BDC COMMON STOCKS
In a holiday-shortened week, the BDC Sector did pretty much one thing: go up. To $21.26.
For which investors will be thankful.
After all, at the beginning of the month the UBS Traded Note with the ticker BDCS was at a YTD Low of $20.43.
That was (10%) down in the period and (15%) off the YTD and multiple year high of $23.87 on March 31, 2017.
Basically half the price gains achieved since the BDC Rally began in February 2016 had been frittered away.
However, after that November nadir, the BDC Sector has been pulling itself off the mat as a group, even if individual names have been pummelled.
In 3 weeks, BDCS is up 3.7%.
More Up Than Down
This week, most BDCs were in the green. Out of 46 we track, 36 were up, or at least flat.
Of the 10 who did not get the mini-rally memo, none were down by our self designated threshold of (3%) or more.
However, among the BDCs that were up, 3 broke through the 3% barrier.
These were – in order – TICC (4.1%), SAR (3.9%) and FDUS (3.2%).
Given that we only had two earnings releases in the week – and none for those names – this looked like normal market re-pricing.
That means Mr Market giving and taketh away. After all, over a 4 week period TICC and FDUS are both down by a material percentage and SAR is up 0.1%.
Overall, the BDC market has become slightly more bullish based on price versus the 50 Day Moving Average with 27 up and 19 down.
From a 200 Day Moving Average, the BDC Sector still remains ever so slightly in the red, with 26 stocks down versus that metric and 22 up.
That pretty much sums up the BDC Sector right now: divided roughly in half between the BDCs that are prospering with one month of the year to go, and the other half that are not.
Yes, ABDC picked itself off the mat after reaching multiple new All Time Lows.
However, the hapless BDC remains (54%) off its 52 Week High.
PSEC also took a u-turn in November, which continued last week from $5.56 to $6.80.
This was probably helped by the huuuge insider purchases of common stock by the CEO.
We muse to ourselves: is this just a perceived good investment by the CEO – made rich on PSEC’s fees – or something else ?
The BDC Reporter does like to speculate at times. We are wondering if the Investment Advisor has plans for PSEC besides just hanging in there ?
We’ll know soon enough.
Still having a hard time at the bottom of the table are CPTA (which we last reviewed in-depth on October 2), BKCCand CMFN (which we featured on November 11 in an article called “Why We Are Concerned”).
Also down there are KCAP, OFS and MCC (waiting for its earnings moment coming up-see the BDC Earnings Calendar)
A more recent addition to the Lowest Of The Low is HCAP.
Some of the BDCs that have reported good results – and sometimes even dividend increases – in recent months took a breather price-wise. MAIN was down (1.5%) and GAIN (2.9%).
Is the Worst Behind Us where BDC sector prices are concerned ? Do we have more weeks like this one of a mostly up moving market ?
We’ll stick our neck out – but we literally would not put money on this hunch – and predict that much of the bottom fishing boost has already occurred.
Plus, at the top of the table, BDC values are already pretty high.
So we expect at year-end to see the BDC Sector at or below the current level.
If we are right, we will say as much on these pages. If not, we will begrudgingly fess up.
Insert Pancake Analogy Here
Frequent readers of this column and anybody who tracks the BDC Fixed Income sector will not be surprised to hear prices have remained flat.
The median price on the 35 public issues we track is at $25.40, down from $25.47 the week before and $25.40 two weeks ago.
For fun, we went back to a BDC Market Recap written at the beginning of the year to check where that median price stood.
The number was $25.39.
Nonetheless, there has been a very modest downward shift which is barely noticeable and may not tell us much that’s useful.
This week we only had 2 BDC issues trading at or above $26.00 a share versus three or four in the past.
We have 2 fixed income issues trading below par, where we usually only have MFINL.
MFINL remains below par (at $24.50) but CPTA‘s Convertible with the ticker CPTAG is below $25.00 for a second week in a row at $24.84.
TCCA and TCCB both dipped during the week towards par level – impelled by the issuer’s well known problems – but eager buyers quickly stepped in.
In A Land Far, Far Away
The Big News of the Week from a BDC Fixed Income perspective was PFLT’s new 2023 Unsecured Note announcement.
In an unusual deal, the BDC placed on the Israeli market (which you are reportedly not allowed to trade in) at a 3.83% yield.
This was notable because it’s PFLT’s first foray into Unsecured Debt whose economics typically don’t work well with their low-risk-low yield business model.
Also, the rate which PFLT received from Israeli investors is very low: second only to ARCC‘s 3.5% issue.
If this is the future of BDC Fixed Income, many investors may be getting ready to pack up their tents in the next couple of years.
Looking down our BDC Fixed Income Table we can’t help noting that between issues that are already being redeemed or whose deadline for early redemption is before December 31, 2018, two-thirds of the universe we track is potentially capable of being called in.
A Beginning And An End In Sight
In more prosaic news, MVC’s most recent Baby Bond with the ticker MVCD – whose proceeds will shortly repay the existing issue with the ticker MVCB – began trading.
Very shortly the 35 issues in the BDC Fixed Income Table will be down to 33 as MVCB leaves us, as does SLRC’s incomprehensibly long dated 2042 Baby Bond with the ticker SLRA.
We wrote about SLRA in an article on November 15, 2017.
Poor old BDC Fixed Income investors. Despite all the willingness in the world to invest in new fixed income offerings, the BDCs themselves are finding an array of alternative capital market options.\