John Buckingham is a leading value investor and money manager; in his newsletter, The Prudent Specul...
Bain Capital Seeks World-Class Management
07/06/2020 5:00 am EST
I want to press our exposure to well-capitalized lenders of private businesses with a high focus on companies with world-class management teams, suggests Bryan Perry, income expert and editor of Cash Machine.
Bain Capital Specialty Finance (BCSF) operates as a business development company (BDC) specializing in direct loans to middle-market companies. It typically invests in companies with EBITDA between $10 million and $150 million.
Bain Capital seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, mezzanine debt, junior securities, other junior investments and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt.
We have the first-quarter 2020 results in the record books that show how well companies managed their businesses as the coronavirus was affecting operations.
While encouraged by the company’s financial results during the first quarter and pleased its adviser demonstrated commitment by providing an unsecured loan for greater balance sheet flexibility, Bain Capital remains focused on properly positioning its business to navigate “uncertain and volatile periods ahead,” said Michael Ewald, its president and chief executive officer.
As of March 31, 2020, the weighted average yield on the investment portfolio at amortized cost and fair value was 7.3% and 7.6%, respectively. Plus, 99.7% of the company’s debt investments at fair value were in floating-rate securities.
“After careful consideration, our board of directors has declared a regular $0.41 per share distribution for the second quarter ending June 30, 2020,” Ewald announced. “This is intended to maintain our historical distribution rate of approximately 8% annualized on book value.”
The company’s debt-to-equity (net of cash) ratio as of March 31 was 1.78x. Total fair value of investments ending Q1 2020 was $2.48 billion. The dividend is payable on July 30 for shareholders of record on June 30, with an ex-dividend date of June 29. Buy the shares before the ex-dividend date to receive the payment.
Shares of BCSF were trading at $20 prior to the COVID-19 selloff and currently trade above $12, putting the current dividend yield at 13.13%, making for a fine addition to our Extreme Income Portfolio. Buy Bain Capital under $13.
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