Seeking Alpha

MCG Capital choosing not to play amid bubbly conditions

  • Net operating income of $6.3M or $0.09 per share compares to $0.125 dividend. $37.1M of originations and advances during quarter, including $33M to two new portfolio companies. $39.6M of portfolio monetized. 512K shares repurchased at average price of $4.73 each. For full year, about 1M shares repurchased at average price of $4.62 each. Operating efficiency: Costs (excl. interest expense) as a percentage of total assets falls to 2.2% from 3.6% two years ago.
  • Outlook: "We believe that current market conditions in our primary lending markets are consistent with the peak of a credit cycle. The current supply of debt capital exceeds the demand by issuers in our markets, resulting in lower pricing and weaker contractual protections ... We intend to redeploy our excess liquidity in a cautious and deliberate manner." Money will instead go to buybacks as share repurchase program is boosted to $35M from $25M.
  • NOI for FY2014 is guided for $0.25-$0.30 per share vs. $0.42 for 2013. Management expects distribution to be cut to something in the area of $0.07 per share for the rest of 2014.
  • MCGC -0.5% premarket
  • Q4 results, press release
  • Last week: Hercules warns over frothy market

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Comments (4)
  • june1234
    , contributor
    Comments (3192) | Send Message
     
    Somebody forgot to tell debt markets. Demand still sky high. $19B worth of corporate bonds issued the other day alone. Most of it will be used for buybacks and dividend increases
    5 Mar 2014, 08:55 AM Reply Like
  • Michael Nau
    , contributor
    Comments (972) | Send Message
     
    I don't get why management would engage in a buyback at the peak of the credit cycle. They should horde cash and wait to redeploy.
    5 Mar 2014, 09:34 AM Reply Like
  • Moneymaven.ron
    , contributor
    Comments (3) | Send Message
     
    With a NAV of $4.74, after listening to the conference call, this Co. Is, and should be pot up for sale. Suggest you listen to the call!
    5 Mar 2014, 11:04 AM Reply Like
  • Tack
    , contributor
    Comments (14385) | Send Message
     
    Any BDC that has been unable to sustain its income and maintain NAV in the market we have had for the past year simply doesn't know what it's doing. And, as MN says, above, why would they engage in buybacks when their price/NAV has been less than one?

     

    This dog's barking.
    5 Mar 2014, 12:21 PM Reply Like
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