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BDC Market Recap: Week Ended February 3, 2017

BDCs:
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LAST DAY SPURT

February is underway and Week Five of the new year for the BDC Sector has ended.

The UBS Exchange Traded Note with the ticker BDCS, which we use as a measuring stick, moved up to $22.96 from $22.69 the week before.

However, essentially all the increase came on the last day of the week, apparently buoyed by the promise of less financial services regulation by the Trump administration.

Given that BDCs have flourished in recent years because of the increasing regulation of the large banks, that’s counter intuitive.

Maybe the BDC Sector rose along with the markets generally: all up sharply on the day.

HEAD FAKE

Just a couple of days ago, the BDC Reporter was girding itself to write about signs of softness in BDC prices.

We had noticed downdrafts in several names in advance of earnings season, which kicks off next week.

Thankfully, we decided we were getting ahead of ourselves and wrote nothing.

Now we can report that 32 of 45 BDCs are trading above their 50 Day Moving Average, and 35 above the 200 Day.

A week ago, the corresponding metrics were 29 and 36. A mixed picture.

AGAINST THE GRAIN

Still, we can’t help noting that Alcentra Capital (ABDC) slipped to a 5 Day Low and close to a 1 Month Low.

ABDC’s stock price is down against 50 Day and 200 Day averages.

Medallion Financial (MFIN), which we covered at length during the week reached at all-time low.

The former taxi medallion lender champion and soon to no longer be a BDC recovered partly when a repositioning of the business was announced.

BACK TO OUR REGULARLY SCHEDULED PROGRAMMING

These were the exceptions to the rule, with three quarters of BDCs (34 of 45) trading within 10% of their 52 Week Highs.

At the bottom end of the scale, including MFIN there are only 3 BDCs within 10% of their 52 Week Lows, down from 4 previously.

BlackRock Investment (BKCC) had a very strong week as the chart shows, and pulled itself out of the cellar.

Overall, the BDC common stock rally meanders on.

 

 

QUIET UPWARD PROGRESS

There was less action in BDC Baby Bonds and Preferreds than in the prior week.

Prices, though, continued to firm, with the median price of the 37 issues we track up from $25.48 to $25.55.

27 of 37 securities were trading above their 50 Day Moving Average, and 18 of 37 above the 200 Day metric.

Only one Baby Bond traded below par in the week as even the long dated Notes/Preferreds traded up marginally.

DISTRESS

That Exception To The Rule Baby Bond was, of course, the distressed Medallion Financial Note with the ticker MFINL.

Like its parent common stock MFINL dropped sharply in price intra-week, but partly recovered, ending at $15.70.

The lowest point was $15.23.

A week ago MFINL was at $16.02.

We expect the roller coaster ride to continue for both Medallion Financial’s stock and Note.

Otherwise,though, BDC Bonds remain in a sweet spot.

 

 

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