Link to a new article we published on Seeking Alpha which digs deep into Fifth Street Finance's (FSC) 10-K for the year ended September 30, 2015. The focus of this first article is on financial issues such as income, earnings, leverage and asset valuation.
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.
Nothing lasts forever, not even BDC Sector stock slumps. As we expected, the record series of day losses across the entire breadth of BDC-land has been followed by an equally broad-based surge upwards in the past two days. As we promised, we've been tweeting about the subject at #bdcreporter. We are writing this after Day Two of the "rally" on Wednesday July 29, 2015,
As expected, Fifth Street Finance (FSC) offered up a lower fee on new equity raised in future. We are underwhelmed and discuss the bigger picture of the mismatch of the BDC sector's misaligned incentives, and the long term impact on the industry. Unfortunately, greed is likely to win out in short term as the foxes run the hen house.
Fifth Street Finance (FSC) unexpectedly announced the sale of its largest portfolio company. We dig into the details of the transaction and link the transaction to the profound changes underway at this under-loved middle market BDC. How FSC tackles its own balance sheet leverage will decide risk and return in the quarters ahead.