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BDC Market Agenda: Wednesday May 19, 2021

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What’s Been Happening

There was only one significant BDC story on Tuesday: First Eagle Alternative Credit issued a new Baby Bond and prepares to redeem an existing one. See more below.

On the price front, the BDC sector was up for a 4th day in a row, if modestly. The Wilshire BDC Index was up 0.18% and BDCZ – which is tied to the soon-to-be withdrawn Wells Fargo BDC Index – was up an equivalent percentage. BDCZ closed at $19.19, just ($0.30) off its 52 week high, or (1.5%). The three day price drop that occurred May 11-13 was a doozy, with BDCZ dropping about (6%) just like that, on no tangible news. That’s just the way the markets work: plenty of investors milling around the exit door, ready to grab their hat and coats when an alarm sounds. This time, at least, that seems to have been a false alarm, as other investors soon took their place.

  • First Eagle Alternative Capital BDC (FCRD) Issues And Prices New Baby Bond:  One by one BDCs with public unsecured debt are refinancing their obligations well ahead of their maturity dates, taking advantage of a wide open capital markets. The latest player is FCRD, which has just raised $60mn in a new publicly traded Baby Bond that will mature in 2026.  (The ultimate amount might be $69mn should the underwriters exercise their option).  The yield on the new debt is 5.0% per annum.  That’s a substantial improvement on the  the two existing FCRD Baby Bonds, paying 6.75% and 6.25%: FCRZ and FCRW.  FCRZ will get repaid with the proceeds of this offering on June 21, 2021, which will reduce the BDC’s interest cost a year and a half early and push out the maturity. FCRW will probably get called in some short time after its early redemption period begin 10/31/2021. BTW, we’ve already updated the BDC Fixed Income Table, noting that FCRZ will be shortly redeemed. That brings to three the number of publicly traded BDC debt issues soon to be called in. However, thanks to new public debt offerings from Oxford Square (OXSQ) and now FCRD, the total number of public unsecured debt securities will drop only to 29 from 3o currently.

Latest Article

The BDC Reporter published on Tuesday an annotated version of Crescent Capital BDC’s (CCAP) IQ 2021 conference call transcript. Frankly for investors already familiar with the newer public BDC there was little in the way of eye opening news or unique insights to offer. However, because the BDC is so new – relatively speaking – to the public BDC company stage – we thought a thorough going over would be useful. This is a BDC whose final shape in terms of assets, leverage and “real (non-subsidised) earnings is far from being set.

Coming Up Next

We’re putting the final touches of our annotation of an old BDC hand: Golub Capital (GBDC) – in some ways very different from CCAP.

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