BDC Review: Part 8 - 3 Stragglers

Includes: FDUS, GSVC, OXLC
by: Philip Mause

There used to be a saying that you could never make up a list of every restaurant in New York City because, while you were typing up the list, new restaurants were constantly opening. I am beginning to feel as if the "complete list of every BDC" project is somewhat similar.

A reader has suggested three other entities which appear to be Business Development Companies which have recently opened up for business (although in two cases there is a slight amount of ambiguity). They are following very different business strategies and offer some interesting opportunities to investors.

In each case I will provide the name of the company, the symbol, Friday's closing price,the dividend yield and the price to net asset value (NYSE:NAV) ratio.

Fidus Investment (NASDAQ:FDUS): (13.35), (9.6), (.91).

FDUS came out in June at 15 and is down in the generally bad market for financial stocks. It acquired an existing portfolio of assets but has some additional capital to deploy. Its assets are primarily mezzanine loans and some equity and its stated intention is to deploy capital in that general direction.

GSV Capital (NASDAQ:GSVC): (14.77), (0), (1.09)

GSVC has a unique strategy for a BDC. It invests in the common equity of companies that have not yet gone public. Presumably GSVC is a qualified investor and can purchase such stocks in the secondary market. Retail investors who might not be qualified to buy such stocks or might not have access to sellers can participate in the upside potential of such stocks by buying GSVC. GSVC has acquired stock in Facebook, Groupon and some of the other most widely discussed non-public companies.

I am not sure how they calculate NAV but investors will probably be able to track value here by calculating how many shares of each stock GSVC owns and then monitoring various sources to get a sense of price (remember these are not public companies so you can't just get an instantaneous quote on line.)

Oxford Lane Capital (NASDAQ:OXLC): (15.25), (13.0), (.92)

OXLC is managed by the same folks who run TICC Capital (NASDAQ:TICC). Its stated strategy is to acquire senior secured loans in companies that are either rated below investment rate or are not rated at all. It has acquired junior tranches in some CLOs. It appears to be oriented to a very targeted credit approach and will probably seek a combination of yield and appreciation. Needless to say it is too early to tell how well these companies (which have each just recently commenced operations) are executing their respective strategies.

The entire list of BDCs illustrates the wide variety of investment approaches utilized and the variety of opportunities for retail investors to participate in the sector. I think I have now covered them all at least as of now. I will do a perspective piece on the sector, its place in our network of financial entities, some suggestions for regulatory reform and some strategies for investors.

By the time I put all of that together, there may be a few more of these to review.

Disclosure: I am long TICC.