|
|
Site Index Sept Aug July Jun May Aprl Mar Feb Jan REIT Updates Sept Off/Ind Sept Retail Sept Triple's Sept Apt/Hosp Bank Updates Sept Aug July Jun May Aprl Mar Feb Jan |
BDCs May Have External or Internal Managements Stephen Ellis, Motley Fool 12-07 A key consideration for shareholders when investigating BDCs is whether the company is managed by external management or internal management. Externally managed BDCs like Gladstone, Ares Capital, and Apollo Investment are advised by management teams from a separate entity -- in most cases, a private equity firm. Operating expenses tend to run higher for these players, as management typically works under "2 and 20" compensation schemes similar to hedge funds, where the fees are 2% of assets under management and 20% of any realized gains. That's essentially what Gladstone adopted as its new fee plan going forward, with some additional incentives once the net investment income for the quarter exceeds the hurdle rate, which is 1.75% of assets under management in any given quarter. Previously, Gladstone management had been compensated on a straight 2% of assets under management. Internally managed BDCs like American Capital and Allied Capital tend to have lower fees because of the lack of an external advisor. Case in point -- American Capital's salaries, benefits, and stock options compensation ran about 1.6% of assets in 2005.
Prospect Energy Corp., which lends to and invests in energy companies, said Friday it agreed to sell 6 million of its common shares at $17.80 each to raise gross proceeds of $106.2 million. Prospect currently has only 12.9 million shares outstanding. PSEC said it expects to use net proceeds to repay debt, fund investments in portfolio companies and for general corporate purposes. Prospect Energy Corporation also announced that it has declared a second fiscal quarter (for the fiscal year ending June 30, 2007) dividend of $0.385/share, payable on 1-05-07 to shareholders of record as of 12-29-06. The ex-dividend date is 12-27-06. This dividend marks the ninth consecutive quarterly increase and an increase of $0.105 or 38% from the year-over-year prior quarter's dividend of $0.28 per share. Ares Capital Hopes to Raise $50.5M From Offering of 2.7 Million Shares AP 12-14 Investment company Ares Capital Corp. [ARCC] will sell 2.7 million shares of common stock at $18.50 per share with the aim of raising $50.5 million in proceeds. ARCC will use the proceeds to repay outstanding debts and for other general purposes. Hercules Technology Growth Capital Raises $77.5 Million in Public Offering Businesswire 12-11 HTGC increased its public offering of 5.5 million shares to 5.7 million primary shares raising approximately $77.5 million of gross proceeds. The 5.7 million shares of common stock will be delivered on December 13, 2006. The net proceeds to Hercules Technology Growth Capital from the sale of the shares in the offering are intended to reduce borrowings under its credit facilities, to originate new as well as fund existing investments and for general corporate purposes. ACAS Assigned BBB, Baa2, BBB Ratings by Moody's, Standard & Poor's, Fitch PRNewswire 12-22 American Capital Strategies announced that Moody's Investors Service has assigned a Baa2 long-term issuer rating to American Capital and Standard & Poor's Ratings Services has assigned a BBB counterparty credit rating. In addition, Fitch Ratings has upgraded American Capital's long-term issuer default rating (IDR) and senior unsecured debt rating to BBB. Fitch, Moody's and Standard & Poor's gave their American Capital ratings a stable outlook. Moody's wrote: From a financial metrics perspective, ACAS is well positioned, particularly due to the company's substantial equity base. BDC regulations require ACAS to effectively maintain leverage below one to one (debt to equity), which is significant. ACAS's sizeable equity cushion provides its debt holders with considerable protection in the event portfolio valuations decline. ACAS does manage this metric closely to the requirement; however, the use of its equity forward program provides some flexibility and potential relief, although the amount of the equity forward is likely insufficient to cover an extensive portfolio decline. Regarding ACAS's profitability, Moody's recognized that the company's return on average managed assets (defined as net investment income plus net realized gains as a percentage of average managed assets) has produced strong results in recent years. The ability of the company to maintain these returns in an economic downturn will be key in demonstrating its expertise in investment selection and operations. ACAS's status as a Regulated Investment Company requires the company to distribute 90% of ordinary taxable income to shareholders in the form of a dividend. Moody's recognizes that ACAS's ability to cover and grow its dividend with ordinary income as opposed to cash (or other liquid assets) or long-term capital gains mitigates this risk to some extent. Finally, there is a risk that greater competition could impact portfolio yields or lead to adverse investment selection as more companies enter the middle market lending and buyout business. ACAS's ability to differentiate itself from other market participants with its product offerings and operations expertise is also significant to the rating. S&P's wrote: Over the past two years, management has moved to invest in commercial real estate (CMBS) bonds and to establish funds of private assets that the firm will both invest in and manage for third parties. These moves to grow its European business and add fund management (with its more stable fee income) also strengthen our view of the firm's credit worthiness. While low asset liquidity has been a hallmark of the private equity business, American Capital has demonstrated an ability to securitize assets and garners steady cash flow from its fixed income investments. Debt funding is solid and cash flow coverage metrics have been adequate even during periods of economic softness. In addition, management has cultivated excellent access to equity markets. The firm's use of forward equity sales bolsters our view of its ability to maintain funding during a downturn. American Capital's permanent capital base and the breadth of its business are also strengths. Nevertheless, management's decision to grow rapidly limits the rating, especially in the context of a leveraged finance market that has sustained high returns for longer than has historically been the case. Although we believe American Capital's valuation procedures are strong, these procedures also assume a value consistent with current markets. Thus during a market disruption or recession, the value of the firm's assets would decrease along with enterprise value of its investments. The firm's permanent capital and systematic investing platform have helped American Capital carve out a strong competitive position during a robust market. We remain wary of the firm's rapid growth and the high risk profile of its portfolio. On 12-01 Jefferies Initiated coverage of MCGC at Buy. On 12-04 Keefe Bruyette Initiated coverage of AINV at Outperform. On 12-06 Oppenheimer Initiated coverage of PSEC at Buy. On 12-07 AG Edwards Initiated coverage of MIC at Buy. On 12-12 Ferris Baker Watts Downgraded PSEC from Buy to Neutral. On 12-12 Allied Capital Corporation [ALD] announced that it has declared an extra cash dividend of $0.05 per share. This represents additional taxable income that will be distributed for 2006 - but payable on 1-19-07. For 2006, Allied Capital has already declared total regular quarterly dividends of $2.42 per share. On 12-08 NGP Capital Resources [NGPC] announced a quarterly dividend to stockholders in the amount of $0.33 per common share. The dividend, consisting of a $0.26 per share regular quarterly dividend and a $0.07 per share special dividend will be paid on December 29, 2006 to shareholders of record on December 19, 2006. The ex-dividend date is December 15, 2006. We anticipate that the dividend will be paid from ordinary income for tax purposes. The actual tax characteristics of all dividends will be reported to each shareholder on Form 1099 after the end of the year. On 12-21 Technology Investment Capital [TICC] declared a special dividend of $0.12/share payable on 1-17-07 to shareholders of record as of 12-29-06. With this special dividend, total stockholder distributions for 2006 will be $1.38/share, compared to total stockholder distributions of $1.01/share for 2005 and $0.43/share for 2004. NOTE #1: This page is ment to be a supplement for those already getting monthly sector updates from another source. Data entry errors sporadically happen. Metrics like Debt/Market Cap and should not be ignored. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||