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BDC Market Recap: Week Ended February 10, 2017

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UPWARD TREND

Week Six of 2017 closed with the BDC Sector up to $23.19, using the Exchange Traded Note with the ticker BDCS as our usual guide.

That’s not the highest point of the year so far in absolute terms, but when you adjust for a distribution by BDCS, it’s the high in Total Return terms.

Add together the $23.19 and the $0.44 distribution in January and BDCS is at $23.63.

That’s up from $22.96 the week before.

MOVING TOGETHER

No less than 39 of the 45 public BDCs we track are at a price above both their 50 Day and 200 Day Moving Average.

35 of 45 are trading within 10% of their 52 Week High.

More remarkably, more than one-third of BDCs are within 1% of their 52 Week Highs.

LEFT BEHIND

Only a handful of BDCs have been left out of the Never Ending Rally.

In prior weeks, we’ve mentioned Medallion Financial (MFIN), which plumbed new depths this week only to pull out of its tailspin late.

That’s a story that could end badly for everyone concerned, with the stock closing at $1.96, but reaching a low of $1.77 intra-week.

MFIN’s 52 Week High was $9.99 and the Company has announced its intention to cease being a BDC.

CASUALTY OF THE WEEK

However, the Biggest Loser of Week Six was Fifth Street Finance (FSC), which we’ve covered extensively and as recently as this Friday.

FSC was as low as $4.4, ended at $4.56 and is way off its 52 Week High of $6.32.

The BDC has been under-performing for 3.5 years so the stock did not have that far to drop.

WINNERS AND LOSERS

If we had to arbitrarily divide the BDC universe we track into Winners and Losers for the past 12 months, we’d say there are 35 of the former and 10 of the latter.

Of the Bottom 10, we’d say half are in real distress and the other half just have a headache and a feeling that they’ve missed the boat.

LOOKING FORWARD

We’re still in the middle of BDC earnings season and will be interested to see if the rally continues once most of the companies have reported.

To date, results have been pretty much as expected, with the glaring exception of Fifth Street Finance.

We’re not going to venture a guess as to which way the market goes in the weeks ahead.

ALL QUIET

Notwithstanding all the fireworks going off in BDC common stocks and in the main indices, BDC Baby Bonds had a quiet week.

The rule of thumb median of the prices of 37 issues that we use to measure progress was up to $25.57 from $25.55 the week before.

As we said: quiet.

NOT MUCH NEWS

Nor was there much to report in terms of new Baby Bond issues or redemptions, whether early or not.

The BDC Reporter gets the impression a couple of Baby Bonds may get called before too long, either because a new issue will be issued at a lower price, or to reduce a BDC’s interest bill.

Many BDCs with a nominal maturity in 2019 can be redeemed at any time or will shortly have the option.

Some Baby Bond holders may need to gird themselves to give up their steady distributions and low volatility and prepare for a smaller pool of assets and ever-lower yields.

That’s a side effect of all that optimism coursing through the markets.

EXCEPTION TO THE RULE

Again, there is only one BDC Baby Bond trading below $25.00 par. More on that in a second.

There are 5 issues at $26.00 or higher.

Usually that’s a sign of a “strong” market.

As usual, the only “distressed” Baby Bond is Medallion Financial’s Note with the ticker MFINL.

The price has dropped to $14.60 from $15.70 last week.

Intra-week, MFINL was as low as $13.72.

Sadly, we foresee continuing woes for the only “stressed” Baby Bond.

OBJECT LESSON

Its current fate serves to remind Baby Bond investors that there are no “sure things”,  even in this very safe part of the BDC universe.

We worry about a few other issues should their BDCs falter in the near or far future, but that’s a discussion for another time.

GOOD TIMES

We’d rather close with the assertion that both BDC common stocks and Baby Bonds continue to enjoy a golden period.

How long this lasts is for our readers to guess.

 

 

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