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  • ARCC Reports Solid Q1 - Price Falls

    Not counting special dividends that have occurred on a regular basis - the annual dividend (4 times 38) is $1.52. At today's price of $16.00 -- the yield is 9.5%. BDCs should not be used as bond substitutes. I believe that ones BDC allocation should be well below 10% of the total portfolio. That said, I would have no fear in having a 2% weighting in ARCC as long as one has several high CAGR portfolio holdings to harvest some capital gains when your BDC holdings suffer some dividend cuts. I think ARCC is screaming 'buy me' -- but only the right people should be tempted.

    There was some really good news in the Q1 numbers - the weighted average portfolio yield is rising.

    ARCC Reports NII of $0.3873 compared to a Div of $0.38 Business Wire 05-04
    Ares Capital Corporation (NASDAQ:ARCC) reported for Q1-15 Total Investment Income of $253.247 million ($0.8062/share); (after tax) Net Investment Income of $121.677 million ($0.3873/share); and a Net Increase in Net Assets Resulting from Operations of $100.576 million ($0.3202/share). 'Core' NII was $0.37/share. The NII/TII ratio was 51.14%. The Net Asset Value per share was $16.71 compared to $16.82 at the end of Q4-14.

     -----Q1-15-----Q4-14-----Q3-14-----Q2-14-----Q1-14-----Q4-13

    Total investment income253.247270.917253.396224.927239.719233.742
    Net investment income121.677128.185105.29091.991112.336111.510
    Investments @ fair value8.4829.0288.7848.0687.8007.633
    Wt Av Share Count314.108314.108314.108298.583298.270297.971
    TII/share$0.8062$0.8625$0.8067$0.7533$0.8037$0.7844
    NII/share$0.3873$0.4081$0.3352$0.3081$0.3766$0.3742
    NAV/share$16.71$16.82$16.71$16.52$16.42$16.46
    Wt Av Yield @ FV10.5%10.1%9.9%10.0%10.2%10.4%

    NII of 39 cents was right on target

    Earnings HistoryJun 14Sep 14Dec 14Mar 15
    EPS Est0.380.380.390.39
    EPS Actual0.310.340.410.39
    Difference-0.07-0.040.020.00
    Surprise %-18.40%-10.50%5.10%0.00%

    The regular dividend of $1.52 is covered by the NII projection.

    Earnings EstCurrent Qtr.
    Jun 15
    Next Qtr.
    Sep 15
    Current Year
    Dec 15
    Next Year
    Dec 16
    Avg. Estimate0.380.401.571.63
    No. of Analysts15.0015.0015.0015.00
    Low Estimate0.350.381.511.52
    High Estimate0.410.431.631.79
    Year Ago EPS0.310.341.431.57

    Tags: ARCC
    May 06 12:00 PM | Link | Comment!
  • With Typical Leverage, WHF Attains Dividend Coverage

    WHF was patient (or just slow) in building portfolio leverage to the point that NII now covers the dividend.

    WHF Reports NII of $0.3560/share compared to a Dividend of $0.3350/quarter PRNewswire 5-6-15
    What They Earned WhiteHorse Finance (NASDAQ:WHF) reported for Q1-15 Total Investment Income (TII) of $11.271 million ($0.7522/share). Net Investment Income was $5.334 million ($0.3560/share). The NII/TII ratio was 47.32%. The Net Increase in Net Assets Resulting from Operations was $4.773 million ($0.3186/share). WHF's NAV (Net Asset Value) per share was $15.00 compared to $15.04 last quarter.

     -----Q1-15-----Q4-14-----Q3-14-----Q2-14-----Q1-14-----Q4-13-----Q3-13-----Q2-13-----Q1-13

    Total investment income11.27111.0139.2659.0188.2508.61511.1229.4988.382
    Net investment income5.3344.9764.0433.9923.9904.1696.2824.8504.009
    Investments @ fair value0.3910.4040.3690.3470.2870.2720.2150.2380.233
    Wt Av Share Count14.98314.98314.98314.98314.98314.97714.97714.96614.965
    TII/share$0.7522$0.7350$0.6184$0.6019$0.5506$0.5752$0.7426$0.6346$0.5601
    NII/share$0.3560$0.3321$0.2698$0.2664$0.2663$0.2784$0.4194$0.3241$0.2679
    NAV/share$15.00$15.04$15.16$15.21$15.23$15.16$15.09$15.04$15.18
    Wt Av Yield11.4%11.3%10.3%10.6%10.8%10.9%12.2%14.0%14.2%


    What They Own As of March 31, 2015, the fair value of WhiteHorse Finance's investment portfolio was $391.3 million. The portfolio consisted of 35 positions across 29 companies with an average investment size of $11.2 million and a weighted average yield of 11.4%. The majority of the portfolio was comprised of senior secured loans and more than 96% of these loans were variable-rate.

    Originations For the three months ended March 31, 2015, WhiteHorse Finance invested $19.7 million across three portfolio companies. Gross proceeds from sales and repayments totaled $31.9 million for the quarter, which was in line with expectations.

    What They Owe WhiteHorse Finance had $100.5 million in outstanding borrowings on a credit facility of $150 million which bears interest at the daily commercial paper rate plus 2.25% on outstanding borrowings. WHF had $55.000 million in an unsecured term loan agreement with Citibank which bears interest at LIBOR plus 2.20%. WHF had $30.000 million of aggregate principal amount of 6.50% senior notes (WHFBL) due 2020. With total debt of $185.500 million and share outstanding of 14.983 million, debt/share was $12.38 and the debt/NAV ratio was 82.54%.

    Q1-15 NII of (rounding up) $0.36 was well above expectations.

    Earnings EstCurrent Qtr.
    Mar 15
    Next Qtr.
    Jun 15
    Current Year
    Dec 15
    Next Year
    Dec 16
    Avg. Estimate0.320.331.341.35
    No. of Analysts8.008.008.006.00
    Low Estimate0.300.311.231.24
    High Estimate0.340.351.431.47
    Year Ago EPS0.270.271.141.34

    TII of $11.3 million was just above expectations

    Revenue EstCurrent Qtr.
    Mar 15
    Next Qtr.
    Jun 15
    Current Year
    Dec 15
    Next Year
    Dec 16
    Avg. Estimate11.20M11.40M46.19M48.18M
    No. of Analysts7775
    Low Estimate10.60M11.00M44.00M44.00M
    High Estimate11.82M12.35M50.60M59.98M

    Summary - At the current $12.90, WHF has a yield of 10.39%. That is just above sector average as of my last update of 4-24-15. I am wary of BDCs with low amounts of portfolio loans -- one non-accrual can really kill NII. So WHF is not for me. But WHF should have a rising NII projection. (You should know that BDCs with rising NII projections tend to out perform the sector.) And that rising projection should provide a NII/dividend ratio that is below 100%. The ratio currently is above 100%.

    Tags: WHF
    May 06 11:09 AM | Link | Comment!
  • Why SLRC Scares The Heck Out Of Me

    SLRC Reports NII of $0.3389/share compared to a Div of $0.40/quarter Business Wire 04-05
    What They Earned Solar Capital (NASDAQ:SLRC) reported for Q2-15 Total Investment Income of $25.630 million [$0.6036/share]; Net Investment Income of $14.390 million [$0.3389/share]; and a Net Increase in Net Assets Resulting from Operations of $10.899 million [$0.26/share]. The NII/TII ratio was 56.14%. SLRC's net asset value per share was $21.91 compared to $22.05/share last quarter.

     ----Q1-15--------Q4-14--------Q3-14--------Q2-14--------Q1-14--------Q4-13----

    Total investment income25.63032.94528.35828.00432.63035.364
    Net investment income14.39016.79216.36016.13217.42418.532
    Investments @ fair value1.0431.0211.1340.9840.9721.088
    Wt Av Share Count42.46542.88842.46542.66143.98344.244
    TII/share$0.6036$0.7682$0.6678$0.6564$0.7419$0.7993
    NII/share$0.3389$0.3915$0.3853$0.3781$0.3962$0.4189
    NAV/share$21.91$22.05$22.34$22.44$22.43$22.50
    Wt Av Yield10.0%9.9%10.3%10.5%10.9%11.3%

    SLRC reports all income as investment income - and parses the income by whether the investment is affiliated or non-affiliated. Lots of BDCs report in this kind of format. It is totally 'acceptable' conduct - and it is totally insufficient at to explaining income. Why?

    From the 10-Q:

    "Capital structuring fees, amendment fees, consent fees, and any other non-recurring fee income as well as management fee and other fee income for services rendered, if any, are recorded as other income when earned."

    The TII yo-yo is evidence (or dang near 'proof') that a significant percentage of income is being derived from non-recurring fees "that happen in most quarters". In order to understand the oscillations in TII - a BDC needs to parse income by fee component - and not in the "affiliated and non-affiliated" way.

    A BDC with Q1 NII of 34 cents could be safe to pay a 40 cent quarterly dividend if non-recurring income is at a cyclical low. But SLRC does not report numbers in a format that allows investors to made an independent assessment of this.

    Tags: SLRC
    May 06 11:07 AM | Link | Comment!
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