67 WALL STREET, New York - June 24, 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: TCP Capital Corp. (TCPC) and many more.
In the following excerpt from the Business Development Companies Report, the Chairman and CEO of TCP Capital Corp. (TCPC) discusses company strategy and the outlook for this vital industry:
TWST: What is the reasoning behind your emphasis on senior secured loans?
Mr. Levkowitz: We have the flexibility in our skill sets to invest across the entire capital structure of our target companies, but in the current environment, we are getting paid well for investing in senior secured loans, which is generally a more conservative strategy. If you are senior in the capital structure, you are the first to get paid off in the event of a financial restructuring. Given the opportunities that we are seeing in the market, we prefer the returns being offered in senior secured loans with their lower risk profile relative to the returns being offered by subordinated debt or equity.
Our portfolio at the end of last quarter had an 11% effective yield, and we were paying a regular dividend of approximately 9% that excludes the special dividends we paid at the end of Q4 and Q1. And with a senior loan portfolio we are able to generate about a 9% yield based on where the stock has recently been trading. If you think of that in comparison with high-yield bonds, which are paying around 6% to 6.5% today, we are creating 250-300 basis points of extra yield.
We are more senior in the capital structure than high-yield bonds, and we are lending on a floating rate basis, so we are protected from increases in interest rates. Our companies typically have less leverage through our loan amount than companies with high-yield debt because of our senior position in the capital structure. So we are able to generate a better return on a much better risk-adjusted basis in the current environment. That's why we...
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.