It all started this summer when TICC decided to replace the poorly-performing external manager that invests its portfolio. In doing so, TICC decided to pay the outgoing manager over $100 million, according to analyst estimates, and picked a new one, Benefit Street, without running a competitive process. This set shareholders alight, and gave credence to skepticism that BDC’s are run in interests of managers who earn recurring fees, not shareholders.
TPG Capital Specialty Finance (TSLX) capitalized on this discontent by floating a hostile takeover of proposal for TICC, which remains ongoing. As FORBES noted in October, TICC’s fat 17% dividend, its big draw to retail investors during the hostile fight, is completely unsustainable. TICC’s investment income only earns half its dividend; it leans on accounting maneuvers and projections of fee streams that have evaporated for the other half. As such, to keep its dividend alive, TICC has in effect burned its furniture.
The net value of TICC’s assets has dropped precipitously in recent quarters, and at a rate that can’t be mitigated by juicy dividend payments. Now, the game is all but up. TICC nearly breached BDC leverage restrictions last quarter and on Wednesday the company was forced to sell $117 million of loans to repair its balance sheet.
The furniture burning has come in different forms across the industry. No one else has sold assets, but KCAP
up is a mystery. Might be factoring in the $.29 declared dividend payable in December? I would like to see TICC management gone as soon as possible as they keep charging way too much in fees and are steering a sinking ship.
My understanding from the brief conference call is that the drop in NAV is due to the fall in the valuation of the CLO portfolio and that the NII from operations covered the dividend by$.03. The accounting for these BDC's is complicated and takes some time to decipher. Management also seems to think that because of the big drop last quarter that there are some buying opportunities in the certain CLO tranches. Management are slime balls, no doubt, and overcharging for their performance based upon the price of the stock and the hit the investors have taken in equity valuation. Selfish A holes.
I don't believe there is a huge amount of risk here. Wells recently wrote a report that the stock should be selling at $4-$6 a share. The Wells analyst really does not like management!! This feeling is based on several quarterly conference calls where the Wells analyst questioned some of the managements investment and accounting practices. I have owned TICC for many years, originally put in by my stock broker at over $13.00 a share. The stock did survive through the financial melt down, although the dividend was cut significantly and the stock went down in the $4 range, but management sold some #$%$ets and paid down the debt to comply with SEC regulations, and made it through very difficult times. Yes, Management's fees are way too high, and they are arrogant #$%$ holes, snubbing analysts with their contrary accounting and investment strategy, but it appears that the underlying investments are sound. I have friends that have gone to BDC's for loans, because of the unavailability of bank or other traditional financing and I would consider the companies my friends are a part of very good risks. Good underwriting is the key, and it appears that management has done a good job of #$%$essing risk.
I still think that ARCC and some of the other BDC's selling under NAV are better long term investments. Holding but not buying more.
You have 9900 shares and you don't know if it is a sound investment? HMMMMMM. Current management is the problem. So, with current management the stock has gone from over $10.58 down to where it is now and the stock is selling at a 26% discount to NAV. Most of the BDC's are down but TICC and a few others due to the investment in CLO's and perceived risk and poor management are down further. This is the worst performing BDC that I have. All of my others are up in price and pay over a 9.5% dividend. This is one of the Big Dogs of the BDC's.
Giving Raging Capital the ability to vote in board members in exchange for its agreement to vote for the BSP deal. #$%$....... Management for TICC are slime. I am hopeful that Nexpoint moves forward in its litigation and shoves the entire transaction up managements #$%$.
HI Geezer. I realize that we are not getting Nexpoints stock and that they are just going to be managers of TICC. . I was comparing returns on the stock that they do manage now, and that the return is only 3%. on that portfolio
Nexpoint's stock is selling at about $23 and only pays a $.72 dividend or a 3% annual yield. What happens if they take over TICC? Can they maintain the same yield as the current crooks? Will Nexpoints credibility allow the stock to trade at a higher price per share, near or above book value, which if the dividend remains the same still gives us close to a 13-14% return? Does anyone know the asset value of Nexpoint?
WE pay for it in the end, by paying over market management fees. If no fee to TICC was paid, they could afford to discount its management fee further to the shareholders..
I have been investing in the stock market for over 40 years and in that time I have never heard of or been involved in a stock, where "independent "special" directors" did not vote in-line with managements wishes. It is a joke.
The shareholders are paying for the $60 M purchase price with the increased management fee being paid to BSP over the Nex Point proposal. Isn't it obvious that anything paid to TICC management is part of the equation in setting the fees for managing and thus being financed by the shareholders.
Cohen and the rest of management are Wall Street Goniffs. In 2014 they extracted $24M in fees while the common stock dropped over 30%. The board of directors and the outside board are not independent. They are managements croonies that do whatever the company executives tell them to do. Believe me, the reason that TICC management sold to BSP and not NexPoint is for selfish financial reasons and has nothing to do with benefitting the shareholders, although any management company will be an improvement and should help the stock price. Shareholders are at the mercy of unscrupulous, greedy, and selfish management/executives charging outrageous fees that erode shareholders returns.