We review how Ares Capital (ARCC) is doing 6 months after breaking up with its GE Capital joint venture partner, and as credit conditions have deteriorated. The stock price has been at 6 year lows. Opportunity or just another way station to a previously unimaginable lower price point for this BDC aristocrat ?
We take on the subject of BDC stock buybacks, touted in Barron's recently. We review the wide discrepancy between BDC managers enthusiasm for stock repurchases and reality. We end by diagnosing why the BDC sector needs a more viable and longer term solution than buybacks to its current depressed state. Plus, how we are positioned.
With half the Business Development Companies having reported earnings for the second quarter, we have a look at the direction of the sector and highlight a number of developments underway. It's just a snapshot and not a comprehensive review. We'll have a full survey once earnings season is over.
Ares Capital (ARCC) announced a new joint venture partner to replace the absconding GE Capital to continue making loans in the upper middle market. Investors and analysts seem comfortable with the news. We've dug a little deeper and are less convinced that ARCC is free and clear. We explain why in great detail. We are Short ARCC as discussed at the end of the article, but we accept this is a contrarian view.