Casey Alexander, Director of Research and Special Situations Analyst at Gilford Securities Incorporated, Interviews with The Wall Street Transcript: BDCs Approach Fair Valuation and Trade Around NAV

Wall Street Transcript

67 WALL STREET, New York - June 27, 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: Consistent BDC Dividend Yield - BDC Risk/Reward Profile - Higher Dividend Yields - Business Development Companies Historical Overview

Companies include: General Electric Co. (GE), Yahoo! Inc. (YHOO), eBay Inc. (EBAY) and many more.

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

TWST: Tell us about one of your holdings that has an interesting story.

Mr. Alexander: In terms of any BDC that you are considering recommending, the story is the same as analyzing a regular operating company, an industrial company or manufacturing company: Everything starts with management, and you have to have a great deal of trust in the ability of management to analyze and put together a portfolio of loans that creates a return and does everything possible to minimize risk and the potential loss related to making bad loans.

We have followed Medley Capital since its formation as a BDC in 2011 and happen to believe that this is one of the single best management teams out there in the BDC space. We think that Brook Taube, his brother Seth Taube and Andrew Fentress - they are the three-headed management team there - had significant middle market lending experience prior to the formation of Medley Capital, the BDC.

Just as importantly, they also have significant experience in working out problem loans. They spent 10 years before they started making middle market loans doing workouts and reorganizations. So if a company were to get in trouble in the Medley portfolio, they have great experience at how to protect the Medley investor from large capital loss as a result of a company getting in trouble. This is a critical differentiator, because everybody has a company from time to time that gets in trouble in their portfolio.

We are neutral on Medley right now and that's merely a function of price, being that Medley is trading at a 15% premium to net asset value. In the example that I gave you in Horizon, in that there was a potential if Horizon were rise to NAV for an 18% total return, that's exactly the reverse for Medley. Medley is trading at a 15% premium to NAV with a 9.8% yield. If Medley were to return in the next 12 months to trading at NAV, an investor would actually suffer about 5% total return loss. Therefore we are...

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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