2014 High Yielding Business Development Company Top Picks: A Wall Street Transcript Interview with Merrill Ross, Senior Analyst at BGB Securities, Inc.

Wall Street Transcript

67 WALL STREET, New York - December 30, 2013 - The Wall Street Transcript has just published its Business Development Companies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: BDC Risk/Reward Profile - Business Development Companies Historical Overview - Yield Compression Issues - Internally and Externally Managed BDCs - BDC Dividend Growth

Companies include: Business Development Companies (BDCs)

In the following excerpt from the Business Development Companies Report, an experienced analyst discusses the outlook for the sector for investors:

TWST: What are the factors for you that are most critical to selecting a BDC to go into a portfolio?

Ms. Ross: I do think it's impossible to separate the management team from the diligence and the analytical ability; management is the single most important factor. Anybody can make a mistake. But if you have an ability to find companies that have better operating results given 10 choices, you have a track record of picking the right two or three. Management does have an influence that's pretty inseparable from successful investing, and it relies on having the discipline to not fall in love with a particular business but to be very clear about that business' real prospects, which might range from building a client base or filling a niche in the market or providing essential service, all those things, and then maybe it's a little bit of luck.

TWST: Are there certain types of BDCs that are doing better than others, such as those investing in middle versus lower market, or is the success BDC-specific?

Ms. Ross: It's more specific to the BDC. There are a lot of BDCs that broadly invest in technology, Hercules Technology Growth Capital (HTGC) is one example, and they look at clean tech, biotech, and then more standard cloud servers, computer tech, and that's a concentration that is broad enough to withstand something of a backup; for example, clean tech got to be really overextended and ahead of itself. Some ideas that weren't economically feasible were perpetuated because there were tax breaks, but that doesn't make a business or the enterprise successful.

I find BDCs to be equally successful in old-school industries and leading-edge tech if they keep to the criteria of lending either with particular sponsors or private equity firms that have a distinct expertise and deep pockets, so that they'll be able to bail out the company if they get stuck sideways. In addition to that, it is really important to have strong covenants that protect your return of capital, get the money back. It is easy to lend money, but it can be very difficult to get it back...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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