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  • The Pure Income Portfolio Alternatives: BDCs And Royalty Trusts [View article]
    Bruce - Thanks for the shout out and some good info in the article.
    Nov 25, 2014. 11:49 AM | Likes Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    JZ - The closing date on the offering is 11/26. I would not worry about the ATM program and for BDCs such as HTGC and TCPC this is only used for small amounts that are accretive and well timed. Obviously TCPC chose to do a formal offering for this amount of shares and gave us some preliminary stats for the quarter. There is a chance that originations might be weighted toward the back half of the quarter due to year end seasonality.
    Nov 25, 2014. 12:40 AM | Likes Like |Link to Comment
  • BDC Leverage And Interest Expense Coverage [View article]
    Smurf - When it comes to interest rates I believe very little about what is written and to be honest I have a hard time getting excited about restarting a more detailed rate sensitivity series on BDCs.

    I might send out a survey to the newsletter group to see what types of articles readers are interested in going into 2015.
    Nov 25, 2014. 12:28 AM | 1 Like Like |Link to Comment
  • BDC Leverage And Interest Expense Coverage [View article]
    G3 - You might find the following op-ed today about "The Inflation and Rising Interest Rates That Never Showed Up" amusing:

    http://nyti.ms/1v3PruT
    Nov 24, 2014. 11:17 AM | Likes Like |Link to Comment
  • BDC Leverage And Interest Expense Coverage [View article]
    G3 - Absolutely. But matched-book fund is the smart move even if it means higher rates on borrowings. Some of the older BDCs locked in long-term borrowing rates and then experienced yield compression while maintaining an aggressive dividend program.

    If rates remain low for an extended period the BDCs with longer term loans at 5% to 6% will be at a disadvantage especially if BDCs start to lock in below 4%.

    FYI - The table for ARCC shows quite a few interesting things including the differences in rates for variable vs fixed by maturity.
    Nov 24, 2014. 09:24 AM | Likes Like |Link to Comment
  • BDC Leverage And Interest Expense Coverage [View article]
    TX - Keep in mind that it is like a three legged stool that is the combination of the table in the BDC expenses articles along with the interest expense coverage in this article and the dividend amounts being paid.

    In your example FSIC and HTGC have a much more conservative dividend policy that takes into account their cost on borrowings. Also HTGC has a much lower operational cost structure.

    FSIC and HTGC along with many others including PSEC and ARCC have taken steps to secure longer term matched-book fundings. This takes time and has a higher cost associated with it but in the long term these capital structures could prove to be superior. It should also be noted that the larger more established BDCs have lower coverage. There are many reasons for this but one is that smaller BDCs are much more nimble and able to take advantage of temporary borrowings at lower rates. For example TCPC is in a transitional phase so you might see it gravitate toward the middle in 2015.

    I will try to combine the tables in the recent articles to make some of my ramblings a bit more clear.
    Nov 24, 2014. 03:52 AM | 2 Likes Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    HD - At this point there are only a couple of continued commentors that fit this category. The more abusive ones are eventually removed by SA.

    This article actually has a much healthier set of comments so far, many of which are opposing opinions so I consider that a win for readers. I think for articles like this I will continue to keep my opinions to a minimum. I will have other articles with my personal thoughts clearly identified.

    Thanks for the continued support and comments.
    Nov 23, 2014. 11:35 PM | Likes Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    Ron - Thank you for the positive words and support. Obviously you are in the group of - we can disagree about some things but it is still good to have the information.

    The NII vs. taxable income conversation has two sides. No one is trying to say that PSEC did not cover dividends with taxable income for FQ1 2015.

    One more time - "No one is trying to say that PSEC did not cover dividends with taxable income for FQ1 2015."

    This article for example is not focused on 92 days of taxable income for PSEC and the 1099 sent to investors having ROC, cap gains or qualified divs. Other authors on SA are focused on these issues and can provide much more info.

    Next quarter, if PSEC has lower taxable income than NII I will not lower my coverage metrics for the company. At a high level, following NII trends and changes in NAV per share means much more to me than taxable income for a certain quarter.
    Nov 22, 2014. 01:00 PM | 3 Likes Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    I am going to stay out of most of this conversation because it seems a bit hyperbolic. However I would like to say that I agree wit most of what surfgeezer has said in this comment. The conversation about using taxable income vs. NII for coverage calculations has two sides. NII is a measure used for longer term predictability rather than actual/historical taxable I'm assuming that if PSEC's taxable income was lower than NII for the most recent quarter this would not even be mentioned in articles such as this.

    surfgeezer is also correct about the non-qual bucket and we need to see the yield on how this capital is repositioned to assess long-term.

    NAV is a fuzzy measure which is why I do not like to base valuations completely on this measure. We have seen plenty of times where a BDC can change its valuation methodology/discount rates that swing NAV per share. Stock price is obviously a function of what others are willing to pay and PSEC has a large retail base.
    Nov 22, 2014. 01:02 AM | 3 Likes Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    MBN - At a minimum I would hope that articles like these have a small impact on new share issuances by the company. As long as the company is acting in the long-term best interest of the shareholders that is all we can ask. I do believe that new originations trending toward 9% for the quarter is a solid indicator for portfolio quality.

    TCRD has had a rough year so far and as you know I am always looking to actively recommend at some point. Have you considered PNNT? Seems appropriate given your current holdings.
    Nov 22, 2014. 12:05 AM | Likes Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    Gary - I hope you got in at the lows of the day. Obviously I have a FULL position but always looking to add if the price gets silly. I buy on each of the big pullbacks and recently around $16. The latest offering will be a nice boost to NAV per share.
    Nov 22, 2014. 12:01 AM | 1 Like Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    gawilley - I'm not sure what your problem with me is but this is the 4th comment you have left on this article that has nothing to do with the article.

    Suggesting that I have recommended BDCL to the average BDC investor brings out the crazy in you. I have BDCL as a component in the high yield high risk BDC portfolio along with other BDCs that I would never suggest to the average investor. I also suggest that higher risk BDC investors do not include BDCL in the portfolio and list plenty of reasons.

    The high yield portfolio has underperformed all of the others and I predicted this in the beginning of the year. Yield hunters such as yourself got burned this year and next year they might do well - look forward to your comments at that point.
    Nov 21, 2014. 11:56 PM | 3 Likes Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    Rose - Thank you for the continued support. As others have mentioned - the potential for a lower dividend may already be priced into the stock. I can understand both sides of conversation for a hold vs. seeking returns elsewhere.
    Nov 21, 2014. 10:11 AM | 3 Likes Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    sme20 - Here is a recent article showing total returns for BDCs this year:

    http://seekingalpha.co...

    I should have an article coming out next week with total returns for a longer period of time.
    Nov 21, 2014. 09:15 AM | 1 Like Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    mmoz - Keep in mind that there are many other BDCs with 2.00% base management fees including: AINV, BKCC, FSC, GLAD, HRZN, PNNT, SLRC and TICC. However AINV and GLAD are willing to waive fees to ensure coverage and TICC has a more shareholder friendly incentive fee structure compared to the others. SLRC and BKCC did not pay out the full 20% incentive fee in the most recent quarter most likely due to hurdles but I do not follow these BDCs as closely.

    It should also be noted that AINV, BKCC and PNNT all had superior dividend coverage for the most recent quarter so it seems that they still have an appropriate operating cost structure for their current portfolio yield and dividend policy.
    Nov 21, 2014. 03:33 AM | 7 Likes Like |Link to Comment
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