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BDC Market Update For Wednesday February 14, 2018

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BDC Market Update For Wednesday February 14, 2018

 

NEWS

 

Very little BDC news for a change. Awaiting TSLX’s IVQ 2017 earnings release. The high flying stock, which has been out-performing most of its peers for some time, has seen its price slump of late. Market being careful in advance of earnings or something else ?

 

MARKETS

 

Common Stocks

 

BDCS closed Tuesday September 13 at $19.66. Notwithstanding news of higher than expected inflation which caused headline writers to draw on their most dramatic tropes, BDCS was up slightly in early morning trading.

 

Only two BDC stocks moved above our self imposed 3% threshold: SAR up and CMFN down.

 

The BDC Reporter’s internal stats shows an ever shrinking number of BDCs trading within 5% of their 52 Week Lows: 16 from 20 the last time we checked. There are 18 trading between 5%-10%.

 

There are two BDCs trading within 5% of their 52 Week Highs, and 5 in the 5%-10% range.

 

The worst has come and gone for the BDC Sector, and we are sitting on an overall base – using BDCS as a guide – just below the price level before the major markets swoons of ten days ago.

 

Fixed Income

 

Notwithstanding the CPI increase, BDC bond investors remain calm. Prices are largely unchanged by the news.Which is not to say that fixed income investors – a deliberative bunch – may not eventually start to shed positions and cause prices to drop more.

 

The best argument for why that is not about to happen is the maturity profile of so many BDCs. As we’ve noted before, more than half existing issues are up for early redemption in 2018 or are already eligible. Even with higher rates most BDCs can still raise new capital at materially lower rates than the existing coupons.

 

Moreover, even if the issuers pass on early redemption,  much of the debt is reaching its term in the next few years. Most BDC lenders will be refinancing or paying off months in advance of nominal maturities, making most BDC debt outstanding short term in nature, and not subject to rate risk.

 

Happy Valentine’s Day To All

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