VanEck Vectors BDC Income ETFNYSEARCA
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
- ETFs: BDCL, BDCS, BIZD, FGB
- Previously: TICC Capital sued by NexPoint Advisors (Oct. 9)
- Previously: Wells Fargo excoriates TICC Capital board (Oct. 7)