Thursday, October 23, 2014

SA Instablog Published On New Mountain's Share Offering Today/ SOLD 100 of 150 NMFC at $14.4773

New Mountain Finance Share Offering Today Illustrates Multiple Risks Inherent In BDC Stocks - South Gent | Seeking Alpha

Added 10/23/14: In that post, I discuss NMFC's writedown of a PIK first lien loan made to a company called UniTek Global Services, who agreed to a prepackaged bankruptcy filing with its lenders. In UniTek's press release, the agreement is generally described as more than a 40% swap of bonds for equity. UniTek Global Services

TICC Capital (TICC) listed a UniTek "tranche B term loan" in the principal amount of $11,781,583 and valued by TICC at $11,781,583 as of 6/30/14:

Page 4 10-Q for the Q/E 6/30/14

Apollo Investment is providing 1/2 of the debtor-in-possession financing, according to an article published by The Deal Pipeline (a subscription publication that provided a free preview through a Yahoo Finance link at UNTK.

Main Street Capital (MAIN) also listed a loan to UniTek in its last SEC Form 10-Q, valuing the loan in excess of its principal amount at that time:

10-Q Filing at page 21 I am surprised to see that BDC participate in this loan.

Among the BDC's that I own, NMFC had the largest exposure to UniTek.  NMFC's investment was written down as noted in a 10/22/14 filing, 8-k, and a new NAV estimate was required as a predicate for NMFC's  stock offering of 5 million shares priced at $14.53 to the public: New Mountain Finance Corporation Announces Pricing of 5,000,000 Shares of Common Stock The net proceeds to NMFC were $14.35 before expenses. Prospectus

NAV Per Share as of 6/30/14: $14.65 10-Q

NAV Per Share Estimate as of 10/22/14: $14.35 8-K

Net Proceeds after Underwriters' Discount: $14.35

Added 10/24/14: 

I was not please with NMFC's large investment in UniTek or the issuance of stock just after NMFC wrote down that investment.

As noted in my SA Instablog article, I was then down to 150 shares.

I elected to sell 100 of the 150 remaining shares this morning. I escaped with a minuscule profit and harvested 7 quarterly dividend payments. That is actually viewed as a success for an externally managed BDC.

Snapshot of Trade:

Snapshot of Profit: 

2014 NMFC 100 Shares +$3.79

Snapshot of Dividend Payments:  



Total Dividends: $185.55

Total Return: $189.34

% Return on $1,435.95 Total Cost= +13.19% (holding period 16+ months) 

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