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.
BDC COMMON STOCKS
VERY LITTLE TO REPORT
- For the week ended July 28, 2017, the BDC Sector barely moved. Again.
- The Exchange Traded Note with the ticker BDCS which we use as a measuring stick ended at $22.33.
- That’s from $22.36 the week before.
- The becalming of the market which began May 10 continues.
- The number of the 46 BDC public companies we track above their 50 Day Moving Average was 27, versus 26.
- The 200 Day numbers were 17 and 19 respectively.
- When we look at how many BDCs were within 10% of their 52 Week High we find 23 vs 19.
- Ditto at the other end of the spectrum: essentially unchanged from last week with 8 names.
- There are a couple of interesting individual names to call out which might be on readers Buy or Sell lists.
- And which are On The Move.
DOWN, DOWN, DOWN
- On no news whatsover, Alcentra Capital (ABDC) has been slipping in price week after week.
- This week ABDC was at $11.90, way off its 52 Week High of $14.90 and not so far off the 12 month low of $11.17.
- This is only weeks after DA Davidson gave the stock a Target Price of $15.0. The stock was at $13.41 at the time.
- We’d like to think Mr Market read the BDC Reporter’s May 18 analysis where we said we were “disconcerted”.
Here is a fuller quote:
"Nonetheless, investors may want to worry both about the sale of ABDC’s stocks by its Investment Advisor; the uncertainty surrounding any change in leadership and the BDC Credit Reporter’s warning that the credit trend is headed downward. As we said at the outset- for the BDC Reporter – the combination of the above – as well as the absence of any explanation by the Investment Advisor for its stock sale and the continued absence from the BDC’s financial statements,"
- The “good news” from a prospective buyer’s standpoint is that ABDC is more fairly priced.
- We have a fair value price for every BDC that we might buy for the long term and ABDC’s is $11.33.
- What a difference a few weeks can make.
FIFTH STREET FEARS
- Losing momentum in the week were Fifth Street Senior Floating Rate (FSFR) and Fifth Street Finance (FSC).
- After the glow of the news that Oaktree Capital be buying the management contract wore off, both stock prices have slipped.
- Readers will know we wrote skeptical articles (here and here) about calls for higher prices than where originally reached at both BDCs, concerned about both fundamental deterioration yet to show up and the high valuations already being attached to the companies.
- Mr Market – who must have a subscription under an assumed name or read our free version of the articles which we post after we inform our subscribers – appears to have agreed for the moment.
- The publishing of the FSC and FSFR Proxies – which we covered – and Oaktree Capital’s comments about the deal on its own Conference Call last week (which we read but did not post about) did not stymie the still modest drop in the stock prices.
- Enthusiasm may return when we get the earnings for both entities on August 9, or there could be another leg down.
- As per the usual for the last many weeks, BDC common stocks are generally flat.
- Nonetheless, there are a few names whose downward trajectory is intriguing, including ABDC, FSC and FSFR.
- However, we also point out a number of other tickers – some expected and some others less obvious – which are flying low:
- OHAI, TCAP and FSIC to name but 3.
- The days when everything in BDC-land was going up appear to have past even as the bull market snores on.
BDC BABY BONDS
TO THE POINT
- We don’t want to write just for the sake of writing so we’ll keep this short.
- Where Baby Bonds are concerned, this was an uneventful week as well.
- True, the median price increased from $25.59 to $25.69.
- However, the number of BDC Notes trading above the 50 Day and 200 Day Moving Average were unchanged.
- 15 and 13 respectively out of 34.
- Like before, all the issues were trading at $25.00 or above (including 5 above $26.00).
- As usual, only Medallion Financial’s MFINL is below par at $23.9, awaiting the all-clear from its issuer.
- No BDC redeemed any issue and no new Baby Bonds and new tickers were announced.
- Yet, we get the impression much is going on behind the scenes as Oaktree decides what to do about Fifth Street’s Notes.
- Gladstone Investment (GAIN) has a shelf offering in the hopper and a Term Preferred which can be repaid.
- Earnings season is coming and we might learn more about Apollo Investment (AINV), KCAP Financial (KCAP) and MVC Capital‘s (MVC) plans for their debt. Or even Ares Capital(ARCC) and a dozen other issuers.
- A lot could happen. Or very little.
- Stay tuned and if you’re a Baby Bond holder or prospective investor keep guessing who will stay and who will go.
By Nicholas Marshi, BDC Reporter