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BDC Prospect Capital Comes a Calling

Once again a $1,000 note is being issued with the proceeds being used to call a $25 baby bond.

Business development company Prospect Capital (PSEC) has announced a new $1,000 note issue with the intention of calling a baby bond.

The 6.25% notes due 2024 (PBB) have been callable since 2018.

No real harm is done to investors as the PBB shares are trading around $25.38 and there is accrued interest and depending on the call date investors should be close to break even.

The new note offering with ‘use of proceed’ language can be read here.

j was right on this one.

7 thoughts on “BDC Prospect Capital Comes a Calling”

  1. This is OT but is there an easy way (website) that calculates YTC? Ideally, enter a BB or preferred symbol and it outputs YTC. Thanks.

    1. You gotta do a little bit more than that, leonard, but try https://gpi.fidelity.com/ftgw/interfaces/pyc/ it will provide YTC/YTM simulaneously assuming you’re not trying to calculate YTM on a perpetual lol, and will do it for various par amounts of $25, 50, 100 and 1000k and for payout periods of monthly, quarterly, semi-annually and annual. If you’re dealing with a perpetual, just put call date in as maturity to calculate YTC and then do your own math for a current yield instead of a YTM.

      1. 2wr – thanks for the link! It will come in very handy. I tried it on PSA-H (5.6%, callable on 3/11/2024, $25) with hypothetical $28 entry price, settlement date 1/19/2021, $0 commission. It computes YTC 1.67% which is close I assume, even though it has an accrued interest of $14.78 built in to the calculation but probably in the noise of the overall result. Think I’ll try it in Excel and compare.

        1. Leonard – the next step to a completely accurate answer would be to subtract the amount of accrued from your $28 entry price (since you’re not paying that out as the calculator assumes, given it’s a true bond calculator) and then recalculate. See https://www.investopedia.com/terms/s/strippedyield.asp under “Stripped Yield and Preferred Shares” for an explanation…

  2. This is surprising, considering that they have at least 36 (by my count) outstanding bonds with coupons of 6.5 – 6.75%, all of which are callable in the next 6 months or less. I’ll be sorry to see my PBB go, don’t see a good IG replacement in today’s market.

    1. I agree surprising. The two remaining PSEC traded bonds are not attractive at present prices. Time to call is very short and YTC if called promptly would be very low. Better pickings among the non-traded issues (which you can trade at IBKR). It’s a very long list.

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