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Casey Alexander of Gilford Securities Incorporated: Investors Move from Treasuries to BDC Equitized Yield: a Wall Street Transcript Interview

67 WALL STREET, New York - December 18, 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: Fifth Street Finance Corp. (FSC) and many others.

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

TWST: Overall, how does the BDC space look right now?

Mr. Alexander: I developed a new focus on the BDC group around mid-2009, and it came from a worldview that there were trillions of dollars packed into the U.S. Treasury market for no better reason than out of fear and that that money was earning no return - but that when a lot of that money came out of the Treasury market, that it was going to be looking for equitized yield. My assessment was that when it came out and it was looking for a home in equitized yield, which is my fancy way of saying dividend-producing equities, that BDCs were going to run smack into that equation.

The interesting thing is that 3.5 years later with lots of profitable investing having taken place, that worldview hasn't changed. The treasury market is still yielding nothing, there are still trillions of dollars packed in there out of fear, and yet there has been tremendous opportunities in the BDC market, both with the companies that I've covered and the companies in my peer group that I haven't covered, and we've helped investors take advantage of a lot of them, and we think that there is still a lot more to come.

TWST: Does that mean it is a good time to invest in BDCs?

Mr. Alexander: I believe it is. But we also have a view that for everything there's a price. Each BDC has a stated net asset value. In my peer group of 14 BDCs that I use as my peer group, I keep track of how they trade individually versus net asset value, and also as a group versus net asset value. Interestingly, as a group, over the last several years, they have acted in a sine-wave fashion in terms of sinking to relatively deep discounts of up to 15% to 17% to NAV as a group, individual names as much as 25% discounts to NAV, and rising to 10% to 15% premiums to NAV as a group - and in the cases of selected BDCs, significantly greater premiums to NAV. We believe that astute investors can find the better-quality ones, examine their historical trading patterns to NAV and use that as a guide for when to increase their exposure and when to decrease their exposure, adding incremental return to the simple dividend yields provided by BDCs.

TWST: Do investors understand the BDC structure now? Has it been around long enough to give them comfort?

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.