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BDC Wrap-Up: Friday September 29, 2017

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On Friday September 29, the News Of The Day selection was an unusual item. BlackRock Investment (BKCC) quietly filed with the SEC – as they do periodically – a disclosure about internal rate of return calculations made on investments booked since the Investment Advisor of the BDC became BlackRock alone. (So long Kelso). We’ve opined about the use of internal rates of return by BKCC before, in an article available to all our readers. This latest iteration gave the BDC Reporter a second chance to dissect the BDC’s numbers in a Premium article. We’re still underwhelmed, as we show. However, the article is not only about BKCC but also about the economics of BDCs using leverage to supposedly enhance shareholder returns and how much of that is a mirage when you look into the numbers, as we’ve done. This is an example of the opinionated side of the BDC Reporter, but we do back up our points with plenty of numbers.


There have been a myriad developments since our last report. Wedbush Securities initiated Gladstone Capital (GLAD) at Neutral, just as the BDC completed its new Term Offering and redeemed its earlier, more expensive issue. GLAD itself had some more news: a $500,000 equity investment in a marijuana-related business.  (The times they are a changing). The Capitala Group, investment advisor of Capitala Finance (CPTA), announced a new loan just booked but left out some key details. We commented on the subject on Seeking Alpha. Elsewhere, Solar Capital (SLRC) and Solar Senior Capital (SUNS) announced the date of their next earnings release and Conference Calls: November 2 and 3rd.  Golub Capital (GBDC) amended its main Credit Agreement, extending both its re-investment period by 1 year and the final maturity by two years. Again, we made a brief comment on the subject on SA. Harvest Capital (HCAP), fresh off its recent Baby Bond issue, filed a Post Effective Amendment, which provided further details about the costs involved. Also included was a distribution agreement for the sale of up to 1 million shares, under an At-The-Market program. HCAP – which is trading above book – seems to be intent on taking advantage and raising new equity. The BDC is still very small in size since going public in 2013 and has a relatively concentrated portfolio so the Investment Advisor must be anxious to grow.

Otherwise, Saratoga Investment (SAR) announced the results of its just completed annual shareholder vote. In this case there was one director up for re-election who was overwhelmingly re-elected and nothing else on the docket. Horizon Technology Finance (HTF), which has just issued a new Baby Bond, announced the date of details of the repayment of its existing Baby Bond with the ticker HTF. The BDC Reporter updated our premium Fixed Income Table accordingly.


On Friday there was no BDC stock which moved more than 3% either up or down. Most every BDC has been trading within its recent range. One exception to the rule is Ares Capital (ARCC), which had been swooning for awhile for no obvious reason, but which has been reviving of late and closed at $16.39 from $15.79 just a few days before. Overall – as the readers of our premium BDC Market Recap will know, there has been a change of tone amidst BDC common stocks, while the fixed income segment of the sector is in a state of constant change as new issues come to market and others are retired at a feverish pace, a subject we’ve been covering in great detail in recent weeks.


Both as an attachment and as a link (till our readers get accustomed to the change) we are providing constantly updated disclosure on what positions we hold amongst all the BDC common stock and fixed income securities out there.

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