BDC Buzz Report: 29 July 2013
I took a break last week to prepare for the BDC earnings season that starts today and decided not to introduce the new picks for the 'General Optimal', 'Risk Averse' and 'Value & Growth' portfolios given the amount of changes expected from the financial results over the coming weeks. Also the FOMC announcement on July 31st could impact prices as it did after the last statement on June 19th sending BDC prices sharply lower and could potentially be another buying opportunity. BDCs more than recovered and it was a five day broad sell off of high-yield stocks and rate sensitive investments. However, if investors perceive the upcoming announcement as reassuring regarding future stimulus and low rates I would expect the opposite response and we could see BDCs as a group head higher.
There was one change to the 'High-Yield' portfolio given the recent announcement from Solar Capital (SLRC) to cut its dividend to a point that it is no longer 'high-yield'. Hopefully this will be a temporary rate reduction as SLRC realigns its investments with stronger portfolio income to support dividend increases. SLRC was ranked 3 out of 10 in the profitability category implying a potential risk to dividends and was the lowest allocation in the portfolio, but the rate reduction was still a surprise and it is the first in its three year history. Obviously there will be downgrades to projection and price targets in the coming days.
BDCs that I follow reporting this week:
- American Capital (ACAS) on July 30th
- MCG Capital (MCGC) on July 30th
- Solar Capital (SLRC) on July 31st
- Solar Senior Capital (SUNS) on July 31st
- Gladstone Capital (GLAD) on July 31st
- Medley Capital (MCC) on August 1st
- Fidus Investment (FDUS) on August 1st
- BlackRock Kelso Capital (BKCC) on August 1st
- Hercules Technology Growth Capital (HTGC) on August 1st
- Keating Capital (KIPO) on July 29th (not part of the 25)
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