Lead Left Interview – Greg Mason and Troy Ward

This week we speak with Greg Mason and Troy Ward, managing directors with KBW’s North America Equity Research team. Messrs. Mason and Ward specialize in business development company research.

The Lead Left: Guys, really appreciate your time today. What’s your current view of the BDC space?

Greg Mason: Thanks, Randy. The long-term view is that the BDCs have the regulatory winds at their back. Regulatory issues plaguing the financial world are pressuring their competitors, not BDCs. Banks, for example, are dealing with capital allocation problems, leveraged loan exposure, increase in capital regulations…all actions telling banks not to lend! The CLO space will be hampered over time with the new risk retention rules. Add to all this the outflows from retail funds, which are the third largest holders of leveraged loans.

Troy Ward: There has been considerable discussion over the past 12-18 months regarding expanding leverage at the BDCs from 1:1 to 2:1. While the proposed legislation, we believe, is on hold till 2015, we do believe the industry will continue to grow to fill the void left by CLOs