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BDC News Of The Day Round-Up: June 19, 2019

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At the start of the week, interesting BDC news is hard to find. We keep looking down our list to see if we’ve anything worth delving into without any success. Three BDCs filed Proxy materials. BDC News Of The Day has already written about Capital Southwest’s final Proxy. Apollo Investment (AINV) and Gladstone Investment (GAIN) have followed suit. The BDC Reporter has read all the related documents – none of which are now terribly controversial or market moving-  and brings you the highlights, including news of an insider purchase:

Apollo Investment (AINV): The final Proxy materials were filed. The shareholders are being asked to approve 3 Directors in a “staggered” Board and the engagement of the independent accounting firm. The BDC Reporter has commented extensively in the past about the corporate governance of AINV, and the relatively low number of shares owned by the Directors, most of whom have been at the helm through several disastrous years for the BDC and its shareholders, but have not felt much impact to their own net worth therefrom, given that most own less than $200,000 worth of stock. Ditto for the officers who are not directors.

In fact, only two insiders have a material stake in the business, CEO Zelter and co-founder of Apollo Management John Hannan.  Apollo Management Holdings, L.P. – an affiliate of the Investment and of asset manager behemoth Apollo Global, holds 8,886,305 shares, or just over 3% of the total, with a value of over $50mn.  That stake is higher than last year. However, Apollo Global is hardly the biggest investor in its own BDC. Thornburg Investment Management – the Proxy tells us – holds 3 times more shares. Roughly speaking Apollo’s direct ownership in AINV appears to be worth about one year’s worth of management and incentive fees, net of waivers.

Gladstone Investment (GAIN): The BDC is asking for “routine” approval of its appointed Directors; as well as  –  per the usual – permission to issue shares below Net Asset Value, if need be, in the year ahead. Given that the BDC did raise new capital back in May at a (modest) discount to book value, shareholders should prepare themselves for another trip to the discounted stock price well in the months ahead.

If it’s any comfort to GAIN’s shareholders – and it is in many cases – the firm’s founder and Chairman David Gladstone has also filed a Form 4 showing a material purchase of stock: 24,000 shares on June 14. That brings Mr Gladstone’s ownership to 645,973 shares.

(Unfortunately, the rest of the insiders continue to have very low ownership interests, despite receiving handsome compensation for sitting on any number of Gladstone-related companies. Most have not even one year’s worth of their director’s fees into GAIN’s stock. If you equate stock ownership with a Director voting as a shareholder, GAIN will disappoint).

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