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Author: jdb52 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77266  
Subject: Re: BDCs on Barrons Date: 4/24/2013 12:31 PM
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<<<<Are you sure that today's BDC's could weather another storm like the last one? Since I don't spend any time on BDC's, I do not have a current opinion. I would certainly be suspicious.>>>>

Actually, that's a pretty easy question to answer. Just look for the BDCs that did survive the credit crisis and find out why. ARCC, PNNT for a start. If you know about BDCs today, you will know that the ones that survived have taken action to reduce the threats inherent in the credit crisis. For a number of BDCs, the threat was not in the companies they were associated with. The threat was in the nature of their liabilities and the covenants associated with those liabilities. Particularly, bank credit facilities. The market marked down their assets far in excess of the fundamental concerns of the businesses that BDCs loaned to. They broke covenants associated with their credit facilities and the banks moved against them. Not in all cases, but in some.

Further, the main issue was how the big boys had developed over time. They had become large equity owners as opposed to lenders. The equity marks were decimated. That held true with ACAS and ALD, but not with ARCC, another large BDC that made it thru the credit crisis (bought out ALD), and is prospering today.

I own a number of BDCs. I think they are good income investments, if you follow your companies and the lending market very closely.
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