NEW YORK, March 14, 2018 /PRNewswire/ -- Alcentra Capital Corporation (NASDAQ: ABDC) ("Alcentra" or the "Company"), a...
HRZN: Notwithstanding HRZN announcing an unchanged $0.10 per month distribution for the April-June 2018 months, the BDC Reporter maintains a Dividend Outlook of AT RISK for 2018. After reviewing the latest results, Net Investment Income Per Share is at just $0.21 in the IVQ 2017. Leverage remains close to the maximum target at 0.71x. Troubled loans have been sold off so credit risk is down but the BDC has little room to boost earnings, even if yields are holding up. Nor is any great Realized Gain of equity investments likely that could be turned into yield bearing investments. The excess income from prior periods is rolling off fast as the BDC has been paying out more than has been coming in. On the other hand, management is making the case that a plethora of loans booked in the IVQ 2017 will boost income, and are adding-back 3 cents a share incurred in the IVQ 2017 for refinancing the Unsecured Notes. Then there's higher rates...As a result the sustainability of the distribution remains much in question. We are affirming our AT RISK view.
SCM: Following SCM's IVQ and full year 2017 results, the BDC Reporter affirms our Dividend Outlook of UNCHANGED. Although the latest quarter's recurring earnings were several cents below the distribution, the deficit was made up with Realized Gains. That's a payout strategy other BDcs use including recently ARCC and MAIN. Moreover, early in 2018 the BDC appears to be set to boost recurring Net Investment Income thanks to a material net increase in portfolio assets and lower cost on its Unsecured Notes thanks to the refinancing in 2017. The BDC has announced an unchanged distribution for the first quarter of 2018 of $0.34. That's 21 quarters in a row. SCM is modestly helped by having a modest amount of undistributed ordinary income and Realized Gains yet to pay out:about $1mn.
PFLT: The BDC announced a March monthly distribution of $0.095. That's unchanged from the last month and for the last 13 quarters. Dividend Outlook: Remains UNCHANGED for 2018.
PNNT: As expected, the BDC announced an unchanged distribution for the first quarter of 2018 of $0.18, now for 5 quarters in a row. Dividend Outlook: We have a rating of AT RISK, but may re-rate to UNCHANGED as energy investments benefit from higher oil and credit stabilizes.
CSWC: One day after the Dividend Outlook feature added an INCREASE rating, one of the 6 BDCs expected to boost its payout in 2018 did just that. Capital Southwest continued its campaign of quarterly increases, moving from $0.26 in the IVQ 2017, and $0.24 in the IIIQ 2017 to $0.28 in the IQ 2018. For the BDC Reporter that's the 4th correct call we've made where dividend moves are concerned, after rating either DECREASE or AT RISK OCSL, OCSI and HCAP, all of which have cut their payouts this year. In the case of CSWC we have maintained our rating going forward at INCREASE. Every time CSWC will be challenged to maintain its upward streak, but the BDC remains under-leveraged (debt to equity of 0.3 to 1.0), with plenty of liquidity after a Unsecured Note raise and booking deals regularly, according to press releases. That should boost recurring earnings and allow at least one more raise in 2018, which is the period covered by our projection.
With Saratoga Investment's dividend increase, and a recent hike from Solar Capital, we've decided to add another category to our 1 year out dividend rating system. Instead of having three rating options, we are adding a fourth: INCREASE. We immediately upgraded 6 BDCs from UNCHANGED to INCREASE. That includes Saratoga and Solar Capital, both of whom we expect further regular dividend increases from, along with NEWT,MAIN, GAIN and CSWC. Check out the Dividend Outlook Table for the changes made.
SAR: For the quarter ended February 2018, SAR announced a 1 cent increase in its distribution to $0.50. We had a rating of UNCHANGED. Subsequent to our expanding our rating system (see above) to include an INCREASE projection, we updated SAR through November 2018 to the highest rating. Although Net Investment Per Share and the distribution are getting closer, we expect at least one more raised distribution.
TSLX: The BDC Reporter had an UNCHANGED rating for the $0.39 quarterly distribution TSLX in advance of the most recent earnings. Now, we've reviewed the IVQ and full year 2017 earnings press release and the accompanying 10-K of the BDC. We also looked at the 45 company portfolio list and identified only 2 Watch List names (Mississippi Resources and IRGSE Holding Corp), both of which are of long standing. These two credits account for $60mn, or 3.6% of total assets. That number is essentially unchanged from the prior period and down by $116mn from the end of 2016, thanks to Realized Losses and write-ups. There are no non-accruals. Yields continue at historic or higher levels and we project annual earnings for 2018 of $1.90, well covering the $1.56 regular distribution liability that will now have been paid 14 quarters in a row and which has never been cut. Admittedly, Mississippi Resources seems to have deteriorated in value. The company was restructured in 2017 into a debt and equity portion. The latter $17mn has been almost completely written off. The $25.2mn in Senior debt, though, remains valued very close to par. A problem for another quarter perhaps, but OK for the moment. With plenty of liquidity, and debt to equity at a recent low and with TSLX being able to maintain its yield by doing idiosyncratic senior deals - often in an asset based format- and with recurring earnings running well ahead of the distribution, there appears to be no immediate threat to the sustainability of the dividend. DIVIDEND OUTLOOK AFFIRMED AT "UNCHANGED" FOR 2018.
OCSI: Oaktree Strategic Income cuts its distribution - the second BDC this year just 6 weeks in on February 9, 2018. This has caused the BDC Reporter to re-rate the BDC's Dividend Outlook for the rest of 2018 at the new - lower - level. Are we done with the payout reductions at OCSI this year ? THE BDC REPORTER RE-RATES OCSI'S DIVIDEND OUTLOOK AS "AT RISK". See the article for the full discussion.
OCSI: The BDC reduced its quarterly dividend from the first quarter of 2018 from $0.19 to $0.14, a (26%) drop. The BDC Reporter had a DECREASE rating in 2018 for OCSI.
MCC: The BDC Reporter's rating of DECREASE remains unchanged after the IVQ 2017 results are announced. See the article.