BDC News 12/27: Trump, KBW Bullish on HTGC, and GECC Prepares to Pay Dividends

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8435321969_8c5a154a0a_zIt was a light news week due to the Christmas holiday, but we think there were a few stories that you should have known about over the past week.

3 top stories in BDCs this week:

  • Donald Trump and BDCs – Institutional Investor joins a long list of publications that have tried to understand what President Trump means for financial stocks, specifically business development companies. The article includes some interesting commentary from Wells Fargo analyst Jonathan Bock. “Any Tom, Dick, or Harry can raise $100 million and say they are a great lender, but that’s going to be harder to prove in the next five years.”
  • Buy Hercules Capital? – Barron’s uses KBW’s rationale for buying HTGC, one of the better-performing BDCs in recent memory. Some choice commentary is as follows: “They write that Hercules also has one the best return on equity ratios of the group, and it’s consistently generated high ROE over various periods of time. It’s also the most sensitive name to short-term interest rates. While valuation might turn some investors off, Lynch and Johnson argue that price-to-book value doesn’t tell the whole story for Hercules, and it deserves its price-to-book premium.” Fitch said that HTGC was one of hte best BDCs for rising rates in 2017.
  • Great Elm Capital’s dividend – GECC will start paying regular dividends to investors in February 2017, beginning with a monthly payout of $0.083 per share, or $1.00 per share, per year. The Great Elm Capital (GECC) debacle was something else, formed from the controversial merger with Full Circle Capital in late 2016. The press release states that “the initial distribution yield of 7% is driven predominantly by a faster than anticipated conversion of the acquired Full Circle portfolio to cash, which [GECC’s CEO] and team view as a long-term positive for GECC, albeit a short-term hindrance to the generation of net interest income.”

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