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BDC Market Recap: Week Ended October 13, 2017

Posted by Nicholas Marshi, BDC Reporter on Oct 19, 2017 5:00:02 PM

BDC COMMON STOCKS

Sag

During the week ended October 13, 2017 the BDC Sector sagged, judging by the 1% drop in the Wells Fargo BDC Index.

(The Exchange Traded Note with the ticker BDCS was down (2.35%), but that’s partly due to the just announced quarterly dividend announcement).

Still over a 1 month period, the Wells Fargo Index (which we’ll be using as our measuring stick from now on, having found a useful site for charting its changes) is still up over 2%.

That suggests the sector is still in mini bounce up mode since hitting a YTD low on August 31, 2017.

Above Average

Thanks to the recent mild change of market direction – like last week – 34 of 46 BDCs are trading above the 50 Day Moving Average.

Now, 19 BDCs are trading above their  200 Day Moving Average, where the number was 16 last week.

Not Much Change

22 BDCs are trading within 10% of their 52 Week Highs, versus 21 last week and 20 the week before that.

Down at the bottom of the table, 14 BDCs (after eliminating names which are also in the 10% of the 52 Week high) are within 10% of their lowest 52 week price.

In the Bigger Scheme Of Things, though, not much has changed and the sector remains in limbo between the “Bull Market” conditions enjoyed through till the spring and the constant price erosion of all of August.

Weekly Price Moves

Using a new stat we introduced last week, 23 BDCs were up in price on the week (versus 28 last time) and 23 were flat or down.

Monthly Price Moves

Confirming our thesis that we are still in a mini bounce of late: over a 4 week time frame 34 of 46 BDCs are up in price.

Specifically Speaking

This new weekly data is also useful for pointing out who were the individual price winners and losers for the week just ended.

If we use a 3% move as a cut off point, there were only two significant upward movers:

Gladstone Investment (GAIN) reported a slightly higher regular distribution and a Special Distribution and was rewarded with a 3.3% price increase. See the Daily News Table and comments.

Saratoga Investment (SAR) reported higher earnings (albeit boosted by one time items) and a higher NAV, and was Top Dog with a 6.6% price boost.

Mr Market was impressed enough to offer a modest/moderate boost up.

Out Of Favor

More interesting has been what’s been happening amongst BDCs whose price dropped.

There were 4 in the week, led by KCAP Financial (KCAP), which paid out its distribution and saw its price fall substantially (7.7%) on no new news.

This follows a rising price period in prior weeks. KCAP has now cleanly round tripped: up 0.0% over 4 weeks.

Prospect Capital (PSEC) dropped by (6.3%) on the week, reaching at one point a 1 year low. 

PSEC was knocked down by a negative report from Chris Testa at National Securities.

Frankly, we barely noticed at the time but FS Investment (FSIC) dropped (4.6%) during the week, but is up 0.6% in a month snapshot. Still, thanks to a dividend cut, FSIC is down (10.5%) over the last 52 weeks, and makes it the 11th Worst Performer in price terms when compared with the 46 BDC universe we track.

Finally, Newtek Business Services (NEWT) saw a subsidiary raided by the FBI. It’s stock price dropped a lot, then mostly recovered, and is off “just” (3.2%) on the week and remains 24.5% up over 52 weeks.

Special 

Three of the four under-performers (with FSIC the odd man out) are on our Special Situation Watch List. Or, in other words, we expect more shoes to drop and the possibility of buying opportunities to develop.

Like The Weather

Still, despite the dramas at NEWT, PSEC (more talk of SEC investigations or inquiries) and the well received news at GAIN and SAR, 40 of 46 BDCs traded within a narrow range in the period.

However, Earnings Season is looming up ahead. We’ve been keeping an Earnings Release calendar and from November 1 investors should expect more rocking and rolling.


FIXED INCOME

A Quiet Fortnight

In its own quiet way, the BDC Fixed Income segment consolidated in the week ended October 13, 2017.

The median price on our 37 issue list was $25.47, up from $25.37 the week before and $25.38 two weeks ago.

Only 1 BDC issue traded below par (MFINL, which was up this week to $24.07) and 4 were at $26.00 or above.

No News Is…

After weeks of BDCs announcing new fixed income offerings and early redemptions, there has been a lull.

However, we suspect – Hercules Capital (HTGC) is preparing to issue a new Baby Bond , which may or may not replace its current 2024 Note (HTGX) with a 6.125% coupon.

Almost Out Of Here

As we mentioned last week, there are 3 issues officially scheduled to be paid off in October starting with Apollo Investment’s Baby Bond with the ticker AIB, being redeemed October 15.

Great Elm’s FULLL and Horizon Technology Finance‘s HTF will follow shortly.

That will leave the BDC Fixed Income universe at 34 issues.

Looking Around

We’re still looking around to see if BDCs like OFS Capital (OFS) and Fidus Investment (FDUS) and Capital Southwest (CSWC) might become first time issuers…"

 

 

 

Topics: BDC, Fixed Income


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