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BDC Market Recap: Week Ended October 6, 2017

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BDC COMMON STOCKS

As this link shows, the BDC Wells Fargo Index was up for the week, but the Exchange Traded Note with the ticker BDCS was down.

BDCS closed at $21.94. Last week, the price was $21.98.

Pretty, Pretty Good

However, most other metrics suggest the BDC Sector – on the common stock side – is enjoying a mini revival. (See also the YTD BDCS chart)

Last week a surprising 34 of 46 BDCS we track were trading above their 50 Day Moving Average. This week: 37.

The 200 Day Moving Average has 16 names in the green, up from 15 the week before and 10 the week before.

When we look at the number of BDCs trading within 10% of their 52 Week High, there are now 21 where there were 20 and 18 a fortnight ago.

Right Direction

Using a new stat for the Weekly Recap: 28 BDCs moved up in price on the week and 18 went down.

Over the last 4 weeks, a remarkable 38 are up in price and only 8 down.

Of those 8, only half are down in price over a 52 Week time frame.  Here are the tickers of the Failing Four (which should be no great surprise):

GECC, ABDC, PSEC and MFIN.

52 Week Data

We couldn’t help ourselves from playing with this new data set and looked at how many BDCs are up in price over the past year.

The number is 28 and 18 down.

Watch Out Below

However, the percentage drops down are much fiercer than the moves up.

OHAI, MFIN and CPTA are off (60%), (49%) and (33%) respectively.

By contrast, the BDCs standing on the winner’s podium : WHF, SCM and NEWT are up 38%, 29% and 26%.

Three Out Of Four

Generally speaking – and your results may differ – we are coming off a massive BDC “Bull Market” and it’s been hard to lose money on a Total Return basis.

Just scanning down the list only 10 BDCs are down more than 10% (roughly 1 year’s worth of distributions) in the past 52 weeks.

So we can make the unscientific observation that more than three quarters of BDC have “made money” for their shareholders in the past year.

Not Over Yet

This screen shot shows the Top Ten Losers of the past year, but also illustrates that several have been in rebound mode in the last week and -more importantly- the last 4 weeks.

Tripping

Two names are worthy of mention in the “falling and can’t get up” department: GECC and PSEC.

The former- as we noted in the BDC News Of The Day which has added this sort of data to our just launched Table –  has been reaching a new YTD low in its short history, as this chart shows.

We do have a suspicion as to why the stock price is dropping as we shared with an indifferent world in a  Seeking Alpha Comment attached to an article about GECC’s latest Baby Bond issue.

PSEC’s stock price had a weaker week, but remains a couple of percentage points off its lowest 2017 lows as investors continue to debate whether a “bottom” has been found.

Crystal Ball

Does this BDC bounce back continue in the weeks and  months ahead ? A year from now, will we be higher or lower where the Wells Fargo Index and most BDCs prices are concerned ?

The BDC Reporter – looking at our own BDC-by-BDC review of fiscal results year-to-date and projections we make for the rest of the year, and remembering that we are coming off a period of Very High Prices – is not sanguine.

Like a warm and sunny day in London in October, this too shall not last.

As always, though, “there’s winners, and there’s losers” (to quote John Mellencamp), but probably less of the former and more of the latter.


FIXED INCOME

Calm Before The Storm

This week, the BDC Fixed Income segment settled down after a few weeks of change.

We were able to update our BDC Fixed Income Table, which is up to 37 issues, despite 3 recent redemptions.

If you take our median price as gospel about the direction of BDC Fixed Income (we don’t but it’s a useful rough and ready measure) this was a quiet week price-wise.

The median price was $25.37, versus $25.38 the week before.

We had 5 of the 37 issues trading at $26.00 or higher, versus 4 last week.

More telling, we only had one Baby Bond trading below $25.00 par: poor old MFINL, the Medallion Financial (MFIN) at $23.83. It’s been higher and it’s been lower.

Relief Rally

Now that Capitala Finance (CPTA) has announced a much reduced dividend, it’s two fixed income issues (CPTAG and CPTAL) traded up on the week.

As the BDC Reporter commented in the Daily News Table  about its own positions in the two issues on hearing about the dividend cut:

“The big reduction in the dividend is probably a good augury for our positions in both CPTA fixed income issues because less cash will be going out the door to shareholders and management is likely to be more conservative going forward”.

Not Over Yet

However, as the Fixed Income Table shows, there are 3 issues already scheduled for redemption in October.

More importantly, there are 12 fixed income issues which could get redeemed in the rest of 2017. As regular readers of the Table will know – we’ve raised our rating of issues whose chances of getting paid off as High to 9.

No wonder that nearly two-thirds of BDC Fixed Income issues are trading at $25.50 or lower.

What’s the point in buying your favorite Baby Bond only to get repaid a few weeks later.

As we opined weeks ago when we looked at the data, this is putting downward pressure on Baby Bond and Term Preferred prices, and will continue to do so.

The Good News is that we don’t expect the median price to drop much more, with $25.25 a likely “As Bad As It Will Get” through the rest of 2017.


DISCLOSURE

For the BDC Reporter’s common stock and fixed income ownership disclosure, see the attachment entitled Presentation or click here. 

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