With BDC earnings season underway, here is a repost of the BDC Reporter's regular recap of the current state of the market for the sector's common stocks and Baby Bonds. They have a look at where these two segments of the 46 publicly traded BDCs they track every week, in a series that began months ago.
INTRODUCTION
Fifth Street Finance‘s (FSC) stock price has been moving sharply up and down throughout 2017, and especially in the weeks after the BDC’s just-arrived CEO resigned. That happened in April. In May the Investment Advisor of FSC – Fifth Street Asset Management (FSAM) – put itself up for sale. In June, the Wall Street Journal leaked a story that FSAM was being acquired by Oaktree Capital. In July we discovered Oaktree was buying the investment management contracts of FSC and sister BDC Fifth Street Senior Floating Rate (FSFR). Now the participants and investors expect a closing of the acquisition by the IVQ of 2017. FSC began the year peaking at a price of $5.67 in January; dropping to $4.31 when the new CEO announced a large number of non-accruing loans and a reduction in distributions in February, and a new low of $3.92 just before the Wall Street Journal leak. Since then FSC jumped to just over $5.0 until the July 14 confirmation of the Oaktree transaction, which then took the stock price to a high of $5.71 on July 18. From lowest to highest, FSC has moved 45% in a few weeks, and is now trading back close to its YTD high, and at a level achieved before all the developments mentioned above even occurred.
Topics: BDC
In an 8-K on July 6, 2017 MVC Capital (MVC) confirmed the previously announced sale of its affiliate U.S. Gas and Electric (USGE) had been completed on July 5. Here are the details, our analysis of the likely impact of the USGE transaction on investment income and earnings over time; the BDC Reporter’s own mixed view of MVC’s prospects and a disclosure about our own exposure:
Topics: BDC
Last week, the BDC Reporter initiated coverage of TCG BDC (ticker: CGBD), the latest public Business Development Company (“BDC”). In order to delve into the details, we have broken the analysis into multiple parts. We began with CGBD’s History/Formation, and reviewed Strategy. Now we turn to Compensation. This is not just a matter of listing out what the fees charged are, but involves placing compensation in the context of the business overall, and ascertaining how incentives shape how the BDC is run. In this case, Carlyle is doing much that is a copycat of other BDCs, and not in a way that’s necessarily good for shareholders. However, there is a noteworthy exception to that statement which we’ll review below. We end,though, by pointing out some of the ways the compensation scheme may have unfavorable consequences over the long term for those who hold the stock. (By the way, the Prospectus show that Carlyle insiders own very little of the stock t the moment: 0.5%).
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