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Sierra Income (SIRR)

Filed: 28 Dec 21, 4:31pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

________________________________

SCHEDULE 14A
(RULE 14a-101)

________________________________

Information Required in Proxy Statement
Schedule 14A Information

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant

 

☒ 

Filed by a Party other than the Registrant

 

☐ 

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

Sierra Income Corporation

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

  

(1)

 

Title of each class of securities to which transaction applies:

  

 

(2)

 

Aggregate number of securities to which transaction applies:

  

 

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

  

 

(4)

 

Proposed maximum aggregate value of transaction:

  

 

(5)

 

Total fee paid:

    

 

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

  

(1)

 

Amount Previously Paid:

  

 

(2)

 

Form, Schedule or Registration Statement No.:

  

 

(3)

 

Filing Party:

  

 

(4)

 

Date Filed:

    

 

 

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BARINGS BDC, INC.
300 South Tryon Street, Suite 2500
Charlotte, NC 28202

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

December 28, 2021

Dear Stockholder:

You are cordially invited to attend the Special Meeting of Stockholders (the “Barings BDC Special Meeting”) of Barings BDC, Inc., a Maryland corporation (“Barings BDC”), to be held virtually on February 24, 2022, at 1:00 p.m., Eastern Time, at the following website: www.virtualshareholdermeeing.com/BBDC2022SM.

The notice of special meeting and the joint proxy statement/prospectus accompanying this letter provide an outline of the business to be conducted at the Barings BDC Special Meeting. At the Barings BDC Special Meeting, you will be asked to consider and vote upon a proposal to:

(1)    approve the issuance of shares of Barings BDC common stock, $0.001 par value per share (“Barings BDC Common Stock”), pursuant to the Agreement and Plan of Merger, dated as of September 21, 2021 (as may be amended from time to time, the “Merger Agreement”), by and among Barings BDC, Mercury Acquisition Sub, Inc., a Maryland corporation and a direct wholly-owned subsidiary of Barings BDC (“Acquisition Sub”), Sierra Income Corporation, a Maryland corporation (“Sierra”), and Barings LLC, a Delaware limited liability company and the external investment adviser to Barings BDC (“Barings”) (such proposal, the “Merger Stock Issuance Proposal”);

(2)    approve the issuance of shares of Barings BDC Common Stock pursuant to the Merger Agreement at a price below its then-current net asset value (“NAV”) per share, if applicable (such proposal, the “Barings BDC Below NAV Issuance Proposal”); and

(3)    approve the adjournment of the Barings BDC Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Barings BDC Special Meeting to approve the Merger Stock Issuance Proposal or the Barings BDC Below NAV Issuance Proposal (such proposal, the “Barings BDC Adjournment Proposal” and, together with the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal, the “Barings BDC Proposals”).

Barings BDC and Sierra are proposing a combination of both companies by a merger and related transactions pursuant to the Merger Agreement in which Acquisition Sub would merge with and into Sierra (the “First Merger”), with Sierra continuing as the surviving corporation and as a wholly-owned subsidiary of Barings BDC. Immediately after the effectiveness of the First Merger, Sierra, as the surviving corporation, will merge with and into Barings BDC (together with the First Merger, the “Merger”), with Barings BDC continuing as the surviving corporation.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the First Merger, each share of Sierra common stock, $0.001 par value per share (“Sierra Common Stock”), issued and outstanding immediately prior to the effective time of the First Merger (excluding Canceled Shares (as defined below)) will be converted into the right to receive (i) $0.9783641 per share in cash, without interest, from Barings (such amount of cash, the “Cash Consideration”), and (ii) 0.44973 (the “Exchange Ratio”) of a validly issued, fully paid and non-assessable share of Barings BDC Common Stock, plus any cash in lieu of fractional shares (the “Share Consideration” and, together with the Cash Consideration, the “Merger Consideration”). For purposes of the Merger Agreement, “Canceled Shares” means all shares of Sierra Common Stock issued and outstanding immediately prior to the effective time of the First Merger that are held by a subsidiary of Sierra or held, directly or indirectly, by Barings BDC or Acquisition Sub.

 

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The market value of the Merger Consideration will fluctuate with changes in the market price of Barings BDC Common Stock. Barings BDC urges you to obtain current market quotations of Barings BDC Common Stock. Barings BDC Common Stock trades on the New York Stock Exchange (the “NYSE”) under the ticker symbol “BBDC.” The following table shows the closing sale prices of Barings BDC Common Stock, as reported on the NYSE on September 20, 2021, the last trading day before the execution of the Merger Agreement, and on December 27, 2021, the last trading day before printing this document.

 

Barings BDC
Common Stock

Closing Sales Price at September 20, 2021

 

$

10.63

Closing Sales Price at December 27, 2021

 

$

10.91

Your vote is extremely important.    At the Barings BDC Special Meeting, you will be asked to vote on the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal and, if necessary or appropriate, the Barings BDC Adjournment Proposal. The approval of the Merger Stock Issuance Proposal and the Barings BDC Adjournment Proposal each requires the affirmative vote of the holders of at least a majority of votes cast by holders of shares of Barings BDC Common Stock present at the Barings BDC Special Meeting, virtually or represented by proxy, and entitled to vote thereat. The approval the Barings BDC Below NAV Issuance Proposal requires the affirmative vote of each of the following: (1) a majority of the outstanding voting securities (as used in the Investment Company Act of 1940, as amended (the “Investment Company Act”)) of Barings BDC Common Stock; and (2) a majority of the outstanding voting securities of Barings BDC Common Stock that are not held by affiliated persons of Barings BDC. For purposes of this proposal, the Investment Company Act defines a “majority of the outstanding voting securities” as the vote of the lesser of: (1) 67% or more of the voting securities of Barings BDC present at the Barings BDC Special Meeting, if the holders of more than 50% of the outstanding voting securities of Barings BDC are present virtually or represented by proxy; or (2) more than 50% of the outstanding voting securities of Barings BDC.

Abstentions and broker non-votes (if any) will (1) not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Merger Stock Issuance Proposal or the Barings BDC Adjournment Proposal and (2) will have the same effect as votes “against” the Barings BDC Below NAV Issuance Proposal.

Barings, as party to the Merger Agreement, agreed to vote all shares of Barings BDC Common Stock over which it has voting power (other than in its fiduciary capacity) in favor of the Barings BDC Proposals.

After careful consideration, the Barings BDC Board unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger, the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance, and unanimously recommends that Barings BDC stockholders vote “FOR” the Merger Stock Issuance Proposal, “FOR” the Barings BDC Below NAV Issuance Proposal and, if necessary or appropriate, “FOR” the Barings BDC Adjournment Proposal.

It is important that your shares be represented at the Barings BDC Special Meeting. You have the right to receive notice of, and to vote at, the Barings BDC Special Meeting if you were a stockholder of record of Barings BDC Common Stock at the close of business on December 27, 2021 (the “Barings BDC Record Date”). Each Barings BDC stockholder is invited to attend the Barings BDC Special Meeting virtually. You or your proxyholder will be able to attend the Barings BDC Special Meeting online, vote and submit questions by visiting www.virtualshareholdermeeing.com/BBDC2022SM and using a control number assigned by Broadridge Financial Solutions Inc. To receive access to the virtual Barings BDC Special Meeting, you will need to follow the instructions provided in the Notice of Special Meeting of Stockholders and the joint proxy statement/prospectus that follow. Barings BDC encourages you to vote via the Internet as it saves Barings BDC significant time and processing costs. If you are the beneficial owner of your shares, you will need to follow the instructions provided by your broker, bank, trustee or nominee regarding how to instruct your broker, bank, trustee or nominee to vote your shares at the Barings BDC Special Meeting. Voting by proxy does not deprive you of your right to participate in the virtual Barings BDC Special Meeting.

 

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The joint proxy statement/prospectus accompanying this letter describes the Barings BDC Special Meeting, the Merger and the documents related to the Merger (including the Merger Agreement) that Barings BDC stockholders should review before voting on the Merger Stock Issuance Proposal, the Barings BDC Below NAV Issuance Proposal and, if necessary or appropriate, the Barings BDC Adjournment Proposal and should be retained for future reference. Please carefully read this entire document, including “Risk Factors” beginning on page 25 and as otherwise incorporated by reference herein, for a discussion of the risks relating to the Merger, Barings BDC and Sierra. Barings BDC files annual, quarterly and current reports, proxy statements and other information about itself with the SEC. Barings BDC maintains a website at www.baringsbdc.com and makes all of its annual, quarterly and current reports, proxy statements and other publicly filed information available on or through its website. Information contained on Barings BDC’s website is not incorporated by reference into the joint proxy statement/prospectus accompanying this letter, and you should not consider information contained on Barings BDC’s website to be part of the joint proxy statement/prospectus accompanying this letter. You may also obtain such information, free of charge, and make stockholder inquiries by calling Barings BDC at (888) 401-1088, by sending an email to Barings BDC at BDCinvestorrelations@barings.com or by writing to Barings BDC at 300 South Tryon Street, Suite 2500, Charlotte, North Carolina 28202, Attention: Investor Relations. The SEC also maintains a website at www.sec.gov that contains such information.

Sincerely yours,

Eric Lloyd
Chairman of the Board and Chief Executive Officer of Barings BDC, Inc.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of Barings BDC Common Stock to be issued under the joint proxy statement/prospectus accompanying this letter or determined if the joint proxy statement/prospectus accompanying this letter is truthful or complete. Any representation to the contrary is a criminal offense.

Important Notice Regarding the Availability of Proxy Materials for the Barings BDC Special Meeting to Be Held on February 24, 2022

The date of the accompanying joint proxy statement/prospectus is December 28, 2021 and it is first being mailed or otherwise delivered to Barings BDC stockholders and Sierra stockholders on or about December 28, 2021.

Barings BDC, Inc.
300 South Tryon Street, Suite 2500
Charlotte, North Carolina 28202
(704) 805
-7200

 

Sierra Income Corporation
100 Park Avenue, 16
th Floor
New York, New York 10017
(212) 759
-0777

 

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BARINGS BDC, INC.
300 South Tryon Street, Suite 2500
Charlotte, NC 28202

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 24, 2022

NOTICE OF VIRTUAL 2022 SPECIAL MEETING OF STOCKHOLDERS

Online Meeting Only — No Physical Meeting Location

www.virtualshareholdermeeing.com/BBDC2022SM

February 24, 2022, at 1:00 p.m., Eastern Time

Notice is hereby given to the holders of shares of common stock of Barings BDC, Inc., a Maryland corporation (“Barings BDC”), that:

A Special Meeting of Stockholders of Barings BDC will be held virtually, solely by the means of remote communication, on February 24, 2022, at 1:00 p.m., Eastern Time, at the following website: www.virtualshareholdermeeing.com/BBDC2022SM, for the following purposes:

(1)     to consider and vote upon a proposal to approve the issuance of shares of Barings BDC common stock, $0.001 par value per share (“Barings BDC Common Stock”), pursuant to the Agreement and Plan of Merger, dated as of September 21, 2021 (as may be amended from time to time, the “Merger Agreement”), by and among Barings BDC, Mercury Acquisition Sub, Inc., a Maryland corporation and a direct wholly-owned subsidiary of Barings BDC (“Acquisition Sub”), Sierra Income Corporation, a Maryland corporation (“Sierra”), and Barings LLC, a Delaware limited liability company and the external investment adviser to Barings BDC (“Barings”) (such proposal, the “Merger Stock Issuance Proposal”);

(2)    to consider and vote upon a proposal to approve the issuance of shares of Barings BDC Common Stock pursuant to the Merger Agreement at a price below its then-current net asset value (“NAV”) per share, if applicable (such proposal, the “Barings BDC Below NAV Issuance Proposal”); and

(3)    to consider and vote upon a proposal to approve the adjournment of the Barings BDC Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Barings BDC Special Meeting to approve the Merger Stock Issuance Proposal or the Barings BDC Below NAV Issuance Proposal (such proposal, the “Barings BDC Adjournment Proposal” and, together with the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal, the “Barings BDC Proposals”).

Barings BDC and Sierra are proposing a combination of both companies by a merger and related transactions pursuant to the Merger Agreement in which Acquisition Sub would merge with and into Sierra (the “First Merger”), with Sierra continuing as the surviving corporation and as a wholly-owned subsidiary of Barings BDC. Immediately after the effectiveness of the First Merger, Sierra, as the surviving corporation, will merge with and into Barings BDC (together with the First Merger, the “Merger”), with Barings BDC continuing as the surviving corporation.

THE BOARD OF DIRECTORS OF BARINGS BDC (THE “BARINGS BDC BOARD”) UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, MERGER STOCK ISSUANCE PROPOSAL AND BARINGS BDC BELOW NAV ISSUANCE PROPOSAL, AND UNANIMOUSLY RECOMMENDS THAT BARINGS BDC STOCKHOLDERS VOTE “FOR” THE MERGER STOCK ISSUANCE PROPOSAL, “FOR” THE BARINGS BDC BELOW NAV ISSUANCE PROPOSAL AND, IF NECESSARY OR APPROPRIATE, “FOR” THE BARINGS BDC ADJOURNMENT PROPOSAL.

You have the right to receive notice of, and to vote at, the Barings BDC Special Meeting if you were a stockholder of record of Barings BDC Common Stock at the close of business on December 27, 2021 (the “Barings BDC Record Date”). A list of these stockholders will be open for examination by any Barings BDC stockholder for any purpose germane to the Barings BDC Special Meeting for a period of 10 days prior to the Barings BDC Special Meeting at Barings BDC’s principal executive office at 300 South Tryon Street, Suite 2500, Charlotte, North Carolina 28202,

 

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and electronically during the Barings BDC Special Meeting at www.virtualshareholdermeeing.com/BBDC2022SM. Barings BDC is furnishing a joint proxy statement/prospectus and proxy card to Barings BDC stockholders on the Internet, rather than mailing printed copies of those materials to Barings BDC stockholders.

Each Barings BDC stockholder is invited to attend the Barings BDC Special Meeting virtually. You or your proxyholder will be able to attend the Barings BDC Special Meeting online, vote and submit questions by visiting www.virtualshareholdermeeing.com/BBDC2022SM and using a control number assigned by Broadridge Financial Solutions Inc.

If you are a beneficial owner of shares that are held in “street name,” that is they are registered in the name of your broker, bank, trustee or other nominee, you should have received a notice containing voting instructions from your nominee rather than from us. You should follow the voting instructions in the notice to ensure that your vote is counted. Many brokers and banks participate in a program that offers a means to grant proxies to vote shares via the Internet or by telephone. If your shares are held in an account with a broker or bank participating in this program, you may grant a proxy to vote those shares via the Internet or telephonically by using the website or telephone number shown on the instruction form provided to you by your nominee.

In order to vote at the Barings BDC Special Meeting, you must either be a stockholder of record of Barings BDC Common Stock as of the Barings BDC Record Date, or you must be a beneficial holder as of the Barings BDC Record Date and obtain a legal proxy from your broker, bank, trustee, or other nominee. Barings BDC stockholders of record will have the opportunity to vote electronically at the Barings BDC Special Meeting after they have checked into the Barings BDC Special Meeting as described above and in the joint proxy statement/prospectus. If you are a beneficial holder, you must request a legal proxy from your nominee in sufficient time so that it can be obtained, completed and submitted by you to Barings BDC no later than 11:59 p.m., Eastern Time, on February 23, 2022.

The meeting webcast will begin promptly at 1:00 p.m., Eastern Time, on February 24, 2022. We encourage you to access the meeting prior to the start time. Because the Barings BDC Special Meeting will be a completely virtual meeting, there will be no physical location for Barings BDC stockholders to attend.

Whether or not you plan to participate in the Barings BDC Special Meeting, Barings BDC encourages you to vote your shares either virtually or by proxy.

Your vote is extremely important to Barings BDC. In the event there are insufficient votes for a quorum or to approve the Merger Stock Issuance Proposal or the Barings BDC Below NAV Issuance Proposal at the time of the Barings BDC Special Meeting, the Barings BDC Special Meeting may be adjourned in order to permit further solicitation of proxies by Barings BDC.

The Merger and the Merger Agreement are each described in more detail in the joint proxy statement/prospectus accompanying this letter, which you should read carefully and in its entirety before authorizing a proxy to vote. A copy of the Merger Agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this letter.

 

By Order of the Board of Directors,

  

  

Ashlee Steinnerd

  

Secretary of Barings BDC, Inc.

Charlotte, North Carolina
December 28, 2021

To ensure proper representation at the Barings BDC Special Meeting, please follow the instructions on the accompanying proxy card to authorize a proxy to vote your shares via the Internet or telephone, or by requesting, signing, dating and returning a proxy card. Even if you vote your shares prior to the Barings BDC Special Meeting, you still may participate in the virtual Barings BDC Special Meeting.

 

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SIERRA INCOME CORPORATION

100 Park Avenue, 16th Floor
New York, NY 10017

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

December 28, 2021

Dear Stockholder:

You are cordially invited to attend the Special Meeting of Stockholders (the “Sierra Special Meeting”) of Sierra Income Corporation, a Maryland corporation (“Sierra”), to be held virtually on February 24, 2022, at 1:00 p.m., Eastern Time, at the following website: https://viewproxy.com/sicSM/2022.

The notice of special meeting and the joint proxy statement/prospectus accompanying this letter provide an outline of the business to be conducted at the Sierra Special Meeting. At the Sierra Special Meeting, you will be asked to consider and vote upon proposals to:

(1)    approve the merger of Mercury Acquisition Sub, Inc. (“Acquisition Sub”), a Maryland corporation and a direct wholly-owned subsidiary of Barings BDC, Inc. (“Barings BDC”), a Maryland corporation, with and into Sierra (the “First Merger”), with Sierra continuing as the surviving corporation and as a wholly-owned subsidiary of Barings BDC, pursuant to the Agreement and Plan of Merger, dated as of September 21, 2021 (as may be amended from time to time, the “Merger Agreement”), by and among Barings BDC, Acquisition Sub, Sierra and Barings LLC, a Delaware limited liability company and the external investment adviser to Barings BDC (“Barings”) (such proposal, the “Merger Proposal”); and

(2)    approve the adjournment of the Sierra Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Sierra Special Meeting to approve the Merger Proposal (such proposal, the “Sierra Adjournment Proposal” and, together with the Merger Proposal, the “Sierra Proposals”).

Sierra and Barings BDC are proposing a combination of both companies by a merger and related transactions, including the First Merger, pursuant to the Merger Agreement. Immediately after the effectiveness of the First Merger, Sierra, as the surviving corporation, will merge with and into Barings BDC (together with the First Merger, the “Merger”), with Barings BDC continuing as the surviving corporation.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the First Merger, each share of Sierra common stock, $0.001 par value per share (“Sierra Common Stock”), issued and outstanding immediately prior to the effective time of the First Merger (excluding Canceled Shares (as defined below)) will be converted into the right to receive (i) $0.9783641 per share in cash, without interest, from Barings (such amount of cash, the “Cash Consideration”), and (ii) 0.44973 (the “Exchange Ratio”) of a validly issued, fully paid and non-assessable share of Barings BDC common stock, $0.001 par value per share (“Barings BDC Common Stock”), plus any cash in lieu of fractional shares (the “Share Consideration” and, together with the Cash Consideration, the “Merger Consideration”). For purposes of the Merger Agreement, “Canceled Shares” means all shares of Sierra Common Stock issued and outstanding immediately prior to the effective time of the First Merger that are held by a subsidiary of Sierra or held, directly or indirectly, by Barings BDC or Acquisition Sub.

The market value of the Merger Consideration will fluctuate with changes in the market price of Barings BDC Common Stock. Sierra urges you to obtain current market quotations of Barings BDC Common Stock. Barings BDC Common Stock trades on the New York Stock Exchange (the “NYSE”) under the ticker symbol “BBDC.” The following table shows the closing sale prices of Barings BDC Common Stock, as reported on the NYSE on September 20, 2021, the last trading day before the execution of the Merger Agreement, and on December 27, 2021, the last trading day before printing this document.

 

Barings BDC
Common Stock

Closing Sales Price at September 20, 2021

 

$

10.63

Closing Sales Price at December 27, 2021

 

$

10.91

 

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Your vote is extremely important.    At the Sierra Special Meeting, you will be asked to vote on the Merger Proposal and, if necessary or appropriate, the Sierra Adjournment Proposal. The approval of the Merger Proposal requires the affirmative vote of holders of Sierra Common Stock constituting a majority of all the votes entitled to be cast on the matter at the Sierra Special Meeting. The approval of the Sierra Adjournment Proposal requires the affirmative vote of the holders of at least a majority of the votes cast by holders of Sierra Common Stock present at the Sierra Special Meeting, virtually or represented by proxy.

Because the vote on the Merger Proposal is based on the total number of shares entitled to be cast on the matter (i.e., shares outstanding), abstentions and broker non-votes (which occur when a beneficial owner does not instruct its broker, bank, trustee or nominee holding its shares of Sierra Common Stock how to vote such shares on its behalf) will not count as affirmative votes cast and therefore will have the same effect as votes “against” the Merger Proposal. Abstentions and broker non-votes (if any) will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Sierra Adjournment Proposal. In addition, please note that the chairman of the Sierra Special Meeting will have the authority to adjourn the Sierra Special Meeting from time-to-time for any reason without notice and without the vote or approval of the Sierra stockholders.

After careful consideration, the Board of Directors of Sierra (the “Sierra Board”), including each of its independent directors, and upon recommendation from the Special Committee of the Sierra Board (the “Sierra Special Committee”), unanimously approved the First Merger, and unanimously recommends that Sierra stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the Sierra Adjournment Proposal.

It is important that your shares be represented at the Sierra Special Meeting. You have the right to receive notice of, and to vote at the Sierra Special Meeting if you were a stockholder of record of Sierra Common Stock at the close of business on December 27, 2021 (the “Sierra Record Date”). Each Sierra stockholder is invited to attend the Sierra Special Meeting virtually. You or your proxy holder will be able to attend the Sierra Special Meeting online, vote and submit questions by visiting https://viewproxy.com/sicSM/2022 and using a control number assigned by Alliance Advisors, LLC. To reserve access to the virtual Sierra Special Meeting, you will need to follow the instructions provided in the Notice of Special Meeting of Stockholders and the joint proxy statement/prospectus that follow. Please follow the instructions on the accompanying proxy card and authorize a proxy via the Internet, by telephone or by mail to vote your shares. Sierra encourages you to vote via the Internet as it saves Sierra significant time and processing costs. If you are the beneficial owner of your shares, you will need to follow the instructions provided by your broker, bank, trustee or nominee regarding how to instruct your broker, bank, trustee or nominee to vote your shares at the Sierra Special Meeting. Voting by proxy does not deprive you of your right to participate in the virtual Sierra Special Meeting.

The joint proxy statement/prospectus accompanying this letter describes the Sierra Special Meeting, the First Merger, and the documents related to the First Merger (including the Merger Agreement) that Sierra stockholders should review before voting on the Merger Proposal and the Sierra Adjournment Proposal and should be retained for future reference. Please carefully read this entire document, including “Risk Factors” beginning on page 25 and as otherwise incorporated by reference herein, for a discussion of the risks relating to the Merger, Sierra and Barings BDC. Sierra files annual, quarterly and current reports, proxy statements and other information about itself with the U.S. Securities and Exchange Commission (the “SEC”). Sierra maintains a website at www.sierraincomecorp.com and makes all of its annual, quarterly and current reports, proxy statements and other publicly filed information available on or through its website. Information contained on Sierra’s website is not incorporated by reference into the joint proxy statement/prospectus accompanying this letter, and you should not consider information contained on Sierra’s website to be part of the joint proxy statement/prospectus accompanying this letter. You may also obtain such information, free

 

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of charge, and make stockholder inquiries by calling Sierra at (212) 759-0777 or by writing to Sierra Income Corporation at 100 Park Avenue, 16th Floor, New York, New York 10017. The SEC also maintains a website at www.sec.gov that contains such information.

Sincerely yours,

Dean Crowe
Chief Executive Officer and President of Sierra Income Corporation

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of Barings BDC Common Stock to be issued under the joint proxy statement/prospectus accompanying this letter or determined if the joint proxy statement/prospectus accompanying this letter is truthful or complete. Any representation to the contrary is a criminal offense.

Important Notice Regarding the Availability of Proxy Materials for the Sierra Special Meeting to Be Held on February 24, 2022

The date of the accompanying joint proxy statement/prospectus is December 28, 2021 and it is first being mailed or otherwise delivered to Barings BDC stockholders and Sierra stockholders on or about December 30, 2021.

Sierra Income Corporation
100 Park Avenue, 16
th Floor
New York, New York 10017
(212) 759
-0777

 

Barings BDC, Inc.
300 South Tryon Street, Suite 2500
Charlotte, North Carolina 28202
(704) 805
-7200

 

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SIERRA INCOME CORPORATION
100 Park Avenue, 16th Floor
New York, NY 10017

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 24, 2022

NOTICE OF VIRTUAL 2022 SPECIAL MEETING OF STOCKHOLDERS

Online Meeting Only — No Physical Meeting Location

https://viewproxy.com/sicSM/2022

February 24, 2022, at 1:00 p.m., Eastern Time

Notice is hereby given to the holders of shares of common stock of Sierra Income Corporation, a Maryland corporation (“Sierra”), that:

A Special Meeting of Stockholders of Sierra (“Sierra Special Meeting”) will be held virtually, solely by the means of remote communication, on February 24, 2022, at 1:00 p.m., Eastern Time, at the following website: https://viewproxy.com/sicSM/2022, for the following purposes:

(1)    to consider and vote upon a proposal to approve the merger of Mercury Acquisition Sub, Inc. (“Acquisition Sub”), a Maryland corporation and a direct wholly-owned subsidiary of Barings BDC, Inc. (“Barings BDC”), a Maryland corporation, with and into Sierra (the “First Merger”), with Sierra continuing as the surviving corporation and as a wholly-owned subsidiary of Barings BDC, pursuant to the Agreement and Plan of Merger, dated as of September 21, 2021 (as may be amended from time to time, the “Merger Agreement”), by and among Barings BDC, Acquisition Sub, Sierra and Barings LLC, a Delaware limited liability company and the external investment adviser to Barings BDC (“Barings”) (such proposal, the “Merger Proposal”); and

(2)    to consider and vote upon a proposal to approve the adjournment of the Sierra Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event there are insufficient votes at the time of the Sierra Special Meeting to approve the Merger Proposal (such proposal, the “Sierra Adjournment Proposal” and, together with the Merger Proposal, the “Sierra Proposals”).

Sierra and Barings BDC are proposing a combination of both companies by a merger and related transactions, including the First Merger, pursuant to the Merger Agreement. Immediately after the effectiveness of the First Merger, Sierra, as the surviving corporation, will merge with and into Barings BDC (together with the First Merger, the “Merger”), with Barings BDC continuing as the surviving corporation.

THE BOARD OF DIRECTORS OF SIERRA (THE “SIERRA BOARD”), INCLUDING EACH OF ITS INDEPENDENT DIRECTORS AND THE SPECIAL COMMITTEE OF THE SIERRA BOARD (THE “SIERRA SPECIAL COMMITTEE”), HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND THE SIERRA BOARD, INCLUDING EACH OF ITS INDEPENDENT DIRECTORS, AND UPON RECOMMENDATION FROM THE SIERRA SPECIAL COMMITTEE, UNANIMOUSLY RECOMMENDS THAT SIERRA STOCKHOLDERS VOTE “FOR” THE MERGER PROPOSAL AND “FOR” THE SIERRA ADJOURNMENT PROPOSAL.

You have the right to receive notice of, and to vote at, the Sierra Special Meeting if you were a stockholder of record of Sierra common stock at the close of business on December 27, 2021 (the “Sierra Record Date”). A list of these stockholders will be open for examination by any Sierra stockholder for any purpose germane to the Sierra Special Meeting for a period of 10 days prior to the Sierra Special Meeting at Sierra’s principal executive office at 100 Park Avenue, 16th Floor, New York, New York 10017, and will be available electronically during the Sierra Special Meeting. Sierra is furnishing a joint proxy statement/prospectus and proxy card to Sierra stockholders on the Internet, rather than mailing printed copies of those materials to Sierra stockholders.

Each Sierra stockholder is invited to attend the Sierra Special Meeting virtually. You or your proxyholder will be able to attend the Sierra Special Meeting online, vote and submit questions by visiting https://viewproxy.com/sicSM/2022 and using a control number assigned by Alliance Advisors, LLC.

 

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If you are a beneficial owner of shares that are held in “street name,” that is they are registered in the name of your broker, bank, trustee or other nominee, you should have received a notice containing voting instructions from your nominee rather than from us. You should follow the voting instructions in the notice to ensure that your vote is counted. Many brokers and banks participate in a program that offers a means to grant proxies to vote shares via the Internet or by telephone. If your shares are held in an account with a broker or bank participating in this program, you may grant a proxy to vote those shares via the Internet or telephonically by using the website or telephone number shown on the instruction form provided to you by your nominee.

In order to vote at the Sierra Special Meeting, you must either be a stockholder of record of Sierra common stock as of the Sierra Record Date, or you must be a beneficial holder as of the Sierra Record Date and obtain a legal proxy from your broker, bank, trustee, or other nominee. Sierra stockholders of record will have the opportunity to vote electronically at the Sierra Special Meeting after they have checked into the Sierra Special Meeting as described above and in the joint proxy statement/prospectus. If you are a beneficial holder, you must request a legal proxy from your nominee in sufficient time so that it can be obtained, completed and submitted by you to Sierra no later than 11:59 p.m., Eastern Time, on February 23, 2022.

The meeting webcast will begin promptly at 1:00 p.m., Eastern Time, on February 24, 2022. We encourage you to access the virtual Sierra Special Meeting prior to the start time. Because the Sierra Special Meeting will be a completely virtual meeting, there will be no physical location for Sierra stockholders to attend.

Whether or not you plan to participate in the Sierra Special Meeting, Sierra encourages you to vote your shares by following the instructions on the proxy card.

Your vote is extremely important to Sierra. In the event there are insufficient votes for a quorum or to approve the Merger Proposal at the time of the Sierra Special Meeting, the Sierra Special Meeting may be adjourned in order to permit further solicitation of proxies by Sierra.

The Merger and the Merger Agreement are each described in more detail in the joint proxy statement/prospectus accompanying this notice, which you should read carefully and in its entirety before authorizing a proxy to vote. A copy of the Merger Agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this notice.

 

By Order of the Board of Directors,

  

  

Stephen R. Byers

  

Independent Chairman of Sierra

New York, New York
December 28, 2021

To ensure proper representation at the Sierra Special Meeting, please follow the instructions on the accompanying proxy card to authorize a proxy to vote your shares via the Internet or telephone, or by requesting, signing, dating and returning a proxy card. Even if you vote your shares prior to the Sierra Special Meeting, you still may participate in the virtual Sierra Special Meeting.

 

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TABLE OF CONTENTS

 

Page

ABOUT THIS DOCUMENT

 

iii

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS AND THE MERGER

 

1

SUMMARY OF THE MERGER

 

14

RISK FACTORS

 

25

COMPARATIVE FEES AND EXPENSES

 

34

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

38

THE BARINGS BDC SPECIAL MEETING

 

40

THE SIERRA SPECIAL MEETING

 

43

CAPITALIZATION

 

45

THE MERGER

 

46

DESCRIPTION OF THE MERGER AGREEMENT

 

92

ACCOUNTING TREATMENT OF THE MERGER

 

114

CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

 

115

BARINGS BDC PROPOSAL 1: THE MERGER STOCK ISSUANCE PROPOSAL

 

130

BARINGS BDC PROPOSAL 2: THE BARINGS BDC BELOW NAV ISSUANCE PROPOSAL

 

131

BARINGS BDC PROPOSAL 3: THE BARINGS BDC ADJOURNMENT PROPOSAL

 

133

SIERRA PROPOSAL 1: THE MERGER PROPOSAL

 

134

SIERRA PROPOSAL 2: THE SIERRA ADJOURNMENT PROPOSAL

 

135

MARKET PRICE, DIVIDEND AND DISTRIBUTION INFORMATION

 

136

BUSINESS OF BARINGS BDC

 

139

DETERMINATION OF NET ASSET VALUE OF BARINGS BDC

 

139

REGULATION OF BARINGS BDC

 

139

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BARINGS BDC

 

140

SENIOR SECURITIES OF BARINGS BDC

 

141

PORTFOLIO COMPANIES OF BARINGS BDC

 

144

MANAGEMENT OF BARINGS BDC

 

179

PORTFOLIO MANAGEMENT OF BARINGS BDC

 

179

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS OF BARINGS BDC

 

182

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS OF BARINGS BDC

 

183

BUSINESS OF SIERRA

 

185

DETERMINATION OF NET ASSET VALUE OF SIERRA

 

185

REGULATION OF SIERRA

 

185

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SIERRA

 

186

SENIOR SECURITIES OF SIERRA

 

187

PORTFOLIO COMPANIES OF SIERRA

 

189

MANAGEMENT OF SIERRA

 

205

PORTFOLIO MANAGEMENT OF SIERRA

 

205

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS OF SIERRA

 

207

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS OF SIERRA

 

210

DESCRIPTION OF CAPITAL STOCK OF BARINGS BDC

 

211

DESCRIPTION OF CAPITAL STOCK OF SIERRA

 

217

BARINGS BDC DIVIDEND REINVESTMENT PLAN

 

225

SIERRA DISTRIBUTION REINVESTMENT PLAN

 

226

COMPARISON OF BARINGS BDC AND SIERRA STOCKHOLDER RIGHTS

 

227

CUSTODIAN, TRANSFER AND DISTRIBUTION PAYING AGENT AND REGISTRAR OF BARINGS BDC AND SIERRA

 

240

BROKERAGE ALLOCATION AND OTHER PRACTICES

 

241

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ABOUT THIS DOCUMENT

This document, which forms part of a registration statement on Form N-14 filed with the U.S. Securities and Exchange Commission (the “SEC”) by Barings BDC (as defined below) (File No. 333-260591), constitutes a prospectus of Barings BDC, Inc., a Maryland corporation (“Barings BDC”), under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of Barings BDC common stock, $0.001 par value per share (“Barings BDC Common Stock”), to be issued to the holders of shares of common stock, par value $0.001 per share (“Sierra Common Stock”), of Sierra Income Corporation, a Maryland corporation (“Sierra”), pursuant to the Agreement and Plan of Merger, dated as of September 21, 2021 (as may be amended from time to time, the “Merger Agreement”), by and among Barings BDC, Mercury Acquisition Sub, Inc., a Maryland corporation and a direct wholly-owned subsidiary of Barings BDC (“Acquisition Sub”), Sierra and Barings LLC, a Delaware limited liability company and investment adviser to Barings BDC (“Barings”). Pursuant to the Merger Agreement, Acquisition Sub will merge with and into Sierra (the “First Merger”), with Sierra continuing as the surviving corporation and as a wholly-owned subsidiary of Barings BDC. Immediately after the effectiveness of the First Merger (the “Effective Time”), Sierra, as the surviving corporation, will merge with and into Barings BDC (together with the First Merger, the “Merger”), with Barings BDC continuing as the surviving corporation.

Effective January 1, 2021, the SEC adopted certain new disclosure rules applicable to transactions such as the Merger under SEC release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses (the “Final Rule”), which among other things, added a new rule Regulation S-X Rule 6-11 that eliminates the requirement to provide pro forma financial information for fund acquisitions if certain supplemental financial information is disclosed, as described under Regulation S-X Rule 6-11(d) (“Regulation S-X Rule 6-11(d)”). Furthermore, the Final Rule amended Form N-14 to make the disclosure requirements consistent with Regulation S-X Rule 6-11(d). Under the Final Rule, Barings BDC has determined that it has met the supplemental disclosure requirements consistent with Regulation S-X Rule 6-11(d) as it has (1) included a pro forma fee table, showing (a) the pre-transaction fee structures of Barings BDC and Sierra and (b) the post-transaction fee structure of the combined company, (2) determined that the Merger would not result in a material change in Sierra’s investment portfolio due to investment restrictions and (3) determined that there are no material differences in accounting policies between Barings BDC and Sierra.

This document also constitutes a joint proxy statement of Barings BDC and Sierra under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a notice of meeting with respect to: (1) the Special Meeting of Stockholders of Barings BDC (the “Barings BDC Special Meeting”), at which holders of shares of Barings BDC Common Stock will be asked to vote upon the Merger Stock Issuance Proposal (as defined below), the Barings BDC Below NAV Issuance Proposal (as defined below) and, if necessary or appropriate, the Barings BDC Adjournment Proposal (as defined below); and (2) the Special Meeting of Stockholders of Sierra (the “Sierra Special Meeting”), at which Sierra stockholders will be asked to vote upon the Merger Proposal (as defined below) and, if necessary or appropriate, the Sierra Adjournment Proposal (as defined below).

You should rely only on the information contained in this joint proxy statement/prospectus, including in determining how to vote the shares of Barings BDC Common Stock or Sierra Common Stock, as applicable. No one has been authorized to provide you with information that is different from that contained in this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated December 28, 2021. You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than that date. Neither any mailing of this joint proxy statement/prospectus to Barings BDC stockholders or Sierra stockholders nor the issuance of Barings BDC Common Stock in connection with the First Merger will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

Except where the context otherwise indicates, information contained in this joint proxy statement/prospectus regarding Barings BDC has been provided by Barings BDC and information contained in this joint proxy statement/prospectus regarding Sierra has been provided by Sierra.

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS AND THE MERGER

The questions and answers below highlight only selected information from this joint proxy statement/prospectus. They do not contain all of the information that may be important to you. You should carefully read this entire document to fully understand the Merger Agreement and the transactions contemplated thereby (including the Merger) and the voting procedures for the Barings BDC Special Meeting and the Sierra Special Meeting (collectively, the “Special Meetings”).

Questions and Answers about the Special Meetings

Q:     Why am I receiving these materials?

A:     Barings BDC is furnishing these materials to Barings BDC stockholders in connection with the solicitation of proxies by the board of directors of Barings BDC (the “Barings BDC Board”) for use at the Barings BDC Special Meeting to be held virtually at 1:00 p.m., Eastern Time, on February 24, 2022 at the following website: www.virtualshareholdermeeing.com/BBDC2022SM, and any adjournments or postponements thereof.

Sierra is furnishing these materials to Sierra stockholders in connection with the solicitation of proxies by the board of directors of Sierra (the “Sierra Board”) for use at the Sierra Special Meeting to be held virtually at 1:00 p.m., Eastern Time, on February 24, 2022 at the following website: https://viewproxy.com/sicSM/2022, and any adjournments or postponements thereof.

This joint proxy statement/prospectus and the accompanying materials are being made available on or about December 28, 2021 to stockholders of record of Barings BDC and Sierra as described below and are available at www.proxyvote.com for stockholders of record of Barings BDC and at https://viewproxy.com/sicSM/2022 for stockholders of record of Sierra.

Q:     What items will be considered and voted on at the Barings BDC Special Meeting?

A:     At the Barings BDC Special Meeting, Barings BDC stockholders will be asked to approve: (1) the issuance of shares of Barings BDC Common Stock pursuant to the Merger Agreement (such proposal, the “Merger Stock Issuance Proposal”), (2) the issuance of shares of Barings BDC Common Stock pursuant to the Merger Agreement at a price below its then-current net asset value (“NAV”) per share, if applicable (such proposal, the “Barings BDC Below NAV Issuance Proposal”) and (3) if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Barings BDC Special Meeting to approve the Merger Stock Issuance Proposal or the Barings BDC Below NAV Issuance Proposal (such proposal, the “Barings BDC Adjournment Proposal” and, together with the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal, the “Barings BDC Proposals”). No other matters will be acted upon at the Barings BDC Special Meeting without further notice.

Q:     What items will be considered and voted on at the Sierra Special Meeting?

A:     At the Sierra Special Meeting, Sierra stockholders will be asked to: (1) approve the First Merger on the terms and conditions set forth in the Merger Agreement (such proposal, the “Merger Proposal”) and (2) approve the adjournment of the Sierra Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Sierra Special Meeting to approve the Merger Proposal (such proposal, the “Sierra Adjournment Proposal” and, together with the Merger Proposal, the “Sierra Proposals”). No other matters will be acted upon at the Sierra Special Meeting without further notice.

Q:     How does the Barings BDC Board recommend voting on the Barings BDC Proposals at the Barings BDC Special Meeting?

A:     The Barings BDC Board believes that the transactions contemplated by the Merger Agreement are in the best interests of the Barings BDC stockholders and unanimously approved the Merger Agreement and the transactions contemplated thereby. Therefore, the Barings BDC Board unanimously recommends that Barings BDC stockholders vote “FOR” the Merger Stock Issuance Proposal, “FOR” the Barings Below NAV Issuance Proposal and, if necessary or appropriate, “FOR” the Barings BDC Adjournment Proposal.

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Certain material factors considered by the Barings BDC Board, including the directors that are not “interested persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), of Barings BDC or Barings (the “Barings BDC Independent Directors”), that favored the conclusion of the Barings BDC Board that the Merger is in the best interests of Barings BDC and Barings BDC stockholders included, among others:

•        the combined company’s increased scale and liquidity;

•        the expected accretion to Barings BDC stockholders;

•        the alignment of Barings and Barings BDC stockholders as a result of Barings agreeing to (1) fund the cash portion of the purchase price of $0.9783641 per share, or approximately $100.0 million, (2) amend the Existing Barings BDC Advisory Agreement (as defined below) to increase the incentive fee hurdle rate from 8.0% to 8.25% (annualized) and (3) provide up to $100.0 million of credit support pursuant to a credit support agreement (the “Credit Support Agreement”) designed to limit downside to Barings BDC stockholders from net cumulative realized and unrealized losses on the acquired Sierra portfolio relative to purchase price while also allowing Barings BDC stockholders to benefit from long-term Sierra portfolio appreciation; and

•        the combined company’s economies of scale.

The Barings BDC Board considered that while the Merger could cause dilution to Barings BDC stockholders’ voting interests and the NAV per share of the combined company’s common stock, the potential benefits of the Merger (including each of the foregoing) outweighed this cost.

For more information regarding the Barings BDC Board’s considerations in determining that the Merger is in the best interests of Barings BDC and Barings BDC stockholders, see “The Merger — Reasons for the Merger — Barings BDC.

Q:     How does the Sierra Board recommend voting on the Sierra Proposals at the Sierra Special Meeting?

A:     The Sierra Board, acting on the recommendation of a special committee of the Sierra Board (the “Sierra Special Committee”), consisting of Stephen R. Byers, Valerie Lancaster-Beal, Oliver T. Kane and Matthew E. Forstenhausler, believes the Merger Agreement and the transactions contemplated thereby are in the best interests of Sierra stockholders, and unanimously approved the First Merger on the terms and conditions set forth in the Merger Agreement, and therefore unanimously recommends that Sierra stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the Sierra Adjournment Proposal.

Certain material factors considered by the Sierra Board, including Sierra directors who are not “interested persons” as defined by the Investment Company Act (the “Sierra Independent Directors”) and who comprise the Sierra Special Committee, that favored the conclusion of the Sierra Board that the First Merger is in the best interests of Sierra and Sierra stockholders included, among others:

•        the consideration to be received by Sierra stockholders represents a premium to Sierra’s NAV as of June 30, 2021;

•        the First Merger will provide the Sierra stockholders with the opportunity for immediate liquidity upon the close of the Merger;

•        the Sierra stockholders will have the option of selling the shares of Barings BDC they receive in the First Merger or remaining stockholders of Barings BDC; and

•        the Merger is expected to qualify as a tax-free transaction for federal income tax purposes and the other factors described under “The Merger — Reasons for the Merger — Sierra.

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Q:     If I am a Barings BDC stockholder, what is the “Record Date” and what does it mean?

A:     The record date for the Barings BDC Special Meeting is December 27, 2021 (the “Barings BDC Record Date”). The Barings BDC Record Date was established by the Barings BDC Board, and only holders of record of shares of Barings BDC Common Stock at the close of business on the Barings BDC Record Date are entitled to receive notice of the Barings BDC Special Meeting and vote at the Barings BDC Special Meeting. As of the Barings BDC Record Date, there were 65,316,085 shares of Barings BDC Common Stock outstanding.

Q:     If I am a Sierra stockholder, what is the “Record Date” and what does it mean?

A:     The record date for the Sierra Special Meeting is December 27, 2021 (the “Sierra Record Date”). The Sierra Record Date was established by the Sierra Board, and only holders of record of shares of Sierra Common Stock at the close of business on the Sierra Record Date are entitled to receive notice of, and vote at, the Sierra Special Meeting. As of the Sierra Record Date, there were 102,276,889 shares of Sierra Common Stock outstanding.

Q:     If I am a Barings BDC stockholder, how many votes do I have?

A:     Each share of Barings BDC Common Stock held by a holder of record as of the Barings BDC Record Date has one vote on each matter to be considered at the Barings BDC Special Meeting.

Q:     If I am a Sierra stockholder, how many votes do I have?

A:     Each share of Sierra Common Stock held by a holder of record as of the Sierra Record Date has one vote on each matter to be considered at the Sierra Special Meeting.

Q:     If I am a Barings BDC stockholder, how do I vote?

A:     The Barings BDC Special Meeting will be hosted live via Internet audio webcast. Any Barings BDC stockholder can attend the Barings BDC Special Meeting live at www.virtualshareholdermeeing.com/BBDC2022SM. A Barings BDC stockholder should follow the instructions on the accompanying proxy card and authorize a proxy via the Internet or telephone to vote in accordance with the instructions provided below. Authorizing a proxy by telephone or through the Internet requires you to input the control number located on your proxy card. After inputting the control number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link. If you are the beneficial owner of your shares, you will need to follow the instructions provided by your broker, bank, trustee or nominee regarding how to instruct your broker, bank, trustee or nominee to vote your shares at the Barings BDC Special Meeting.

•        By Internet:    www.proxyvote.com

•        By telephone:    (800) 690-6903 to reach a toll-free, automated touchtone voting line, or (877) 777-4652 Monday through Friday 9:00 a.m. until 10:00 p.m. Eastern Time to reach a toll-free, live operator line.

•        By mail:    You may vote by proxy, after you request the hard copy materials, by following the directions and indicating your instructions on the enclosed proxy card, dating and signing the proxy card, and promptly returning the proxy card in the envelope provided, which requires no postage if mailed in the United States. Please allow sufficient time for your proxy card to be received on or prior to 11:59 p.m., Eastern Time, on February 23, 2022.

Important notice regarding the availability of proxy materials for the Barings BDC Special Meeting.    Barings BDC’s joint proxy statement/prospectus and the proxy card are available at www.proxyvote.com.

Q:     If I am a Sierra stockholder, how do I vote?

A:     The Sierra Special Meeting will be hosted live via Internet audio webcast. Any Sierra stockholder can attend the Sierra Special Meeting live at https://viewproxy.com/sicSM/2022. A Sierra stockholder should follow the instructions on the accompanying proxy card and authorize a proxy via the Internet or telephone to vote in accordance with the instructions provided below. Authorizing a proxy by telephone or through the Internet

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requires you to input the control number located on your proxy card. After inputting the control number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link. If you are the beneficial owner of your shares, you will need to follow the instructions provided by your broker, bank, trustee or nominee regarding how to instruct your broker, bank, trustee or nominee to vote your shares at the Sierra Special Meeting.

•        By Internet:    https://viewproxy.com/sicSM/2022

•        By telephone:    (844) 885-0180 Monday through Friday between 9 a.m. and 10 p.m. Eastern Time and Saturday and Sunday between 10 a.m. and 6 p.m. Eastern Time.

•        By mail:    You may vote by proxy, after you request the hard copy materials, by following the directions and indicating your instructions on the enclosed proxy card, dating and signing the proxy card, and promptly returning the proxy card in the envelope provided, which requires no postage if mailed in the United States. Please allow sufficient time for your proxy card to be received on or prior to 11:59 p.m., Eastern Time, on February 23, 2022.

Important notice regarding the availability of proxy materials for the Sierra Special Meeting.    Sierra’s joint proxy statement/prospectus and the proxy card are available at https://viewproxy.com/sicSM/2022.

Q:     What if a Barings BDC stockholder does not specify a choice for a matter when authorizing a proxy?

A:     All properly executed proxies representing shares of Barings BDC Common Stock at the Barings BDC Special Meeting will be voted in accordance with the directions given. If the enclosed proxy card is signed and returned without any directions given, the shares of Barings BDC Common Stock will be voted “FOR” the Barings BDC Proposals.

Q:     What if a Sierra stockholder does not specify a choice for a matter when authorizing a proxy?

A:     All properly executed proxies representing shares of Sierra Common Stock at the Sierra Special Meeting will be voted in accordance with the directions given. If the enclosed proxy card is signed and returned without any directions given, the shares of Sierra Common Stock will be voted “FOR” the Sierra Proposals.

Q:     If I am a Barings BDC stockholder, how can I change my vote or revoke a proxy?

A:     You may revoke your proxy and change your vote by giving notice at any time before your proxy is exercised. A revocation may be effected by submitting new voting instructions via the Internet voting site, by telephone, by obtaining and properly completing another proxy card that is dated later than the original proxy card and returning it, by mail, in time to be received before the Barings BDC Special Meeting, by attending the Barings BDC Special Meeting and voting virtually or by a notice, provided in writing and signed by you, delivered to Barings BDC’s Secretary on any business day before the date of the Barings BDC Special Meeting.

Q:     If I am a Sierra stockholder, how can I change my vote or revoke a proxy?

A:     You may change your vote or revoke a proxy by giving notice at any time before your proxy is exercised. A revocation may be effected by submitting new voting instructions via the Internet voting site, by telephone, by obtaining and properly completing another proxy card that is dated later than the original proxy card and returning it, by mail, in time to be received before the Sierra Special Meeting, by attending the Sierra Special Meeting and voting virtually or by a notice, provided in writing and signed by you, delivered to Sierra’s Secretary on any business day before the date of the Sierra Special Meeting.

Q:     If my shares of Barings BDC Common Stock or Sierra Common Stock, as applicable, are held in a broker-controlled account or in “street name,” will my broker vote my shares for me?

A:     No. You should follow the instructions provided by your broker on your voting instruction form. It is important to note that your broker will vote your shares only if you provide instructions on how you would like your shares to be voted at the applicable Special Meeting.

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Q:     What constitutes a “quorum” for the Barings BDC Special Meeting?

A:     The presence at the Barings BDC Special Meeting, virtually or represented by proxy, of the holders of a majority of the shares of Barings BDC Common Stock, issued and outstanding and entitled to vote at the Barings BDC Special Meeting, will constitute a quorum. Shares held by a broker, bank, trustee or nominee for which the broker, bank, trustee or nominee has not received voting instructions from the record holder as to how to vote such shares and does not have discretionary authority to vote the shares on non-routine proposals (which are considered “broker non-votes” with respect to such proposals) will not be treated as shares present for quorum purposes.

Q:     What constitutes a “quorum” for the Sierra Special Meeting?

A:     The presence at the Sierra Special Meeting, virtually or represented by proxy, of the holders of one-third of the shares of Sierra Common Stock entitled to be cast at the Sierra Special Meeting will constitute a quorum.

Q:     What vote is required to approve each of the proposals being considered at the Barings BDC Special Meeting?

A:     The Merger Stock Issuance Proposal requires the affirmative vote of the holders of at least a majority of the votes cast by holders of shares of Barings BDC Common Stock present at the Barings BDC Special Meeting, virtually or represented by proxy, entitled to vote thereat. Abstentions and broker non-votes (if any) will not be counted as votes cast and will have no effect on the result of the vote of the Merger Stock Issuance Proposal.

The Barings BDC Below NAV Issuance Proposal requires the affirmative vote of each of the following: (1) a majority of the outstanding voting securities of Barings BDC Common Stock; and (2) a majority of the outstanding voting securities of Barings BDC Common Stock that are not held by affiliated persons of Barings BDC. For purposes of this proposal, the Investment Company Act defines a “majority of the outstanding voting securities” as the vote of the lesser of: (1) 67% or more of the voting securities of Barings BDC present at the Barings BDC Special Meeting, if the holders of more than 50% of the outstanding voting securities of Barings BDC are present virtually or represented by proxy; or (2) more than 50% of the outstanding voting securities of Barings BDC. Abstentions and broker non-votes (if any) will have the effect of a vote “against” the Barings BDC Below NAV Issuance Proposal.

The Barings BDC Adjournment Proposal requires the affirmative vote of the holders of at least a majority of votes cast by holders of shares of Barings BDC Common Stock present at the Barings BDC Special Meeting, virtually or represented by proxy, and entitled to vote thereat is required to approve the Barings BDC Adjournment Proposal. Abstentions and broker non-votes (if any) will not be counted as votes cast and will have no effect on the result of the vote of the Barings BDC Adjournment Proposal.

Q:     What vote is required to approve each of the proposals being considered at the Sierra Special Meeting?

A:     The affirmative vote of the holders of Sierra Common Stock constituting a majority of all the votes entitled to be cast on the matter at the Sierra Special Meeting is required to approve the Merger Proposal. The affirmative vote of the holders of at least a majority of the votes cast by holders of the shares of Sierra Common Stock present at the Sierra Special Meeting, virtually or represented by proxy, is required to approve the Sierra Adjournment Proposal.

Abstentions and broker non-votes (which occur when a beneficial owner does not instruct its broker, bank, trustee or nominee holding its shares of Sierra Common Stock how to vote such shares on its behalf), if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Sierra Adjournment Proposal but will have the same effect as a vote “against” the Merger Proposal.

Q:     How does the bankruptcy of Medley LLC affect the Merger Agreement and/or the Merger?

A:     The bankruptcy of Medley LLC is not expected to affect the Merger Agreement or the Merger. On March 7, 2021, Medley commenced a voluntary case (the “Medley LLC Bankruptcy Case”) under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). Medley LLC is the sole member of Sierra’s investment adviser, SIC Advisors LLC (“SIC Advisors”),

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and Sierra’s administrator, Medley Capital LLC (“Medley Capital”). Medley LLC, Medley Capital and the Official Committee of Unsecured Creditors appointed in the Medley LLC Bankruptcy Case reached agreement on the terms of a chapter 11 plan, which was filed with the Bankruptcy Court on August 13, 2021, and ultimately confirmed by the Bankruptcy Court on October 14, 2021 (as supplemented and modified, the Modified Third Amended Combined Disclosure Statement Chapter 11 Plan of Medley LLC, the “Final Plan”). The Final Plan became effective on October 18, 2021.

The Final Plan provides for a limited restructuring in chapter 11 to enable Medley LLC to maximize the value of its remaining contracts (the “Remaining Contracts”) over a short run-off period, until the Remaining Contracts are terminated, subject to an end date of March 31, 2022 (the “Run-Off End Date”). The Remaining Contracts include the Sierra Investment Advisory Agreement (as defined below under “— Questions and Answers about the Merger — Will stockholders of Barings BDC following the Merger pay a higher base management fee than stockholders of Barings BDC and Sierra prior to the Merger?”) and the Sierra Administration Agreement (as defined in “Certain Relationships and Related Party Transactions — Sierra Administration Agreement”). The Final Plan contemplates that SIC Advisors will continue to honor its obligations under the Sierra Investment Advisory Agreement until the termination thereof. Accordingly, Sierra’s arrangements with SIC Advisors and Medley Capital are expected to remain in place until the closing of the First Merger. If, notwithstanding that, SIC Advisors is no longer performing its duties and obligations under the Sierra Investment Advisory Agreement, the Merger Agreement permits Sierra to replace SIC Advisors as Sierra’s investment adviser. See “Description of the Merger Agreement — Additional Covenants — Sierra Investment Advisory Agreement”).

Q:     What will happen if the Barings BDC Proposals being considered at the Barings BDC Special Meeting and/or the Sierra Proposals being considered at the Sierra Special Meeting are not approved by the required vote?

A:     The Merger Stock Issuance Proposal and the Barings BDC Below NAV Proposals with respect to Barings BDC, and the Merger Proposal with respect to Sierra, are conditions precedent to the closing of the Merger. If the Merger does not close because Barings BDC stockholders do not approve the Merger Stock Issuance Proposal or the Barings BDC Below NAV Proposal (the “Barings BDC Stockholder Approval”) and Sierra stockholders do not approve the Merger Proposal (the “Sierra Stockholder Approval”) or any of the other conditions to closing of the Merger are not satisfied or, if legally permissible, waived, Barings BDC and Sierra will continue to operate independently under the management of their respective investment advisers, and Barings BDC’s and Sierra’s respective directors and officers will continue to serve in such roles until their respective successors are duly elected and qualify or their resignation. Furthermore, neither Barings BDC nor Sierra will benefit from the expenses incurred in their pursuit of the Merger and, under certain circumstances, Sierra may be required to pay Barings BDC’s and Barings’ expenses incurred in connection with the Merger, subject to a cap of $2.0 million. See “Description of the Merger Agreement — Termination of the Merger Agreement” below for a more detailed discussion. The Sierra Board would also expect to consider alternatives, including the replacement of SIC Advisors as its investment adviser, another merger transaction or Sierra’s liquidation, based on, among other things, then-current market circumstances, the performance of the Sierra portfolio and the financial position of Sierra. Sierra also might seek a modification to the Final Plan that would extend the Run-Off End Date so that SIC Advisors may continue to serve as Sierra’s investment adviser beyond March 31, 2022.

Stockholder approval of the Barings BDC Adjournment Proposal and the Sierra Adjournment Proposal are not conditions to the closing of the Merger.

Q:     How will the final voting results be announced?

A:     Preliminary voting results may be announced at each Special Meeting. Final voting results will be published by Barings BDC and Sierra in a current report on Form 8-K within four business days after the date of the Barings BDC Special Meeting and the Sierra Special Meeting, respectively.

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Q:     Are the proxy materials available electronically?

A:     Barings BDC and Sierra have made the registration statement (of which this joint proxy statement/prospectus forms a part), the applicable notice of special meeting of stockholders and the applicable proxy card available to stockholders of Barings BDC and Sierra on the Internet. Stockholders may (i) access and review the proxy materials of Barings BDC and Sierra, as applicable, (ii) authorize their proxies, as described in “The Barings BDC Special Meeting — Voting of Proxies” and “The Sierra Special Meeting — Voting of Proxies” and/or (iii) elect to receive future proxy materials by electronic delivery via the Internet address provided below.

The registration statement (of which this joint proxy statement/prospectus forms a part), notice of special meeting of stockholders and the proxy card are available at www.proxyvote.com for stockholders of record of Barings BDC and at https://viewproxy.com/sicSM/2022 for stockholders of record of Sierra.

Pursuant to the rules adopted by the SEC, Barings BDC and Sierra furnish proxy materials by email to those stockholders who have elected to receive their proxy materials electronically. While each of Barings BDC and Sierra encourages stockholders to take advantage of electronic delivery of proxy materials, which helps to reduce the environmental impact of stockholder meetings and the cost associated with the physical printing and mailing of materials, stockholders who have elected to receive proxy materials electronically by email, as well as beneficial owners of shares of Barings BDC Common Stock and Sierra Common Stock, as applicable, held by a broker or custodian, may request a printed set of proxy materials.

Q:     Will my vote make a difference?

A:     Yes. Your vote is needed to ensure that the proposals can be acted upon. Your vote is very important. Your immediate response will help avoid potential delays and may save significant additional expenses associated with soliciting stockholder votes, and potentially adjourning the Special Meetings.

Q:     Whom can I contact with any additional questions?

A:     If you are a Barings BDC stockholder, you can contact Barings BDC by calling Barings BDC collect at (888) 401-1088, by sending an e-mail to Barings BDC at BDCinvestorrelations@barings.com, or by writing to Barings BDC at 300 South Tryon Street, Suite 2500, Charlotte, North Carolina 28202, Attention: Investor Relations, or by visiting Barings BDC’s website at www.baringsbdc.com or you may contact Broadridge Inc., Barings BDC’s proxy solicitor, toll-free at 1-877-777-4652.

If you are a Sierra stockholder, you can contact Sierra by calling Sierra collect at (212) 759-0777, by sending an email to SierraIncome@allianceadvisors.com, or by writing to Sierra Income Corporation at 100 Park Avenue, 16th Floor, New York, New York 10017, or by visiting Sierra’s website at www.sierraincomecorp.com or you may contact Alliance Advisors, LLC, Sierra’s proxy solicitor, toll-free at (844) 885-0180 (Monday through Friday between 9 a.m. and 10 p.m. Eastern Time and Saturday and Sunday between 10 a.m. and 6 p.m. Eastern Time).

Q:     Where can I find more information about Barings BDC and Sierra?

A:     You can find more information about Barings BDC and Sierra in the documents described under the section entitled “Where You Can Find More Information.

Q:     What do I need to do now?

A:     Barings BDC and Sierra urge you to carefully read this entire document, including its annexes. You should also review the documents referenced under “Where You Can Find More Information” and consult with your accounting, legal and tax advisors.

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Questions and Answers about the Merger

Q:     What will happen in the Merger?

A:     As of the Effective Time, the separate corporate existence of Acquisition Sub will cease. Sierra will be the surviving corporation of the First Merger and will continue its existence as a corporation under the laws of the State of Maryland until the Second Merger (as defined below). Immediately after the Effective Time, Sierra, as the surviving corporation in the First Merger, will merge with and into Barings BDC (the “Second Merger” and, together with the First Merger, the “Merger”), with Barings BDC as the surviving corporation in the Second Merger.

Q:     What will Sierra stockholders receive in the Merger?

A:     Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of Sierra Common Stock issued and outstanding immediately prior to the Effective Time (excluding Canceled Shares (as defined below)) will be converted into the right to receive (1) $0.9783641 per share in cash, without interest, from Barings (such amount of cash, the “Cash Consideration”) and (2) 0.44973 (as may be adjusted pursuant to the Merger Agreement) of a validly issued, fully paid and non-assessable share of Barings BDC Common Stock (and, if applicable, cash in lieu of fractional shares of Barings BDC Common Stock payable in accordance with the Merger Agreement) (the “Share Consideration” and, together with the Cash Consideration, the “Merger Consideration”). For purposes of the Merger Agreement, “Canceled Shares” means all treasury shares and all shares of Sierra Common Stock issued and outstanding immediately prior to the Effective Time that are owned by Barings BDC, Sierra or any subsidiary thereof.

Q:     How will the Exchange Ratio be determined?

A:     The Exchange Ratio was fixed at the signing of the Merger Agreement at 0.44973. Because the Exchange Ratio is fixed, other than customary anti-dilution adjustments in the event of certain changes in the number of outstanding shares of Barings BDC Common Stock and Sierra Common Stock, the value of the consideration to be received by Sierra stockholders in the First Merger will depend on the market price of shares of Barings BDC Common Stock at the time of the First Merger.

Q:     Who is responsible for paying the expenses relating to completing the Merger?

A:     In general, all fees and expenses incurred in connection with the Merger will be paid by the party incurring such fees and expenses, whether or not the Merger or any of the transactions contemplated in the Merger Agreement are consummated, provided that each of Barings BDC and Sierra agreed to be responsible for one-half of all filing fees incurred in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). It is expected that Barings BDC will incur approximately $7.3 million, or $0.11 per share of Barings BDC Common Stock, and Sierra will incur approximately $9.1 million, of which approximately $3.8 million had been paid as of September 30, 2021, or $0.09 per share of Sierra Common Stock, of fees and expenses in connection with completing the Merger. While Barings BDC does not anticipate material portfolio repositioning following the Merger, these costs described above do not reflect commissions or other transaction fees that may be incurred by Barings BDC as a result of any such portfolio repositioning.

Under certain circumstances, Sierra will be required to reimburse Barings BDC’s and Barings’ expenses incurred in connection with the Merger, subject to a maximum reimbursement payment of $2.0 million, and to pay Barings BDC a termination fee in the amount of $11.0 million. See “Description of the Merger Agreement — Termination of the Merger Agreement” for a more detailed discussion.

Q:     Will I receive distributions after the Merger?

A:     Each Sierra stockholder will become a stockholder of Barings BDC in the First Merger and, as such, will receive any future distributions paid to Barings BDC stockholders with respect to shares of Barings BDC Common Stock received in the First Merger.

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Barings BDC intends to continue to make distributions on a quarterly basis to Barings BDC stockholders out of assets legally available for distribution. All distributions will be paid at the discretion of the Barings BDC Board and will depend on Barings BDC’s earnings, financial condition, maintenance of its status as a “regulated investment company” (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), compliance with applicable business development company (“BDC”) regulations and such other factors as the Barings BDC Board may deem relevant from time to time. Barings BDC cannot guarantee that it will pay distributions to stockholders in the future. For a history of the dividends and distributions paid by Barings BDC since January 1, 2019, see “Market Price, Dividend and Distribution Information — Barings BDC.” For a history of the dividends and distributions paid by Sierra since January 1, 2019, see “Market Price, Dividend and Distribution Information — Sierra.

Barings BDC has adopted a dividend reinvestment plan that provides for reinvestment of Barings BDC’s distributions on behalf of Barings BDC stockholders, unless a stockholder elects to receive cash as provided below. Following the closing, Sierra stockholders receiving shares of Barings BDC Common Stock in the First Merger will be automatically enrolled into the Barings BDC dividend reinvestment plan and would need to opt out to receive future distributions, if any, in cash. As a result, if the Barings BDC Board authorizes, and Barings BDC declares, a cash distribution, then Barings BDC stockholders, including former Sierra stockholders who received shares of Barings BDC Common Stock in the First Merger, who have not “opted out” of Barings BDC’s dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of Barings BDC Common Stock, rather than receiving the cash. See “Barings BDC Dividend Reinvestment Plan” for additional information regarding Barings BDC’s dividend reinvestment plan. To opt out of the Barings BDC dividend reinvestment plan, a Barings BDC stockholder should notify Computershare, Inc., the plan administrator, in writing at Computershare, Inc., P.O. Box 505000, Louisville, Kentucky 40233, so that such notice is received by the plan administrator no later than the applicable record date for a dividend to Barings BDC stockholders.

Q:     What happened to the Sierra Distribution Reinvestment Plan as a result of the Merger Agreement?

A:     Sierra agreed to suspend its distribution reinvestment plan in connection with the Merger Agreement. As a result, beginning with Sierra’s first distribution following its September 2021 distribution, any distributions declared by Sierra will be paid in cash to all Sierra stockholders unless and until the distribution reinvestment plan is reinstated. See “Sierra Distribution Reinvestment Plan.”

Q:     Is the Merger subject to any third-party consents?

A:     Under the Merger Agreement, Sierra and Barings BDC have agreed to cooperate with each other and use their reasonable best efforts to take promptly, or cause to be taken promptly, all actions to do, or cause to be done, all things necessary, proper or advisable to consummate the transactions contemplated by the Merger Agreement, including the Merger, in the most expeditious manner practicable. There can be no assurance that any permits, consents, approvals, confirmations or authorizations will be obtained or that such permits, consents, approvals, confirmations or authorizations will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following the Merger.

Q:     How does Barings BDC’s investment objective and strategy differ from Sierra’s?

A:     Barings BDC’s primary investment objective is to generate income by investing directly in privately-held middle-market companies to help these companies fund acquisitions, growth or refinancing. Barings BDC seeks to achieve its investment objective by investing in senior secured private debt investments in well-established middle-market businesses that operate across a wide range of industries. Sierra’s investment objective is to generate current income, and to a lesser extent, long-term capital appreciation. Sierra seeks to achieve its investment objective by primarily lending to and investing in the debt of privately owned U.S. middle-market companies.

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The following table presents a comparison of Barings BDC’s and Sierra’s investment objectives and strategies:

   

Barings BDC

 

Sierra

  

Primary Investment Objective

 

To generate income by investing directly in privately-held middle-market companies to help these companies fund acquisitions, growth or refinancing.

 

To generate current income, and to a lesser extent, long-term capital appreciation by primarily lending to and investing in the debt of privately-owned U.S. middle-market companies.

Investment Focus

 

Senior secured private debt investments in well-established middle-market businesses that operate across a wide range of industries.

 

First lien senior secured debt, second lien secured debt and, to a lesser extent, subordinated debt.

Target Borrower

 

Middle market companies, which tend to be privately owned, often by a private equity sponsor, and are companies that typically generate annual earnings before interest, taxes, depreciation and amortization, as adjusted (“Adjusted EBITDA”) of $10.0 million to $75.0 million.

 

U.S. companies operating in a broad range of industries with annual revenue between $50.0 million and $1.0 billion.

Equity Investments

 

On a limited basis, Barings BDC may acquire equity interests in portfolio companies. In such cases, Barings BDC generally seeks to structure its equity investments as non-control investments that provide Barings BDC with minority rights.

 

Sierra may make equity investments in companies that Sierra believes will generate appropriate risk adjusted returns, although Sierra does not expect such investments to be a substantial portion of its portfolio.

Notwithstanding the differences in investment objective and strategy, Barings BDC does not anticipate any material repositioning of assets acquired in the Merger following the Merger.

The risks associated with an equity investment in Barings BDC and Sierra are similar, although there are differences in such risks due to the different investment objective, investment focus and target investment of Barings BDC and Sierra. See “Risk Factors — Risks Relating to the Merger — The investment objectives and investment strategy of Barings BDC differ from the investment objectives and investment strategy of Sierra and, therefore, an equity investment in Barings BDC has different risks than an equity investment in Sierra.

Q:     How will the combined company be managed following the Merger?

A:     The directors of Barings BDC immediately prior to the Merger will remain the directors of Barings BDC and will hold office until their respective successors are duly elected and qualify, or their earlier death, resignation or removal. In addition, pursuant to the Merger Agreement, two current independent members of the Sierra Board selected by Barings BDC will be added to the Barings BDC Board as Class II directors effective as of the Closing. Barings BDC has not yet determined which Sierra independent directors will be appointed. The officers of Barings BDC immediately prior to the Merger will remain the officers of Barings BDC and will hold office until their respective successors are duly appointed and qualify, or their earlier death, resignation or removal. Following the Merger, Barings BDC will continue to be managed by Barings, and there are not expected to be any material changes in Barings BDC’s investment objective or strategy.

Q:     Are Barings BDC stockholders or Sierra stockholders able to exercise appraisal rights in connection with the Merger?

A:     No. Neither Barings BDC stockholders nor Sierra stockholders will be entitled to exercise appraisal rights with respect to any matter to be voted upon at the Barings BDC Special Meeting or the Sierra Special Meeting, respectively.

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Q:     When do the parties expect to complete the Merger?

A:     While there can be no assurance as to the exact timing, or that the Merger will be completed at all, Barings BDC and Sierra are working to complete the Merger in the first quarter of 2022. It is currently expected that the Merger will be completed promptly following receipt of the Barings BDC Stockholder Approval at the Barings BDC Special Meeting and the Sierra Stockholder Approval at the Sierra Special Meeting, along with the satisfaction or (to the extent legally permissible) waiver of the other closing conditions set forth in the Merger Agreement.

Q:     Is the Merger expected to be taxable to Sierra stockholders?

A:     The Merger is intended to qualify as a “reorganization,” within the meaning of Section 368(a) of the Code. If the Merger qualifies as a reorganization, then generally, for U.S. federal income tax purposes, U.S. stockholders (as defined herein under the heading “Certain Material U.S. Federal Income Tax Consequences of the Merger”) of Sierra Common Stock who receive a combination of shares of Barings BDC Common Stock and cash, other than cash in lieu of a fractional share of Barings BDC Common Stock, in exchange for their Sierra Common Stock, will recognize gains, but will not recognize any losses, equal to the lesser of (1) the amount of cash received in exchange for Sierra Common Stock (excluding cash received in lieu of a fractional share of Barings BDC Common Stock) and (2) the excess, if any, of (a) the sum of the amount of cash received in exchange for Sierra Common Stock (including cash received in lieu of a fractional share of Barings BDC Common Stock) and the fair market value of the Barings BDC Common Stock received in the Merger (determined at the Effective Time) over (b) the U.S. stockholder’s tax basis in the shares of Sierra Common Stock surrendered in the Merger. A U.S. stockholder also will recognize gain or loss attributable to cash received in lieu of a fractional share of Barings BDC Common Stock in an amount equal to the difference between the amount of cash received and the portion of the basis of the Sierra Common Stock surrendered that is allocable to the fractional share. Any gains recognized generally will be capital gains, and any such capital gains generally will be long-term capital gains, provided certain holding period and other requirements are met. Sierra Tax Dividends (as defined in “Description of the Merger Agreement — Additional Covenants — Coordination of Dividends”) paid by Sierra should not be treated for U.S. federal income tax purposes as part of the consideration paid for shares of Sierra Common Stock in the Merger but instead should be treated for U.S. federal income tax purposes as a distribution with respect to the Sierra Common Stock. The U.S. federal income tax treatment of the Cash Consideration is uncertain in many respects. Sierra believes that its U.S. stockholders have a reasonable basis upon which to take a position that the Cash Consideration should be treated as additional merger consideration, and, assuming such position is respected, any gain realized by a U.S. stockholder on the receipt of the Cash Consideration would be a capital gain if the shares of Sierra Common Stock were held by such U.S. stockholder as a capital asset. No assurances can be given, however, that the IRS will not assert, or that a court would not sustain, a contrary position under which the Cash Consideration could be subject to taxation as ordinary income. Barings BDC and Barings do not express any position on how the U.S. stockholders of Sierra should treat the Cash Consideration.

Sierra’s obligation to effect the Merger is conditioned on its receipt of an opinion from Sullivan & Worcester LLP (“S&W”) (or, if S&W is unable to deliver such an opinion, of such other nationally recognized tax counsel reasonably satisfactory to Sierra and Barings BDC), to the effect that, for U.S. federal income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the registration statement of which this joint proxy statement/prospectus is a part, Goodwin Procter LLP (“Goodwin Procter”) has delivered an opinion to Barings BDC to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Such opinions will be or are based on, among other things, certain facts, representations and covenants, each made by officers of Barings BDC and Sierra, and assumptions, all of which must be consistent with the state of facts existing at the time of the Merger. If any of these facts, representations, covenants and assumptions are, or become, inaccurate or incomplete, such opinion may be invalid, and the conclusions reached therein could be jeopardized. An opinion of counsel represents counsel’s best legal judgment and is not binding on the Internal Revenue Service (the “IRS”) or the courts, which may not agree with the conclusions set forth in such opinion.

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No ruling has been, or will be, sought by Barings BDC or Sierra from the IRS with respect to the Merger and there can be no assurance that the IRS will not challenge the qualification of the Merger as a “reorganization” under Section 368(a) of the Code or that a court would not sustain such a challenge. If the IRS or a court determines that the Merger should not be treated as a tax-free reorganization under Section 368(a) of the Code, then a U.S. stockholder (as defined herein under the heading “Certain Material U.S. Federal Income Tax Consequences of the Merger”) would generally recognize gain or loss for U.S. federal income tax purposes upon the exchange of Sierra Common Stock for Barings BDC Common Stock and cash in the Merger (with potential ordinary income treatment, as noted above, for the Cash Consideration).

For additional information, see the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Merger.” The tax consequences to you of the Merger will depend on your particular facts and circumstances. Please consult your own tax advisor as to the tax consequences of the Merger in your particular circumstances, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws.

Q:     What happens if the Merger is not consummated?

A:     If the Merger is not completed for any reason, Sierra stockholders will not receive any payment for their shares of Sierra Common Stock in connection with the Merger. Instead, Sierra will remain an independent company. In addition, Sierra may, under certain circumstances specified in the Merger Agreement, be required to pay Barings BDC a termination fee of $11.0 million and reimburse Barings BDC and Barings for their out-of-pocket expenses incurred in connection with the transactions, subject to a maximum reimbursement amount of $2.0 million. See “Description of the Merger Agreement — Termination of the Merger Agreement” for a more detailed discussion. The Sierra Board would also expect to consider other alternatives, including the replacement of SIC Advisors as its investment adviser, another merger transaction or Sierra’s liquidation, based on, among other things, then-current market circumstances, the performance of the Sierra portfolio and the financial position of Sierra. Sierra also might seek a modification to the Final Plan that would extend the Run-Off End Date so that SIC Advisors may continue to serve as Sierra’s investment adviser beyond March 31, 2022.

Q:     Will stockholders of Barings BDC following the Merger pay a higher base management fee than stockholders of Barings BDC and Sierra prior to the Merger?

A:     No. Currently, Barings BDC stockholders pay a base management fee equal to 1.250% of Barings BDC’s average gross assets under the amended and restated investment advisory agreement, dated as of December 23, 2020, by and between Barings BDC and Barings (the “Existing Barings BDC Advisory Agreement”). On September 21, 2021, the Barings BDC Board, including a majority of the Barings BDC Board Independent Directors, approved a second amended and restated investment advisory agreement between Barings BDC and Barings (the “New Barings BDC Advisory Agreement”), which will be entered into in connection with and effective upon the closing of the Merger. The New Barings BDC Advisory Agreement does not result in any change to the base management fee currently payable to Barings under the Existing Barings BDC Advisory Agreement; the sole change is to increase the rate of return at which Barings would be entitled to an incentive payment from 2.0% to 2.0625% per quarter (or from 8.0% to 8.25% annualized) (the “Hurdle Rate Increase”). The Hurdle Rate Increase has the effect of reducing the likelihood that Barings will be eligible to receive an income incentive fee from Barings BDC, thus reducing the likelihood that Barings BDC will pay an income incentive fee to Barings.

Under the investment advisory agreement, dated as of April 5, 2012, by and between Sierra and SIC Advisors (the “Sierra Investment Advisory Agreement”), Sierra stockholders pay a 1.75% base management fee based on Sierra’s gross assets (which includes any borrowings for investment purposes) to SIC Advisors. Sierra stockholders will pay a base management fee to Barings under the New Barings BDC Advisory Agreement, which will be entered into in connection with and effective upon the closing of the Merger, that is less than the 1.75% base management fee otherwise payable to SIC Advisors.

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The New Barings BDC Advisory Agreement is not required to be approved by the Barings BDC stockholders or the Sierra stockholders. However, if the Merger does not close because, for instance, Barings BDC has not obtained the Barings BDC Stockholder Approval or Sierra has not obtained the Sierra Stockholder Approval, the Existing Barings BDC Advisory Agreement, including the current hurdle rate, will continue in effect. For additional information about the terms of the New Barings BDC Advisory Agreement, see “The Merger — Terms of Second Amended and Restated Investment Advisory Agreement.”

Q:     How will the proposed Merger affect the costs and expenses that Sierra stockholders will pay as stockholders of Barings BDC following the Merger?

A:     Estimated annual expenses expected to be borne, directly or indirectly, by stockholders of Barings BDC following the Merger will be higher than the annual expenses borne, directly or indirectly, by stockholders of Sierra prior to the Merger. As of September 30, 2021, Sierra stockholders bore, directly or indirectly, costs and expenses equal to 5.3% of net assets and, on a pro forma basis taking into account the completion of the Merger and the effectiveness of the New Barings BDC Advisory Agreement, stockholders of Barings BDC following the Merger are expected to bear, directly or indirectly, costs and expenses equal to 6.1% of net assets. The increase in costs and expenses for Barings BDC stockholders after the Merger are due, in part, to Barings BDC having significantly higher borrowings and, as a result, higher interest expense, than Sierra currently has. Additionally, following the Merger, Barings BDC expects to pay incentive fees to Barings, based on performance, while SIC Advisors is not currently entitled to receive incentive fees from Sierra.

For these purposes, costs and expenses include base management fees, incentive fees, interest payments on borrowed funds, other expenses and acquired fund fees and expenses. Additionally, costs and expenses are calculated as a percentage of net assets, which is defined as total assets less indebtedness before taking into account any incentive fees payable during the relevant period. Costs and expenses will likely vary from period to period and may vary materially depending on a variety of factors. For additional information about the fees and expenses relating to the Merger, see “Comparative Fees and Expenses.”

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SUMMARY OF THE MERGER

This summary highlights selected information contained elsewhere in this joint proxy statement/prospectus and may not contain all of the information that is important to you. You should read this entire joint proxy statement/prospectus carefully, including “Risk Factors” and other information incorporated by reference for a more complete understanding of the Merger. In particular, you should read the annexes attached to this joint proxy statement/prospectus, including the Merger Agreement, which is attached as Annex A hereto, as it is the legal document that governs the Merger. The discussion in this joint proxy statement/prospectus, which includes the material terms of the Merger and the principal terms of the Merger Agreement, is subject to, and is qualified in its entirety by reference to, the Merger Agreement. See “Where You Can Find More Information,” “Incorporation by Reference for Barings BDC” and “Incorporation by Reference for Sierra.” For a discussion of the risk factors you should carefully consider, see the section entitled “Risk Factors” beginning on page 25 for risks related to the Merger and “Risk Factors” in Part I, Item 1A of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in Part II, Item 1A of Barings BDC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 and in Part I, Item 1A of Sierra’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in Part II, Item 1A of Sierra’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021 for general risks related to Barings BDC and Sierra.

The Parties to the Merger

Barings BDC, Inc.
300 South Tryon Street, Suite 2500
Charlotte, North Carolina 28202
(704) 805-7200

Barings BDC is a Maryland corporation incorporated on October 10, 2006. Barings BDC currently operates as a closed-end, non-diversified investment company and has elected to be treated as a BDC under the Investment Company Act.

In August 2018, Barings BDC completed a series of transactions with Barings pursuant to which the management of Triangle Capital Corporation was externalized, Triangle Capital Corporation changed its name to Barings BDC, Inc. and Barings became the investment adviser and administrator to Barings BDC (such transactions, the “Barings BDC Externalization Transaction’’). In connection with the Barings BDC Externalization Transaction, on August 3, 2018, Barings BDC began trading on the New York Stock Exchange (“NYSE”) under the symbol “BBDC.”

Prior to the Barings BDC Externalization Transaction, Barings BDC’s business was to provide capital to lower middle-market companies located primarily in the United States. Barings BDC focused on investments in companies with a history of generating revenues and positive cash flows, an established market position and a proven management team with a strong operating discipline. Barings BDC’s target portfolio company had annual revenues between $20.0 million and $300.0 million and annual earnings before interest, taxes, depreciation and amortization, as adjusted between $5.0 million and $75.0 million. Barings BDC invested primarily in senior and subordinated debt securities of privately held companies, generally secured by security interests in portfolio company assets. In addition, Barings BDC generally invested in one or more equity instruments of the borrower, such as direct preferred or common equity interests. Barings BDC’s investments generally ranged from $5.0 million to $50.0 million per portfolio company.

At the time of the Barings BDC Externalization Transaction, Barings shifted the investment focus of Barings BDC to investing in syndicated senior secured loans, bonds and other fixed income securities. Since that time, Barings has transitioned Barings BDC’s portfolio to primarily senior secured private debt investments in well-established middle-market businesses that operate across a wide range of industries. Barings’ existing SEC co-investment exemptive relief under the Investment Company Act permits Barings BDC’s and Barings’ affiliated private and SEC-registered funds to co-invest in Barings-originated loans, which allows Barings to efficiently implement its senior secured private debt investment strategy for Barings BDC.

Barings employs fundamental credit analysis, and targets investments in businesses with relatively low levels of cyclicality and operating risk. The hold size of each position will generally be dependent upon a number of factors including total facility size, pricing and structure, and the number of other lenders in the facility. Barings has experience managing levered vehicles, both public and private, and will seek to enhance Barings BDC’s returns

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through the use of leverage with a prudent approach that prioritizes capital preservation. Barings believes this strategy and approach offers attractive risk/return with lower volatility given the potential for fewer defaults and greater resilience through market cycles.

Barings BDC has elected for federal income tax purposes to be treated as a RIC under the Code.

Sierra Income Corporation
100 Park Avenue, 16th Floor
New York, New York 10017
(212) 759-0777

Sierra is a non-diversified closed-end management investment company incorporated in Maryland that has elected to be regulated as a BDC under the Investment Company Act.

Sierra’s investment objective is to generate current income, and to a lesser extent, long-term capital appreciation. Sierra seeks to achieve its investment objective by primarily lending to and investing in the debt of privately owned U.S. middle-market companies. Sierra invests primarily in first lien senior secured debt, second lien secured debt and, to a lesser extent, subordinated debt of middle market companies in a broad range of industries with annual revenue between $50.0 million and $1.0 billion. Sierra will originate transactions sourced through SIC Advisors’ direct origination network, and also expects to acquire debt securities through the secondary market. Sierra may make equity investments in companies that it believes will generate appropriate risk adjusted returns, although it does not expect such investments to be a substantial portion of the portfolio.

Sierra has elected for federal income tax purposes to be treated as a RIC under the Code.

Mercury Acquisition Sub, Inc.
300 South Tryon Street, Suite 2500
Charlotte, North Carolina 28202
(704) 805-7200

Acquisition Sub is a Maryland corporation and a newly formed wholly-owned direct consolidated subsidiary of Barings BDC. Acquisition Sub was formed in connection with and for the sole purpose of the Merger and has no prior operating history.

Barings LLC
300 South Tryon Street, Suite 2500
Charlotte, North Carolina 28202
(704) 805-7200

Barings, a Delaware limited liability company and wholly-owned subsidiary of Massachusetts Mutual Life Insurance Company, is Barings BDC’s investment adviser. Barings is a leading global asset management firm and is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended. Barings’ primary investment capabilities include fixed income, private credit, real estate, equity, and alternative investments. Subject to the overall supervision of the Barings BDC Board, a majority of which is made up of the Barings BDC Independent Directors, Barings’ Global Private Finance Group (“Barings GPFG”) manages Barings BDC’s day-to-day operations, and provides investment advisory and management services to Barings BDC. Barings GPFG is part of Barings’ Global Fixed Income Platform that includes all of public fixed income, all of private credit and real estate debt of Barings, which had approximately $300.4 billion assets under management as of September 30, 2021. Barings GPFG manages private funds and separately managed accounts, along with multiple public vehicles.

Included in Barings GPFG is Barings North American Private Finance Team, which, provides a full set of solutions to North American middle market companies, including revolvers, first and second lien senior secured loans, unitranche structures, mezzanine debt and equity co-investments. Barings GPFG is responsible for identifying investment opportunities, conducting research and due diligence on prospective investments, structuring Barings BDC’s investments and monitoring and servicing Barings BDC’s investments.

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Structure of the Merger

Pursuant to the terms of the Merger Agreement, at the Effective Time, Acquisition Sub will be merged with and into Sierra. Sierra will be the surviving corporation in the First Merger and will continue its existence as a corporation under the laws of the State of Maryland. As of the Effective Time, the separate corporate existence of Acquisition Sub will cease. Immediately after the Effective Time, Sierra will merge with and into Barings BDC, with Barings BDC continuing as the surviving corporation in the Second Merger.

Based on the number of shares of Barings BDC Common Stock issued and outstanding on September 20, 2021, it is expected that, following consummation of the Merger, current Barings BDC stockholders will own approximately 58.7% of the outstanding Barings BDC Common Stock and former Sierra stockholders will own approximately 41.3% of the outstanding Barings BDC Common Stock.

The following diagram illustrates the First Merger, the Second Merger and the ownership structure of Barings BDC immediately following the Merger:

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Merger Consideration

Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of Sierra Common Stock issued and outstanding immediately prior to the Effective Time (excluding Canceled Shares) will be converted into the right to receive (i) $0.9783641 per share in cash, without interest, from Barings and (ii) 0.44973 of a validly issued, fully paid and non-assessable share of Barings BDC Common Stock, plus, if applicable, cash in lieu of fractional shares. Pursuant to the Merger Agreement, the Exchange Ratio is fixed, other than customary anti-dilution adjustments in the event of certain changes in the number of outstanding shares of Barings BDC and Sierra common stock. For more information, see “Description of the Merger Agreement — Merger Consideration.

Market Price of Securities

Shares of Barings BDC Common Stock trade on the NYSE under the symbol “BBDC.” Shares of Sierra Common Stock are illiquid investments for which there is currently no secondary market.

The following table presents the closing sales prices as of the last trading day before the execution of the Merger Agreement and the last trading day before the date of this joint proxy statement/prospectus.

 

Barings BDC
Common Stock

Closing Sales Price at September 20, 2021

 

$

10.63

Closing Sales Price at December 27, 2021

 

$

10.91

Risks Relating to the Proposed Merger

The Merger and the other transactions contemplated by the Merger Agreement are subject to, among others, the following risks. Barings BDC stockholders and Sierra stockholders should carefully consider these risks before deciding how to vote on the proposals to be voted on at the Special Meetings.

•        Because the market price of Barings BDC Common Stock will fluctuate, Sierra stockholders cannot be sure of the market value of the Merger Consideration they will receive until the closing date of the Merger (the “Closing Date”).

•        Sales of shares of Barings BDC Common Stock after the completion of the Merger may cause the market price of Barings BDC Common Stock to decline.

•        Sierra stockholders and Barings BDC stockholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Merger.

•        The NAV per share of Barings BDC Common Stock will be diluted if Barings BDC issues shares of Barings BDC Common Stock at a price below the then-current NAV per share in connection with the First Merger.

•        Barings BDC may be unable to realize the benefits anticipated by the Merger, including estimated cost savings, or it may take longer than anticipated to realize such benefits.

•        The announcement and pendency of the proposed Merger could adversely affect both Barings BDC’s and Sierra’s business, financial results and operations.

•        If the Merger does not close, neither Barings BDC nor Sierra will benefit from the expenses incurred in their pursuit of the Merger.

•        The termination of the Merger Agreement could negatively impact Sierra and Barings BDC.

•        Under certain circumstances, Sierra may be obligated to pay a termination fee upon termination of the Merger Agreement.

•        Except in specified circumstances, if the Merger is not completed by March 31, 2022, either Sierra or Barings BDC may choose not to proceed with the Merger.

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•        The Merger is subject to closing conditions, including stockholder approvals, that, if not satisfied or waived, will result in the Merger not being completed, which may result in material adverse consequences to Sierra’s and Barings BDC’s business and operations.

•        Sierra and Barings BDC will be subject to contractual restrictions while the Merger is pending, including restrictions on pursuing alternatives to the Merger.

•        The Merger Agreement contains provisions that could discourage or make it difficult for a third party to acquire Sierra prior to the completion of the Merger.

•        If the Merger is not completed or Sierra is not otherwise acquired, Sierra may consider other strategic alternatives, which are subject to risks and uncertainties.

•        Subject to applicable law, each party may waive one or more conditions to the Merger without resoliciting approval from its respective stockholders.

•        The shares of Barings BDC Common Stock to be received by Sierra stockholders as a result of the First Merger will have different rights associated with them than shares of Sierra Common Stock currently held by them. For a more detailed discussion comparing the rights of Barings BDC stockholders and Sierra stockholders, see section entitled “Comparison of Barings BDC and Sierra Stockholder Rights.”

•        The market price of Barings BDC Common Stock after the Merger may be affected by factors different from those affecting Barings BDC Common Stock or Sierra Common Stock currently.

•        The Merger may trigger certain “change of control” provisions and other restrictions in certain of Barings BDC’s and Sierra’s contracts and the failure to obtain any required consents or waivers could adversely impact the combined company.

•        The opinion delivered to the Barings BDC Board by its financial advisor and the opinion delivered to the Sierra Board and the Sierra Special Committee by Sierra’s financial advisor will not reflect any changes in circumstances that may occur since the opinions were delivered prior to signing the Merger Agreement.

•        Certain persons related to Sierra and Barings BDC have interests in the Merger that differ from the interests of Sierra and Barings BDC stockholders. For example, Sierra directors and officers are entitled to post-closing indemnification by Barings BDC under the Merger Agreement, Barings BDC has agreed to maintain a directors and officers’ liability insurance policy covering current and former Sierra directors and officers for six years following the closing of the Merger and two independent members of the Sierra Board will be appointed to the Barings BDC Board following the Merger. In addition, Barings, the investment adviser of Barings BDC, has indirect financial interests in the transactions contemplated by the Merger Agreement that are different from, and/or in addition to, the interests of Barings BDC stockholders. For more information, see “The Merger — Interests of Certain Persons Related to Barings BDC in the Merger” and “The Merger — Interests of Certain Persons Related to Sierra in the Merger.”

•        The combined company may not be able to obtain financing for additional capital requirements.

•        Sierra and Barings BDC have incurred and expect to incur substantial transaction fees and costs in connection with the Merger, whether or not the Merger is completed.

•        Any litigation which may be filed against Sierra and Barings BDC in connection with the Merger, regardless of its merits, could result in substantial costs and could delay or prevent the Merger from being completed.

•        The Merger may not be treated as a tax-free reorganization under Section 368(a) of the Code.

•        The U.S. federal income tax treatment of the Cash Consideration is not entirely clear. Sierra believes that its U.S. stockholders have a reasonable basis upon which to take a position that the Cash Consideration should be treated as additional merger consideration, and, assuming such position is respected, any gain realized by a U.S. stockholder on the receipt of the Cash Consideration would be a capital gain if the

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shares of Sierra Common Stock were held by such U.S. stockholder as a capital asset. No assurances can be given, however, that the IRS will not assert, or that a court would not sustain, a contrary position under which the Cash Consideration could be subject to taxation as ordinary income. Barings BDC and Barings do not express any position on how the U.S. stockholders of Sierra should treat the Cash Consideration.

•        The investment objectives and investment strategy of Barings BDC differ from the investment objectives and investment strategy of Sierra and, therefore, an equity investment in Barings BDC has different risks than an equity investment in Sierra.

See the section captioned “Risk Factors — Risks Relating to the Merger” below for a more detailed discussion of these factors.

Tax Consequences of the Merger

The Merger is intended to qualify as a “reorganization,” within the meaning of Section 368(a) of the Code. If the Merger qualifies as a reorganization, then generally, for U.S. federal income tax purposes, U.S. stockholders (as defined herein under the heading “Certain Material U.S. Federal Income Tax Consequences of the Merger”) of Sierra Common Stock who receive a combination of shares of Barings BDC Common Stock and cash, other than cash in lieu of a fractional share of Barings BDC Common Stock, in exchange for their Sierra Common Stock, will recognize gains, but will not recognize any losses, equal to the lesser of (1) the amount of cash received in exchange for Sierra Common Stock (excluding cash received in lieu of a fractional share of Barings BDC Common Stock) and (2) the excess, if any, of (a) the sum of the amount of cash received in exchange for Sierra Common Stock (including cash received in lieu of a fractional share of Barings BDC Common Stock ) and the fair market value of the Barings BDC Common Stock received in the Merger (determined at the Effective Time) over (b) the U.S. stockholder’s tax basis in the shares of Sierra Common Stock surrendered in the Merger. A U.S. stockholder also will recognize gain or loss attributable to cash received in lieu of a fractional share of Barings BDC Common Stock in an amount equal to the difference between the amount of cash received and the portion of the basis of the Sierra Common Stock surrendered that is allocable to the fractional share. Any gains recognized generally will be capital gains, and any such capital gains generally will be long-term capital gains, provided certain holding period and other requirements are met. Sierra Tax Dividends paid by Sierra should not be treated for U.S. federal income tax purposes as part of the consideration paid for shares of Sierra Common Stock in the Merger but instead should be treated for U.S. federal income tax purposes as a distribution with respect to the Sierra Common Stock. The U.S. federal income tax treatment of the Cash Consideration is uncertain in many respects. Sierra believes that its U.S. stockholders have a reasonable basis upon which to take a position that the Cash Consideration should be treated as additional merger consideration, and, assuming such position is respected, any gain realized by a U.S. stockholder on the receipt of the Cash Consideration would be a capital gain if the shares of Sierra Common Stock were held by such U.S. stockholder as a capital asset. No assurances can be given, however, that the IRS will not assert, or that a court would not sustain, a contrary position under which the Cash Consideration could be subject to taxation as ordinary income. Barings BDC and Barings do not express any position on how the U.S. stockholders of Sierra should treat the Cash Consideration.

Sierra’s obligation to effect the Merger is conditioned on its receipt of an opinion from S&W (or, if S&W is unable to deliver such an opinion, of such other nationally recognized tax counsel reasonably satisfactory to Sierra and Barings BDC), to the effect that, for U.S. federal income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the registration statement of which this joint proxy statement/prospectus is a part, Goodwin Procter has delivered an opinion to Barings BDC to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Such opinions will be or are based on, among other things, certain facts, representations and covenants, each made by officers of Barings BDC and Sierra, and assumptions, all of which must be consistent with the state of facts existing at the time of the Merger. If any of these facts, representations, covenants and assumptions are, or become, inaccurate or incomplete, such opinion may be invalid, and the conclusions reached therein could be jeopardized. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or the courts, which may not agree with the conclusions set forth in such opinion.

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No ruling has been, or will be, sought by Barings BDC or Sierra from the IRS with respect to the Merger and there can be no assurance that the IRS will not challenge the qualification of the Merger as a “reorganization” under Section 368(a) of the Code or that a court would not sustain such a challenge. If the IRS or a court determines that the Merger should not be treated as a tax-free reorganization under Section 368(a) of the Code, then a U.S. stockholder (as defined herein under the heading “Certain Material U.S. Federal Income Tax Consequences of the Merger”) would generally recognize gain or loss for U.S. federal income tax purposes upon the exchange of Sierra Common Stock for Barings BDC Common Stock and cash in the Merger (with potential ordinary income treatment, as noted above, for the Cash Consideration).

For additional information, see the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Merger.” The tax consequences to you of the Merger will depend on your particular facts and circumstances. Please consult your own tax advisor as to the tax consequences of the Merger in your particular circumstances, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws.

Special Meeting of Barings BDC Stockholders

Barings BDC plans to hold the Barings BDC Special Meeting virtually on February 24, 2022, at 1:00 p.m., Eastern Time, at the following website: www.virtualshareholdermeeing.com/BBDC2022SM. At the Barings BDC Special Meeting, holders of Barings BDC Common Stock will be asked to approve the Merger Stock Issuance Proposal, the Barings BDC Below NAV Issuance Proposal and, if necessary or appropriate, the Barings BDC Adjournment Proposal.

A Barings BDC stockholder can vote at the Barings BDC Special Meeting if such stockholder owned shares of Barings BDC Common Stock at the close of business on the Barings BDC Record Date. As of that date, there were 65,316,085 shares of Barings BDC Common Stock outstanding and entitled to vote. 481,631 of such total outstanding shares, or approximately 0.7%, were owned beneficially or of record by directors and executive officers of Barings BDC.

Special Meeting of Sierra Stockholders

Sierra plans to hold the Sierra Special Meeting virtually on February 24, 2022, at 1:00 p.m., Eastern Time, at the following website: https://viewproxy.com/sicSM/2022. At the Sierra Special Meeting, holders of Sierra Common Stock will be asked to approve the Merger Proposal and, if necessary or appropriate, the Sierra Adjournment Proposal.

A Sierra stockholder can vote at the Sierra Special Meeting if such stockholder owned shares of Sierra Common Stock at the close of business on the Sierra Record Date. As of that date, there were 102,276,889 shares of Sierra Common Stock outstanding and entitled to vote. None of such total outstanding shares were owned beneficially or of record by directors and executive officers of Sierra.

Barings BDC Board Recommendation

The Barings BDC Board unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger and the Merger Stock Issuance Proposal, and unanimously recommends that Barings BDC stockholders vote “FOR” the Merger Stock Issuance Proposal, “FOR” the Barings BDC Below NAV Issuance Proposal and, if necessary or appropriate, “FOR” the Barings BDC Adjournment Proposal.

Sierra Board Recommendation

The Sierra Board, acting on the recommendation of the Sierra Special Committee, unanimously approved the Merger Agreement and the transactions contemplated thereby, including the First Merger, and unanimously recommends that Sierra stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the Sierra Adjournment Proposal.

Vote Required — Barings BDC

Each share of Barings BDC Common Stock held by a holder of record as of the Barings BDC Record Date has one vote on each matter to be considered at the Barings BDC Special Meeting.

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The Merger Stock Issuance Proposal

Approval of Merger Stock Issuance Proposal requires the affirmative vote of the holders of at least a majority of votes cast by holders of shares of Barings BDC Common Stock present at the Barings BDC Special Meeting, virtually or represented by proxy, and entitled to vote. Abstentions and broker non-votes (if any) will not be counted as votes cast and will have no effect on the result of the vote of the Merger Stock Issuance Proposal.

The Barings BDC Below NAV Issuance Proposal

Approval of the Barings BDC Below NAV Issuance Proposal requires the affirmative vote of each of the following: (1) a majority of the outstanding voting securities of Barings BDC Common Stock; and (2) a majority of the outstanding voting securities of Barings BDC Common Stock that are not held by affiliated persons of Barings BDC. For purposes of this proposal, the Investment Company Act defines a “majority of the outstanding voting securities” as the vote of the lesser of: (1) 67% or more of the voting securities of Barings BDC present at the Barings BDC Special Meeting, if the holders of more than 50% of the outstanding voting securities of Barings BDC are present virtually or represented by proxy; or (2) more than 50% of the outstanding voting securities of Barings BDC. Abstentions and broker non-votes (if any) will have the effect of a vote “against” the Barings BDC Below NAV Issuance Proposal.

The Barings BDC Adjournment Proposal

Approval of the Barings BDC Adjournment Proposal requires the affirmative vote of the holders of at least a majority of votes cast by holders of shares of Barings BDC Common Stock present at the Barings BDC Special Meeting, virtually or represented by proxy, and entitled to vote thereat. Abstentions and broker non-votes (if any) will not be counted as votes cast and will have no effect on the result of the vote of the Barings BDC Adjournment Proposal.

Vote Required — Sierra

Each share of Sierra Common Stock held by a holder of record as of the Sierra Record Date has one vote on each matter to be considered at the Sierra Special Meeting.

The Merger Proposal

The approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Sierra Common Stock present at the Sierra Special Meeting, virtually or represented by proxy, and entitled to vote thereat (“Sierra Stockholder Approval”). Abstentions and broker non-votes (if any) will not count as affirmative votes cast and will therefore have the same effect as votes “against” the Merger Proposal.

The Sierra Adjournment Proposal

The approval of the Sierra Adjournment Proposal requires the affirmative vote of the holders of at least a majority of the votes cast by holders of the shares of Sierra Common Stock present at the Sierra Special Meeting, virtually or represented by proxy, and entitled to vote thereat, whether or not a quorum exists. Abstentions and broker non-votes (if any) will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Sierra Adjournment Proposal. In addition, the chairman of the Sierra Special Meeting will have the authority to adjourn the Sierra Special Meeting from time-to-time for any reason without notice and without the vote or approval of the Sierra stockholders.

Completion of the Merger

As more fully described in this joint proxy statement/prospectus and in the Merger Agreement, the completion of the Merger depends on a number of conditions being satisfied or, where legally permissible, waived. For information on the conditions that must be satisfied or waived for the Merger to occur, see “Description of the Merger Agreement — Conditions to Closing the First Merger.” While there can be no assurances as to the exact timing, or that the Merger will be completed at all, Barings BDC and Sierra are working to complete the Merger in the first quarter of 2022. It is currently expected that the Merger will be completed promptly following receipt of the stockholder approvals at the Barings BDC Special Meeting and the Sierra Special Meeting and satisfaction (or to the extent legally permitted, waiver) of the other closing conditions set forth in the Merger Agreement.

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Termination of the Merger and Termination Fee and Expenses

The Merger Agreement contains certain termination rights for Barings BDC and Sierra, each of which is discussed below in “Description of the Merger Agreement — Termination of the Merger Agreement.” The Merger Agreement provides that, upon the valid termination of the Merger Agreement under certain circumstances, Sierra may be required to pay or cause to be paid to Barings BDC a termination fee of $11.0 million and to reimburse Barings BDC’s and Barings’ expenses incurred in connection with the Merger, subject to a cap of $2.0 million. See “Description of the Merger Agreement — Termination of the Merger Agreement” for a discussion of the circumstances that could result in the payment of the termination fee and expense reimbursement.

Reasons for the Merger

Barings BDC

Barings BDC’s Board consulted with Barings BDC’s management and Barings, as well as its legal and other advisors, and considered numerous factors and, as a result, the Barings BDC Board, including the Barings BDC Independent Directors, determined that the Merger is in Barings BDC’s best interests and the best interests of Barings BDC stockholders.

Certain material factors considered by the Barings BDC Board, including the Barings BDC Independent Directors, that favored the conclusion of the Barings BDC Board that the Merger is in the best interests of Barings BDC and Barings BDC stockholders included, among others:

•        the combined company’s increased scale and liquidity;

•        the expected accretion to Barings BDC stockholders;

•        the alignment of Barings and Barings BDC stockholders as a result of Barings agreeing to (1) fund the cash portion of the purchase price of $0.9783641 per share, or approximately $100.0 million and (2) provide up to $100.0 million of credit support pursuant to the Credit Support Agreement designed to limit downside to Barings BDC stockholders from net cumulative realized and unrealized losses on the acquired Sierra portfolio relative to purchase price while also allowing Barings BDC stockholders to benefit from long-term Sierra portfolio appreciation;

•        the combined company’s economies of scale;

•        the combined company’s quality of holdings and diversification of assets and liabilities;

•        the combined company’s increased market capitalization and commensurate increased trading volume;

•        the structure and tax consequences of the Merger;

•        the opinion of Barings BDC’s financial advisor; and

•        the terms of the Merger Agreement, including (1) the interim operating covenants applicable to Sierra’s portfolio, (2) the non-solicitation covenants and (3) the provisions relating to Sierra’s payment of the termination fee and reimbursement of Barings BDC’s and Barings’ expenses up to a cap under certain circumstances.

The Barings BDC Board considered that while the Merger could cause dilution to Barings BDC stockholders’ voting interests and the NAV per share of the combined company’s common stock, the potential benefits of the Merger (including each of the foregoing) outweighed this cost.

The foregoing list does not include all the factors that the Barings BDC Board considered in approving the proposed Merger and the Merger Agreement and recommending that Barings BDC stockholders approve the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal. For a further discussion of the material factors considered by the Barings BDC Board, see “The Merger — Reasons for the Merger — Barings BDC.

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Sierra

In evaluating the merger proposal from Barings BDC, the Sierra Board, including the Sierra Independent Directors, and the Sierra Special Committee consulted with and received the advice of certain outside advisors, including financial and legal advisors. In reaching their decisions, the Sierra Board and the Sierra Special Committee considered a number of factors, including the factors discussed below, and, as a result, determined that the First Merger is in the best interests of Sierra and Sierra stockholders.

Certain material factors considered by the Sierra Board and the Sierra Special Committee favored the conclusion of the Sierra Board that the First Merger is in the best interests of Sierra and Sierra stockholders, including, among others:

•        the consideration to be received by Sierra stockholders represents a premium to Sierra’s NAV as of June 30, 2021;

•        the First Merger will provide the Sierra stockholders with the opportunity for immediate liquidity upon the close of the Merger;

•        the Sierra stockholders will have the option of selling the shares of Barings BDC they receive in the First Merger or remaining stockholders of Barings BDC;

•        Barings BDC will increase the hurdle rate on the income incentive fee payable to Barings;

•        The opportunity for Sierra stockholders to receive a higher dividend rate as holders of Barings BDC Common Stock;

•        The combined company will be significantly larger and also more highly diversified than a standalone Sierra;

•        With approximately $2.5 billion in assets (on a pro forma basis as of June 30, 2021), Barings BDC will have greater scale and thus is expected to be better able to successfully compete for investment opportunities and have access to lower cost financing sources than Sierra;

•        the Credit Support Agreement is expected to give stockholders of the combined company downside protection on the Sierra portfolio and insulate the combined company’s stockholders from certain losses in the Sierra portfolio for the ten years following the completion of the Merger;

•        the Merger Agreement provides that Barings BDC will repurchase up to $30 million of its shares over a twelve-month period in the event the combined company’s shares trade below a specified level of NAV following the completion of the first quarterly period ended after the closing of the Merger, subject to Barings BDC’s compliance with certain contractual covenants and regulatory requirements;

•        the Merger is expected to qualify as a tax-free transaction for federal income tax purposes;

•        the terms of the Merger Agreement, including: (1) a provision that permits Sierra, under specified circumstances, to respond to and engage in discussions with, and provide information to, third parties regarding unsolicited proposals to acquire Sierra; (2) a provision that permits the Sierra Board and the Sierra Special Committee, under specified circumstances in connection with an intervening event, to change their recommendation that Sierra stockholders vote in favor of the First Merger; (3) a provision whereby two Sierra Independent Directors will be appointed to the Barings BDC Board following the closing of the Merger; and (4) Barings BDC’s obligation to complete the First Merger is not conditioned on Barings BDC receiving any third-party financing; and

•        the opinion of the Sierra Special Committee’s financial advisor.

The Sierra Board and the Sierra Special Committee considered, among other factors and risks, that while there are risks and costs to Sierra if the First Merger is not completed, the potential benefits resulting from the Merger outweighed such factors and risks.

The foregoing list does not include all the factors that the Sierra Board considered in approving the Merger Agreement and the First Merger and recommending that Sierra stockholders approve the First Merger. In view of the complexity and the large number of factors considered, the Sierra Board and the Sierra Special Committee

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did not find it practicable to, and did not, quantify, rank or otherwise assign relative weights to the specific factors they considered in reaching their decisions. For a further discussion of the material factors considered by the Sierra Board, see “The Merger — Reasons for the Merger — Sierra” below.

Opinion of the Financial Advisor to Barings BDC

Barings BDC retained Wells Fargo Securities, LLC (“Wells Fargo Securities”) as the financial advisor to the Barings BDC Board in connection with the proposed Merger. At the meeting of the Barings BDC Board on September 21, 2021, Wells Fargo Securities rendered its oral opinion to the Barings BDC Board that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing its opinion, the Exchange Ratio in the proposed Merger was fair, from a financial point of view, to Barings BDC. Wells Fargo Securities subsequently confirmed this oral opinion by delivering its written opinion to the Barings BDC Board, dated September 21, 2021.

The full text of the written opinion of Wells Fargo Securities dated September 21, 2021, which sets forth the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing its opinion, is attached as Annex D to this joint proxy statement/prospectus and is incorporated herein by reference. Stockholders of Barings BDC are urged to read the opinion in its entirety. Wells Fargo Securities’ written opinion was addressed to the Barings BDC Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Merger, was directed only to the fairness, from a financial point of view, to Barings BDC of the Exchange Ratio in the proposed Merger and did not address any other aspect of the proposed Merger. The opinion does not constitute a recommendation to any stockholder of Barings BDC as to how such stockholder should vote with respect to the proposed Merger or any other matter. For a description of the opinion that the Barings BDC Board received from Wells Fargo Securities, see “The Merger — Opinion of the Financial Advisor to Barings BDC” beginning on page 70 of this joint proxy statement/prospectus.

Opinion of the Financial Advisor to the Sierra Special Committee

In connection with the Merger, Broadhaven Capital Partners (“Broadhaven”) delivered a written opinion, dated September 21, 2021, as discussed in more detail in the section entitled “The Merger — Opinion of the Financial Advisor to the Sierra Special Committee,” to the Sierra Special Committee as to the fairness, from a financial point of view, to the holders of Sierra Common Stock of the Merger Consideration to be received by such holders in the Merger. The full text of the opinion, which describes the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Broadhaven in preparing the opinion, is attached as Annex E to this joint proxy statement/prospectus. The opinion was for the information of, and was directed to, the Sierra Special Committee (in its capacity as such) in connection with its consideration of the financial terms of the Merger. The opinion did not address the underlying business decision of Sierra to engage in the Merger or enter into the Merger Agreement, nor did it constitute a recommendation to the Sierra Special Committee or the Sierra Board in connection with the Merger, and it does not constitute a recommendation to any holder of Sierra Common Stock as to how to vote in connection with the Merger or any other matter.

At the instruction of the Sierra Special Committee, a copy of Broadhaven’s opinion was provided to the Sierra Board for informational purposes only prior to its deliberations relating to the approval of the Merger and the Merger Agreement.

For more information, see the section entitled “The Merger — Opinion of the Financial Advisor to the Sierra Special Committee.

Barings BDC Stockholders Do Not Have Appraisal Rights

Barings BDC stockholders will not be entitled to exercise appraisal rights in connection with the Merger under the laws of the State of Maryland.

Sierra Stockholders Do Not Have Appraisal Rights

Sierra stockholders will not be entitled to exercise appraisal rights in connection with the First Merger under the laws of the State of Maryland.

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RISK FACTORS

In addition to the other information included in this document, stockholders should carefully consider the risks described below in determining whether to approve, in the case of Barings BDC stockholders, (1) the Merger Stock Issuance Proposal and (2) the Barings BDC Below NAV Issuance Proposal and, in the case of Sierra stockholders, the Merger Proposal. The information in “Risk Factors” in Part I, Item 1A of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in Part II, Item 1A of Barings BDC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 is incorporated herein by reference for general risks related to Barings BDC. The information in “Risk Factors” in Part I, Item 1A of Sierra’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in Part II, Item 1A of Sierra’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021 is incorporated herein by reference for general risks related to Sierra.

The risks, as set out below and incorporated by reference herein are not the only risks Barings BDC and Sierra and, following the Merger, the combined company, face. Additional risks and uncertainties not currently known to Barings BDC or Sierra or that they currently deem to be immaterial also may materially adversely affect their or, following the Merger, the combined company’s, business, financial condition or operating results. If any of the following events occur, Barings BDC or Sierra or, following the Merger, the combined company’s, business, financial condition or results of operations could be materially adversely affected. See also “Incorporation by Reference for Barings BDC,” “Incorporation by Reference for Sierra” and “Where You Can Find More Information” in this joint proxy statement/prospectus.

Risks Relating to the Merger

Because the market price of Barings BDC Common Stock will fluctuate, Sierra stockholders cannot be sure of the market value of the Merger Consideration they will receive until the Closing Date.

The Exchange Ratio is fixed in the Merger Agreement and the Merger Consideration will not be adjusted for changes in the market price of Barings BDC Common Stock. Pursuant to the terms of the Merger Agreement, at the Effective Time, each Sierra stockholder will have the right to receive 0.44973 newly issued shares of Barings BDC Common Stock for each share of Sierra Common Stock that they own immediately prior to the Effective Time, subject only to customary anti-dilution adjustments and with cash paid in lieu of fractional shares. The market value of the Merger Consideration may vary from the closing price of Barings BDC Common Stock on the date the Merger was announced, on the date that this joint proxy statement/prospectus was made available to stockholders, on the date of the Barings BDC Special Meeting or the date of the Sierra Special Meeting and on the date the Merger is completed. Any change in the market price of Barings BDC Common Stock prior to completion of the Merger will affect the market value of the aggregate Merger Consideration that Sierra stockholders will receive upon completion of the First Merger.

Accordingly, at the time of the Sierra Special Meeting, Sierra stockholders will not know or be able to calculate the market value of the Merger Consideration they would receive upon completion of the First Merger. Neither Barings BDC nor Sierra is permitted to terminate the Merger Agreement or resolicit the vote of their respective stockholders solely because of changes in the market price of shares of Barings BDC Common Stock.

Changes in the market price of Barings BDC Common Stock may result from a variety of factors, including, among other things:

•        changes in the business, operations or prospects of Barings BDC;

•        the financial condition of current or prospective portfolio companies of Barings BDC;

•        interest rates or general market or economic conditions;

•        market assessments of the likelihood that the Merger will be completed and the timing of completion of the Merger;

•        market perception of the future profitability of the combined company;

•        the duration and effects of the COVID-19 pandemic on Barings BDC’s portfolio companies; and

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•        the duration and effects of the COVID-19 pandemic on equity trading prices generally, and specifically on the trading price of Barings BDC Common Stock and the common stock of the surviving corporation following the Merger.

See “Special Note Regarding Forward-Looking Statements” for other factors that could cause the market price of Barings BDC Common Stock to change.

These factors are generally beyond the control of Barings BDC. The range of high and low closing sales prices of Barings BDC Common Stock, as reported on the NYSE for the nine months ended September 30, 2021, was a low of $8.83 to a high of $11.07. However, historical trading prices are not necessarily indicative of future performance. You should obtain current market quotations for shares of Barings BDC Common Stock prior to the Special Meetings.

Sales of shares of Barings BDC Common Stock after the completion of the Merger may cause the market price of Barings BDC Common Stock to decline.

Based on the number of outstanding shares of Sierra Common Stock as of the close of business on September 20, 2021, Barings BDC would issue approximately 46.0 million shares of Barings BDC Common Stock pursuant to the Merger Agreement. Former Sierra stockholders may decide not to hold the shares of Barings BDC Common Stock that they receive pursuant to the Merger Agreement. In addition, Barings BDC stockholders may decide not to hold their shares of Barings BDC Common Stock after completion of the Merger. In each case, such sales of Barings BDC Common Stock could have the effect of depressing the market price for Barings BDC Common Stock and may take place promptly following the completion of the Merger.

Sierra stockholders and Barings BDC stockholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Merger.

Sierra stockholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power in respect of the combined company relative to their respective percentage ownership interests in Sierra prior to the Merger. Consequently, Sierra stockholders should expect to exercise less influence over the management and policies of the combined company following the Merger than they currently exercise over the management and policies of Sierra. Barings BDC stockholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power in respect of the combined company relative to their respective ownership interests in Barings BDC prior to the Merger. Consequently, Barings BDC stockholders should expect to exercise less influence over the management and policies of the combined company following the Merger than they currently exercise over the management and policies of Barings BDC.

If the Merger is consummated, based on the number of shares of Barings BDC Common Stock and Sierra Common Stock issued and outstanding on September 20, 2021, it is expected that current Barings BDC stockholders will own approximately 58.7% of the outstanding Barings BDC Common Stock and former Sierra stockholders will own approximately 41.3% of the outstanding Barings BDC Common Stock. In addition, both prior to and after completion of the Merger, subject to certain restrictions in the Merger Agreement and Barings BDC Stockholder Approval, Barings BDC may issue additional shares of Barings BDC Common Stock (including, subject to certain restrictions under the Investment Company Act, at prices below Barings BDC Common Stock’s then-current NAV per share), all of which would further reduce the percentage ownership of the combined company held by former Sierra stockholders and current Barings BDC stockholders. In addition, the issuance or sale by Barings BDC of shares of Barings BDC Common Stock at a discount to NAV poses a risk of economic dilution to stockholders.

The NAV per share of Barings BDC Common Stock will be diluted if Barings BDC issues shares of Barings BDC Common Stock at a price below the then-current NAV per share in connection with the First Merger.

At the Barings BDC Special Meeting, subject to certain determinations required to be made by the Barings BDC Board, Barings BDC stockholders are being asked to approve Barings BDC’s ability to issue shares of Barings BDC Common Stock at a price below the then-current NAV per share in connection with the First Merger in the event that at the time of such issuance, Barings BDC’s then-current NAV per share is greater than the value of the shares of Sierra Common Stock being exchanged.

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Under the Merger Agreement, the Exchange Ratio is fixed as of September 21, 2021, the signing date of the Merger Agreement, subject to certain adjustments pursuant to the Merger Agreement. The Exchange Ratio was determined taking into account the NAV per share of each of Barings BDC Common Stock and Sierra Common Stock as of June 30, 2021 and is not subject to adjustment based on changes in the NAV per share of Barings BDC Common Stock or Sierra Common Stock. In that regard, regardless of the date on which the Merger is consummated and the resulting date on which the shares of Barings BDC Common Stock are issued, the Exchange Ratio upon which the shares of Barings BDC Common Stock will be issued will not change (except for certain customary anti-dilution adjustments). Consequently, if, on the date that the Barings BDC Common Stock is issued, the per share value of the Sierra Common Stock were to decrease from its per share value as of June 30, 2021 and the NAV of Barings BDC Common Stock were to remain the same, then Barings BDC could be deemed to be issuing shares at a price below its then-current NAV per share. As a result, it is not known at this time whether Barings BDC will be issuing shares of Barings BDC Common Stock at a price below the then-current NAV per share to Sierra stockholders in connection with the First Merger. The determination of whether Barings BDC is issuing its shares of Barings BDC Common Stock at a price below the then-current net asset value per share will be made at or around the time of the closing of the First Merger.

If Barings BDC were to issue shares of Barings BDC Common Stock below its then-current NAV per share in connection with the First Merger, such sales would result in an immediate dilution to the NAV per share of Barings BDC Common Stock. This dilution would occur as a result of the issuance of shares at a price below the then-current NAV per share of Barings BDC Common Stock and a proportionately greater decrease in the stockholders’ interest in Barings BDC’s earnings and assets and their voting interest in Barings BDC than the increase in Barings BDC’s assets resulting from such issuance. Because the NAV of shares of Barings BDC Common Stock at or around the time of the First Merger is not currently known, the actual dilutive effect cannot be predicted.

Barings BDC may be unable to realize the benefits anticipated by the Merger, including estimated cost savings, or it may take longer than anticipated to realize such benefits.

The realization of certain benefits anticipated as a result of the Merger will depend in part on the integration of Sierra’s investment portfolio with Barings BDC’s and the integration of Sierra’s business with Barings BDC’s. There can be no assurance that Sierra’s investment portfolio or business can be operated profitably or integrated successfully into Barings BDC’s operations in a timely fashion or at all. The dedication of management resources to such integration may divert attention from the day-to-day business of the combined company and there can be no assurance that there will not be substantial costs associated with the transition process or there will not be other material adverse effects as a result of these integration efforts. Such effects, including incurring unexpected costs or delays in connection with such integration and failure of Sierra’s investment portfolio to perform as expected, could have a material adverse effect on the financial results of the combined company.

Barings BDC also expects to achieve certain cost savings from the Merger when the two companies have fully integrated their portfolios. It is possible that the estimates of the potential cost savings could ultimately be incorrect. The cost savings estimates also assume Barings BDC will be able to combine the operations of Barings BDC and Sierra in a manner that permits those cost savings to be fully realized. If the estimates turn out to be incorrect or if Barings BDC is not able to successfully combine Sierra’s investment portfolio or business with the operations of Barings BDC, the anticipated cost savings may not be fully realized, or realized at all, or may take longer to realize than expected.

The announcement and pendency of the proposed Merger could adversely affect both Barings BDC’s and Sierra’s business, financial results and operations.

The announcement and pendency of the proposed Merger could cause disruptions in and create uncertainty surrounding both Barings BDC’s and Sierra’s business, including affecting relationships with their respective existing and future borrowers, which could have a significant negative impact on Barings BDC’s future revenues and results of operations, regardless of whether the Merger is completed, and on Sierra’s future revenues and results of operations if the Merger is not consummated. In addition, Barings BDC and Sierra have diverted, and will continue to divert, significant management resources towards the completion of the Merger, which could have a significant negative impact on each of their future revenues and results of operations.

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Sierra and Barings BDC are also subject to restrictions on the conduct of each of their businesses prior to the completion of the Merger as provided in the Merger Agreement, generally requiring Sierra and Barings BDC to conduct their business only in the ordinary course and subject to specific limitations, including, among other things, certain restrictions on their respective ability to make certain investments and acquisitions, sell, transfer or dispose of their respective assets, amend their respective organizational documents and, in the case of Sierra, enter into or modify certain material contracts. These restrictions could prevent Sierra or Barings BDC from pursuing otherwise attractive business opportunities, industry developments and future opportunities and may otherwise have a significant negative impact on Barings BDC’s future investment income and results of operations. For more information about the restrictions applicable to Barings BDC and Sierra, see “Description of the Merger Agreement — Interim Operations of Barings BDC” and “Description of the Merger Agreement — Interim Operations of Sierra,” respectively.

If the Merger does not close, neither Barings BDC nor Sierra will benefit from the expenses incurred in their pursuit of the Merger and, under certain circumstances, Sierra may be required to pay an $11.0 million termination fee and to reimburse expenses incurred in connection with the Merger by Barings BDC and Barings, subject to a maximum expense reimbursement payment of $2.0 million.

For various reasons, the Merger may not be completed. If the Merger is not completed, Sierra and Barings BDC will have incurred substantial expenses for which no ultimate benefit will have been received. Both companies have incurred out-of-pocket expenses in connection with the Merger for investment banking, legal and accounting fees and financial printing and other related charges, much of which will be incurred even if the Merger is not completed. The Merger Agreement provides that, upon the valid termination of the Merger Agreement under certain circumstances, Sierra may be required to pay or cause to be paid to Barings BDC a termination fee of $11.0 million and to pay Barings BDC’s and Barings’ expenses incurred in connection with the Merger, subject to a maximum reimbursement payment of $2.0 million. See “Description of the Merger Agreement — Termination of the Merger Agreement” for a discussion of the circumstances that could result in the payment of the termination fee and expenses.

The termination of the Merger Agreement could negatively impact Sierra and Barings BDC.

If the Merger Agreement is terminated, there may be various consequences, including:

•        Sierra’s and Barings BDC’s businesses may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger;

•        the market price of Barings BDC Common Stock might decline to the extent that the market price prior to termination reflects a market assumption that the Merger will be completed;

•        the Sierra Board would expect to consider alternatives, including the replacement of SIC Advisors as its investment adviser, another merger transaction (though Sierra may not be able to find a party willing to pay an equivalent or more attractive price than the price Barings BDC agreed to pay in the Merger) or Sierra’s liquidation, based on, among other things, then-current market circumstances, the performance of the Sierra portfolio and the financial position of Sierra;

•        Sierra also might seek a modification to the Final Plan to extend the Run-Off End Date so that SIC Advisors may continue to serve as Sierra’s investment adviser beyond March 31, 2022; and

•        the payment of any termination fee and reimbursement of expenses, if required under the circumstances, could adversely affect the financial condition and liquidity of Sierra.

Except in specified circumstances, if the Merger is not completed by March 31, 2022, either Sierra or Barings BDC may choose not to proceed with the Merger.

Either Sierra or Barings BDC may terminate the Merger Agreement if the Effective Time has not occurred by March 31, 2022. However, this right to terminate the Merger Agreement will not be available to Sierra or Barings BDC if the failure of such party to perform any of its obligations under the Merger Agreement has been the primary cause of or resulted in the failure of the Merger to be complete on or before such date. For more information, see the sections entitled “Description of the Merger Agreement — Termination of the Merger Agreement.”

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The Merger is subject to closing conditions, including stockholder approvals, that, if not satisfied or waived, will result in the Merger not being completed, which may result in material adverse consequences to Sierra’s and Barings BDC’s business and operations.

While there can be no assurances as to the exact timing, or that the Merger will be completed at all, Barings BDC and Sierra are working to complete the Merger in the first quarter of 2022. The Merger is subject to closing conditions, including required regulatory approvals (including the expiration of the waiting period under the HSR Act and the rules and regulations thereunder) and certain approvals of Barings BDC’s and Sierra’s respective stockholders that, if not satisfied, will prevent the Merger from being completed. The waiting period under the HSR Act expired on December 7, 2021. The closing condition that Barings BDC stockholders approve the issuance of shares of Barings BDC Common Stock in connection with the First Merger and the issuance of shares of Barings BDC Common Stock in connection with the First Merger at a price below its then-current NAV may not be waived and must be satisfied for the Merger to be completed. Barings BDC currently expects that all directors and executive officers of Barings BDC will vote their shares of Barings BDC Common Stock in favor of the proposals presented at the Barings BDC Special Meeting. Additionally, Barings, as a party to the Merger Agreement, agreed to vote all shares of Barings BDC Common Stock over which it has voting power (other than in its fiduciary capacity) in favor of the proposals presented at the Barings BDC Special Meeting. The closing condition that Sierra stockholders adopt the Merger Agreement may not be waived and must be satisfied for the Merger to be completed. If the closing conditions to the Merger are not satisfied, including receipt of the Barings BDC Stockholder Approval and the Sierra Stockholder Approval, and the Merger is not completed, the resulting failure to complete the Merger could have a material adverse impact on Barings BDC’s and Sierra’s respective business and operations.

Sierra and Barings BDC will be subject to contractual restrictions while the Merger is pending, including restrictions on pursuing alternatives to the Merger.

Uncertainty about the effect of the Merger may have an adverse effect on Barings BDC and Sierra and, consequently, on the combined company following completion of the Merger. These uncertainties may impair Barings’ and SIC Advisors’ abilities to motivate key personnel until the Merger is consummated and could cause those who deal with Barings BDC and Sierra to seek to change their existing business relationships with Barings BDC and Sierra, respectively. In addition, the Merger Agreement restricts Barings BDC and Sierra from taking actions that they might otherwise consider to be in their best interests without the consent of the other party. These restrictions may prevent Barings BDC and Sierra from pursuing certain business opportunities that may arise prior to the completion of the Merger, including restrictions on them pursuing alternatives to the Merger. Please see the section entitled “Description of the Merger Agreement — Interim Operations of Sierra” and “Description of the Merger Agreement — Interim Operations of Barings BDC” for a description of the restrictive covenants to which Sierra and Barings BDC are subject.

The Merger Agreement contains provisions that could discourage or make it difficult for a third party to acquire Sierra prior to the completion of the proposed Merger.

The Merger Agreement prohibits Sierra from soliciting alternatives to the Merger and imposes limitations on Sierra’s ability to respond to and negotiate unsolicited proposals received from third parties. The Merger Agreement contains customary non-solicitation and other provisions that, subject to limited exceptions, limit Sierra’s ability to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of Sierra. Sierra can consider and participate in discussions and negotiations with respect to an alternative proposal only in very limited circumstances so long as certain notice and other procedural requirements are satisfied. In addition, subject to certain procedural requirements (including the ability of Barings BDC to revise its offer) and the payment of an $11.0 million termination fee and the reimbursement of up to $2.0 million in expenses incurred by Barings BDC and Barings, Sierra may terminate the Merger Agreement and enter into an agreement with a third party that makes a superior proposal. These provisions may discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Sierra from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in connection with the Merger.

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If the Merger is not completed, Sierra would expect to consider other strategic alternatives, which are subject to risks and uncertainties.

If the Merger is not completed, the Sierra Special Committee and the Sierra Board expect to consider alternatives, including the replacement of SIC Advisors as its investment adviser, another merger transaction or Sierra’s liquidation, based on, among other things, then-current market circumstances, the performance of the Sierra portfolio and the financial position of Sierra. In addition, the terms of any such alternative transaction may be less attractive than the Merger. These strategic or other alternatives available to Sierra may involve various additional risks to its business, including, among others, distraction of its management team and associated expenses with exploring such alternatives, and risks and uncertainties related to its ability to complete any such alternatives and other variables which may adversely affect its operations.

Subject to applicable law, each party may waive one or more conditions to the Merger without resoliciting approval from its respective stockholders.

Certain conditions to Barings BDC’s and Sierra’s obligations to complete the Merger may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of Barings BDC and Sierra. In the event that any such waiver does not require resolicitation of stockholders, the parties to the Merger Agreement will have the discretion to complete the Merger without seeking further stockholder approval. Accordingly, the terms and conditions as set forth in the Merger Agreement and described herein, including certain protections to Barings BDC and Sierra, may be waived. The conditions requiring the Barings BDC Stockholder Approval and the Sierra Stockholder Approval, however, cannot be waived.

The shares of Barings BDC Common Stock to be received by Sierra stockholders as a result of the First Merger will have different rights associated with them than shares of Sierra Common Stock currently held by them.

The rights associated with Sierra Common Stock are different from the rights associated with Barings BDC Common Stock. See “Comparison of Barings BDC and Sierra Stockholder Rights.

The market price of Barings BDC Common Stock after the Merger may be affected by factors different from those affecting Barings BDC Common Stock or Sierra Common Stock currently.

The businesses of Barings BDC and Sierra differ in some respects and, accordingly, the results of operations of the combined company and the market price of Barings BDC Common Stock after the Merger may be affected by factors different from those currently affecting the independent results of operations of each of Barings BDC and Sierra. These factors include:

•        a larger stockholder base;

•        a different portfolio composition; and

•        a different capital structure.

Accordingly, the historical trading prices and financial results of Barings BDC may not be indicative of these matters for the combined company following the Merger.

The Merger may trigger certain “change of control” provisions and other restrictions in certain of Barings BDC’s and Sierra’s contracts and the failure to obtain any required consents or waivers could adversely impact the combined company.

Certain agreements of Barings BDC and Sierra or their controlled affiliates will or may require the consent of one or more counterparties in connection with the Merger. The failure to obtain any such consent may permit such counter-parties to terminate, or otherwise increase their rights or Barings BDC’s or Sierra’s obligations under, any such agreement because the Merger may violate an anti-assignment, change of control or similar provision. If this happens, Barings BDC or Sierra may have to seek to replace that agreement with a new agreement or seek a waiver or amendment to such agreement. Barings BDC and Sierra cannot assure you that Barings BDC or Sierra will be able to replace, amend or obtain a waiver under any such agreement on comparable terms or at all.

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If any such agreement is material, the failure to obtain consents, amendments or waivers under, or to replace on similar terms or at all, any of these agreements could adversely affect the financial performance or results of operations of the combined company following the Merger, including preventing Barings BDC from operating a material part of Sierra’s business.

In addition, the consummation of the Merger may violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or result in the termination, cancellation, acceleration or other change of any right or obligation (including any payment obligation) under Barings BDC’s or Sierra’s agreements. Any such violation, conflict, breach, loss, default or other effect could, either individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Merger.

The opinion delivered to the Barings BDC Board by its financial advisor and the opinion delivered to the Sierra Board and the Sierra Special Committee by Sierra’s financial advisor will not reflect any changes in circumstances that may occur since the opinions were delivered prior to signing the Merger Agreement.

The opinion to the Barings BDC Board from its financial advisor and the opinion to the Sierra Board and the Sierra Special Committee from Sierra’s financial advisor were both delivered on, and dated, September 21, 2021. Changes in the operations and prospects of Barings BDC or Sierra, general market and economic conditions and other factors that may be beyond the control of Barings BDC or Sierra, may significantly alter the value of Sierra or the prices of shares of Barings BDC Common Stock or Sierra Common Stock by the time the Merger is completed. The opinions do not speak as of the time the Merger will be completed or as of any date other than the date of such opinions. The recommendations of the Barings BDC Board and the Sierra Board that their respective stockholders vote “FOR” the approval of the matters described in this joint proxy statement/prospectus are made as of the date of this joint proxy statement/prospectus. For a description of the opinion of Sierra’s financial advisor to the Sierra Board and the Sierra Special Committee, see “The Merger — Opinion of the Financial Advisor to the Sierra Special Committee.” For a description of the opinion that Barings BDC received from its financial advisor, see “The Merger — Opinion of the Financial Advisor to Barings BDC.”

Certain persons related to Sierra and Barings BDC have interests in the Merger that differ from the interests of Sierra and Barings BDC stockholders.

Sierra’s directors and executive officers have certain interests in the Merger that are different from, or in addition to, the interests of Sierra stockholders. The members of the Sierra Board and the Sierra Special Committee were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger and in recommending to Sierra stockholders that the First Merger be approved.

In addition, certain Barings BDC’s directors and executive officers have certain interests in the Merger that are different from, or in addition to, the interests of Barings BDC stockholders. The members of the Barings BDC Board, including the Barings BDC Independent Directors, were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger.

These interests are described in more detail in the section of this joint proxy statement/prospectus entitled “The Merger — Interests of Certain Persons Related to Sierra in the Merger” and The Merger — Interests of Certain Persons Related to Barings BDC in the Merger.”

The combined company may not be able to obtain financing for additional capital requirements.

Following completion of the Merger, the combined company may seek significant ongoing capital funding and, although Sierra and Barings BDC anticipate that the combined company will be able to obtain such funding through cash generated from operations and subsequent debt, equity or hybrid offerings, there can be no assurances that the combined company will be able to obtain financing on acceptable terms or at all.

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Sierra and Barings BDC have incurred and expect to incur substantial transaction fees and costs in connection with the Merger, whether or not the Merger is completed.

Sierra and Barings BDC have incurred and expect to incur additional material non-recurring expenses in connection with the Merger and completion of the transactions contemplated by the Merger Agreement. Sierra and Barings BDC have incurred significant legal, advisory and financial services fees in connection with the process of negotiating and evaluating the terms of the Merger and, in the case of Sierra, the strategic review process that led to the Merger Agreement. Additional significant unanticipated costs may be incurred in the course of coordinating the businesses of Sierra and Barings BDC after completion of the Merger. Even if the Merger is not completed, Sierra and Barings BDC will need to pay certain costs relating to the Merger incurred prior to the date the Merger was abandoned, such as legal, accounting, financial advisory, filing and printing fees. Such costs may be significant and could have an adverse effect on the parties’ future results of operations, cash flows and financial condition.

Litigation filed against Sierra or Barings BDC in connection with the Merger could result in substantial costs and could delay or prevent the Merger from being completed.

From time to time, Sierra and Barings BDC may be subject to legal actions, including securities class action lawsuits and derivative lawsuits, as well as various regulatory, governmental and law enforcement inquiries, investigations and subpoenas in connection with the Merger. These or any similar securities class action lawsuits and derivative lawsuits, regardless of their merits, may result in substantial costs and divert management time and resources. An adverse judgment in such cases could have a negative impact on Sierra’s or Barings BDC’s liquidity and financial condition or could prevent the Merger from being completed.

The Merger may not be treated as a tax-free reorganization under Section 368(a) of the Code.

Barings BDC and Sierra intend that the Merger will qualify as a tax-free reorganization under Section 368(a) of the Code. No ruling has been, or will be, sought by Barings BDC or Sierra from the IRS with respect to the Merger and there can be no assurance that the IRS will not challenge the qualification of the Merger as a “reorganization” under Section 368(a) of the Code or that a court would not sustain such a challenge. If the IRS or a court determines that the Merger should not be treated as a tax-free reorganization under Section 368(a) of the Code, then a U.S. stockholder (as defined herein under the heading “Certain Material U.S. Federal Income Tax Consequences of the Merger”) would generally recognize gain or loss for U.S. federal income tax purposes upon the exchange of Sierra Common Stock for Barings BDC Common Stock and cash in the Merger (with potential ordinary income treatment, as noted below, for the Cash Consideration).

Sierra’s obligation to effect the Merger is conditioned on its receipt of an opinion from S&W (or, if S&W is unable to deliver such an opinion, of such other nationally recognized tax counsel reasonably satisfactory to Sierra and Barings BDC), to the effect that, for U.S. federal income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the registration statement of which this joint proxy statement/prospectus is a part, Goodwin Procter has delivered an opinion to Barings BDC to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Such opinions will be or are based on, among other things, certain facts, representations and covenants, each made by officers of Barings BDC and Sierra, and assumptions, all of which must be consistent with the state of facts existing at the time of the Merger. If any of these facts, representations, covenants and assumptions are, or become, inaccurate or incomplete, such opinion may be invalid, and the conclusions reached therein could be jeopardized. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or the courts, which may not agree with the conclusions set forth in such opinion.

For additional information, see the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Merger.” The tax consequences to you of the Merger will depend on your particular facts and circumstances. Please consult your own tax advisor as to the tax consequences of the Merger in your particular circumstances, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws.

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The U.S. federal income tax treatment of the Cash Consideration is not clear and might be challenged by the IRS.

With respect to the Cash Consideration, there is limited authority addressing the tax consequences of the receipt of merger consideration from a party other than the acquiror and, as a result, the tax consequences of the receipt of the Cash Consideration are not clear. Sierra believes that its U.S. stockholders have a reasonable basis upon which to take a position that the Cash Consideration should be treated as additional merger consideration, and, assuming such position is respected, any gain realized by a U.S. stockholder on the receipt of the Cash Consideration would be a capital gain if the shares of Sierra Common Stock were held by such U.S. stockholder as a capital asset. No assurances can be given, however, that the IRS will not assert, or that a court would not sustain, a contrary position under which the Cash Consideration could be subject to taxation as ordinary income. Barings BDC and Barings do not express any position on how the U.S. stockholders of Sierra should treat the Cash Consideration. Please refer to the section entitled “Material U.S. Federal Income Tax Consequences of the Merger.

The investment objectives and investment strategy of Barings BDC differ from the investment objectives and investment strategy of Sierra and, therefore, an equity investment in Barings BDC has different risks than an equity investment in Sierra.

As further described under the heading “How does Barings BDC’s investment objective and strategy differ from Sierra’s?” on page 9, Barings BDC’s primary investment objective is to generate income by investing directly in privately-held middle-market companies to help these companies fund acquisitions, growth or refinancing. Barings BDC seeks to achieve its investment objective by investing in senior secured private debt investments in well-established middle-market businesses that operate across a wide range of industries. Sierra’s investment objective, by contrast, is to generate current income, and to a lesser extent, long-term capital appreciation. Sierra seeks to achieve its investment objective by primarily lending to and investing in the debt of privately owned U.S. companies middle-market companies. Stockholders of Sierra will become stockholders of Barings BDC in connection with the closing of the Merger and, therefore, should understand the risks of an investment in Barings BDC. Given the relative size of the constituent companies of the Merger (with Barings BDC having total assets of approximately $1.80 billion as of September 30, 2021 and Sierra having total assets of approximately $635.5 million as of September 30, 2021), the risks related to an investment in the combined company will be weighted more towards the risks related to an investment in Barings BDC. This will increasingly be the case as Sierra’s assets mature over time and Barings BDC redeploys proceeds from such assets in accordance with Barings BDC’s investment strategy.

For more information regarding the risks related to an investment in Barings BDC, please refer to “Risk Factors” in Part I, Item 1A of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in Part II, Item 1A of Barings BDC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, which are incorporated by reference herein. For more information regarding the risks related to an investment in Sierra, please refer to Part I, Item 1A of Sierra’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in Part II, Item 1A of Sierra’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021, which are incorporated by reference herein.

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COMPARATIVE FEES AND EXPENSES

Comparative Fees and Expenses Relating to the Merger

The following tables are intended to assist you in understanding the costs and expenses that an investor in the common stock of Barings BDC or Sierra bears directly or indirectly, and, based on the assumptions set forth below, the pro forma costs and expenses estimated to be incurred by the combined company in the first year following the Merger. Barings BDC and Sierra caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this document contains a reference to fees or expenses paid or to be paid by “you,” “Barings BDC” or “Sierra,” stockholders will indirectly bear such fees or expenses as investors in Barings BDC or Sierra, as applicable. The table below is based on information as of September 30, 2021 (except as noted below).

The SEC requires that the percentages in the table below be calculated as a percentage of net assets (defined as total assets less indebtedness before taking into account any incentive fees payable during the period), rather than total assets, including assets that have been funded with borrowed monies.

 

Actual

  
  

Barings BDC (acquiring fund)

 

Sierra
(target fund)

 

Pro Forma

Stockholder transaction expenses

      

Sales load (as a percentage of offering price)

 

None(1)

 

None(1)

 

None(1)

Offering expenses (as a percentage of offering price)

 

None(1)

 

None(1)

 

None(1)

Dividend reinvestment plan expenses

 

None(2)

 

None(2)

 

None(2)

Total stockholder transaction expenses (as a percentage of offering price)

 

None

 

None

 

None

 



Actual

 

Pro Forma
(Under Existing
Barings BDC
Advisory
Agreement)

 

Pro Forma
(Under New
Barings BDC
Advisory
Agreement)

  

Barings BDC (acquiring fund)

 

Sierra
(target fund)

 

Estimated annual expenses (as a percentage of consolidated net assets attributable to common stock):(3)

  

 

  

 

  

 

  

 

Base management fees

 

2.8

%(4)

 

2.0

%(5)

 

2.1

%(4)

 

2.1

%(9)

Incentive fees

 

2.3

%(6)

 

0.0

%(7)

 

1.0

%(6)

 

0.7

%(10)

Interest payments on borrowed funds

 

4.2

%

 

0.6

%

 

2.4

%

 

2.4

%

Other expenses(8)

 

1.2

%

 

2.7

%(11)

 

0.9

%

 

0.9

%

Acquired fund fees and expenses

 

0.0

%

 

0.0

%

 

0.0

%

 

0.0

%

Total annual expenses

 

10.5

%

 

5.3

%(11)

 

6.4

%

 

6.1

%

____________

(1)      Purchases of shares of common stock of Barings BDC or Sierra on the secondary market are not subject to sales charges, but may be subject to brokerage commissions or other charges. The table does not include any sales load (underwriting discount or commission) that stockholders may have paid in connection with their purchase of shares of Barings BDC Common Stock or Sierra Common Stock in a prior underwritten offering or otherwise.

(2)      The estimated expenses associated with the respective distribution reinvestment plans are included in “Other expenses.”

(3)      “Consolidated net assets attributable to common stock” equals total assets less indebtedness before taking into account any incentive fees payable at September 30, 2021. For the pro forma columns, the combined net assets of Barings BDC and Sierra on a pro forma basis as of September 30, 2021 were used.

(4)      For Barings BDC, pursuant to the Existing Barings BDC Advisory Agreement, the base management fee is 1.25% of Barings BDC’s average gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters prior to the quarter for which such fees are being calculated. The fee table above shows the base management fee as a percentage of net assets as required by the SEC.

(5)      For Sierra, the amount shown reflects a base management fee that is calculated at an annual rate of 1.75% of Sierra’s gross assets at the end of each completed calendar quarter and is payable quarterly in arrears. For purposes of calculating the base management fee, the term “gross assets” includes any assets acquired with the proceeds of leverage.

(6)      Barings BDC’s incentive fee consists of two parts: (1) a portion based on Barings BDC’s pre-incentive fee net investment income (the “Income-Based Fee”) and (2) a portion based on the net capital gains received on Barings BDC’s portfolio

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of securities on a cumulative basis for each calendar year, net of all realized capital losses and all unrealized capital depreciation for that same calendar year (the “Capital Gains Fee”). Pursuant to the Existing Barings BDC Advisory Agreement, Barings BDC pays an Income-Based Fee to Barings which is 100% of Barings BDC’s pre-incentive fee net investment income, if any, that exceeds the hurdle rate of 2.00% per quarter (8.00% annualized) but is less than 2.50% (10.00% annualized) (the “Catch-Up Amount”) and 20.00% of Barings BDC’s pre-incentive fee net investment income, if any, that exceeds the Catch-Up Amount. The Catch-Up Amount is intended to provide Barings with an Income-Based Fee of 20.00% on all of Barings BDC’s pre-incentive fee net investment income when Barings BDC’s pre-incentive fee net investment income reaches 2.00% per quarter (8.00% annualized). However, the Income-Based Fee will not be in excess of the incentive fee cap which is an amount equal to (1) 20.00% of the cumulative net return during the relevant trailing twelve quarters (the current calendar quarter and the eleven preceding calendar quarters beginning with the calendar quarter that commences on or after January 1, 2021, as the case may be, or the appropriate portion thereof in the case of any of Barings BDC’s first eleven calendar quarters that commences on or after January 1, 2021) minus (2) the aggregate Income-Based Fee that was paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant trailing twelve quarters. The incentive fee cap is not subject to recoupment. The Capital Gains Fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Existing Barings BDC Advisory Agreement), and is calculated at the end of each applicable year by subtracting (1) the sum of Barings BDC’s cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (2) Barings BDC’s cumulative aggregate realized capital gains, in each case calculated from August 2, 2018. If such amount is positive at the end of such year, then the Capital Gains Fee payable for such year is equal to 20% of such amount, less the cumulative aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then there is no Capital Gains Fee payable for such year. If the Existing Barings BDC Advisory Agreement is terminated as of a date that is not a calendar year end, the termination date will be treated as it were a calendar year end for purposes of calculating and paying a Capital Gains Fee.

(7)      “Incentive fees” for Sierra represent the annualized incentive fees based on actual incentive fees incurred during the three months ended September 30, 2021. The incentive fees, if any, are divided into two parts:

i.        a subordinated incentive fee on income, which, at a maximum, for any quarter in which Sierra’s pre-incentive fee net investment income exceeds 2.1875% of its net assets at the end of the immediately preceding quarter, will equal 20% of the amount of its pre-incentive fee net investment income; and

ii.       an incentive fee on capital gains that will equal 20% of Sierra’s capital gains, if any, less the aggregate amount of any previously paid incentive fee on capital gains; and the incentive fees are based on Sierra’s performance and will not be paid unless Sierra achieves certain goals. Sierra will record an expense accrual relating to the capital gains incentive fee payable by it to its investment adviser (but not paid) when the unrealized gains on its investments exceed all realized capital losses on its investments given the fact that a capital gains incentive fee would be owed to its investment adviser if Sierra were to sell its investment portfolio at such time. The amount in the table assumes that no incentive fees on capital gains will be paid for the following 12-month period which is based on the actual realized capital gains (losses) for the three months ended September 30, 2021 and the unrealized appreciation (depreciation) of Sierra’s investments as of such date and assumes that all such unrealized appreciation (depreciation) is converted to realized capital gains (losses) on such date. See “Business of Sierra — Investment Advisory Agreement and Feesin Part I, Item 1 of Sierra’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 19, 2021 for more information concerning the incentive fees.

On April 23, 2021, Sierra entered into the Incentive Fee Waiver Agreement (as defined in “Certain Relationships and Related Party Transactions of Sierra”) with SIC Advisors, pursuant to which SIC Advisors agreed to waive (i) 50% of any incentive fee on income payable to SIC Advisors for any fiscal quarter during the period beginning with the fiscal quarter ending September 30, 2021 and the fiscal quarter ending June 30, 2022, and (ii) 50% of any incentive fee on capital gains payable to SIC Advisors for the fiscal year ending December 31, 2021. The Incentive Fee Waiver Agreement does not amend the calculation of the incentive fees as set forth in the Sierra Investment Advisory Agreement. Other than the waiver contemplated by the Sierra Incentive Fee Waiver Agreement, the terms of the Sierra Investment Advisory Agreement will remain in full force and effect. Following (i) the fiscal quarter ending June 30, 2022 with respect to the waiver granted by SIC Advisors on any incentive fee payable on income, and (ii) the fiscal year ending December 31, 2021 with respect to the waiver granted by SIC Advisors on any incentive fee payable on capital gains, unless otherwise extended by Sierra and SIC Advisors, the Incentive Fee Waiver Agreement will terminate and the original terms of the Sierra Investment Advisory Agreement will be in full force and effect.

(8)      In the case of Barings BDC, other expenses include expenses incurred under the administration agreement, by and between Barings BDC and Barings, as the administrator, Barings BDC Board fees, directors and officers insurance costs, as well as legal and accounting expenses. The percentage presented in the table reflects actual amounts incurred during the three months ended September 30, 2021 on an annualized basis.

In the case of Sierra, other expenses include professional fees, administrator expenses and all other general and administrative expenses. Such expenses are annualized based on actual expenses incurred during the three months ended September 30, 2021. On April 23, 2021, Sierra entered into the Expense Limitation Agreement (as defined in “Certain Relationships and Related Party Transactions of Sierra”) with Medley Capital, Sierra’s administrator, pursuant to which, Medley Capital agreed that the amount of expenses payable and reimbursable by Sierra under the Sierra Administration

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Agreement (as defined in “Certain Relationships and Related Party Transactions of Sierra”) will be capped at $2.2 million for the fiscal year ending December 31, 2021. For the avoidance of doubt, other than the cap contemplated by the Expense Limitation Agreement, the Expense Limitation Agreement does not amend the allocation of costs and expenses that are payable or reimbursable by Sierra under the Sierra Administration Agreement. Following the quarter ending December 31, 2021, unless otherwise extended by Sierra and Medley Capital, the Expense Limitation Agreement will terminate and the original terms of the Sierra Administration Agreement will be in full force and effect.

In the case of pro forma expenses, other expenses reflect anticipated decreases in duplicative costs such as professional fees for legal, audit and tax, directors’ fees, and other redundant administrative and operating expenses.

(9)      If the Merger closes, and the New Barings BDC Advisory Agreement becomes effective upon the Closing, Barings BDC’s base management fee under the New Barings BDC Advisory Agreement will remain the same as the base management fee under the Existing Barings BDC Advisory Agreement, which is 1.250% of Barings BDC’s average gross assets.

(10)    If the Merger closes, and the New Barings BDC Advisory Agreement becomes effective upon the Closing, the New Barings BDC Advisory Agreement will modify the Income-Based Fee solely to increase the hurdle rate of 2.00% per quarter (8.00% annualized) to 2.0625% per quarter (8.25% annualized) and therefore will increase the catch-up amount that is used in calculating the income incentive fee to correspond to the hurdle rate increase, as described under the caption “The Merger — Terms of Second Amended and Restated Investment Advisory Agreement” on page 89.

(11)    “Other expenses” and “Total annual expenses” shown do not include transaction expenses paid by Sierra. If such expenses had been included, “Other expenses” and “Total annual expenses” would have been 5.4% and 8.0%, respectively.

Example

The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in Barings BDC, Sierra or the combined company’s common stock following the Merger on a pro forma basis. In calculating the following expense amounts, each of Barings BDC and Sierra has assumed that it would have no additional leverage and that its annual operating expenses would remain at the levels set forth in the tables above. Calculations for the pro forma combined company following the Merger assume that the Merger closed on September 30, 2021 and that the leverage and operating expenses of Barings BDC and Sierra remain at the levels set forth in the tables above. Transaction expenses related to the Merger are not included in the following examples.

 

1
year

 


years

 


years

 

10 
years

You would pay the following expenses on a $1,000 investment:

 

 

  

 

  

 

  

 

 

Barings BDC, assuming a 5% annual return (assumes no return from net realized capital gains or net unrealized capital appreciation)

 

$

82

 

$

257

 

$

451

 

$

1,027

Sierra, assuming a 5% annual return (assumes no return from net realized capital gains or net unrealized capital appreciation)

 

$

53

 

$

166

 

$

292

 

$

664

Barings BDC, assuming a 5% annual return (assumes return entirely from realized capital gains and thus subject to the capital gains incentive fee)

 

$

92

 

$

286

 

$

496

 

$

1,100

Sierra, assuming a 5% annual return (assumes return entirely from realized capital gains and thus subject to the capital gains incentive fee)

 

$

63

 

$

196

 

$

340

 

$

754

  

 

  

 

  

 

  

 

 

Pro forma combined company following the Merger (Under
Existing Barings BDC Advisory Agreement)

 

 

  

 

  

 

  

 

 

You would pay the following expenses on a $1,000 investment:

 

 

  

 

  

 

  

 

 

Assuming a 5% annual return (assumes no return from net realized capital gains or net unrealized capital appreciation)

 

$

54

 

$

169

 

$

297

 

$

676

Assuming a 5% annual return (assumes return entirely from realized capital gains and thus subject to the capital gains incentive fee)

 

$

64

 

$

199

 

$

345

 

$

765

  

 

  

 

  

 

  

 

 

Pro forma combined company following the Merger (Under New Barings BDC Advisory Agreement)

 

 

  

 

  

 

  

 

 

You would pay the following expenses on a $1,000 investment:

 

 

  

 

  

 

  

 

 

Assuming a 5% annual return (assumes no return from net realized capital gains or net unrealized capital appreciation)

 

$

54

 

$

169

 

$

297

 

$

676

Assuming a 5% annual return (assumes return entirely from realized capital gains and thus subject to the capital gains incentive fee)

 

$

64

 

$

199

 

$

345

 

$

765

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The foregoing tables are to assist you in understanding the various costs and expenses that an investor in Barings BDC, Sierra or, following the Merger, the combined company’s common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, performance of Barings BDC, Sierra and the combined company will vary and may result in a return greater or less than 5%. The incentive fee under each of the Existing Barings BDC Advisory Agreement, the Sierra Investment Advisory Agreement and the New Barings BDC Advisory Agreement, assuming a 5% annual return, would either not be payable or have an immaterial impact on the expense amounts shown above in the example where there is no return from net realized capital gains, and thus are not included in those examples. Under each of the Existing Barings BDC Advisory Agreement, the Sierra Investment Advisory Agreement and the New Barings BDC Advisory Agreement, no incentive fee would be payable if Barings BDC, Sierra or the combined company, as applicable, has a 5% annual return with no capital gains, however, there would be incentive fees payable in the examples where the entire return is derived from realized capital gains. If sufficient returns are achieved on investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, expenses, and returns to investors, would be higher. The example assumes that all dividends and other distributions are reinvested at NAV. Under certain circumstances, reinvestment of dividends and other distributions under the relevant dividend reinvestment plan may occur at a price per share that differs from NAV. See “Barings BDC Dividend Reinvestment Plan” and “Sierra Distribution Reinvestment Plan” for additional information regarding Barings BDC’s and Sierra’s dividend reinvestment plan, respectively.

The example and the expenses in the table above should not be considered a representation of Barings BDC’s, Sierra’s, or, following the Merger, the combined company’s, future expenses, and actual expenses may be greater or less than those shown.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus, including the documents incorporated by reference herein, contains statements that constitute forward-looking statements, which relate to Barings BDC, Sierra or, following the Merger, the combined company, regarding future events or the future performance or future financial condition of Barings BDC, Sierra or, following the Merger, the combined company. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Barings BDC, Sierra or, following the Merger, the combined company, their industry and their respective beliefs and assumptions. The forward-looking statements contained in this joint proxy statement/prospectus involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including:

•        the timing or likelihood of the Merger closing;

•        the combined company’s plans, expectations, objectives and intentions;

•        the ability to realize the anticipated benefits for the Merger;

•        the expected synergies and savings associated with the Merger;

•        the expected elimination of certain expenses and costs due to the Merger;

•        the percentage of Sierra stockholders voting in favor of the First Merger;

•        the percentage of Barings BDC stockholders voting in favor of the relevant proposals;

•        the possibility that competing offers or acquisition proposals for Sierra will be made;

•        the possibility that any or all of the various conditions to the consummation of the First Merger may not be satisfied or waived;

•        risks related to diverting the attention of Barings BDC’s management or Sierra’s management from ongoing business operations;

•        the risk that stockholder litigation in connection with the transactions contemplated by the Merger Agreement may result in significant costs of defense and liability;

•        the future operating results of the combined company or Barings BDC’s, Sierra’s or the combined company’s portfolio companies;

•        regulatory approvals and other factors;

•        changes in regional or national economic conditions, including but not limited to the impact of the COVID-19 pandemic, and their impact on the industries in which Barings BDC and Sierra operate and invest;

•        general economic and political trends and other external factors;

•        the effect that the announcement or consummation of the Merger may have on the trading price of Barings BDC Common Stock;

•        fluctuations in the market price of Barings BDC Common Stock;

•        changes in Sierra’s and/or Barings BDC’s NAV;

•        potential litigation arising from the Merger Agreement and/or the Merger;

•        the transaction’s effect on the relationships of Barings BDC or Sierra with their respective investors, portfolio companies, lenders and service providers, whether or not the Merger is completed;

•        the reduction in Barings BDC stockholders’ and Sierra stockholders’ percentage ownership and voting power in the combined company;

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•        the challenges and costs presented by the integration of Barings BDC and Sierra;

•        the uncertainty of third-party approvals;

•        the significant transaction costs;

•        the effect of changes to tax legislation and Sierra’s and Barings BDC’s respective tax positions;

•        any potential termination of the Merger Agreement;

•        the restrictions on Barings BDC’s and Sierra’s conduct of business set forth in the Merger Agreement;

•        Sierra’s and/or Barings BDC’s ability to qualify and maintain their respective qualifications as a RIC and as a BDC; and

•        other changes in the conditions of the industries in which Barings BDC and Sierra invest and other factors enumerated in Barings BDC’s and Sierra’s filings with the SEC.

Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar words. The forward-looking statements contained in this joint proxy statement/prospectus involve risks and uncertainties. Actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” in Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in Barings BDC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 and Sierra’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Sierra’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021, as such factors may be updated from time to time in their periodic filings with the SEC, and elsewhere contained or incorporated by reference in this joint proxy statement/prospectus.

The forward-looking statements included in this joint proxy statement/prospectus and documents incorporated by reference into this joint proxy statement/prospectus have been based on information available to Barings BDC and/or Sierra on the applicable date of the relevant document. Actual results could differ materially from those anticipated in Barings BDC’s and Sierra’s forward-looking statements and future results could differ materially from historical performance. You are advised to consult any additional disclosures that Barings BDC or Sierra may make directly to you or through reports that they have filed or in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. This joint proxy statement/prospectus and documents incorporated by reference into this joint proxy statement/prospectus contains or may contain statistics and other data that have been obtained from or compiled from information made available by third-party service providers. Neither Barings BDC nor Sierra has independently verified such statistics or data.

You should understand that, under Sections 27A(b)(2)(B) of the Securities Act, and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in connection with any offering of securities pursuant to this joint proxy statement/prospectus, any prospectus supplement or in periodic reports Barings BDC or Sierra file under the Exchange Act.

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THE BARINGS BDC SPECIAL MEETING

Date, Time and Place of the Barings BDC Special Meeting

The Barings BDC Special Meeting will be held virtually at 1:00 p.m., Eastern Time, on February 24, 2022 at the following website: www.virtualshareholdermeeing.com/BBDC2022SM. This joint proxy statement/prospectus will be made available to Barings BDC stockholders of record as of December 27, 2021 on or about December 28, 2021.

Purpose of the Barings BDC Special Meeting

At the Barings BDC Special Meeting, Barings BDC stockholders will be asked to approve the Merger Stock Issuance Proposal, the Barings BDC Below NAV Issuance Proposal and, if necessary or appropriate, the Barings BDC Adjournment Proposal.

The Barings BDC Board unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger, the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal and unanimously recommends that Barings BDC stockholders vote “FOR” the Merger Stock Issuance Proposal, “FOR” the Barings BDC Below NAV Issuance Proposal and, if necessary or appropriate, “FOR” the Barings BDC Adjournment Proposal.

Record Date

Barings BDC stockholders may vote their shares at the Barings BDC Special Meeting only if they were a stockholder of record at the close of business on December 27, 2021. There were 65,316,085 shares of Barings BDC Common Stock outstanding on the Barings BDC Record Date. Each share of Barings BDC Common Stock is entitled to one vote.

Quorum

A quorum must be present at the Barings BDC Special Meeting for any business to be conducted. The presence at the Barings BDC Special Meeting, virtually or represented by proxy, of the holders of a majority of the shares of Barings BDC Common Stock issued and outstanding and entitled to vote at the Barings BDC Special Meeting will constitute a quorum. Broker non-votes will not be treated as shares present for quorum purposes.

Broker Non-Votes

Broker non-votes are described as votes cast by a broker, bank, trustee or nominee on behalf of a beneficial holder who does not provide explicit voting instructions as to how to vote such beneficial holder’s shares to such broker, bank, trustee or nominee and who does not attend the meeting. The Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal are non-routine matters for Barings BDC. As a result, if a Barings BDC stockholder holds shares in “street name” through a broker, bank, trustee or nominee, the broker, bank, trustee or nominee will not be permitted to exercise voting discretion with respect to the Merger Stock Issuance Proposal or the Barings BDC Below NAV Issuance Proposal. Abstentions and broker non-votes (if any) will (1) not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Merger Stock Issuance Proposal or the Barings BDC Adjournment Proposal and (2) will have the same effect as votes “against” the Barings BDC Below NAV Issuance Proposal.

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Vote Required

Each share of Barings BDC Common Stock held by a holder of record as of the Barings BDC Record Date has one vote on each matter to be considered at the Barings BDC Special Meeting.

The Merger Stock Issuance Proposal

Approval of Merger Stock Issuance Proposal requires the affirmative vote of the holders of at least a majority of votes cast by holders of shares of Barings BDC Common Stock present at the Barings BDC Special Meeting, virtually or represented by proxy, and entitled to vote thereat is required to approve the Merger Stock Issuance Proposal. For purposes of the vote on this proposal, abstentions and broker non-votes will (if any) not be counted as votes cast and will have no effect on the result of the vote.

The Barings BDC Below NAV Issuance Proposal

Approval of the Barings BDC Below NAV Issuance Proposal requires the affirmative vote of each of the following: (1) a majority of the outstanding voting securities (as used in the Investment Company Act) of Barings BDC Common Stock; and (2) a majority of the outstanding voting securities of Barings BDC Common Stock that are not held by affiliated persons of Barings BDC. For purposes of this proposal, the Investment Company Act defines a “majority of the outstanding voting securities” as the vote of the lesser of: (1) 67% or more of the voting securities of Barings BDC present at the Barings BDC Special Meeting, if the holders of more than 50% of the outstanding voting securities of Barings BDC are present virtually or represented by proxy; or (2) more than 50% of the outstanding voting securities of Barings BDC. Abstentions and broker non-votes (if any) will have the effect of a vote “against” the Barings BDC Below NAV Issuance Proposal.

The Barings BDC Adjournment Proposal

Approval of the Barings BDC Adjournment Proposal requires the affirmative vote of the holders of at least a majority of votes cast by holders of shares of Barings BDC Common Stock present at the Barings BDC Special Meeting, virtually or represented by proxy, and entitled to vote thereat is required to approve the Barings BDC Adjournment Proposal. For purposes of the vote on this proposal, abstentions and broker non-votes (if any) will not be counted as votes cast and will have no effect on the result of the vote.

Voting of Proxies

Barings BDC encourages Barings BDC stockholders to vote their shares by proxy via the Internet or telephone, which means that Barings BDC stockholders authorize someone else to vote their shares. Shares represented by duly executed proxies will be voted in accordance with Barings BDC stockholders’ instructions. If Barings BDC stockholders execute a proxy without specifying their voting instructions, such Barings BDC stockholders’ shares will be voted in accordance with the Barings BDC Board’s recommendation. If any other business is brought before the Barings BDC Special Meeting, Barings BDC stockholders’ shares will be voted at the Barings BDC Board’s discretion unless Barings BDC stockholders specifically state otherwise on their proxy.

A Barings BDC stockholder may authorize a proxy by telephone or through the Internet using the toll-free telephone numbers or web address printed on your proxy card. Authorizing a proxy by telephone or through the Internet requires you to input the control number located on your proxy card. After inputting the control number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link.

•        By Internet:    www.proxyvote.com

•        By telephone:    (800) 690-6903 to reach a toll-free, automated touchtone voting line, or (877) 777-4652 Monday through Friday 9:00 a.m. until 10:00 p.m. Eastern Time to reach a toll-free, live operator line.

•        By mail:    You may vote by proxy, after you request the hard copy materials, by following the directions and indicating your instructions on the enclosed proxy card, dating and signing the proxy card, and promptly returning the proxy card in the envelope provided, which requires no postage if mailed in the United States. Please allow sufficient time for your proxy card to be received on or prior to 11:59 p.m., Eastern Time, on February 23, 2022.

Important notice regarding the availability of proxy materials for the Barings BDC Special Meeting.    Barings BDC’s proxy statement/prospectus and the proxy card are available at www.proxyvote.com.

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Revocability of Proxies

Any proxy authorized pursuant to this solicitation may be revoked by notice from the person giving the proxy at any time before it is exercised. A revocation may be effected by submitting new voting instructions via the Internet voting site, by telephone, by obtaining and properly completing another proxy card that is dated later than the original proxy card and returning it, by mail, in time to be received before the Barings BDC Special Meeting, by attending the Barings BDC Special Meeting and voting virtually or by a notice, provided in writing and signed by the Barings BDC stockholder, delivered to Barings BDC’s Secretary on any business day before the date of the Barings BDC Special Meeting.

Solicitation of Proxies

Barings BDC and Sierra will bear their own costs of preparing, printing and mailing this joint proxy statement/prospectus and the applicable accompanying notice of special meeting of stockholders and proxy card. Barings BDC intends to use the services of Broadridge Financial Solutions Inc. (“Broadridge”) to aid in the distribution and collection of proxy votes. Barings BDC expects to pay market rates of approximately $130,000 for such services. No additional compensation will be paid to directors, officers or regular employees for such services.

Appraisal Rights

Barings BDC stockholders do not have the right to exercise appraisal rights with respect to any matter to be voted upon at the Barings BDC Special Meeting.

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THE SIERRA SPECIAL MEETING

Date, Time and Place of the Sierra Special Meeting

The Sierra Special Meeting will be held virtually at 1:00 p.m., on February 24, 2022 at the following website: https://viewproxy.com/sicSM/2022. This joint proxy statement/prospectus will made available to Sierra stockholders of record as of December 27, 2021 on or about December 28, 2021.

Purpose of the Sierra Special Meeting

At the Sierra Special Meeting, Sierra stockholders will be asked to approve the Merger Proposal and, if necessary or appropriate, the Sierra Adjournment Proposal.

The Sierra Board unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger Proposal, and unanimously recommends that Sierra stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the Sierra Adjournment Proposal.

Record Date

Sierra stockholders may vote their shares at the Sierra Special Meeting only if they were a stockholder of record at the close of business on December 27, 2021. There were 102,276,889 shares of Sierra Common Stock outstanding on the Sierra Record Date. Each share of Sierra Common Stock is entitled to one vote.

Quorum

A quorum must be present at the Sierra Special Meeting for any business to be conducted. The presence at the Sierra Special Meeting, virtually or represented by proxy, of the holders of one-third of the shares of Sierra Common Stock entitled to be cast at the Sierra Special Meeting will constitute a quorum.

Broker Non-Votes

Broker non-votes are described as votes cast by a broker, bank, trustee or nominee on behalf of a beneficial holder who does not provide explicit voting instructions as to how to vote such beneficial holder’s shares to such broker, bank, trustee or nominee and who does not attend the meeting. The Merger Proposal is a non-routine matter for Sierra. As a result, if a Sierra stockholder holds shares in “street name” through a broker, bank, trustee or nominee, the broker, bank, trustee or nominee will not be permitted to exercise voting discretion with respect to the Merger Proposal. Abstentions and broker non-votes will not count as affirmative votes cast and will therefore have the same effect as votes “against” the Merger Proposal. Abstentions and broker non-votes (if any) will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Sierra Adjournment Proposal.

Vote Required

Each share of Sierra Common Stock held by a holder of record as of the Sierra Record Date has one vote on each matter to be considered at the Sierra Special Meeting.

The Merger Proposal

The affirmative vote of the holders of Sierra Common Stock constituting a majority of all the votes entitled to be cast on the matter at the Sierra Special Meeting is required to approve the Merger Proposal. Abstentions and broker non-votes (if any) will not count as affirmative votes cast and will therefore have the same effect as votes “against” the Merger Proposal.

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The Sierra Adjournment Proposal

The affirmative vote of the holders of at least a majority of votes cast by holders of the shares of Sierra Common Stock present at the Sierra Special Meeting, virtually or represented by proxy, is required to approve the Sierra Adjournment Proposal. Abstentions and broker non-votes (if any) will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Sierra Adjournment Proposal.

Voting of Proxies

Sierra encourages Sierra stockholders to vote their shares by proxy via the Internet or telephone, which means that Sierra stockholders authorize someone else to vote their shares. Shares represented by duly executed proxies will be voted in accordance with Sierra stockholders’ instructions. If Sierra stockholders execute a proxy without specifying their voting instructions, such Sierra stockholders’ shares will be voted in accordance with the Sierra Board’s recommendation. If any other business is brought before the Sierra Special Meeting, Sierra stockholders’ shares will be voted at the Sierra Board’s discretion unless Sierra stockholders specifically state otherwise on their proxy.

A Sierra stockholder may authorize a proxy by telephone or through the Internet using the toll-free telephone numbers or web address printed on your proxy card. Authorizing a proxy by telephone or through the Internet requires you to input the control number located on your proxy card. After inputting the control number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link.

•        By Internet:    https://viewproxy.com/sicSM/2022

•        By telephone:    (844) 855-0180 Monday through Friday between 9 a.m. and 10 p.m. Eastern Time and Saturday and Sunday between 10 a.m. and 6 p.m. Eastern Time.

•        By mail:    You may vote by proxy, after you request the hard copy materials, by following the directions and indicating your instructions on the enclosed proxy card, dating and signing the proxy card, and promptly returning the proxy card in the envelope provided, which requires no postage if mailed in the United States. Please allow sufficient time for your proxy card to be received on or prior to 11:59 p.m., Eastern Time, on February 23, 2022.

Important notice regarding the availability of proxy materials for the Sierra Special Meeting.    Sierra’s joint proxy statement/prospectus and the proxy card are available at https://viewproxy.com/sicSM/2022.

Revocability of Proxies

Any proxy authorized pursuant to this solicitation may be revoked by notice from the person giving the proxy at any time before it is exercised. A revocation may be effected by submitting new voting instructions via the Internet voting site, by telephone, by obtaining and properly completing another proxy card that is dated later than the original proxy card and returning it, by mail, in time to be received before the Sierra Special Meeting, by attending the Sierra Special Meeting and voting virtually or by a notice, provided in writing and signed by the Sierra stockholder, delivered to Sierra’s Secretary on any business day before the date of the Sierra Special Meeting.

Solicitation of Proxies

Barings BDC and Sierra will bear their own costs of preparing, printing and mailing this joint proxy statement/prospectus and the applicable accompanying Notice of Special Meeting of Stockholders and proxy card. Sierra intends to use the services of Alliance Advisors, LLC to aid in the distribution and collection of proxy votes. Sierra expects to pay market rates of approximately $1.0 million for such services. No additional compensation will be paid to directors, officers or regular employees for such services.

Appraisal Rights

Sierra stockholders will not be entitled to exercise appraisal rights in connection with the First Merger under the laws of the State of Maryland.

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CAPITALIZATION

The following table sets forth (1) Barings BDC’s and Sierra’s actual capitalization as of September 30, 2021 and (2) Barings BDC’s capitalization as of September 30, 2021 as adjusted to reflect the effects of the Merger. The amounts in the table below are unaudited. You should read this table together with Barings BDC’s and Sierra’s condensed consolidated financial data incorporated by reference herein.

 

As of September 30, 2021
(unaudited, dollar amounts in thousands, except share and per share data)

  

Actual

 

Actual

 

Pro forma Adjustments

 

Pro forma

  

Barings BDC

 

Sierra

 

Barings BDC

Cash, cash equivalents and restricted cash

 

$

91,386

(1)

 

$

74,931

 

$

(91,626

)(2)

 

$

74,690

 

Debt less unamortized debt issuance costs

 

$

1,036,930

 

 

$

79,000

 

$

(79,000

)(2)

 

$

1,036,930

 

Net Assets

 

$

744,822

 

 

$

544,042

 

$

21,046

(3)

 

$

1,309,909

 

Total Capitalization

 

$

1,781,751

 

 

$

623,042

 

$

(57,954)

 

 

$

2,346,839

 

Number of common shares outstanding

 

 

65,316,085

 

 

 

102,276,889

 

 

(56,279,904

)(4)

 

 

111,313,070

(5)

NAV per common share

 

$

11.40

 

 

$

5.32

 

 

 

 

 

$

11.77

 

____________

(1)      Includes $30.2 million of cash, $11.1 million of foreign currencies and $50.0 million of money market investments.

(2)      Assumes all Sierra cash is used to repay the Existing Sierra Loan Agreement (as defined under “Description of the Merger Agreement — Additional Covenants — Repayment of Existing Sierra Loan Agreement”) and a portion of Barings BDC’s cash is used to pay the remainder of the Existing Sierra Loan Agreement, the associated transaction expenses of approximately $7.3 million for Barings BDC and the associated remaining transaction expenses of approximately $5.3 million for Sierra. Does not include any adjustment for the Cash Consideration as the Cash Consideration is being paid by Barings and not Barings BDC.

(3)      Includes estimated $16.3 million reduction in fair value of investments; transaction expenses of Barings BDC of approximately $7.3 million; remaining transaction expenses of Sierra of approximately $5.3 million; and estimated initial value of the Credit Support Agreement of $50.0 million.

(4)      Represents the difference between the number of shares of Sierra Common Stock issued and outstanding prior to the First Merger and the number of shares of Barings BDC Common Stock that Barings BDC expects to issue to Sierra stockholders in connection with the First Merger (as described in footnote 5 below).

(5)      Represents 65,316,085 shares of Barings BDC Common Stock outstanding prior to the First Merger plus 45,996,985 shares of Barings BDC Common Stock to be issued to Sierra stockholders in connection with the First Merger. The number of shares of Barings BDC Common Stock to be issued to Sierra stockholders in the First Merger was determined by multiplying 102,276,889.12 shares of Sierra Common Stock outstanding prior to the First Merger by the Exchange Ratio of 0.44973.

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THE MERGER

The discussion in this joint proxy statement/prospectus, which includes the material terms of the Merger and the principal terms of the Merger Agreement, is subject to, and is qualified in its entirety by reference to, the Merger Agreement, which is attached as Annex A to this joint proxy statement/prospectus.

General Description of the Merger

Pursuant to the terms of the Merger Agreement, at the Effective Time, Acquisition Sub will be merged with and into Sierra. Sierra will be the surviving corporation and will continue its existence as a corporation under the laws of the State of Maryland and a direct, wholly-owned subsidiary of Barings BDC. As of the Effective Time, the separate corporate existence of Acquisition Sub will cease. Immediately after the Effective Time, Sierra will merge with and into Barings BDC, with Barings BDC as the surviving corporation in the Second Merger. Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of Sierra Common Stock issued and outstanding immediately prior to the Effective Time (excluding Canceled Shares) will be converted into and exchanged for the right to receive the Merger Consideration.

Based on the number of shares of Barings BDC Common Stock issued and outstanding as of September 30, 2021, it is expected that, following consummation of the Merger, current Barings BDC stockholders will own approximately 58.7% of the outstanding Barings BDC Common Stock and former Sierra stockholders will own approximately 41.3% of the outstanding Barings BDC Common Stock.

Background of the Merger

Since commencing operations in April 2012, Sierra has primarily invested in the indebtedness of privately owned U.S. companies, with a focus on senior secured debt, second lien debt and, to a lesser extent, subordinated debt. Sierra originates transactions sourced through its investment adviser’s direct origination network, through its relationships with other lenders and borrowers, and also acquires debt securities through the secondary market. Sierra also may make equity investments in companies that it believes will generate appropriate risk adjusted returns.

On January 26, 2018, the Sierra Board established the Sierra Special Committee, which was and continues to be comprised of all of the Sierra Independent Directors, and authorized it to, among other things, evaluate the merits of a potential sale of substantially all of Medley LLC’s and its subsidiaries’ assets to a third party; as well as other alternatives. Discussions relating to a potential sale were subsequently terminated by the parties.

On July 2, 2018, the Sierra Board, among other things, authorized the Sierra Special Committee to evaluate and review the terms of a potential three-way combination of Sierra, Medley Capital Corporation (“MCC”), a BDC, and Medley Management Inc. (“MDLY”). Sierra and MCC at the time were both affiliates of MDLY by virtue of being managed by registered investment advisers that are wholly owned subsidiaries of MDLY.

On August 9, 2018, Sierra announced that it had entered into definitive agreements with MCC and MDLY (the “2018 Agreements”), pursuant to which Sierra agreed to acquire MCC and MDLY (the “2018 Proposed Transaction”). In the 2018 Proposed Transaction, MCC would have merged with and into Sierra, with Sierra as the surviving company, and simultaneously, Sierra would have acquired MDLY, and MDLY’s existing asset management business, which would have been operated as a wholly owned subsidiary of Sierra. The 2018 Proposed Transaction was contingent upon stockholder approval, the SEC granting certain exemptive relief as well as other customary closing conditions.

In early 2019, Sierra, MCC and MDLY entered into negotiations to amend the 2018 Agreements to reflect changes to the parties’ respective businesses and other developments since the 2018 Agreements had been negotiated.

On July 29, 2019, Sierra announced that it had entered into definitive amended agreements (the “2019 Amended Agreements”) under which MCC would have merged with and into Sierra and Sierra would have simultaneously acquired MDLY and its existing asset management business, which would have been operated as a wholly owned subsidiary of Sierra (the “2019 Proposed Transaction”). The 2019 Proposed Transaction was also contingent on stockholder approval, the SEC granting certain exemptive relief as well as other customary closing conditions.

On May 5, 2020, Sierra announced that, effective as of May 1, 2020, the Sierra Board had terminated the 2019 Proposed Transaction as the outside date for the 2019 Proposed Transaction provided for in the 2019 Amended Agreements to be completed had passed, and the 2019 Proposed Transaction had not been consummated.

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In determining to terminate the 2019 Amended Agreements, Sierra considered a number of factors, including, among other factors, changes in the relative valuations of Sierra, MCC, and MDLY, the changed circumstances and the unpredictable economic conditions resulting from the global health crisis caused by the coronavirus (COVID-19) pandemic, and the uncertainty regarding the parties’ ability to satisfy the conditions to closing in a timely manner.

On March 7, 2021 (the “Petition Date”), Medley LLC, the parent of Sierra’s investment adviser, SIC Advisors, and administrator, Medley Capital, commenced the voluntary Medley LLC Bankruptcy Case under chapter 11 of title 11 of the United States Code in the Bankruptcy Court. Concurrently with the commencement of the Bankruptcy Case on the Petition Date, Medley LLC filed its Chapter 11 Plan of Reorganization of Medley LLC (the “Original Medley LLC Chapter 11 Plan”) and the related proposed disclosure statement (the “Original Disclosure Statement”).

On April 15, 2021, the Sierra Board, including all of the Sierra Independent Directors, approved the renewal of the Sierra Investment Advisory Agreement with SIC Advisors for an additional year. In their deliberations regarding the re-approval of the Sierra Investment Advisory Agreement, the Sierra Independent Directors took into consideration the terms of the Original Medley LLC Chapter 11 Plan, which contemplated the restructuring of Medley LLC’s debt, and determined that, if the Original Medley LLC Chapter 11 Plan was ultimately confirmed by the Bankruptcy Court, the impact on Sierra and its stockholders would be positive, as Sierra would benefit from both the increase in financial resources available to SIC Advisors following the restructuring of Medley LLC’s debt and from certain management and governance changes which would be implemented in order to effectuate the terms of the Original Medley LLC Chapter 11 Plan.

On April 23, 2021, Sierra entered into the Incentive Fee Waiver Agreement (as defined in “Certain Relationships and Related Party Transactions of Sierra”) with SIC Advisors, pursuant to which SIC Advisors agreed to waive (i) 50% of any incentive fee on income payable to SIC Advisors for any fiscal quarter during the period beginning with the fiscal quarter ending September 30, 2021 and the fiscal quarter ending June 30, 2022, and (ii) 50% of any incentive fee on capital gains payable to SIC Advisors for the fiscal year ending December 31, 2021.

Also, on April 23, 2021, Sierra entered into the Expense Limitation Agreement (as defined in “Certain Relationships and Related Party Transactions of Sierra”) with Medley Capital, pursuant to which Medley Capital agreed that the amount of expenses payable and reimbursable by Sierra under the Sierra Administration Agreement with Medley Capital would be capped at $2.1 million for the fiscal year ending December 31, 2021.

On May 13, 2021, Medley LLC filed a Form 8-K disclosing that on May 7, 2021, each of MDLY, Medley LLC, and six pre-IPO owners of Medley, each of whom is a current or former officer of Medley LLC (the “Individuals”) received a “Wells Notice” from the SEC staff relating to MDLY’s previously-disclosed SEC investigation. Although neither a formal charge of wrongdoing nor a final determination that MDLY, Medley LLC or the Individuals had violated any law, the Wells Notices informed MDLY, Medley LLC and the Individuals that the SEC staff had made a preliminary determination to recommend that the SEC file an enforcement action against MDLY, Medley LLC and each of the Individuals that would allege certain violations of the federal securities laws. The Wells Notices also stated that the SEC staff’s recommendation may involve a civil injunctive action, public administrative proceeding, and/or cease-and-desist proceeding, and may seek remedies that include an injunction, a cease-and-desist order, disgorgement, pre-judgment interest, civil money penalties, censure, and limitations on activities or bars from association.

The Wells Notices relate to, among other matters: MDLY’s and Medley LLC’s disclosures relating to MDLY’s assets under management (“AUM”), its fee-earning assets under management (“FEAUM”), trends and risks related to AUM and FEAUM, and specifically, alleged violations of the federal securities laws relating to such disclosures in MDLY’s registration statement relating to its initial public offering, Medley LLC’s registration statements relating to its bond offerings, and MDLY and Medley LLC’s periodic reports under the Exchange Act; the effectiveness of MDLY’s and Medley LLC’s disclosure controls and procedures; and MDLY’s financial projections included in a joint proxy statement/prospectus, including any amendments thereto, in connection with the 2018 Proposed Transaction and 2019 Proposed Transaction.

On May 13, 2021, Medley LLC withdrew the filing of the Original Medley LLC Chapter 11 Plan and Disclosure Statement. As discussed in more detail below, on July 6, 2021, Medley LLC filed a Combined Disclosure Statement and Chapter 11 Plan of Reorganization and Wind-Down with the Bankruptcy Court.

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On May 17, 2021, the Sierra Special Committee met telephonically with representatives of S&W, counsel to the Sierra Special Committee, to discuss certain updates concerning Medley LLC and potential future actions that could be taken by the Sierra Special Committee. The Chair of the Sierra Special Committee discussed his recent communications with representatives of Broadhaven, noting that Broadhaven had offered to assist the Sierra Special Committee in considering the various options available to Sierra. S&W representatives discussed their understanding of the status of the investigation by the SEC of Medley LLC and certain members of its management as well as the bankruptcy proceeding involving Medley LLC.

Also, on May 17, 2021, Brook Taube notified the Sierra Board that he was resigning as a Class II director of the Board, effective immediately.

On May 21, 2021, the Sierra Special Committee met telephonically with representatives of Broadhaven and S&W to review the various options available to Sierra. Broadhaven representatives provided an overview of the current BDC market, noting that the strong BDC market would likely have a positive impact on the options available to Sierra. Broadhaven representatives also noted that multiple market participants, including Party A, had contacted Broadhaven to inquire whether Sierra might have an interest in entering into a transaction with them.

Broadhaven representatives reviewed options available to Sierra, including continuing as a stand-alone BDC with SIC Advisors as its manager, identifying a new manager to manage Sierra’s investment portfolio, internalizing the portfolio management function, and liquidating Sierra’s investment portfolio. Broadhaven representatives noted that there were a variety of ways for Sierra to change its manager, such as by entering into a management contract with a new manager or merging Sierra into another BDC managed by a different manager. Broadhaven representatives also discussed the possibilities of internalizing Sierra’s portfolio management function and liquidating Sierra’s investment portfolio. Broadhaven representatives then discussed with the Sierra Special Committee the various forms that a strategic review might take, including a broad or narrow process in terms of the number of potential counterparties solicited to participate in the auction process and whether the existence of such a review process, regardless of its form, should be publicly disclosed.

The Sierra Special Committee then discussed with representatives of Broadhaven and S&W the advantages and disadvantages of the options available to Sierra. Broadhaven representatives noted that identifying a new manager for Sierra either through a merger of Sierra with another BDC or the hiring a new adviser to manage Sierra would be the most likely path for maximizing value and other opportunities for Sierra stockholders. Broadhaven representatives noted that any further material negative developments at Medley LLC could adversely affect aspects of Sierra’s business, as well as have a deleterious effect on Sierra’s ability to conduct a robust strategic review process.

The Sierra Special Committee then discussed with representatives of Broadhaven and S&W the possibility of securing retention packages for Medley Capital personnel who provided essential services to Sierra in order to assure that the necessary personnel would remain during a strategic review process and facilitate prospective bidders’ due diligence of Sierra during the auction process and any transactions contemplated by any transaction agreement entered into between Sierra and another party.

Broadhaven representatives discussed the advantages and disadvantages of undertaking a broad versus a narrow process and reviewed with the Sierra Special Committee the steps involved in conducting a strategic review.

The Sierra Special Committee determined to defer any formal action until a later date so they could consider the various matters raised during the meeting.

On May 24, 2021, the Sierra Special Committee met telephonically with representatives of Miles & Stockbridge (“Miles & Stockbridge”), Maryland legal counsel to Sierra, and S&W to discuss, among other matters, whether Sierra should undertake a strategic review. The Sierra Special Committee discussed with the representatives of Miles & Stockbridge and S&W, among other things, the form a strategic review might take in terms of a broad process versus a narrow process and the possibility and advisability of a public announcement of a strategic review versus undertaking a private process. The Sierra Special Committee also discussed with the representatives of Miles & Stockbridge and S&W the possibility of contributing to the funding of a retention package for Medley Capital personnel who provided essential services to Sierra in an effort to ensure there would be no disruption in the services provided to Sierra due to departures from Medley Capital. Representatives of S&W discussed conversations S&W had with Broadhaven about a proposed engagement letter, including the proposed compensation and expense reimbursement. Representatives of S&W then discussed the potential impact a strategic review by Sierra might have

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on the bankruptcy proceedings involving Medley LLC. The representatives of Miles & Stockbridge and S&W also discussed with the Sierra Special Committee the formal actions that would need to be taken by the Sierra Board and the Sierra Special Committee in order for Sierra to undertake a strategic review.

On May 26, 2021, the Sierra Board met via video conference with members of management and representatives of Eversheds Sutherland (US) LLP (“Eversheds Sutherland”), legal counsel to Sierra, Miles & Stockbridge and S&W. The Chair of the Sierra Special Committee reviewed the Sierra Special Committee’s discussions amongst themselves and with representatives of S&W and Broadhaven. He indicated that the Sierra Special Committee had discussed the various options available to Sierra in view of the uncertainty around the timing and resolution of the bankruptcy proceeding involving Medley LLC and the SEC’s investigation of Medley LLC and certain members of its management. He noted that the Sierra Special Committee had discussed engaging Broadhaven to assist in connection with a strategic review by Sierra. After discussion, the Sierra Board authorized the Sierra Special Committee, on behalf of Sierra, to, among other things, conduct a formal review to evaluate strategic alternatives available to Sierra; consider, evaluate, review, and negotiate the terms and conditions of any strategic transaction; select and retain financial, legal and other advisors; and recommend to the Board the rejection or approval of any strategic transaction. The Sierra Independent Directors discussed with the members of management their preference to publicly announce the strategic review process. After hearing the views of the members of management, the Sierra Independent Directors met in an executive session with representatives of Miles & Stockbridge and S&W. Following that executive session, the Sierra Board meeting was reconvened, and the Sierra Independent Directors informed the members of management that they had decided to publicly announce the strategic review. The Sierra Board then voted, among other things, to file a Form 8-K that publicly disclosed the commencement of a formal review process to evaluate strategic alternatives for Sierra.

On May 26, 2021, the Sierra Special Committee also met via video conference with representatives of Miles & Stockbridge and S&W. The Sierra Special Committee discussed the possible engagement of various firms to assist it in its review of the strategic alternatives available to Sierra. In evaluating whether to re-engage Broadhaven to serve as its financial advisor, the Sierra Special Committee noted Broadhaven’s qualifications, experience, reputation, knowledge of the relevant industry and business in which Sierra operates. After further discussion, the Sierra Special Committee voted to engage Broadhaven as the financial advisor to the Sierra Special Committee and to approve an engagement letter with Broadhaven. The Sierra Special Committee also voted to approve the engagement of Miles & Stockbridge and S&W as legal advisors to the Sierra Special Committee in connection with the strategic review. The Sierra Special Committee in addition voted to engage a public relations firm to advise on public relations and investor relations in regard to a potential transaction. The Sierra Special Committee then discussed next steps with the representatives of Miles & Stockbridge and S&W.

On May 27, 2021, Sierra publicly announced that the Sierra Board had entered into a formal review process to evaluate strategic alternatives for Sierra and had authorized the Sierra Special Committee to lead the process.

Following the public announcement, representatives of Broadhaven and S&W prepared a process letter for the strategic review, and S&W drafted a form of non-disclosure agreement (“NDA”), which included a non-solicit provision, that parties participating in the strategic review would be asked to execute. These were subsequently reviewed with and approved by the Sierra Special Committee.

On June 8, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven and S&W. Broadhaven representatives provided an update on the strategic review, while the representatives of S&W provided an update on the bankruptcy proceeding involving Medley LLC. Broadhaven representatives reported that they had had inbound and outbound conversations with interested parties and that they had sent out a process letter and NDA to any party who expressed an interest in exploring a transaction with Sierra.

Broadhaven representatives reviewed various components that interested parties were likely to include in their preliminary proposals and the benefits and issues that the Sierra Special Committee might wish to consider with respect to the potential transaction structures. The members of the Sierra Special Committee discussed various factors they believed would be important to Sierra stockholders, such as the amount of consideration to be paid to Sierra stockholders, the opportunity for liquidity, reductions or other changes to fee structures, payment of regular dividends and the tax treatment, under certain circumstances, of certain types of consideration Sierra stockholders might receive in a transaction, along with other factors, including, but not limited to, the reputation of prospective new advisers, experience in credit markets and with BDCs specifically, depth of available resources, performance in

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credit instruments similar in nature to Sierra’s portfolio, and proficiency in restructurings and workouts. Broadhaven representatives discussed next steps in regard to the strategic review, noting that the deadline for bidders to submit their preliminary proposals was June 21, 2021. The Sierra Special Committee discussed the possibility of inviting Medley LLC, Medley Capital, MDLY and their respective affiliates (collectively, “Medley”) to participate in the strategic review process. Following discussion and at the direction of the Sierra Special Committee, the Broadhaven representatives indicated that they would ask Medley whether it wished to submit a proposal to remain the external manager to Sierra.

The Sierra Special Committee also discussed with the representatives of Broadhaven and S&W contributing to a potential retention package for Medley Capital personnel who provided services to Sierra. Broadhaven and S&W representatives discussed their recent conversation with members of Medley management regarding a possible retention package. Broadhaven representatives indicated that the consulting firm specializing in compensation matters, which had been engaged at the direction of the Sierra Special Committee, had shared with Broadhaven its views concerning a potential retention package for Medley Capital personnel. A representative of S&W also provided an update on the bankruptcy proceeding involving Medley LLC.

On June 18, 2021, the Sierra Special Committee met via video conference with Mr. Howard Liao, Chief Executive Officer of Medley LLC, and representatives of Broadhaven and S&W. Mr. Liao informed the Sierra Special Committee that he and certain other officers of MDLY intended to resign their positions with MDLY later that day but would retain their positions at Medley LLC in an effort to avoid any conflicts of interest that might arise in the future. He also discussed the potential impact of the resignations on MDLY, noting that he did not believe the resignations would have any impact on Medley’s institutional clients. He also provided an update on certain of Medley’s institutional accounts. Mr. Liao indicated that Medley LLC was likely to propose an orderly liquidation of its business in the Medley LLC bankruptcy proceeding. At this time, Mr. Liao was excused from the meeting.

The Sierra Special Committee also discussed contributing to a potential retention package for Medley Capital personnel who provided services to Sierra. A representative of S&W discussed S&W’s conversations with various parties involved in the Medley LLC bankruptcy proceeding about contributing to a potential retention package. Broadhaven representatives discussed the retention package proposed by Medley and also discussed the view of the compensation consultant concerning potential retention payments, noting that the compensation consultant was recommending aggregate retention payments that were in some instances lower than the aggregate retention payments Medley was recommending. The Sierra Special Committee then began discussing possible terms of any additional compensation payment program with the assistance of S&W, Broadhaven and information provided by the compensation consultant.

Broadhaven representatives provided an update on the strategic review process. They reported that they had had conversations with over 40 parties concerning a possible transaction with Sierra and that Broadhaven expected to receive between 15 and 20 proposals from interested parties and that those parties’ bid letters would be shared with the Sierra Special Committee. Broadhaven representatives reported that Medley was in the process of populating a virtual data room and that Medley’s investment team would be available to meet with potential bidders starting the week of July 5, 2021.

On June 24, 2021, Medley notified Broadhaven that Medley had decided not to participate in Sierra’s strategic review.

On June 25, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven and S&W. Broadhaven representatives provided an update on the strategic review process. They indicated that as of June 24, 2021, Broadhaven had received 27 executed NDAs from counterparties and also received 22 preliminary indications of interest. All of the persons submitting an indication of interest had executed a satisfactory NDA. They indicated that interested parties who had not submitted preliminary indications of interest generally had concluded that they were unable to submit a proposal that they believed would be competitive. Broadhaven representatives noted that of the 22 preliminary indications of interest received, there were nine merger proposals, three proposals to acquire Sierra’s assets and ten proposals to become Sierra’s investment adviser. They also noted that some of the bidders, including Party E, had proposed two or more transaction structures in their proposals. Broadhaven representatives indicated that access to the virtual data room would be given to those parties selected by the Sierra Special Committee to advance to the second round of the bid process.

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Party A submitted a non-binding, preliminary indication of interest to Broadhaven on June 21, 2021. Party A proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party A in exchange for a combination of up to $250 million of cash consideration with the remaining merger consideration coming in the form of stock. In addition, Party A proposed to make a cash payment to Sierra stockholders in the aggregate amount of $10 million.

Party B submitted a non-binding, preliminary indication of interest to Broadhaven on June 21, 2021. Party B proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party B in exchange for a combination of approximately 50% stock consideration and approximately 50% cash consideration. Party B indicated its willingness to increase the stock consideration to 100% and to improve the offer by adding a cash payment to Sierra stockholders. Party B also indicated that it was open to becoming Sierra’s manager if that was preferable to Sierra.

Barings submitted a non-binding, preliminary indication of interest to Broadhaven on June 21, 2021. Barings proposed to acquire all of Sierra’s common stock through a merger of Sierra into Barings BDC in exchange for Barings BDC Common Stock at an exchange ratio of 0.4570 Barings BDC shares per Sierra share. In addition, Barings proposed a $50 million cash payment to Sierra. Barings also proposed to enter into a $100 million, ten-year credit support agreement (“CSA”) with Barings BDC, which was anticipated to add approximately $50 million at fair value to the combined company’s NAV. Barings also proposed a $20 million share repurchase program by Barings BDC to support the stock price of the common stock of the combined company following the closing of the proposed merger.

Party D submitted a non-binding, preliminary indication of interest to Broadhaven on June 21, 2021. Party D proposed to purchase all of Sierra’s assets for an aggregate purchase price between $515 million to $570 million. Party D indicated that the consideration would be in the form of cash and potentially tradeable stock of a BDC managed by Party D. Party D also indicated that it was open to discussions on whether to structure the transaction as a stock or asset purchase.

Party E submitted a non-binding, preliminary indication of interest to Broadhaven on June 21, 2021. Party E’s preliminary indication of interest consisted of three separate alternatives: a proposal to acquire Sierra’s assets, a proposal to acquire 75% of Sierra’s assets while allowing Sierra stockholders to retain ownership in a continuing BDC, and a proposal to become Sierra’s manager. In the first alternative, Party E proposed that vehicles affiliated with Party E would acquire 100% of Sierra for cash. In the second alternative, Party E proposed that it would acquire for cash up to 75% of Sierra stockholders’ interests in Sierra with the balance of Sierra stockholders’ interests rolled into the continuing BDC. In the third alternative, Party E proposed to manage Sierra at reduced fees, including a 1.00% management fee, inject $100 million to $150 million of capital at NAV into Sierra and pay Sierra $7.5 million in cash. As part of this proposal, Party E also proposed, among other things, to increase the quarterly redemption right from the current 2.5% to 4.0%.

Party F submitted a non-binding, preliminary indication of interest to Broadhaven on June 24, 2021. Party F’s preliminary indication of interest consisted of two separate proposals: a proposal to become Sierra’s manager and a proposal to merge Sierra into a BDC managed by Party F. Party F proposed to pay Sierra $70 million to become Sierra’s manager. Alternatively, Party F proposed to acquire all of Sierra’s common stock through a merger of Sierra into the BDC managed by Party F in exchange for stock. Party F’s merger proposal also included a $70 million cash payment from Party F to Sierra stockholders.

Party G submitted a non-binding, preliminary indication of interest to Broadhaven on June 18, 2021, which was subsequently revised on June 23, 2021. Party G proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party G in exchange for common stock. Party G’s proposal also included the following: (1) special dividends of $0.01 – $0.05 per share over two to four quarters, (2) a share repurchase plan of equal to or larger size than that of the BDC managed by Party G, (3) a ten-year CSA between the BDC and Party G to protect against net cumulative realized losses of up to $50 million and (4) one-time or fixed period waivers of management fees or incentive fees.

Party H submitted a non-binding, preliminary indication of interest to Broadhaven on June 21, 2021. Party H proposed to offer Sierra $60 million in a combination of fee waivers, special dividends and share buybacks to become Sierra’s manager. Party H expressed its intent to grow Sierra’s assets to over $1 billion over three to four years, which would make Sierra, in Party H’s opinion, a viable candidate for publicly listing its shares on a securities exchange.

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During the June 25, 2021 Sierra Special Committee meeting, the representatives of Broadhaven reviewed with the Sierra Special Committee the various forms of consideration being offered by the bidders, along with the proposed structures of various proposals. They noted that some bidders’ proposals discussed potential employment of Medley Capital employees but none identified any specific individuals. Broadhaven representatives indicated they would prepare an analysis that would allow the Sierra Special Committee to compare the various proposals on the basis of the estimated economic value to Sierra stockholders.

Broadhaven representatives next reviewed certain transaction considerations with the Sierra Special Committee. They then discussed with the Sierra Special Committee their summary of the three types of proposals received from the bidders.

The Sierra Special Committee discussed with the representatives of Broadhaven and S&W how the Sierra Special Committee might compare merger proposals and proposals to become Sierra’s investment adviser.

Broadhaven representatives discussed next steps with the Sierra Special Committee, including the need to determine which bidders would be invited into the second round of the bid process.

The Sierra Special Committee next discussed with the representatives of Broadhaven and S&W contributing to a potential retention package for Medley Capital personnel, including the ability of Sierra to reallocate any amounts contributed by it in the event there were departures at Medley Capital. The Chair of the Sierra Special Committee indicated that he had confirmed with senior management at Medley Capital that all of the investment professionals currently at Medley Capital had responsibility for a portion of Sierra’s investments or operations.

S&W representatives indicated that they had spoken to Medley LLC’s bankruptcy counsel about conditioning any contribution by Sierra to a retention package for Medley Capital’s personnel on the various parties to the bankruptcy releasing any potential claims against Sierra. After discussion, and upon a determination that a contribution by Sierra to a retention package for Medley Capital’s personnel would be in the best interests of Sierra and Sierra stockholders, the Sierra Special Committee tentatively agreed to contribute up to $2.1 million toward a retention package for Medley Capital personnel, as a part of a total retention package of $5.7 million, provided Sierra would have the ability to reallocate amounts not paid in the event there were departures at Medley Capital and that Sierra would be released from any claims against it arising from Medley LLC’s bankruptcy proceeding.

On June 28, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven and S&W. Broadhaven representatives provided an update on the strategic review process and their recommendations regarding the bidders that should be invited into the second round of the bid process. They indicated that since the Sierra Special Committee meeting held on June 25, 2021, they had received two additional proposals to become Sierra’s investment adviser, including Party F, bringing the total number of proposals to 24.

The Broadhaven representatives noted that they were recommending that nine separate bidders be invited into the second round of the bid process and that two of these bidders had submitted asset purchase proposals. Broadhaven representatives indicated that among the bidders that had submitted merger proposals, Broadhaven recommended that the Sierra Special Committee invite the five bidders that had submitted BDC merger proposals offering the most economic value to the Sierra stockholders, which included Party B, Barings BDC and Party G, into the second round of the bid process. They also recommended that the Sierra Special Committee invite into the second round of the bid process the three bidders that submitted proposals to become Sierra’s investment adviser offering the most value to the Sierra stockholders, which were Party E (which also submitted an asset purchase proposal), Party F (which also submitted a BDC merger proposal) and Party H, in addition to the two bidders that had submitted asset purchase proposals, which included Party E. Broadhaven representatives also noted, based on Broadhaven’s analysis of the elements of value of the various proposals, that in terms of economic value to Sierra stockholders, the merger proposals were higher than the proposals to become Sierra’s investment adviser.

After further discussion of the preliminary indications of interest and Broadhaven’s recommendations, the Sierra Special Committee indicated that it agreed with Broadhaven’s recommendations concerning the bidders that should be invited into the second round of the bid process on the basis of both quantitative and qualitative considerations. The Sierra Special Committee discussed other bidders that might be invited into the second round of the bid process in the event any of the bidders invited into the second round chose not to continue in the process.

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Broadhaven representatives then discussed the second-round process with the Sierra Special Committee. They indicated that the second-round bidders would be notified of their selection; they would be given access to the virtual data room; they would be given the opportunity to meet with representatives of Medley, as adviser to Sierra, and Broadhaven; and they would be asked to provide their second-round bid proposals to Broadhaven by the end of July. The Sierra Special Committee discussed the possibility of the Sierra Special Committee meeting with each second-round bidder in order to gain an understanding of, among other things, the firm, its investment personnel, its historical investment performance and their proposals. Broadhaven and S&W representatives indicated that they would draft a second-round process letter to be sent to the second-round bidders.

The Sierra Special Committee then discussed with the representatives of Broadhaven and S&W the proposed retention package for Medley Capital personnel.

On June 28, 2021, Party D submitted a revised proposal to Broadhaven. In its revised proposal, Party D proposed to make a cash payment to become Sierra’s manager rather than to acquire Sierra’s assets. Party D proposed paying between $110 million and $125 million to Sierra stockholders. In its revised proposal, Party D indicated that it anticipated recommending to the board of a BDC it managed that Sierra be merged into that BDC within twenty-four months of the transaction closing.

On July 3, 2021, Party A submitted a revised proposal to Broadhaven. Party A revised its prior offer to increase the cash payment to Sierra stockholders from $10.0 million to $55.5 million.

Following receipt of the revised proposals, Broadhaven recommended, and, after discussion of Party A’s and Party D’s revised proposals and Broadhaven’s recommendation, the Sierra Special Committee agreed that Party A and Party D should be invited into the second round based on their improved proposals. The Sierra Special Committee instructed Broadhaven to invite Party A and Party D into the second round, bringing the total number of parties in the second round to 11.

On July 3, 2021, S&W representatives received drafts of a Combined Disclosure Statement and Chapter 11 Plan of Reorganization and Wind-Down of Medley LLC and S&W provided comments on various drafts of the document until it was ultimately filed with the Bankruptcy Court on July 6, 2021 (as filed, the “Revised Medley Plan”). The Revised Medley Plan contemplated that Medley LLC would undergo a limited restructuring in chapter 11 in order to enable Medley LLC to maximize the remaining value of the remaining agreements of its subsidiary advisers.

On July 9, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven and S&W. Broadhaven representatives provided an update on the strategic review. They reported that since the June 28, 2021 Sierra Special Committee meeting, four parties, which included Party A and Party D, had revised their bids. Another party increased its bid to become Sierra’s investment adviser, while still another bidder had added a cash payment from its manager to its proposal.

Broadhaven representatives then discussed next steps with respect to the strategic review. This included providing bidders with access to the virtual data room and an opportunity to request information from and, beginning the week of July 12, 2021, meet with the Medley management team. They indicated that the second-round process letter would be sent to bidders during the following week and included a second-round bid deadline of August 2, 2021 and that the Special Committee might consider meeting with certain bidders.

Broadhaven representatives reviewed a summary of the estimated total economic value per share of each of the proposals received from the 11 bidders which had been invited into the second round. They discussed with the Sierra Special Committee the assumptions underlying the summary. They noted that based on estimated total economic value per share, Barings BDC and Party G had offered the strongest merger proposals from a financial perspective, while Party D offered the strongest proposal to become Sierra’s investment adviser from a financial perspective. The Sierra Special Committee discussed with the representatives of Broadhaven how they might compare a merger proposal to a proposal to become Sierra’s investment adviser. The Sierra Special Committee asked that Broadhaven give consideration to the impact of potential tax consequences to Sierra stockholders associated with the various proposals. The Sierra Special Committee also discussed with the representatives of Broadhaven the possibility of combining a proposal to become Sierra’s investment adviser and an asset purchase proposal. It was determined at this time to wait for the second-round bid proposals to be submitted by the second-round bidders before a final determination was made regarding the advisability of combining a proposal to become Sierra’s investment adviser and an asset purchase proposal.

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Broadhaven representatives reviewed an analysis that showed the estimated total economic value of the bids assuming Sierra’s shares were valued at 80% of NAV as of March 31, 2021. This analysis included the estimated economic value of proposed fee structures and other components of value. Broadhaven provided an additional analysis that showed the estimated total economic value of the bids assuming Sierra’s shares were valued at 90% of NAV as of March 31, 2021 and another analysis that assumed a decline in the estimated pro forma price to NAV following the closing of the merger transactions, which would have the effect of reducing the value of any stock consideration to be received by Sierra stockholders, among other analyses.

Broadhaven representatives indicated that they had informed four bidders, including Party E and Party F, that, based on their respective preliminary proposals, Broadhaven believed they were unlikely to be selected by Sierra as the winning bidder. They noted that all four firms indicated that they wished to remain in the process.

The Sierra Special Committee then discussed with representatives of Broadhaven and S&W next steps in regard to the strategic review. Following that discussion, the Sierra Special Committee instructed Broadhaven to proceed as recommended by Broadhaven earlier in the meeting.

S&W representatives provided an update on the potential retention package for Medley Capital personnel, noting that Medley LLC and the Creditors’ Committee in the Medley LLC Bankruptcy Case had expressed their preference to provide for a clawback of any payments made under the plan to Medley Capital personnel who subsequently left Medley Capital. The Sierra Special Committee expressed their opposition to any clawback provisions given the potential uncertainty they might generate and the potential negative impact on employee morale and retention.

S&W representatives then provided an update concerning the Medley LLC Bankruptcy Case. The Sierra Special Committee instructed the S&W representatives to communicate to the relevant parties the conditions under which Sierra would agree to contribute to a retention package, having determined that such a contribution was in the best interests of both Sierra and Sierra stockholders.

On July 13, 2021, the Sierra Special Committee met via video conference with representatives of Miles & Stockbridge and S&W. S&W representatives reviewed with the Sierra Special Committee the draft merger agreement that would be provided to bidders in the second round of the bid process and responded to questions from the Sierra Special Committee. S&W representatives indicated that the draft merger agreement would be uploaded to the virtual data room and that prospective bidders proposing a merger would be asked to either provide a markup of the draft merger agreement or a list setting forth issues to be discussed by the parties.

Over the next few weeks, S&W representatives met with the representatives of multiple second-round bidders and their financial advisors and legal counsel and responded to various legal due diligence questions raised by the bidders and their financial advisors and legal counsel.

On July 16, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven and S&W. Broadhaven representatives provided an update on the second round of the bid process.

S&W representatives provided an update on the Medley LLC Bankruptcy Case. The Sierra Special Committee also discussed the status of a potential retention package for Medley Capital personnel, noting potential actions Sierra might take in the event the various parties were unable to agree on a retention package.

On July 23, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven and S&W. Broadhaven representatives provided an update on the second round of the bid process. Broadhaven representatives discussed the possibility of pushing back the August 2, 2021 deadline for bidders to provide their second-round proposals, noting that there were advantages and disadvantages to doing so. In conversations subsequent to the meeting, and upon the recommendation of Broadhaven, the Sierra Special Committee agreed that the bid deadline would be pushed back to August 6, 2021, and that decision was communicated to bidders on July 26, 2021. Broadhaven representatives indicated that in response to the Sierra Special Committee’s request they were preparing to discuss certain tax considerations regarding the forms of consideration payable in various proposals. They also indicated that they wanted to share Sierra’s second quarter financial results and an estimate of transaction costs with the bidders so that the bidders could incorporate that data into their second-round proposals.

S&W representatives provided an update on the Medley LLC Bankruptcy Case. They indicated that they had an opportunity to review and comment on a draft term sheet (the “Plan Term Sheet”) which was being negotiated among Medley LLC, Medley Capital and the Official Committee of Unsecured Creditors appointed in the

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Medley LLC Bankruptcy Case (the “Creditors Committee”), and which outlined the terms of a further revised Combined Disclosure Statement and Plan of Reorganization and Wind-Down of Medley LLC. The Plan Term Sheet included references to a proposed retention plan for Medley Capital personnel which were generally consistent with what the Sierra Special Committee had proposed. Under the draft term sheet Medley LLC would undertake an organized wind-down and Medley LLC’s subsidiaries, including SIC Advisors, would agree to continue to perform their contractual obligations through March 31, 2022. The representatives of S&W indicated that Sierra’s contribution to the retention package would be memorialized in a commitment letter among Sierra, Medley LLC, Medley Capital and SIC Advisors (the “Commitment Letter”), pursuant to which Sierra agreed to contribute $2.1 million of the total $5.7 million in payments toward the retention package for Medley Capital personnel.

On July 30, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven and S&W. Broadhaven representatives provided an update on the second round of the bid process. They indicated that one of the bidders that had proposed to acquire Sierra’s assets had withdrawn from the process, noting that the bidder had concluded that its proposal was unlikely to be selected.

Broadhaven representatives then discussed next steps with the Sierra Special Committee, noting that the Sierra Special Committee was scheduled to meet on August 11, 2021, during which the Sierra Special Committee would review the bidders’ second-round proposals and that the Sierra Special Committee would have an opportunity to meet with the final bidders the week of August 23, 2021. The Sierra Special Committee discussed the possibility of asking Dean Crowe, Chief Executive Officer and President of Sierra and a member of the Sierra Board, about his assessment of the various bidders before Sierra made a final determination about which bid to accept given his interactions with bidders during the course of their due diligence review of Sierra and to determine if he had become aware of any information that might be relevant to the Sierra Special Committee’s evaluation of bidders.

On August 11, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven, S&W and Miles & Stockbridge to review the bidders’ second-round proposals. Broadhaven representatives provided an update on the strategic review process. They reminded the Sierra Special Committee that of the parties who had submitted preliminary proposals, the Sierra Special Committee had invited 11 parties into the second round of the bid process and that second-round bids were due August 6, 2021. Broadhaven representatives noted that eight second round bids had been received which included five merger proposals and three proposals to become Sierra’s investment adviser. They reported that three bidders, in total, had withdrawn from the process. They noted that none of the remaining bidders had proposed acquiring Sierra’s assets. Broadhaven representatives noted that they had had multiple conversations with the bidders to clarify various elements of the bidders’ proposals.

Broadhaven representatives discussed their views regarding the next steps in the process, noting that because the proposals were tightly grouped from a financial perspective, there was greater importance on the Sierra Special Committee evaluating qualitative factors. They indicated that they would provide those bidders invited by the Sierra Special Committee into the third round with Sierra’s second quarter results and transaction fee estimates and would respond to any remaining diligence requests.

Broadhaven representatives discussed with the Sierra Special Committee various procedural options available to them, including identifying one party and offering exclusivity, selecting two or three parties that would meet with the Sierra Special Committee or meeting with most of the bidders to fully understand the qualitative factors offered by each bidder and better understand the bidder’s proposal.

Broadhaven representatives then reviewed with the Sierra Special Committee the second-round proposals that had been received, noting any changes from the bidders’ preliminary indications of interest.

Party A submitted a non-binding, second-round bid to Broadhaven on August 5, 2021. Party A proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party A in exchange for a combination of up to $250 million of cash consideration with the remaining merger consideration coming in the form of stock. In addition, Party A proposed to make a $55.5 million cash payment to Sierra stockholders.

Party B submitted a non-binding, second-round bid to Broadhaven on August 6, 2021. Party B proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party B in exchange for a combination of stock and $153.0 million in cash. In addition, Party B proposed to make a $57.0 million cash payment to Sierra stockholders. Party B also expected to exclude non-performing investments acquired from Sierra from the calculation of its base management fee, and to voluntarily waive its income-based incentive fee to the extent necessary to maintain its current quarterly dividend per share through December 31, 2022.

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Barings submitted a non-binding, second-round bid to Broadhaven on August 6, 2021, which reflected a $15 million increase in its cash payment, from $50 million to $65 million, to Sierra stockholders and an increase in the incentive fee hurdle rate for Barings BDC from 8.00% to 8.25%. Barings proposed for Barings BDC to acquire all of Sierra’s common stock through a merger of Sierra into Barings BDC in exchange for Barings BDC common stock at an exchange ratio of 0.4469 Barings BDC shares per Sierra share. Barings also proposed to enter into a $100 million, ten-year CSA with Barings BDC, which was anticipated to add approximately $50 million at fair value to the combined company’s NAV. Barings also proposed a $20 million share repurchase program by Barings BDC to support the stock price of the common stock of the combined company following the closing of the proposed merger.

Party D submitted a non-binding, second-round bid to Broadhaven on August 6, 2021, which reflected an increase in the cash payment by Party D. Party D proposed to pay Sierra $150 million to become Sierra’s manager. In addition, Party D indicated its intention to enter into an incentive fee waiver agreement similar to the current waiver agreement between Sierra and SIC Advisors and that it expected to extend the waiver period through the fiscal year ending December 31, 2022. Party D indicated that once a substantial percentage of Sierra’s portfolio was comprised of assets that were directly originated by Party D, which it estimated would be within twelve to twenty-four months of the transaction closing, it anticipated recommending a merger between Sierra and another BDC managed by Party D.

Party E submitted a non-binding, second-round bid to Broadhaven on August 6, 2021, which was subsequently revised on August 9, 2021, to become Sierra’s manager. Party E’s revised second-round bid only included a proposal to become Sierra’s manager. The bid reflected an increase in the capital injection into Sierra at NAV to $250 million, a further reduction in management fee to 0.90% and a $2.5 million reduction in the cash consideration, to a total of $5.0 million, to Sierra stockholders. In addition, Party E proposed a $50 million special cash dividend paid with cash from Sierra’s balance sheet.

Party F submitted a non-binding, second-round bid to Broadhaven dated August 6, 2021, which reflected a $10 million increase in the cash payment by Party F to Sierra stockholders and an increase in stock consideration to Sierra stockholders by a BDC managed by Party F. Party F’s second-round bid only included a proposal to merge Sierra into a BDC managed by Party F. Party F proposed to acquire all of Sierra’s common stock through a merger of Sierra into the BDC in exchange for stock and an $80 million cash payment to Sierra stockholders.

Party G submitted a non-binding, second-round bid to Broadhaven on August 6, 2021, subsequently revised on August 10, 2021, which reflected the addition of a proposed cash payment by Party G to Sierra stockholders and transaction fee reimbursement. Party G proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party G in exchange for stock. Party G also proposed to make a $75 million cash payment to Sierra stockholders and to reimburse 50% of transaction fees and expenses, which it estimated to be $8 million. In addition, Party G proposed to enter into a $50 million, ten-year CSA with the BDC.

Party H submitted a non-binding, second-round bid to Broadhaven dated August 6, 2021, which reflected a proposed $30 million cash payment by Party H to Sierra stockholders and a $60 million share buyback over the two years following the transaction closing.

Broadhaven representatives indicated that they had focused on the merger consideration and cash payment being offered in comparing the merger proposals but that Sierra stockholders would also benefit from other bid components such as management and incentive fee structures, dividend rates, and share buyback commitments, among other things. In valuing the stock component of the consideration, Broadhaven used recent market prices for publicly traded BDCs and estimated the public market values for non-publicly traded BDCs. They indicated that in terms of stock and cash consideration, Barings BDC’s offer of $5.53 per share to Sierra stockholders was $0.15 higher than the second highest bidder which was Party G.

Broadhaven representatives indicated that all of the bidders that had submitted a merger proposal had proposed a NAV for NAV merger, with various adjustments including, in most cases, a markdown of certain credits at Sierra. They noted that no bidder considered a discount to Sierra’s NAV of more than 6%.

Broadhaven representatives next reviewed the fee structures of the proposed acquiring BDCs. They noted that the acquiring BDCs’ base management fees ranged between 1.25% and 1.50% of assets, the incentive fees ranged between 17.5% and 20.0%, the hurdle rate for the incentive fees ranged between 7.00% and 8.25% and that all of the fee structures included a 100% catch-up on incentive fees. Broadhaven representatives noted that only two of the fee

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structures had a high-water mark. They indicated that Barings BDC had an industry leading fee structure, including that the hurdle rate of 8.25% would mean that stockholders of Barings BDC would benefit from investment returns up to that level before Barings would benefit from those returns in the form of incentive fees.

Broadhaven representatives then reviewed other components and considerations with respect to the merger proposals such as the acquiring BDC’s credit rating, where available, and the impact of the CSAs included in certain proposals, noting that a CSA would add value to the acquiring BDC’s NAV and protect the acquiring BDC from credit losses in Sierra’s investment portfolio following the closing of a transaction.

Broadhaven representatives next reviewed the historical performance of the potential merger partners, noting that a comparison of historical performance was of limited value due to particular circumstances involving each potential merger partner. Broadhaven representatives also reviewed various metrics concerning the performance of potential merger partners’ common stock.

Broadhaven representatives next reviewed the proposals to become Sierra’s investment adviser received from Party D, Party E and Party H. They indicated that Party D had offered to make a $150 million cash payment to Sierra stockholders in connection with its proposal to become Sierra’s investment adviser, which was substantially more cash than was being offered by Party E and Party H. They noted that Party E proposed the lowest management fee among the three bidders seeking to become Sierra’s investment adviser without a merger. Broadhaven representatives reviewed the economic value per share of the bids from Party D, Party E and Party H, assuming Sierra’s common stock was valued at various discounts to NAV.

Broadhaven representatives indicated that when the estimated value per share of the merger proposals and proposals to become Sierra’s investment adviser were compared, the merger proposal from Barings BDC offered the most economic value to Sierra stockholders, and the proposal to become Sierra’s investment adviser from Party D offered the next highest economic value to Sierra stockholders. They noted that Party D contemplated a liquidity event (such as a merger with a publicly traded BDC) within one to two years after the transaction closed.

Broadhaven representatives then reviewed the estimated economic value of the various proposals under different assumptions, for example, assuming Sierra’s common stock was valued at 85% of NAV rather than 80% of NAV. They noted that changing this assumption benefitted the relative standing of all of the proposals to become Sierra’s investment adviser because the value of such proposals were highly dependent on how Sierra’s common stock was valued. Broadhaven then reviewed a summary of the proposals that took into account the impact of the likely tax treatment of the proposed transactions, which analysis took into account a number of assumptions and limitations conveyed to Broadhaven by Sierra and S&W.

Broadhaven representatives next reviewed the estimated value of the proposals after factoring in assumed values for other components of the bidders’ proposals such as fee reductions and the value of the CSA, as applicable.

Broadhaven representatives then reviewed the fee structures with respect to the three proposals to become Sierra’s investment adviser. They also reviewed other components of the proposals, which included consulting arrangements or potential offers of employment for unidentified employees of Medley Capital who are involved in Sierra’s investments or operations. Broadhaven and S&W representatives noted that there were possible opportunities for current members of the Sierra Board to have some role following a merger or change in manager transaction to ensure the interests of Sierra stockholders would be represented going forward.

A representative of S&W provided the Sierra Special Committee with an update on the Medley LLC Bankruptcy Case. After discussion, the Sierra Special Committee indicated its willingness to make one modification to the Commitment Letter related to the retention plan for Medley Capital personnel. The Commitment Letter was finalized and signed on or about August 11, 2021. On August 13, 2021, Medley LLC, Medley Capital and the Creditors Committee filed the Third Amended Combined Disclosure Statement and Chapter 11 Plan of Medley LLC, which incorporated the provisions of the Term Sheet and the Commitment Letter.

On August 16, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven and S&W to communicate a decision on which parties to invite into the third round. At that meeting, the Sierra Special Committee instructed Broadhaven to invite Party A, Party B, Barings BDC, Party D, Party E, Party F and Party G into the next round. It was noted that the third round would include the submission of a 15(c) questionnaire by the seven remaining bidders and an opportunity to present to the Sierra Special Committee.

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On August 23, 2021, August 24, 2021 and August 27, 2021, the Sierra Special Committee, along with representatives from Broadhaven and S&W, met with each of Party A, Party B, Barings BDC, Party D, Party E, Party F and Party G. During these meetings with the Sierra Special Committee and its advisors, representatives of each bidder reviewed, among other items, the bidding firm and its management and investment personnel, such firm’s investment capabilities and historic investment performance, and the terms of such firm’s second-round bid. The bidders responded to questions from the members of the Sierra Special Committee and representatives of Broadhaven and S&W. During its meeting with the Sierra Special Committee on August 24, 2021, Barings expressed its willingness, subject to obtaining internal approval, to increase Barings BDC’s proposed share repurchase program to $30 million.

Following the Sierra Special Committee’s meetings with the final bidders, the bidders responded to follow-up requests from the Sierra Special Committee, which included additional information about their historical investment returns and cash distributions.

On August 30, 2021, the Sierra Special Committee met via video conference with representatives of Broadhaven, Miles & Stockbridge and S&W. The representative of Miles & Stockbridge reviewed with the Sierra Special Committee the standard of conduct that applied to directors of a Maryland corporation, noting that decisions by directors of a Maryland corporation were protected by the business judgment rule and that the members of the Sierra

Special Committee generally were entitled to rely on information from other members of the Sierra Special Committee, representatives of Miles & Stockbridge and S&W as to any matter within their professional competence and representatives of Broadhaven, including any information, opinion, report or statement prepared by Broadhaven, if within their expert competence.

Broadhaven representatives provided an update on the strategic review process. They reminded the Sierra Special Committee that the deadline for best and final bids was August 27, 2021. They noted that, with the exception of Party D, all of the final bidders had improved their second-round bids, while Party D reaffirmed its second-round bid. Consistent with second-round bids, they indicated that Party A, Party B, Barings BDC, Party F and Party G had each submitted merger proposals, while Party D and Party E had submitted proposals to become Sierra’s investment adviser.

Broadhaven representatives then reviewed with the Sierra Special Committee the third-round bid proposals that had been received, noting any changes from the bidders’ second-round proposals.

Party A submitted a non-binding, third-round bid to Broadhaven dated August 27, 2021, which reflected a $10 million increase in the cash merger consideration from a BDC managed by Party A, partly offset by a reduction in the stock consideration. Party A proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party A in exchange for a combination of up to $260 million of cash consideration with the remaining merger consideration coming in the form of stock. In addition, Party A proposed to make a $55.5 million cash payment to Sierra stockholders. Broadhaven estimated, on the basis of various assumptions, that the total value of the merger consideration and cash payment was $5.34 per Sierra share, or 98% of NAV, and that the total economic value of the proposal was $5.57 per Sierra share, or 103% of NAV.

Party B submitted a non-binding, third-round bid to Broadhaven on August 27, 2021, which reflected a $12.5 million increase in merger consideration and a $40 million increase in the cash payment to Sierra stockholders. Party B proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party B in exchange for a combination of $391.9 million in stock and $130.6 million in cash. In addition, Party B proposed to make a $97.0 million cash payment to Sierra stockholders. Party B also expected to exclude non-performing investments acquired from Sierra from the calculation of its base management fee, and to voluntarily waive its income-based incentive fee to the extent necessary to maintain its current quarterly dividend per share through December 31, 2022. Party B also expressed its willingness to enter into a $100 million, eight-year CSA with Party B’s BDC. If Sierra preferred the CSA, then Party B indicated that the cash payment from Party B would be reduced by $20 million to $77 million. Broadhaven estimated, on the basis of various assumptions, that the total value of the merger consideration and cash payment was $5.45 per Sierra share, or 100% of NAV, and that the total economic value of the proposal was $5.91 per Sierra share, or 109% of NAV.

Barings submitted a non-binding, third-round bid to Broadhaven on August 27, 2021, which reflected a $20 million increase in the cash payment to Sierra stockholders, a $25 million increase in the CSA and a $10 million increase in the share repurchase program. Barings proposed to acquire all of Sierra’s common stock through a merger of Sierra into Barings BDC in exchange for Barings BDC common stock at an exchange ratio of 0.4522 Barings BDC shares

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per Sierra share. In addition, Barings proposed an $85 million cash payment to Sierra stockholders. Barings also proposed to enter into a $125 million, 10-year CSA with Barings BDC, which was anticipated to add approximately $62.5 million at fair value to the combined company’s NAV. Barings also proposed a $30 million share repurchase program by Barings BDC to support the stock price of the common stock of the combined company following the closing of the proposed merger. In addition, Barings proposed to increase the incentive fee hurdle rate from 8.00% to 8.25%. Broadhaven estimated, on the basis of various assumptions, that the total value of the merger consideration and cash payment was $5.75 per Sierra share, or 106% of NAV, and that the total economic value of the proposal was $6.45 per Sierra share, or 119% of NAV.

Party D submitted a non-binding, third-round bid to Broadhaven on August 27, 2021, in which Party D reaffirmed its second-round bid. Party D proposed to pay Sierra $150 million to become Sierra’s manager. In addition, Party D indicated its intention to enter into an incentive fee waiver agreement similar to the current waiver agreement between Sierra and SIC Advisors and that it expected to extend the waiver period through the fiscal year ending December 31, 2022. Broadhaven estimated, on the basis of various assumptions, that the total economic value of the proposal was $5.96 per Sierra share, or 110% of NAV.

Party E submitted a non-binding, third-round bid to Broadhaven on August 27, 2021, subsequently revised on August 29, 2021, which reflected a $4 million increase in the cash paid to Sierra, an increase in the price of the equity capital injection into Sierra, and a further reduction in management fees. Party E proposed to pay Sierra $9 million in cash to become Sierra’s manager. Party E also proposed a $250 million equity capital injection into Sierra at a 0.5% premium to NAV. In addition, Party E proposed a $50 million special cash dividend paid with cash on Sierra’s balance sheet. Party E also proposed a further reduction in management fees to 0.80%. Broadhaven estimated, on the basis of various assumptions, that the total economic value of the proposal was $5.81 per Sierra share, or 107% of NAV.

Party F submitted a non-binding, third-round bid to Broadhaven on August 28, 2021, which reflected a $20.5 million increase in the merger consideration by the BDC managed by Party F and a $30 million increase in the cash payment to Sierra stockholders. Party F proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party F in exchange for stock and a $110 million cash payment to Sierra stockholders. Broadhaven estimated, on the basis of various assumptions, that the total value of the merger consideration and cash payment was $5.81 per Sierra share, or 107% of NAV, and that the total economic value of the proposal was $6.04 per Sierra share, or 111% of NAV.

Party G submitted a non-binding, third-round bid to Broadhaven on August 27, 2021, which reflected an increase in merger consideration, a $5 million increase in the cash payment to Sierra stockholders and a $30 million increase in the CSA. Party G proposed to acquire all of Sierra’s common stock through a merger of Sierra into a BDC managed by Party G in exchange for stock. In addition, Party G proposed to make an $80.0 million cash payment to Sierra stockholders, and to reimburse 50% of transaction fees and expenses which was estimated to be $8.0 million. Party G also proposed to enter into a $80 million, ten-year CSA with the BDC. Broadhaven estimated, on the basis of various assumptions, that the total value of the merger consideration and cash payment was $5.49 per Sierra share, or 101% of NAV, and that the total economic value of the proposal was $5.84 per Sierra share, or 108% of NAV.

Broadhaven representatives indicated that in comparing the economic values of the proposals, they had reviewed the merger consideration (cash and stock) and cash payment being offered in the merger proposals and that they also had factored in other bid components, such as management and incentive fee structures, CSAs, and share buyback commitments, among other things. In valuing the stock component of the consideration, Broadhaven used recent market prices for publicly traded BDCs and estimated what the public market values could be for non-publicly traded BDCs. Broadhaven noted that, based on the value of the merger consideration and cash payments of the merger proposals, the analysis showed that Party F’s proposal offered the most value to Sierra stockholders. Broadhaven also noted that, based on the total economic value of all of the proposals, which included, in the case of the proposals to become Sierra’s investment adviser, the assumption that Sierra’s common stock was valued at 80% of NAV, Barings’ proposal offered the most economic value to the Sierra stockholders.

Broadhaven representatives then reviewed various sensitivities to key assumptions. Broadhaven reviewed the estimated economic value of the various proposals assuming Sierra’s common stock was valued at 85% of NAV rather than 80% of NAV. They noted that changing this assumption benefitted the relative standing of all of the proposals to become Sierra’s investment adviser because the value of such proposals were highly dependent on how Sierra’s common stock was valued. Broadhaven then reviewed a summary of the proposals that took into account

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the impact of the likely tax treatments of the various proposed transactions, which analysis included a number of assumptions and limitations conveyed to Broadhaven by Sierra and S&W. It was noted that a significant percentage of Sierra stockholders held their shares in tax-deferred accounts and that such stockholders should be indifferent to whether the payments constituted ordinary income or capital gains.

Broadhaven representatives then discussed in greater detail the estimated value of certain components of the bidders’ proposals other than stock consideration and cash consideration. They discussed the estimated economic value attributed to the CSAs that were being proposed by Barings BDC and Party G and was offered by Party B, noting they had the effect of increasing the pro forma NAV of the combined BDCs. They also noted that both Barings BDC and Party G proposed to increase the aggregate amount of the potential losses covered by their proposed CSAs and that Party B had expressed their willingness to implement a CSA but that it would reduce the cash payment from its manager by approximately $20 million.

Broadhaven representatives then reviewed the fee structures of the bidders. They indicated that Barings BDC had the most competitive fee structure, noting it had a low base management fee; it did not charge a fee on cash; it proposed the highest hurdle rate; and it had a high-water mark. Broadhaven representatives then discussed with the Sierra Special Committee the track records, historical performance and various characteristics of the bidders’ common stock. The Sierra Special Committee reviewed with the representatives of Broadhaven and S&W certain follow-up questions and open matters to be discussed with the bidders. The Sierra Special Committee then discussed the bidders’ proposals with the representatives of Miles & Stockbridge and S&W and considered possible bidders to eliminate from the process.

On August 31, 2021, the Sierra Special Committee met via video conference with representatives of Miles & Stockbridge and S&W. The members of the Sierra Special Committee discussed the various proposals from the bidders, noting the factors they believed would be most important to Sierra stockholders. The members of the Sierra Special Committee determined that Barings’ proposal best addressed the items they believed were most important to Sierra stockholders and that Party F’s and Party G’s proposals were most likely alternatives to Barings’ proposal. They agreed that Broadhaven should be notified of these conclusions and that Barings would be offered the opportunity to negotiate a transaction if it agreed to increase the cash payment from Barings to Sierra stockholders from $85 million to $100 million. In addition, the Sierra Special Committee instructed Broadhaven to request from Barings that two of the Sierra Independent Directors be added to the Barings BDC Board to ensure the interests of Sierra stockholders would be represented going forward, given that former Sierra stockholders would own approximately 40% of Barings BDC’s common stock following the closing of the transaction , with the selection of the individuals to be added to be left to the discretion of the board of directors of Barings BDC.

The Chair of the Special Committee indicated that he would ask Howard Liao, Chief Executive Officer of Medley LLC, and Dean Crowe, Chief Executive Officer and President of Sierra, for their assessments of the top three bidders, Barings BDC, Party F and Party G to ensure that there were no issues of which they were aware that might be relevant to the Sierra Special Committee’s evaluation of the bidders.

The members of the Sierra Special Committee noted that they had reviewed responses made by Barings BDC management to specific questions concerning investment, operations, and compliance activities in a 15(c) questionnaire that had been sent, on behalf of the Sierra Special Committee, to Barings BDC management.

The Sierra Special Committee discussed with the representatives of S&W Barings’ markup of the draft merger agreement, noting that there were certain matters that should be addressed before Sierra selected Barings as the winning bidder.

Following the August 31, 2021 Sierra Special Committee meeting, S&W sent a revised draft of the merger agreement to Barings BDC’s counsel, Goodwin Procter. The Sierra Special Committee instructed Broadhaven to ask Barings to increase the cash payment by the manager from $85 million to $100 million in exchange for reducing the proposed CSA from $125 million to $100 million, to agree to appoint two of the Sierra Independent Directors to the Barings BDC Board and to agree to certain modifications to the draft merger agreement. Barings agreed to such changes as long as Sierra would enter into an exclusivity agreement with Barings to complete the negotiation of terms.

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On September 1, 2021, the Chair of the Sierra Special Committee spoke to Messrs. Liao, Crowe and David Richards of Medley to obtain their assessment of the top three bidders. The Chair subsequently reported to the other members of the Sierra Special Committee that the members of Medley management had not identified any matters that were materially relevant to the Sierra Special Committee’s evaluation of the top three bidders.

On September 1, 2021, the Sierra Special Committee met via video conference with representatives of Miles & Stockbridge and S&W and reviewed the revised proposal from Barings BDC. After a discussion of the relative advantages and disadvantages of each proposal, the Sierra Special Committee determined to proceed with Barings BDC and authorized Sierra to enter into an exclusivity agreement with Barings BDC, to expire on September 23, 2021.

On September 8, 2021, representatives of S&W met with representatives of Goodwin to discuss pre-closing matters relating to the draft merger agreement and related matters.

On September 8, 2021, representatives of Broadhaven and S&W met with representatives of Barings and Wells Fargo Securities, financial advisor to Barings BDC, to conduct reverse due diligence of Barings and Barings BDC.

Between September 8, 2021 and September 20, 2021, S&W and Goodwin exchanged multiple drafts of the merger agreement along with drafts of the terms of the proposed Credit Support Agreement between Barings BDC and Barings and a proposed second amended and restated investment advisory agreement between Barings BDC and Barings.

On September 20, 2021, representatives of S&W met with representatives of Barings and its legal counsel to respond to questions from the representatives of S&W that arose during their reverse legal due diligence of Barings and Barings BDC.

On September 20, 2021, the Sierra Special Committee met via video conference with Dean Crowe, Chief Executive Officer and President of Sierra and a member of the Sierra Board, and representatives of Broadhaven, Eversheds Sutherland, Miles & Stockbridge and S&W.

Broadhaven representatives reviewed with the Sierra Special Committee Broadhaven’s analysis with respect to the fairness, from a financial point of view, to the holders of Sierra Common Stock of the merger consideration to be received by such holders in the proposed Merger.

S&W representatives discussed their reverse legal due diligence of Barings BDC and Barings, noting that they had not identified any material matters during the course of that reverse legal due diligence.

S&W representatives then discussed the proposed Merger Agreement. They noted that under the interim operating covenants, Sierra’s dividends would be limited to $0.03 per share for each quarter and that Sierra would be required to suspend its distribution reinvestment plan. They indicated that the Merger Agreement addressed, among other items, the proposed Credit Support Agreement, the share repurchase plan and the increase in the hurdle rate to be applied to the incentive fee payable to Barings. They also noted that the Merger Agreement would allow Sierra to enter into an interim advisory contract with SIC Advisors before the closing of the transaction under certain circumstances.

On September 21, 2021, the Sierra Special Committee met via video conference with Dean Crowe, Chief Executive Officer and President of Sierra and a member of the Sierra Board, and representatives of Broadhaven, Eversheds Sutherland, Miles & Stockbridge and S&W. The Sierra Special Committee continued its consideration of the proposed transaction between Sierra and Barings BDC. The Chair of the Sierra Special Committee noted that the Sierra Special Committee had received a presentation from representatives of Broadhaven in connection with its fairness opinion relating to the proposed Merger. Broadhaven representatives delivered to the Sierra Special Committee Broadhaven’s oral opinion, which was confirmed by delivery of a written opinion dated September 21, 2021, to the effect that, as of the date of the opinion and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Broadhaven as set forth in such opinion, the merger consideration was fair, from a financial point of view, to the holders of Sierra Common Stock, as more fully described in the section entitled “— Opinion of the Financial Advisor to the Sierra Special Committee” beginning on page 78 of this joint proxy statement/prospectus.

The Sierra Special Committee, after taking into consideration all of the information during Sierra Board meetings and Sierra Special Committee meetings with respect to the strategic review process and the proposed

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Merger, including the current meeting, approved the Merger Agreement and recommended that the Sierra Board, among other things, declare that the Merger Agreement and the transactions contemplated thereby, including the First Merger, advisable and in the best interests of Sierra and the Sierra stockholders, and submit the First Merger to Sierra stockholders for approval.

Immediately following the Sierra Special Committee meeting, the Sierra Board met via video conference with representatives of Broadhaven, Eversheds Sutherland, Miles & Stockbridge and S&W.

The representative of Miles & Stockbridge reviewed with the Sierra Board the standard of conduct that applied to directors of a Maryland corporation, noting that decisions by the Board were protected by the business judgement rule and that the members of the Board generally were entitled to rely on the report from the Sierra Special Committee, representatives of Eversheds Sutherland, Miles & Stockbridge and S&W as to any matter within their professional competence and representatives of Broadhaven, including any information, opinion, report or statement prepared by Broadhaven, if within its expert competence.

The Chair of the Sierra Special Committee then provided the Sierra Board with the Sierra Special Committee report from the meetings held the previous day and the meeting held immediately prior to the current meeting. He noted that the current meeting was the culmination of a long and rigorous process undertaken by the Sierra Special Committee. He indicated that at its meeting earlier that day the Sierra Special Committee had met and had voted unanimously to approve the Merger Agreement and to recommend its approval to the Sierra Board.

Based upon the approval and recommendation of the Sierra Special Committee, the Sierra Board, after taking into consideration all of the information during Sierra Board meetings and Sierra Special Committee meetings with respect to the strategic review process and the proposed Merger, including the current meeting, determined that the Merger Agreement and the transactions contemplated thereby, including the First Merger, were advisable and in the best interests of Sierra and Sierra stockholders, approved and adopted the Merger Agreement, directed that the First Merger be submitted to Sierra stockholders for approval, and authorized Sierra’s officers to sign the Merger Agreement and such other documents required to effectuate the transactions contemplated thereby.

In the afternoon of September 21, 2021, the Barings BDC Board held a special meeting, which was attended by each of the Barings BDC Independent Directors and by representatives of Barings BDC’s management. Representatives of Wells Fargo Securities, Goodwin Procter and Dechert were also in attendance. Prior to the meeting, the Barings BDC Board was provided certain informational materials related to the potential business combination with Sierra, including presentations by each of Barings BDC’s management, Goodwin Procter and Wells Fargo Securities and a draft of the proposed merger agreement. At the meeting, representatives of Goodwin Procter provided the Barings BDC Board with an update on the merger agreement negotiation process with Sierra and discussed with the Barings BDC Board the material terms of the merger agreement, the proposed amendment to the Barings BDC Advisory Agreement and the material terms of the Credit Support Agreement. Representatives of Wells Fargo Securities then reviewed with the Barings BDC Board its final financial analysis of the Exchange Ratio provided for in the Merger Agreement. Representatives of Wells Fargo Securities then delivered to the Barings BDC Board its oral opinion, which was confirmed by delivery of a written opinion dated September 21, 2021, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing the opinion, the Exchange Ratio in the proposed Merger was fair, from a financial point of view, to Barings BDC, as more fully described below in the section entitled “— Opinion of the Financial Advisor to Barings BDC” beginning on page 70 of this joint proxy statement/prospectus. After further discussion, the Barings BDC Board members in attendance, which included each of the Barings BDC Independent Directors, unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of Barings BDC and Barings BDC’s stockholders and approved and adopted the merger agreement, among other things.

On September 21, 2021, following approval of the Merger Agreement by the Sierra Board and the Barings BDC Board, Barings BDC, Sierra, Acquisition Sub and Barings executed and delivered the Merger Agreement. Barings BDC and Sierra issued a joint press release announcing the execution of the Merger Agreement on September 21, 2021.

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Reasons for the Merger

Barings BDC

At various telephonic meetings of the Barings BDC Board, the Barings BDC Board, including the Barings BDC Independent Directors, discussed the potential Merger and considered the approval of the Merger Agreement and the transactions contemplated by that agreement. In connection with such consideration, the Barings BDC Board requested, and Barings provided, information regarding the proposed Merger, Sierra, and the anticipated effects of the Merger on Barings BDC and its stockholders, both immediately after the Merger and over the longer-term assuming that certain benefits and synergies of the Merger were realized. The Barings BDC Board also considered the effect of (1) the changes contemplated by the proposed New Barings BDC Advisory Agreement on the combined company following the closing of the Merger, (2) the proposed Credit Support Agreement and (3) the approximately $100.0 million cash payment by Barings to Sierra stockholders in connection with Barings BDC’s purchase of Sierra.

Over the course of its review of the materials and information provided and its consideration of the Merger, the Barings BDC Board, including each of the Independent Directors of the Barings BDC Board, consulted with Barings and Barings BDC’s legal counsel, and Wells Fargo Securities, the financial advisor to Barings BDC. In addition, the Barings BDC Independent Directors were advised by their independent legal counsel regarding the nature and adequacy of the information provided, the terms of the Merger Agreement and their fiduciary duties in approving the Merger Agreement and the transactions contemplated thereby. The Barings BDC Board, including the Barings BDC Independent Directors, considered numerous factors, including the ones described below, in connection with its consideration and approval of the Merger Agreement and the transactions contemplated thereby. On September 21, 2021, the Barings BDC Board, including the Barings BDC Independent Directors, unanimously determined that the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the issuance of shares of Barings BDC Common Stock in the Merger, are advisable and in the best interests of Barings BDC and its stockholders and that approval of the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal should be recommended to such stockholders for their approval.

The Barings BDC Board, including the Barings BDC Independent Directors, weighed various benefits and risks in considering the Merger, both with respect to the immediate effects of the Merger on Barings BDC and its stockholders and with respect to the potential benefits that could be experienced by the combined company in the long term after the Merger. The determination to approve the Merger Agreement was made on the basis of each Barings BDC Board member’s judgment after consideration of all of the factors taken as a whole, though individual Barings BDC Board members may have attributed different weights to various factors. The material factors considered by the Barings BDC Board, including the Barings BDC Independent Directors, that contributed to the Barings BDC Board concluding that the Merger is in the best interests of Barings BDC and its stockholders included, among others:

Increased Scale and Liquidity.    The Barings BDC Board, including the Barings BDC Independent Directors, considered advantages expected to accrue to the combined company as a result of its larger size. The Barings BDC Board noted that the combined company is expected to have more than $2.2 billion of investments on a pro forma basis. The Barings BDC Board also considered that larger BDCs generally have broader coverage by equity research analysts as well as improved borrowing terms. This coverage is also expected to expand the potential stockholder base of the combined company, potentially resulting in a higher trading valuation and greater access to, and flexibility in, raising opportunistic capital on attractive terms. In addition, the Barings BDC Board considered the potential that, as a result of its larger scale, the combined company may have increased access to the institutional, index-eligible investment grade debt capital markets at a lower cost of capital.

The Transaction is Expected to be Accretive to Barings BDC Stockholders.    The Barings BDC Board, including the Barings BDC Independent Directors, considered management’s estimates that Barings BDC’s net investment income per share would be $0.24 in the first full quarter post-closing compared to $0.22 per share during the second quarter of 2021. Net investment income at that level would represent a net investment income yield of 8.25% on the combined company’s NAV. The Barings BDC Board further considered management’s estimate for short-term NAV accretion of approximately 4% and additional long-term accretion to NAV as assets acquired are realized and repositioned into Barings BDC’s directly originated investments in the future.

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Barings and Barings BDC Stockholder Alignment.    The Barings BDC Board, including the Barings BDC Independent Directors, considered that, as part of the transaction, Barings would (1) fund the cash portion of the purchase price of $0.9783641 per share, or approximately $100.0 million, (2) amend its advisory agreement in the form of the New Barings BDC Advisory Agreement to increase the incentive fee hurdle rate from 8.0% to 8.25% (annualized) and (3) provide up to $100.0 million of credit support pursuant to the Credit Support Agreement designed to limit downside to Barings BDC stockholders from net cumulative realized and unrealized losses on the acquired Sierra portfolio relative to purchase price while also allowing Barings BDC stockholders to benefit from long-term Sierra portfolio appreciation. The Barings BDC Board, including the Barings BDC Independent Directors, considered that the Credit Support Agreement will provide Barings BDC stockholders protection on the acquired Sierra assets from $612 million down to approximately $512 million of fair value, or 73% of Sierra’s original cost (based on the total original cost of Sierra’s portfolio of approximately $701 million and the total fair value of Sierra portfolio as of June 30, 2021 of approximately $631 million).

Economies of Scale.    The Barings BDC Board, including the Barings BDC Independent Directors, also considered that, as a result of the Merger, the ratio of Barings BDC’s fixed costs (e.g., legal expenses, insurance, audit fees and other expenses) to assets under management is expected to be lower than Barings BDC’s current expense ratio. The Barings BDC Board, including the Barings BDC Independent Directors, noted that, if the Merger is consummated, the fixed costs and expenses would be spread across a larger asset base and duplicative fixed costs would be eliminated. As a result, , the total annual expenses borne by Barings BDC stockholders on a pro forma basis are expected to be reduced due to an anticipated reduction in general and administrative expenses. Barings has estimated approximately $8.1 million in identified cost savings from duplicative general and administrative costs. The Barings BDC Board, including the Barings BDC Independent Directors, found that the expected decrease in the total annual expense ratio of the combined entity would benefit Barings BDC and Barings BDC stockholders if the Merger Agreement and the transactions contemplated thereby were approved.

Diversification of Assets and Liabilities.    The Barings BDC Board, including the Barings BDC Independent Directors, reviewed Sierra’s investment portfolio and noted that the Sierra assets were encumbered by a relatively low level of leverage. The Barings BDC Board, including the Barings BDC Independent Directors, discussed how the combined company would have an increased asset base, which would allow for enhanced diversification and flexibility in periods of market stress, and an expansion of the balance sheet management solutions available to the combined company, including greater access to the unsecured debt markets. The Barings BDC Board, including the Barings BDC Independent Directors, also reviewed the expected portfolio composition of the combined company and noted an enhanced diversification of portfolio assets; the combined portfolio would have 245 portfolio companies with the top 10 companies representing approximately 17% of the portfolio. The Barings BDC Board considered that the combined company could provide benefits to Barings BDC stockholders in the form of greater diversification and reduced concentration of investments and risks associated with such concentration of investments.

Increased Market Capitalization and Commensurate Increased Trading Volume.    Given that Barings BDC will issue shares of its common stock as consideration in connection with the First Merger, the Barings BDC Board, including the Barings BDC Independent Directors, considered the potential for greater trading interest for Barings BDC Common Stock, which may result in tighter bid-ask spreads and increased trading volume. Barings BDC’s pro forma trading liquidity profile after closing as implied by the public BDC peer set suggests an approximate 80% increase in Barings BDC’s current three-month average daily trading volume. The Barings BDC Board noted that Barings BDC’s increased profile could result in additional market coverage of Barings BDC by financial analysts and, potentially, an increased focus by current and potential investors on Barings BDC, including institutional investors. In addition, the Barings BDC Board, including the Barings BDC Independent Directors, considered the discount at which Barings BDC Common Stock trades as compared to its NAV and considered that the increased profile and coverage could potentially result in a narrowing of that discount. The Barings BDC Board, including the Barings BDC Independent Directors, also considered the potential impact of the Credit Support Agreement on the trading of Barings BDC Common Stock following the closing of the Merger. In addition, the Investment Company Act prohibits mutual funds, registered closed-end funds, BDCs and most private funds from acquiring and owning more than 3% of the outstanding voting securities of a BDC like Barings BDC. The Barings BDC Board, including the Barings BDC Independent Directors, noted that the Merger would increase Barings BDC’s equity base, which would give these funds more leeway to invest in the combined company without implicating the 3% limitation.

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Structure and Tax Consequences.    The Barings BDC Board, including the Barings BDC Independent Directors, considered that by structuring the Merger as a two-step transaction with the First Merger followed by the Second Merger, the Merger is anticipated to be treated as a tax-free reorganization for federal income tax purposes and Barings BDC stockholders are not expected to recognize any gain or loss for U.S. federal income tax purposes as a result of the Merger.

Opinion of Financial Advisor.    The Barings BDC Board considered the oral opinion of Wells Fargo Securities delivered to the Barings BDC Board, which was confirmed by delivery of a written opinion, dated September 21, 2021, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing the opinion, the Exchange Ratio in the proposed Merger was fair, from a financial point of view, to Barings BDC, as more fully described below under the section entitled “— Opinion of the Financial Advisor to Barings BDC” beginning on page 70 of this joint proxy statement/prospectus. The full text of the written opinion of Wells Fargo Securities, dated September 21, 2021, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing the opinion, is attached as Annex D to this joint proxy statement/prospectus.

Terms of the Merger Agreement.    The Barings BDC Board considered the terms and conditions of the Merger Agreement and the course of negotiations thereof, as described in further detail below:

•        The Merger Agreement imposes customary restrictions on Sierra’s ability to operate outside the ordinary course of business between the date of the Merger Agreement and the Effective Time (or until the earlier termination of the Merger Agreement), including certain restrictions regarding Sierra’s ability to transact with existing and future portfolio companies, issue equity securities, incur indebtedness and pay dividends.

•        The Merger Agreement contains customary non-solicitation covenants. In particular, the Merger Agreement:

•        requires Sierra to immediately cease and cause to be terminated immediately any existing solicitation of, or discussions with, any third party relating to any competing proposal or any inquiry, discussion, offer or request that could reasonably be expected to lead to a competing proposal; and

•        prohibits Sierra from directly or indirectly initiating, soliciting or knowingly encouraging or facilitating (including by way of furnishing or disclosing information) any inquiries or the making, submission or implementation of any competing proposal, or entering into any agreement, arrangement, discussions or understanding with respect to any competing proposal or enter into any contract or understanding requiring it to abandon, terminate or fail to consummate the Merger, or initiating or engaging in negotiations or discussions with, or furnish any information to, any third party relating to a competing proposal.

•        The Merger Agreement provides that Sierra will be required to pay a customary termination fee to Barings BDC under certain circumstances if the transactions contemplated by the Merger Agreement are not consummated, along with Barings’ and Barings BDC’s expenses, subject to a cap of $2.0 million, in specific circumstances.

Other Considerations.    The Barings BDC Board considered that the Merger is not expected to affect the ability of Barings BDC to comply with its regulatory obligations, including its ability to maintain appropriate leverage and continue to operate in compliance with the asset coverage requirements set forth in the Investment Company Act and to pay dividends required of RICs. The Barings BDC Board also considered benefits that could result from the Merger, such as an increase in scale of Barings BDC and an increase in “non-qualifying asset” capacity for higher yielding opportunities. In addition, the Barings BDC Board considered that Barings BDC will implement a $30.0 million stock purchase plan pursuant to Rule 10b-18 under the Exchange Act over a 12-month period in the event the combined company’s shares trade below a specific level of NAV per share following the completion of the first quarterly period ended after the closing of the merger, subject to a share repurchase agreement and liquidity and regulatory constraints. The Barings BDC Board also considered that while the Merger could cause dilution to Barings BDC stockholders’ voting interests and the NAV per share of the combined company’s common stock, the potential benefits of the Merger described above outweighed this cost.

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Risks.    In the course of its deliberations, the Barings BDC Board also considered a variety of risks and other potentially negative factors, including (which are not in any relative order of importance):

•        that it would be possible that the Merger may not be completed or may be delayed;

•    ��   shares issued by Barings BDC in connection with the First Merger may be issued below the then-current Barings BDC NAV and thus may result in a dilution of NAV to existing Barings BDC stockholders;

•        certain restrictions are imposed on the conduct of Barings BDC’s business prior to completion of the Merger, requiring Barings BDC to conduct its business only in the ordinary course of business in accordance with the Merger Agreement, subject to specific limitations, which could delay or prevent Barings BDC from taking advantage of business opportunities that may arise pending completion of the Merger;

•        under most circumstances, Barings BDC will be responsible for the expenses incurred by Barings BDC in connection with the Merger and the completion of the transactions contemplated by the Merger Agreement, whether or not the Merger is consummated, including the costs and expenses of any filing and other fees payable by Barings BDC to the SEC in connection with the Merger;

•        it is possible that the attention of management may be diverted toward finalizing the Merger during the period prior to completion of the Merger, which may adversely affect Barings BDC’s business; and

•        various other risks associated with the Merger and the business of Barings BDC and the combined company described in the section entitled “Risk Factors” beginning on page 25 and in the section entitled “Special Note Regarding Forward-Looking Statements” beginning on page 38.

When considering the information described above, including all of the anticipated effects of the Merger on Barings BDC and Barings BDC stockholders and the related pro forma information, the Barings BDC Board and the Barings BDC Independent Directors noted that information based on projections and assumptions may be incorrect, is subject to change, and may fluctuate over time. The Barings BDC Board, including the Barings BDC Independent Directors, acknowledged that the projections and assumptions on which the potential expenses, earnings, yield, dividend and trading price information are based depend on many factors and variables, including, among other things, asset mix, the performance of individual investments, rate of the turnover of the Sierra portfolio, leverage, the cost of leverage, changes in interest rates and general market conditions. The Barings BDC Board, including the Barings BDC Independent Directors, noted that there is no assurance that any of the potential benefits to Barings BDC or Barings BDC stockholders as a result of the Merger will be realized, including any anticipated synergies, and that the combined entity could experience detrimental effects that had not been anticipated.

This discussion of the information and factors that the Barings BDC Board, including the Barings BDC Independent Directors, considered in making its decision is not intended to be exhaustive, but includes the material factors considered by the Barings BDC Board. Because of the wide variety of factors considered in connection with its evaluation of the Merger and Merger Agreement and the complexity of those matters, the Barings BDC Board did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to these factors. In addition, the individual members of the Barings BDC Board may have given different weights to different factors.

The Barings BDC Board, including the Barings BDC Independent Directors, consulted with Wells Fargo Securities, as financial advisor to Barings BDC, in evaluating the financial terms of the Merger. In addition, the Barings BDC Board and the Barings BDC Independent Directors relied on their legal counsel for legal analysis in connection with the Merger.

The Barings BDC Board, including the Barings BDC Independent Directors, considered all of these factors and others as a whole and, on balance, determined the Merger to be in the best interests of Barings BDC and Barings BDC stockholders and unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger and the Barings BDC Stock Issuance.

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Sierra

In evaluating the merger proposal from Barings BDC, the Sierra Board, including the Sierra Independent Directors, and the Sierra Special Committee consulted with and received the advice of certain outside advisors, including financial and legal advisors. In reaching their decision, the Sierra Board and the Sierra Special Committee considered a number of factors, including the factors discussed below, and, as a result, determined that the First Merger is in the best interests of Sierra and Sierra stockholders.

The following discussion of the information and factors considered by the Sierra Board and the Sierra Special Committee is not intended to be exhaustive. However, Sierra believes it includes the material factors considered by the Sierra Board and the Sierra Special Committee in evaluating the First Merger. In view of the complexity and the large number of factors considered, the Sierra Board and the Sierra Special Committee did not find it practicable to, and did not, quantify, rank or otherwise assign relative weights to the specific factors they considered in reaching their decisions. Rather, they based their recommendation or approval, as applicable, on the totality of the information presented to and considered by them, including, in the case of the Sierra Board, the unanimous determination of the Sierra Special Committee to recommend that the Sierra Board approve the First Merger, and concluded that, overall, the positive factors of the First Merger to Sierra stockholders outweighed the potential negative factors related to the First Merger.

Certain Merits of the Transaction

•        The consideration to be received by Sierra stockholders represents a premium to Sierra’s NAV as of June 30, 2021.

•        Every Sierra stockholder will receive a cash distribution of approximately $0.98 with respect to every share of Sierra Common Stock they own.

•        The First Merger will provide the Sierra stockholders with the opportunity for immediate liquidity upon close of the Merger.

•        The Sierra stockholders will have the option of selling the shares of Barings BDC they receive in the First Merger or remain stockholders of Barings BDC.

•        The opportunity for Sierra stockholders to receive a higher dividend rate as holders of Barings BDC Common Stock.

•        Barings BDC has a higher dividend rate than Sierra, which will begin accruing to Sierra stockholders immediately following the closing of the Merger, assuming the Sierra stockholders decide to retain their pro rata Barings BDC Common Stock exchanged for their shares of Sierra Common Stock.

•        Barings BDC will increase the hurdle rate on the incentive fee payable to Barings.

•        Barings BDC’s base management fee was lower than Sierra’s base management fee and its proposed incentive fee hurdle rate of 8.25% was higher than Sierra’s hurdle rate.

•        The Credit Support Agreement is expected to give stockholders of the combined company downside protection on the Sierra portfolio and insulate the combined company’s stockholders from certain losses in the Sierra portfolio for the ten years following the completion of the Merger.

•        The Merger Agreement provides that Barings BDC will repurchase up to $30 million of its shares over a twelve-month period in the event the combined company’s shares trade below a specified level of NAV following the completion of the first quarterly period ended after the closing of the Merger, subject to Barings BDC’s compliance with certain contractual covenants and regulatory requirements.

•        The Merger is expected to qualify as tax-free transactions for federal income tax purposes, and Sierra believes that U.S. stockholders have a reasonable basis upon which to take the position that the Cash Consideration should be treated as additional merger consideration.

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•        The Sierra Board and Sierra Special Committee believe the First Merger is more favorable to Sierra stockholders than remaining a stand-alone company or other alternative transactions available to Sierra.

•        The financial analyses and presentations prepared by Broadhaven and its oral opinion delivered to the Sierra Special Committee on September 20, 2021, which was subsequently confirmed in writing by delivery of Broadhaven’s written opinion dated September 21, 2021, to the effect that, as of that date and based upon and subject to various assumptions, limitations and qualifications described in its opinion, the Merger Consideration to be received by Sierra stockholders in the First Merger is fair, from a financial point of view, to such Stockholders.

Certain Other Considerations

•        There are inherent uncertainties with regard to Sierra’s ability to continue as a stand-alone BDC.

•        There are inherent uncertainties with regard to the impact of the Medley LLC Bankruptcy Case on SIC Advisors.

•        The fact that Barings, which represented approximately 21% of the outstanding shares of Barings BDC Common Stock as of October 15, 2021, agreed to vote all shares of Barings BDC Common Stock over which it has voting power (other than in a fiduciary capacity) in favor of the Barings BDC Proposals.

•        Although a liquidation of Sierra could have been an alternative to a business combination, there are inherent uncertainties and a protracted timeline associated with the liquidation of a portfolio of private loans as well as risks that per share liquidation values would be below the implied per share Merger Consideration value.

•        The combined company will maintain a large concentration of senior secured first and second lien assets, which are expected to provide Sierra stockholders with an attractive risk-adjusted return.

•        The combined company will be significantly larger and also more highly diversified than a standalone Sierra, and Barings BDC has had substantially more favorable experience of non-accrual loans.

•        Barings BDC has steadily paid dividends to its stockholders and those dividends have been steadily increasing.

•        Barings BDC Common Stock has been trading above 90% of NAV in the last six months.

•        Barings BDC has strong dividend coverage.

•        Barings BDC has an investment grade rating.

•        Barings BDC has successfully completed other BDC mergers.

•        Barings BDC’s base management fee of 1.25% of assets under management and its proposed incentive fee hurdle rate of 8.25%, along with its high watermark, is highly competitive.

•        Barings BDC has meaningful management ownership of its shares, reflecting potentially greater alignment of management’s and stockholders’ interests.

•        With approximately $2.5 billion in assets (on a pro forma basis as of June 30, 2021), Barings BDC will have greater scale and thus is expected to be better able to successfully compete for investment opportunities and have access to lower cost financing sources than Sierra.

•        Barings BDC is managed by a large global asset manager, which has access to the resources of a large parent company.

•        Barings BDC has strong institutional ownership relative to other BDCs and has broad analyst coverage.

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Certain Merger Valuation Considerations

•        The exchange ratio at which the First Merger will be effected has been adjusted for a 3% credit-related markdown, $9.1 million in transaction costs and a $2.1 million contribution by Sierra to a retention program for Medley Capital personnel.

•        As a result of the First Merger, Sierra stockholders will own approximately 41% of Barings BDC’s common stock following the consummation of the First Merger.

•        The Merger Consideration is based on a fixed exchange ratio and therefore Sierra stockholders will benefit in the event that the market price of Barings BDC Common Stock increases relative to the value of Sierra Common Stock prior to the consummation of the First Merger.

History of Negotiations

•        The Sierra Special Committee successfully negotiated, among other things, a significantly increased cash payment by Barings to Sierra stockholders in exchange for a reduced Credit Support Agreement commitment.

•        The financial and other terms and conditions of the Merger Agreement and the First Merger were the product of arm’s length negotiations between the parties.

Terms of the Merger Agreement

•        The Merger Agreement is required to be adopted by the affirmative vote of a majority of the votes entitled to be cast on the matter at a special meeting of Sierra stockholders.

•        There is a closing condition that a material adverse effect with respect to Barings BDC must not have occurred prior to the closing date of the First Merger, and that certain other representations and warranties regarding Barings BDC’s and Barings’ conduct of business be true and correct in all material respects at the closing of the First Merger.

•        There is a provision that permits Sierra, under specified circumstances, to respond to and engage in discussions with, and provide information to, third parties regarding unsolicited proposals to acquire Sierra.

•        There is a provision that permits the Sierra Board and the Sierra Special Committee, under specified circumstances in connection with an intervening event, to change their recommendation that Sierra stockholders vote in favor of the First Merger.

•        Two Sierra Independent Directors will be appointed to the Barings BDC Board following the closing of the Merger.

•        Barings BDC’s obligation to complete the First Merger is not conditioned on Barings BDC receiving any third-party financing.

•        After consulting financial and legal advisors, the Sierra Board and the Sierra Special Committee considered the other terms and conditions of the Merger Agreement to be reasonable and consistent with precedents they deemed relevant.

The Sierra Board and the Sierra Special Committee also discussed the following factors and risks, which were determined to be outweighed by the potential benefits resulting from the Merger:

•        There are risks and costs to Sierra if the First Merger is not completed, including uncertainty about the effect of the proposed First Merger on Sierra’s portfolio investments, investors, service providers and other parties, which could cause portfolio companies, investors, service providers and other parties to seek to change or not enter into business relationships with Sierra.

•        The Merger Agreement contains a fixed exchange ratio and therefore Sierra stockholders will not be compensated for a decline in the price of Barings BDC Common Stock relative to the value of Sierra Common Stock prior to the consummation of the First Merger.

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•        The Merger Agreement contains provisions that restrict the conduct of Sierra’s business prior to the completion of the First Merger (including suspension of the distribution reinvestment plan), generally

prohibiting Sierra from taking certain actions with respect to the conduct of its business without the prior consent of Barings BDC, and that such restrictions may delay or prevent Sierra from undertaking desirable business opportunities that may arise pending completion of the First Merger.

•        As a result of their smaller percentage of equity ownership in the combined company, Sierra stockholders may have reduced influence over the board of directors, management and policies of the combined company as compared to the influence Sierra stockholders presently have over the Sierra Board, management and policies of Sierra.

•        There is the possibility that, under specified circumstances under the Merger Agreement, Sierra may be required to pay a termination fee and reimburse certain expenses incurred by Barings BDC and Barings in connection with the Merger.

•        There is the risk of incurring expenses in connection with the First Merger, including in connection with any litigation that may result from the announcement or pendency of the Merger.

•        There is the risk of diverting management attention and resources from the operation of Sierra’s business and toward completion of the First Merger.

•        Barings BDC’s obligation to complete the First Merger is conditioned on obtaining Barings BDC stockholders’ approval.

The Barings BDC Board Recommendation

At a special meeting held on September 21, 2021, the Barings BDC Board unanimously approved the Merger Agreement and the transactions contemplated thereby, and unanimously recommended that Barings BDC stockholders vote “FOR” the Merger Stock Issuance Proposal, “FOR” the Barings BDC Below NAV Issuance Proposal and, if necessary or appropriate, “FOR” the Barings BDC Adjournment Proposal.

The Sierra Board Recommendation

At a special meeting held on September 21, 2021, the Sierra Board and all of the Sierra Independent Directors unanimously approved the Merger Agreement and the transactions contemplated thereby, and the Sierra Board unanimously recommended that Sierra stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the Sierra Adjournment Proposal.

Opinion of the Financial Advisor to Barings BDC

Pursuant to an engagement letter dated August 15, 2021, Barings BDC retained Wells Fargo Securities as the financial advisor to the Barings BDC Board in connection with a review of the potential transaction with Sierra.

On September 21, 2021, Wells Fargo Securities rendered its oral opinion to the Barings BDC Board, which was subsequently confirmed in writing by delivery of Wells Fargo Securities’ written opinion dated the same date, that, as of September 21, 2021, the Exchange Ratio in the proposed Merger was fair, from a financial point of view, to Barings BDC.

Wells Fargo Securities’ opinion was for the information and use of the Barings BDC (in its capacity as such) in connection with its evaluation of the proposed Merger. Wells Fargo Securities’ opinion only addressed the fairness, from a financial point of view, to Barings BDC, of the Exchange Ratio in the proposed Merger and did not address any other aspect or implication of the proposed Merger. The summary of Wells Fargo Securities’ opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex D to this joint proxy statement/prospectus and sets forth the procedures followed, assumptions made, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in connection with the preparation of its opinion. However, neither Wells Fargo Securities’ written opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus is intended to be, and they do not constitute, advice or a recommendation to the Barings BDC Board or any holder of Barings BDC Common Stock as to how such holder should vote or act on any matter relating to the proposed Merger.

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In arriving at its opinion, Wells Fargo Securities, among other things:

•        reviewed a draft, dated September 20, 2021, of the Merger Agreement;

•        reviewed certain publicly available business and financial information relating to Barings BDC and Sierra and the industries in which they operate;

•        compared the financial and operating performance of Barings BDC and Sierra with publicly available information concerning certain other companies Wells Fargo Securities deemed relevant, and compared current and historic market prices of Barings BDC Common Stock with similar data for such other companies;

•        compared the proposed financial terms of the proposed Merger with the publicly available financial terms of certain other business combinations that Wells Fargo Securities deemed relevant;

•        reviewed the Barings BDC Projections and the Pro Forma Projections (each as defined below under “— Financial Forecasts and Estimates”), in each case prepared by the management of Barings BDC and Barings;

•        reviewed certain estimates prepared by the management of Barings BDC as to the potential cost savings expected by such management to be achieved as a result of the proposed Merger (the “Synergies”);

•        discussed with the managements of Barings BDC, Barings, Sierra and SIC Advisors regarding certain aspects of the proposed Merger, the business, financial condition and prospects of Barings BDC and Sierra, respectively, the effect of the proposed Merger on the business, financial condition and prospects of Barings BDC and Sierra, respectively, and certain other matters that Wells Fargo Securities deemed relevant; and

•        considered such other financial analyses and investigations and such other information that Wells Fargo Securities deemed relevant.

In giving its opinion, Wells Fargo Securities assumed and relied upon the accuracy and completeness of all information that was publicly available or was furnished to or discussed with Wells Fargo Securities by Barings BDC, Barings, Sierra or SIC Advisors or otherwise reviewed by Wells Fargo Securities. Wells Fargo Securities did not independently verify any such information, and pursuant to the terms of Wells Fargo Securities’ engagement by Barings BDC, Wells Fargo Securities did not assume any obligation to undertake any such independent verification. In relying on the Barings BDC Projections (including the Synergies), Wells Fargo Securities assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of management as to the future performance and financial condition of Barings BDC. Wells Fargo Securities expressed no view or opinion with respect to the Barings BDC Projections and the Synergies or the assumptions upon which they are based. Wells Fargo Securities assumed that any representations and warranties made by Barings BDC, Barings LLC and Sierra in the Merger Agreement or in other agreements relating to the proposed Merger will be true and accurate in all respects that are material to its analysis.

Barings BDC does not publicly disclose internal management projections of the type provided to Wells Fargo Securities in connection with Wells Fargo Securities’ analysis of the proposed Merger, and the Barings BDC Projections were not prepared with a view toward public disclosure. The Barings BDC Projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in the Barings BDC Projections. For more information regarding the use of the Barings BDC Projections, please refer to the section entitled “— Financial Forecasts and Estimates” beginning on page 85 of this joint proxy statement/prospectus.

Wells Fargo Securities also assumed that the proposed Merger will have the tax consequences described in discussions with, and materials provided to Wells Fargo Securities by, Barings BDC and its representatives. Wells Fargo Securities also assumed that, in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the proposed Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Barings BDC, Sierra or the contemplated benefits of the proposed Merger. Wells Fargo Securities also assumed that the proposed Merger will be consummated in compliance with all applicable laws and regulations and in accordance with the terms of the Merger Agreement without waiver, modification or amendment of any

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term, condition or agreement thereof that is material to its analyses or opinion and that the final form of the Merger Agreement would not differ from the draft reviewed by Wells Fargo Securities in any respect material to its analysis or opinion. In addition, Wells Fargo Securities did not make any independent evaluation, inspection or appraisal of the assets or liabilities (contingent or otherwise) of Barings BDC or Sierra, nor was Wells Fargo Securities furnished with any such evaluations or appraisals. Wells Fargo Securities did not evaluate the solvency of Barings BDC or Sierra under any state or federal laws relating to bankruptcy, insolvency or similar matters. Wells Fargo further assumed that the final form of the Merger Agreement, when executed by the parties thereto, would conform to the draft reviewed by Wells Fargo Securities in all respects material to its analyses and opinion.

Wells Fargo Securities’ opinion only addressed the fairness, from a financial point of view, of the Exchange Ratio to Barings BDC in the proposed Merger, and Wells Fargo Securities expressed no opinion as to the fairness to the holders of any other class of securities, creditors or other constituencies of Barings BDC of any other consideration, including the Cash Consideration, paid in connection with the proposed Merger. Furthermore, Wells Fargo Securities expressed no opinion as to any other aspect or implication (financial or otherwise) of the proposed Merger, or any other agreement, arrangement or understanding entered into in connection with the proposed Merger or otherwise, including, without limitation, the Parent Trading Plan, the Credit Support Agreement to be entered into between Barings BDC and Barings or the increase in Barings’ incentive fee hurdle rate provided for in the Merger Agreement, the fairness of the amount or nature of, or any other aspect relating to, any compensation or consideration to be received by or otherwise payable to any officers, directors or employees of any party to the proposed Merger, or class of such persons, relative to the Exchange Ratio or otherwise. Furthermore, Wells Fargo Securities did not express any advice or opinion regarding matters that require legal, regulatory, accounting, insurance, tax, environmental, executive compensation or other similar professional advice and has relied upon the assessments of Barings BDC and its advisors with respect to such advice.

Wells Fargo Securities’ opinion was necessarily based upon information made available to Wells Fargo Securities as of the date of its opinion and financial, economic, market and other conditions as they existed and could be evaluated on the date of its opinion. Wells Fargo Securities did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion. Wells Fargo Securities’ opinion did not address the relative merits of the proposed Merger as compared to any alternative transactions or strategies that might have been available to Barings BDC, nor did it address the underlying business decision of the Barings BDC Board or Barings BDC to proceed with or effect the proposed Merger. Wells Fargo Securities did not express any opinion as to the price at which the Barings BDC Common Stock may be traded at any time.

Financial Analyses

In preparing its opinion to the Barings BDC Board, Wells Fargo Securities performed a variety of analyses, including those described below. The summary of Wells Fargo Securities’ analyses is not a complete description of the analyses underlying Wells Fargo Securities’ opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Wells Fargo Securities’ opinion nor its underlying analyses is readily susceptible to summary description. Wells Fargo Securities arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor. Accordingly, Wells Fargo Securities believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Wells Fargo Securities’ analyses and opinion.

In performing its analyses, Wells Fargo Securities considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. None of the selected companies used in Wells Fargo Securities’ analyses is identical to Barings BDC nor Sierra, and none of the selected transactions reviewed was identical to the proposed Merger. Evaluation of the results of those analyses is not entirely mathematical. The financial analyses performed by Wells Fargo Securities were performed for analytical purposes only and are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses.

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In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of Barings BDC.

While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, Wells Fargo Securities did not make separate or quantifiable judgments regarding individual analyses. Much of the information used in, and accordingly the results of, Wells Fargo Securities’ analyses are inherently subject to substantial uncertainty.

Wells Fargo Securities’ opinion was only one of many factors considered by the Barings BDC Board in evaluating the proposed Merger. Neither Wells Fargo Securities’ opinion nor its analyses were determinative of the Exchange Ratio or of the views of the Barings BDC Board or management with respect to the proposed Merger or the Exchange Ratio. The type and amount of consideration payable in the proposed Merger were determined through negotiations between Barings BDC and Sierra, and the decision to enter into the Merger Agreement was solely that of the Barings BDC Board.

The following is a summary of the material financial analyses performed by Wells Fargo Securities in connection with the preparation of its opinion rendered to, and reviewed with, the Barings BDC Board on September 21, 2021. The order of the analyses summarized below does not represent relative importance or weight given to those analyses by Wells Fargo Securities. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions made, procedures followed, matters considered and limitations and qualifications affecting, each analysis, could create an incomplete view of Wells Fargo Securities’ analyses.

The estimates of the future financial performance of the companies in the “Selected Public Companies Analysis” and the “Selected Precedent Transactions Analysis” listed below were based on public filings, including SEC and state regulatory filings, and research estimates for those companies and the estimates of the future financial performance of Barings BDC relied upon for the financial analyses described below were based on the Barings BDC Projections.

Sierra Financial Analyses

Sierra Selected Public Companies Analysis

Wells Fargo Securities reviewed certain data for selected companies with publicly traded equity securities that Wells Fargo Securities deemed relevant. None of the selected companies used in Wells Fargo Securities’ analyses is identical to Sierra. The selected companies were selected by Wells Fargo Securities because they were deemed by Wells Fargo Securities to be similar to Sierra in one or more respects, including, among other things, that each was a senior loan focused business development company with net assets between $250 million and $3.0 billion.

Using publicly available information, Wells Fargo Securities calculated the multiple of each selected company’s per share market price as of September 20, 2021 to NAV per share.

The selected companies and median and mean of such financial data for the selected companies were:

•        Golub Capital BDC, Inc.

•        Goldman Sachs BDC, Inc.

•        New Mountain Finance Corporation

•        Bain Capital Specialty Finance, Inc.

•        Apollo Investment Corporation

•        BlackRock TCP Capital Corporation

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•        TCG BDC, Inc.

•        Barings BDC, Inc.

•        Crescent Capital BDC, Inc.

•        BlackRock Capital Investment Corporation

•        Stellus Capital Investment Corporation

 

Median

 

Mean

Price/NAV

 

0.92x

 

0.93x

Taking into account the results of the selected companies analysis and based on Wells Fargo Securities’ professional judgement, Wells Fargo Securities applied multiple ranges of 0.85x to 0.95x to Sierra’s NAV per share on June 30, 2021, adjusted for a 3.0% write-down on Sierra’s investment assets per instructions from Barings BDC management based on Barings BDC management’s underwriting analysis of Sierra’s investment portfolio, of $5.24. The selected companies analysis indicated the following implied equity per share reference ranges for Sierra Common Stock:

 

Implied Equity per Share

  

Low

 

High

Price/NAV After Write-down

 

$

4.45

 

$

4.98

The implied equity per share reference ranges were then compared to the implied offer price per share of $4.78 per share of Sierra Common Stock (based on the Exchange Ratio of 0.44973x, the closing price per share of Barings BDC Common Stock of $10.63 on September 20, 2021, the trading day immediately preceding the date of the written opinion dated September 21, 2021, and excluding the Cash Consideration).

Sierra Selected Precedent Transactions Analysis

Wells Fargo Securities reviewed, among other things, financial data relating to the selected transactions that Wells Fargo Securities considered generally relevant as recent transactions involving target companies which Wells Fargo Securities judged to be sufficiently analogous to Sierra’s business based on Wells Fargo Securities’ experience and familiarity with the industries in which Sierra operates.

Using publicly available information, Wells Fargo Securities calculated, for each of the selected transactions, the multiple of the target company’s implied price per share in the relevant transaction as of the announcement date of the relevant transaction to the target company’s NAV per share based on the most recent reporting date before the announcement of the relevant transaction.

The selected transactions and median and average of such price to NAV data for the selected transactions were:

Announce Date

 

Target

 

Acquiror

August 10, 2020

 

MVC Capital Inc.

 

Barings BDC, Inc.

June 24, 2020

 

Garrison Capital Inc.

 

Portman Ridge Finance Corporation

August 13, 2019

 

Alcentra Capital Corporation

 

Crescent Capital BDC, Inc.

July 23, 2018

 

Corporate Capital Trust, Inc.

 

FS Investment Corporation

April 4, 2018

 

Triangle Capital Corporation

 

Benefit Street Partners L.L.C.

May 23, 2016

 

American Capital, Ltd.

 

Ares Capital Corporation

 

Median

 

Mean

Price/NAV

 

0.83x

 

0.79x

None of the selected transactions reviewed was identical to the proposed Merger. However, the selected transactions were chosen because certain aspects of the transactions, for purposes of Wells Fargo Securities’ analysis, may be considered similar to the proposed Merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the transactions differently than they would affect the proposed Merger.

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Taking into account the results of the selected transactions analysis and based on Wells Fargo Securities’ professional judgement, Wells Fargo Securities applied multiple ranges of 0.75x to 0.90x to NAV per share on June 30, 2021, adjusted for a 3.0% write-down on Sierra’s investment assets per instructions from Barings BDC management based on Barings BDC management’s underwriting analysis of Sierra’s investment portfolio, of $5.24. The selected transactions analysis indicated the following implied equity per share reference ranges for Sierra Common Stock:

 

Implied Equity per Share

  

Low

 

High

Price/NAV After Asset Write-down

 

$

3.93

 

$

4.72

The implied equity per share reference ranges were then compared to the implied offer price of $4.78 per share of Sierra Common Stock (based on the Exchange Ratio of 0.44973x, the closing price per share of Barings BDC Common Stock of $10.63 on September 20, 2021, the trading day immediately preceding the date of the written opinion dated September 21, 2021, and excluding the Cash Consideration).

Sierra NAV Analysis

Wells Fargo Securities calculated the NAV of Sierra based on Sierra’s balance sheet as of June 30, 2021, adjusted for a 3.0% write-down on Sierra’s investment assets per instructions from Barings BDC management based on Barings BDC management’s underwriting analysis of Sierra’s investment portfolio. The NAV analysis took into account, based on Sierra’s public filings and other public information, (i) the total value, based on Sierra’s balance sheet as of June 30, 2021, of Sierra’s assets, which were adjusted for a 3.0% write-down on Sierra’s investment assets per instructions from Barings BDC management based on Barings BDC management’s underwriting analysis of Sierra’s investment portfolio, and (ii) the total amount of Sierra’s liabilities. The implied NAV per share was then calculated based on Sierra’s implied aggregate NAV derived from such analysis divided by the total number of fully diluted shares of Sierra Common Stock as of June 30, 2021. The NAV analysis indicated an implied NAV of $5.24 per share of Sierra Common Stock. The implied NAV per share was then compared to the implied offer price of $4.78 per share of Sierra Common Stock (based on the Exchange Ratio of 0.44973x, and the closing price per share of Barings BDC Common Stock of $10.63 on September 20, 2021, the trading day immediately preceding the date of the written opinion dated September 21, 2021, and excluding the Cash Consideration).

Barings BDC Financial Analyses

Barings BDC Selected Public Companies Analysis

Wells Fargo Securities reviewed certain data for selected companies with publicly traded equity securities that Wells Fargo Securities deemed relevant. None of the selected companies used in Wells Fargo Securities’ analyses is identical to Barings BDC. The selected companies were selected by Wells Fargo Securities because they were deemed by Wells Fargo Securities to be similar to Barings BDC in one or more respects, including that each was a senior loan focused business development company with net assets between $500 million and $3.0 billion.

Using publicly available information, Wells Fargo Securities calculated the multiple of each selected company’s per share market price as of September 20, 2021 to NAV per share and each selected company’s most recent quarter dividend yield.

The selected companies and median and mean of such financial data for the selected companies were:

•        Golub Capital BDC, Inc.

•        Goldman Sachs BDC, Inc.

•        New Mountain Finance Corporation

•        Bain Capital Specialty Finance, Inc.

•        Apollo Investment Corporation

•        BlackRock TCP Capital Corporation

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•        TCG BDC, Inc.

•        Crescent Capital BDC, Inc.

 

Median

 

Mean

Price/NAV

 

0.92x

 

 

0.94x

 

Dividend Yield (Price)

 

9.2

%

 

9.1

%

Taking into account the results of the selected companies analysis and based on Wells Fargo Securities’ professional judgement, Wells Fargo Securities applied multiple ranges of 0.90x to 1.00x to Barings BDC’s NAV per share on June 30, 2021 of $11.39. Taking into account the results of the selected companies analysis and based on Wells Fargo Securities’ professional judgement, Wells Fargo Securities applied multiple ranges of 8.0% and 9.0% to Barings BDC’s annualized dividend of $0.84 based on the dividend of $0.21 announced by Barings BDC on August 5, 2021. The selected companies analysis indicated the following implied equity per share reference ranges for Barings BDC Common Stock:

 

Implied Equity per Share

  

Low

 

High

Price/NAV

 

$

10.25

 

$

11.39

Dividend Yield (Price)

 

$

9.33

 

$

10.50

The implied equity per share reference ranges were then compared to the closing price per share of Barings BDC Common Stock of $10.63 on September 20, 2021, the trading day immediately preceding the date of the written opinion dated September 21, 2021.

Barings BDC NAV Analysis

Wells Fargo Securities performed a NAV analysis of Barings BDC based on Barings BDC’s balance sheet as of June 30, 2021. The NAV analysis took into account, based on Barings BDC’s public filings, (i) the total value of BDC Baring’s assets based on its balance sheet as of June 30, 2021, and (ii) the total amount of Barings BDC’s liabilities. The implied NAV per share was then calculated based on Barings BDC’s implied aggregate NAV derived from such analysis divided by the total number of fully diluted shares of Barings BDC Common Stock as of June 30, 2021. The NAV analysis indicated an implied NAV per share of Barings BDC Common Stock of $11.39. The implied equity per share was then compared to the closing price per share of Barings BDC Common Stock of $10.63 on September 20, 2021, the trading day immediately preceding the date of the written opinion dated September 21, 2021.

Barings BDC Dividend Discount Analysis

Wells Fargo Securities performed a dividend discount analysis of Barings BDC Common Stock for the purpose of determining the fully diluted equity value per share. In performing its analysis, Wells Fargo Securities used, among others, the following assumptions, which were reviewed and approved by Barings BDC’s management:

•        a September 20, 2021 valuation date;

•        a range for cost of equity of 8.25% to 10.25%; and

•        a range of terminal values based on 2024 estimated NAV per share and calculated by applying a Price/NAV multiple range of 0.90x to 1.00x.

These calculations resulted in an implied range of equity values per share for Barings BDC Common Stock of approximately $10.16 to $11.59, as compared to the closing price per share of Barings BDC Common Stock of $10.63 on September 20, 2021.

Exchange Ratio Analysis

Wells Fargo Securities compared the results for Sierra to the results for Barings BDC with respect to the public trading multiples and NAV analyses described above. Wells Fargo Securities compared the highest equity value per share for Barings BDC to the lowest equity value per share for Sierra to derive the lowest exchange ratio implied

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by each pair of results. Wells Fargo Securities also compared the lowest equity value per share for Barings BDC to the highest equity value per share for Sierra to derive the highest exchange ratio implied by each pair of results. The ranges of implied exchange ratios resulting from this analysis were:

 

Implied Exchange Ratios

  

Low

 

High

Price/NAV per Share

 

0.39094x

 

0.48548x

NAV

 

0.45993x

 

0.45993x

The ranges of implied exchange ratios resulting from the foregoing analysis were compared to the Exchange Ratio of 0.44973x.

Pro Forma Value Creation Analysis

Wells Fargo Securities conducted an analysis of the pro forma value creation, based on the Barings BDC Projections and the Pro Forma Projections, to existing holders of Barings BDC Common Stock. Wells Fargo Securities performed a dividend discount analysis of Barings BDC Common Stock assuming completion of the proposed Merger based on the Pro Forma Projections for the purpose of determining the implied pro forma equity value per share of Barings BDC Common Stock. In performing its analysis, Wells Fargo Securities used, among others, the following assumptions, which were reviewed and approved by Barings BDC’s management:

•        a September 20, 2021 valuation date;

•        a range for cost of equity of 8.25% to 10.25%;

•        an Exchange Ratio of 0.44973x;

•        estimates of Synergies and transaction-related expenses provided by Barings BDC’s management; and

•        a range of terminal values based on 2024 estimated NAV per share and calculated by applying a Price/NAV multiple range of 0.90x to 1.00x.

With the consent of Barings BDC Board, the intrinsic value creation analysis did not take into consideration the Cash Consideration, the Credit Support Agreement or the Parent Trading Plan. These calculations resulted in an implied range of pro forma equity values per share for Barings BDC Common Stock of $10.56 to $12.04. Wells Fargo Securities then compared the mid-point of the implied equity value range per share of Barings BDC Common Stock on a standalone basis described above under the section titled “— Barings BDC Dividend Discount Analysis” to the midpoint of the implied pro forma equity value per share of Barings BDC Common Stock. This analysis indicated that the proposed Merger would result in an accretion in value of $0.42 per share of Barings BDC Common Stock, or 3.9%. There can be no assurance, however, that the Synergies, transaction-related expenses and other impacts referred to above will not be substantially greater or less than those estimated by Barings BDC’s management.

Other Matters

Wells Fargo Securities is a trade name of Wells Fargo Securities, LLC, an investment banking subsidiary and affiliate of Wells Fargo & Company. Barings BDC retained Wells Fargo Securities as its financial advisor in connection with the proposed Merger based on Wells Fargo Securities’ experience and reputation. Wells Fargo Securities is regularly engaged to provide investment banking and financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings. Barings BDC has agreed to pay Wells Fargo Securities an aggregate fee currently estimated to be approximately $4.0 million, $1.5 million of which became payable to Wells Fargo Securities at the time the proposed Merger was publicly announced on September 21, 2021, and the remainder of which is contingent and payable upon the consummation of the proposed Merger. In addition, Barings BDC has agreed to reimburse Wells Fargo Securities for certain expenses and to indemnify Wells Fargo Securities and certain related parties against certain liabilities and other items that may arise out of or relate to Wells Fargo Securities’ engagement. The issuance of Wells Fargo Securities’ opinion was approved by an authorized committee of Wells Fargo Securities.

Wells Fargo Securities and its affiliates provide a wide range of investment and commercial banking advice and services, including financial advisory services, securities underwritings and placements, securities sales and trading, brokerage advice and services, and commercial loans. During the two years preceding the date of

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Wells Fargo Securities’ written opinion, Wells Fargo Securities and its affiliates had investment or commercial banking relationships with Barings BDC, for which Wells Fargo Securities and such affiliates received customary compensation, in the aggregate amount of $67,000. Such relationships have included acting as placement agent for Barings BDC in connection with equity repurchases in December 2019. Wells Fargo Securities and its affiliates hold, on a proprietary basis, less than 2% of the outstanding common stock of Barings BDC. In the ordinary course of business, Wells Fargo Securities and its affiliates may trade or otherwise effect transactions in the securities or other financial instruments (including bank loans or other obligations) of Barings BDC and certain of their affiliates for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities or financial instruments. Wells Fargo Securities and its affiliates have adopted policies and procedures designed to preserve the independence of their research and credit analysts whose views may differ from those of the members of the team of investment banking professionals involved in preparing Wells Fargo Securities’ opinion.

Opinion of the Financial Advisor to the Sierra Special Committee

The Sierra Special Committee engaged Broadhaven to act as its financial advisor and provide an opinion in connection with the Merger. The Sierra Special Committee selected Broadhaven to act as its financial advisor based on Broadhaven’s qualifications, experience and reputation and its knowledge of the relevant industry and the business in which Sierra operates.

As part of its engagement, representatives of Broadhaven attended the meetings of the Sierra Special Committee held on August 30, 2021, September 20, 2021 and September 21, 2021, at which the Sierra Special Committee evaluated the proposed Merger. At these meetings, Broadhaven reviewed the financial aspects of the proposed Merger and, at the September 21 meeting, rendered its opinion to the Sierra Special Committee to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Broadhaven as set forth in such opinion, the Merger Consideration was fair, from a financial point of view, to the holders of Sierra Common Stock.

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex E to this joint proxy statement/prospectus and is incorporated herein by reference.

Broadhaven’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the Sierra Special Committee in connection with its consideration of the financial terms of the Merger. The opinion addressed only the fairness, from a financial point of view, to holders of Sierra Common Stock of the Merger Consideration. It did not address the underlying business decision of Sierra to engage in the Merger or enter into the Merger Agreement or constitute a recommendation to the Sierra Special Committee or the Sierra Board in connection with the Merger, and it does not constitute a recommendation to any holder of Sierra Common Stock as to how to vote in connection with the Merger or any other matter (including whether or not any such stockholder should exercise any dissenters’ or appraisal rights that may be available to such stockholder).

Broadhaven’s opinion was reviewed and approved by Broadhaven’s Fairness Opinion Committee on September 17, 2021, in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

In connection with the opinion set forth herein, Broadhaven has, among other things:

•        Reviewed certain business and audited and unaudited financial information, and other operating data, regarding Barings BDC, Barings and Sierra;

•        Reviewed the recent stock price performance and trading activity of the Barings BDC Common Stock, the financial performance of Barings BDC, and a comparison with that of certain other comparable companies the securities of which are publicly traded, and that were, in its judgment, comparable in certain respects to Barings BDC;

•        Reviewed the Barings BDC Projections (as defined below under “— Financial Forecasts and Estimates”) prepared by or at the direction of the management of Barings BDC and Barings and discussed the Barings BDC Projections with the management of Barings BDC and Barings;

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•        Reviewed the Pro Forma Projections (as defined below under “— Financial Forecasts and Estimates”) prepared by the management of Barings BDC and Barings and discussed the Pro Forma Projections with the management of Barings BDC and Barings;

•        Discussed the past and current business, operations, financial condition and prospects of Sierra with members of the management of Sierra and SIC Advisors, and discussed the past and current business, operations, financial condition and prospects of the Barings BDC, including after giving effect to the proposed Merger and the strategic benefits anticipated by the management of Barings BDC and Barings to result therefrom, with members of the management of Barings BDC and Barings;

•        Reviewed the anticipated pro forma impact of the proposed Merger on Barings BDC’s earnings per share, net asset value per share, capitalization and financial ratios;

•        Reviewed the financial terms, to the extent publicly available, of certain acquisition transactions that were, in its judgment, comparable to the proposed Merger;

•        Reviewed a draft of the Merger Agreement dated September 21, 2021 (the “Draft Agreement”) and certain related documents;

•        Participated in certain discussions among representatives of Sierra, SIC Advisors, Barings BDC and Barings, their legal advisors and their financial advisors; and

•        Performed such other analyses and considered such other factors as it deemed appropriate.

In arriving at its opinion, Broadhaven, with the Sierra Special Committee’s consent, (1) assumed and relied upon, without assuming any responsibility for independent verification, the accuracy and completeness of the information that was publicly available or supplied to, discussed with, reviewed by, or otherwise made available to Broadhaven by Barings, Barings, SIC Advisors and Sierra, and that formed a substantial basis for its opinion; (ii) did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of Sierra or Barings BDC, nor was it furnished with any such evaluations or appraisals; and (3) did not examine any individual loan or credit files. In addition, with the Sierra Special Committee’s consent, Broadhaven further relied upon assurances of the management of Barings BDC and Barings and management of Sierra and SIC Advisors that they were not aware of any facts or circumstances that would make such information inaccurate or misleading and that no material change in the assets, financial condition, results of operations, business or prospects of Barings BDC or Sierra had occurred since the respective dates of the most recent financial statements and other information, financial or otherwise, relating to Barings BDC or Sierra, respectively, made available to Broadhaven. Further, Broadhaven expressed no view as to, or as to the likelihood of achieving, the Barings BDC Projections or the Pro Forma Projections, nor the assumptions on which they were based.

Broadhaven assumed, in all cases at the Sierra Special Committee’s direction and with its consent, that (1) the final executed Merger Agreement did not differ from the Draft Agreement in any respect material to Broadhaven’s analysis or its opinion; (2) the Barings BDC Projections and Pro Forma Projections were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Barings BDC and Barings of the future financial performance of Barings BDC, on a standalone basis and following the acquisition of Sierra, respectively; (3) the proposed Merger would be consummated in accordance with all applicable laws and regulations and in accordance with the terms set forth in the Merger Agreement without any waiver, modification, amendment or delay of any terms or conditions in any manner that would be material to Broadhaven’s analysis or its opinion; (4) the revenues and earnings projected in Barings BDC Projections and the Pro Forma Projections would be realized in the amounts and at the times projected in all respects material to Broadhaven’s analysis and its opinion; (5) the proposed Merger would not result in the assumption or other acquisition of any material tax, regulatory or other liabilities (including liabilities of Sierra) beyond those provided for in the Merger Agreement; (6) all applicable judicial, governmental, regulatory or other approvals and consents (including but not limited to client consents) required for the proposed Merger would be obtained, and no delays, limitations, conditions (including any required divestitures) or restrictions would be imposed that would have any adverse effect on Sierra, its assets under management, Barings BDC, its assets under management, or the contemplated benefits expected to be derived in the proposed Merger in any respect material to Broadhaven’s analysis or its opinion; (7) all material information requested from Sierra, SIC Advisors, Barings BDC and Barings during the scope of Broadhaven’s engagement were provided to Broadhaven fully and in good faith; (8) the representations and warranties contained

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in the Merger Agreement were and would be accurate and complete in all respects material to Broadhaven’s analysis and its opinion; and (9) none of the potential adjustments (if any) to the Cash Consideration or the Share Consideration would be material to Broadhaven’s analysis.

Broadhaven acted as financial advisor only and relied upon, without independent verification, the assessments of Sierra and its legal, tax and regulatory advisors with respect to legal, tax and regulatory matters.

Broadhaven was not requested to make, and did not make, any independent valuation or appraisal of Barings BDC, Sierra or their respective assets or liabilities (including any contingent, derivative or other off-balance sheet assets and liabilities and including either of Barings BDC’s or Sierra’s loan portfolio), nor has Broadhaven relied upon any such valuations or appraisals furnished to Broadhaven. Further, Broadhaven did not conduct a physical inspection of Sierra or its assets, and Broadhaven’s opinion was necessarily based on financial, economic, monetary, market and other conditions as in effect on, and the information made available to Broadhaven as of the date of, the opinion. Broadhaven assumed no responsibility for updating, revising or reaffirming its opinion based on events occurring after the date of Broadhaven’s opinion (regardless of the closing date of the Merger). Broadhaven’s opinion speaks only as of the date thereof. Without limiting the generality of the foregoing, Broadhaven’s opinion does not in any manner address the impact of the proposed Merger on the solvency or viability of Barings BDC or Sierra or the ability of Barings BDC or Sierra to pay their respective obligations as and when they come due.

Broadhaven expressed no view or opinion as to what the value of Barings BDC Common Stock or any other security of Barings BDC would be when issued pursuant to the Merger or otherwise. Further, Broadhaven expressed no view or opinion as to the prices at which any of the respective portfolio investments or assets of Sierra or Barings BDC may be purchased, sold or exchanged, or otherwise be transferable, at any time.

Broadhaven expressed no view or opinion as to the form or structure of the proposed Merger or any related transaction. Broadhaven’s opinion was limited to the fairness, from a financial point of view, as of the date thereof, of the Merger Consideration to be received by holders of Sierra Common Stock for each share of Sierra Common Stock (other any cancelled shares as set forth in the Merger Agreement) to the extent expressly addressed therein. Further, Broadhaven expressed no opinion as to any other term or aspect of the Merger Agreement or the proposed Merger or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the proposed Merger (including, without limitation, the credit support agreement and trading plan provided for in the Agreement or the potential amendment of the investment advisory agreement between Barings BDC and Barings). Broadhaven was not requested to opine as to, and its opinion did not in any manner address, the underlying business decision by Sierra to proceed with or effect the proposed Merger or the likelihood of consummation of the proposed Merger. Moreover, Broadhaven’s opinion did not address the relative merits of the proposed Merger as compared to any alternative transaction or business strategy in which Sierra would engage, or whether or not such alternatives would be achieved or were available, or the effect of any other transaction which Sierra may consider in the future. Broadhaven’s opinion did not address, and Broadhaven expressed no opinion as to (1) the tax, accounting or legal consequences of the proposed Merger or any related transaction; or (2) the fairness of the amount or nature of any compensation to any officers, directors, or employees of any party to the proposed Merger, or any class of such persons, relative to the Merger Consideration.

In its analyses, Broadhaven considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of Sierra. No company, business or transaction reviewed is identical to Sierra, Barings BDC or the Merger. An evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or other values of the companies, businesses or transactions reviewed. The estimates contained in Broadhaven’s analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Broadhaven’s analyses are inherently subject to substantial uncertainty.

Broadhaven was not requested to, and it did not, recommend the specific consideration payable in the Merger. The type and amount of consideration payable in the Merger was determined through negotiations between Sierra and Barings BDC, and the decision of Sierra to enter into the Merger Agreement was solely that of the Sierra Board and the Sierra Special Committee. Broadhaven’s opinion was only one of many factors considered by the Sierra Board

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and the Sierra Special Committee in their consideration of the Merger and should not be viewed as determinative of the views of the Sierra Board, the Sierra Special Committee or Sierra’s management with respect to the Merger or the consideration to be paid in the Merger.

The following is a summary of the material financial analyses provided to the Sierra Board and the Sierra Special Committee in connection with Broadhaven’s opinion. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Broadhaven did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses summarized below include information presented in tabular format. In order to fully understand Broadhaven’s financial analyses, the tables must be read together with the text of each summary. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Broadhaven’s financial analyses.

Implied Transaction Value for the Merger.    For purposes of the financial analysis of Sierra described below, Broadhaven utilized an implied value of the Merger Consideration of $5.76 per outstanding share of Sierra Common Stock, calculated as the sum of the Cash Consideration of $0.9783641 per outstanding share of Sierra Common Stock and the value of the Share Consideration of $4.78 per outstanding share of Sierra Common Stock based on the closing price of Barings BDC Common Stock of $10.63 per share on September 20, 2021. When evaluating the Merger Consideration at Barings BDC’s NAV per outstanding share of Barings BDC Common Stock as of June 30, 2021 of $11.39 per share, the implied value of the Share Consideration is $5.12 per outstanding share of Sierra Common Stock and the total implied value of the Merger Consideration at NAV would be $6.10 per outstanding share of Sierra Common Stock. Broadhaven noted that the implied value of the Merger Consideration of $5.76 per outstanding share of Sierra Common Stock represented 106% of Sierra’s NAV per share as of June 30, 2021 based on Sierra filings, and a multiple of 30.2x to Sierra’s last twelve months net investment income as of June 30, 2021 based on Sierra filings. Broadhaven also noted that the Cash Consideration of $0.9783641 per outstanding share of Sierra Common Stock represented a multiple of 12.6x of illustrative pro forma management fees payable to Barings, based on applying the management fee rate payable to Barings of 1.25% to Sierra’s gross assets, net of cash, as of June 30, 2021, of $637.4 million.

Public Market BDC Comparables Analysis.    Using publicly available information, Broadhaven compared the trading ratios of thirty-five publicly traded, externally managed business development companies to the Merger Consideration of $5.76 per outstanding share of Sierra Common Stock. Among other things, Broadhaven compared stock price as a ratio of NAV per share (“P/NAV”), stock price as a multiple of 2021E net investment income based on analyst consensus estimates (“2021E P/NII”), dividend yield based on most recent quarterly dividend annualized (“Annualized MRQ Dividend Yield”), and estimated 2021E operating return on equity (“ROE”) based on consensus analyst estimates as of September 20, 2021. To perform this analysis, Broadhaven used market price information and estimates as of September 20, 2021 and reported NAV per share data as of the end of the most recent completed quarterly period available in company filings. The selected companies were the following (the “Selected BDCs”):

•        Apollo Investment Corporation

•        Ares Capital Corporation

•        Bain Capital Specialty Finance, Inc.

•        Barings BDC

•        BlackRock Capital Investment Corporation

•        BlackRock TCP Capital Corp.

•        Crescent Capital BDC, Inc.

•        Fidus Investment Corporation

•        First Eagle Alternative Capital BDC, Inc.

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•        FS KKR Capital Corp.

•        Gladstone Capital Corporation

•        Gladstone Investment Corporation

•        Goldman Sachs BDC

•        Golub Capital BDC, Inc.

•        Horizon Technology Finance Corporation

•        Investcorp Credit Management BDC, Inc.

•        Logan Ridge Finance Corporation

•        Monroe Capital Corporation

•        New Mountain Finance Corporation

•        Oaktree Specialty Lending Corporation

•        OFS Capital Corporation

•        Owl Rock Capital Corporation

•        Oxford Square Capital Corp.

•        PennantPark Floating Rate Capital Ltd.

•        PennantPark Investment Corporation

•        Portman Ridge Finance Corporation

•        Prospect Capital Corporation

•        Saratoga Investment Corp.

•        Sixth Street Specialty Lending, Inc.

•        SLR Investment Corp.

•        SLR Senior Investment Corp.

•        Stellus Capital Investment Corporation

•        TCG BDC, Inc.

•        TriplePoint Venture Growth BDC Corp.

•        WhiteHorse Finance, Inc.

In the analysis, Broadhaven noted that the range of P/NAV per share ratios of 82% to 99% based on the 25th percentile and 75th percentile of the Selected BDCs implied values of $4.47 to $5.38 per share of Sierra, compared to the value of the Merger Consideration of $5.76 per share. Broadhaven also noted a range of 2021E P/NII per share multiples of 6.1x to 9.4x based on the 25th percentile and 75th percentile of the Selected BDCs implied values of $1.21 to $1.88 per share of Sierra, compared to the value of the Merger Consideration of $5.76 per share. Broadhaven noted an Annualized MRQ Dividend Yield range of 7.8% to 9.8% based on the 25th percentile and 75th percentile of the Selected BDCs implied values of $1.23 to $1.54 per share of Sierra, compared to the value of the Merger Consideration of $5.76 per share. Finally, Broadhaven compared Sierra’s ROE adjusted for normalized leverage (“Normalized Leverage Run Rate ROE”) with the relationship between 2021 ROEs based on analyst consensus estimates and current P/NAV trading levels for Selected BDCs as of September 20, 2021. Sierra’s Normalized Leverage Run Rate ROE of 6.6% was estimated based on adjusting Sierra’s net debt/equity from 0.13x to 0.97x (industry average) and assuming incremental investment yield of 8%. Other assumptions on the impact

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of incremental assets are in line with Sierra historical financials for the three-month period ended June 30, 2021. Sierra’s Normalized Leverage Run Rate ROE is in line with 2018 operating ROE of 6.7%. These Sierra operating ROE levels implied a trading price per share equal to 77% of Sierra’s NAV based on such regression analysis and implied values of $4.18 to $4.20 per share of Sierra, compared to the value of the Merger Consideration of $5.76 per share. This analysis was prepared for illustrative purposes only as a hypothetical approximation of the levels at which Sierra would publicly trade on a standalone basis. There can be no assurance of the prices, if listed, at which Sierra shares would trade at any time.

The below table summarizes the implied value per share of Sierra based on the 25th percentile and 75th percentile ranges described above, as compared to the value of the Merger Consideration of $5.76 per share of Sierra based on Barings BDC market price of $10.63 per share as of September 20, 2021:

 

Selected Companies

    

Multiple Range

 

Implied Share Price

  

Sierra
Metric

 

25th
Percentile

 

75th
Percentile

 

Low

 

High

P/NAV (as of 6/30/2021)

 

$

5.43

 

82

%

 

99

%

 

$

4.47

 

$

5.38

2021E P/NII (Q2 21 Ann.)(1)

 

 

0.20

 

6.1x

 

 

9.4x

 

 

 

1.21

 

 

1.88

Annualized MRQ Dividend Yield(2)

 

 

0.12

 

7.8

%

 

9.8

%

 

 

1.23

 

 

1.54

ROE Regression Analysis(3)

 

 

5.43

 

77

%

 

77

%

 

 

4.18

 

 

4.20

____________

Note: certain figures may not tie out due to rounding.

(1)      Based on 2021E forward earnings estimated for selected companies; Sierra 2021E estimate represents Q2 2021E annualized NII per share.

(2)      Based on Sierra’s dividend yield and implied valuation of selected companies; $0.12 MRQ annualized dividend represents 2.2% yield on 6/30/2021 Sierra NAV.

(3)      Multiple range reflects implied P/NAV based on BDC regression analysis using Normalized Leverage Run Rate ROE of 6.6% and 2018 ROE of 6.7%.

No company used as a comparison in the above Selected BDCs analysis is identical to Sierra or Barings BDC. Accordingly, an analysis of these results is not mathematical. Rather, an evaluation of the results of these analyses necessarily involves complex considerations and judgments concerning differences in financial, operating, and business sector characteristics, and other factors that could affect the selected companies to which Sierra is compared.

Selected Transactions Analysis — Business Development Companies.    Using publicly available information, Broadhaven compared 11 selected acquisitions of business development companies announced since May 2017 (the “Selected BDC Transactions”) to the Merger Consideration of $5.76 per outstanding share of Sierra Common Stock. Among other things, Broadhaven compared the purchase price as a multiple of NAV per share (“P/NAV”) and as a multiple of the last-twelve-month NII (“P/LTM NII’) to the value of the Merger Consideration in the proposed Merger.

The Selected BDC Transactions were as follows:

Target

 

Acquirer

Harvest Capital Credit Corporation

 

Portman Ridge Finance Corporation

FS KKR Capital Corp. II

 

FS KKR Capital Corp.

Oaktree Strategic Income Corporation

 

Oaktree Specialty Lending Corporation

MVC Capital, Inc.

 

Barings BDC, Inc.

Garrison Capital Inc.

 

Portman Ridge Finance Corporation

Goldman Sachs Middle Market Lending LLC

 

Goldman Sachs BDC, Inc.

Alcentra Capital Corporation

 

Crescent Capital BDC, Inc.

OHA Investment Corporation

 

Portman Ridge Finance Corporation

Golub Capital Investment Corporation

 

Golub Capital BDC, Inc.

Corporate Capital Trust, Inc.

 

FS Investment Corporation

NF Investment Corp.

 

TCG BDC, Inc.

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Broadhaven noted that the range of P/NAV per share ratios of 72% to 100% based on the 25th percentile and 75th percentile of the Selected BDC Transactions implied values of $3.93 to $5.42 per share of Sierra, compared to the value of the Merger Consideration of $5.76 per share. To compare the value of the Merger Consideration on a NAV basis, Broadhaven also noted that a range of P/NAV per share ratios of 100% to 102% based on the 25th percentile and 75th percentile of the Selected BDC Transactions implied values of $5.41 to $5.53 per share of Sierra, compared to the implied transaction value of the Merger Consideration of $6.10 per share of Sierra at Barings BDC NAV per share of $11.39 as of June 30, 2021. Additionally, Broadhaven noted that the range of P/LTM NII multiples of 10.5x to 13.1x based on the 25th percentile and 75th percentile of the Selected BDC Transactions implied values of $2.00 to $2.48 per share of Sierra, compared to the value of the Merger Consideration of $5.76 per share.

The below table summarizes the implied value per share of Sierra based on the 25th percentile and 75th percentile ranges described above, as compared to value of the Merger Consideration of $5.76 per outstanding share of Sierra at Barings BDC market price of $10.63 per share as of September 20, 2021 and $6.10 per outstanding share of Sierra at Barings BDC NAV per share of $11.39 as of June 30, 2021:

 

Selected BDC Transactions

    

Multiple Range

 

Implied Share Price

  

Sierra Metric

 

25th Percentile

 

75th Percentile

 

Low

 

High

P/NAV (based on Barings BDC market price)

 

$

5.43

 

72

%

 

100

%

 

$

3.93

 

$

5.42

P/NAV (based on Barings BDC NAV)

 

 

5.43

 

100

%

 

102

%

 

 

5.41

 

 

5.53

P/LTM NII

 

 

0.19

 

10.5x

 

 

13.1x

 

 

 

2.00

 

 

2.48

Note: certain figures may not tie out due to rounding.

No company or transaction used as a comparison in the Selected BDC Transaction analysis is identical to Sierra or the proposed Merger. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Relative Contribution Analysis.    Broadhaven noted the relative standalone contribution of Sierra and Barings BDC to the combined company in terms of NAV, investment portfolio at fair value, net investment income, and net increase/(decrease) in net assets resulting from operations. The results of Broadhaven’s analysis are set forth in the following table and compares the relative contribution of Sierra and Barings with the implied pro forma ownership percentages of Sierra stockholders and Barings BDC stockholders in the combined company based on the fixed 0.44973x exchange ratio in the proposed Merger:

 

Sierra
as a % of
Total

 

Barings
BDC
as a % of
Total

Contribution

  

 

  

 

Based on NAV as of 6/30/2021

 

42.7

%

 

57.3

%

Based on Investments at Fair Value as of 6/30/2021(1)

 

28.8

%

 

71.2

%

   

 

  

 

2020 Net Investment Income

 

 

 

100.0

%

LTM Q2 2021 Net Investment Income

 

29.8

%

 

70.2

%

Q2 2021 Net Investment Income (Annualized)

 

26.0

%

 

74.0

%

2020 Net Increase/(Decrease) in Net Assets Resulting From Operations

 

 

 

100.0

%

LTM Q2 2021 Net Increase/(Decrease) in Net Assets Resulting From Operations

 

44.6

%

 

55.4

%

Q2 2021 Net Increase/(Decrease) in Net Assets Resulting From Operations (Annualized)

 

38.6

%

 

61.4

%

Pro Forma Ownership

 

41.3

%

 

58.7

%

____________

(1)      Barings BDC investments at fair value excludes short-term investments.

Miscellaneous.    Broadhaven acted as financial advisor to the Sierra Special Committee in connection with the proposed Merger and did not act as an advisor to or agent of any other person. Pursuant to the engagement agreement between Sierra and Broadhaven Securities, LLC (a wholly-owned subsidiary of Broadhaven), Sierra

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agreed to pay Broadhaven (i) commencing on June 1, 2021, a monthly retainer in the amount of $50,000 (the “Monthly Retainer”); (ii) a fee in the amount of $1,750,000 for rendering its opinion (the “Opinion Fee”); and (iii) a cash fee equal to $5,150,000 in connection with the proposed Merger, payable upon consummation of the Merger, to be reduced by the Opinion Fee and the Monthly Retainers. Sierra also agreed to reimburse Broadhaven, subject to certain caps, for reasonable out-of-pocket expenses and disbursements incurred in connection with its engagement (including, without limitation, fees, disbursements and other charges of Broadhaven’s legal counsel, Dechert LLP) and to indemnify Broadhaven against certain liabilities relating to or arising out of Broadhaven’s engagement or Broadhaven’s role in connection therewith. During the two years preceding the date of Broadhaven’s opinion, Broadhaven and its affiliates provided financial advisory services to the Sierra Special Committee for which compensation was received. Broadhaven and its affiliates did not provide financial advisory services to Barings BDC, Barings, or its affiliates during the two years preceding the date of Broadhaven’s opinion. Broadhaven and its affiliates may in the future provide financial advisory and other services to Barings BDC, Barings, Sierra and Sierra External Adviser and receive compensation for such services.

Financial Forecasts and Estimates

Barings BDC

Barings BDC does not as a matter of course make public forecasts as to future performance, earnings or other prospective financial information, and Barings BDC is especially reluctant to make forecasts for extended periods due to the inherent uncertainty of the underlying assumptions and estimates. However, in connection with the transactions contemplated by the Merger Agreement, in August 2021, Barings BDC’s management prepared and provided to the Barings BDC Board certain non-public, unaudited prospective financial forecasts regarding (1) Barings BDC’s anticipated future operations (without giving effect to the Merger) for the third and fourth quarter of fiscal year 2021 and each of the fiscal years of 2022, 2023 and 2024 (the “Barings BDC Projections”) and (2) Barings BDC’s anticipated future operations (after giving effect to the Merger) for the third and fourth quarter of fiscal year 2021 and each of the fiscal years of 2022, 2023 and 2024 (the “Pro Forma Projections”, and together with the Barings BDC Projections, the “Projections”). At the direction of the Barings BDC Board, the Projections were provided to Wells Fargo Securities for its use and reliance in connection with Wells Fargo Securities’ financial analyses and opinion described above under the section entitled “— Opinion of the Financial Advisor to Barings BDC.” As described below, certain of these unaudited prospective financial forecasts were also provided to Sierra and its financial advisor, Broadhaven, for use and reliance in connection with Broadhaven’s financial analysis and opinion. Barings BDC has included below a summary of the Projections for the purpose of providing Barings BDC stockholders access to certain non-public information considered by the Barings BDC Board for purposes of evaluating the Merger.

The Projections were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts or in accordance with GAAP. Barings BDC’s independent registered public accounting firm has not examined, compiled or performed any procedures with respect to the accompanying prospective financial information and, accordingly, such independent registered public accounting firm does not express an opinion or any other form of assurance with respect thereto. The reports of such independent registered public accounting firm incorporated by reference to this joint proxy statement/prospectus relate only to Barings BDC’s historical financial information. They do not extend to prospective financial information or and should not be read to do so. The Projections included below are not being included to influence your decision whether to vote for the matters described in this proxy statement, but instead because they were provided by Barings BDC to the Barings BDC Board.

While presented with numeric specificity, the Projections were based on numerous variables and assumptions, including (but not limited to):

•        the performance of investment assets;

•        the amount of income;

•        the amount of dividend payments;

•        the degree and methods of portfolio leverage;

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•        industry performance and competition;

•        general business, economic, market and financial conditions; and

•        additional matters specific to Barings BDC’s or Sierra’s business, as applicable.

Many of these assumptions are inherently subjective and uncertain and are beyond the control of Barings BDC. Important factors that may affect actual results and cause uncertainties relating to Barings BDC’s and Sierra’s businesses (including the combined company’s ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, general business and economic conditions and other factors discussed in the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” The Projections also reflect numerous variables, expectations and assumptions available at the time they were prepared as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in the Projections. Accordingly, there can be no assurance that the Projections summarized below will be realized.

The inclusion of a summary of the Projections in this joint proxy statement/prospectus should not be regarded as an indication that any of Barings BDC, Barings, Sierra or their respective affiliates, advisors or other representatives considered the Barings BDC Projections or the Pro Forma Projections to necessarily be predictive of actual future events, and these internal financial forecasts should not be relied upon as such nor should the information contained in the Projections be considered appropriate for other purposes. None of Barings BDC, Barings, Sierra or their respective affiliates, advisors or other representatives can give you any assurance that actual results will not differ materially from the Barings BDC Projections or the Pro Forma Projections and none of them undertakes any obligation to update or otherwise revise or reconcile the Barings BDC Projections or the Pro Forma Projections to reflect circumstances existing after the date these internal financial forecasts were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying these forecasts are shown to be in error.

Since the Projections cover multiple years, such information by its nature becomes subject to greater uncertainty with each successive year. Barings BDC does not intend to make publicly available any update or other revision to these internal financial forecasts. None of Barings BDC, Barings, Sierra or their respective officers, directors, affiliates, advisors or other representatives has made or makes any representation to any stockholder or other person regarding the combined company’s ultimate performance compared to the information contained in these internal financial forecasts or that the forecasted results will be achieved. Barings BDC has made no representation to Sierra, in the Merger Agreement or otherwise, concerning these internal financial forecasts. Barings BDC urges all of its stockholders to review Barings BDC’s financial statements and notes thereto appearing elsewhere in this joint proxy statement/prospectus for a description of Barings BDC’s reported financial results.

Barings BDC Projections

The following is a summary of the Barings BDC Projections. The Barings BDC Projections were prepared by Barings BDC’s management based solely on the information available to Barings BDC’s management at that time. The Barings BDC Forecasts were finalized in August 2021.

 

For the Fiscal
Quarter Ended

 

For the Fiscal
Year Ended

  

9/30/21

 

12/31/21

 

12/31/22

 

12/31/23

 

12/31/24

Core Net Investment Income per Share

 

$

0.23

 

$

0.23

 

$

0.91

 

$

0.92

 

$

0.92

Dividend per Share

 

$

0.21

 

$

0.22

 

$

0.88

 

$

0.88

 

$

0.88

NAV per Share

 

$

11.41

 

$

11.42

 

$

11.45

 

$

11.49

 

$

11.53

Key Barings BDC Forecast Assumptions

The Barings BDC forecasts were based on numerous variables and assumptions, including, but not limited to, certain material assumptions regarding:

•        Management fee assumptions including (1) a base management fee projected at 1.25% throughout the projections, (2) net operating income incentive compensation low hurdle rate set at 8% with a 100% catch up between 8% and 10%, and 20% above 10% (consistent with Barings BDC’s current net operating income incentive fee formula).

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•        Operating assumptions including, but not limited to:

•        The assumption of no changes in portfolio value and as a result there are no unrealized gains nor losses during the periods presented.

•        Investment income is calculated using a 3-year discount margin, which assumes investments have a 3-year average life.

•        The highest net debt-to-equity leverage ratio during the projection period is 1.16x.

•        Non-accrual rates of 2.5% per quarter.

•        Barings BDC sometimes obtains equity co-investments, warrants, or other similar forms of investments with debt originations. Although it is generally expected that these provide a positive return to offset potential loan losses, such potential upside is not factored into the projections.

•        No additional outside equity raised and no share repurchases by Barings BDC through the projection period.

Pro Forma Projections

The following is a summary of the Pro Forma Projections. The Pro Forma Projections were prepared by Barings BDC’s management based solely on the information available to Barings BDC’s management at that time. The Pro Forma Projections were finalized in August 2021.

 

For the Fiscal
Quarter Ended

 

For the Fiscal
Year Ended

  

9/30/21

 

12/31/21

 

12/31/22

 

12/31/23

 

12/31/24

Core Net Investment Income per Share

 

$

0.23

 

$

0.23

 

$

0.97

 

$

0.98

 

$

0.98

Dividend per Share

 

$

0.21

 

$

0.22

 

$

0.95

 

$

0.96

 

$

0.96

NAV per Share

 

$

11.41

 

$

11.42

 

$

11.82

 

$

11.84

 

$

11.85

Key Pro Forma Projections Assumptions

The Pro Forma Projections were based on numerous variables and assumptions, including, but not limited to, certain material assumptions including:

•        The Merger is consummated on February 15, 2022.

•        Management fee assumptions including (1) a base management fee projected at 1.25% throughout the projections, (2) net operating income incentive compensation low hurdle rate set at 8.25% with a 100% catch up between 8.25% and 10.31%, and 20% above 10.31% (consistent with Barings BDC’s current net operating income incentive fee formula).

•        Operating assumptions including, but not limited to:

•        The assumption of no changes in portfolio value and as a result there are no unrealized gains nor losses during the periods presented.

•        Investment income is calculated using a 3-year discount margin, which assumes investments have a 3-year average life.

•        The highest net debt-to-equity leverage ratio during the projection period is 1.42x.

•        Non-accrual rates of 2.5% per quarter.

•        Barings BDC sometimes obtains equity co-investments, warrants, or other similar forms of investments with debt originations. Although it is generally expected that these provide a positive return to offset potential loan losses, such potential upside is not factored into the projections.

•        Other than shares of Barings BDC Common Stock issued in the First Merger, no additional outside equity raised and no share repurchases by Barings BDC through the projection period.

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•        The Credit Support Agreement has an initial fair value of $50.0 million.

•        5% of the investment portfolio acquired from Sierra either matures or is repaid per quarter through the projection period.

Terms of Credit Support Agreement

Promptly following the closing of the Merger, Barings and Barings BDC will enter into the Credit Support Agreement under which Barings will agree to provide credit support to Barings BDC in the amount of up to $100.0 million relating to the net cumulative realized and unrealized losses on the acquired Sierra investment portfolio over the next 10 years. A summary of the material terms of the Credit Support Agreement, which are attached as Annex C hereto, is as follows:

•        There will be no fee or other payment by Barings BDC to Barings or any of its affiliates in connection with the Credit Support Agreement.

•        The effective date of the Credit Support Agreement will be the Closing Date.

•        The Credit Support Agreement will cover all of the investments acquired by Barings BDC in the Merger and any investments received by Barings BDC in connection with the restructuring, amendment, extension or other modification (including the issuance of new securities) of any of the investments acquired by Barings BDC in the Merger (collectively, the “Reference Portfolio”).

•        Barings will have an obligation to provide credit support to Barings BDC in an amount equal to the excess of (1) the aggregate realized and unrealized losses on the Reference Portfolio over (2) the aggregate realized and unrealized gains on the Reference Portfolio, in each case from the Closing Date through the Designated Settlement Date (up to a $100.0 million cap) (such amount, the “Covered Losses”). For purposes of the Credit Support Agreement, “Designated Settlement Date” means the earlier of (1) the date which is ten years from the closing of the Merger and (2) the date on which the entire Reference Portfolio has been realized or written off. No credit support will be required to be made by Barings to Barings BDC under the Credit Support Agreement if the aggregate realized and unrealized gains on the Reference Portfolio exceed realized and unrealized losses of the Reference Portfolio on the Designated Settlement Date.

•        Barings will settle any credit support obligation under the Credit Support Agreement as follows. If the Covered Losses are greater than $0.00, then, in satisfaction of Barings’ obligation set forth in the Credit Support Agreement, Barings will irrevocably waive during the Waiver Period (as defined below) (1) the incentive fees payable under the then current investment advisory agreement between Barings BDC and Barings (including any incentive fee calculated on an annual basis during the Waiver Period), and (2) in the event that Covered Losses exceed such incentive fees, the base management fees payable under the then current investment advisory agreement between Barings BDC and Barings. The “Waiver Period” means the four quarterly measurement periods immediately following the quarter in which the Designated Settlement Date occurs. If the Covered Losses exceed the aggregate amount of incentive fees and base management fees waived by Barings during the Waiver Period, then, on the date on which the last incentive fee or base management fee payment would otherwise be due during the Waiver Period, Barings shall make a cash payment to Barings BDC equal to the positive difference between the Covered Losses and the aggregate amount of incentive fees and base managements fee previously waived by Barings during the Waiver Period.

•        The Credit Support Agreement and the rights of Barings BDC thereunder shall automatically terminate if Barings (or an affiliate of Barings) ceases to serve as the investment adviser to Barings BDC or any successor thereto, other than as a result of the voluntary termination by Barings of the then current investment advisory agreement between Barings BDC and Barings. In the event of such a voluntary termination by Barings of the then current investment advisory agreement with Barings BDC, Barings will remain obligated to provide the credit support contemplated by the Credit Support Agreement. In the event of a non-voluntary termination of the advisory agreement or its expiration (due to non-renewal by the Barings BDC Board), Barings will have no obligations under the Credit Support Agreement.

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•        It is expected that the Credit Support Agreement will initially be recorded as an asset on Barings BDC’s financial statements in an amount equal to the value thereof and thereafter such value will fluctuate each quarter based on the change in the payment obligation owed under the Credit Support Agreement. The Credit Support Agreement will be accounted for by Barings BDC as a derivative under ASC 815 and a credit to contributed (paid-in) capital from Barings.

The Credit Support Agreement is intended to give stockholders of the combined company downside protection from net cumulative realized and unrealized losses on the acquired Sierra portfolio and insulate the combined company’s stockholders from potential value volatility and losses in Sierra’s portfolio following the closing of the Merger. Any cash payment from Barings to Barings BDC under the Credit Support Agreement will be excluded from the combined company’s incentive fee calculations under the then current investment advisory agreement between Barings BDC and Barings BDC.

Terms of Second Amended and Restated Investment Advisory Agreement

On September 21, 2021, the Barings BDC Board, including a majority of the Barings BDC Board Independent Directors, approved the New Barings BDC Advisory Agreement, which will be entered into in connection with and effective upon the closing of the Merger. The New Barings BDC Advisory Agreement will increase the current hurdle rate from 2.0% to 2.0625% per quarter (or from 8.0% to 8.25% annualized) (the “Hurdle Rate Increase”) and therefore will increase the catch-up amount that is used in calculating the income incentive fee to correspond to the Hurdle Rate Increase (the “Catch-Up Amount Increase”). All other terms and provisions of the Existing Barings BDC Advisory Agreement, including with respect to the calculation of the other fees payable to Barings, remain unchanged under the New Barings BDC Advisory Agreement. In this regard, the New Barings BDC Advisory Agreement does not result in any change to the base management fee currently payable to Barings under the Existing Barings BDC Advisory Agreement, which is calculated based on Barings BDC’s gross assets at an annual rate of 1.25%. A copy of the form of New Barings BDC Advisory Agreement is attached hereto as Annex B.

Barings’ recommendation that the Barings BDC Board approve the New Barings BDC Advisory Agreement was driven by the Merger, as the Barings BDC Board’s approval of the New Barings BDC Advisory Agreement is a condition precedent to the closing of the Merger. In determining to approve the New Barings BDC Advisory Agreement, the Barings BDC Board considered information it had received relating to the shareholder-friendly effects of the Hurdle Rate Increase on Barings BDC’s fee structure. The Barings BDC Board considered that, because Barings BDC’s net investment income must exceed the hurdle rate before Barings can receive an income incentive fee from Barings BDC, the Hurdle Rate Increase has the effect of reducing the likelihood that Barings will be eligible to receive an income incentive fee from Barings BDC, thus reducing the likelihood that Barings BDC will pay an income incentive fee to Barings. In addition, the Barings BDC Board considered that the Hurdle Rate Increase would provide shareholders of the combined company following the Merger with the highest hurdle rate among BDCs in the industry.

No stockholder approval of the New Barings BDC Advisory Agreement by the Barings BDC stockholders or the Sierra stockholders is required. Accordingly, no stockholder vote will be taken with respect to the New Barings BDC Advisory Agreement. As approved by the Barings BDC Board, the New Barings BDC Advisory Agreement, including the Hurdle Rate Increase and the Catch-Up Amount Increase, will become effective upon and subject to the closing of the Merger. If the Merger does not close because, for instance, Barings BDC has not obtained the Barings BDC Stockholder Approval or Sierra has not obtained the Sierra Stockholder Approval, the Existing Barings BDC Advisory Agreement, including the current hurdle rate and the current catch-up amount, will continue in effect.

In determining whether to approve, in the case of Barings BDC stockholders, the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal, and in the case of Sierra stockholders, the Merger Proposal, stockholders should carefully consider that the New Barings BDC Advisory Agreement, including the Hurdle Rate Increase and the Catch-Up Amount Increase (each as described above), will take effect only upon and subject to the closing of the Merger.

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Interests of Certain Persons Related to Sierra in the Merger

Indemnification and Insurance

Pursuant to the Merger Agreement, following the Effective Time, Barings BDC and Acquisition Sub will, to the fullest extent permitted under applicable law, indemnify, defend and hold harmless and advance expenses to the current or former directors, officers, managers, or employees, as the case may be, of Sierra, its controlled subsidiaries or affiliates, including but not limited to officers and employees of Sierra’s investment advisor, SIC Advisors, to the extent related to the management of Sierra (the “D&O Indemnified Parties”), with respect to all acts or omissions by them in their capacities as such at any time prior to or at the Effective Time (including any matters arising in connection with the Merger Agreement or the transactions contemplated thereby).

The Merger Agreement requires Barings BDC and Acquisition Sub to maintain for a period of six years following the Effective Time a directors’ and officers’ liability insurance policy covering the D&O Indemnified Parties or any other person entitled to the benefit under the Merger Agreement, containing terms and conditions no less advantageous as that coverage currently provided by Sierra’s current policies, except that Barings BDC and Acquisition Sub are not required to expend more than 300% of the last amount expended by Sierra for its policies.

Barings BDC Board Composition

Upon completion of the Merger, the members of Barings BDC Board will continue as directors of Barings BDC. However, at the Effective Time, the size of the Barings BDC Board will be increased by two and two current independent members of the Sierra Board who will be selected by Barings BDC between the date of the Merger Agreement and prior to the completion of the Merger will be appointed to fill the vacancy.

Interests of Certain Persons Related to Barings BDC in the Merger

Barings BDC’s investment adviser, Barings, has indirect financial interests in the transactions contemplated by the Merger Agreement, including the Merger, that are different from, and/or in addition to, the interests of Barings BDC stockholders. For example, the base management fee Barings currently receives under the Existing Barings BDC Advisory Agreement and will receive under the New Barings BDC Advisory Agreement (as further described in “The Merger — Terms of Second Amended and Restated Investment Advisory Agreement”) is based on the average value of Barings BDC’s gross assets (excluding cash and cash equivalents). Because total assets under management will increase as a result of the Merger, the dollar amount of Barings’ base management fee will likely increase as a result of the Merger.

Certain members of the Barings BDC Board, Barings BDC’s senior management and members of Barings’ investment committee have indirect financial and other interests in Barings, as detailed below. Eric Lloyd, Chairman of the Barings BDC Board and the Chief Executive Officer of Barings BDC, also serves as the Global Head of Private Assets of Barings and as a Managing Director of Barings. David Mihalick, a member of the Barings BDC Board, is also the Head of U.S. Public Fixed Income, Head of U.S. High Yield and a Member of Global High Yield Allocation Committee of Barings. As a result of their roles with Barings, such persons may have indirect financial interests in the transactions contemplated by the Merger Agreement, including the Merger, that are different from, and/or in addition to, the interests of Barings BDC stockholders due to Barings’ interests described above.

Approvals Required for the Merger

The obligations of Barings BDC and Sierra to complete the Merger is subject to the satisfaction or, where permissible, waiver of certain conditions, including the condition that Barings BDC Common Stock to be issued as part of the Merger Consideration has been approved for listing by the NYSE and that the registration statement on Form N-14 (of which this joint proxy statement/prospectus forms a part) has become effective under the Securities Act. Barings BDC and Sierra have agreed to cooperate with each other and use their reasonable best efforts to obtain all necessary actions or non-actions, consents and approvals from governmental authorities or other persons necessary in connection with the consummations of the transactions contemplated by the Merger Agreement and the making of all necessary registrations and filings (including filings with governmental authorities, if any) and the taking of all commercially reasonable steps as may be reasonably necessary to obtain approval from, or to avoid a proceeding by, any governmental authority or other persons necessary in connection with the consummation of the transactions contemplated hereby, including the First Merger.

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There can be no assurance that such regulatory approvals will be obtained, that such approvals will be received on a timely basis or that such approvals will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Merger.

Management of the Combined Company Following the Merger

Promptly after the effectiveness of the Merger, Barings BDC shall increase the size of the Barings BDC Board in order to cause two current independent members of the Sierra Board (the “Designees”) to be appointed to the Barings BDC Board as Class II directors as of immediately after the effectiveness of the Merger. Pursuant to the terms of the Merger Agreement, each such Designee shall be selected by Barings BDC at its discretion, shall not be an “interested person” of Barings BDC (as such term is defined in Section 2(a)(19) of the Investment Company Act) and shall have no current or past relationship with KPMG LLP, Barings BDC’s independent public accounting firm, that would cause KPMG LLP not to be deemed independent of Barings BDC under applicable auditor independence standards. The Designees will be chosen by Barings BDC between the date of the Merger Agreement and the Closing Date.

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DESCRIPTION OF THE MERGER AGREEMENT

The following summary, which includes certain of material terms of the Merger Agreement, is qualified by reference to the complete text of the Merger Agreement, which is attached as Annex A to this joint proxy statement/prospectus and is incorporated by reference in this joint proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. Barings BDC and Sierra encourage you to read the Merger Agreement carefully and in its entirety.

Structure of the Merger

Pursuant to the terms of the Merger Agreement, at the Effective Time, Acquisition Sub will be merged with and into Sierra, whereupon the separate existence of Acquisition Sub will cease, and Sierra will continue as the surviving corporation in the Merger and a wholly-owned subsidiary of Barings BDC (the “Surviving Corporation”). Immediately after the Effective Time, the Surviving Corporation will be merged with and into Barings BDC, whereupon the separate existence of the Surviving Corporation will cease, and Barings BDC will continue as the surviving corporation in the Second Merger.

Closing; Completion of the Proposed Merger

Subject to the satisfaction of various conditions to closing (including approval by Barings BDC’s and Sierra’s stockholders, as described herein), the closing of the First Merger shall take place at 10:00 a.m. (local time) on a date to be specified by Barings BDC and Sierra, but no later than the second business day after the satisfaction or waiver of the conditions to the closing set forth in the Merger Agreement, unless another time, date or place is agreed to in writing by the parties to the Merger Agreement.

Concurrently with the closing of the First Merger, Sierra will cause articles of merger with respect to the First Merger (the “Articles of First Merger”) to be executed and filed with the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”) as provided under the Maryland General Corporation Law (the “MGCL”). The First Merger shall become effective on the date and time at which the Articles of First Merger have been accepted for record by the SDAT or at such other date and time as is agreed between Barings BDC and Sierra and specified in the Articles of First Merger.

Immediately after the Effective Time and as part of a single integrated transaction with the First Merger, Barings BDC and the Surviving Corporation shall cause articles of merger with respect to the Second Merger (the “Articles of Second Merger”) to be executed and filed with the SDAT as provided under the MGCL. The Second Merger shall become effective on the date and time at which the Articles of Second Merger have been accepted for record by the SDAT or at such other date and time as is agreed between Barings BDC and Sierra and specified in the Articles of Second Merger.

Merger Consideration

At the Effective Time, each share of Sierra Common Stock issued and outstanding immediately prior to the Effective Time (excluding Canceled Shares) shall be converted into the right to receive (1) $0.9783641 in cash, without interest, payable by Barings and (2) 0.44973 of a validly issued share of Barings BDC Common Stock (as may be adjusted as described below), plus any cash in lieu of fractional shares. The issuance of shares of Barings BDC Common Stock in connection with the First Merger is referred to herein as the “Barings BDC Stock Issuance.” At the closing of the First Merger, each Canceled Share shall cease to exist, and no consideration or payment shall be delivered therefor or in respect thereof.

If at any time during the period between the signing of the Merger Agreement and the Effective Time, any change in the number of outstanding shares of Barings BDC Common Stock or Sierra Common Stock occurs as a result of a reclassification, recapitalization, stock split (including a reverse stock split) or combination, exchange or readjustment of shares, or any stock dividend or stock distribution with a record date during such period, the Exchange Ratio and any similarly dependent items shall be appropriately adjusted to provide the same economic effect as contemplated by the Merger Agreement prior to such event (provided that any such adjustment shall not prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code).

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No fractional shares of Barings BDC Common Stock will be issued upon the conversion of Sierra Common Stock into Barings BDC Common Stock in connection with the First Merger, and such fractional share interests will not entitle the owner thereof to any Barings BDC Common Stock or to vote or to any other rights of a holder of Barings BDC Common Stock. All fractional shares to which a single record holder of Sierra Common Stock would be otherwise entitled to receive will be aggregated and calculations will be rounded to three decimal places. In lieu of any such fractional shares, each holder of Sierra Common Stock which would otherwise be entitled to such fractional shares will instead be entitled to an amount of cash, without interest, rounded up to the nearest cent, equal to the product of (1) the amount of the fractional interest in a share of Barings BDC Common Stock to which such holder would otherwise be entitled and (2) an amount equal to the average of the volume weighted average price per share of Barings BDC Common Stock on the NYSE (as reported by Bloomberg L.P. or, if not reported therein, in another authoritative source mutually selected by Barings BDC and Sierra) on each of the five consecutive trading days ending with the third complete trading day immediately prior to the Closing Date).

Conversion of Shares; Exchange of Certificates; Book-Entry Shares

At the Effective Time, each share of Sierra Common Stock issued and outstanding immediately prior to the Effective Time (other than any Canceled Shares) will be automatically converted into and exchanged for the right to receive the Merger Consideration, in all cases without interest. Each such share of Sierra Common Stock will no longer be outstanding and will be automatically cancelled and cease to exist, and the holders of any such share of Sierra Common Stock will thereafter cease to have any rights with respect thereto, except (other than in the case of Canceled Shares) the right to receive the Merger Consideration, to be paid in consideration therefor upon surrender or cancellation (as applicable) of such certificate that immediately prior to the Effective Time represented outstanding shares of Sierra Common Stock or share of Sierra Common Stock held in book-entry form, as well as any dividends to which Sierra stockholders become entitled in accordance with the terms of the Merger Agreement.

After the Effective Time, there will be no registration of transfers on the stock transfer books of Sierra of shares of Sierra Common Stock that that were issued and outstanding immediately prior to the Effective Time. If book-entry shares are presented to the Surviving Corporation for transfer to the Exchange Agent, they will be cancelled against delivery of the applicable Merger Consideration.

Letter of Transmittal; Lost Certificates

As promptly as practicable following the Effective Time and in any event not later than the second business day thereafter, Barings BDC will cause an exchange agent that is appointed prior to the closing of the First Merger (the “Exchange Agent”) to mail to each holder of record of a stock certificate or book entry shares that immediately prior to the Effective Time represented outstanding shares of Sierra Common Stock (1) a letter of transmittal, which will specify that delivery shall be effected, and risk of loss and title to the certificates or book-entry shares, if applicable, shall pass, only upon proper delivery of the certificates or book-entry shares, if applicable, to the Exchange Agent and which shall be in the form and have such other provisions as Barings BDC and Sierra may reasonably specify and (2) instructions for use in effecting the surrender of the certificates or book-entry shares in exchange for (a) cash in an amount equal to the Cash Consideration multiplied by the number of shares of Sierra Common Stock previously represented by such certificates or book-entry shares, (b) the number of shares of Barings BDC Common Stock (which shall be in book-entry form unless a certificate is requested) representing, in the aggregate, the whole number of shares that such holder has the right to receive in respect of such certificate or book-entry shares pursuant to the Merger Agreement, (c) any dividends or other distributions payable pursuant to the Merger Agreement and (d) cash in lieu of fractional shares of Barings BDC Common Stock calculated pursuant to the formula set forth in the Merger Agreement and described above.

Upon surrender of a certificate (or affidavit or loss in lieu thereof) or book-entry share for cancellation to the Exchange Agent, together with a letter of transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such certificate or book-entry share shall be entitled to receive in exchange therefor, and Barings BDC and, with respect to the Cash Consideration, Barings, shall cause the Exchange Agent to pay and deliver in exchange thereof as promptly as practicable, but in any event within two business days following the later to occur of (a) the Effective Time or (b) the Exchange Agent’s receipt of such certificate or book-entry shares (1) cash in an amount equal to the Cash Consideration multiplied by the number of shares of Sierra Common Stock previously represented by such certificates or book-entry shares, (2) the number of shares of Barings BDC Common Stock (which shall be

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in book-entry form unless a certificate is requested) representing, in the aggregate, the whole number of shares that such holder has the right to receive in respect of such certificate or book-entry shares pursuant to the Merger Agreement, (3) any dividends or other distributions payable pursuant to the Merger Agreement and (4) cash in lieu of fractional shares of Barings BDC Common Stock calculated pursuant to the formula set forth in the Merger Agreement and described above, and the certificates or book-entry shares so surrendered shall be canceled. The Exchange Agent shall accept such certificates and book-entry upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. No interest shall be paid or accrued for the benefit of holders of the book-entry shares on the cash payable upon the surrender of the certificates book-entry shares.

If any certificate has been lost, stolen or destroyed, then upon the making of an affidavit of that fact (in a form reasonably satisfactory to Barings BDC and the Exchange Agent) by the person claiming such certificate to be lost, stolen or destroyed and, if required by the Exchange Agent, the posting of a bond as indemnity with respect to such certificate, the Exchange Agent will deliver the Merger Consideration to which such person is entitled in respect of such certificate.

Appraisal Rights

No rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL shall be available to holders of Sierra Common Stock with respect to the First Merger or the other transactions contemplated by the Merger Agreement.

Withholding Taxes

Barings BDC, Barings, the Surviving Corporation and the Exchange Agent will be entitled to deduct and withhold from the Merger Consideration and any other amounts payable pursuant to the Merger Agreement to any former holder of Sierra Common Stock such amounts as Barings BDC, Barings, the Surviving Corporation or the Exchange Agent are required to deduct and withhold with respect to the making of such payment under the Code or any provisions of applicable state, local or foreign tax law. If any amounts are withheld and paid over to the appropriate governmental entity, such withheld amounts shall be treated for all purposes of the Merger Agreement as having been paid to the person in respect of which such deduction and withholding was made by Barings BDC, Barings, the Surviving Corporation or the Exchange Agent.

Representations and Warranties

The Merger Agreement contains representations and warranties made by Sierra to Barings BDC and Barings BDC and Acquisition Sub to Sierra, subject, in each case, to specified exceptions and qualifications, relating to, among other things:

•        organization and qualification, including with respect to subsidiaries;

•        capitalization and subsidiaries;

•        power and authority to execute, deliver and perform obligations under the Merger Agreement and absence of conflicts;

•        required government filings and consents;

•        compliance with applicable law and permits;

•        SEC reports, books and records, financial statements and enforcement actions;

•        the accuracy and completeness of information supplied for inclusion in this joint proxy statement/prospectus;

•        disclosure controls and procedures;

•        absence of certain changes and actions since December 31, 2020;

•        absence of undisclosed liabilities;

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•        absence of certain litigation, orders or investigations;

•        employee matters;

•        intellectual property and data privacy matters;

•        tax matters;

•        material contracts;

•        real property matters;

•        environmental matters;

•        state takeover laws;

•        the applicable stockholder votes required to effect, with respect to Sierra, the First Merger, and with respect to Barings BDC, the Barings BDC Stock Issuance including, if applicable, at a price below NAV;

•        brokers’ fees;

•        opinion of financial advisor;

•        insurance coverage;

•        investment assets;

•        in the case of Sierra, appraisal rights of holders of Sierra Common Stock;

•        in the case of Sierra, the Sierra Investment Advisory Agreement;

•        in the case of Sierra, its investment documents for debt and equity investments;

•        in the case of Sierra, tax matters relating to its investments;

•        in the case of Barings BDC and Acquisition Sub, sufficiency of funds to consummate the transactions contemplated by the Merger Agreement, including the payment of the Merger Consideration (other than the Cash Consideration);

•        in the case of Barings BDC and Acquisition Sub, solvency matters; and

•        in the case of Barings BDC, the approval by the Barings BDC Board of the increase in the incentive fee hurdle rate in the New Barings BDC Advisory Agreement.

In addition, Barings BDC and Acquisition Sub also make representations to Sierra relating to the absence of agreements or understandings pursuant to which (1) any stockholder of Sierra would be entitled to receive consideration of a different amount or nature than the Merger Consideration, (2) any stockholder of Sierra has agreed to vote to adopt the Merger Agreement or the First Merger or agreed to vote against any Superior Proposal (as defined herein under the heading “— Additional Covenants — No Solicitation”) or (3) a third party has agreed to provide, directly or indirectly, equity capital to Barings BDC or Sierra to finance in whole or in part the First Merger.

The Merger Agreement also contains representations and warranties made by Barings to Sierra, subject, in each case, to specified exceptions and qualifications, relating to:

•        organization and qualification;

•        power and authority to execute, deliver and perform obligations under the Merger Agreement and absence of conflicts;

•        required government filings and consents;

•        compliance with applicable law and permits;

•        absence of certain litigation, orders or investigations;

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•        the accuracy and completeness of information supplied for inclusion in this joint proxy statement/prospectus; and

•        sufficiency of funds to make the payment of the Cash Consideration.

These representations and warranties were made as of specific dates, may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Merger Agreement and may have been included in the Merger Agreement for the purpose of allocating contractual risk between the parties rather than to establish matters as facts. The Merger Agreement is described in, and included as Annex A to, this joint proxy statement/prospectus only to provide you with information regarding its terms and conditions and not to provide any other factual information regarding the parties or their respective businesses. Accordingly, the representations and warranties and other provisions of the Merger Agreement should not be read alone, but instead, should be read only in conjunction with the information provided elsewhere in this joint proxy statement/prospectus.

For purposes of the Merger Agreement, “material adverse effect” with respect to Sierra, Barings BDC or Barings, as applicable, means, any fact, circumstance, event, change, occurrence or effect that would have, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on, (1) the business, condition (financial or otherwise), properties, liabilities, assets or results of operations of such party and its subsidiaries, taken as a whole, or (2) the ability of such party to perform its obligations under the Merger Agreement or consummate the transactions contemplated thereby. However, for purposes of the foregoing clause (1) none of the following shall constitute or be taken into account in determining whether a material adverse effect shall have occurred or exists or would reasonably be expected to occur or exist:

•        changes in general economic, financial market, business or geopolitical conditions;

•        general changes or developments in any of the industries or markets in which such party, any of its subsidiaries, or any of the portfolio companies operate (or applicable portions or segments of such industries or markets);

•        changes in any applicable law or applicable accounting regulations or principles or interpretations thereof;

•        any change in the price or trading volume of such party’s securities (or, with respect to Sierra’s, any of Sierra’s portfolio companies’ securities or other financial instruments), in and of itself (provided that the facts or occurrences giving rise to or contributing to such change that are not otherwise excluded from the definition of “material adverse effect” shall be taken into account in determining whether there has been a material adverse effect);

•        any failure by such party (or, with respect to Sierra, any of its portfolio companies) to meet published analyst estimates or expectations of such party’s (or, with respect to Sierra, any of its portfolio companies’) revenue, earnings or other financial performance or results of operations for any period, in and of itself (provided that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of “material adverse effect” shall be taken into account in determining whether there has been a material adverse effect);

•        any failure by such party (or, with respect to Sierra, any of its portfolio companies) to meet its internal or published projections, budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations, in and of itself (provided that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of “material adverse effect” shall be taken into account in determining whether there has been a material adverse effect);

•        any outbreak or escalation of hostilities or war or any act of terrorism, any acts of God or natural disasters or any epidemic, pandemic or disease outbreak (including COVID-19);

•        the negotiation, existence, announcement, or the performance of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement, including the initiation of any stockholder litigation with respect to the Merger Agreement or the transactions contemplated thereby or any termination of, reduction in or similar negative impact on relationships, contractual or otherwise, with any portfolio companies of Sierra or Barings BDC, as applicable, or any loss or diminution

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of rights or privileges, or any creation of, increase in or acceleration of obligations, pursuant to any contract or otherwise, on the part of Sierra or Barings BDC or their respective subsidiaries or portfolio companies;

•        any action taken by such party or any of its subsidiaries (or, with respect to Sierra, any of its portfolio companies), in each case which is required or expressly permitted by the Merger Agreement;

•        any actions taken (or omitted to be taken) at the written request of Sierra or Barings, as applicable, to the extent taken in accordance with such request;

•        any termination, expiration or non-renewal of any Sierra or Barings BDC material contract, as applicable, or any financing arrangement, or any notice of such termination or non-renewal, other than as a result of any material breach by Sierra or Barings BDC, as applicable, or any of their respective subsidiaries of the terms of any such material contract; and

•        in the case of Sierra, the termination of the employment of any person employed by a portfolio company;

provided that the facts, circumstances, events, changes, occurrences or effects set forth in the first, second, third and seventh bullets above shall be taken into account in determining whether a material adverse effect has occurred to the extent (but only to such extent) such facts, circumstances, events, changes, occurrences or effects have a disproportionate adverse impact on such party and its subsidiaries, taken as a whole, relative to the other participants in the industries in which such party and its subsidiaries operate.

Interim Operations of Sierra

Under the Merger Agreement, Sierra has agreed that, between the date of the Merger Agreement and the closing of the Merger (or until the earlier termination of the Merger Agreement), except (1) as may be required by law, (2) as may be agreed in writing by Barings BDC (which consent shall not be unreasonably withheld, delayed or conditioned), (3) as may be expressly contemplated or permitted by the Merger Agreement or (4) as set forth in its disclosure letter to the Merger Agreement, Sierra will, and will cause each of its subsidiaries to, use reasonable best efforts to conduct its business in the ordinary course of business and in a manner consistent with past practice in all material respects and will not, and will not permit any of its subsidiaries to, take certain specified actions. In particular, Sierra will not, and will not permit any of its subsidiaries to:

•        amend or otherwise change Sierra’s charter or bylaws (or, in any material respect, such equivalent organizational or governing documents of any of its subsidiaries);

•        except for transactions solely among Sierra and its wholly owned subsidiaries, split, combine, reclassify, redeem, purchase, repurchase or otherwise acquire or amend the terms of any capital stock or other equity interests of Sierra or its subsidiaries (other than any wholly owned subsidiaries) or any options, warrants, or rights to acquire any such shares or other equity interests;

•        except for transactions solely among Sierra and its wholly owned subsidiaries, issue, sell, pledge, dispose, encumber or grant any (1) shares of its or its subsidiaries’ capital stock, (2) options, warrants, convertible securities or other rights of any kind to acquire any shares of Sierra’s or its subsidiaries’ capital stock or (3) appreciation rights, phantom equity or similar rights with respect to, or valued in whole or in part in reference to, Sierra or any of its subsidiaries;

•        declare, authorize, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to Sierra’s or any of its subsidiaries’ capital stock or other equity interests, other than (1) dividends and distributions paid by any subsidiary of Sierra to Sierra or any of its subsidiaries, (2) regular cash distributions payable by Sierra in an aggregate amount not to exceed $0.03 per share of Sierra Common Stock per quarter or (3) a Sierra Tax Dividend;

•        acquire or dispose of (including by merger, consolidation or acquisition of stock or assets), or lease or license or otherwise sell, transfer or encumber, any material assets other than equity interests and loans to be acquired by Barings BDC in the Merger (“acquired investments”), except (1) acquisitions among Sierra and its wholly owned subsidiaries or (2) acquisitions of assets with aggregate purchase prices not exceeding $5.0 million, provided that this does not apply with respect to acquired investments;

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•        incur any indebtedness or guarantee any indebtedness of any person;

•        amend in any material respect any Sierra material contract which cannot be terminated without material penalty upon notice of 30 days or less; provided that this does not apply to acquired investments;

•        make any investments (including a loan, guarantee, equity investment, cash contribution or otherwise) (1) with respect to any portfolio company in which an investment specified in Sierra’s disclosure letter to the Merger Agreement (a “specified investment”) has been made, (2) with respect to an existing portfolio company other than one in which a specified investment has been made, that are greater in the aggregate than the lesser of (x) 10% of the fair market value of such existing investment in such portfolio company as of June 30, 2021 as reflected in the schedule of investments included in Sierra’s Quarterly Report on Form 10-Q filed with the SEC on August 13, 2021 (“Sierra’s Second Quarter 10-Q”) and (y) $500,000 or (3) in any portfolio company in which Sierra does not own an investment as of the date of the Merger Agreement;

•        dispose of (including by merger, consolidation or acquisition or disposition of stock or assets), forgive any amount under or lease or license or otherwise sell, transfer or encumber, all or any portion of an acquired investment, other than (1) the sale of an acquired investment listed in Sierra’s disclosure letter to the Merger Agreement for cash consideration not less than 98% of the value of such investment as set forth in such disclosure letter or (2) sales of assets with an aggregate fair market value as of June 30, 2021 as reflected in the schedule of investments included in Sierra’s Second Quarter 10-Q not exceeding $5.0 million for cash consideration not less than 98% of the value set forth in such schedule of investments; provided, that Sierra and its subsidiaries shall be permitted to encumber assets, including acquired investments, to the extent required to take such action under the Existing Sierra Loan Agreement (as defined below);

•        make any material change to its methods of accounting, except (1) as required by United States generally accepted accounting principles, consistently applied in accordance with past practice (“GAAP”) (or any interpretation thereof), Regulation S-X of the Exchange Act or a governmental authority or quasi-governmental authority (including the Financial Accounting Standards Board or any similar organization), (2) to permit the audit of Sierra’s financial statements in compliance with GAAP, (3) as required by a change in applicable law or (4) as disclosed in Sierra’s public filings with the SEC prior to the date of the Merger Agreement;

•        (1) make, change or revoke any material tax election, (2) change any material method of tax accounting other than in the ordinary course of business, (3) file any material amended tax return other than in the ordinary course of business, (4) settle or compromise any audit or proceeding relating to a material amount of taxes, (5) agree to an extension or waiver of the statute of limitations with respect to a material amount of taxes, (6) enter into any “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of state, local or foreign law) with respect to any material tax or (7) surrender any right to claim a material tax refund;

•        change Sierra’s investment objectives, or enter into a new line of business outside Sierra’s investment objectives, in each case as described in Sierra’s SEC reports (provided, that this prohibition does not apply to any Sierra portfolio company);

•        (1) modify, amend or waive any of the material terms, covenants or conditions of any investment document relating to (w) any acquired investment with a fair market value equal to or greater than $3.5 million as of June 30, 2021 as reflected in the schedule of investments included in Sierra’s Second Quarter 10-Q, (x) any acquired investment that was a control investment of Sierra as of the date of the Merger Agreement, (y) any acquired investment set forth in Sierra’s disclosure letter to the Merger Agreement or (z) any acquired investment in a portfolio company that is in default under the applicable investment documents, or (2) authorize the acceleration or prepayment (partial or in full, other than a prepayment at the option of the borrower) of (w) any acquired investment with a fair market value equal to or greater than $3.5 million as of June 30, 2021 as reported in the schedule of investments included in Sierra’s Second Quarter 10-Q, (x) any acquired investment that was a control investment of Sierra as

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of the date of the Merger Agreement, (y) any acquired investment set forth in Sierra’s disclosure letter to the Merger Agreement or (z) any acquired investment in a portfolio company that is in default under the applicable investment documents;

•        adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Sierra;

•        (1) increase the compensation or benefits payable or that may become payable to any of its directors, (2) enter into, adopt, or establish any employee benefit plan, program, agreement, arrangement or policy, including without limitation any employment, severance, change of control or retention agreement or “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or (3) hire any employee or individual consultant;

•        modify any provision of the acquired loan documents that (i) alters the order of application of proceeds or the pro rata sharing of payments required thereby, (ii) alters the provisions relating to maturity, lender commitments, mandatory prepayments, scheduled amortization, interest rates (including the composition thereof), subordination and/or intercreditor arrangements, lender consent requirements or amendments or (iii) releases any security or collateral for any acquired loan (other than releases required under the applicable investment documents or the ordinary course release of funds from escrow or reserve accounts required by the applicable investment documents); provided, however, that it will not be a violation of this prohibition if any such modification was not proposed, approved or consented to by Sierra; or

•        enter into any agreement to do any of the foregoing.

In accordance with Sierra’s agreement not to issue, sell or grant any shares of its capital stock, Sierra suspended its distribution reinvestment plan.

Interim Operations of Barings BDC

Similarly, Barings BDC has agreed that, between the date of the Merger Agreement and the closing of the First Merger (or until the earlier termination of the Merger Agreement), except (1) as may be required by law, (2) as may be agreed in writing by Sierra (which consent shall not be unreasonably withheld, delayed or conditioned), (3) as may be expressly contemplated or permitted by the Merger Agreement or (4) as set forth in its disclosure letter to the Merger Agreement, Barings BDC will, and will cause each of its subsidiaries to, use reasonable best efforts to conduct its business in the ordinary course of business and in a manner consistent with past practice in all material respects, and Barings BDC will not, and will not permit any of its subsidiaries to, take certain specified actions. In particular, Barings BDC will not, and will not permit any of its subsidiaries to take the following actions:

•        amend or otherwise change the organizational documents of Barings BDC (or, in any material respect, such equivalent organizational or governing documents of any of its subsidiaries);

•        except for transactions solely among Barings BDC and its wholly owned subsidiaries, split, combine, reclassify, redeem, purchase, repurchase or otherwise acquire or amend the terms of any capital stock or other equity interests of Barings BDC or its subsidiaries (other than any wholly owned subsidiaries) or any options, warrants, or rights to acquire any such shares or other equity interests;

•        except for transactions solely among Barings BDC and its wholly owned subsidiaries or in connection with Barings BDC’s dividend reinvestment plan, issue, sell or grant any (1) shares of its or its subsidiaries’ capital stock, (2) options, warrants, convertible securities or other rights of any kind to acquire any shares of its or its subsidiaries’ capital stock or (3) appreciation rights, phantom equity or similar rights with respect to, or valued in whole or in part in reference to, Barings BDC or any of its subsidiaries;

•        declare, authorize, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to Barings BDC’s or any of its subsidiaries’ capital stock or other equity interests, other than (1) dividends and distributions paid by any subsidiary of Barings BDC to Barings BDC or any of its subsidiaries, (2) regular quarterly cash distributions payable by Barings BDC on a quarterly

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basis consistent with past practices and Barings BDC’s investment objectives and policies as publicly disclosed on or prior to the date of the Merger Agreement or (3) the authorization and payment of any dividend or distribution necessary for Barings BDC to maintain its qualification as a RIC, as reasonably determined by Barings BDC;

•        acquire or dispose of (including by merger, consolidation or acquisition or sale of stock or assets) or lease or license or otherwise sell or transfer, any corporation, partnership, limited liability company, other business organization or any division or material amount of assets thereof outside the ordinary course of business in a transaction that would require approval of the Barings BDC’s stockholders or would reasonably be expected to require a material delay (i.e., more than 10 days) in preparing or mailing the Form N-14, a material delay or postponement in the timing of the Barings BDC Special Meeting or a material delay in the closing of the First Merger, provided that this does not prohibit (1) transactions solely among Barings BDC and its wholly owned subsidiaries and (2) acquisitions and sales of Barings BDC’s portfolio companies, interests therein or assets thereof in the ordinary course of Barings BDC’s business consistent with past practice and in accordance with its investment objectives, policies and restrictions;

•        make any material change to Barings BDC’s method of accounting, except (1) as required by GAAP (or any interpretation thereof), Regulation S-X of the Exchange Act or a governmental authority or quasi-governmental authority (including the Financial Accounting Standards Board or any similar organization), (2) to permit the audit of Barings BDC’s financial statements in compliance with GAAP, (3) as required by a change in applicable law or (4) as disclosed in Barings BDC’s SEC filings prior to the date of the Merger Agreement;

•        (1) make, change or revoke any material tax election, (2) change any material method of tax accounting other than in the ordinary course of business, (3) file any material amended tax return other than in the ordinary course of business, (4) settle or compromise any audit or proceeding relating to a material amount of taxes, (5) agree to an extension or waiver of the statute of limitations with respect to a material amount of taxes, (6) enter into any “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of state, local or foreign law) with respect to any material tax or (7) surrender any right to claim a material tax refund;

•        change Barings BDC’s investment objectives or enter into a new line of business outside Barings BDC’s investment objectives, in each case as described in Barings BDC’s SEC reports, provided that this prohibition does not apply in any way to any Barings BDC portfolio company;

•        adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Barings BDC;

•        amend, terminate, modify or waive any material rights under the Existing Barings BDC Advisory Agreement in a manner adverse to Barings BDC;

•        (1) increase in any material respect the compensation or benefits payable or that may become payable to any of its directors or (2) enter into, adopt, or establish any employee benefit plan, program, agreement, arrangement or policy, including without limitation any employment, severance, change of control or retention agreement or “employee benefit plan” within the meaning of Section 3(3) of ERISA; or

•        enter into any agreement to do any of the foregoing.

Additional Covenants

Sierra and Barings BDC have agreed to additional covenants between the execution of the Merger Agreement and the closing of the Merger including, but not limited to, the following matters:

Preparation of the Form N-14 and Proxy Statement

Sierra and Barings BDC shall cooperate to prepare this joint proxy statement/prospectus and Form N-14 as promptly as practicable after the execution of the Merger Agreement and (ii) Barings BDC shall file with the SEC the Form N-14, in which this joint proxy statement will be included as a prospectus, in connection with the registration

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under the Securities Act of Barings BDC Common Stock to be issued in the First Merger as promptly as practicable following the date of the Merger Agreement but no later than 40 business days following the date of the Merger Agreement. Each of Barings BDC and Sierra will use its reasonable best efforts to (1) cause the Form N-14 and this joint proxy statement/prospectus to comply with the applicable rules and regulations promulgated by the SEC and (2) have the Form N-14, of which this joint proxy statement/prospectus is a part, declared effective under the Securities Act as promptly as practicable after such filing (including by responding to comments from the SEC), and, prior to the effective date of the Form N-14, Barings BDC will take all action reasonably required to be taken under any applicable state securities laws in connection with the issuance of shares of Barings BDC Common Stock in the First Merger. Each of Barings BDC and Sierra will furnish all information as may be reasonably requested by the other in connection with any such action and the preparation, filing and distribution of the Form N-14 and this joint proxy statement/prospectus. As promptly as practicable after the Form N-14 shall have become effective, each of Barings BDC and Sierra will use its reasonable best efforts to cause this proxy statement to be mailed to their respective stockholders. No filing of, or amendment or supplement to, the Form N-14 will be made by Barings BDC, and no filing of, or amendment or supplement to, the Joint Proxy Statement will be made by Sierra, in each case without providing the other party with a reasonable opportunity to review and comment thereon. Barings BDC and Sierra will cooperate to correct any misstatements of material facts or omissions of material facts from the Form N-14 and this joint proxy statement/prospectus, and shall coordinate with one another in connection with the receipt of comments or requests for amendments or supplements by the SEC.

Sierra and Barings BDC Special Meetings

Subject to the earlier termination of the Merger Agreement in accordance with the terms of the Merger Agreement, Sierra and Barings BDC will each, as soon as reasonably practicable following the effectiveness of the Form N-14, duly call, give notice of, convene and hold a special meeting of its respective stockholders for the purpose of seeking, in the case of Sierra, the Sierra Stockholder Approval or, in the case of Barings BDC, the Barings BDC Stockholder Approval; provided, that Sierra and Barings BDC, as applicable, may postpone or adjourn the Special Meetings to a later date (1) with the prior consent of Barings BDC or Sierra, as applicable (which consent shall not be unreasonably withheld, conditioned or delayed), (2) for the absence of a quorum (not to exceed 120 days from the original record date), (3) to allow reasonable additional time (not to exceed 120 days from the original record date) to obtain approval of the First Merger or solicit additional proxies to obtain the Sierra Stockholder Approval or the Barings BDC Stockholder Approval, whether or not a quorum is present, (4) if required by applicable law or (5) to allow reasonable additional time for the filing and dissemination of any supplemental or amended disclosure if, in the good faith judgment of the Sierra Board or the Barings BDC Board (after consultation in each case with outside legal counsel), the failure to do so would be inconsistent with Sierra or Barings BDC’s directors’ duties under applicable law.

The Sierra Board has approved and declared advisable the Merger Agreement and the transactions contemplated thereby and recommended that Sierra stockholders vote to approve the First Merger (the “Sierra Board Recommendation”). Except as expressly provided by the Merger Agreement, neither the Sierra Board nor any committee thereof will (1) withhold, withdraw or modify or qualify, or propose publicly to withhold, withdraw or modify or qualify the Sierra Board Recommendation, in each case in a manner materially adverse to Barings BDC, (2) fail to include the Sierra Board Recommendation in this joint proxy statement/prospectus or (3) approve, determine to be advisable or recommend, or propose publicly to approve, determine to be advisable or recommend, any Competing Proposal (as defined herein under the heading “— Additional Covenants — No Solicitation”) (each such action in (1), (2) and (3) being referred to as a “Sierra Adverse Recommendation Change”). Notwithstanding any Sierra Adverse Recommendation Change, unless the Merger Agreement is terminated in accordance with its terms, the obligations of the parties thereunder will continue in full force and effect and such obligations will not be affected by the commencement, public proposal, public disclosure or communication to Sierra of any Competing Proposal (whether or not a Superior Proposal or any Intervening Event (each as defined herein under the heading “— Additional Covenants — No Solicitation”)).

The Barings BDC Board has approved and declared advisable the Merger Agreement and the transactions contemplated thereby and recommended that Barings BDC stockholders approve the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal (the “Barings BDC Board Recommendation”) and the other matters presented for Barings BDC stockholder approval in this joint proxy statement/prospectus. Neither the Barings BDC Board nor any committee thereof shall (x) withhold, withdraw, modify, qualify, or propose publicly

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to withhold, withdraw, modify or qualify the Barings BDC Board Recommendation, in each case in a manner materially adverse to Sierra or (y) fail to include the Barings BDC Board Recommendation in this joint proxy statement/prospectus.

Appropriate Actions; Consents; Filings

Each of the parties to the Merger Agreement will use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the Merger Agreement and to cause the conditions to the First Merger set forth in the Merger Agreement to be satisfied, including using reasonable best efforts to accomplish the following: (1) the obtaining of all necessary actions or non-actions, consents and approvals from governmental authorities or other persons necessary in connection with the consummation of the transactions contemplated by the Merger Agreement, including the First Merger, and the making of all necessary registrations and filings and the taking of all reasonable steps as may be necessary to obtain an approval from, or to avoid a proceeding by, any governmental authority or other persons necessary in connection with the consummation of the transactions contemplated by the Merger Agreement, including the First Merger; (2) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of the transactions contemplated thereby, including the First Merger, performed or consummated by such party in accordance with the terms of the Merger Agreement; and (3) the execution and delivery of any additional instruments reasonably necessary to consummate the First Merger and any other transactions to be performed or consummated by such party in accordance with the terms of the Merger Agreement and to carry out fully the purposes of the Merger Agreement. Each of Sierra, Barings BDC and Acquisition Sub will furnish to the other such necessary information and reasonable assistance as the other may reasonably request in connection with the preparation of any required governmental filings or submissions and will cooperate in responding to any investigation or other inquiry from a governmental authority or in connection with any proceeding initiated by a private party. Neither Sierra nor Barings BDC are required to take or commit to take any actions under this covenant of the Merger Agreement that would or would reasonably be expected to result in a material adverse effect on the part of Barings BDC or Sierra.

To the extent required by applicable law, Barings BDC and Sierra will, as promptly as reasonably practicable after the execution of the Merger Agreement, make and not withdraw its respective filings under the HSR Act.

Access to Information; Confidentiality

Upon reasonable notice, each of Sierra and Barings BDC shall (and shall cause each of its subsidiaries to) afford reasonable access to the other’s representatives, in a manner not disruptive to the operations of the business of such party, during normal business hours and upon reasonable notice throughout the period prior to the closing of the Merger (or until the earlier termination of the Merger Agreement), to its and its subsidiaries properties, books and records and personnel and, during such period, shall (and shall cause each of its subsidiaries to) furnish promptly to such representatives all information concerning the business, properties and personnel of such party and its subsidiaries as may reasonably be requested.

No Solicitation

Sierra has agreed to, and to cause its subsidiaries and instruct its representatives to, immediately cease and cause to be terminated any existing solicitation of, or discussions or negotiations with, any third party relating to any Competing Proposal or any inquiry, discussion, offer or request that could reasonably be expected to lead to a Competing Proposal (an “Inquiry”).

In addition, except as otherwise permitted by the Merger Agreement, until the closing of the Merger (or until the earlier termination of the Merger Agreement), Sierra shall not, and shall cause its subsidiaries and instruct its representatives, not to directly or indirectly:

•        initiate, solicit or knowingly encourage or facilitate (including by way of furnishing or disclosing non-public information) any Inquiries or the making, submission or implementation of any Competing Proposal;

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•        enter into any agreement, arrangement or discussions with respect to any Competing Proposal or enter into any contract requiring it to abandon, terminate or fail to consummate the Merger, including, in the case of an agreement or contract, any letter of intent, agreement in principle, memorandum of understanding or confidentiality agreement (collectively, a “Competing Agreement”); or

•        initiate or engage in negotiations or discussions with respect to, or that could reasonably be expected to lead to, a Competing Proposal.

Notwithstanding the foregoing, Sierra is permitted to grant a waiver of or terminate any “standstill” or similar obligation of any third party with respect to Sierra or any of its subsidiaries solely for the purpose of allowing such third-party to submit a Competing Proposal.

If, at any time prior to the date that the Sierra Stockholder Approval is obtained, Sierra (or its representatives on Sierra’s behalf) receives an unsolicited bona fide written Competing Proposal that did not result from a breach of the non-solicitation provisions of the Merger Agreement from any third party, Sierra and its representatives may contact such third party to clarify the terms and conditions thereof. In addition, Sierra and the Sierra Board and its representatives may engage or participate in negotiations or substantive discussions with, or furnish any information and other access, to any third party making such Competing Proposal and its representatives, affiliates and prospective debt and equity financing sources only where:

•        such Competing Proposal either constitutes a Superior Proposal or could reasonably be expected to lead to a Superior Proposal and a failure to do so would be inconsistent with the Sierra directors’ duties under applicable law;

•        prior to furnishing any material non-public information concerning Sierra and its subsidiaries, Sierra receives from such person, to the extent such person is not already subject to a confidentiality agreement with Sierra, a confidentiality agreement containing confidentiality terms that are not materially less favorable in the aggregate to Sierra than those contained in the confidentiality agreement between Sierra and Barings BDC (an “Acceptable Confidentiality Agreement”); and

•        Sierra shall (subject to the terms of any confidentiality agreement existing prior to the date of the Merger Agreement) promptly (and in any event within 24 hours) provide or make available to Barings BDC any non-public information concerning it or its subsidiaries that it provides to any third party given such access was not previously made available to Barings BDC and its representatives.

Until the closing of the Merger (or the earlier termination of the Merger Agreement), Sierra shall, as promptly as reasonably practicable, and in any event within two business days, of receiving and Inquiry or Competing Proposal, notify Barings BDC of such Inquiry or Competing Proposal (including the identity of the person (or group of persons) making such Inquiry or Competing Proposal and, if applicable, the material terms and conditions of any such Competing Proposal and copies of any written materials received by Sierra in connection with any of the foregoing.

Sierra will also keep Barings BDC informed on a reasonably current basis of the status and material terms and conditions (including amendments or proposed amendments) of any such Inquiry or Competing Proposal.

The Sierra Board shall not effect a Sierra Adverse Recommendation Change and shall not approve or recommend, or allow Sierra or any of its subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, or definitive merger or similar agreement with respect to any Competing Proposal (other than an Acceptable Confidentiality Agreement), and neither the Sierra Board nor any committee thereof will resolve, agree or publicly propose to take any such actions, except as follows. At any time prior to the receipt of the Sierra Stockholder Approval, the Sierra Board may (A) effect a Sierra Adverse Recommendation Change if, upon the occurrence of an Intervening Event, the Sierra Board determines in good faith, after consultation with its outside legal counsel, that failure to do so would be inconsistent with the Sierra directors’ duties under applicable law or (B) authorize, adopt or approve a Superior Proposal and cause or permit Sierra to enter into a definitive agreement with respect to such Superior Proposal (an “Alternative Acquisition Agreement”) if Sierra has received a bona fide written Competing

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Proposal that did not result from a breach of the non-solicitation provisions of the Merger Agreement that the Sierra Board has determined in good faith, after consultation with its outside professional advisors, constitutes a Superior Proposal, provided in the case of both clause (A) and (B) above that:

•        Sierra shall have provided prior written notice to Barings BDC, at least three business days in advance, that it intends to effect a Sierra Adverse Recommendation Change and/or terminate the Merger Agreement, which notice shall specify in reasonable detail the basis for the Sierra Adverse Recommendation Change and/or termination and, in the case of a Superior Proposal, the identity of the person or group of persons making such Superior Proposal and the material terms and conditions thereof and copies of the proposed transaction documents, or (B) in the case of an Intervening Event, reasonable detail regarding the Intervening Event;

•        after providing such notice and prior to effecting such Sierra Adverse Recommendation Change and/or terminating the Merger Agreement, Sierra shall have negotiated, and shall have caused its representatives to be available to negotiate, with Barings BDC and Acquisition Sub in good faith (to the extent Barings BDC and Acquisition Sub desire to negotiate) during such three business day period to make such adjustments to the terms and conditions of the Merger Agreement as would obviate the need for Sierra to effect the Sierra Adverse Recommendation Change and/or terminate the Merger Agreement (provided that any change to the financial or other material terms of the Superior Proposal giving rise to this notice shall require a new notice and a new two business day period); and

•        following the end of such negotiation period, the Sierra Board shall have determined in good faith, after consultation with its outside legal counsel and, with respect to clause (A) below, its financial advisor, taking into account any changes to the Merger Agreement proposed in writing by Barings BDC in response to the notice of the Sierra Adverse Recommendation and/or notice of a Superior Proposal, that (A) the Superior Proposal giving rise to the notice of Superior Proposal continues to be a Superior Proposal or (B) in the case of an Intervening Event, the failure of the Sierra Board to effect a Sierra Adverse Recommendation Change would continue to be inconsistent with Sierra’s directors’ duties under applicable law.

For purposes of the Merger Agreement:

•        “Competing Proposal” means any inquiry, proposal, discussions, negotiations or offer from any person or group (as defined in Section 13(d) of the Exchange Act) of persons (other than Barings BDC, Acquisition Sub or any affiliate thereof) (1) with respect to a merger, consolidation, tender offer, exchange offer, stock acquisition, asset acquisition, share exchange, business combination, recapitalization, liquidation, dissolution, joint venture or similar transaction involving Sierra or any of its subsidiaries, (2) relating to any direct or indirect acquisition, in one transaction or a series of transactions, of (a) assets or businesses (including any mortgage, pledge or similar disposition thereof but excluding any bona fide financing transaction) that constitute or represent, or would constitute or represent if such transaction is consummated, 20% or more of the total assets, net revenue or net income of Sierra and its subsidiaries, taken as a whole, for the 12 month period ending on the last day of Sierra’s then most recently completed fiscal quarter, or (b) 20% or more of the outstanding shares of capital stock of, or other equity or voting interests in, Sierra or in any of its subsidiaries, in each case other than the Merger, or (3) to replace SIC Advisors as Sierra’s investment adviser and become the primary investment adviser to Sierra (other than in connection with a transaction covered in the foregoing clause (1) or (2)), whether or not such change is coupled with a capital infusion into Sierra, a purchase of shares of Sierra or a commitment to provide credit support to Sierra (or an undertaking to make such a capital infusion, purchase of shares or to provide credit support).

•        “Superior Proposal” means an unsolicited Competing Proposal (with all percentages in the definition of Competing Proposal increased to 50%) made by a third party that did not result from a breach of the no solicitation provisions of the Merger Agreement that the Sierra Board determines in good faith, after consultation with its financial advisor and outside legal advisors, and considering such factors as the Sierra Board considers to be appropriate, (1) is more favorable from a financial point of view to Sierra

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stockholders than the transactions contemplated by the Merger Agreement (including any revisions to the terms of the Merger Agreement committed to by Barings BDC to Sierra in writing in response to such Competing Proposal made to Sierra under the Merger Agreement), (2) is reasonably likely to be consummated (taking into account, among other things, legal, financial, regulatory and other aspects of such proposal, including any conditions and the identity of the offeror) on a timely basis, and (3) in respect of which any financing required has been determined by the Sierra Board to be reasonably likely to be obtained as evidenced by a written commitment of a reputable financing source.

•        “Intervening Event” means a material event, occurrence, development or change in circumstances with respect to Sierra and its subsidiaries, taken as a whole, that occurred or arose after the date of the Merger Agreement, which was unknown to, nor reasonably foreseeable by, the Sierra Board as of the date of the Merger Agreement and becomes known to or by the Sierra Board prior to the time the Sierra Stockholder Approval is obtained; provided, however, that the receipt, existence of or terms of an Inquiry or Competing Proposal or any matter relating thereto or consequence thereof will not constitute or be considered in determining whether there has been, an Intervening Event.

Directors’ and Officers’ Indemnification and Insurance

Barings BDC and Acquisition Sub have agreed that all rights to exculpation and indemnification for acts or omissions occurring at or prior to the closing of the Merger, whether asserted or claimed prior to, at or after the closing of the Merger (including any matters arising in connection with the transactions contemplated by the Merger Agreement), existing as of the date of the Merger Agreement in favor of the current or former directors, officers, managers, or employees, as the case may be, of Sierra, its subsidiaries or affiliates, including, but not limited to officers and employees of SIC Advisors, Sierra’s investment adviser, to the extent related to the management of Sierra (the “D&O Indemnified Parties”) as provided in their respective organizational documents or any contract as in effect on the date of the Merger Agreement shall continue in full force and effect Barings BDC has also agreed to:

•        indemnify and hold harmless each D&O Indemnified Party against and from any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, proceeding or investigation, whether civil, criminal, administrative or investigative, to the extent such claim, proceeding or investigation arises out of or pertains to: (1) any alleged action or omission in such D&O Indemnified Party’s capacity as a director, officer or employee of Sierra, its investment adviser or any of its subsidiaries prior to the closing of the Merger, or (2) the Merger Agreement or the transactions contemplated thereby; and

•        pay in advance of the final disposition of any such claim, proceeding or investigation the expenses (including attorneys’ fees) of such D&O Indemnified Party upon receipt of an undertaking by or on behalf of such D&O Indemnified Party to repay such amount if it shall ultimately be determined that such D&O Indemnified Party is not entitled to be indemnified by applicable law.

Notwithstanding anything to the contrary contained in the Merger Agreement, Barings BDC will not settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any claim, proceeding or investigation, unless such settlement, compromise, consent or termination includes an unconditional release of all of the D&O Indemnified Parties covered by the claim, proceeding or investigation from all liability arising out of such claim, proceeding or investigation.

Barings BDC has agreed to, and will cause its subsidiaries to purchase and maintain in full force and effect, a six year “tail” policy, on terms and conditions no less advantageous to the D&O Indemnified Parties than the existing directors’ and officers’ liability insurance and fiduciary insurance maintained by Sierra as of the date of the Merger Agreement, covering claims arising from facts, events, acts or omissions that occurred at or prior to the closing of the Merger, including the transactions contemplated by the Merger Agreement (provided that Barings BDC will not be required to pay a total premium for such tail policy in excess of 300% of the annual premium currently paid by Sierra for such insurance, but in such case shall purchase as much of such coverage as possible for such amount).

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Notification of Certain Matters

Subject to applicable law, Sierra will give prompt written notice to Barings BDC, and Barings BDC will give prompt written notice to Sierra, of (1) any notice or other communication received by such party from any governmental authority in connection with the Merger Agreement, the Merger or the transactions contemplated by the Merger Agreement, or from any person alleging that the consent of such person is or may be required in connection with the Merger or the transactions contemplated by the Merger Agreement, if the subject matter of such communication or the failure of such party to obtain such consent could be material to Sierra, the Surviving Corporation or Barings BDC, and (2) any claims, investigations or proceedings commenced or, to such party’s knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its subsidiaries which relate to the Merger Agreement, the Merger or the transactions contemplated by the Merger Agreement.

Public Announcements

Except as otherwise provided in the Merger Agreement, prior to any Sierra Adverse Recommendation Change, each of Sierra, Barings BDC and Acquisition Sub will consult with each other before issuing any press release or public announcement with respect to the Merger Agreement or the transactions contemplated thereby, and none of the parties or their affiliates shall issue any such press release or public announcement prior to obtaining the other parties’ written consent (which consent shall not be unreasonably withheld or delayed), except that no consent shall be required to the extent disclosure may be required by applicable law. Sierra may, without Barings BDC’s or Acquisition Sub’s consent, communicate to its employees, portfolio companies, customers, suppliers and consultants in a manner consistent with prior communications of Sierra or in a manner that is consistent with a communications plan previously agreed to by Barings BDC and Sierra.

Acquisition Sub

Barings BDC will take all actions necessary to (a) cause Acquisition Sub to perform its obligations under the Merger Agreement and to consummate the First Merger on the terms and conditions set forth in the Merger Agreement and (b) ensure that, prior to the Effective Time, Acquisition Sub shall not conduct any business, or incur or guarantee any indebtedness or make any investments, other than as specifically contemplated by the Merger Agreement.

No Control of the Other Party’s Business

Nothing contained in the Merger Agreement is intended to give Barings BDC or Sierra, directly or indirectly, the right to control or direct the operations of the other party or its subsidiaries prior to the closing of the Merger. Prior to the closing of the Merger, each of Barings BDC and Sierra will exercise, consistent with the terms and conditions of the Merger Agreement, complete control and supervision over its and its subsidiaries’ operations.

Rule 16b-3 Matters

Prior to the closing of the Merger, each of Barings BDC and Sierra will take all such steps as may be required to cause any dispositions or deemed dispositions of Sierra Common Stock (including derivative securities with respect to Sierra Common Stock) or acquisitions or deemed acquisitions of Barings BDC Common Stock (including derivative securities with respect to Barings BDC Common Stock) resulting from the transactions contemplated by the Merger Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Sierra or will become subject to such reporting requirements with respect to Barings BDC, to be exempt under Rule 16b-3 promulgated under the Exchange Act, to the extent permitted by applicable law.

Repayment of Existing Sierra Loan Agreement

At least five business days prior to the Closing Date, Sierra will deliver to Barings BDC draft copies of customary payoff letters (the “Payoff Letters”) with respect to the credit facility under the Amended and Restated Loan Agreement, dated as of September 29, 2017, by and among Alpine Funding LLC, as borrower,

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JPMorgan Chase Bank, National Association, as administrative agent, the financing providers from time to time party thereto, Sierra’s investment adviser, as the portfolio manager, and the collateral administrator, collateral agent and securities intermediary party thereto, as amended by Amendment No. 1 to Amended and Restated Loan Agreement, dated as of November 18, 2020, among Alpine Funding LLC, Sierra’s investment adviser, the financing providers thereto, Citibank, N.A., as collateral agent and securities intermediary, Virtus Group, LP, as collateral administrator, and JPMorgan Chase Bank, National Association, as administrative agent (the “Existing Sierra Loan Agreement”), and, on or prior to the Closing Date, Barings BDC will deliver to Sierra an executed copy of the Payoff Letters to be effective upon the closing of the Merger. Sierra will, and will cause its subsidiaries to, deliver all the documents required for the termination of commitments under the Existing Sierra Loan Agreement, subject to the closing of the First Merger and the repayment in full of all obligations then outstanding thereunder.

Certain Tax Matters

Each of Sierra, Barings BDC and Acquisition Sub will use its reasonable best efforts to cause the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, including by not taking any action that such party knows is reasonably likely to prevent such qualification. Each of Sierra, Barings BDC and Acquisition Sub shall report the Merger and the other transactions contemplated by the Merger Agreement in a manner consistent with the intended tax treatment of the Merger.

During the period from the date of the Merger Agreement to the closing of the Merger, each of Barings BDC and Sierra will not, and will not permit any of its subsidiaries to, directly or indirectly, without the prior written consent of the other party, take any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to cause such party to fail to qualify as a RIC.

Each of Sierra and Barings BDC will use its reasonable best efforts to obtain the tax opinion described in the fourth bullet point under the heading “— Conditions to Closing the First Merger — Conditions to the Obligation of Sierra to Effect the First Merger,” including making representations and covenants requested by tax counsel in order to render such tax opinion.

Stock Exchange Listing

Barings BDC will use its best efforts to cause the shares of Barings BDC Common Stock to be issued in connection with the First Merger to be approved for listing on the NYSE, subject to official notice of issuance, at or prior to the closing of the Merger.

Takeover Statutes and Provisions

None of Sierra, Barings BDC or the Acquisition Sub will take any action that would cause the First Merger and related transactions to be subject to requirements imposed by any takeover statutes. Each of Sierra and Barings BDC will take all necessary steps within its control to exempt (or ensure the continued exemption of) the First Merger from, or if necessary challenge the validity or applicability of, any applicable takeover statute, as now or hereafter in effect.

Stockholder Litigation

Each of Sierra and Barings BDC will reasonably cooperate and consult with one another in connection with the defense and settlement of any proceeding by Sierra stockholders or Barings BDC stockholders against any of them or any of their respective directors, officers or affiliates with respect to the Merger Agreement or the transactions contemplated thereby. Each of Sierra and Barings BDC (1) shall provide the other party with prompt written notice of any such proceeding brought by its stockholders and keep the other party reasonably informed of any material developments in connection therewith and (2) shall not settle any such proceeding without the prior written consent of the other party (such consent not to be unreasonably delayed, conditioned or withheld).

Update to NAV

No later than the close of business on the 10th business day immediately following the end of each calendar month ending after the date of the Merger Agreement, Sierra shall deliver to Barings BDC its estimated NAV as of the end of such month.

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Coordination of Dividends

Barings BDC and Sierra shall coordinate with each other in designating the record and payment dates for any dividends or distributions to its stockholders, including a Sierra Tax Dividend, declared in accordance with the Merger Agreement in any calendar quarter in which the Closing Date might occur.

For purposes of the Merger Agreement and this joint proxy statement/prospectus, a “Sierra Tax Dividend” means a dividend or dividends, with respect to any applicable tax year, which is deductible pursuant to the dividends paid deduction under Section 562 of the Code, and shall have the effect of distributing to the Company’s stockholders all of its previously undistributed (i) “investment company taxable income” within the meaning of Section 852(b) of the Code (determined without regard to Section 852(b)(2)(D) of the Code), (ii) any prior year shortfall as determined under Section 4982(b)(2) of the Code, (iii) amounts constituting the excess of (A) the amount specified in Section 852(a)(1)(B)(i) of the Code over (B) the amount specified in Section 852(a)(1)(B)(ii) of the Code, and (iv) net capital gain (within the meaning of Section 1222(11) of the Code), if any, in each case recognized either in the applicable tax year or any prior tax year, or any other dividend or distribution necessary for Sierra to maintain its qualification as a RIC, as reasonably determined by Sierra.

Credit Support Agreement; Barings BDC Trading Plan

Promptly following the closing of the Merger, Barings and Barings BDC shall enter into the Credit Support Agreement, the form of which will be prepared in reasonable consultation with Sierra on or prior to the Closing Date. The Credit Support Agreement will provide for enhancement of stockholder credit in an aggregate amount of up to $100.0 million on substantially the terms set forth as an exhibit to the Merger Agreement. A summary of the material terms of the Credit Support Agreement is attached hereto Annex C.

The Barings BDC Board agreed to announce, promptly following the Closing Date, Barings BDC’s commitment (the “Parent Trading Plan”) to purchase up to $30.0 million worth of shares of Barings BDC Common Stock in the aggregate in open market transactions, at the then-current market price, if the shares of Barings BDC Common Stock trade below a specified the target net asset value per share during the twelve (12) month period commencing upon the first day of the Parent Trading Plan, subject to Barings BDC’s compliance with its covenant and regulatory requirements. Purchases made pursuant to this trading plan shall be in accordance with Rule 10b-18 under the Exchange Act.

Sierra Investment Advisory Agreement

Sierra agreed that the Sierra Board will, consistent with the requirements of Section 15 of the Investment Company Act, take all commercially reasonable steps to ensure the effectiveness of the Sierra Investment Advisory Agreement at all times between the date of the Merger Agreement and the earlier of the Effective Time and the date, if any, on which the Merger Agreement is validly terminated. In addition, the Merger Agreement contemplates that (a) the Sierra Investment Advisory Agreement might be automatically terminated as a result of its “assignment” (as defined in the Investment Company Act) and (b) the Sierra Board may determine in good faith, after consultation with Barings, to terminate the Sierra Investment Advisory Agreement or, if applicable, an Interim Investment Advisory Agreement (as defined below) because SIC Advisors is no longer performing its duties and obligations under the Sierra Investment Advisory Agreement or such Interim Investment Advisory Agreement. In either event, the Sierra Board, subject to its fiduciary obligations under applicable law, will approve an interim investment advisory agreement (an “Interim Investment Advisory Agreement”) for Sierra with, in the case of clause (a) above, SIC Advisors or, in the case of clause (b) above, such other entity chosen in good faith by the Sierra Board (subject to the consent of Barings, such consent not to be unreasonably delayed, conditioned or withheld) in accordance with Rule 15a-4 under the Investment Company Act, to become effective immediately following the event resulting in the “assignment” or termination of the Sierra Investment Advisory Agreement (or as soon as practicable thereafter) and remain in effect until the earlier of the Effective Time or 150 days after the effective date of the termination of the Sierra Investment Advisory Agreement. An Interim Investment Advisory Agreement will contain terms and conditions that are, taken as a whole, substantially the same in all material respects as the terms and conditions of the Sierra Investment Advisory Agreement (except for changes thereto to the extent necessary to comply with

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Rule 15a-4 under the Investment Company Act). Sierra and Barings have agreed, under circumstances when SIC Advisors is going to be replaced, to negotiate in good faith for Barings to serve as Sierra’s investment adviser under the terms of the Interim Investment Advisory Agreement.

Voting Agreement

Barings agreed to vote all shares of Barings BDC Common Stock over which it has voting power (other than in a fiduciary capacity) in favor of the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal.

Conditions to Closing the First Merger

Conditions to Each Party’s Obligation to Effect the First Merger

The obligations of each party to complete the First Merger are subject to the satisfaction or (to the extent permitted by law) waiver at or prior to the closing of the First Merger of the following conditions:

•        Sierra shall have obtained the Sierra Stockholder Approval and Barings BDC shall have obtained the Barings BDC Stockholder Approval;

•        the issuance of Barings BDC Common Stock in connection with the First Merger and the issuance of shares of Barings BDC Common Stock upon the conversion of any instruments exchangeable therefor or convertible thereto shall have been approved for listing on the NYSE, subject to official notice of issuance;

•        the Form N-14 (of which this joint proxy statement/prospectus is a part) shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order;

•        any applicable waiting period (and any extension thereof) under the HSR Act, the EU Merger Regulation or any other antitrust laws relating to the consummation of the First Merger shall have expired or early termination thereof shall have been granted; and

•        no governmental authority of competent jurisdiction shall have promulgated, issued or entered any law or order which is then in effect and has the effect of restraining, enjoining or otherwise prohibiting the consummation of the First Merger.

The waiting period under the HSR Act expired on December 7, 2021.

Conditions to Obligations of Barings BDC and Acquisition Sub to Effect the First Merger

The obligations of Barings BDC and Acquisition Sub to effect the First Merger are also subject to the satisfaction, or (to the extent permitted by law) waiver by Barings BDC, at or prior to the closing of the First Merger, of the following conditions:

•        the representations and warranties of Sierra shall be true and correct in all respects (subject to the materiality thresholds set forth in the Merger Agreement) as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only);

•        Sierra shall have performed or complied in all material respects with its obligations required under the Merger Agreement (other than the obligations described under “— Additional Covenants — Notification of Certain Matters”) to be performed or complied with on or prior to the Closing Date;

•        Barings BDC shall have received a certificate signed by an executive officer of Sierra certifying as to the satisfaction of certain of the conditions to the obligations of Barings BDC and Acquisition Sub to effect the First Merger;

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•        since the date of the Merger Agreement, there shall not have occurred and be continuing any material adverse effect with respect to Sierra; and

•        the administration agreement by and between Sierra and its administrator, as then in effect, and the Sierra Investment Advisory Agreement shall have been terminated.

Conditions to the Obligations of Sierra to Effect the First Merger

The obligation of Sierra to effect the First Merger is also subject to the satisfaction, or (to the extent permitted by applicable law) waiver by Sierra, at or prior to the closing of the First Merger, of the following conditions:

•        the representations and warranties of Barings BDC, Acquisition Sub and Barings shall be true and correct in all respects (subject to the materiality thresholds set forth in the Merger Agreement) as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only);

•        Barings BDC, Acquisition Sub and Barings shall have performed or complied in all material respects with their respective obligations required under the Merger Agreement to be performed or complied with on or prior to the Closing Date;

•        Sierra shall have received a certificate signed by an executive officer of Barings BDC certifying as to the satisfaction of each of certain conditions to the obligations of Sierra to effect the First Merger;

•        Sierra shall have received the written opinion of S&W (or, if S&W is unable to deliver such an opinion, of such other nationally recognized tax counsel reasonably satisfactory to Sierra and Barings BDC) to the effect that the Merger will qualify for the intended tax treatment;

•        the Existing Barings BDC Investment Advisory Agreement shall have been duly amended and restated in the form agreed under the Merger Agreement;

•        since the date of the Merger Agreement, there shall not have occurred and be continuing any material adverse effect with respect to Barings BDC; and

•        since the date of the Merger Agreement, there shall not have occurred and be continuing any material adverse effect with respect to Barings.

Frustration of Closing Conditions

No party to the Merger Agreement may rely either as a basis for not consummating the First Merger any of the other transactions contemplated by the Merger Agreement or terminating the Merger Agreement and abandoning the First Merger on the failure of any condition set forth in the Merger Agreement to be satisfied if such failure was primarily caused by such party’s failure to perform or comply with any of its obligations under the Merger Agreement.

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the closing of the Merger, whether before or after the Sierra Stockholder Approval or Barings BDC Stockholder Approval, is obtained (except as otherwise expressly noted), as follows:

(1)    by mutual written consent of Barings BDC and Sierra;

(2)    by either Barings BDC or Sierra, if:

(a)     the First Merger shall not have been consummated on or before 5:00 p.m. (New York time) on March 31, 2022 (the “Termination Date”);

(b)    prior to the closing of the Merger, any governmental authority of competent jurisdiction shall have promulgated, issued or entered any law or order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the Merger Agreement, and

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such law or order or other action shall have become final and non-appealable; provided, that the party seeking to terminate the Merger Agreement shall have used its reasonable best efforts to remove such law or order or other action; or

(c)     (i) the Sierra Special Meeting (including any adjournments or postponements thereof) shall have been duly held and completed and the Sierra Stockholder Approval shall not have been obtained at such special meeting (or at any adjournment or postponement thereof) at which a vote on the approval of the First Merger is taken and (ii) the Barings BDC Special Meeting (including any adjournments or postponements thereof) shall have been duly held and completed and the Barings BDC Stockholder Approval shall not have been obtained at such special meeting (or at any adjournment or postponement thereof) at which a vote on the Merger Stock Issuance Proposal and the Barings BDC Below NAV Issuance Proposal is taken.

provided, however, that the right to terminate the Merger Agreement pursuant to clauses (2)(a) or (2)(b) above will not be available to any party that has breached in any material respect its obligations in any manner that has been the primary cause of or resulted in the failure to consummate the transactions contemplated by the Merger Agreement;

(3)    by Sierra, if:

(a)     Barings BDC, Acquisition Sub or Barings breaches or fails to perform any of their respective representations, warranties and covenants under the Merger Agreement, which breach or failure to perform would result in the failure to be satisfied of a condition of each party to the Merger Agreement or a condition to the obligations of Sierra, and such breach is not curable prior to the Termination Date or if curable on or before the earlier of (x) the Termination Date and (y) the date that is 30 days following Sierra’s delivery of written notice to Barings BDC of such breach or failure to perform; provided, however, that the right to terminate the Merger Agreement pursuant to this clause will not be available to Sierra if it is then in material breach of any of its representations, warranties or covenants under the Merger Agreement so as to cause any of the conditions of each party or conditions of the obligations of Barings BDC and Acquisition Sub to effect the First Merger to be satisfied or if Barings BDC’s breach of the Merger Agreement has been primarily cause by a breach of the Merger Agreement by Sierra; or

(b)    prior to obtaining the Sierra Stockholder Approval, in order to substantially concurrently enter into an Alternative Acquisition Agreement providing for the consummation of a Superior Proposal to the extent permitted by, and subject to the applicable terms and conditions of the Merger Agreement (provided that such right to terminate shall only apply if (x) the proposal did not result from Sierra’s breach of any of the non-solicitation provisions of the Merger Agreement and (y) prior to or simultaneously with such termination, Sierra pays Barings BDC a termination fee of $11.0 million (the “Sierra Termination Fee”), plus the expenses of Barings BDC and Barings in an amount not to exceed $2.0 million); or

(4)    by Barings BDC, if:

(a)     Sierra breaches or fails to perform its representations, warranties and covenants under the Merger Agreement, which breach or failure to perform would result in the failure to be satisfied of a condition of each party to the Merger Agreement or a condition to the obligations of Barings BDC and Acquisition Sub, and such breach is not curable prior to the Termination Date or if curable on or before the earlier of (x) the Termination Date and (y) the date that is 30 days following the Barings BDC’s delivery of written notice to Sierra of such breach or failure to perform; provided, however, that the right to terminate the Merger Agreement pursuant to this clause will not be available to Barings BDC if Barings BDC, Acquisition Sub or Barings is then in material breach of any of its respective representations, warranties or covenants under the Merger Agreement so as to cause any of the conditions of each party or conditions of the obligations of Sierra to effect the Merger to be satisfied or if Barings BDC’s breach of the Merger Agreement has been primarily cause by a breach of the Merger Agreement by Sierra; or

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(b)    at any time prior to the receipt of Sierra Stockholder Approval, if (w) the Sierra Board (or any committee thereof) shall have made a Sierra Adverse Recommendation Change, (x) Sierra or any of its subsidiaries has entered into an Alternative Acquisition Agreement or a Competing Agreement (other than an acceptable confidentiality agreement), (y) Sierra shall have willfully breached its obligations under the non-solicitation provisions of the Merger Agreement, and such breach remains uncured for five business days following the written notice thereof by Barings BDC to Sierra or (z) a Competing Proposal structured as a tender offer for Sierra Common Stock is commenced and, within 10 business days after the public announcement thereof, Sierra has not issued a public statement (and filed a Schedule 14D-9) reaffirming the Sierra Board Recommendation and recommending that the stockholders of Sierra reject such Competing Proposal, provided that Barings BDC’s right to terminate the Merger Agreement pursuant to this clause will expire at 5:00 p.m., New York City time, on the 10th business day following the date on which Barings BDC became aware of such right to terminate.

Termination Fees and Expenses

The Merger Agreement provides for the payment by Sierra to Barings BDC the Sierra Termination Fee plus the expenses of Barings BDC and Barings in an amount not to exceed $2.0 million if, and only if:

•        Barings BDC terminates the Merger Agreement because of Sierra’s willful breach of the Merger Agreement or either Barings BDC or Sierra terminates the Merger Agreement because the Sierra Stockholder Vote was not obtained, and, in either case, (x) prior to such termination (or the Sierra Special Meeting in the case of termination due to a failure to achieve the Sierra Stockholder Vote), a Competing Proposal that has been made after the date of the Merger Agreement shall have been publicly disclosed or otherwise communicated to the Sierra Board and not withdrawn prior to such date and (y) within 12 months after such termination, Sierra enters into a definitive acquisition agreement with respect to any Competing Proposal with a third party, and such Competing Proposal is subsequently consummated (regardless of whether such consummation happens prior to or following such 12-month period) (provided, however, that for this purpose only, the references to “20%” in the definition of Competing Proposal shall be deemed to be references to “50%”);

•        Sierra terminates the Merger Agreement to enter into an Alternative Acquisition Agreement in respect of a Superior Proposal; or

•        Barings BDC terminates the Merger Agreement under the circumstances described in (4)(b) above under “— Termination of the Merger Agreement.”

Except in cases involving fraud, Barings BDC’s right to receive payment from Sierra of the Sierra Termination Fee and expenses constitutes the sole and exclusive monetary remedy of Barings BDC, Acquisition Sub and Barings against Sierra and its subsidiaries and any of their respective former, current or future general or limited partners, stockholders, members, managers, directors, officers, employees, agents, representatives or assignees for all losses and damages suffered as a result of the failure of the transactions contemplated by the Merger Agreement to be consummated or for a breach or failure to perform under the Merger Agreement.

Effect of Termination

In the event that the Merger Agreement is terminated and the Merger abandoned, written notice thereof shall be given by the terminating party to the other party, specifying the provisions of the Merger Agreement pursuant to which such termination is made, and the Merger Agreement shall become null and void and of no effect without liability on the part of any party to the Merger Agreement, and all rights and obligations of any party to the Merger Agreement shall cease, except that (1) each party to the Merger Agreement will remain liable to the others for any damages incurred arising out of any willful breach of the Merger Agreement (prior to such termination) or fraud (2) the confidentiality agreement by and between Barings BDC and Sierra and certain designated provisions of the Merger Agreement will survive the termination, including, but not limited to, the termination and termination fee provisions and provisions with respect to the payment of expenses.

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Amendment of the Merger Agreement

Subject to applicable law, each of the parties to the Merger Agreement may modify or amend the Merger Agreement by written agreement executed and delivered by the duly authorized officers of each of the respective parties, except that no amendment shall be made to the Merger Agreement after the closing of the Merger. However, after receipt of the Sierra Stockholder Approval or the Barings BDC Stockholder Approval, if any such amendment shall by applicable law require further approval of the stockholders of Sierra or Barings BDC, as applicable, the effectiveness of such amendment shall be subject to the approval of the applicable stockholders.

Extension; Waiver

The conditions to each of the parties’ obligations to consummate the Merger are for the sole benefit of such party and may be waived by such party (without the approval of the stockholders of Sierra) in whole or in part to the extent permitted by applicable law.

At any time prior to the closing of the Merger, Sierra and Barings BDC may (1) waive or extend the time for the performance of any of the obligations or other acts of Barings BDC, Acquisition Sub or Barings, in the case of Sierra, or Sierra, in the case of Barings BDC, or (2) waive any inaccuracies in the representations and warranties contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement on the part of Barings BDC, Acquisition Sub or Barings, in the case of Sierra, or Sierra, in the case of Barings BDC.

Expenses; Transfer Taxes

In general, each party to the Merger Agreement shall be responsible for paying the expenses incurred by it in connection with the Merger Agreement and the transactions contemplated thereby, provided that each of Barings BDC and Sierra shall each be responsible for 50% of all filing fees in connection with the filing of any required notices under the HSR Act or other antitrust laws.

Other than taxes imposed upon holders of Sierra Common Stock, Barings BDC will pay all (1) transfer, stamp and documentary taxes or fees and (2) sales, use, gains, real property transfer and other similar taxes or fees arising out of or in connection with the Merger Agreement.

Governing Law; Jurisdiction

The Merger Agreement is governed and construed in accordance with the laws of the State of Maryland applicable to contracts made and performed entirely within such state, without regard to any applicable conflicts of law principles that would cause the application of the laws of another jurisdiction, except to the extent governed by the Investment Company Act, in which case the latter shall control.

Each of the parties to the Merger Agreement have agreed that any proceeding brought by any party to enforce any provision of, or based on any matter arising out of or in connection with, the Merger Agreement or the transactions contemplated by the Merger Agreement shall be brought in the Circuit Court for Baltimore City, Maryland, or if jurisdiction over the matter is vested exclusively in federal courts, the United States District Court for the District of Maryland, and the appellate courts to which orders and judgments therefore may be appealed.

Specific Performance

The Merger Agreement provides that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that any party to the Merger Agreement does not perform the provisions of the Merger Agreement (including failing to take such actions as are required of it thereunder to consummate the Merger Agreement) in accordance with its specified terms or otherwise breach such provisions. Accordingly, each of the parties to the Merger Agreement have agreed that the others shall be entitled to an injunction, specific performance and other equity relief to prevent breaches of the Merger Agreement to specifically enforce the terms and provisions thereof (without proof of actual damages), in additional to any other remedy to which they are entitled at law or equity, without providing any bond or other security.

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ACCOUNTING TREATMENT OF THE MERGER

Barings BDC will account for the Merger as an asset acquisition in accordance with ASC 805-50, Business Combinations — Related Issues. Under asset acquisition accounting, acquiring assets in groups not only requires ascertaining the cost of the asset (or net assets), but also allocating that cost to the individual assets (or individual assets and liabilities) that make up the group. Per ASC 805-50-30-1, the acquired assets (as a group) are recognized based on their cost to the acquiring entity, which generally includes transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets carrying amounts on the acquiring entity’s records. ASC 805-50-30-2 goes on to say asset acquisitions in which the consideration given is cash are measured by the amount of cash paid. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on the cost to the acquiring entity or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measured.

The cost of the group of assets acquired in an asset acquisition is allocated to the individual assets acquired or liabilities assumed based on their relative fair values of net identifiable assets acquired other than “non-qualifying” assets (for example cash) and does not give rise to goodwill.

If the fair value of the net assets to be acquired exceeds the fair value of the Share Consideration to be paid by Barings BDC, then Barings BDC would recognize a deemed contribution from Barings in an amount up to approximately $100.0 million. If the fair value of net assets to be acquired exceeds the fair value of the Merger Consideration to be paid by Barings BDC and by Barings, then Barings BDC would also recognize a purchase accounting gain. Alternatively, if the fair value of the net assets to be acquired is less than the fair value of the portion of the Merger Consideration to be paid by Barings BDC, then Barings BDC would recognize a purchase accounting loss. Barings BDC expects any potential gain or loss would be classified as unrealized on the statement of operations until the underlying assets are sold.

Barings BDC has concluded that the Credit Support Agreement will be accounted for separately from the Merger and is not included as part of the Merger Consideration. Barings BDC will record the Credit Support Agreement at fair value as a derivative asset and a deemed contribution from Barings. For additional information about the Credit Support Agreement, see “The Merger — Terms of Credit Support Agreement.”

The final allocation of the purchase price will be determined after the Merger is completed and after completion of a final analysis to determine the estimated relative fair values of the acquired assets and liabilities. Increases or decreases in the estimated fair values of the net assets, commitments, and other items of Sierra as compared to the information shown in this joint proxy statement/prospectus may occur. Accordingly, the final adjustments may be materially different from the pro forma adjustments presented in this joint proxy statement/prospectus.

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CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

Scope of Discussion

The following is a general discussion of certain material U.S. federal income tax consequences of the Merger to holders of Sierra Common Stock that exchange their shares of Sierra Common Stock for the Merger Consideration and of the payment of any Sierra Tax Dividend to holders of Sierra Common Stock. This discussion does not purport to be a complete analysis of all potential tax consequences. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed.

This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS, in each case in effect as of the date of this joint proxy statement/prospectus. These authorities may change or be subject to differing interpretations, and any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of Sierra Common Stock. Neither Barings BDC nor Sierra has sought any rulings from the IRS or an opinion from counsel regarding the matters discussed below. In addition, no legal opinion regarding the matters discussed below is a condition precedent to closing under the Merger Agreement. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the Merger or any related transactions.

This discussion is limited to Sierra stockholders that hold Sierra Common Stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a stockholder’s particular circumstances. In addition, it does not address consequences relevant to stockholders subject to special rules, including, without limitation:

•        U.S. expatriates and former citizens or long-term residents of the United States;

•        persons subject to the alternative minimum tax;

•        persons holding Sierra Common Stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

•        banks, insurance companies, and other financial institutions;

•        brokers, dealers or traders in securities;

•        “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;

•        partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

•        tax-exempt organizations or governmental organizations;

•        persons subject to the three-year holding period rule in Section 1061 of the Code;

•        persons deemed to sell Sierra Common Stock under the constructive sale provisions of the Code;

•        persons who hold or receive Sierra Common Stock pursuant to the exercise of any employee stock option or otherwise as compensation; and

•        tax-qualified retirement plans.

If a partnership (including for this purpose any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Sierra Common Stock, the tax treatment of a partner will depend on the status of the partner, the activities of the partnership, and certain determinations made at the partner level. If you are a partner of a partnership holding Sierra Common Stock, you should consult your tax advisor.

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THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. HOLDERS OF SIERRA COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE MERGER, INCLUDING AN INVESTMENT IN BARINGS BDC COMMON STOCK, ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Qualification of the Merger as a Reorganization under Section 368(a) of the Code

Sierra and Barings BDC intend for the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code, based on certain factual assumptions, including that the fair market value of the Barings BDC Common Stock received by Sierra stockholders in the Merger will equal at least 40% of the aggregate consideration in the Merger.

No ruling has been, or will be, sought by Barings BDC or Sierra from the IRS with respect to the Merger and there can be no assurance that the IRS will not challenge the qualification of the Merger as a “reorganization” under Section 368(a) of the Code or that a court would not sustain such a challenge. If the Merger does not qualify as a tax-free reorganization under Section 368(a) of the Code, then a U.S. stockholder (as defined below) would generally recognize gain or loss for U.S. federal income tax purposes upon the exchange of Sierra Common Stock for Barings BDC Common Stock and cash in the Merger (with potential ordinary income treatment, as noted below under the heading “— U.S. Stockholders,” for the Cash Consideration). The remainder of this discussion assumes that the Merger qualifies as a “reorganization” under Section 368(a) of the Code.

In connection with the filing of the registration statement of which this joint proxy statement/prospectus is a part, Goodwin Procter LLP has delivered an opinion to Barings BDC to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code based on, among other things, certain facts, representations and covenants, each made by officers of Barings BDC and Sierra, and assumptions, all of which must be consistent with the state of facts existing at the time of the Merger. If any of these facts, representations, covenants and assumptions are, or become, inaccurate or incomplete, such opinion may be invalid, and the conclusions reached therein could be jeopardized. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or the courts, which may not agree with the conclusions set forth in such opinion.

Certain Tax Consequences if the Merger Qualifies as a Reorganization

For purposes of this discussion, a “U.S. stockholder” is any beneficial owner of Sierra Common Stock that is, for U.S. federal income tax purposes:

•        an individual who is a citizen or resident of the United States;

•        a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia;

•        an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

•        a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.

A “non-U.S. stockholder” is any beneficial owner of Sierra Common Stock that is neither a U.S. stockholder nor an entity treated as a partnership for U.S. federal income tax purposes.

As discussed previously in this joint proxy statement/prospectus, upon completion of the Merger, each Sierra stockholder will receive, in exchange for each share of Sierra Common Stock, the Merger Consideration consisting of (1) the Share Consideration and (2) the Cash Consideration.

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U.S. Stockholders

If the Merger qualifies as a reorganization, then generally, and subject to the discussion herein, for U.S. federal income tax purposes:

•        Each U.S. stockholder will recognize gains, but not losses, in the Merger, equal to the lesser of (1) the amount of cash received in exchange for Sierra Common Stock (and excluding cash received in lieu of a fractional share of Barings BDC Common Stock) and (2) the excess, if any, of (a) the sum of the amount of cash received in exchange for Sierra Common Stock (including cash received in lieu of a fractional share of Barings BDC Common Stock ) and the fair market value of the Barings BDC Common Stock received in the Merger (determined at the Effective Time) over (b) the U.S. stockholder’s tax basis in the shares of Sierra Common Stock surrendered in the Merger. A U.S. stockholder also will generally recognize gain or loss attributable to cash received in lieu of a fractional share of Barings BDC Common Stock in an amount equal to the difference between the amount of cash received and the portion of the basis of the Sierra Common Stock surrendered that is allocable to the fractional share. A Sierra Tax Dividend should not be treated for U.S. federal income tax purposes as part of the consideration paid for shares of Sierra Common Stock in the Merger but instead should be treated for U.S. federal income tax purposes as a distribution with respect to the Sierra Common Stock. See the discussion below under the heading “— Sierra’s Pre-Merger Income and Gains, Sierra Tax Dividends and Sierra Deemed Distributions”;

•        A U.S. stockholder’s aggregate tax basis in the shares of Barings BDC Common Stock received in the Merger (including any fractional share of Barings BDC Common Stock for which cash is received) will be the same as his, her or its aggregate tax basis in the Sierra Common Stock surrendered in the Merger, increased by the amount of gains recognized (excluding any gains attributable to the receipt of cash in lieu of a fractional share of Barings BDC Common Stock) and decreased by the amount of cash received in exchange for Sierra Common Stock (other than cash received in lieu of a fractional share of Barings BDC Common Stock); and

•        The holding period of the shares of Barings BDC Common Stock received in the Merger (including any fractional share of Barings BDC Common Stock for which cash is received) by a U.S. stockholder will include the holding period of the shares of Sierra Common Stock that he, she or it surrendered.

The tax treatment of the receipt of the Cash Consideration that U.S. stockholders would receive in the Merger is unclear because there is limited authority addressing the tax consequences of the receipt of merger consideration from a party other than the acquiror. If the Cash Consideration is treated as additional merger consideration received in exchange for Sierra Common Stock, such payment would be treated as part of the total consideration received in exchange for the Sierra Common Stock and treated in the manner described above with respect to other cash consideration provided in the Merger or simply as cash received in a taxable sale or exchange of shares. It is possible, however, that the Cash Consideration may be treated as ordinary income, and not as received in exchange for a U.S. stockholder’s Sierra Common Stock.

Sierra believes that its U.S. stockholders have a reasonable basis upon which to take a position that the Cash Consideration should be treated as additional merger consideration, and, assuming such position is respected, any gain realized by a U.S. stockholder on the receipt of the Cash Consideration would be a capital gain if the shares of Sierra Common Stock were held by such U.S. stockholder as a capital asset. No assurances can be given, however, that the IRS will not assert, or that a court would not sustain, a contrary position under which the Cash Consideration could be subject to taxation as ordinary income. Barings BDC and Barings do not express any position on how the U.S. stockholders of Sierra should treat the Cash Consideration. Following the closing, the Cash Consideration will be reported to U.S. stockholders on a Form 1099-MISC.

Subject to the discussion below under “— Potential Treatment of Cash as a Dividend,” any gains recognized in the Merger generally will be long-term capital gains if the U.S. stockholder’s holding period for the shares of Sierra Common Stock surrendered is more than one year at the Effective Time. Each U.S. stockholder is urged to consult his, her or its tax advisor about the application of these rules. The amount of gains (or non-recognized losses) must be computed separately for each block of Sierra Common Stock if those blocks were purchased at different prices or at different times, and a loss realized on one block of stock may not be used to offset gains realized on another block of stock. If a U.S. stockholder acquired different blocks of shares of Sierra Common Stock at different prices or at

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different times, the U.S. stockholder is urged to consult his, her or its tax advisor about the calculation of gains (or non-recognized losses) for different blocks of Sierra Common Stock surrendered in the Merger and the identification of the tax basis and holding periods of the particular shares of Barings BDC Common Stock received in the Merger.

Potential Treatment of Cash as a Dividend

It is possible that all or part of the gains that a U.S. stockholder recognizes in the Merger could be treated as dividend income rather than capital gains if (1) the U.S. stockholder is a significant stockholder of Barings BDC or (2) the U.S. stockholder’s percentage ownership, taking into account constructive ownership rules, in Barings BDC after the Merger is not meaningfully reduced from what its percentage ownership would have been if it had received solely shares of Barings BDC Common Stock rather than a combination of cash and shares in the Merger. This could happen, for example, because of ownership of additional shares of Barings BDC Common Stock by such holder, ownership of Barings BDC Common Stock by a person related to such holder or a share repurchase by Barings BDC from other Barings BDC stockholders. The IRS has indicated in rulings that any reduction in the interest of a stockholder that owns a small number of shares in a publicly and widely held corporation and that exercises no control over corporate affairs would result in capital gains as opposed to dividend treatment.

Net Investment Income Tax on Certain Investment Income

Certain non-corporate U.S. stockholders whose income exceeds certain thresholds may also be subject to a 3.8% tax on their “net investment income” up to the amount of such excess. Gain or loss recognized in the Merger will be includable in a U.S. stockholder’s net investment income for purposes of this tax. Non-corporate U.S. stockholders are urged to consult their tax advisors regarding the possible effect of this tax.

Information Reporting and Backup Withholding

U.S. stockholders may be subject to information reporting and backup withholding on any cash payments they receive in the Merger, including cash in lieu of fractional shares of Barings BDC Common Stock. Payments will not be subject to backup withholding if the U.S. stockholder (i) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (ii) provides Barings BDC or the transfer agent, as appropriate, with a properly completed IRS Form W-9 (or its successor form) certifying that such U.S. stockholder is a U.S. person, the taxpayer identification number provided is correct and such U.S. stockholder is not subject to backup withholding. The taxpayer identification number of an individual is his or her Social Security number. Any amounts withheld under the backup withholding rules are not an additional tax and will generally be allowed as a refund or a credit against a U.S. stockholder’s U.S. federal income tax liability, provided that the U.S. stockholder timely furnishes the required information to the IRS.

Non-U.S. Stockholders

If the Merger qualifies as a reorganization, then generally, and subject to the discussion herein, for U.S. federal income tax purposes, gains recognized by a non-U.S. stockholder upon the exchange of Sierra Common Stock for the Merger Consideration pursuant to the Merger generally should not be subject to U.S. federal income tax unless:

•        the gains are effectively connected with a U.S. trade or business of such non-U.S. stockholder (and, if required by an applicable income tax treaty, the non-U.S. stockholder maintains a permanent establishment in the United States to which such gains are attributable), in which case the non-U.S. stockholder generally would be subject to tax on such gains in the same manner as a U.S. stockholder and, if the non-U.S. stockholder is a foreign corporation, such corporation may be subject to a branch profits tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty);

•        the non-U.S. stockholder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the Merger and certain other requirements are met, in which case the non-U.S. stockholder generally would be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the non-U.S. stockholder, if any, provided the non-U.S. stockholder has timely filed U.S. federal income tax returns with respect to such losses; or

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•        Sierra is or has been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of (1) the five-year period ending on the date of the Merger and (2) the non-U.S. stockholder’s holding period in the Sierra Common Stock, and the non-U.S. stockholder owned (directly, indirectly or constructively) more than 5% of Sierra’s outstanding common stock at any time during the applicable period.

As discussed above under the heading “— U.S. Stockholders,” the tax treatment of the receipt of the Cash Consideration is not entirely clear. Although it is not free from doubt, Sierra, Barings and Barings BDC believe that non-U.S. stockholders that do not otherwise hold their shares of Sierra Common Stock in connection with a U.S. trade or business and are not otherwise subject to U.S. federal income tax with respect to their shares of Sierra Common Stock should not be subject to U.S. federal income tax, nor be subject to withholding of U.S. federal income tax, with respect to the payment and receipt of the Cash Consideration; however, none of Sierra, Barings and Barings BDC can be certain that the paying agent or other applicable withholding agent would not take the position that it is required to withhold U.S. federal income tax at a 30% rate (or, if applicable, a reduced rate under a tax treaty) with respect to any Cash Consideration paid to such a non-U.S. stockholder. If withholding results in an overpayment of taxes, a refund or credit may be obtainable, provided that the required information is timely furnished to the IRS. Non-U.S. stockholders are urged to consult their own tax advisors regarding the application of U.S. federal income tax and withholding to the Cash Consideration.

If the Cash Consideration received by a non-U.S. stockholder is effectively connected with the non-U.S. stockholder’s conduct of a trade or business within the United States, the non-U.S. stockholder will be exempt from the potential U.S. federal withholding tax described immediately above. To claim the exemption, the non-U.S. stockholder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the Cash Consideration is effectively connected with the non-U.S. stockholder’s conduct of a trade or business within the United States. Any such effectively connected income will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A non-U.S. stockholder that is a corporation may also be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected income, as adjusted for certain items. Non-U.S. stockholders are urged to consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

A non-U.S. stockholder will be subject to information reporting and, in certain circumstances, backup withholding with respect to the Merger Consideration received by such holder pursuant to the Merger, unless such non-U.S. stockholder certifies under penalties of perjury that it is a non-U.S. stockholder (and the payor does not have actual knowledge or reason to know that the holder is a United States person as defined under the Code) or such holder otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. stockholder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Limitations on Utilization of Loss Carryforwards and Unrealized Losses

In general, it is expected that certain limitations under the Code will apply to loss carryforwards and unrealized losses of Sierra and its subsidiaries (if any) to the extent Sierra stockholders before the Merger hold less than 50% of the outstanding shares of Barings BDC immediately following the Merger. Similarly, it is expected that these same limitations will apply to loss carryforwards and unrealized losses of Barings BDC as a result of the issuance of Barings BDC Common Stock to holders of Sierra Common Stock in the Merger. Barings BDC (including all subsidiaries) had approximately $311.7 million of capital loss carryforwards reported on its fiscal year 2020 tax returns. Sierra (including all subsidiaries) had approximately $251.2 million of capital loss carryforwards reported on its fiscal year 2020 tax return.

Accordingly, the Merger is expected to result in potential limitations on the ability of Barings BDC to use its and/or Sierra’s loss carryforwards and potentially to use unrealized capital losses inherent in the tax basis of its assets and the assets acquired, once realized, and on the ability of Sierra’s and Barings BDC’s taxable subsidiaries to use their net operating loss and capital loss carryforwards, if any. These potential limitations generally would be imposed on an annual basis. Losses in excess of the limitation may be carried forward indefinitely for capital loss carryforwards and post-2017 net operating loss carryforwards while pre-2018 net operating loss carryforwards are subject to a 20-year expiration from the year incurred. The limitations generally would equal the product of the fair market value of Sierra’s (or Sierra’s taxable subsidiaries, as the case may be), in the case of Sierra, and the fair market value of

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Barings BDC’s (or Barings BDC’s taxable subsidiaries, as the case may be), in the case of Barings BDC, equity immediately prior to the Merger and the “long-term tax-exempt rate,” as published quarterly by the IRS, in effect at such time. No assurance can be given as to what long-term tax-exempt rate will be in effect at the time of the Merger.

Each of Barings BDC and Sierra (or their taxable subsidiaries, as the case may be) will be prohibited from using their respective capital loss carryforwards, if any, and unrealized losses (once realized) against the unrealized gains in Barings BDC’s and Sierra’s portfolios at the time of the Merger, if any, to the extent such gains are realized within five years following the Merger, if Barings BDC or Sierra, respectively, has a net unrealized built in gains at the time of the Merger. The ability of Barings BDC and/or Sierra to absorb its losses in the future depends upon a variety of factors that cannot be known in advance. Even if Barings BDC and/or Sierra is able to utilize its respective capital loss carryforwards or unrealized losses, the tax benefit resulting from those losses will be shared by both Barings BDC and Sierra stockholders following the Merger. Therefore, a Barings BDC stockholder or Sierra stockholder may pay more taxes, or pay taxes sooner, than such stockholder otherwise would have paid if the Merger did not occur.

The ability of Barings BDC to use Sierra’s losses in the future depends upon a variety of factors that cannot be known in advance. A RIC cannot carry forward or carry back any net operating losses for U.S. federal income tax purposes. Accordingly, Barings BDC cannot use any net operating losses inherited from Sierra in the Merger. Even if Barings BDC is able to utilize capital loss carryforwards or unrealized losses of Sierra, the tax benefit resulting from those losses will be shared by both Sierra and Barings BDC stockholders following the Merger. Therefore, a Sierra stockholder may pay more taxes, or pay taxes sooner, than such stockholder otherwise would have paid if the Merger did not occur.

Further, in addition to the other limitations on the use of losses, under Section 381 of the Code, for the tax year of the Merger, only that percentage of Barings BDC’s capital gains net income for such tax year (excluding capital loss carryforwards), if any, equal to the percentage of its tax year that remains following the Merger can be reduced by Sierra’s capital loss carryforwards (as otherwise limited under Sections 382, 383 and 384 of the Code, as described above).

Sierra’s Pre-Merger Income and Gains, Sierra Tax Dividends and Sierra Deemed Distributions

Sierra’s 2021 taxable year will end on December 31, 2021, and Sierra’s next taxable period will end on the Closing Date. Under applicable U.S. tax rules, for each of Sierra’s 2021 taxable year and for the taxable period ending on the Closing Date, Sierra will be required to declare a dividend of at least 90% of its net ordinary income and short term capital gains in order to maintain Sierra’s treatment as a RIC. Sierra may choose to increase a dividend above that minimum, since additional amounts it pays out will reduce the amount of income subject to corporate-level U.S. federal income or excise tax for such taxable year or taxable period (as applicable). Pursuant to the Merger Agreement, Sierra will be required to declare a dividend on or prior to December 31, 2021 for its 2021 taxable year and on or prior to the Closing Date with respect to its taxable period ending on the Closing Date in an amount at least sufficient to allow it to maintain RIC status (the “Required Dividend”). In addition, the Merger Agreement permits Sierra to pay dividends in excess of the Required Dividend (“Additional Dividends”), so long as the sum of the Required Dividend and any Additional Dividends does not exceed the Sierra Tax Dividend amount. In the event Sierra does not pay an Additional Dividend, Sierra will be required to pay corporate income tax on any retained net ordinary income, net short-term capital gain, and net long term capital gain. If Sierra retains and pays tax on any net long term capital gain (“Net Capital Gain”), it will designate any such Net Capital Gain as a “deemed distribution” to its stockholders pursuant to an election made under Section 852(b)(3)(D) of the Code for each of the taxable year ending December 31, 2021 and the taxable period ending on the Closing Date (any such deemed distribution, a “Sierra Deemed Distribution”).

If Sierra designates a Sierra Deemed Distribution, among other consequences, Sierra will pay corporate income tax on the retained Net Capital Gain, each U.S. stockholder will be required to include such stockholder’s share of the deemed distribution in income as if it had been actually distributed to the U.S. stockholder, and the U.S. stockholder will be entitled to claim a credit (for U.S. income tax purposes) equal to such stockholder’s allocable share of the tax paid thereon by Sierra. The amount of the deemed distribution net of such tax will be added to the U.S. stockholder’s adjusted tax basis for such stockholder’s Sierra Common Stock. A Sierra stockholder that is not subject to U.S. federal income tax or otherwise required to file a U.S. federal income tax return would be required to file a

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U.S. federal income tax return on the appropriate form to claim a refund with respect to such stockholder’s allocable share of the taxes that were paid by Sierra. All Sierra stockholders should consult with their own tax advisors to determine how they should report their allocable share of any Sierra Deemed Distribution, and their allocable share of any taxes paid by Sierra with respect thereto, on their U.S. federal, state and local income tax returns.

A dividend paid by Sierra should be treated as a distribution with respect to the Sierra Common Stock. Distributions of Sierra’s investment company taxable income (“ICTI”) (which is, generally, Sierra’s net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses) will be taxable as ordinary income to the extent of Sierra’s current or accumulated earnings and profits. Distributions from the excess of long-term capital gains over short-term capital losses will be taxable as long term capital gains, if so designated by Sierra in a notice to stockholders. To the extent any portion of a dividend paid by Sierra is attributable to dividends from U.S. corporations and certain qualified foreign corporations, that portion may be eligible for taxation at a preferential rate for Sierra stockholders that are taxed at individual rates. In this regard, it is anticipated that a dividend paid by Sierra will generally not be attributable to dividends and, therefore, generally will not qualify for the preferential rate. Distributions in excess of Sierra’s earnings and profits first will reduce a Sierra stockholder’s adjusted tax basis in its Sierra Common Stock and, after the adjusted basis is reduced to zero, will constitute capital gains to a Sierra stockholder.

A dividend paid by Sierra paid to a non-U.S. stockholder generally will be subject to withholding of U.S. federal tax at a 30% rate (or lower rate under an applicable income tax treaty) to the extent attributable to a distribution of Sierra’s ICTI out of current and accumulated earnings and profits, unless the distributions are properly designated as (1) paid by Sierra in respect of Sierra’s “qualified net interest income” (generally, Sierra’s U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which Sierra is at least a 10% stockholder, reduced by expenses that are allocable to such income) or (2) paid by Sierra in connection with Sierra’s “qualified short-term capital gains” (generally, the excess of Sierra’s net short-term capital gains over Sierra’s net long-term capital losses for such taxable year or taxable period, as applicable). If any portion of a dividend paid by Sierra is in excess of Sierra’s current and accumulated earnings and profits that portion of the dividend paid by Sierra generally will not be subject to U.S. federal income tax and will reduce the non-U.S. stockholder’s basis in its Sierra Common Stock. If a dividend paid by Sierra is effectively connected with the conduct of a U.S. trade or business by a non-U.S. stockholder, and, if an income tax treaty applies, attributable to a permanent establishment in the United States, the non-U.S. stockholder will not be subject to U.S. federal withholding tax on the dividend paid by Sierra, but generally will be subject to tax on the dividend paid by Sierra in the same manner as a U.S. stockholder, as described in the preceding paragraph.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or “FATCA”). Pursuant to FATCA, the relevant withholding agent generally will be required to withhold 30% on certain types of income from sources within the United States, which may include the dividend paid by Sierra and Cash Consideration (subject to proposed U.S. Treasury Regulations as discussed below) paid to (i) a foreign financial institution unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity that is the beneficial owner of the payment unless such entity certifies that it does not have any substantial U.S. owners or provides the name, address and taxpayer identification number of each substantial U.S. owner and such entity meets certain other specified requirements. If FATCA withholding tax is withheld from such payments, non-U.S. stockholders that are otherwise eligible for an exemption from, or reduction of, U.S. federal withholding taxes with respect to such payments will be required to seek a credit or refund from the IRS to obtain the benefit of such exemption or reduction. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. Certain jurisdictions have entered into agreements with the United States that may supplement or modify these rules.

Under proposed Treasury Regulations, withholding under FATCA does not apply to gross proceeds from any sale or disposition of Sierra Common Stock. Taxpayers may generally rely on those proposed regulations until final regulations are issued.

Sierra stockholders are urged to consult their tax advisors regarding the potential application of withholding under FATCA to the Cash Consideration and any dividend paid by Sierra.

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U.S. Federal Income Taxation of an Investment in Barings BDC Common Stock

Election to be Taxed as a RIC

As a BDC, Barings BDC has elected to be treated as a RIC under the Code. As a RIC, Barings BDC generally will not pay corporate-level income taxes on its income and net capital gain that Barings BDC distributes to its stockholders as dividends on a timely basis. Barings BDC will be subject to U.S. federal corporate-level income tax on any undistributed income and/or gains. To qualify as a RIC, Barings BDC must, among other things, meet certain source of income and asset diversification requirements (as described below). In addition, Barings BDC must distribute to its stockholders, for each taxable year, generally an amount equal to at least 90% of Barings BDC’s ICTI (the “Annual Distribution Requirement”). See “Risk Factors” in Part I, Item 1A of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Taxation as a RIC

If Barings BDC:

•        qualifies as a RIC; and

•        satisfies the Annual Distribution Requirement;

then Barings BDC will not be subject to U.S. federal income tax on the portion of its ICTI and net capital gain that Barings BDC distributes (or is deemed to distribute) to stockholders. Barings BDC will be subject to U.S. federal income tax at the regular corporate rates on any income or net capital gain not distributed (or deemed distributed) to Barings BDC stockholders.

Barings BDC will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless Barings BDC distributes in a timely manner an amount at least equal to the sum of (1) 98% of Barings BDC’s ordinary income for each calendar year, (2) 98.2% of Barings BDC’s capital gains net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (collectively, the “Excise Tax Requirement”). Barings BDC has paid in the past, and can be expected to pay in the future, such excise tax on a portion of its income.

Moreover, Barings BDC’s ability to dispose of assets to meet its distribution requirements may be limited by (1) the illiquid nature of Barings BDC’s portfolio and (2) other requirements relating to Barings BDC’s status as a RIC, including the Diversification Tests (as defined below). If Barings BDC disposes of assets to meet the Annual Distribution Requirement, the Diversification Tests, or the Excise Tax Requirement, Barings BDC may make such dispositions at times that, from an investment standpoint, are not advantageous.

To qualify as a RIC for U.S. federal income tax purposes, Barings BDC generally must, among other things:

•        qualify to be treated as a BDC at all times during each taxable year;

•        derive in each taxable year at least 90% of its gross income from (a) dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities or other income derived with respect to its business of investing in such stock or securities or (b) net income derived from an interest in a “qualified publicly traded partnership,” or “QPTP” (collectively, the “90% Income Test”); and

•        diversify its holdings so that at the end of each quarter of the taxable year:

•        at least 50% of the value of its assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs and other securities that, with respect to any issuer, do not represent more than 5% of the value of its assets or more than 10% of the outstanding voting securities of that issuer; and

•        no more than 25% of the value of its assets is invested in the securities, other than U.S. Government securities or securities of other RICs, of (i) one issuer, (ii) two or more issuers that are controlled, as determined under applicable tax rules, by Barings BDC and that are engaged in the same or similar or related trades or businesses or (iii) securities of one or more QPTPs (collectively, the “Diversification Tests”).

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Barings BDC may be required to recognize taxable income in circumstances in which it does not receive cash, such as income from hedging or foreign currency transactions. For example, if Barings BDC holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, that have increasing interest rates or that are issued with warrants), Barings BDC must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by it in the same taxable year. Because any original issue discount or other amounts accrued will be included in Barings BDC’s ICTI for the year of accrual, Barings BDC may be required to make a distribution to its stockholders in order to satisfy the Annual Distribution Requirement and/or the Excise Tax Requirement, even though Barings BDC will not have received any corresponding cash amount.

Furthermore, a portfolio company in which Barings BDC invests may face financial difficulty that requires Barings BDC to work-out, modify or otherwise restructure Barings BDC’s investment in the portfolio company. Any such restructuring could, depending on the specific terms of the restructuring, result in unusable capital losses and future non-cash income.

In addition, certain of Barings BDC’s investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (a) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (b) convert long-term capital gains (currently taxed at lower rates for non-corporate taxpayers) into higher taxed short-term capital gains or ordinary income, (c) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (d) adversely affect the time when a purchase or sale of stock or securities is deemed to occur or (e) adversely alter the characterization of certain complex financial transactions. Barings BDC will monitor its transactions and may make certain tax elections in order to mitigate the effects of these provisions; however, no assurance can be given that Barings BDC will be eligible for any such tax elections or that any elections Barings BDC makes will fully mitigate the effects of these provisions.

Gain or loss recognized by Barings BDC from warrants acquired by Barings BDC as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long Barings BDC held a particular warrant.

Barings BDC’s investment in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes. In that case, Barings BDC’s yield on those securities would be decreased. Stockholders will generally not be entitled to claim a U.S. foreign tax credit or deduction with respect to non-U.S. taxes paid by Barings BDC.

If Barings BDC purchases shares in a “passive foreign investment company” (a “PFIC”), Barings BDC may be subject to U.S. federal income tax on a portion of any “excess distribution” or gains from the disposition of such shares, even if such income is distributed as a taxable dividend by Barings BDC to its stockholders. Additional charges in the nature of interest may be imposed on Barings BDC in respect of deferred taxes arising from such distributions or gains. If Barings BDC invests in a PFIC and elects to treat the PFIC as a “qualified electing fund” under the Code (a “QEF”), in lieu of the foregoing requirements, Barings BDC will be required to include in income each year a portion of the ordinary earnings and net capital gains of the QEF, even if such income is not distributed to Barings BDC. Alternatively, Barings BDC may elect to mark-to-market at the end of each taxable year Barings BDC’s shares in such PFIC; in this case, Barings BDC will recognize as ordinary income any increase in the value of such shares, and as ordinary loss any decrease in such value to the extent it does not exceed prior increases included in income. Barings BDC’s ability to make either election will depend on factors beyond its control, and Barings BDC is subject to limitations which may limit the availability or benefit of these elections. Under either election, Barings BDC may be required to recognize in any year income in excess of Barings BDC’s distributions from PFICs and Barings BDC’s proceeds from dispositions of PFIC stock during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of determining whether Barings BDC satisfies the Excise Tax Requirement.

Barings BDC has invested in foreign securities that are treated as controlled foreign corporations (each a “CFC”) for U.S. federal income tax purposes. As a result, Barings BDC will generally be required to include in gross income each year, as ordinary income that is included in net investment income, its share of certain amounts of a CFC’s income, whether or not the CFC distributes such amounts to Barings BDC. Under recently finalized regulations, such inclusions will be treated as “qualifying income” for purposes of the income requirement

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described above to the extent they are either (i) timely and currently repatriated or (ii) derived with respect to Barings BDC’s business of investing in stock, securities or currencies. Investments by Barings BDC in CFCs could cause Barings BDC to recognize taxable income in excess of cash generated by such investments, potentially requiring Barings BDC to borrow money or dispose of investments to make the distributions required to qualify for treatment as a RIC and to eliminate a Barings BDC level tax and could affect the amount, timing and character of Barings BDC’s distributions.

Barings BDC’s functional currency is the U.S. dollar for U.S. federal income tax purposes. Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time Barings BDC accrues income, expenses or other liabilities denominated in a foreign currency and the time Barings BDC actually collects such income or pay such expenses or liabilities may be treated as ordinary income or loss. Similarly, gains or losses on foreign currency forward contracts, the disposition of debt denominated in a foreign currency and other financial transactions denominated in foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, may also be treated as ordinary income or loss.

If Barings BDC borrows money, it may be prevented by loan covenants from declaring and paying dividends in certain circumstances. Even if Barings BDC is authorized to borrow funds and to sell assets in order to satisfy distribution requirements, under the Investment Company Act, Barings BDC generally is not permitted to make distributions to its stockholders while Barings BDC’s debt obligations and senior securities are outstanding unless certain “asset coverage” tests or other financial covenants are met. Limits on Barings BDC’s payment of dividends may prevent Barings BDC from meeting the Annual Distribution Requirement or the Excise Tax Requirement, and may, therefore, jeopardize Barings BDC’s qualification for taxation as a RIC, or subject Barings BDC to the 4% excise tax on undistributed income.

Some of the income and fees that Barings BDC recognizes, such as management fees, may not count towards satisfaction of the 90% Income Test. In order to ensure that such income and fees do not disqualify Barings BDC as a RIC for a failure to satisfy the 90% Income Test, Barings BDC may be required to recognize such income or fees through one or more entities treated as U.S. corporations for U.S. federal income tax purposes. While Barings BDC expects that recognizing such income through such corporations will assist Barings BDC in satisfying the 90% Income Test, no assurance can be given that this structure will be respected for U.S. federal income tax purposes, which could result in such income not being counted towards satisfying the 90% Income Test. If the amount of such income were too great and Barings BDC were otherwise unable to mitigate this effect, it could result in Barings BDC’s disqualification as a RIC. If, as Barings BDC expects, the structure is respected, such corporations will be required to pay U.S. corporate income tax on their earnings, which ultimately will reduce the yield on such income and fees.

If Barings BDC fails to satisfy the 90% Income Test or the Diversification Tests in any taxable year, Barings BDC may be eligible for relief provisions if the failures are due to reasonable cause and not willful neglect and if a penalty tax is paid with respect to each failure to satisfy the applicable requirements. Additionally, relief is provided for certain de minimis failures of the diversification requirements where Barings BDC corrects the failure within a specified period. If the applicable relief provisions are not available or cannot be met, all of Barings BDC’s income would be subject to corporate-level income tax as described below. Barings BDC cannot provide assurance that it would qualify for any such relief should Barings BDC fail the 90% Income Test or the Diversification Test.

If Barings BDC fails to satisfy the Annual Distribution Requirement or otherwise fails to qualify as a RIC in any taxable year, and is not eligible for relief as described above, Barings BDC will be subject to tax in that year on all of its taxable income, regardless of whether Barings BDC makes any distributions to its stockholders. In that case, all of Barings BDC’s income will be subject to corporate-level income tax, reducing the amount available to be distributed to its stockholders. In contrast, assuming Barings BDC qualifies as a RIC, Barings BDC’s U.S. federal corporate-level income tax should be substantially reduced or eliminated. See “— Election to Be Taxed as a RIC” above and “Risk Factors” in Part I, Item 1A of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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Taxation of U.S. Stockholders

Whether an investment in the shares of Barings BDC Common Stock is appropriate for a U.S. stockholder will depend upon that person’s particular circumstances. An investment in the shares of Barings BDC Common Stock by a U.S. stockholder may have adverse tax consequences. The following summary generally describes certain U.S. federal income tax consequences of an investment in shares of Barings BDC Common Stock by taxable U.S. stockholders and not by U.S. stockholders that generally are exempt from U.S. federal income taxation. U.S. stockholders are urged to consult their tax advisors before investing in shares of Barings BDC Common Stock, including with respect to the applicable state, local and non-U.S. consequences of such investment.

Distributions on Barings BDC Common Stock

Distributions by Barings BDC generally are taxable to U.S. stockholders as ordinary income or long-term capital gain. Distributions of Barings BDC’s ICTI (which is, generally, Barings BDC’s ordinary income excluding net capital gain) will be taxable as ordinary income to U.S. stockholders to the extent of Barings BDC’s current and accumulated earnings and profits, whether paid in cash or reinvested in additional shares of Barings BDC Common Stock. Distributions of Barings BDC’s net capital gain properly reported by Barings BDC as “capital gains dividends” will be taxable to U.S. stockholders as long-term capital gains (which, under current law, are taxed at preferential rates in the case of individuals, trusts or estates). This is true regardless of U.S. stockholders’ holding periods for their Barings BDC Common Stock and regardless of whether the dividend is paid in cash or reinvested in additional shares of Barings BDC Common Stock.

Distributions in excess of Barings BDC’s earnings and profits first will reduce a U.S. stockholder’s adjusted tax basis in such stockholder’s Barings BDC Common Stock and, after the adjusted tax basis is reduced to zero, will constitute capital gains to such U.S. stockholder. Barings BDC has made distributions in excess of its earnings and profits and may continue to do so in the future. As a result, a U.S. stockholder will need to consider the effect of Barings BDC’s distributions on such U.S. stockholder’s adjusted tax basis in Barings BDC Common Stock in their individual circumstances.

A portion of Barings BDC’s ordinary income dividends, but not capital gains dividends, paid to corporate U.S. stockholders may, if certain conditions are met, qualify for the dividends-received deduction to the extent that Barings BDC has received dividends from certain corporations during the taxable year, but only to the extent such ordinary income dividends are treated as paid out of Barings BDC’s earnings and profits. Barings BDC expects only a small portion of its dividends to qualify for this deduction, if any Corporate U.S. stockholders are urged to consult their tax advisors in determining the application of these rules in their particular circumstances.

In general, “qualified dividend income” realized by non-corporate U.S. stockholders is taxable at the same rate as net capital gain. Generally, qualified dividend income is dividend income attributable to certain U.S. and foreign corporations, as long as certain holding period requirements are met. As long as certain requirements are met, Barings BDC’s dividends paid to non-corporate U.S. stockholders attributable to qualified dividend income may be treated by such U.S. stockholders as qualified dividend income, but only to the extent such ordinary income dividends are treated as paid out of Barings BDC’s earnings and profits. Barings BDC expects only a small portion of its dividends to qualify as qualified dividend income, if any.

Although Barings BDC currently intends to distribute any of its net capital gain for each taxable year on a timely basis, Barings BDC may in the future decide to retain some or all of its net capital gain, and may designate the retained amount as a “deemed distribution” to its stockholders pursuant to an election made under Section 852(b)(3)(D) of the Code. In that case, among other consequences, Barings BDC will pay tax on the retained amount, each U.S. stockholder will be required to include such stockholder’s share of the deemed distribution in income as if it had been actually distributed to the U.S. stockholder, and the U.S. stockholder will be entitled to claim a credit equal to such stockholder’s allocable share of the tax paid thereon by Barings BDC. The amount of the deemed distribution net of such tax will be added to the U.S. stockholder’s adjusted tax basis for such stockholder’s Barings BDC Common Stock. A U.S. stockholder that is not subject to U.S. federal income tax or otherwise is not required to file a U.S. federal income tax return would be required to file a U.S. federal income tax return on the appropriate form in order to claim a refund for the taxes Barings BDC paid. In order to utilize the deemed distribution approach, Barings BDC must provide a written statement to its stockholders reporting the deemed distribution after the close of the relevant taxable year. Barings BDC cannot treat any of its ICTI as a “deemed distribution.”

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For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any year and (2) the amount of dividends paid for that year, Barings BDC may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If Barings BDC makes such an election, the U.S. stockholder will still be treated as receiving the dividend in the taxable year in which the distribution is made. However, any dividend declared by Barings BDC in October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it had been received by Barings BDC’s U.S. stockholders on December 31 of the year in which the dividend was declared.

Barings BDC has the ability to declare a large portion of a dividend in shares of its stock. As long as a portion of such dividend is paid in cash (which portion could generally be as low as 20%) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, Barings BDC stockholders will be taxed on 100% of the fair market value of the dividend on the date the dividend is received in the same manner as a cash dividend, even though most of the dividend was paid in shares of Barings BDC Common Stock, which may result in Barings BDC’s U.S. stockholders having to pay tax on such dividends, even if no cash is received.

If investors purchase shares of Barings BDC Common Stock shortly before the record date of a distribution, the price of the shares will include the value of the distribution and the investors will be subject to tax on the distribution even though it represents a return of their investment. Barings BDC has built-up or has the potential to build up large amounts of unrealized gains which, when realized and distributed, could have the effect of a taxable distribution to stockholders.

Sale or Other Disposition of Barings BDC Common Stock

A U.S. stockholder generally will recognize taxable gain or loss if the U.S. stockholder sells or otherwise disposes of such stockholder’s shares of Barings BDC Common Stock. The amount of gain or loss will be measured by the difference between such stockholder’s adjusted tax basis in the stock sold and the amount of the proceeds received in exchange. Any gains arising from such sale or disposition generally will be treated as long-term capital gains or losses if the stockholder has held such stockholder’s shares of Barings BDC Common Stock for more than one year. Otherwise, such gain or loss will be classified as short-term capital gain or loss. However, any capital loss arising from the sale or disposition of shares of Barings BDC Common Stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gains dividends received, or undistributed capital gains deemed received, with respect to such shares. In addition, all or a portion of any loss recognized upon a disposition of shares of Barings BDC Common Stock may be disallowed if substantially identical stock or securities are purchased (whether through reinvestment of distributions or otherwise) within 30 days before or after the disposition.

In general, U.S. stockholders that are individuals, trusts or estates are taxed at preferential rates on their net capital gains (generally, the excess of net long-term capital gains over net short-term capital losses for a taxable year, including long-term capital gains derived from an investment in Barings BDC shares). Such rate is lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. stockholders currently are subject to U.S. federal income tax on net capital gains at the maximum rate that also applies to ordinary income. Non-corporate U.S. stockholders with net capital losses for a year (i.e., capital loss in excess of capital gain) generally may deduct up to $3,000 of such losses against their ordinary income each year; any net capital losses of a non-corporate U.S. stockholder in excess of $3,000 generally may be carried forward and used in subsequent years as provided in the Code. Corporate U.S. stockholders generally may not deduct any net capital losses for a year, but may carry back such losses for three years or carry forward such losses for five years.

Information Reporting and Backup Withholding

Barings BDC will send to each of its U.S. stockholders, after the end of each calendar year, a notice providing, on a per share and per distribution basis, the amounts includible in such U.S. stockholder’s taxable income for such year as ordinary income and as long-term capital gain. In addition, the U.S. federal tax status of each year’s distributions generally will be reported to the IRS.

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Barings BDC may be required to withhold U.S. federal income tax (“backup withholding”) from all taxable distributions to any non-corporate U.S. stockholder (1) who fails to furnish Barings BDC with a correct taxpayer identification number or a certificate that such stockholder is exempt from backup withholding or (2) with respect to whom the IRS notifies Barings BDC that such stockholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect. An individual’s taxpayer identification number is his or her social security number. Backup withholding is not an additional tax. Any amount withheld under backup withholding is allowed as a credit against the U.S. stockholder’s U.S. federal income tax liability and may entitle such stockholder to a refund, provided that proper information is timely provided to the IRS.

Taxation of Non-U.S. Stockholders

Whether an investment in shares of Barings BDC Common Stock is appropriate for a non-U.S. stockholder will depend upon that person’s particular circumstances. An investment in shares of Barings BDC Common Stock by a non-U.S. stockholder may have adverse tax consequences and, accordingly, may not be appropriate for a non-U.S. stockholder. Non-U.S. stockholders are urged to consult their tax advisors before investing in Barings BDC Common Stock.

Distributions on Barings BDC Common Stock

Distributions of Barings BDC’s ICTI to non-U.S. stockholders will be subject to U.S. withholding tax of 30% (unless lowered or eliminated by an applicable income tax treaty) to the extent payable from Barings BDC’s current and accumulated earnings and profits unless the distributions are properly designated as (1) paid by Barings BDC in respect of Barings BDC’s “qualified net interest income” (generally, Barings BDC’s U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which Barings BDC is at least a 10% stockholder, reduced by expenses that are allocable to such income) or (2) paid by Barings BDC in connection with Barings BDC’s “qualified short-term capital gains” (generally, the excess of Barings BDC’s net short-term capital gains over Barings BDC’s net long-term capital losses for such taxable year). No assurance can be given that Barings BDC will distribute any interest-related or short-term capital gains dividends. Furthermore, in the case of shares of Barings BDC stock held through an intermediary, the intermediary may withhold U.S. federal income tax even if Barings BDC reports the payment as an interest-related dividend or short-term capital gains dividend.

If any portion of a distribution is in excess of Barings BDC’s current and accumulated earnings and profits, that portion of the distribution generally will not be subject to U.S. federal income tax. If the distribution is effectively connected with the non-U.S. stockholder’s conduct of a U.S. trade or business, and, if an income tax treaty applies, attributable to a permanent establishment in the United States, the non-U.S. stockholder will not be subject to U.S. federal withholding tax, but generally will be subject to tax on the distribution in the same manner as a U.S. stockholder, as described in the preceding section, “U.S. Federal Income Taxation of an Investment in Barings BDC Common Stock — Taxation of U.S. Stockholders — Distributions on Barings BDC Common Stock.”

In that case, Barings BDC will not be required to withhold U.S. federal income tax if the non-U.S. stockholder complies with applicable certification and disclosure requirements. Special certification requirements apply to a non-U.S. stockholder that is a foreign trust and such entities are urged to consult their own tax advisors.

Actual or deemed distributions of Barings BDC’s net capital gain to a non-U.S. stockholder, and gains recognized by a non-U.S. stockholder upon the sale of Barings BDC Common Stock, will not be subject to withholding of U.S. federal income tax and generally will not be subject to U.S. federal income tax unless (1) the distributions or gains, as the case may be, are effectively connected with a U.S. trade or business of the non-U.S. stockholder and, if an income tax treaty applies, are attributable to a permanent establishment maintained by the non-U.S. stockholder in the United States (as discussed above) or (2) the non-U.S. stockholder is an individual, has been present in the United States for 183 days or more during the taxable year, and certain other conditions are satisfied. For a corporate non-U.S. stockholder, distributions (both actual and deemed), and gains recognized upon the sale of Barings BDC Common Stock that are effectively connected with a U.S. trade or business may, under certain circumstances, be subject to an additional “branch profits tax” (unless lowered or eliminated by an applicable income tax treaty). Non-U.S. stockholders of Barings BDC Common Stock are encouraged to consult their own advisors as to the applicability of an income tax treaty in their particular circumstances.

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If Barings BDC distributes its net capital gain in the form of deemed rather than actual distributions (which Barings BDC may do in the future), a non-U.S. stockholder will be entitled to a U.S. federal income tax credit or tax refund equal to the non-U.S. stockholder’s allocable share of the tax Barings BDC pays on the capital gains deemed to have been distributed. In order to obtain the refund, the non-U.S. stockholder must obtain a U.S. taxpayer identification number (if one has not been previously obtained) and file a U.S. federal income tax return even if the non-U.S. stockholder would not otherwise be required to obtain a U.S. taxpayer identification number or file a U.S. federal income tax return.

Barings BDC has the ability to declare a large portion of a dividend in shares of Barings BDC Common Stock. As long as a portion of such dividend is paid in cash (which portion could generally be as low as 20%) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, Barings BDC’s non-U.S. stockholders will be taxed on 100% of the fair market value of the dividend on the date the dividend is received in the same manner as a cash dividend (including the application of withholding tax rules described above), even though most of the dividend was paid in shares of Barings BDC Common Stock. In such a circumstance, Barings BDC may be required to withhold all or substantially all of the cash or shares of Barings BDC Common Stock Barings BDC would otherwise distribute to a non-U.S. stockholder.

A non-U.S. stockholder who is otherwise subject to withholding of U.S. federal income tax may be subject to information reporting and backup withholding of U.S. federal income tax on dividends unless the non-U.S. stockholder provides Barings BDC or the dividend paying agent with an IRS Form W- 8BEN or IRS Form W-8BEN-E (or an acceptable substitute form) or otherwise meets documentary evidence requirements for establishing that it is a non-U.S. stockholder or otherwise establishes an exemption from backup withholding.

Withholding and Information Reporting on Foreign Financial Accounts

Pursuant to FATCA, the relevant withholding agent generally will be required to withhold 30% of any dividends paid on Barings BDC Common Stock and (subject to proposed U.S. Treasury Regulations as discussed below) 30% of the gross proceeds from a sale of Barings BDC Common Stock to (i) a foreign financial institution unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity that is the beneficial owner of the payment unless such entity certifies that it does not have any substantial U.S. owners or provides the name, address and taxpayer identification number of each substantial U.S. owner and such entity meets certain other specified requirements. If this tax is withheld, non-U.S. stockholders that are otherwise eligible for an exemption from, or reduction of, U.S. federal withholding taxes with respect to such dividends or proceeds will be required to seek a credit or refund from the IRS to obtain the benefit of such exemption or reduction. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. Certain jurisdictions have entered into agreements with the United States that may supplement or modify these rules.

Under proposed Treasury Regulations, withholding under FATCA does not apply to gross proceeds from any sale or disposition of Barings BDC Common Stock. Taxpayers may generally rely on those proposed regulations until final regulations are issued. Non-U.S. stockholders are urged consult with their tax advisors regarding the particular consequences to them of FATCA. Barings BDC will not pay any additional amounts in respect of any amounts withheld.

Reportable Transactions

Under U.S. Treasury regulations, if a stockholder recognizes a loss with respect to shares of $2 million or more for a non-corporate stockholder or $10 million or more for a corporate stockholder in any single taxable year (or a greater loss over a combination of years), the stockholder must file with the IRS a disclosure statement on Form 8886. Direct stockholders of certain portfolio securities in many cases are excepted from this reporting requirement, but under current guidance, stockholders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to stockholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Significant monetary penalties apply to a failure to comply with this reporting requirement. States may also have a similar reporting requirement. Stockholders are urged to consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

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Failure to Qualify as a RIC

If Barings BDC were unable to qualify for treatment as a RIC, and relief were not available as discussed above, Barings BDC would be subject to tax on all of its taxable income at regular corporate rates. Barings BDC would not be able to deduct distributions to stockholders and would not be required to make distributions for tax purposes. Distributions generally would be taxable to Barings BDC stockholders as ordinary dividend income to the extent of Barings BDC’s current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate U.S. stockholders would be eligible for the dividends-received deduction. Distributions in excess of Barings BDC’s current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. If Barings BDC were to fail to meet the RIC requirements for more than two consecutive years and then sought to requalify as a RIC, Barings BDC would be subject to tax on any unrealized net built-in gains in the assets held by Barings BDC during the period in which Barings BDC failed to qualify as a RIC that are recognized within the subsequent ten years, unless Barings BDC makes a special election to pay corporate-level tax on such built-in gains at the time of its requalification as a RIC.

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BARINGS BDC PROPOSAL 1: THE MERGER STOCK ISSUANCE PROPOSAL

Barings BDC is asking Barings BDC stockholders to approve the issuance of shares of Barings BDC Common Stock pursuant to the Merger Agreement. Upon completion of the First Merger, and subject to the terms and conditions of the Merger Agreement, each share of Sierra Common Stock issued and outstanding immediately prior to the Effective Time (excluding Canceled Shares) will be converted into the right to receive, in accordance with the Merger Agreement, the Merger Consideration as described in the section entitled “Description of the Merger Agreement — Merger Consideration.”

The issuance of shares of Barings BDC Common Stock to Sierra stockholders is a condition to the closing of the First Merger and the approval of the Merger Stock Issuance Proposal is required for completion of the Merger. In the event the Merger Stock Issuance Proposal is approved by Barings BDC stockholders, but the Merger Agreement is terminated (without the First Merger being completed) prior to the issuance of shares of Barings BDC Common Stock pursuant to the Merger Agreement, Barings BDC will not issue any shares of Barings BDC Common Stock as a result of the approval of the Merger Stock Issuance Proposal.

Under the NYSE rules, a company is required to obtain stockholder approval prior to the issuance of shares of common stock in connection with the acquisition of the stock or assets of another company if, among others, the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the shares of common stock. Based on the number of shares of Barings BDC Common Stock issued and outstanding as of the close of business on December 27, 2021, the last practicable date before the date of this joint proxy statement/prospectus, it is estimated that Barings BDC will issue approximately 45,996,985 shares of Barings BDC Common Stock to Sierra stockholders in the aggregate upon completion of the First Merger. The aggregate number of shares of Barings BDC Common Stock that Sierra will issue in the First Merger will exceed 20% of the shares of Barings BDC Common Stock outstanding before such issuance, and, for this reason, Barings BDC is seeking the approval of its stockholders for the issuance of shares of Barings BDC Common Stock pursuant to the Merger Agreement.

THE BARINGS BDC BOARD UNANIMOUSLY RECOMMENDS THAT BARINGS BDC STOCKHOLDERS VOTE “FOR” THE MERGER STOCK ISSUANCE PROPOSAL.

Barings BDC stockholders may vote “FOR” or “AGAINST,” or they may “ABSTAIN” from voting on, the Merger Stock Issuance Proposal. Approval of this proposal requires the affirmative vote of the holders of at least a majority of votes cast by holders of shares of Barings BDC Common Stock present at the Barings BDC Special Meeting, virtually or represented by proxy, and entitled to vote thereat. Abstentions and broker non-votes (if any) will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of this proposal. Proxies received will be voted “FOR” the approval of the Merger Stock Issuance Proposal unless Barings BDC stockholders designate otherwise.

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BARINGS BDC PROPOSAL 2: THE BARINGS BDC BELOW NAV ISSUANCE PROPOSAL

Barings BDC is asking Barings BDC stockholders to approve the issuance of shares of Barings BDC Common Stock pursuant to the Merger Agreement at a price below its then-current NAV per share, if applicable. It is a condition to completion of the First Merger that Barings BDC issue shares of Barings BDC Common Stock to Sierra stockholders pursuant to the Merger Agreement. Upon completion of the First Merger, and subject to the terms and conditions of the Merger Agreement, each share of Sierra Common Stock issued and outstanding immediately prior to the Effective Time (excluding Canceled Shares) will be converted into the right to receive, in accordance with the Merger Agreement, the Merger Consideration as described in the section entitled “Description of the Merger Agreement — Merger Consideration.”

The issuance of shares of Barings BDC Common Stock to Sierra stockholders at a price below Barings BDC’s then-current NAV per share, if applicable, may be necessary to complete the First Merger. The approval of the Barings BDC Below NAV Issuance Proposal is required for completion of the First Merger if the issuance of shares of Barings BDC Common Stock pursuant to the Merger Agreement is at a price below Barings BDC’s then-current NAV per share.

Examples of Dilutive Effect of the Issuance of Shares of Barings BDC Common Stock Below Net Asset Value in Connection with the First Merger (if necessary)

The table below illustrates the level of NAV dilution that would be experienced by Barings BDC stockholders (solely in their capacity as Barings BDC stockholders) in an issuance of 45,996,985 shares of Barings BDC Common Stock to Sierra stockholders in connection with the First Merger at three different hypothetical levels of discount from Barings BDC’s NAV per share (each, a “Dilutive Offering”). The number of shares of Barings BDC Common Stock to be issued to Sierra stockholders in the First Merger was determined by multiplying 102,276,889.12 shares of Sierra Common Stock outstanding prior to the First Merger by the Exchange Ratio of 0.44973. Although issuance of shares of Barings BDC Common Stock to Sierra stockholders at a price below Barings BDC’s then-current NAV per share, if applicable, may be necessary to complete the First Merger, it is not possible to predict the level of any potential discount prior to Closing. The actual discount, if any, may differ from the presentation below.

The examples assume that Barings BDC has 65,316,085 shares of common stock outstanding, current net assets of $744,821,565, and a current NAV per share of $11.40, which reflects Barings BDC’s shares outstanding, net assets, and NAV per share as of September 30, 2021. The table illustrates the dilutive effect on a hypothetical Barings BDC stockholder of (1) a Dilutive Offering at $10.83 per share (a 5% discount from NAV), (2) a Dilutive Offering at $10.26 per share (a 10% discount from NAV) and (3) a Dilutive Offering at $9.12 per share (a 20% discount from NAV).

Dilutive Effect of the Issuance of Shares of Barings BDC Common Stock

Below Net Asset Value in Connection with the First Merger

 

Prior to
Issuance
Below NAV

 

Example 1
Dilutive Offering at
5% Discount

 

Example 2
Dilutive Offering at
10% Discount

 

Example 3
Dilutive Offering at
20% Discount

Following
Issuance

 

%
Change

 

Following
Issuance

 

%
Change

 

Following
Issuance

 

%
Change

Offering Price

 

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

Price per Share to Sierra Stockholders(1)

 

 

 

 

$

10.83

 

 

 

 

$

10.26

 

 

 

 

$

9.12

 

 

 

Proceeds per Share to Barings BDC(1)

 

 

 

 

$

10.83

 

 

 

 

$

10.26

 

 

 

 

$

9.12

 

 

 

Decrease to NAV

 

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

Total Shares Outstanding

 

 

65,316,085

 

 

 

111,313,070

 

 

70.42

%

 

 

111,313,070

 

 

70.42

%

 

 

111,313,070

 

 

70.42

%

NAV per Share

 

$

11.40

 

 

$

11.17

 

 

(2.07

)%

 

$

10.93

 

 

(4.13

)%

 

$

10.46

 

 

(8.26

)%

Dilution to Barings BDC Stockholder

 

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

Shares Held by Barings BDC Stockholder

 

 

10,000

 

 

 

10,000

 

 

 

 

 

10,000

 

 

 

 

 

10,000

 

 

 

Percentage Held by Barings BDC Stockholder

 

 

0.01531

%

 

 

0.00898

%

 

(0.00633

)%

 

 

0.00898

%

 

(0.00633

)%

 

 

0.00898

%

 

(0.00633

)%

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Prior to
Issuance
Below NAV

 

Example 1
Dilutive Offering at
5% Discount

 

Example 2
Dilutive Offering at
10% Discount

 

Example 3
Dilutive Offering at
20% Discount

Following
Issuance

 

%
Change

 

Following
Issuance

 

%
Change

 

Following
Issuance

 

%
Change

Total Asset Values

 

 

  

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

Total NAV Held by Barings BDC Stockholder

 

$

114,000

 

$

111,700

 

 

(2.02

)%

 

$

109,300

 

 

(4.12

)%

 

$

104,600

 

 

(8.25

)%

Total Investment by Barings BDC Stockholder (Assumed to Be $11.39 per Share)

 

$

114,000

 

$

114,000

 

 

 

 

$

114,000

 

 

 

 

$

114,000

 

 

 

Total Dilution to Barings BDC Stockholder (Total NAV Less Total Investment)

 

 

 

$

(2,300

)

 

 

 

$

(4,700

)

 

 

 

$

(9,400

)

 

 

Per Share Amounts

 

 

  

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

NAV per Share Held by Barings BDC Stockholder

 

 

 

$

11.17

 

 

 

 

$

10.93

 

 

 

 

$

10.46

 

 

 

Investment per Share Held by Barings BDC Stockholder (Assumed to be $11.39 per Share on Shares Held Prior to Offering)

 

$

11.40

 

$

11.40

 

 

 

 

$

11.40

 

 

 

 

$

11.40

 

 

 

Dilution per Share Held by Barings BDC Stockholder (NAV per Share Less Investment per Share)

 

 

 

$

(0.23

)

 

 

 

$

(0.47

)

 

 

 

$

(0.94

)

 

 

Percentage Dilution to Barings BDC Stockholder (Dilution per Share Divided by Investment per Share)

 

 

 

 

 

 

(2.02

)%

 

 

 

 

(4.12

)%

 

 

 

 

(8.25

)%

____________

(1)      Represents the hypothetical net asset value received by Barings BDC at Closing divided by 45,996,985 shares of Barings BDC Common Stock expected to be issued to Sierra stockholders in connection with the First Merger at the Exchange Ratio of 0.44973.

THE BARINGS BDC BOARD UNANIMOUSLY RECOMMENDS THAT BARINGS BDC STOCKHOLDERS VOTE “FOR” THE BARINGS BDC BELOW NAV ISSUANCE PROPOSAL.

Barings BDC stockholders may vote “FOR” or “AGAINST,” or they may “ABSTAIN” from voting on, the Barings BDC Below NAV Issuance Proposal. Approval of this proposal requires the affirmative vote of each of the following: (1) a majority of the outstanding voting securities of Barings BDC Common Stock; and (2) a majority of the outstanding voting securities of Barings BDC Common Stock that are not held by affiliated persons of Barings BDC. For purposes of this proposal, the Investment Company Act defines a “majority of the outstanding voting securities” as the vote of the lesser of: (1) 67% or more of the voting securities of Barings BDC present at the Barings BDC Special Meeting, if the holders of more than 50% of the outstanding voting securities of Barings BDC are present virtually or represented by proxy; or (2) more than 50% of the outstanding voting securities of Barings BDC. Abstentions and broker non-votes (if any) will have the effect of a vote “against” the Barings BDC Below NAV Issuance Proposal. Proxies received will be voted “FOR” the approval of the Barings BDC Below NAV Issuance Proposal unless Barings BDC stockholders designate otherwise.

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BARINGS BDC PROPOSAL 3: THE BARINGS BDC ADJOURNMENT PROPOSAL

Barings BDC is asking Barings BDC stockholders to approve the adjournment of the Barings BDC Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Barings BDC Special Meeting to approve the Merger Stock Issuance Proposal or the Barings BDC Below NAV Issuance Proposal.

THE BARINGS BDC BOARD UNANIMOUSLY RECOMMENDS THAT, IF NECESSARY OR APPROPRIATE, BARINGS BDC STOCKHOLDERS VOTE “FOR” THE BARINGS BDC ADJOURNMENT PROPOSAL.

Barings BDC stockholders may vote “FOR” or “AGAINST,” or they may “ABSTAIN” from voting on, the Barings BDC Adjournment Proposal. Approval of this proposal requires the affirmative vote of the holders of at least a majority of votes cast by holders of shares of Barings BDC Common Stock present at the Barings BDC Special Meeting, virtually or represented by proxy, and entitled to vote thereat. Abstentions and broker non-votes (if any) will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of this proposal. Proxies received will be voted “FOR” the approval of the Barings BDC Adjournment Proposal unless Barings BDC stockholders designate otherwise.

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SIERRA PROPOSAL 1: THE MERGER PROPOSAL

Sierra is asking Sierra stockholders to approve the First Merger, in which Acquisition Sub will merge with and into Sierra, with Sierra as the surviving corporation, and immediately thereafter, as part of a single integrated transaction, Sierra will merge with and into Barings BDC, with Barings BDC continuing as the surviving corporation. Upon completion of the Merger, and subject to the terms and conditions of the Merger Agreement, each share of Sierra Common Stock issued and outstanding immediately prior to the Effective Time (excluding Canceled Shares) will be converted into the right to receive, in accordance with the Merger Agreement, the Merger Consideration as described in the section entitled “Description of the Merger Agreement — Merger Consideration.”

Approval of the Merger Proposal is required for the completion of the Merger. In the event that the Merger Proposal is approved by Sierra stockholders, but the Merger Agreement is terminated prior to the closing of the First Merger, the First Merger will not be completed.

THE SIERRA BOARD UNANIMOUSLY RECOMMENDS THAT SIERRA STOCKHOLDERS VOTE “FOR” THE MERGER PROPOSAL.

Sierra stockholders may vote “FOR” or “AGAINST,” or they may “ABSTAIN” from voting on, the Merger Proposal. Adoption of this proposal requires the affirmative vote of the holders of Sierra Common Stock constituting a majority of all the votes entitled to be cast on the matter at the Sierra Special Meeting. Abstentions and broker non-votes have the same effect as a vote “AGAINST” the Merger Proposal. Proxies received will be voted “FOR” the approval of the Merger Proposal unless Sierra stockholders designate otherwise.

Appraisal Rights

Sierra stockholders will not be entitled to exercise appraisal rights in connection with the First Merger under the laws of the State of Maryland.

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SIERRA PROPOSAL 2: THE SIERRA ADJOURNMENT PROPOSAL

Sierra is asking Sierra stockholders to approve the adjournment of the Sierra Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Sierra Special Meeting to approve the Merger Proposal.

ON THE RECOMMENDATION OF THE SIERRA SPECIAL COMMITTEE, THE SIERRA BOARD UNANIMOUSLY RECOMMENDS THAT, IF NECESSARY OR APPROPRIATE, SIERRA STOCKHOLDERS VOTE “FOR” THE SIERRA ADJOURNMENT PROPOSAL.

Sierra stockholders may vote “FOR” or “AGAINST,” or they may “ABSTAIN” from voting on, the Sierra Adjournment Proposal. The affirmative vote of the holders of at least a majority of votes cast by holders of the shares of Sierra Common Stock present at the Sierra Special Meeting, virtually or represented by proxy, is required to approve the Sierra Adjournment Proposal. Abstentions and broker non-votes (if any) will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Sierra Adjournment Proposal. Proxies received will be voted “FOR” the approval of the Sierra Adjournment Proposal unless Sierra stockholders designate otherwise.

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MARKET PRICE, DIVIDEND AND DISTRIBUTION INFORMATION

Barings BDC

Price Range of Common Stock

Barings BDC Common Stock began trading on February 15, 2007 and is currently traded on the NYSE under the symbol “BBDC.” The following table sets forth: (i) the NAV per share of Barings BDC Common Stock as of the applicable period end, (ii) the range of high and low closing sales prices of Barings BDC Common Stock as reported on the NYSE during the applicable period, (iii) the closing high and low sales prices as a premium (discount) to NAV during the appropriate period, and (iv) the dividends and distributions per share of Barings BDC Common Stock declared during the applicable period.

Period

 

NAV
per share
(1)

 




Closing Sales Price

 

Premium/
(Discount) of
High Sales
Price to
NAV
(2)

 

Premium/
(Discount) of
Low Sales
Price to
NAV
(2)

 

Dividends
and
Distributions
Declared

High

 

Low

 

Fiscal Year Ending December 31, 2021

 

 

  

 

  

 

   

 

  

 

 

 

 

Third quarter

 

$

11.40

 

$

11.07

 

$

10.36

 

(2.9

)%

 

(9.1

)%

 

$

0.21

Second quarter

 

$

11.39

 

$

10.77

 

$

10.16

 

(5.4

)%

 

(10.8

)%

 

$

0.20

First quarter

 

$

11.14

 

$

10.20

 

$

8.83

 

(8.4

)%

 

(20.7

)%

 

$

0.19

Fiscal Year Ended December 31, 2020

 

 

  

 

  

 

   

 

  

 

 

 

 

Fourth quarter

 

$

10.99

 

$

9.28

 

$

7.51

 

(15.6

)%

 

(31.7

)%

 

$

0.17

Third quarter

 

$

10.97

 

$

8.44

 

$

7.36

 

(23.1

)%

 

(32.9

)%

 

$

0.16

Second quarter

 

$

10.23

 

$

8.41

 

$

6.22

 

(17.8

)%

 

(39.2

)%

 

$

0.16

First quarter

 

$

9.23

 

$

10.54

 

$

5.34

 

14.2

%

 

(42.1

)%

 

$

0.16

Fiscal Year Ended December 31, 2019

 

 

  

 

  

 

   

 

  

 

 

 

 

Fourth quarter

 

$

11.66

 

$

10.49

 

$

9.94

 

(10.0

)%

 

(14.8

)%

 

$

0.15

Third quarter

 

$

11.58

 

$

10.24

 

$

9.65

 

(11.6

)%

 

(16.7

)%

 

$

0.14

Second quarter

 

$

11.59

 

$

10.33

 

$

9.81

 

(10.9

)%

 

(15.4

)%

 

$

0.13

First quarter

 

$

11.52

 

$

10.00

 

$

9.28

 

(13.2

)%

 

(19.4

)%

 

$

0.12

____________

(1)      NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low closing sales prices. The NAVs shown are based on outstanding shares at the end of each period.

(2)      Calculated as of the respective high or low closing sales price divided by the quarter-end NAV.

The last reported price for Barings BDC Common Stock as of December 22, 2021 was $10.83 per share. As of December 22, 2021, Barings BDC had 99 stockholders of record. This does not include the number of stockholders that hold shares through banks or broker-dealers.

Barings BDC cannot predict the price at which its common stock will trade. Shares of closed-end investment companies frequently trade at a discount to their NAV and Barings BDC Common Stock may also be discounted in the market. This characteristic of closed-end investment companies is separate and distinct from the risk that Barings BDC’s NAV per share may decline. Barings BDC cannot predict whether shares of its common stock will trade above, at or below its NAV. The risk of loss associated with this characteristic of closed-end investment companies may be greater for investors expecting to sell shares of common stock soon after the purchase of such shares of common stock. In addition, if Barings BDC Common Stock trades below its NAV, it will generally not be able to issue additional shares of its common stock at its market price without first obtaining the approval of Barings BDC stockholders and the Barings BDC Independent Directors.

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Pursuant to Barings BDC’s dividend reinvestment plan, Barings BDC will reinvest all cash dividends or distributions declared by the Barings BDC Board on behalf of stockholders who do not elect to receive their distributions in cash. As a result, if the Barings BDC Board declares a distribution, then stockholders who have not elected to “opt out” of Barings BDC’s dividend reinvestment plan will have their distributions automatically reinvested in additional shares of Barings BDC Common Stock. See “Business — Dividend Reinvestment Plan” in Part I, Item 1 of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which is incorporated by reference in this joint proxy statement/prospectus for additional information regarding Barings BDC’s dividend reinvestment plan.

Sierra

There is currently no publicly traded market for Sierra Common Stock. Sierra’s distributions, if any, are determined by the Sierra Board. Sierra has elected, and intends to qualify annually, to be treated as a RIC under Subchapter M of the Code. To maintain RIC tax treatment, Sierra must timely distribute at least 90% of its net ordinary income and net short-term capital gains in excess of its net long- term capital losses, if any. Sierra will be subject to a 4% nondeductible U.S. federal excise tax on its undistributed income unless it distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of its capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in preceding years and on which it did not pay U.S. federal income tax.

The following table reflects the cash distributions per share that Sierra has declared or paid to Sierra Stockholders for the fiscal years ended December 31, 2019 and 2020 and the current fiscal year to date. Stockholders of record as of each respective record date were entitled to receive the distribution.

Record Date

 

Payment Date

 

Amount
Per Share

Fiscal Year Ending December 31, 2021

   

 

 

December 30, 2021

 

December 31, 2021

 

$

0.01000

November 29, 2021

 

November 30, 2021

 

$

0.01000

November 15, 2021

 

November 16, 2021

 

$

0.01000

September 29, 2021

 

September 30, 2021

 

$

0.01000

August 30, 2021

 

August 31, 2021

 

$

0.01000

July 29, 2021

 

July 30, 2021

 

$

0.01000

June 29, 2021

 

June 30, 2021

 

$

0.01000

May 28, 2021

 

May 31, 2021

 

$

0.01000

April 29, 2021

 

April 30, 2021

 

$

0.01000

March 30, 2021

 

March 31, 2021

 

$

0.01000

February 25, 2021

 

February 26, 2021

 

$

0.01000

January 28, 2021

 

January 29, 2021

 

$

0.01000

Fiscal Year Ending December 31, 2020

   

 

 

December 30, 2020

 

December 31, 2020

 

$

0.01000

November 27, 2020

 

November 30, 2020

 

$

0.01000

October 29, 2020

 

October 30, 2020

 

$

0.01000

March 30, 2020

 

March 31, 2020

 

$

0.03500

February 27, 2020

 

February 28, 2020

 

$

0.03500

January 30, 2020

 

January 31, 2020

 

$

0.03500

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Record Date

 

Payment Date

 

Amount
Per Share

Fiscal Year Ending December 31, 2019

   

 

 

December 30, 2019

 

December 31, 2019

 

$

0.05334

November 28, 2019

 

November 29, 2019

 

$

0.05334

October 30, 2019

 

October 31, 2019

 

$

0.05334

September 27, 2019

 

September 30, 2019

 

$

0.05334

August 29, 2019

 

August 30, 2019

 

$

0.05334

July 30, 2019

 

July 31, 2019

 

$

0.05334

June 27, 2019

 

June 28, 2019

 

$

0.05334

May 30, 2019

 

May 31, 2019

 

$

0.05334

April 29, 2019

 

April 30, 2019

 

$

0.05334

March 11, 2019

 

March 29, 2019

 

$

0.05334

February 11, 2019

 

February 28, 2019

 

$

0.05334

January 25, 2019

 

January 31, 2019

 

$

0.05334

Sierra has a distribution reinvestment plan which has been suspended pursuant to the Merger Agreement. See “Sierra Distribution Reinvestment Plan” for a description of the Sierra distribution reinvestment plan.

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BUSINESS OF BARINGS BDC

The information in “Business” in Part I, Item 1 of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 is incorporated herein by reference.

DETERMINATION OF NET ASSET VALUE OF BARINGS BDC

The information in “Business — Valuation Process and Determination of Net Asset Value” in Part I, Item 1 of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 is incorporated herein by reference.

REGULATION OF BARINGS BDC

The information in “Business — Regulation of Business Development Companies” in Part I, Item 1 of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 is incorporated herein by reference.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BARINGS BDC

The information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of Barings BDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in Part 1, Item 2 of Barings BDC’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021 is incorporated herein by reference.

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SENIOR SECURITIES OF BARINGS BDC

Information about Barings BDC’s senior securities is shown as of the dates indicated in the below table. This information about Barings BDC’s senior securities should be read in conjunction with Barings BDC’s audited and unaudited consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Barings BDC.”

Class and Year(1)

 

Total Amount Outstanding Exclusive of Treasury Securities(2)(3)

 

Asset Coverage per Unit(4)

 

Involuntary Liquidating Preference per Unit(5)

 

Average Market Value per Unit(6)

  

($’s in thousands)

2019 Notes

 

 

  

 

  

 

  

 

 

2012

 

$

69,000

 

$

1,580

 

$

 

$

25.92

2013

 

 

69,000

 

 

2,259

 

 

 

 

25.99

2014

 

 

69,000

 

 

2,215

 

 

 

 

25.74

December 2022 Notes

 

 

  

 

  

 

  

 

 

2012

 

 

80,500

 

 

1,580

 

 

 

 

25.03

2013

 

 

80,500

 

 

2,259

 

 

 

 

24.94

2014

 

 

80,500

 

 

2,215

 

 

 

 

25.05

2015

 

 

80,500

 

 

1,972

 

 

 

 

25.23

2016

 

 

80,500

 

 

2,124

 

 

 

 

25.15

2017

 

 

80,500

 

 

2,120

 

 

 

 

25.51

March 2022 Notes

 

 

  

 

  

 

  

 

 

2015

 

 

86,250

 

 

1,972

 

 

 

 

25.46

2016

 

 

86,250

 

 

2,124

 

 

 

 

25.58

2017

 

 

86,250

 

 

2,120

 

 

 

 

25.85

SBA-guaranteed debentures payable(7)

 

 

  

 

  

 

  

 

 

2011

 

 

224,238

 

 

2,397

 

 

 

 

N/A

2012

 

 

213,605

 

 

1,580

 

 

 

 

N/A

2013

 

 

193,285

 

 

2,259

 

 

 

 

N/A

2014

 

 

224,780

 

 

2,215

 

 

 

 

N/A

2015

 

 

224,968

 

 

1,972

 

 

 

 

N/A

2016