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Medley Capital: Stock Watch

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From the BDC Daily News Table:

Stock Watch: Medley Capital

MCC: On a day without any news, Medley Capital (MCC) dropped yet again to a 52 Week and All Time Low of $4.05.

The BDC Reporter adds:

As we’ve been saying for months, the numbers suggest MCC’s dividend is not sustainable and yet another cut will be required as bad debts and spread compression conspire to squeeze earnings lower.

With recurring earnings already well below the distribution – and much of that income of dubious quality anyway – the market is increasingly pessimistic.

Unexpected Consequences 

However, investors in both MCC and its public investor manager Medley Management (MDLY) might want to pay close attention if a dividend cut does occur.

The lower payout level might affect the strange arrangement in which investors from Fortress and MDLY have invested bundles in MCC’s stock.

That two tier arrangement where the Fortress investors get a Preferred return if proceeds from distributions are insufficient to cover their promised return.

Both MDLY and MCC have been very close lipped about the risks involved here in this arrangement – booked through a Special Purpose vehicle called Medley Seed Funding I, LLC.

However our reading – and we’ve written extensively on the subject – suggests that at some point there is a risk Medley Seed Funding I might be forced to dump its holdings into the market.

That would cause huge pressure on MCC’s stock and cause Realized Losses for MDLY.

Worth noting and reading our archives.

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