Barings Corporate Investors Reports Preliminary Fourth Quarter 2023 Results

Rhea-AI Summary

Barings Corporate Investors (MCI) reported its preliminary financial results for Q4 2023, showing growth in net investment income and dividends. The Trust focuses on quality middle-market investments, leading to stable returns. The annual dividend increased by 39.2% compared to 2022, with an annualized yield of 8.2%.

Insights

Financial Analyst

The preliminary financial results reported by Barings Corporate Investors indicate a mixed performance in Q4 2023. While net investment income per share decreased from $0.44 to $0.36 quarter-over-quarter, the Trust still managed to grow its net investment income year-over-year. This growth suggests that the Trust has been effective in capitalizing on rising base rates and maintaining a diverse and sound credit portfolio. However, the decrease in net asset value (NAV) per share from $17.07 to $16.77, primarily due to dividend payments, may raise concerns about the sustainability of dividend increases, especially if such decreases in NAV persist.

From a capital gains perspective, the Trust's strategy appears to be yielding positive results, as evidenced by the net realized gains in Q4 2023 compared to net realized losses in the previous quarter. This turnaround suggests successful investment exits and could signal management's adeptness at navigating market conditions. The Trust's liquidity position, with $14.8 million in cash against $42.5 million in borrowings, indicates a comfortable cushion for short-term obligations but also points to leverage that stakeholders should monitor.

Market Research Analyst

The reported increase in dividends for six consecutive quarters is a strong signal to investors regarding the Trust's performance and its management's confidence in the underlying portfolio. The 39.2% increase in the annual dividend compared to the previous year, along with the annualized yield of 8.2%, may make the Trust an attractive option for income-focused investors. However, it is crucial to consider whether the yield is sustainable in the context of the Trust's overall financial health, including the recent decrease in NAV.

Barings Corporate Investors' focus on 1st lien senior secured middle-market investments is a conservative strategy that aims to provide stable returns and mitigate risks during economic downturns. This approach, coupled with the Trust's emphasis on investing in high-quality businesses with defensive characteristics, may appeal to investors seeking lower-risk income-generating assets. The Trust's recent portfolio activity, including new and add-on investments, as well as repayments and realizations, suggests an active management approach that is responsive to market opportunities and risks.

Economist

The Trust's performance should be considered within the broader economic context, particularly the impact of rising base rates on investment income. The increase in net investment income aligns with the trend of rising interest rates, which can benefit income-generating investment vehicles like Barings Corporate Investors. However, this benefit may be offset by potential challenges in the credit market, especially if economic conditions deteriorate and affect the credit quality of the Trust's portfolio.

Investors should also be aware of the macroeconomic factors that could influence the Trust's performance, such as inflationary pressures, changes in monetary policy and market volatility. These factors could impact the Trust's ability to sustain its dividend growth and maintain a stable NAV. The disclosed financial results provide a snapshot of the Trust's resilience and adaptability to such economic forces.

CHARLOTTE, N.C.--(BUSINESS WIRE)-- The Board of Trustees of Barings Corporate Investors (NYSE: MCI) (the "Trust") met on February 26, 2024, and would like to report its preliminary financial results for the fourth quarter of 2023.

Financial Highlights(1)	Three Months Ended December 31, 2023						Three Months Ended September 30, 2023
	Total Amount			Per Share(4)			Total Amount			Per Share(4)
Net investment income(2)	$	7,379,615		$	0.36		$	8,904,737		$	0.44
Net realized gains / (losses)(3)	$	480,613		$	0.02		$	(1,970,622	)	$	(0.10	)
Net unrealized (depreciation) / appreciation	$	1,093,175		$	0.05		$	3,042,761		$	0.15
Net increase in net assets resulting from operations operations	$	9,075,093		$	0.45		$	9,991,192		$	0.49
Total net assets (equity)	$	339,826,094		$	16.77		$	345,947,291		$	17.07
(1) All figures for 2023 are unaudited
(2) December 31, 2023 figures net of approximately $0.04 per share of excise tax
(3) December 31, 2023 figures net of approximately $0.01 per share of capital gains tax
(4) Based on shares outstanding at the end of the period of 20,261,719

Key Highlights:

Commenting on the year, Christina Emery, President, stated, "We are pleased to have grown net investment income, net of taxes, during 2023 to $1.61 per share compared to $1.03 per share in 2022. The increase is a function of both the sound credit quality and diversity of the portfolio coupled with rising base rates. During 2023, Barings continued to drive origination flow into quality, 1st lien senior secured middle-market investments. The Trust has increased dividends for the last 6 quarters, which is further confirmation of our credit philosophy, where we focus on leading businesses backed by strong sponsor ownership and conservative capital structures. This approach has historically generated stable returns and relative stability during economic stress. When constructing portfolios, we focus on investing in high-quality businesses that are leaders in their space and offer defensive characteristics that will allow them to perform through economic cycles.”

In 2023, the Trust’s dividend increased by $0.02 per share in the third quarter and $0.01 per share in the fourth quarter, for a total annual dividend of $1.42 per share, representing a 39.2% increase to the 2022 total annual dividend of $1.02 per share. Based on the Trust’s December 31, 2023, share price of $18.43 per share, the most recent distribution of $0.38 per share represents an annualized yield of 8.2%.

During the three months ended December 31, 2023, the Trust reported total investment income of $10.3 million, net investment income of $7.4 million, or $0.36 per share, and a net increase in net assets resulting from operations of $9.1 million, or $0.45 per share.

Net asset value ("NAV") per share as of December 31, 2023, was $16.77, as compared to $17.07 as of September 30, 2023. The decrease in NAV per share was primarily attributable to the payment of a $0.37 per share dividend on November 17, 2023, the declaration of a $0.38 per share dividend which was paid on January 19, 2024, partially offset by net investment income of $0.36 per share, net unrealized appreciation on investments of $0.05 per share and net realized gains of approximately $0.02 per share.

Recent Portfolio Activity

During the three months ended December 31, 2023, the Trust made six new investments totaling $6.8 million and 23 add-on investments in existing portfolio companies totaling $2.9 million. During the three months ended December 31, 2023, the Trust had one loan repaid at par totaling $0.9 million, one mezzanine debt investment repaid at par totaling $2.7 million and three fully realized equity investments and one partial realization totaling $2.9 million for a realized gain of $0.4 million, or approximately $0.02 per share.

Liquidity and Capitalization

As of December 31, 2023, the Trust had cash of $14.8 million and $42.5 million of borrowings outstanding. The Trust had unfunded commitments of $19.7 million as of December 31, 2023.

Net Capital Gains

The Trust realized net capital gains of $480,613 or $0.02 per share during the quarter ended December 31, 2023, which resulted in realized net capital losses for the year ended December 31, 2023, of $1,447,280 or $0.07 per share. By comparison, for the year ended December 31, 2022, the Trust realized net capital losses of $689,783 or $0.03 per share. During the quarter ended September 30, 2023, the Trust realized net capital losses of $1,970,622 or $0.10 per share.

Annual Meeting

The Trust’s annual shareholders' meeting will be held on Thursday, May 16, 2024. Shareholders of record at the close of business on March 18, 2024, will be entitled to vote at the meeting.

About Barings Corporate Investors

Barings Corporate Investors is a closed-end management investment company advised by Barings LLC. Its shares are traded on the New York Stock Exchange under the trading symbol ("MCI").

About Barings LLC

Barings is a $381+ billion* global investment manager sourcing differentiated opportunities and building long-term portfolios across public and private fixed income, real estate, and specialist equity markets. With investment professionals based in North America, Europe and Asia Pacific, the firm, a subsidiary of MassMutual, aims to serve its clients, communities, and employees, and is committed to sustainable practices and responsible investment. Learn more at www.barings.com.

*Assets under management as of December 31, 2023

Per share amounts are rounded to the nearest cent.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Cautionary Notice: Certain statements contained in this press release may be "forward looking" statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management’s current estimates, projections, expectations or beliefs, and which are subject to risks and uncertainties that may cause actual results to differ materially. These statements are subject to change at any time based upon economic, market or other conditions and may not be relied upon as investment advice or an indication of the fund's trading intent. References to specific securities are not recommendations of such securities, and may not be representative of the fund's current or future investments. We undertake no obligation to publicly update forward looking statements, whether as a result of new information, future events, or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240226037454/en/

MediaRelations@barings.com

Source: Barings Corporate Investors

FAQ

What are the financial highlights for Barings Corporate Investors in Q4 2023?

Net investment income was $7.4 million, net realized gains were $480,613, and net unrealized appreciation was $1,093,175.

How did the Trust's dividend change in 2023 compared to 2022?

The dividend increased by $0.02 per share in Q3 and $0.01 per share in Q4, totaling an annual dividend of $1.42 per share, a 39.2% increase from 2022.

What was the NAV per share as of December 31, 2023?

The NAV per share was $16.77, compared to $17.07 as of September 30, 2023.

What was the Trust's total investment income during Q4 2023?

The Trust reported total investment income of $10.3 million during Q4 2023.

When is the Trust's annual shareholders' meeting scheduled?

The annual meeting will be held on Thursday, May 16, 2024.