FQ3 interest income of $3.2M, dividend income of $811K, and fee and other income of $1M vs. $2.6M, $3M, and $1.6M, respectively one year ago. The big drop in dividend income comes as U.S. Gas & Electric did not make a payout in FQ3.
Net decrease in net assets resulting from operations of $0.35 per share compared to a gain of $0.79 one year ago. Net asset value per share of $15.86 falls from $16.42 at end of FQ2 and $17.36 one year ago.
"The uncertain economic environment in Europe, particularly for consumers, continued to weigh on our portfolio during the quarter," says Chairman & Portfolio Manager Michael Tokarz. "We continue to believe that the long-term fundamentals of our portfolio companies remain bright and we are excited about the optionality that the Equus transaction provides."
Octagon Credit manages leveraged loans and high yield bonds, and MVC Capital (NYSE:MVC) sold its equity interest as part of a put option negotiated in 2008.
MVC initially purchased majority control in Octagon from JPMorgan in 2004. It was paid back on its debt investment in 2011, while continuing to hold onto its equity. With the sale, MVC generated an 8.9x return on its equity capital and an IRR of 39%.
The selloff in BDCs is a buying opportunity, writes BDC reporter, noting the opportunity today to invest in a basket of BDCs (using BDCS as a proxy) at an 11% higher yield than just three months ago. The sector is yielding 43% more than high yield bonds (HYG) and nearly double floating rate loans (BKLN).
The higher yield, of course, reflects market concern distributions are set to fall (and BKCC and MCGC cut in Q1), but for the sector as a whole, distributions have been fairly stable over the last three years. Further, a number of players are under-leveraged or in growth phase, and occasionally have realized gains which are paid out as special distributions.
WIth business development companies getting the boot from S&P indices, will the Russell follow suit? It's a significant issue as investors are far more heavily invested in BDCs though the Russell indices than through S&P, writes Brendan Conway. He notes ownership of BDCs by Russell-tracking index funds are as high as 38 days worth of trading volume, and Wells Fargo estimates there are 24 BDCs where 10 or more days of average volume would be required to unload them.
Wells, however, does not see Russell following S&P's lead, with item #1 being Russell's desire to "represent small cap reality." "Russell Indices receive acclaim because they are willing to provide investors access to the true investable small cap universe. To the extent BDCs are excluded, this would deprive investors the opportunity to invest in what has become a very large/growing industry."
The following list is those BDCs with 10 or more days of average volume in index funds tracking Russell indices.
Alex B. Gray+ FollowFollowing- Unfollow|Send Message17 Dec 2010
MVC Capital MVC declared a dividend of $0.12 per share payable 1/7/11 to shareholders of record on 12/31/10.
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MVC vs. ETF Alternatives
MVC Capital, Inc., is an externally managed, non-diversified, closed-end management investment company. The Company's investment objective is to seek to maximize total return from capital appreciation and/or income.