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Gladstone Capital Corporation Message Board

  • random4225 random4225 May 24, 2011 10:28 AM Flag

    Value Line says may shutdown operations?

    The latest Value Line sheet on GLAD states that if the company cannot obtain long-term financing they may shutdown operations. I do not know if they mean just stop lending or go into run-off mode. Is it possible that the guy who recently said sell is seeing that GLAD has been unable to get the desired financing? Perhaps any other means of financing will be appreciably more expensive. Therefore the distributions would have to come down.

    Given that the share price is considerably lower than NAV would it matter greatly if they stopped lending and went into run-off? All of a sudden the uncertainty would turn into certainty of getting back close to NAV. Just wondering how it could work. Not saying that it will happen. In fact after reviewing the VL sheet I was ready to buy when it hit the 9.4x's but when I got home it had already gone up. If it drops again I will purchase some for my IRA.

    Any thoughts appreciated...

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    • 200% misstated.

      That GLAD would increase return on investments if they could secure ADDITIONAL stable long term financing. However, management was not willing to over pay to borrow. It is a good sign that management is focused on their job of managing our investment rather than building their empire.

      If management cannot secure additional stable long term lending returns will not be as great. But at the same time GLAD will be a more secure and stable investment if they cannot.

      I looked for headlines on the largest investments and could find nothing negative. I am always careful to never assume a run off is just individual investors getting panicked into a stampede. With no other information and the analyst upgrade the most reasonable conclusion at this time is an engineered stampede by individual investors.

      I hope this is correct cause I added a bunch of glad - not for a market but for a small investor like me. It would be nice if management came out and said they are not aware of any news driving the share price.

    • Interesting... but if they are planning to wind down then why originate deals at all (as they have over the past several months)? I think they are just hemming and hawwing, trying to avoid borrowing at 6+%. They will figure something out, as all the other BDCs have. A little borrowing will allow an increased dividend, increased stock price, eventually over NAV, then equity raises, new deals, better debt terms, higher NAV, etc... virtuous cycle - if they can pull it off. Reward here is greater than the risk, given the low leverage and discount to NAV (along with dividend less than NII)

    • By the way there is credit avalible - even better is that that credit is cheap! With interest rates at this level and expected for some time i see the divi yield at 8.58% currently is a screaming deal.

    • had to expect shorts around here ... your value line assesment is clearly being refuted ... "Stifel Nicolaus upgraded Gladstone Capital on VALUATION."

 
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