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: Fifth Street Finance Corp. (FSC) and many more.
In the following excerpt from the Business Development Companies Report, the CFO & the SVP and Head of Investor Relations of Fifth Street Finance Corp. (FSC) discuss company strategy and the outlook for this vital industry:
TWST: I read recently that Fifth Street might be a good fit for investors who are hungry for yield, while others say that prospects for future dividend growth are closer to none, because the dividend is not covered by NII. How do you respond to these assertions?
Mr. Frank: If you look at the last three fiscal years, net investment income per share was $0.95, $1.05 and $1.11 in 2010, 2011 and 2012, respectively. The first half of fiscal year 2013 we had record levels of origination, and I think our investors are currently receiving a strong yield on the stock. The weighted average yield of our portfolio is about 11.4% as of the quarter end March 31, 2013, which in this environment is an excellent return. In addition, we have equity stakes in a number of portfolio investments where we partnered with private equity firms. Some of those companies are performing very well. We believe Fifth Street's future is bright and are excited about the opportunity for NAV growth.
TWST: How did the portfolio perform in the post-Lehman meltdown? Any lessons learned there?
Mr. Frank: Our timing was very fortunate. We raised our IPO capital right before the economic meltdown and were able to put it to work in probably the best time in recent memory for making investments in the middle market space. Our post-financial-crisis vintages have performed extremely well overall, and our credit quality has been stable.
As a result of the lessons learned from the financial crisis, we positioned our portfolio to be primarily first lien. We learned that when economic times are very difficult, it can be a real advantage to be invested in assets which we can control by being senior in the capital structure. When times are more economically buoyant, there is opportunity to invest up and down the capital structure, as we have, and earn greater yields. Today we believe we have a diverse portfolio mix. At March 31, 2013, approximately 64% of our portfolio was first lien, but post financial crisis, our portfolio has been as high as 80% first lien. We aim to have 60% to 80% of our portfolio in first lien loans. We then...
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.