BDC Saratoga Investment (SAR) has priced their new baby bond at 8%.
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4/25/2024
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Thank You 2WR , nice tidbit of information to know. I am trying this week to make a list of bonds that are Baa3 / BBB- and higher.
Last 3 weeks been looking at Preferred’s til I can’t see straight. Have deployed about 10% of my cash.
I haven’t gotten to full allotments on most of preferred I bought. I have been keeping an eye and if one I bought drops below what I paid, I put in another open order. If I over buy, I will just hold until we are out of this mess and hopefully sell some at more than I paid.
they have another baby bond SAT that also matures in 2027. Wonder if this will trade down too.
David – Yes it likely will–it fell yesterday on the announcement and given that it was trading at a current yield around 6.5% something has to give–investors should trade up..
Tim – I mentioned this elsewhere – that 6.50% current yield on SAT comes with an 8.30% YTM…. With YTM on SAJ to be 8.00%, how far off the mark do you think SAJ should be? YTM should take precedence in this case imho.
2WR I have no interest in this offering, coming just before the next Fed rate hike. Seems odd the bills come due on all their debt at the same time in 27.
The wording of the announcement reminds me of Trapping Value disclaimer.
Please note that this is not financial advice. It may seem like it, sound like it, but surprisingly, it is not
The press release says its not a offer to sell you shares. They paid for the cheapest ratings agency Egan – Jones.
I have been searching on Quantum On Line this past week for Preferred’s of CEF and BDC’s and noticed most if not all get rated at time of offering but then fail to keep the ratings current
Charles – According to the BDCReporter, there are 43 BDC preferreds and baby bonds outstanding… I’m having trouble at the moment accessing my account however, on the surface, I would suspect that most of these are not rated and have never been rated…. I think only a handful of the larger issuers have actually gone for ratings at the major houses (i.e. not Egan), so I would disagree with you that most get rated and then don’t maintain the rating… you could be right, but I’ve not noticed it… Saratoga is an interesting one that for the most part is too small to gather much attention.. Overall, they run a conservative (for BDCs) operation and have been shareholder friendly…. In 2020, they did a shareholder unfriendly but conservative thing by quickly eliminating the common dividend when they didn’t have to, but they restored it pretty quickly thereafter. Overall they’re a well run shop with good genes as management comes from my old line boutique investment banking shop, Dillon Read. They took over a failing company and built it into SAR.
2wr–good point. I have noticed those issues with relatively short maturity dates are not trading as they have in the past. Term preferred and baby bonds that mature in the next 5 years have traded much lower and have very high ytc/ytm. I am not certain that ytm will take precedence over current yields right now. Guess we will just have to wait and see.
Tim – I would agree with you that those types are not trading like they used to but don’t you think that’s because of the inverted yield curve in general? I suppose the market could want to overcompensate on YTM a little bit because of the longer duration of a 6% bond vs an 8% bond of the same maturity but overall, YTM should remain the common comparison… Only on perpetuals should a direct current yield to current yield comparison be more relevant……. The easiest comparison to use to show that would be in the Treasury market where there is only a minor difference YTM on zero coupon Treas vs current coupon of the same maturity.. Another comparison for me happens to be with TVA bonds. They have 27 issues outstanding with varying coupons and they trade very close together on a maturity basis… Incidentally those in the ’28 to ’29 maturity all trade over 100 basis points richer (i.e. lower yield) than either TVE or TVC in the baby bond market.