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  • Top 10 BDC Issues For 2015: Part 2
    Tue, Dec. 23 AINV, ARCC, FDUS 77 Comments

    Summary

    • This article discusses some of the key issues that investors should be focused on for investing in BDCs.
    • There continues to be a gap between valuations with many currently trading at a 15% or more discount to book value.
    • Investors should use discretion with upcoming purchases and consider the positive and negative impacts from rising interest rates.
  • Top 10 BDC Issues For 2015: Part 1
    Wed, Dec. 17 BKCC, FSC, FULL 44 Comments

    Summary

    • This article discusses some of the key issues that investors should be focused on for investing in BDCs.
    • There continues to be a gap between valuations with many currently trading at a 20% or more discount to book value.
    • Investors should take advantage of the current BDC pricing but use discretion with upcoming purchases.
  • High-Yield BDCs Hit New Lows
    Mon, Dec. 15 BDCL, BKCC, FSC 51 Comments

    Summary

    • Over the last two months investors have favored BDCs with ‘safer’ portfolios.
    • Higher yield BDCs have reached new lows and offer attractive yields averaging 14.4%.
    • I believe these companies have the most upside potential as well as downside risk.
  • Prospect Capital: What Comes Next? Part 7
    Thu, Dec. 11 PSEC 59 Comments

    Summary

    • Prospect Capital recently reduced its dividend and now has less need to reach for yield.
    • This article uses various dividend coverage measures to stress test the new dividend.
    • I have also used similar coverage measures to compare to Medley Capital.
  • Medley Capital Update For FQ4 2014
    Tue, Dec. 9 MCC 38 Comments

    Summary

    • Medley Capital recently reported a large decline in its portfolio yield.
    • The company covered dividends, mostly due to strong fee income.
    • Three investments were put on non-accrual status.
  • Tax-Loss Harvesting For BDCs
    Sun, Dec. 7 ARCC, BKCC, FDUS 123 Comments

    Summary

    • Tax-loss-related selling pressure will likely impact BDC pricing through year-end.
    • BDCs have underperformed the overall markets for the reasons discussed in this article.
    • Certain BDCs may experience more selling due to lower relative performance.
    • Investors should take advantage of potential upcoming volatility to purchase higher quality BDCs at lower prices.
  • Prospect Capital And Share Issuances Below NAV
    Editors' Pick • Fri, Dec. 5 PSEC 119 Comments

    Summary

    • Prospect Capital shareholders will be voting on a proposal to issue shares below NAV.
    • There is the potential for NAV declines if this proposal is approved for 2015.
    • The price of new shares issued and the yield of the invested proceeds will impact dividend coverage.
  • Institutional Ownership Changes For BDCs
    Wed, Nov. 26 AINV, ARCC, BKCC 21 Comments

    Summary

    • This article discusses changes in institutional ownership levels for BDCs.
    • Earlier this year BDCs were excluded from certain indices that resulted in lower amounts of institutionally held shares.
    • One of the advantages to having larger shareholders is the positive influence they can have on decisions made by management.
  • BDC Leverage And Interest Expense Coverage
    Mon, Nov. 24 ARCC, BKCC, FDUS 16 Comments

    Summary

    • This article discusses debt service coverage levels for each BDC.
    • Some BDCs are spending higher amounts on current borrowings for many reasons including fixed vs. variable rates.
    • BDCs with higher operating and capital costs have less NII to cover dividends.
  • Prospect Capital And Required Returns
    Fri, Nov. 21 PSEC 111 Comments

    Summary

    • This article provides information about dividend coverage for new shares issued by Prospect Capital.
    • Prospect Capital has been maintaining its current underwriting standards and is experiencing yield compression similar to other BDCs.
    • The price of new shares issued and the yield of the invested proceeds will impact dividend coverage.
  • Prospect Capital And BDC Expenses
    Tue, Nov. 18 PSEC 71 Comments

    Summary

    • Prospect Capital has not covered its dividend with net investment income over the last five quarters.
    • One of the reasons for its lack of dividend coverage is its higher operating cost structure.
    • Some BDCs have reduced or waived management fees to ensure dividend coverage.
  • Total Returns For BDC Portfolios: November 2014
    Mon, Nov. 17 ACAS, AINV, ARCC 42 Comments

    Summary

    • This article discusses year-to-date total returns for the 26 BDCs that I follow.
    • I have also included the returns for my suggested BDC portfolios.
    • In general 2014 has been a tough year for the industry but higher quality BDCs continue to outperform the others.
  • BDC Results For Q3 2014
    Sun, Nov. 16 AINV, BKCC, FSC 40 Comments

    Summary

    • This article discusses the recently reported results for 23 of the 26 BDCs that I follow.
    • The average amount of dividend coverage has improved considerably due to better than expected results.
    • Many BDCs are finally experiencing stable or even increasing portfolio yields.
  • BDC Growth Potential Vs. Dividend Coverage
    Sat, Nov. 15 ARCC, BKCC, FDUS 45 Comments

    Summary

    • This article discusses portfolio growth potential for BDCs without the need to issue additional shares.
    • BDCs with higher growth potential and dividend coverage trade at a premium.
    • BDCs with less growth capital and dividend coverage are trading at a discount to NAV and not able to raise equity capital.
  • BDC Market Update Q4 2014: Leverage
    Thu, Nov. 6 AINV, ARCC, FDUS 18 Comments

    Summary

    • This is a series of articles to update BDC investors with general industry trends.
    • BDCs have been using increased amounts of leverage to combat yield compression.
    • Companies that are capital constrained could experience dividend coverage issues in the coming quarters.
  • Required Returns For BDCs
    Tue, Nov. 4 ARCC, BKCC, FDUS 26 Comments

    Summary

    • This article discusses the required return for new equity issuances by BDCs.
    • BDCs with higher operating expenses and dividends need to originate loans with higher yields to support new shares.
    • Higher yield BDCs that are continuing to issue new shares at a higher cost of capital could have coverage issues in the coming quarters.
  • BDC Expenses Vs. Dividend Coverage
    Mon, Nov. 3 ARCC, FDUS, FSC 25 Comments

    Summary

    • This article discusses how BDC cost structures impact the potential to cover dividends.
    • The required return on new equity issuances will continue to impact dividend coverage.
    • Higher yield BDCs that are continuing to issue new shares at a higher cost of capital could have coverage issues in the coming quarters.
  • Why I Sold Ares Capital
    Thu, Oct. 30 ARCC 57 Comments

    Summary

    • This article discusses my reasons for selling Ares Capital.
    • At this time I am focused on BDCs that can clearly cover dividends in worst case scenarios including lower portfolio yields.
    • If the portfolio yield stabilizes along with appropriate amounts of non-interest income, Ares Capital will be able to adequately support dividends while continuing to invest in higher quality assets.
  • BDC Market Update Q4 2014: Yield Compression
    Tue, Oct. 28 ARCC, BKCC, FDUS 35 Comments

    Summary

    • This is a series of articles to update BDC investors with general industry trends.
    • Portfolio yields have experienced compression over the last two years that seems to be slowing for some BDCs.
    • Many higher yield BDCs are at risk of lower portfolio yields impacting dividend coverage.
  • BDC Market Update Q4 2014: Introduction
    Mon, Oct. 27 AINV, ARCC, BKCC 19 Comments

    Summary

    • This is a new series of articles to update BDC investors with general industry trends.
    • Over the last two months BDC investors have sold what I consider to be ‘lower quality’ BDCs.
    • I believe this trend will continue through 2015.
  • Prospect Capital: What Comes Next? Part 6
    Mon, Oct. 20 PSEC 92 Comments

    Summary

    • This article discusses pricing for Prospect Capital.
    • Prospect Capital will most likely cut dividends by 10% to 20% in early 2015.
    • If the upcoming financial results indicate continued declines in portfolio yield and inadequate amounts of non-interest income, I believe the stock price will continue to fall.
  • BDC Pricing For Q4 2014: Part 4
    Sun, Oct. 19 AINV, FSC, FSIC 42 Comments

    Summary

    • This is an ongoing series of articles discussing BDC valuations and overall market update.
    • Over the last two months investors have sold shares in small caps, especially with riskier BDCs, leaving many companies undervalued.
    • At this point investors should be considering purchases of higher quality BDCs or waiting to see if prices continue lower after the recent bounce.
  • BDC Pricing For Q4 2014: Part 3
    Mon, Oct. 6 BKCC, FDUS, FSC 33 Comments

    Summary

    • This is a short series of articles that will discuss various methodologies to value BDCs.
    • Over the last two months BDC investors have retreated to safety leaving many companies undervalued.
    • This article focuses on which higher-yield BDCs are the most attractively priced.
  • BDC Earnings Preview For Q3 2014: Part 1
    Sun, Oct. 5 AINV, ARCC, BKCC 30 Comments

    Summary

    • BDCs will begin to report financial results later this month.
    • Many BDCs have become heavily reliant on non-interest income to cover dividends.
    • Non-interest income for BDCs can be lumpy and usually drives most of the earnings surprises each quarter.
  • BDC Pricing For Q4 2014: Part 2
    Thu, Oct. 2 ARCC, BKCC, FSC 26 Comments

    Summary

    • This is a short series of articles that will discuss various methodologies to value BDCs.
    • This article focuses on pricing related to the core earnings for each BDC.
    • Investors pay higher multiples for BDCs with lower operating cost structures and perceived safety of the portfolio.
  • BDC Pricing For Q4 2014: Part 1
    Wed, Oct. 1 AINV, ARCC, BKCC 30 Comments

    Summary

    • This is a short series of articles that will discuss various methodologies to value BDCs.
    • This article will focus on current price-to-NAV multiples related to recent company performance.
    • Two metrics that are used to assign multiples for BDCs are expected NAV growth or stability and the health of the current dividend.
  • Prospect Capital Vs. Hercules Technology
    Fri, Sep. 26 PSEC, HTGC 113 Comments

    Summary

    • This article compares expected, projected and actual returns for PSEC and HTGC.
    • Both companies have had recent stock declines and could potentially be undervalued.
    • PSEC and HTGC have management teams with meaningful amounts of ‘skin in the game’ but one is clearly more invested in the company.
  • TPG Specialty Lending: BDC Risk Profiles
    Wed, Sep. 24 TSLX 24 Comments

    Summary

    • This article discusses risk indicators for investing in TPG Specialty Lending.
    • I consider TSLX to have a safer than average risk profile and it is a contender for my risk averse BDC portfolio.
    • This article compares TSLX to FSIC both of which I consider to be relatively ‘safer’ BDCs for the reasons discussed in this article.
  • FS Investment Corp.: BDC Risk Profiles
    Tue, Sep. 23 FSIC 43 Comments

    Summary

    • This article discusses risk indicators for investing in FS Investment Corp.
    • I consider FSIC to have a safer than average risk profile.
    • This article compares FSIC to NMFC both of which I consider to be relatively ‘safer’ BDCs for the reasons discussed in this article.
  • Solar Senior Capital: BDC Risk Profiles
    Sun, Sep. 21 SUNS 9 Comments

    Summary

    • This article discusses risk indicators for investing in Solar Senior Capital.
    • I consider SUNS to have a much safer than average risk profile.
    • This article compares SUNS to PFLT and HTGC that I now consider to be relatively ‘safer’ BDCs for the reasons discussed in this article.
  • BlackRock Kelso Capital: BDC Risk Profiles
    Fri, Sep. 19 BKCC 16 Comments

    Summary

    • This article discusses risk indicators for investing in BlackRock Kelso Capital.
    • I consider BlackRock Kelso Capital to have a safer risk profile than my previous rankings for the reasons discussed in this article.
    • This article compares BlackRock Kelso Capital to Prospect Capital; both have taken different paths toward dividend coverage.
    • Many BDCs do not disclose relevant metrics for indicating portfolio credit quality, and this series will attempt to provide investors with this information.
  • Fifth Street Finance: BDC Risk Profiles
    Thu, Sep. 18 FSC 50 Comments

    Summary

    • This article discusses risk indicators for investing in Fifth Street Finance.
    • I consider Fifth Street Finance to have a riskier profile than my previous rankings for the reasons discussed in this article.
    • This article compares Fifth Street Finance to Medley Capital which have historically had similar risk profiles.
    • Many BDCs do not disclose relevant metrics for indicating portfolio credit quality and this series will attempt to provide investors with this information.