As oil prices continue to drop, taking other asset values with them, capital markets are beginning the new year sorting through what this all means for them. In high yield land, while secondary prices for energy credits took it on the chin in early December, the overall theme is “recovery.” As junk guru Martin Fridson…
We had planned on concluding our 2015 predictions with a forecast of structure and pricing in leveraged loans. But market developments compel us to address first what could a factor in changing both those elements dramatically next year. Like all things unexpected, the precipitous drop in oil prices could have been foreseen if you knew…
One of the enduring mysteries of life, other than the fact that Kanye West is Bruce Jenner’s son-in-law, is getting a handle on deal supply in the leveraged loan markets. By the numbers, the forward institutional pipeline has been drifting south since Labor Day. According to S&P Capital IQ, last week’s calendar stood at $40…
We had just polished off our second helping of pumpkin pie last Thursday evening when the first (of what we assume will be many) “2015 Market Outlook” hit our in-box. Always big supporters of the crystal ball crowd, we thought we’d begin our own prognostication series by sharing some of the contents of that forecast…
Everybody talks about yield, but nobody does anything about it. In particular, the Fed’s reluctance to be pinned down to a date certain when rates will rise has lent a “she-loves-me-she-loves-me-not” tone to investors’ worries. The buy-side has toggled all year between loans and bonds in search of optimal returns. Mutual fund flows have oscillated like…
Maybe it was the high caliber attendees and top-notch panels. Could have been the stellar master of ceremonies and sponsor. Whatever the reason, the Wells Fargo Middle Market BDC CEO Forum may have breathed new life into the leveraged loan industry. Led by Jonathan Bock, this gathering of gurus spent the day discussing the role…
We conclude our series on business development companies by answering your questions: Is it better for a BDC to be internally or externally managed? The costs of running an internally managed BDC are typically less than externally managed ones. That’s because it doesn’t pay a fee (which includes a profit margin) to an outside manager,…
When business development companies were created by Congress in 1980, they were designed in response to concerns about liquidity. Specifically, a provision in the 1940 Act limited the number of holders of investment company securities to 100 persons. That, of course, effectively eliminated public ownership. Private equity and venture capital firms argued this would put…
One of the many benefits of business development companies is their ability to easily hold a wide range of investments. From senior term loans, to unitranche loans, second-lien term loans, mezzanine debt, and even preferred stock, BDCs are incredibly versatile asset management vehicles. Historically, BDCs allocated more capital to higher-yielding, thus more risky, assets; particularly…
In the first installment of our special report on business development companies, we reviewed their history, summarized the basic precepts that govern them, and discussed some of their key features. This week, we take a closer look at BDC structures. As we wrote last week, BDCs are companies which issue stock to investors whose capital forms…