MARKETS

After a freak-out about inflation yesterday, the markets were mixed on November 11. The Dow Jones was in the red because one of its constituent stocks – Disney – did not perform well. However, the S&P 500 was back in the black, along with the NASDAQ and Russell 2000.

The BDC sector – which only flinched slightly yesterday – moved up. BIZD – the Van Eck sponsored BDC sector exchange traded fund – moved up 0.5% to close at $17.64, an $0.08 per share gain. Intra-day, BIZD even reached $17.68, just slightly beneath the recently established $17.64 record over 52 weeks.

35 BDCS were in the black, 2 were unchanged and just 5 in the red on the day, reflecting the general upsurge. Cion Investment (CION) was the leader of the pack – up 3.03%. CION has been volatile ever since going public but that has increased in recent days. Everyone is waiting on the quarterly results – first as a publicly traded BDC.

Newtek Business (NEWT) was the second biggest percentage price gainer: up 2.65%. Some investors have seen the big price drop-off that followed its recent earnings release as a buying opportunity. We can’t say otherwise as our review of the results did not suggest that anything merited the shock and awe that accompanied the IIIQ results. Nothing fundamentally has changed at NEWT and the answer to whether the business will succeed or not down the road won’t be found in this quarter’s numbers or even the next two. This means, though, that the volatility inherent in the stock may continue for some time to come.

Crescent Capital (CCAP), which reported excellent results yesterday and increased its payouts, with specials announced all the way through September 2022 moved up, but not as much as one could have expected: 1.85%. The stock price remains (5%) below its high set a few weeks ago.

Interestingly, with much upward pressure and so many BDCs close to their 52 week and all-time highs, no individual stock reached a new record. Still, there’s no reason to expect the BDC rally to cease…

NEWS

Those high BDC prices are making BDCs eye the secondary markets for shares. After the close, Stellus Capital (SCM) – which has been flying high thanks to good results and increasing distributions – announced a secondary. Proceeds will be used to pay down revolver debt and for “general corporate purposes”. The stock closed at $14.42, a 2% premium to net book value. No details on the price at which the new stock will be issued. We’ll have more to discuss tomorrow.

CREDIT

With BDC earnings season coming to an end, the BDC Reporter is turning to undertaking a detailed review of the credit portfolios of every BDC. First in line alphabetically is Apollo Investment (AINV). As a glance at the BDC Credit Table will show, AINV does not offer investors a quarterly rating of all its investments. However, we undertook the work and identified 12 underperforming companies in the 144 in the portfolio. The underperformers have an FMV of $172mn, or 6.6% of the portfolio as a whole.

Amidst the underperformers are the non performers. There are 5 companies on non accrual: Crowne Automotive; Ambrosia Buyer (aka Trimark USA); Sequential Brands; Solarplicity UK and Glacier Oil. In the quarter, AINV converted its non performing debt in Spotted Hawk – an oil & gas business – to equity, removing one company from non accrual status, but the second lien debt in Sequential Brands was added.

Over at the BDC Credit Reporter, we’ve been updating the files on each of the material underperforming companies one by one all day. We left out Crowne Automotive, whose FMV is only $0.400mn. We did complete write-ups on Ambrosia Buyer, Maxus Carbon, Sequential Brands and Glacier Oil & Gas already. More updates are to follow.

We’ll have a full credit review of AINV to offer shortly.