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  • Apollo Investment Corporation Has A Falling Earnings Projection [View article]
    Steve Rasher - Thanks for your long and detailed comments. I believe you are correct in pointing out fact based changes that would justify a forward looking expectation of increasing NII per share. On the other hand, BDC history is full of examples of where this sector is one place where 'hope' comes to die. Like Ben Franklin - "I'd rather be a pessimist -- because then I can only be pleasantly surprised". I expect that patience is randomly rewarded in this sector. I am more concerned that patience could lead to procrastination in making a selling decision.

    There are times where data points to a specific conclusion. And there is time where data points are more like ink blots - or a Rorschach test. Your reply indicates you see a happy face in those data points - when combined with expected data yet to come. I am holding. But I am holding with a fair amount of concern that the face I will see (when future data arrives) could turn menacing.

    I believe I (along with most 'average retail investors') need to have a more pessimistic view - and live with my finger on the sell trigger when it comes to BDCs. I have the typical retail investor reluctance to sell. I need to get psychologically prepped to sell well in advance of the news that would trigger a sell decision. I write for an audience that shares that psychological attribute.
    May 23, 2015. 01:06 AM | 2 Likes Like |Link to Comment
  • Apollo Investment Corporation Has A Falling Earnings Projection [View article]
    On the other hand, Seeking Alpha has just changed "CDN / DNS providers" (I do not know what that exactly means - but it may be like changing Internet Service Providers) - and the site is not working exactly right. It may be that some readers are not getting all the bells and whistles working right. And those malfunctions could have led to the incorrect impression that I have only written about AINV.
    May 21, 2015. 02:30 PM | 2 Likes Like |Link to Comment
  • Apollo Investment Corporation Has A Falling Earnings Projection [View article]
    Since the beginning of May, I have provided articles on TCAP, MAIN, TCRD, ARCC, TSLX, CPTA and AINV. I have also provided Seeking Alpha InstaBlog earnings release updates on GARS, SLRC, WHF, PSEC, HCAP, FSIC, FSFR, GLAD, TPVG, TCPC, PFLT, OFS, GBDC, MCC and FULL.

    "Retirement here I come" is about as wrong as one can get when he asks a question that implies that I only wrote about one BDC.
    May 21, 2015. 09:08 AM | 3 Likes Like |Link to Comment
  • Apollo Investment Corporation Has A Falling Earnings Projection [View article]
    In the news - The debt-default rate for U.S. shale oil companies throughout the next year could hit 7.4%, up from the previous forecast of 2.7%, Moody's Investors Service said Tuesday in a report. "With a gradual recovery in energy prices, the weaker oil and gas issuers are at a much greater risk of default. The companies on the lower end of spec-grade ratings are the ones that should be most worried," said David Keisman, senior vice president at the firm.

    BDCs will strongly tend to be the lenders to 'the lower end of the spec-grading ratings' companies.
    May 20, 2015. 06:31 PM | 1 Like Like |Link to Comment
  • THL Credit Is Priced Below Average On Valuations And Merits Better Treatment [View article]
    On Tuesday May 19th THL Credit, Inc. was upgraded by analysts at Deutsche Bank from a "hold" rating to a "buy" rating. They now have a $14.50 price target on the stock, up previously from $14.25. 18.3% upside from the previous close of $12.26.

    Since this article was posted, both the 2015 and 2016 consensus analyst NII projection has fallen from $1.41 to $1.40. Given that Q1-14 NII was $.35/share - the $1.40 projection is aligned with this run rate.

    There is reason to be optimistic that TCRD will beat that projection. One should note that Q2 through Q4 of 2014, NII/share was higher than in Q1. So based on that trend, I would expect a full year 2015 NII projection to be above the Q1 run rate. But . . . I did not listen to the conference call. TCRD may have provided data to justify those falling projections.
    May 19, 2015. 12:13 PM | 1 Like Like |Link to Comment
  • Stay Away From Capitala Finance Corp. [View article]
    Xav Welsh has the hope that CPTA will hit more home runs. Look at what happened to NAV after those home runs.

    During Q4-14, CPTA exited in late December its equity investment in Chef'n Corporation, receiving $3.7M, including $2.9M in cash and $800K in rollover preferred equity. The $2.7M realized gain in Q4 represented an IRR of 61%, and a 4.2 multiple on invested cash. During Q4, NAV fell from $19.89 to $18.56.

    During Q1-15, CPTA sold 179,748 shares (30% of its stake) in Boot Barn (NYSE:BOOT) for $22.33 each. The realized gain on the sold shares is $3.3M, or a 78% IRR. During Q1, NAV fell from $18.56 to $18.35.

    When I hit home runs in my personal portfolio, my net asset value rises. When CPTA hits home runs, its NAV falls???

    I am a numbers guy. The numbers make the case to stay away from CPTA due to a falling NAV, an uncovered dividend, and a terrible NII/TII ratio. Let's say you need a story. OK. Tell me the story of what happened to PSEC after it hit some home runs in its portfolio a few years ago. Did management reward management? Did it maintain a covered dividend? Did its dividend eventually fall? Is CPTA repeating the PSEC story?

    The numbers may fail to persuade those CPTA holders who have drunk the Kool-Aid. You can still right-size your allocation. It is still the case that the only people that BDCs have made rich are (1) those who purchased shares during the credit crisis, sold after the recovery, and stayed away - and (2) those who run the BDCs.

    I have a light weighting in BDCs in order to have a portfolio yield close to 4% - so that I can live off of that income while not touching the saved capital. I do a lot of due diligence in order to find the relatively safe BDC options. I keep my finger on the trigger, ready to sell if the numbers turn bad. And I believe that such is the way one needs to be . . . if they own BDCs. I believe that because IMHO history tells us that.
    May 17, 2015. 09:08 AM | 2 Likes Like |Link to Comment
  • Stay Away From Capitala Finance Corp. [View article]
    I can answer for Robin Heiderscheit.
    What is the TII? $14.041 million.
    What is the NII? $4.817 million.
    That is a 34.3% NII/TII ratio! And that is ridiculous.
    May 16, 2015. 11:22 AM | 2 Likes Like |Link to Comment
  • MCC's NII Keeps Falling [View instapost]
    Q1's tend to be low points in NII production. Even the lowest NII forecasts are at $0.30/share for the next two quarters.

    Investments of $1.272 billion at 12.6% would produce TII of $40.068 million. At a 50% NII/TII, NII would be (20.034/58.500) $0.3425/share. Even at a 46% ratio, NII would be (18.431/58.500) $0.3151.

    There can always be one more new non-accrual to mess with the above projection. And even small shifts in the NII/TII ratio can produce bad news. Still, I am OK with the cut in the dividend to $0.30/share.
    May 15, 2015. 02:59 PM | Likes Like |Link to Comment
  • MCC's NII Keeps Falling [View instapost]
    I edited the 'good news' to delete the comment that NAV was up. I had the NAV correct in the spreadsheet. Thanks for the correction.
    May 15, 2015. 09:30 AM | 1 Like Like |Link to Comment
  • Comparing Ares Capital To TPG Specialty Lending [View article]
    Hardog - One solution is to only invest in companies that report portfolio company debt/EBITDA and interest coverage ratios - and abstain from investing in those that don't.

    In my own portfolio, I have not gone to that extreme. But I am lightly weighted in one BDC that does not report. I am more heavily weighted in those that do.
    May 14, 2015. 07:30 PM | 1 Like Like |Link to Comment
  • THL Credit Is Priced Below Average On Valuations And Merits Better Treatment [View article]
    The last time I tried to calculate the cost of a secondary offering, the number came close to 6% - or slightly above that. I wanted to know to what degree a BDC would need to be above its NAV for a secondary offering to be accretive to next quarters NAV.

    It does not make much economic sense for a BDC to buy back shares one quarter at a sub 10% discount to NAV if it is going to turn around and offer more shares a few months later if the price is back above
    NAV. I would also expect management to be optimistic - and believe that the market will reward them with a price to NAV near 1.0. Even conservative little me would project a valuation much close to NAV.

    Over time, TCRD would prefer to grow its assets under management in order to grow income for management. Doing a share buy back has the same effect as them taking a pay cut.

    One can also make the case that the BDC sector has under performed due to the presence of several bad apples - like dividend cutting FSC, KCAP, MCC, OHAI and TICC. The PSEC cut is still fresh in our minds. A cut at FULL should be coming.

    One can make the case that BDCs might have under performed due to an overload of fairly recent IPOs.

    Put those five factors together - and you have the justification for the buy back procrastination arrived at by the management. The buy-back exists "in case of fire". And a 0.92 price to NAV is not a fire. I could also make the case that these factors were an insufficient case for procrastination for those with a focus on the short term - a group that would include some major share holders.
    May 13, 2015. 06:19 PM | Likes Like |Link to Comment
  • Expect Hard Times 'Short Term' For Williams Companies [View article]
    Galicianove - For those afraid of K-1s and UBTIs, WMB is a great option. So is KMI. VTTI (which is to new to have a good track record) may also have that potential. For those who have no fear of K-1s and want capital appreciation or the best "total return", there are lots of superior options.
    May 13, 2015. 04:12 PM | 1 Like Like |Link to Comment
  • Expect Hard Times 'Short Term' For Williams Companies [View article]
    Galicianova - I will answer with my take on the merging of WMB with WPZ (which in the past merged with WMZ and recently merged with ACMP).

    In the press release of 4-13 WMB guided "Dividend Guidance of $2.38 Per Share in 2015 with 10% to 15% Annual Dividend Growth through 2017 with Growing Coverage".
    In the press release of 5-13 WMB guided "Planned 3Q 2015 Dividend Increase of 6.7% to $0.64 per Share, or $2.56 per Share on an Annualized Basis, and Expects Dividend Growth of 10%-15% Annually Through 2020".

    10% to 15% growth is slower than average - and that projection goes for a longer period of time. But the 2015 dividend increases. That is close to a wash in the mid term. It's bad in the long term. It's great in the short term.

    WMB has done GP give backs to its MLP. With the merged entity, the give backs end. But those give backs may have been more like moving money from one pocket to another in the same pair of pants. Without the give backs, the MLP would have had less financial health, so the IDRs would have been lower.

    I will wait on the projections from the analysts - then construct a consensus opinion. I will probably accept (or borrow) the consensus opinion.

    A $2.56 dividend divided by the current $52.56 results in a 4.87% yield. Even if I held the moderately bearish 10% CAGR projection - the yield + CAGR is very attractive.

    I get it that many retail investors are reluctant to invest in MLPs because of the UBTIs and/or the K-1s. With WMB and KMI, these problems do not exist. I have the opinion that any (and every) income portfolio that lacks both of those tickers is a defective portfolio.
    May 13, 2015. 02:54 PM | 1 Like Like |Link to Comment
  • Doing Fantasy Accounting With The FULL Numbers Could Produce Reality [View instapost]
    Robin Heiderscheit - Thanks for the feedback. I am in need of assurance that that what I wrote above is correct. If it is correct, then FULL did a major screwing of the existing share holders who failed to participate in the 'subscribed share' offering. FULL appears guilty of misrepresenting their metrics. And Yahoo is guilty of echoing bad numbers. I am not comfortable in making such a strong accusation.
    May 13, 2015. 01:15 PM | 1 Like Like |Link to Comment
  • Stay Away From CPTA [View instapost]
    I strongly prefer good NII/TII ratios. But bad ratios IMHO fails to merit inclusion in the never list. I think ARCC is good enough (at the right price) to own. And ARCC has a poor NII/TII ratio.

    My BDC goals result in my 'pink flag' (not bad enough for a red flag) status on the poor NII/TII attribute. My goals - Harvest an acceptable yield with the priority of not losing money. A person with a different goal could easily have a different assessment of the flag color status of the NII/TII attribute.
    May 12, 2015. 10:03 PM | 1 Like Like |Link to Comment
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