Double Digit Returns for BDCs Forecast by Long Term Sector Analyst: a Wall Street Transcript Interview with Mike Turner, Senior Vice President and Research Analyst for Commercial Finance at Compass Point Research & Trading

Wall Street Transcript

67 WALL STREET, New York - December 17, 2012 - 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: Decreased Bank Loan Competition - Low Corporate Credit Default Rate - Consistent BDC Dividend Yield - Stronger Middle Market Loan Origination - BDC Risk/Reward Profile - Private Middle Market Funding

Companies include: Ares Capital (ARCC), PennantPark Investment Corporation (PNNT), and many others.

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

TWST: How are BDCs doing right now?

Mr. Turner: Right now, it is a good environment to be in for a BDC. Compared to other financials, they are under a lot less competition. The regulatory environment is unchanged for them, credit quality is strong, and lending conditions are historically favorable as far as new lending yields are concerned. So overall, it's a good time to be a lender, and I think a good time to be an investor in this space.

TWST: You mentioned there is less competition right now. Why is that?

Mr. Turner: I would say there is less competition for BDCs compared to banks, but maybe not when you are comparing BDCs to other BDCs. You have the same amount of BDCs as you have had historically, although there are a few smaller ones that have popped up recently. But relative to banks, where everybody is fighting over a smaller amount of loans and having to compete on price and structure, the competition in the BDC space has generally been unchanged.

TWST: You also said it's a good time to be an investor in BDCs. What makes a BDC a good investment?

Mr. Turner: I'd say first, when I look at financials, or really any potential investment, I look at what's my required return as an investor and what's the ROE that these businesses can produce. I think broadly the BDCs can generate double-digit ROEs right now. They're trading on average at book value or at NAV. In that scenario, I'm buying something at NAV, and I'm effectively going to earn a double-digit ROE in the process.

When I look at banks and other financials, I think it's harder to say that. For example, several banks are trading at significant premiums to book and can barely generate 8% or 9% ROEs. So from that standpoint, I think you're buying BDCs at attractive valuations, the dividends are secure, and the fundamentals of the business are improving. If we look at all that and we don't see any major red flags...

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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