SLRC price has dropped quite severely in the past 2 weeks.
I bet the price is off more than the SLRC NAV ......fear of a Fed hike...?
SLRC owned zero energy debt after Q1 so that should be able to help the NAV.
We will all hear on Aug 5 from Gross
The high yield bond market has sold off in June......so SLRC should have seen a few value priced
deals that might be good for the portfolio.
If Gross says again the portfolio missed its NOI in part due to the lack of value based new
orginations, then I will (again) be disappointed in SLRC lack of initiative to utilize its large available
capital on hand to grow the portfolio and the NOI.
In June the SLRC portfolio NAV went down due to the high yield bond market sell off
so its important to build the portfolio when there is relative value to be had.
what could be a possible price for SLRC……..if
…a high yield debt correction occurs, increasing the spread of junk vs Treasuries
Govt debt seems to be selling off due to supply (?) issues……what would happen to junk prices
if the US economy continues to cool further…or the fed hikes their overnight rates….?
Where would the price and NAV for SLRC end up…..?
I would think "somewhere below $ 18" ……how much low, I can't say now.
For what it is worth, one last point.......
For equity exposure into the "newer life science sector" I employ
T Rowe Price and Fidelity sector mutual funds. KISS. They seem
to deliver the alpha with the usual high beta.
Recently I have noted 2 new ETFs.
These funds seem to be looking for "" the newer of the new life
science"" equity opportunities. I have not invested yet.
Both are new, and I would bet wild rides.
I make zero recommendations as to their fitness for you & I have
zero interest in the firm or in any manner regarding these ETFs.
We simply have been talking about emerging life sciences and
these might be interesting options to consider compared to
SLRC debt originations.
BTW, this info might be worth what you paid for it....!
I agree that the life sciences sector holds many breakthroughs in the
future. my only issue with a BDC funding mid market life science firms
is that I would be concerned the ideas that SLRC are considering are
not the top tier concepts. I would strongly think that the top biotech/life
science firm are easily funded by seed money and by private placement
I fear at current quality levels the remaining middle market clients are below
average enterprises in a sector where most fail. I would rather invest in
a emerging tech or aggressive biotech equity fund for this exposure
instead of employing SLRC to make debt deals.
The guys that Gross brought over seem qualified so maybe they will add
approx $ 100 million in loans, over time. IMO, I would not want to see an
over-weight sleeve in SLRC at current loan rates.
Will SLRC see mid $ 16 ? ......probably not. The market would bid
the price higher if it gets a yield above 9.5 % But I would not add to
my existing SLRC position above $ 17.00 until Gross shows us real
portfolio and NOI growth for at least 2 quarters in a row.
I don't really disagree with anything you said, except that I'm a fan of the life sciences VC direction. I work in the life sciences and there are some new diagnostic technologies based on big data, proteomics and genome sequencing that I believe will create several billionaires over the next decade. So I like the space overall, *assuming* the experts they have know what they are doing. That's of course always the risk...but I currently have no other way that I know of to get any skin in that game, so I like having a little slice of exposure here.
You completely echo my thoughts with regard to the oil patch. It's a disappointment that they are content to stay on the sidelines. But at least Gross knows his limitations and isn't going off into an area where they don't know what they are doing.
Wow you think we'll see mid 16s?
Here's how I look at it: I've also not been adding high-yield bonds to my portfolio this year. In fact I sold 1/4th of my VWEHX in Q4 2014.
So it's a little hard for me personally to blame Gross and team for not going nuts originating a bunch of stuff. There is too much easy money floating around out there to get good returns on debt with reasonable covenants. But I like the story they have with life sciences VC and the Pimco unitranche deal . I think these are areas where they get some business done. I also like the jet liner leasing space (own some equity in those companies already) and he said they are increasing their activity in this sector. Hopefully that continues as well. We'll see!
On the downside, he said they will NOT get involved in the oil/energy space, since they don't have the expertise in the commodities area. That seems like a shame because I think there have been and will continue to be some good opportunities in this area.
How do you see Gross getting new loans originated in 2015...?
SLRC has been light adding originations for the past 2 years & there has been dips in the
high yield market during this period.
You are correct that Gross did say SLRC has been relatively active in new originations.
But as an investor in SLRC since 2010, I have heard Gross provide "rosy" expectations
in past CC. I guess I don't really believe him now, until I see a trend in improved NOI.
It will take more than a few words from Gross to replace and build NOI after
the Q4 2014 $ 224 million prepayments. That prepayment deluge will hurt SLRC
until the much anticipate Unitrauche gets at least half employed.....how long will
that take .....Gross gave zero indication on progress for the Unitraunche.
IMO if Gross does not originate at least $ 200 million this quarter, then Q2 will "be light"
as well. Interesting to hear Gross doesn't want to buyback SLRC stock now. What
does he see that he is not telling us...?
As I see it, SLRC doesn't want to originate new loans in the current ""covenants light""
environment. He would rather sit on his cash & wait for a high yield debt route and then
buy when prices are down and yields are higher..........makes sense to me, I guess.
But during the CC Gross bragged that SLRC held zero oil/energy loans. However,
after the past 7-9 months of energy debt collapse, wouldn't NOW be the right time to
at least originate an even-weight position in this sector that now might provide good
risk/reward propositions, after the US on-shore pain....? Instead Gross is ramping up
a life science(biotech?) team to make loans in this hot area that is beginning(?) to show
signs of fatigue....!
I now wonder if Gross is the investor who will be able to make new loans, when there
is ""blood in the high yield streets."" He seems to have NOT been active in the recently
completed US energy sector that might show us what a future overall high yield debt
debt market sell-off would look like. Buying additional SLRC as the price drops is a prudent
idea. However I would wait until SLRC approaches a 10 % yield price.....mid $ 16s.......prior
to a debt sell-off.
SLRC stock is down another 1 % in morning trading
....continued negative response from the market to the continued lack of NOI growth...?
MIssed this summary before I responded to your other post.
I'll just add to your notes here that he did in fact say on the CC that they have already originated a good amount of debt in the current quarter. They also warned that Q1 would be light, as it's historically a quiet quarter for the BDC business. I expect Q2 to be a different story. I think the drop is a great opportunity to add, and I have been doing so.
Sentiment: Strong Buy
He told everybody on the CC that they have already originated a large book of business in the current quarter. He also said they would earn the dividend this year. When an analyst asked if he meant for "the rest of the year" or if he meant they would additionally make up for the deficit we had in Q1, he answered that the full year dividend including Q1 would be earned.
Now, each person needs to decide whether to believe him or not. I think they have a good story with a lot of opportunity in front of them, so I'm buying.
Sentiment: Strong Buy
SLRC posted a weak NII per share number and the stock price go killed, down 4.2 % .......
Is the market as a whole telling us they re not sure Gross will deliver on his promise to
earn $ 1.60 per share in NII for the full 2015 .....???????
Looks like Gross is sitting on $ 1.2 billion of unused capital, that earns zero for shareholders.
The market is not waiting to see this time if he can find loans this year.
SLRC definitely did not earn its NII per share in Q1 2015.
dividend is 40 cents per share, but NII per share was only
26 cents.........! Ouch
NII per share was 34 cents
NII excluding non-recurrings was 39 cents
EPS was 26 cents
NNI wac 40 cents for Q4 2014
NAV was $ 930.5 million or $ 21.91 per share
FMV was $ 1.04 billion or
Q1 originations were $ 30 million
Q1 prepayments were 4 6million (Q4 was $ 224 million..!)
zero Unitrauche loan orginations in Q1 and Gross could not say when they could begin......??
net leverage ratio of 0.13 X
zero direct exposure to the oil industry...maybe now is the time to add that exposure..?
SLRC goals is to originate $ 500 million in new loans in 2015......
Direct Buy is the noly non-accural loan. making up less than 1/2 of 1 % of the portfolio.
Goss said he expects to make the entire annual dividend out of NII in 2015 by 12-31-2015
SLRC needs to originate a lot more new loans to meet its NII goals and fund its existing
40 cents per share dividend
I have listened to Gross talk about his expectations to grow the portfolio for several quarters.
He needs to get the Unitraunche deal working and he needs to get added NII to make up
for recent quarters shortfalls.
With only 3 quarters left in 2015...Gross has to have "really big quarters" to make his own
2015 goals. He doesn't ant to originate many new loans today....does that mean we need
to see a high yield "mini crash" before Gross & SLRC will write a significantly large amount
of loans in the future.
Although Gross said again a lot of nice things about the possible future....I expect to see
more of the same from Gross in 2015.