I just posted a Seeking Alpha article over here that outlines BDCs and whether or not reinvesting your dividends is worthwhile.
The companies to be examined for this article will be American Capital (ACAS), Apollo Investments (AINV), Ares Capital Corp (ARCC), Blackrock Kelso Capital Corp (BKCC), Kohlberg Capital (KCAP), Main Street Capital Corporation (MAIN), PennantPark (PNNT), Prospect Capital (PSEC), Solar Capital (SLRC) and Triangle Capital Corp (TCAP).
Showing posts with label BKCC. Show all posts
Showing posts with label BKCC. Show all posts
Monday, August 22, 2011
Tuesday, May 3, 2011
BDC Weekly Roundup 4/29/2011
The BDCR Index had a nice recovery this past week by an amount of 2.46% from a level of 320.59 on 4/22/2011 to 328.664 for the week ending 4/29/2011. The major winners were CODI (+9.26%) and BKCC (+7.90%) and the major losers were TTO (-0.93%) and GLAD (-0.44%).
Chart:
News:
This week is earnings release week! Will post with any major news.
Chart:
News:
This week is earnings release week! Will post with any major news.
Wednesday, April 27, 2011
Monroe Capital Corp - Another New Filing
(This post is also being published on Seeking Alpha - either as an Instant Blog or real article)
Monroe Capital Corp filed papers to register as a BDC on March 3rd, they just recently filed amended papers on April 19th (N-2/A) for their shelf statement (correcting a typo in the original filing and increasing the fees). This new BDC is a division of Monroe Capital, a smaller private lender that was established in 2004 and currently manages around $440mm. There is an "MCAP" (Mango Capital) traded on the OTC BB, so for this stock, they went with "MRCC" instead (all of the good M tickers are taken). There is a backlog of new BDCs to profile and that raises a concern. We all know from Porter's 5 Forces that Barriers to Entry is a key driver for a company maintaining superior returns. It appears the SEC registration process is no longer a barrier for a number of smaller CLO/PE managers and the potential returns are worth the effort. Will this increased competition hurt some of the other BDCs? Only time and the 10-Qs will tell.
Organization
The company will use Monroe Capital BDC Advisors, LLC (MCAD), an entity formed for the purpose of serving as investment advisor. MCAD will provide MRCC with investment professionals and portfolio selection. Interestingly, they will also use another LLC - Monroe Capital Management Advisors (MCMA), LLC to serve as the administrator. The two entities mean that expenses are split - MCAD will receive the management and performance fees and MCMA will bill MRCC the proportional share of expenses. This setup is slightly different from other external managers and it may result in additional expenses, but there is no way to know how this setup will affect returns.
People in Charge
The investment decisions will be led by Theodore L. Koenig and Daniel M. Duffy. Theodore Koenig is a former lawyer, coming from the defunct firm of Holleb & Coef. After Holleb, he was president and CEO of Hilco Capital. Daniel M. Duffy comes from a more traditional finance background by way of CapitalSource and GE Capital. From what I can find on Mr. Duffy via his old CapitalSource bio:
Mr. Duffy has over 21 years of experience in corporate finance providing both debt and equity capital to companies in a wide range of industries. Mr. Duffy has been with CapitalSource since April 2003. Prior to joining CapitalSource Mr. Duffy was managing director in charge of GE Capital's debt placement team. Mr. Duffy joined GE Capital via its acquisition of Heller Financial where he spent 12 years acting in a number of leadership roles including co-head of the media lending team senior credit officer in corporate finance senior credit officer in equipment finance and team leader in loan workouts. Prior to joining Heller Mr. Duffy received his B.S. in accounting from Northern Illinois University in 1984.
The filing also mentions that 18 professionals from Monroe Capital will also be supporting the firm. There will be no direct employees.
Fees
This is something interesting to note. In the original filing (glad I did not post this last week), the management fees were stated as 1%, as of the 4/19 filing, management fees are stated as: "calculated at an annual rate equal to 2% of our total assets (which includes cash, cash equivalents and assets purchased with borrowed amounts)." The inclusion of cash and cash equivalents makes this one of the higher management fees. The first part of the incentive fee is 20% of Net Investment Income subject to an 8% annual hurdle rate.
The first, payable quarterly in arrears, equals 20% of our pre-incentive fee net investment income (including interest that is accrued but not yet received in cash), subject to a 2% quarterly (8% annualized) hurdle rate and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, MC Advisors receives no incentive fee until our net investment income equals the hurdle rate of 2% but then receives, as a “catch-up,” 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, MC Advisors will receive 20% of our pre-incentive fee net investment income as if a hurdle rate did not apply. The first component of the incentive fee will be computed and paid on income that may include interest that is accrued but not yet received in cash.
The second part is:
The second part is determined and payable in arrears as of the end of each fiscal year in an amount equal to 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of the year, computed net of all realized capital losses on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.
This is similar to other BDCs like BKCC where a huge liability may be payable at the end of the year and introduce some seasonal earnings into the 10-Q analysis. One other note - Monroe is also looking to pay up to 50% of the fee (pursuant to SEC approval) in MCBDC stock.
Portfolio Composition
The company expects to invest most of the proceeds of the IPOunitranche or junior-secured. The firm
expects to make investments in the $5mm to $25mm range, but maintains that range may drift as the firm's capitalization increases. As per the filing, the initial portfolio will have these statistics:
• Loans with a weighted average yield of 7% to 8%;
• Emphasis on middle market transactions;
• Minimum of 90% senior debt investments (including unitranche debt);
• Maximum concentration of 15% in any one industry;
• Average loan position of less than $5,000,000; and
• Loans with maximum loan-to-enterprise value ratio of between 50% to 70%
Risks
Standard risks are outlined here. The N-2/A has a lengthy list of risks as well that are worth reading.
I will keep everyone updated as this company moves along and IPOs.
Monroe Capital Corp filed papers to register as a BDC on March 3rd, they just recently filed amended papers on April 19th (N-2/A) for their shelf statement (correcting a typo in the original filing and increasing the fees). This new BDC is a division of Monroe Capital, a smaller private lender that was established in 2004 and currently manages around $440mm. There is an "MCAP" (Mango Capital) traded on the OTC BB, so for this stock, they went with "MRCC" instead (all of the good M tickers are taken). There is a backlog of new BDCs to profile and that raises a concern. We all know from Porter's 5 Forces that Barriers to Entry is a key driver for a company maintaining superior returns. It appears the SEC registration process is no longer a barrier for a number of smaller CLO/PE managers and the potential returns are worth the effort. Will this increased competition hurt some of the other BDCs? Only time and the 10-Qs will tell.
Organization
The company will use Monroe Capital BDC Advisors, LLC (MCAD), an entity formed for the purpose of serving as investment advisor. MCAD will provide MRCC with investment professionals and portfolio selection. Interestingly, they will also use another LLC - Monroe Capital Management Advisors (MCMA), LLC to serve as the administrator. The two entities mean that expenses are split - MCAD will receive the management and performance fees and MCMA will bill MRCC the proportional share of expenses. This setup is slightly different from other external managers and it may result in additional expenses, but there is no way to know how this setup will affect returns.
People in Charge
The investment decisions will be led by Theodore L. Koenig and Daniel M. Duffy. Theodore Koenig is a former lawyer, coming from the defunct firm of Holleb & Coef. After Holleb, he was president and CEO of Hilco Capital. Daniel M. Duffy comes from a more traditional finance background by way of CapitalSource and GE Capital. From what I can find on Mr. Duffy via his old CapitalSource bio:
Mr. Duffy has over 21 years of experience in corporate finance providing both debt and equity capital to companies in a wide range of industries. Mr. Duffy has been with CapitalSource since April 2003. Prior to joining CapitalSource Mr. Duffy was managing director in charge of GE Capital's debt placement team. Mr. Duffy joined GE Capital via its acquisition of Heller Financial where he spent 12 years acting in a number of leadership roles including co-head of the media lending team senior credit officer in corporate finance senior credit officer in equipment finance and team leader in loan workouts. Prior to joining Heller Mr. Duffy received his B.S. in accounting from Northern Illinois University in 1984.
The filing also mentions that 18 professionals from Monroe Capital will also be supporting the firm. There will be no direct employees.
Fees
This is something interesting to note. In the original filing (glad I did not post this last week), the management fees were stated as 1%, as of the 4/19 filing, management fees are stated as: "calculated at an annual rate equal to 2% of our total assets (which includes cash, cash equivalents and assets purchased with borrowed amounts)." The inclusion of cash and cash equivalents makes this one of the higher management fees. The first part of the incentive fee is 20% of Net Investment Income subject to an 8% annual hurdle rate.
The first, payable quarterly in arrears, equals 20% of our pre-incentive fee net investment income (including interest that is accrued but not yet received in cash), subject to a 2% quarterly (8% annualized) hurdle rate and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, MC Advisors receives no incentive fee until our net investment income equals the hurdle rate of 2% but then receives, as a “catch-up,” 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, MC Advisors will receive 20% of our pre-incentive fee net investment income as if a hurdle rate did not apply. The first component of the incentive fee will be computed and paid on income that may include interest that is accrued but not yet received in cash.
The second part is:
The second part is determined and payable in arrears as of the end of each fiscal year in an amount equal to 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of the year, computed net of all realized capital losses on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.
This is similar to other BDCs like BKCC where a huge liability may be payable at the end of the year and introduce some seasonal earnings into the 10-Q analysis. One other note - Monroe is also looking to pay up to 50% of the fee (pursuant to SEC approval) in MCBDC stock.
Portfolio Composition
The company expects to invest most of the proceeds of the IPOunitranche or junior-secured. The firm
expects to make investments in the $5mm to $25mm range, but maintains that range may drift as the firm's capitalization increases. As per the filing, the initial portfolio will have these statistics:
• Loans with a weighted average yield of 7% to 8%;
• Emphasis on middle market transactions;
• Minimum of 90% senior debt investments (including unitranche debt);
• Maximum concentration of 15% in any one industry;
• Average loan position of less than $5,000,000; and
• Loans with maximum loan-to-enterprise value ratio of between 50% to 70%
Risks
Standard risks are outlined here. The N-2/A has a lengthy list of risks as well that are worth reading.
I will keep everyone updated as this company moves along and IPOs.
Monday, April 18, 2011
BDC Weekly Roundup 4/18/2011
The BDCR Index continued the downward slide this past week by an amount of -1.17% from a level of 324.75 on 4/8/2011 to 321.00 for the week ending 4/15/2011. The major winners were CODI (+1.14%) and FSC (+1.15%) and the major losers were HTGC (-6.18%) and KCAP (-4.67%).
Chart:
News:
ARCC - Closes an $86.5 mm investment
BKCC - Motley Fool calls BKCC a "perfect stock" and gives it a 7 out of 10 score. Wow. - http://www.fool.com/investing/general/2011/04/15/is-blackrock-kelso-capital-the-perfect-stock.aspx
FSC - Closes convertible offering, CEO Leonard M. Tannenbaum purchases $2m in concurrent private offering.
GAIN - Ups dividend by 12.5% - http://finance.yahoo.com/news/Gladstone-Investment-prnews-3583817188.html?x=0&.v=1
HTGC - Joins the convertible party with a $75 million senior notes offering. Changes articles of incorporation to increase maximum share issuance from 60mm to 100mm.
TTO - Downgraded by Ladenburg Thalmann
Chart:
News:
ARCC - Closes an $86.5 mm investment
BKCC - Motley Fool calls BKCC a "perfect stock" and gives it a 7 out of 10 score. Wow. - http://www.fool.com/investing/general/2011/04/15/is-blackrock-kelso-capital-the-perfect-stock.aspx
FSC - Closes convertible offering, CEO Leonard M. Tannenbaum purchases $2m in concurrent private offering.
GAIN - Ups dividend by 12.5% - http://finance.yahoo.com/news/Gladstone-Investment-prnews-3583817188.html?x=0&.v=1
HTGC - Joins the convertible party with a $75 million senior notes offering. Changes articles of incorporation to increase maximum share issuance from 60mm to 100mm.
TTO - Downgraded by Ladenburg Thalmann
Tuesday, April 12, 2011
BDC Weekly Roundup 4/8/2011
The BDCR Index had a small loss this past week by an amount of -0.27% from a level of 325.61 on 4/1/2011 to 324.75 for the week ending 4/8/2011. The major winners were TTO (+2.48%) and NGPC(+2.33%) and the major losers were PSEC (-4.68%) and KCAP (-3.87%).
Chart:
Chart:
News from the past week:
BKCC - Earnings release AND call on May 9th. I suppose they would prefer investors not have time to really dissect the 10-Q this time...
FSC - Issued $150m in convertible notes with a conversion price of $14.76 and an interest rate of 5.375%
GAIN - Sale of $5.6m equity investment in Cavert and reinvestment into Subordinated Debt - http://www.gladstone.com/article.php?q=%3FModule%3DMediaViewer%26GUID%3D18077006%26Ticker%3DGAIN
PNNT - Sibling company PFLT has a poor IPO - http://www.reuters.com/article/2011/04/08/pennantpark-ipo-idUSN0829180920110408?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=43
PSEC - Publishes updated earnings guidance, new investment disclosures and sneaks in a secondary. They priced the offering at 11.40 which was highly below the current price, but accretive to Book Value - http://www.sec.gov/Archives/edgar/data/1287032/000104746911003314/a2203200z497.htm
Thursday, March 17, 2011
Blackrock Kelso Capital BKCC - What now?
BKCC missed its expected quarterly earnings by over 70% and since then the stock has taken a pounding to the tune of over 20%.
Many different sites have already documented this occurrence, but it appears Blackrock's Advisor is putting its money behind the company - BlackRock Kelso Capital Advisors LLC bought 200,000 shares through a private placement, but it includes information on restricted stock that was already granted to him. At best this is a mixed signal, would be a lot more interesting if the CEO / CIO was making the purchase.
See this link for the full Form 4 filing.
Many different sites have already documented this occurrence, but it appears Blackrock's Advisor is putting its money behind the company - BlackRock Kelso Capital Advisors LLC bought 200,000 shares through a private placement, but it includes information on restricted stock that was already granted to him. At best this is a mixed signal, would be a lot more interesting if the CEO / CIO was making the purchase.
See this link for the full Form 4 filing.
Tuesday, March 15, 2011
BDC Weekly Roundup 3/11/2011
(Was out last week) The BDCR Index took a tumble fell this past week by an amount of -3.76% from a level of 335.45 on 3/4/2011 to 323.26 for the week ending 3/11/2011. The major winners were TTO (+8.44%) and HRZN (+0.75%) and the major losers were BKCC (-20%) and TINY (-11.71%).
Chart:
BKCC - Misses earnings, reports Q4 EPS of 03 cents, expected 11 cents. Link to the CC - http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=209952&eventID=3753698
CODI - Raises dividend from 34 cents to 36 cents. Reports Q4 EPS of 48 cents, meeting consensus.
KCAP - Posts positive surprise EPS of 24 cents versus expected 17 cents. Link to the CC - http://ir.kohlbergcap.com/eventdetail.cfm?eventid=93480
Also releases/prices convertible notes - http://finance.yahoo.com/news/Kohlberg-Capital-Corporation-pz-3295497930.html?x=0&.v=1
MCGC - Selling portfolio company Superior Industries for $42.3mm http://finance.yahoo.com/news/MCG-Capital-Announces-Sale-of-bw-3869544465.html?x=0&.v=1
NGPC - Misses earnings, reports 15 cents per share versus estimate of 17 cents. http://finance.yahoo.com/news/NGP-Capital-Resources-Company-pz-3932944371.html?x=0&.v=1
FSC - Closed $182mm in new investments YTD - http://finance.yahoo.com/news/Fifth-Street-Finance-Corp-pz-1930631458.html?x=0&.v=1
MAIN - Raises dividend 4% (from .125 to .13)
MVC - Reports 1Q losses of 26 cents, misses the 3 cents estimate. Link to 1Q presentation - http://www.mvccapital.com/eventdetail.cfm?eventid=41339
TICC - Met earnings estimates - CC details - http://www1.snl.com/irweblinkx/corporateprofile.aspx?IID=4089666
Motley Fool link on BKCC/MVC - http://www.fool.com/investing/general/2011/03/09/blackrock-kelso-capital-shares-plunged-what-you-ne.aspx
Chart:
Notable News Items:BKCC - Misses earnings, reports Q4 EPS of 03 cents, expected 11 cents. Link to the CC - http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=209952&eventID=3753698
CODI - Raises dividend from 34 cents to 36 cents. Reports Q4 EPS of 48 cents, meeting consensus.
KCAP - Posts positive surprise EPS of 24 cents versus expected 17 cents. Link to the CC - http://ir.kohlbergcap.com/eventdetail.cfm?eventid=93480
Also releases/prices convertible notes - http://finance.yahoo.com/news/Kohlberg-Capital-Corporation-pz-3295497930.html?x=0&.v=1
MCGC - Selling portfolio company Superior Industries for $42.3mm http://finance.yahoo.com/news/MCG-Capital-Announces-Sale-of-bw-3869544465.html?x=0&.v=1
NGPC - Misses earnings, reports 15 cents per share versus estimate of 17 cents. http://finance.yahoo.com/news/NGP-Capital-Resources-Company-pz-3932944371.html?x=0&.v=1
FSC - Closed $182mm in new investments YTD - http://finance.yahoo.com/news/Fifth-Street-Finance-Corp-pz-1930631458.html?x=0&.v=1
MAIN - Raises dividend 4% (from .125 to .13)
MVC - Reports 1Q losses of 26 cents, misses the 3 cents estimate. Link to 1Q presentation - http://www.mvccapital.com/eventdetail.cfm?eventid=41339
TICC - Met earnings estimates - CC details - http://www1.snl.com/irweblinkx/corporateprofile.aspx?IID=4089666
Motley Fool link on BKCC/MVC - http://www.fool.com/investing/general/2011/03/09/blackrock-kelso-capital-shares-plunged-what-you-ne.aspx
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