tag:blogger.com,1999:blog-2080506270244832638.post3847004102400079789..comments2024-03-27T17:05:53.544-05:00Comments on Clark Street Value: American Capital: Complicated Structure, NOLs, Pending AM SpinoffMDChttp://www.blogger.com/profile/10679835609782815537noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-2080506270244832638.post-20601242891645468432015-02-05T15:48:27.370-06:002015-02-05T15:48:27.370-06:00I agree on BDCs, personally don't understand t...I agree on BDCs, personally don't understand the appeal and think it's dangerous when investors try to get equity like returns from fixed income products. But retail investors love dividend vehicles so Wall Street is going to give them dividends.<br /><br />I'm not as worried about the crowded nature, just don't believe it has a core investor outside of hedge fund and other event-driven/value investors. Mentioned this in an earlier reply, but BDCs are absent from most indexes so mutual funds don't really touch them, and because ACAS doesn't pay that all important dividend retail investors avoid it. Being "crowded" might be a near term risk if the timing takes longer than expected, but long term it should just be noise. Thanks for reading and the comments.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-6817049526428182452015-02-05T13:59:00.023-06:002015-02-05T13:59:00.023-06:00It's surprising to me that BDCs trade as close...It's surprising to me that BDCs trade as close to NAV as they do considering the hefty fees they pay the managers. <br /><br />The crowded nature of this has me worried. I'd probably quibble with the valuation of ASAM by a few bucks, but it's still pretty easy to get to a total per share value of ACAS around $20. That's pretty attractive from ~$14.50, so the discount available is surprising given that everyone knows this is out there.Mattnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-53072774636446721692015-02-05T13:03:16.613-06:002015-02-05T13:03:16.613-06:00The margin is just a rule of thumb, the multiple d...The margin is just a rule of thumb, the multiple does compare to other permanent capital managers at 14-16x, maybe not the BDC only managers if you include FSAM which looks cheap on the surface if you can get over governance and reputation issues. But keep in mind, American Capital's biggest external contract is with their mortgage REIT AGNC, so it's a more diversified platform, doesn't rely on primarily one BDC like MDLY or FSAM.<br /><br />Fortress (FIG) put out an interesting presentation in the fall, obviously talking their own book, but they outline the case well as they try and move more towards managing permanent capital public vehicles.<br /><br />http://shareholders.fortress.com/Cache/1001191619.PDF?Y=&O=PDF&D=&FID=1001191619&T=&IID=4147324 MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-42202524749002005932015-02-05T11:59:44.549-06:002015-02-05T11:59:44.549-06:00How do your EBITDA margins and multiple compare to...How do your EBITDA margins and multiple compare to the other external BDC managers?Mattnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-43350998214030082022015-02-05T11:10:42.132-06:002015-02-05T11:10:42.132-06:00I'd probably start with a primer like this one...I'd probably start with a primer like this one: http://bdcreporter.com/primer-on-bdc-industry/<br /><br />It's a little dated, American Capital is one of the "original BDCs", a little different flavor than many others that have come since it which are more like CEF bond funds. If you want a more cynical view, read David Einhorn's book "Fooling Some of the People All of the Time, A Long Short Story". It details his multi-year battle with Allied Capital which was ultimately scooped up by Ares Capital Corp. MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-82230886792496577062015-02-05T10:50:29.531-06:002015-02-05T10:50:29.531-06:00Very intrigued by the write-up, but I have to say ...Very intrigued by the write-up, but I have to say I am not super familiar with BDC's, any recommendations on sources to read up on them?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-77279221640758119002015-02-05T08:44:16.634-06:002015-02-05T08:44:16.634-06:00Definitely, it's a well known idea and been ci...Definitely, it's a well known idea and been circulated for a while. It seems to me that some have grown impatient or temporarily got out after the official announcement, too much duration risk. <br /><br />Most mutual funds don't want to hold BDCs since you get a double dip in fees plus they're not in traditional indexes, so the fact that ACAS doesn't pay a dividend and is thus unattractive to retail really only leaves hedge funds and other opportunistic holders left. At $14.50, the risk seems fairly limited to me even if we get a hiccup in the transaction. Thanks for kind words and comment.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-80221916525579616292015-02-05T03:33:39.524-06:002015-02-05T03:33:39.524-06:00Great write-up! very balanced. I like the way you ...Great write-up! very balanced. I like the way you stress the execution and NAV risks and when you highlight the point on Permanent Capital Vehicles AM attractiveness. <br />Also, please note that the trade is extremely crowded; ACAS seems to be the "trade du jour" with US HF money, it was regularly pitched since 2013 and even more in late 2014/early 2015....such is the positioning that another price risk worth pointing is that any roadblock in the spin-offs is likely to provoke a sell-off. Chevalier d'Avennoreply@blogger.com