BDC Preview: Week Of February 19 – February 22, 2019

Posted by Nicholas Marshi, BDC Reporter on Feb 20, 2019 9:00:00 AM
This may be a holiday shortened week, but the BDC Reporter foresees plenty of developments across a range of subjects that will be worth tracking. 

Who’s Next ?:  Clearly, the capital markets for both debt and equity are open for business where public Business Development Companies are concerned.  Admittedly, there’s not been a flood of new capital raised but New Mountain Finance(NMFC) once again undertook a secondary stock offering at a premium to book value (even if that required some subsidizing by the External Manager) and Gladstone Capital (GLAD) entered into an equity distribution arrangement with Jefferies. On the fixed income side of the street,  mid-sized BDC Fidus Investment (FDUS) launched a second Baby Bond not long after Saratoga Investment (SAR) piled on additional issuance to its own second Baby Bond offering, while Prospect Capital (PSEC) indefatigably continued to issue InterNotes, albeit in relatively small sizes. That’s all happened just in the month of February. Also worth mentioning – but less subject to the enthusiasms of the capital markets – multiple BDCs have been not only extending but expanding their secured debt financings, including TPG Specialty (TSLX) and Hercules Capital (HTGC).

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Topics: bdc reporter, News, Fixed Income, market analytics, Analytics, Loans, BDC, business development company

BDC Preview: Week Of February 11 – February 15, 2019

Posted by Nicholas Marshi, BDC Reporter on Feb 12, 2019 9:00:00 AM

Here is our preview of the most important developments likely to occur in the  BDC sector in the coming week.  Pretty much everything highlighted in last week’s report came to pass. This week may be a little less frantic, as we explain below. However – as always – the BDC common stock market remains in a volatile state as investors – who just a few weeks ago – were bailing out have bailed back in, but now face what to do next. BDC Fixed Income investors have a more propitious environment than at any time since November 2018. 

Medley Merger: As we anticipated in last week’s Preview, the dogfight about the future of Medley Capital (MCC), as well as Medley Management(MDLY) and Sierra Income, dominated the BDC news headlines. The BDC Reporter wrote three (!)  more full length articles on the subject during the week for our Premium subscribers, the most recent over the week-end. We won’t repeat all the twists and turns of the week past. However, this is where we are right now: MCC and Sierra have rebuffed the NexPoint offer to serve as the Investment Advisor of the two merged BDCs. Also, MCC, Sierra and MDLY have set a new date for a shareholder vote for each entity: March 8, 2019. Plus, MCC’s Board has changed some of its by-laws to maintain control over when and by whom shareholder meetings are called. NexPoint has offered some very harsh criticism of the management and Boards of the Medley empire. Oh, and we’ve learnt about several lawsuits underway which MCC and MDLY have to contend with by disgruntled parties, including FrontFour.

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Topics: bdc reporter, BDC, business development company, market analytics, Analytics, News

BDC Preview: Week Of February 4 – February 8, 2019

Posted by Nicholas Marshi, BDC Reporter on Feb 5, 2019 9:00:00 AM

Here is our preview of the most important developments likely to occur in the  BDC sector in the coming week.  After a January that was notable mostly for what was happening to BDC prices rather than anything else, the week ahead promises to be jam packed with “hard news”; the ongoing Medley drama and the continuing question mark about how the rally will fare entering into Week 7. The BDC Reporter does not expect to get much sleep.

Medley Mergers: For the first time in weeks, our arbitrary prioritization of what is likely to matter most in the BDC sector will not be led by “the markets”. Not that watching the tape will not be important as the BDC rally grows ever longer in the tooth. However, that other long simmering subject: the attempted merger of Medley Capital (MCC) and Medley Management (MDLY) into non-traded Sierra Income which is to be followed by the internalization of the management arrangement and a public issuance, has reached a boiling point. The BDC Reporter has written two articles over the week-end alone – and more than half a dozen in total – about the twists and turns in this poorly received merger proposal. First, there was opposition from several major MCC shareholders, most notably FrontFour Capital (FrontFour). Then a major proxy advisory firm chimed in with what now seems – as we’ve heard both from the proponents of the merger and its opponents – contradictory views about the merits of the transaction. Over the week-end, the plot thickened when a would-be new manager (NextPoint) offered itself as investment advisor to the shareholders of MCC and Sierra, but not MDLY. In fact, NexPoint’s principal strategy is to dump MDLY out of any arrangement, which leaves a bigger pie for the shareholders of the other two entities to share. That’s how we left matters when we went to bed Sunday night and after much hypothesizing to our readers about the possible impact on the stock price of MCC and MDLY and on the value of Sierra.

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Topics: bdc reporter, News, Finance, market analytics, Analytics, BDC, business development company

BDC Preview: Week of January 28 – February 1, 2019

Posted by Nicholas Marshi, BDC Reporter on Jan 30, 2019 9:25:00 AM

Markets: As always, the BDC Reporter – and everyone else – will be keeping an eye on the markets after five weeks of rallying. We’re not yet at the December 3, 2018 level of 2,535 on the Wells Fargo Index which we set last week as a useful target, but have inched closer after the 0.9%  increase last week. That left us at 2,519 (2,496 the week before) and almost fully recovered from the December bloodbath. As we’ve discussed at greater length in the BDC Common Stocks Market Recap progress going forward is going to be harder to come by and other forms of non-investment grade debt are already leveling out. On the other hand, if January 2019 looks anything like February 2016 – the last time we had a sudden pull-back out of a seemingly clear blue sky – the price trend will remain upward with only very modest bumps along the way.  That rally lasted over a year.

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Topics: bdc reporter, BDC, business development company, market analytics, Analytics, News

BDC Preview: Week of January 14 – January 18, 2019

Posted by Nicholas Marshi, BDC Reporter on Jan 15, 2019 10:30:00 AM

Market: Both BDC common stocks and publicly traded unsecured debt have been in rally mode for three weeks now.  For this preview of the week ahead, we will be looking out for any faltering in the blistering pace of the rebound in leveraged debt values. From the lowest point on Christmas Eve to the close on Friday BDC common stocks have moved up 11%. Less spectacularly, BDC Fixed Income has crossed back over par – using the median of the 41 issues we track – from a low of $24.30 in December, when nearly every issue out there had dropped below the $25.00 level. We’ll be focused on whether BDC common stock prices can make their way back – at least – to the late November level before the markets got into full dramatic mode as investors sold everything that was not nailed down, and some that was. Investors climbing that wall of worry have more than the usual number of challenges ahead including the well worn list of the government shutdown; the uncertainty over tariffs; concerns about a slowing economic environment – or worse; and the endless debate about what the Fed will or won’t do. Moreover, having climbed so high and so quickly investors have – metaphorically speaking – that much further to fall. The week ahead will be a useful test of the breadth and thrust of this rally. We take nothing for granted, and assume the next direction could just as easily be down or up. The best BDC investors might hope for in the short run is a modest pause two weeks ahead of earnings season.

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Topics: bdc reporter, News, BDC, business development company, market analytics, Analytics

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