Popular BDC holdings Global Tel Link, Sorenson aim to widen 1L margins; several credits up for add-ons appear in Barings BDC’s portfolio
A deluge of earnings took center stage last week and while results inevitably spurred a number of notable downside movers, the tone in the broader leveraged finance market slowly improved over the course of the week, opening the door for new opportunistic business such as Bausch Health’s latest refinancing effort. Among the week’s biggest earnings-related standouts were Air Methods, Akorn and Revlon.
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MARKET RALLY MARCHES ON ? : The BDC sector – as measured by the BDC Wells Fargo Index – was up 2.7% last week, reflecting a broad based rally across the 45 public companies tracked. That was the second week in a row that the BDC sector headed up in price, following 5 consecutive weeks of descent that ended the prior rally which had begun in March 2018.
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Bleeding Stopped
In the wider markets, the dramas of the past couple of weeks continued through October 19, 2018. “The S&P’s lower close on Friday marked the tenth down day in the past 12 trading sessions”, according to Yahoo Finance.
BDC common stocks, though, generally consolidated after weeks of decline. The UBS Exchange Traded Note with the ticker BDCS, which includes most of the individual players in the sector on a weighted adjusted basis, dropped to $19.39 from $19.40. The Wells Fargo BDC Index – more useful as a Total Return measuring stick than just the price change at BDCS – dropped to $2,505.24, down 0.42%.
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bankruptcy
Portfolio mainstays Confie Seguros, McAfee pursue lower margins through respective refinancing, repricing
The brief turn two weeks ago toward caution in the leveraged-loan market amid volatility in high-yield and equities has proved to be but a blip amid a sea of endless liquidity, and that sentiment was affirmed last week as loans ignored another selloff in shares. Indeed for loans, it was business as usual with a pronounced emphasis on opportunistic activity. Bonds, too, got back to business, spurred by Uber’s successful $2 billion private offering, with other issuers jumping into the market in the wake of that upsized transaction.
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Singing The Blues
As the lesser know Sonny Curtis song goes “We fought the tape, and the tape won”. Last week (ended October 5) , the BDC Reporter injected a note of optimism after a bad week for the BDC sector in which the Wells Fargo BDC Index dropped (1.4%). However, we’re not yet convinced that this current malaise will last all that much longer, bringing down BDC prices to correction or bear market levels. We can’t speak to general market sentiment which – as they say – is “going to do what it’s going to do”.
We’ve not yet been proven absolutely wrong because BDCS – which has now dropped to $19.40 after disgorging a $0.41 distribution – is down (7.8%) from its high. If we adjust for the dividend the drop is “only” (5.8%) and the “Total Return” Wells Fargo BDC Index is off just (4.5%). We are some way off a a classic 10% correction or a 20% haircut bear market.
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