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Watch the BDCs

I have noticed several articles lately about business development companies starting to show stress from bad debt. I have had concerns about this since the 1st interest rate hike from the Fed. It only makes sense that BDCs would start to show stress—they already lend at very high interest rates which is to a large degree floating rate debt meaning that the smaller companies that they lend to have generally seen rising debt service costs.

Recently there was a Seeking Alpha article on some Moodys credit rating moves (or at least potential moves) placing some BDCs on negative credit outlook–not downgrading yet, but seeing signs of higher loan losses, etc.

I am interested because I hold baby bonds issued by 4 different business development companies which can be seen in my laundry list.

Here is an article in chief investment officer magazine. Here is another in Seeking Alpha. Here is one more in Private Debt Investor.

The question of course is will this worsen? Almost without a doubt. Am I concerned? Yes, I am a bit concerned, but not at a point where ‘action’ is necessary–BUT I will need to keep a close eye on information being released from the companies.

BDCs Forecast to Have a Tough 2024?

Thanks to 2whiteroses for catching this blurb.

Here is a link to a short blurb put out a couple weeks ago by the Fitch ratings agency–I had not seen this and thought it might be of interest to others.

Note that the full article requires a subscription (of course it does), but maybe folks can find it elsewhere on the web.

Of course we all have opinions–but the more opinion the better.

BDC Gladstone Investment Selling New Bonds

Business development company Gladstone Investment (GAIN) is selling a new issue of notes with a maturity on 8/1/2028

The notes will have a early redemption option for the company starting 8/1/2025.

GAIN has 2 other baby bond issues currently outstanding which can be seen here.

The preliminary prospectus is here.

Thanks to J for posting this.

Saratoga Investment Corporation to Issue Baby Bonds

BDC Saratoga Investment Corporation (SAR) has announced they will be issuing a new baby bond.

This issue is rated BBB by Egan-Jones.

The issue will trade under permanent ticker SAC when it begins to trade on the NYSE. No OTC grey market trading will take place, although anxious investors may be able to call their broker with the CUSIP number (when known) and secure shares prior to exchange trading.

The new baby bond will mature in 2025 an will pay the typical quarterly interest payments. There will be a early redemption option for the company but the date has not yet been released.

SAR has 1 other baby bonds currently outstanding–it can be seen here.

The preliminary prospectus can be seen here for the new issue.

EarlyBird was early with this new issue.