earlier, our weighted average borrower net leverage of 4.5 times compares favorably to the broader market, where we're still seeing many transactions with leverage levels of 5 times to 6 times or higher. We've maintained this disciplined approach as we believe that lending on cash flows, as opposed to just loan-to-value, better positions a portfolio for periods of potential distress or in slower growth environments.

Looking ahead to 2026, we expect our near-to-medium-term investment activity pipeline to remain solid, supported by a slowly increasing flow of M&A transactions. While we expect market conditions to remain competitive, we believe that recent increases in overall uncertainty favor experienced lenders like us.

With that, I'll turn it over to Terry Hart to discuss KBDC's fourth-quarter 2025 financial results.

Thanks, Frank. Let's first review results of operations.

During the fourth quarter, we earned net income per share of 32 cents, and net investment income per share was 44 cents, compared to 43 cents in the prior quarter and 4 cents above our dividend. Total investment income for the fourth quarter was $61.9 million, as compared to $61.4 million in the prior quarter.

The increase to investment income was primarily driven by the full-quarter impact of portfolio rotations out of broadly syndicated loans into middle-market loans, and an increase in accelerated amortization of OID and prepayments related to realization activity. Our portfolio yield decreased by 30 basis points, mainly related to lower reference rates.

PIK interest for the quarter was elevated from prior quarters as a result of year-to-date interest income from our investment in Regiment being converted to PIK during the fourth quarter. PIK interest represented 7.4% of total interest income during the quarter, but continues to be relatively low at 3.9% for the full year.

As mentioned, during the fourth quarter, we had approximately $2.6 million of accelerated amortization of OID and prepayment fees related to realization activity. Total expenses for the fourth quarter were $31.8 million, compared to $31.3 million for the prior quarter.

The increase was primarily the result of $0.5 million of excise taxes, higher average borrowings, and the issuance of notes during the fourth quarter, partially offset by $0.5 million of lower incentive management fees. During the quarter, our incentive management fees were reduced by the 12-quarter look-back incentive fee cap.

During the fourth quarter, we had a small realized loss of approximately $0.6 million related to the sale of several broadly syndicated loans. We had net unrealized losses on the portfolio of $7.2 million, compared to unrealized losses of $5 million in the prior quarter.

The unrealized losses were largely the result of negative fair value changes related to our investments in Core Sports, Regiment, and Belle USA, as well as accelerated amortization of OID related to repayment activity. These items were partially offset by positive marks on Arbor Works and Senergy.

Additionally, we had deferred income tax expense of $0.3 million related to unrealized gains on equity investments held in our taxable subsidiary. As of December 31st, total assets were $2.3 billion, and net assets were $1.1 billion.

As of that date, our net asset value was $16.32 per share. The decrease of 2 cents from $16.34 per share as of September 30th was comprised of 12 cents per share related to net realized and unrealized losses, partially offset by 4 cents of net investment income in excess of our dividend, and 6 cents related to accretive share repurchases during the fourth quarter.

At the end of the quarter, we had debt outstanding of $1,130 million, and our debt-to-equity ratio was 1.02 times, which is a slight increase from 1.01 times at the end of the third quarter. On October 15th, we funded and issued $200 million of notes that were priced in August at attractive rates.

As mentioned earlier, we had share repurchases of $24.9 million pursuant to our $100 million share repurchase program. Year-to-date through February 20th, KBDC has repurchased its shares valued at approximately $14.5 million at an average price to NAV per share of 87%.

Now turning to our distributions, on February 12th, our board of directors declared a regular dividend for the first quarter of 40 cents per share to shareholders of record on March 31st, 2026. As of December 31st, our undistributed net investment income was approximately 21 cents per share.

Our positioning to maximize earnings during 2026 centers on several key initiatives. First, we plan to complete the rotation out of our remaining lower-yielding BSL positions, which will provide additional capital to redeploy into higher-yielding direct lending opportunities.

Second, we intend to gradually optimize our leverage within our target debt-to-equity range of 1 time to 1 1/4 times. Our current leverage ratio of 1.02 times provides us with substantial capacity to increase earnings through prudent use of additional leverage.

Third, we continue to work with our banking partners to reduce our borrowing costs. In fact, yesterday, we announced the term extension of our largest credit facility, led by Wells Fargo, and the reduction of the interest rate on this facility from SOFR plus 215 basis points to SOFR plus 195 basis points.

With that, operator, please open the line for questions.

Hi, this is Cory Johnson on for Mike. I sort of have a question.

In regards to your NII for this quarter, I'm guessing it was a partial impact from Fed rate cuts. How much do you estimate that was in the fourth quarter?

How much would you expect the rate cuts to impact the first quarter of this year?

Thank you for the question. This is Doug Goodwillie.

Terry, do you want to handle that?

Sure. For the quarter itself, I can get you the exact details after the call, but I can say that we didn't see the full impact of the Fed rate cuts in this quarter.

During the first quarter, we would see that the full impacts of that, it was a partial impact during the quarter. Offsetting those cuts during the quarter, we saw an uptick in the full-quarter's activity and full investment in SG Credit, and so that helped offset some of those Fed cuts.

In addition to that, as we mentioned, we did see a full-quarter impact of the rotations out of BSLs during the third quarter. Then also in the fourth quarter, we saw additional rotations out of the BSLs, and so that offset some of those Fed cuts.

Great, thank you. Just one follow-up.

You had mentioned about there possibly being opportunities for you to be able to take advantage of as other BDCs which lent more to software companies are sort of dealing with their credit issues. Can you maybe just a couple of them more about what opportunities that you expect to be able to see and take advantage of?

Thanks for the question. This is Doug Goodwillie again.

I think when we say capitalize on that, it's not capitalizing by buying loans from any other stressed BDCs, to speak. We agree with some of the commentary in terms of probably a bit of an overcorrection in the public markets for the AI risk for some of those software portfolios.

What we're talking about there is when a BDC has 20, 30, 40% of their portfolio in software, that becomes time-consuming. If you're in any types of restructures or dealing with companies that could potentially be on a watch list, that tends to take up time.

Then it also keeps valuations generally under a price-to-NAV of 1 in certain circumstances. It allows those that are trading at better levels and those that have less stress in their portfolio to put more capital to work in the current market.

Great, thank you.

Hey, good morning, and thanks for taking my question. Just one on the targeted portfolio ramp.

Any updated outlook in terms of timeframes when you might get to the targeted range within the 1 to 1.25? Given the current environment and what you're seeing, do you think you could be closer to the lower end or the higher end of the range in the near term there?

Thanks.

Thanks, Ken. This is Frank.

I'll start there. Total deployment or net deployment for the quarter was effectively flat.

I think we're seeing a decent amount of activity. I alluded to we've got $50 million of commitments sort of in process for Q1.

We are still working out of the broadly syndicated book, which we did quarter-over-quarter and will continue to do in the first part of this year. Our repurchase program has been reasonably active, there's a decent number of levers that we think will push that leverage ratio up a bit, more towards the middle of the range.

Putting any specific timeframe on it is difficult to do and will depend on market conditions and deployment activity, which again, I think we're reasonably and seeing signs of some increases in activity, but it will be a steady sort of progression over the next couple of quarters.

I think, Ken, this is Doug again. At the outset of what may be a bit of a dislocation in the credit markets, to be at 1 times, with $550 million of dry powder, to speak, or liquidity, we think is a good position to be in.

We would expect that to increase beyond the 1.02, I think where we are as of this quarter, but likely to remain somewhere in the 1 to 1.2 range over the next few quarters.

Gotcha. Very helpful there.

Just one follow-up, if I may. Appreciate the portfolio with only 2% software exposure there.

Wondering if you could just talk a little bit more about any investments on current watch lists, any particular areas where you're seeing any kind of stress within the portfolio or otherwise challenges within the companies there? Thanks.

Sure, this is Doug again. I'll start.

As it relates to software companies, there are no investments in software companies that we have that are on the watch list, as we talked about in Ken's section of the call, it's less than 2% of the portfolio. Less than 10% of the entire portfolio is on the watch list.

I think from our perspective, there are, I think, five credits that are on nonaccrual, we think that's kind of, frankly, a normal course watch list and an amount of nonaccrual kind of in the mid-1% range is fairly low, I think, in respect to our competition. We're happy with the portfolio performance.

I'd say from our perspective, I'm not sure that anything that we've seen is all that new in terms of there's been continued pressure on the consumer, affecting two or three of the companies on our watch list. Then, frankly, some management missteps that we are working with the sponsors and some management teams to correct.

Those are really the two themes that don't really come back to what's going on around AI. I think what we've seen in terms of a theme in terms of stress has been a little bit more on the consumer side over the last 12, 18 months.

Gotcha. Super helpful there.

Thank you very much.

Hi, everyone. Good morning.

Just to start, a small follow-up on the proceeding topic with Ken there. Looks like you have a pretty good clip of '26 maturities.

Is there a big overlay with that cohort and then the sort of underperformers as you described?

I'll start on kind of just the repayment outlook. It's been relatively slow in the first quarter and thus far.

I think by the second quarter, and will go through it name by name, it looks like it picks up at a reasonable level into the third and fourth quarter. I'll turn it over to Frank, but I don't see a lot of overlap in terms of stressed names coming out.

There's no concentration of names on the watch list in '26 maturities.

That's helpful. Then we also wanted to ask about G&A, broadly in the context of the size of your book, the size of your platform.

You guys are just off the scatter plot in a good way in regards to G&A expense being very low. Can you walk us through as many specifics as you'll give in as to what are the sort of conventional items that you elect not to expense that say your advisers or consultants told you that you could?

Then how can we be sure that you won't change your mind one day in the future? Thanks.

Good question. I'll turn it over to Terry in terms of policy and what could be expensed and maybe give some idea of that quantity too, Terry, as you answer the question.

Sure. Fin, yeah, our agreements do allow us to pass through.

As you see, other managers passing through the cost of the CFO, in some cases, the cost of the Chief Compliance Officer, and then their staffs. We have a model where we outsource a lot of our administration, fund accounting, and so we do pass that through.

That tends to be much cheaper than if we had our own staff and then charge back all of that time. In the magnitude, if you look at funds that are similar in size or BDCs that are similar in size, our ratio could be twice as high as it is today, from 40 basis points, it could be 80 basis points or higher if we were to charge some of those things through.

I think we take pride in having a low G&A costs just generally. I think that we do the right thing for our investor.

We want, especially in an environment where coverage is tight, I think that we're going to be very mindful of our G&A expense. As we grow, are we always going to have a zero for any of those costs?

That's hard to say, but like I said, we're going to be very mindful of our G&A as it relates to coverage and our dividend policy.

Very helpful. Thanks so much.

Thanks, Fin.

good morning. Thanks for taking my questions.

Just wondering to get your thoughts just generally what is kind of the, I guess, the supply chain sort of risk within the portfolio, just food companies, distributors, trading companies, those sorts of businesses, given the recent disruption in the shipping market in the Middle East?

You are right that I think when we talk about our value lending philosophy in the stable and staple industries, our biggest industries are industrials and business services, food products, healthcare. The vast majority, and I'll let Lee or Frank weigh in as well, of the supply chain is from the US.

We took a deep dive on this when we were analyzing the prior and, I guess, potential tariff risk on the portfolio, finding it to be fairly minimal, but I'll let Frank give some specific stats.

I think it's not the same analysis as the tariff risk, but it gets back to, hey, if some of the downstream effects is inflation picking back up, and what does that mean over the sort of near and medium term for our borrowers? We think our book performed very well through a substantially elevated inflationary period.

We think our book performed very well through tariffs and tariff uncertainty. I think we'd expect more of the same, admitting that it's hard to see around the corner for all potential scenarios and downstream effects.

Got it. Thanks for that.

Then in terms of the just kind of the remaining BSL rotation, you guys have already obviously taken a fairly measured approach to ramping the portfolio. Loan prices are obviously trading at a more depressed level this quarter.

If that kind of sustains itself, I guess, for the next few quarters or so, for any of the liquid names in the portfolio, how willing are you, I guess, to be selling out at a small loss to fund new originations as opposed to kind of holding out through the volatility to maturity?

It's a good question. This is Doug, I'll start.

We are down to a handful of BSL names at this point. I think it was less than $50 million at the end of the quarter and it's down from there.

I'll put Frank on the exact spot, but we have been actively continuing to exit that portfolio in this quarter. I think the good part of where we're at from a leverage perspective is we've got still a decent ways to go before we're at the point of needing to make a decision around exiting a position at a loss, albeit very small dollars given the size of this book, versus funding new private credit assets.

Got it. Thanks.

That's all for me.

Thank you.

I'd like to thank everyone who joined our earnings call today for their time and continued interest in KBDC. We hope you enjoyed the call and look forward to speaking again in a few months to discuss Q1 2026 performance.

Thank you.