BDC News Of The Day: April 3, 2017
Here are the main news items and SEC filings from all the publicly traded BDCs that we track for Monday April 3, 2017 before the market open. External links to articles or filings are in blue, internal links to BDC Reporter’s prior posts on the subject are in red. Where appropriate, we add brief comments.
Ares Capital (ARCC): Schedules release of IQ 2017 earnings.
ARCC will report earnings for the first quarter ended March 31, 2017 on Wednesday, May 3, 2017 prior to the opening of the Nasdaq Global Select Market. Its webcast/conference call will be held at 12:00 p.m. (Eastern Time) on the same day.
Here are three items shareholders may want to focus on:
- The progress on the integration of the American Capital assets into ARCC. Or to be more specific, any kind of snapshot as to which investments have been sold off (in a seller’s market for financial assets); which are being deliberately retained and which are harder to dispose of. We’ve assumed that ARCC- which undertook substantial due diligence in advance of buying ACAS- has a plan for every investment out there and will convert the bulk to cash given that many strategies followed by ACAS do not mesh with ARCC’s own approach. The faster the ACAS assets are re-deployed, the easier for shareholders to get a picture of the new ARCC with its multi-billion dollar moving parts.
- The status of the wind-up of the JV with GE Capital, which appears to have past the point of no return, and whose impact on ARCC’s profitability (once a fifth of all earnings) must be profoundly felt. We know the new SDLP program with an affiliate of AIG is supposed to be a full replacement for the eventual complete loss of the GE JV, but investors may want to compare what is being lost with what is being gained. If the SDLP is not earning on full cylinders, the temporary waivers of a portion of the Investment Advisor’s Management Fees- ostensibly offered up in relation to the ACAS transaction- may be the best guarantee that ARCC will meet its short term earnings goals.
- Credit quality: Even in the heady environment for credit which currently obtains, and notwithstanding ARCC’s excellent track record to date, shareholders should not take their eye off what’s happening company by company in the portfolio. Part of ARCC’s strategy is being prepared to take on very big positions (even after syndication), so only a couple of errant investments could suddenly impact Net Asset Value and earnings. Exhibit 1 is ARCC’s $143mn position in Infilaw, discussed in our March 31st News Of The Day, which illustrates that ARCC is willing to take very big bites as part of its strategy of being a major player in the upper middle market.
Capital Southwest Corporation (CSWC): Sale of stock by greater than 10% owner
Moab Capital Partners, LLC (and other related entities) own greater than 10% of CSWC’s stock. As a result, every purchase and sale needs a public Form 4 filing with the SEC. In this case, the number of shares involved (in a sale) were tiny: just 600.