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BDC Market Agenda: Tuesday March 30, 2021

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On The Docket

Like yesterday, there’s very little BDC news to speak of that has accumulated since our earlier report. Here are the exceptions to the rule:

  1. Portman Ridge Finance (PTMN): The BDC has filed a draft version of the proxy materials associated with the upcoming Harvest Capital (HCAP) shareholder vote on the proposed merger of the two entities.

Only the HCAP shareholders get to vote as the Board of PTMN has already approved the combination. Frankly, we didn’t read the entire draft prospectus again (over 180 pages) but we were reminded that the value ascribed to the value of each BDC will be its latest NAV, calculated two days before the vote. As of the most recent financial results – at year end 2020 – PTMN’s NAV Per Share was $2.88 and HCAP’s $10.88. Both the NAV Per Share numbers increased in the fourth quarter over the third quarter 2020, but HCAP was up by 2.5% to PTMN’s 1.1%. At today’s open HCAP’s stock price is $8.55. PTMN trades at $2.16. No date has been set in the N-14 draft prospectus for the “virtual” vote date.

2. Prospect Capital: Results Of Tender Offer For 5.875% 2023 Senior Notes.

Regular readers will know that we’ve scratched our head before about how PSEC repeatedly seeks to buy-in many of its multiple debe offerings early, presumably to reduce its interest burden, but consistently on unattractive terms. Given we are in a market here, the result is very little success. That’s again the case with this latest attempt: of the $286mn in 2023 debt outstanding a measly $726,000 was redeemed by investors. This strategy remains a puzzlement to the BDC Reporter.

3. Prospect Capital: Issues InterNotes

Coincidentally, notice of the unsuccessful PSEC debt redemption comes at the same time as the filing of a prospectus regarding its latest Inter Notes unsecured debt issuance in varying maturities. This document illustrates that – in small quantities – can borrow five year monies at 3.00% – one of the lowest rates we’ve seen in a very competitive space amongst BDCs. Moreover, PSEC placed some debt with a maturity 10 years hence, a rarity in the BDC sector these days where most every new issue is 5 years long.

The latest prospectus is also worth reading for inveterate PSEC watchers because of the “recent events” section which provides information about post-IVQ 2020 investment and financing activity conducted by the PSEC. In this case, there’s a lot to catch up on, including many more reminders of the BDC’s debt buy-back attempts launched in recent weeks, as well as new investment activity.

Credit Review

With no material news development to write about, we’ll continue undertaking IVQ 2020 credit reviews for select BDCs. Yesterday, we completed a full fledged review of WhiteHorse Finance (WHF). The BDC’s credit status is GOOD, according to the BDC’s rating system, but there were several borrowers worth keeping an eye out for that could affect future financial performance. Today, we’ll turn to mid-sized – but fast growing – Capital Southwest (CSWC).

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