From Seekingalpha · Tim Travis · · 50s
BDCs Priced for Loan Losses Worse Than 2008
Five BDCs trade at steep discounts to NAV, implying loan losses exceeding 2008 levels.
In brief
Five BDCs trade at steep discounts to NAV, implying loan losses exceeding 2008 levels. Five major BDCs trade at steep discounts to NAV, suggesting loan losses worse than 2008. Originally reported by Seekingalpha.
BDCs Trade at Steep Discounts
Five major BDCs trade at steep discounts to NAV, implying extreme loan losses not reflected in credit performance.
Loan Losses Exceed Historical Peaks
Current market prices require annualized loan losses far exceeding historical peaks despite portfolios of senior secured, diversified loans and low non-accruals.
Buybacks Signal Management Confidence
Buybacks at deep discounts indicate management confidence in loan valuations, with OTF and FSK notably active in repurchasing shares.
Q3 Reports Expected to Confirm Resilience
I overweight BDCs with cleaner balance sheets and better dividend coverage, expecting Q3 reports to confirm resilient credit and NII growth from higher rates.
The takeaway
Five major BDCs trade at steep discounts to NAV, suggesting loan losses worse than 2008.
