67 WALL STREET, New York - December 17, 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 and Equity Analysts. 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: Medley Capital Corporation (MCC) and many more.
In the following excerpt from the Business Development Companies Report, the Chairman and CEO of Medley Capital Corporation (MCC) discusses company strategy and the outlook for this vital industry:
TWST: What triggers an exit from your portfolio? Do you have an automatic liquidation plan?
Mr. Taube: As a credit provider, there are typically three ways for us to get repaid: one is through cash flow, two is through a refinancing, and three is some kind of a strategic or corporate event - a company is bought or sold. When we underwrite a new loan our intention is to see a way to get our principal back from the operations of the borrower themselves.
TWST: How strong is the company's balance sheet and P&L, and what particular items are you focused on there for improvement?
Mr. Taube: The typical borrower, as I mentioned, has between $50 million and $200 million of revenue, has growth opportunities and is coming to Medley for a loan amount that is between 3.5 and 4.0 times the company's cash flow. If you assume that a borrower is worth between six and eight times cash flow, then we're advancing somewhere between 50% and 60% of the total value of the enterprise.
Our benchmark at Medley is to target lending at two-thirds or less of the balance sheet, which in effect gives us 33% or more equity cushion. So the equity folks would have to lose all their money - which represents a third of the value - before our loan would be exposed. This gives us a margin of safety when we do our underwriting, and it's a consistent theme as we look across the average borrower in our portfolio.
TWST: Within the financial reports from Medley, what should investors focus on if they want to understand the strategy going forward and potential in this company?
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.