The following information was previously provided to subscribers of BDC Buzz Premium Reports along with:
- OBDC target prices, buying points, and suggested limit orders (used during market volatility).
- OBDC risk profile, potential credit issues, changes in NAV, and overall rankings. Please see BDC Risk Profiles for additional details.
- OBDC dividend coverage projections (base, best, worst-case scenarios). Please see BDC Dividend Coverage Levels for additional details.
OBDC Quick Quarterly Update (December 31, 2023)
- This information will be discussed in the updated OBDC Deep Dive Projection report.
- Earnings: Beat its best-case projections covering its regular dividend by 149% mostly due to continued prepayment-related income (prepayment fees and accelerated amortization of upfront fees) with $1.1 billion of repayments/sales during the quarter plus higher than expected dividend income and increased portfolio yield.
- PIK Income: Declined slightly from 10.5% to 10.2% of total income, most of which is not related to restructured investments and/or credit issues.
- Dividends: Increased its regular quarterly dividend from $0.35 to $0.37 per share plus a supplemental dividend of $0.08 per share for a total of $0.45 per share for Q1 2024, which was above the previous best-case projections, as shown below.
- NAV Per Share: Increased by $0.05 per share or 0.3% (from $15.40 to $15.45) due to over-earning the dividends by $0.08 per share (after tax) partially offset by net unrealized losses of $0.03 per share mostly related to watch list investments including Hearthside Food Solutions, Ideal Image Development, and Walker Edison Furniture. The largest decline was Hearthside (listed as H-Food) with its second-lien position marked lower by another $11 million (impact of $0.03 per share) likely for the reasons discussed in previous reports and currently valued at 66% of cost but remains on accrual status.
- Credit Quality: The fair value of non-accruals increased slightly from 0.8% to 0.9% of the total portfolio due to adding its watch list investment in Ideal Image Development (a relatively smaller investment). Also, its first-lien positions in Tall Tree Foods, Walker Edison Furniture, and CIBT Global, Inc. remain on non-accrual but mostly marked near or above cost (a good sign). Investments Rating 3 through 5 which are borrowers performing below expectations decreased slightly from 11.2% to 10.9%.
Craig W. Packer, CEO: “OBDC achieved record NII for the fourth consecutive quarter and its highest NAV per share since inception in the fourth quarter. As a result of our strong earnings, OBDC earned a record 13.2%2 ROE in the fourth quarter, translating to an annual ROE of 12.7%.”
As shown below, I was/am expecting additional supplemental dividends and/or dividend increases over the coming quarters (supplemental dividends are paid in the following quarters):
As discussed in previous reports, OBDC has higher-than-average amounts of PIK interest income, currently around 10.2% of total income, which includes The Better Being, Associations Finance, Mavis Tire Express, OB Hospitalist, and Tall Tree Foods which were partially/fully converted to PIK. Management discussed on the previous call and mentioned that most of the PIK is not related to restructured investments and/or credit issues. OBDC has a better-than-average history of credit quality and continues to invest in larger companies that would likely outperform, so a higher amount of PIK is acceptable, but I will continue to watch over the coming quarters.
Please note that the ‘Core NII’ shown below excludes excise tax and one-time fees related to capital gains or borrowing facilities.
Investments Rating 3 through 5 which are borrowers performing below expectations decreased slightly from 11.2% to 10.9%.
What Can I Expect Each Week With a Paid Subscription?
Each week we provide a balance between easy-to-digest general information to make timely trading decisions supported by the detail in the Deep Dive Projection reports (for each BDC) for subscribers that are building larger BDC portfolios.
- Monday Morning Update – Before the markets open each Monday morning, we provide quick updates for the sector, including significant events for each BDC along with upcoming earnings, reporting, and ex-dividend dates. Also, we provide a list of the best-priced opportunities along with oversold/overbought conditions, and what to look for in the coming week.
- Deep Dive Projection Reports – Detailed reports on individual BDCs each week prioritized by focusing on buying opportunities and potential issues such as changes in portfolio credit quality and/or dividend coverage (usually related). This should help subscribers put together a shopping list ready for the next general market pullback.
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