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Other Views: LFI Insights Reports On New Public BDC

BDCs:
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The BDC Reporter seeks to periodically bring readers Other Views. We’ve been on a hiatus as we get our subscription service off the ground. We re-initiate the series with a timely new article by Kelly Tompson  at financial news platform LevFin Insights (more details below). For the BDC Reporter this means one more public BDC to track. We are now at 46…

LFI Insight: Door opens for IPOs in the BDC space

This week’s IPO for TCG BDC (NASDAQ: CGBD) by Carlyle Group was the first BDC to IPO in two years, with Goldman Sachs BDC (NYSE: GSBD) the last to price in 2015.

The Carlyle print, along with two other signals – several BDCs are trading at or above NAV, and demand is white-hot for middle market assets – suggest the timing is right for other private vehicles or new platforms to go public.

Ares Capital (NASDAQ: ARCC), the undisputed goliath of BDCs with $9.2 billion in assets under management, currently trades at book value.

Here’s a look at others trading at book or higher among the top 15 BDCs by AUM:

Carlyle’s TCG BDC had $1.4 billion in assets under management as of March 31. The IPO priced this week at $18.50 per share, for $166.5 million in proceeds. While the IPO printed at the lower end of a $18.50-$19.50 range, it cleared above the portfolio’s March 31 net asset value of $18.31 per share. As of this morning, however, the stock had slipped to $18.15.

Not all BDCs are trading at book or better. Some of the smaller platforms, those with roughly $500 million or less in AUM, are trading at .9x or lower. Those metrics make it tough for a smaller vehicle to IPO since investors don’t want to buy at book if they can pick up a comp at .9x or under.

But clearly there is opportunity at the larger end of the market. Antares Capital has not announced plans for a BDC, but there is market chatter that the lender, which is backed by Canadian Pension Plan Investment Board, is weighing the addition of a BDC platform to its arsenal. In April, Antares expanded its lineup with a giant, $2.1 billion debut CLO. – Kelly


About LFI: LevFin Insights is a New York-based news and research platform that provides real-time deal coverage for the leveraged loan, middle market, high yield, secondary debt, BDC and CLO markets. LFI provides color, context and forward views on what’s next in market trends. To learn more about us, go to www.levfininsights.com.

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