Warning sounded over DoubleLine CEF

|By:, SA News Editor

The current 8.6% payout for the DoubleLine Opportunistic Credit Fund (DBL -0.3%) is at risk, says Wells Fargo's Daniel Brown, who issued an "avoid" recommendation about a month ago (made publicly available today).

The distribution coverage ratio of just 73% for the six months ending in March means the fund has to either boost leverage or cut the payout, says Brown. Should leverage be increased, the portfolio - nearly half of which is invested in below-investment grade or unrated paper - could no longer be considered conservative, according to Brown.

DBL trades close to NAV, notes Brown, which suggests the market likely isn't pricing in any change to the distribution.