drtrader

Is Pennantpark the Best Business Development Company Around?

One more comment on the FASB 159 change. A lot, if not most, of their mez loans are variable. Libor + x. When they mark these to market, the reduction in the Libor component is reflected in their NAV. Marking their credit facility down to reflect the decrease in libor isn't terribly dishonest because quarter over quarter, it keeps their credit spread the same.

Clearly it has that one-off effect of showing a big gain to NAV, but quarter over quarter its a better reflection of true NAV.

Is Pennantpark the Best Business Development Company Around?

The BDCs are all lotto tickets on a short recession. Of the bunch, PNNT is probably the best choice. Their NOI for most recent quarter was .27 cents, they paid out .24 of that. I believe it was the only BDC to cover their existing dividend. I haven't seen any bdc's with a better balance sheet, pnnt is one of the "youngest" bdcs and was significantly less levered going into the crisis. They still have significant room on their credit facility and will likely be entering the very very lucractive DIP financing world. The management is basically all former ainv staff. The biggest relative downside is their relatively high management fees and the fact its relatively thinly traded. If you want to play the BDC lotto game, I agree PNNT is the best of a messy bunch.

I'm not sure if the BDCs are the best play on the short recession thesis. The hospitality reits(and their preferreds) work in the same scenario that the bdcs do and offer much more upside without much more risk. A couple of them still have relatively solid balance sheets(AHT, HT).