So tell me what I am missing. At $10.15 with a confirmed dividend of $.32 in a couple weeks, am I not into this at NAV? Low leverage, and even if the divi gets cut some, this looks like a no brainer from this edge of the table.
I think you have to look at a normalized future dividend yields. I believe all BDCs are more or less traded on a multiple of their dividend. Right now, BKCC probably can support a $1.04 dividend. This would give BKCC a roughly 10% dividend yield. Not to bad so your downside from here is limited.
The question now is whether BKCC can put to good use their $200mm in available dry powder. If they can earn a net interest spread of 7% on this money, it would add $.19 to their dividend. Who knows, the middle market loan origination market is getting tighter and they don't seem to have a great origination window. I guess only time will tell but I did pick up about a 1,000 share at under 10.50 today.
At around $10 a share, I think this is pretty good investment but I would not pay more than $10.50 - 11 a share.
I dont think they have to make a spread. The $200MM is just sitting so they just need to make 7% ( prime + 3.75 ) on that money for your scenario to work. The borrowing cost are already baked in, UNLESS they choose to lever up, but then the spread would be on a lot higher number than $200 MM.