Author: Nicholas Marshi

Nothing lasts forever, not even BDC Sector stock slumps. As we expected, the record series of day losses across the entire breadth of BDC-land has been followed by an equally broad-based surge upwards in the past two days. As we promised, we’ve been tweeting about the subject at #bdcreporter. We are writing this after Day Two of the “rally” on Wednesday July 29, 2015,

We have been reporting frequently recently on the sharp drop in BDC common stocks. We wrote a major post last Thursday July 23rd, 2015 detailing the short and longer term trends. Today we update the status of the BDC market. Spoiler alert: Things are not looking good. Ironically, we believe chances for a rally are increasing. We tell why and detail how we’re investing.

The BDC Sector is down nearly 20% in price terms in the past year, and the downward slide has accelerated in recent days. We review how the group and different sub-groups and individuals names hare fared since July 2014. Looking forward we remain pessimistic for prices, unless earnings season brings joyful news across the board.

As expected, Fifth Street Finance (FSC) offered up a lower fee on new equity raised in future. We are underwhelmed and discuss the bigger picture of the mismatch of the BDC sector’s misaligned incentives, and the long term impact on the industry. Unfortunately, greed is likely to win out in short term as the foxes run the hen house.

We use the opportunity of reporting on Capitala Finance’s (CPTA) announcement of a new joint venture to discuss the good and the bad of such structures for the Company and the BDC sector in general.

Gladstone Investment Corporation’s (GAIN) Chairman is buying more stock as are hedge funds. Is their apparent optimism justified ? Will the Company raise new equity below NAV ? Should they ? All are discussed in this reprint from our Daily Newsletter. If you’ve not signed up already, just type your email address into the box on the right.

Fifth Street Finance (FSC) unexpectedly announced the sale of its largest portfolio company. We dig into the details of the transaction and link the transaction to the profound changes underway at this under-loved middle market BDC. How FSC tackles its own balance sheet leverage will decide risk and return in the quarters ahead.

Ares Capital (ARCC) announced a new joint venture partner to replace the absconding GE Capital to continue making loans in the upper middle market. Investors and analysts seem comfortable with the news. We’ve dug a little deeper and are less convinced that ARCC is free and clear. We explain why in great detail. We are Short ARCC as discussed at the end of the article, but we accept this is a contrarian view.

Phil Falcone’s HCH Holdings (HCHC) has sweetened its revised $5.30 a share offer for MCG Capital (MCGC). We review and evaluate the economics of the sweeteners, and speculate on how this struggle for cash-heavy MCGC will turn out. We discuss the upside and the downside of investing in MCGC at this late date.

We re-publish commentary made about a number of different subjects in our Daily Newsletter. We cover three different subjects related to equity raising, shareholder approvals and SBIC snubs. Don’t forget to sign up for our Daily Newsletter by adding your email to the box on the right.

An article in mergers and acquisition publication The Deal provides new information about the struggle over MCG Capital between PennantPark Floating and HC2 Holdings. The BDC Reporter adds to the debate and suggests a third way.

The second article in our series about trends noted in the first quarter of 2015 Business Development Company earnings releases, SEC filings and Conference Calls. Here we tackle the high hopes of BDCs for market share and spread gains engendered by GE Capital’s impending sale.

First of a series about some of the trends that have emerged from the IQ 2015 Business Development Company earnings reports and the attendant Conference Calls. First up: the sudden and unexpected drop-off in new deal activity in the first 3 months of the the new year.

We are using the opportunity of a new article on Seeking Alpha about Gladstone Capital (GLAD) to review the Company’s outlook and whether the stock is a Buy at the current level.

We briefly review the unsolicited offer from Phil Falcone’s HC2 Holdings (HCHC) for MCGC. We add an update about MCGC’s initial response to new offer.

Welcome to the updated BDC Reporter. In this article we discuss BDC Reporter’s new lay-out and how readers can access all the content we generate about the BDC sector across several publishing platforms. We also address why the BDC Reporter exists and why we are constantly posting on the worldwide web. Click Read More for the full article.