UBS ETRACS Wells Fargo Business Development Company ETN

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  • Wed, Jan. 20, 11:05 AM
    • The S&P 500 is lower by 3%, oil is nearing a $26 handle, and high-yield is selling off, with HYG -1.4% and JNK -1.3%. Those two ETFs are lower by about 5% YTD and in the area of 15% Y/Y.
    • Leveraged to all the above data, BDC sector losses are eve worse. Prospect Capital (PSEC -3.6%), Fifth Street (FSC -7.4%), Ares Capital (ARCC -5.3%), FS Investment (FSIC -10.8%), Main Street (MAIN -6.4%), Blackrock Capital (BKCC -5.3%), Apollo Investment (AINV -7%), Triangle Capital (TCAP -7.9%), TICC Capital (TICC -3.1%), Pennant Park Investment (PNNT -6.5%), KCAP Financial (KCAP -7.7%), THL Credit (TCRD -8%), TCP Capital (TCPC -7.4%), Gladstone Capital (GLAD -5.6%), WhiteHorse Finance (WHF -9.3%), Garrison Capital (GARS -6.8%)
    | Wed, Jan. 20, 11:05 AM | 51 Comments
  • Thu, Jan. 14, 12:04 PM
    • A rally in the major averages and in the price of oil is failing to translate into a bounce for the roughed-up BDC sector.
    • Leading the way lower today is Gladstone Capital (GLAD -16.3%) which is notable (as are others in the sector) for its exposure to energy. Popular names like Prospect Capital (PSEC -1.8%), Fifth Street FInance (FSC -3.1%), Ares Capital (ARES -2.3%), KCAP Financial (KCAP -6%), and Main Street Capital (MAIN -3.1%) also can't catch a bid.
    • As BDC Buzz points out on Seeking Alpha, the BDC sector hasn't done a whole lot worse than the broader averages this year (though that gap is surely widening today), and a large handful of names are in the green for 2016. Among them (along with how they're doing in today's session) are Goldman Sachs BDC (GSBD -1.3%), Golub Capital (GBDC -0.4%), PennantPark Floating Rate (PFLT -1.5%), TCP Capital (TCPC -1.2%), and TPG Specialty Lending (TSLX +2.3%).
    | Thu, Jan. 14, 12:04 PM | 51 Comments
  • Tue, Jan. 12, 11:28 AM
    • Up to one-third of American oil and gas producers could near bankruptcy and restructuring by the middle of next year, according to Wolfe Research, which suggests a rebound in crude to at least $50 per barrel would be necessary for survival.
    • Oil today is threatening a $29 handle, down 2.9% to $30.58.
    • A new report from Morgan Stanley says the environment is worse than the major 1986 oil patch bust which last for five years.
    • Plenty of P-E money is standing on the sidelines, but managers see no need to rush in - instead preferring to wait for bankruptcies and the wiping out of the debt.
    • “There’s no reason to be anybody’s savior,” says FBR's Chad Mabry. “If you can just get the assets out of bankruptcy, then you don’t have to save anyone.”
    • Prospect Capital (PSEC -3.8%), Fifth Street Finance (FSC -2.6%), TICC Capital (TICC -4%), PennantPark (PNNT -4.5%), KCAP Financial (KCAP -1.7%), OHA Investment (OHAI -2.4%), Gladstone Capital (GLAD -2.7%)
    | Tue, Jan. 12, 11:28 AM | 59 Comments
  • Dec. 14, 2015, 11:20 AM
    • The price of oil has stabilized, but the major averages are moving lower, Treasury yields are moving higher in front of this week's expected Fed rate hike, and high-yield continues to sell off (with more funds gating withdrawals/selling holdings).
    • It all adds up to continued panicky liquidation in the business development complex. Prospect Capital (PSEC -4.8%), Fifth Street Finance (FSC -4.1%), Ares Capital (ARCC -4.9%), FS Investment (FSIC -3.4%), Triangle Capital (TCAP -4.8%), TICC Capital (TICC -9.1%), PennantPark Investment (PNNT -4.3%), New Mountain Finance (NMFC -5.8%), Monroe Capital (MRCC -4.5%), Oxford Lane (OXLC -10.4%).
    | Dec. 14, 2015, 11:20 AM | 65 Comments
  • Dec. 11, 2015, 3:40 PM
    • Treasury yields are plunging, but high-yield is headed the other way again as investors mull a big selloff in the major averages and oil's plunge to below $36 per barrel.
    • The pain is widespread, but a panic in credit is particularly painful for BDCs. Hitting the tape a few minutes ago, Jeff Gundlach says "there's never just one cockroach" when credit melts down.
    • Prospect Capital (PSEC -5.5%), Ares Capital (ARCC -5.7%), FS Investment (FSIC -3.6%), BlackRock Capital (BKCC -3.8%), Apollo Investment (AINV -3.8%), PennantPark (PNNT -4.1%), Medley Capital (MCC -4.1%), TCP Capital (TCPC -2.5%), Gladstone Capital (GLAD -6.4%).
    | Dec. 11, 2015, 3:40 PM | 57 Comments
  • Dec. 8, 2015, 12:41 PM
    • The market has more than adequately priced in expectations for further credit issues, says the team of Troy Ward and Greg Mason, noting consensus estimates have already been adjusted to reflect limited fees and slower portfolio churn. WIth an average yield of 10% and very low valuations, a 15% return in 2016 could be just a chip shot away.
    • As for rising interest rates, perceptions that this is bad for yield investments has also been fully priced in. And once rates rise and investors see earnings not being materially affected, there could be a push to buy.
    • Another possible catalyst: The activist push for lower fees.
    • Among stocks on their buy list: Hercules Technology (NYSE:HTGC), Alcentra Capital (NASDAQ:ABDC) for improving fundamentals, and American Capital (NASDAQ:ACAS), Fifth Street Finance (NASDAQ:FSC), and Medley Capital (NYSE:MCC) thanks to activist involvement.
    | Dec. 8, 2015, 12:41 PM | 10 Comments
  • Dec. 7, 2015, 12:27 PM
    • Triangle Capital (TCAP -9.7%) is leading the way lower in the sector as oil tumbles all the way down to $38 per barrel, the XLE slides 4.5%, and junk bonds sell off again.
    • OHA Investment (OHAI -6.4%), PennantPark Investment (PNNT -4.6%), Prospect Capital (PSEC -2.8%), Ares Capital (ARCC -2.5%), Apollo Investment (AINV -4.5%), KCAP Financial (KCAP -3.4%), Main Street Capital (MAIN -1.1%).
    | Dec. 7, 2015, 12:27 PM | 42 Comments
  • Nov. 4, 2015, 11:27 AM
    • The bad news for the beaten-down sector may already be priced in, say KBW's Tony Ward and Greg Mason, suggesting a scenario of weak results, but positive stock price reactions.
    • Indeed: Of the first four to report - ACSF, HRZN, SLRC, and ARCC - three are trading higher.
    • Ward and Mason also expect good things from BlackRock Capital Investment (BKCC -0.5%) when it reports after the close today.
    | Nov. 4, 2015, 11:27 AM | 6 Comments
  • Oct. 9, 2015, 3:27 PM
    • Ares Capital (ARCC -0.6%) CEO Kipp deVeer - speaking at the company investor day last week - poured a little bit of cold water on ideas of a wave of consolidation in the BDC sector.
    • Why wouldn't he be interested in picking up a BDC selling for 0.7x NAV for, say 0.9x? 1) It's a mess, which is what we're watching right now (referring to the TICC deal); 2) Making a few points on $300M of assets isn't material enough for the effort necessary; 3) If management were to go to a board asking to sell the company at 0.9x NAV, the board would rightly go "You're fired," we're bringing in someone to liquidate at NAV because that's what you told us it was worth.
    • The TICC board faces plenty of challenges in that TICC isn't facing credit quality issues, so why would it be interested in selling to TPG Specialty (NYSE:TSLX) at 0.87x book? On the other hand, turning the company over to Benefit Street Partners may not be a great deal either (there's still NexPoint).
    • The major takeaway: Barring any real industry stress, don't expect a lot of deals to get done. Why would management teams - in the chips just for showing up for work each day - give that up unless they were about to lose it all anyway. As the BDC team at Wells Fargo says, the events surrounding TICC "make us sad for the industry."
    • Source: Jordan Wathan at The Motley Fool
    • Previously: TICC Capital sued by NexPoint Advisors (Oct. 9)
    • Previously: Wells Fargo excoriates TICC Capital board (Oct. 7)
    | Oct. 9, 2015, 3:27 PM
  • Sep. 30, 2015, 9:47 AM
    • DA Davidson launches coverage on a number of names in the brutally beaten-up sector, and sees a number of buys.
    • Initiated at Buy are Ares Capital (ARCC +3.2%), BlackRock Capital (BKCC +3.7%), FS Investment (FSIC +2.9%), PennantPark Investment (PNNT +0.5%), and Solar Capital (SLRC +3.4%).
    • Started at Neutral is Apollo Investment (AINV -0.2%).
    | Sep. 30, 2015, 9:47 AM | 13 Comments
  • Sep. 29, 2015, 3:24 PM
    • It's not just about energy anymore, according to a BAML report. "The malaise is spreading." High-yield, says the team, "[is] a slow-moving train wreck that just seems to be accelerating."
    • Equity-type proxies for the high-yield market, business development companies are under major selling pressure again today, with already large discounts to NAVs growing even wider.
    • Previously: Ares Capital greenlighted for $100M in buybacks (Sept. 28)
    • Prospect Capital (PSEC -3.6%), Ares Capital (ARCC -2.7%), Apollo Investment (AINV -4%), TCP Capital (TCPC -5.4%), Monroe Capital (MRCC -4.5%), Oxford Lane Capital (OXLC -5.4%), PennantPark Investment (PNNT -1.8%), American Capital (ACAS -2.5%), Medley Capital (MCC -4.1%), Harris & Harris (TINY -5.4%)
    | Sep. 29, 2015, 3:24 PM | 45 Comments
  • Sep. 28, 2015, 11:16 AM
    • A weekend WSJ story highlighting growing spreads in the high-yield market and the solvency of commodity giant Glencore being called into question are possibly teaming to spook investors in BDCs today.
    • On Friday, Altice sold $4.8B of junk bonds to fund its purchase of Cablevision, well less than the $6.3B it hoped to sell. The 10-year paper on the deal priced to yield 10.875%, more than 100 bps higher than what had been initially expected. Olin on Friday sold $1.2B of paper to fund an acquisition. It had hoped to sell $1.5B. For the privilege, Olin is paying 10% for the 10-year notes, up from 7% expected earlier this month.
    • Prospect Capital (PSEC -4.2%), Fifth Street (FSC -3%), Ares (ARCC -3.2%), FS Investment (FSIC -2.3%), Main Street (MAIN -3.4%), Triangle (TCAP -5.6%), Medley (MCC -2.5%), KCAP (KCAP -3.7%), Gladstone (GLAD -3.9%), WhiteHorse (WHF -5.6%).
    | Sep. 28, 2015, 11:16 AM | 60 Comments
  • Aug. 27, 2015, 2:57 PM
    • Prospect Capital is higher by 7.4% after beating earnings estimates and reporting a slight increase in NAV, and also helping is a near-10% jump in the price of oil.
    • Ares Capital (ARCC +2.5%), Triangle Capital (TCAP +1.8%), PennantPark Investment (PNNT +5.4%), Medley Capital (MCC +3.2%), KCAP Financial (KCAP +3.1%), OHA Investment (OHAI +2.2%), Gladstone Capital (GLAD +4.6%).
    | Aug. 27, 2015, 2:57 PM | 1 Comment
  • Jul. 24, 2015, 3:01 PM
    • Just a 1% decline in the major averages (which are being helped by some high-profile earnings moves) is masking far greater carnage in a number of other sectors, notably healthcare (XLV -2.5%) and energy (XLE -2%).
    • Business development companies and mortgage REITs are being socked again as well, suggesting the worry may go beyond interest rates and to credit in general, especially as commodity prices continue to tumble - to pick one, crude oil at $48.06 per barrel is at its lowest price in about four months.
    • Among BDCs: Hercules Technology Growth (HTGC -4.2%), Triangle Capital (TCAP -3.3%), PennantPark Investment (PNNT -5.4%), Prospect Capital (PSEC -1.4%), Main Street Capital (MAIN -2.8%), TICC Capital (TICC -2.4%), KCAP Financial (KCAP -2.6%), THL Credit (TCRD -2.7%), FS Investment (FSIC -1.8%).
    • Among mREITs: Armour Residential (ARR -3.1%), Two Harbors (TWO -0.9%), CYS Investments (CYS -2%), Invesco Mortgage (IVR -1.5%), Capstead Mortgage (CMO -1.2%), Apollo Residential (AMTG -2.6%), Arlington Asset (AI -3.7%), American Capital Mortgage (MTGE -0.9%), Orchid Island (ORC -5.8%).
    | Jul. 24, 2015, 3:01 PM | 82 Comments
  • Jun. 26, 2015, 3:43 PM
    • Continued strong economic data (June consumer confidence beat expectations) and apparently optimism over a Greek deal getting inked this weekend make for good excuses for today's selling in fixed income.
    • The U.S. 10-year yield is up seven basis points to 2.48%. Short-term rate futures continue to read more dovish than the Fed, predicting just one 25 basis point rate hike by year-end.
    • TLT -1.2%, TBT +2.4%.
    • Among the income favorites, utilities (XLU +0.6%) and equity REITs (IYR +0.2%) are being spared punishment today, leaving jittery investors to focus their selling in mortgage REITs.
    • Also in the red are BDCs, led by Prospect Capital (PSEC -2.5%) and Fifth Street Finance (FSC -1.5%). American Capital (ACAS -1.3%), Medley Capital (MDLY +0.1%), THL Credit (TCRD -1.2%), PennantPark (PNNT -1%).
    | Jun. 26, 2015, 3:43 PM | 36 Comments
  • Jun. 18, 2015, 10:09 AM
    • Talking about BDCs in general, CFO Steven Lilly notes the recent rough patch for the sector coincides with S&P and Russell Index changes causing institutional investors to cut their BDC ownership by 30-35%.
    • Presentation slides
    • As with banks, continues Lilly, interest rate compression affects BDCs and creates challenges for dividend growth. Yet since 2012 when weighed average yield has slid by 17%, 50% of BDCs have boosted their dividend.
    • He further notes the sector's current yield of 9.7% puts it on par with some of the more speculative government bonds on the planet.
    • Speaking of Triangle Capital (TCAP -0.3%) in particular, CEO Garland Tucker says the company's track record of total shareholder value - a 15.8% IRR since 2007 - is second in the sector only to Main Street Capital's 17.3%.
    | Jun. 18, 2015, 10:09 AM | 4 Comments
BDCS Description
The ETRACS Linked to the Wells Fargo Business Development Company Index due April 26, 2041 is designed to track an investment in the Wells Fargo Business Development Company Index ("Index"), and may pay a variable quarterly coupon linked to the cash distributions associated with the underlying BDC constituents, less investor fees. Note that if the BDCs do not make distributions or those distributions do not overcome the investor fees, then investors will not receive any coupons.
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Sector: Financial
Country: United States
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