Close Menu
Fund Focus News
    Facebook X (Twitter) Instagram
    Trending
    • Are mutual funds still the middle class’s best bet for wealth building? – Firstpost
    • Can specialised funds unlock India’s shorting potential—or will they just be long-only funds in disguise?
    • Pay contractors with bonds to curb inflation – Joe Jackson advises government
    • Sumitomo Mitsui Banking Corporation, Temasek Holdings show interest investments in AP
    • Are Faith-Based ETFs the Answer to Clients’ Prayers?
    • Cheapest equity mutual funds with 5-star ratings: 5 funds with up to 140% absolute returns in 3 years – Money News
    • Fidelity Investments® Releases 2025 Retiree Health Care Cost Estimate, a Timely Reminder for All Generations to Begin Planning
    • Amplify ETFs Declares July Income Distributions for its Income ETFs
    Facebook X (Twitter) Instagram
    Fund Focus News
    • Home
    • Bonds
    • ETFs
    • Funds
    • Investments
    • Mutual Funds
    • Property Investments
    • SIP
    Fund Focus News
    Home»Bonds»BDC Weekly Review: The Benefits Of Convertible Bonds For BDCs
    Bonds

    BDC Weekly Review: The Benefits Of Convertible Bonds For BDCs

    July 13, 2024


    Book with page about convertible bonds.

    designer491

    Welcome to another installment of our BDC Market Weekly Review, where we discuss market activity in the Business Development Company (“BDC”) sector from both the bottom-up – highlighting individual news and events – as well as the top-down – providing an overview of the broader market.

    We also try to add some historical context as well as relevant themes that look to be driving the market or that investors ought to be mindful of. This update covers the period through the first week of July.

    Market Action

    BDCs had a strong week with a 1.5% total return, outperforming the broader income market. High-valuation BDCs like MAIN, CSWC and HTGC were in the lead – a common pattern during rallies as valuation in the sector diverges.

    Sector valuation has mostly reversed the recent drop and is trading near the 5-year peak.

    Systematic Income

    Systematic Income

    Market Themes

    Trinity Capital (TRIN) updated the conversion rate of its 2025 convertible bonds. This happens whenever the common dividend exceeds the initial dividend threshold of $0.30 set in the indenture (as well as the company paying a supplemental dividend). The conversion price is now set at $12.62. A holder of $1,000 principal amount is entitled to 79.2226 shares of the stock. This ratio will increase further as the company is likely to continue to pay a significantly higher dividend than $0.30. Net income has been around $0.55-0.6 so, if anything, the dividend could rise further.

    Convertible bonds have some benefits for management. The coupons they have to pay on the bonds are lower than for standard unsecured bonds. This is because convertible bonds carry an embedded option for bondholders which may allow them to convert the bond to shares at a favorable rate. For example, at this point $1,000 of bond principal is worth $1,113 in TRIN common shares because of the premium at which the stock is trading.

    The second benefit to management is that they can issue additional common shares. These can be further leveraged, resulting in a growth of total assets and, hence, fees. For existing common shareholders, the impact is mixed. There will be some EPS dilution as new shares are issued but net income remains the same, however, this should be temporary since EPS will grow as the new equity capital is leveraged and put to work. The NAV will drop a bit as new shares are issued at a price below the NAV. This will result in a slight headwind for existing shareholders.

    Stance And Takeaways

    The two pillars of BDC sector valuations remain expensive. The average BDC in our coverage is trading at a 9% premium – not far off the peak over the last 5 years. And two, underlying loan spreads are on the tight side – a similar dynamic can be seen in the public loan market with 60% of loans trading above par.

    Although the BDC sector is not cheap in absolute terms, there are pockets of value with individual BDCs trading at attractive levels. These include a few of the stocks we recently added to our Income Portfolios such as the Blue Owl Capital Corp III (OBDE), the Golub Capital BDC (GBDC) and the Barings BDC (BBDC), among others.

    Check out Systematic Income and explore our Income Portfolios, engineered with both yield and risk management considerations.

    Use our powerful Interactive Investor Tools to navigate the BDC, CEF, OEF, preferred and baby bond markets.

    Read our Investor Guides: to CEFs, Preferreds and PIMCO CEFs.

    Check us out on a no-risk basis – sign up for a 2-week free trial!



    Source link

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Telegram Email

    Related Posts

    Pay contractors with bonds to curb inflation – Joe Jackson advises government

    July 30, 2025

    Stocks and bonds are behaving like the US economy is recession-proof

    July 29, 2025

    Bonds Firing on All Cylinders After Data and Treasury Supply

    July 29, 2025
    Leave A Reply Cancel Reply

    Top Posts

    Are mutual funds still the middle class’s best bet for wealth building? – Firstpost

    July 30, 2025

    Qu’est-ce qu’un green bond ?

    December 7, 2017

    les cat’ bonds deviennent incontournables

    September 5, 2018

    ETF : définition et intérêt des trackers

    May 15, 2019
    Don't Miss
    Mutual Funds

    Are mutual funds still the middle class’s best bet for wealth building? – Firstpost

    July 30, 2025

    For much of India’s working population, building wealth has always been a long game. The…

    Can specialised funds unlock India’s shorting potential—or will they just be long-only funds in disguise?

    July 30, 2025

    Pay contractors with bonds to curb inflation – Joe Jackson advises government

    July 30, 2025

    Sumitomo Mitsui Banking Corporation, Temasek Holdings show interest investments in AP

    July 30, 2025
    Stay In Touch
    • Facebook
    • Twitter
    • Pinterest
    • Instagram
    • YouTube
    • Vimeo
    EDITOR'S PICK

    Axiom Emerging Markets Corporate Bonds fête son premier anniversaire

    June 2, 2025

    INDIA BONDS – Les rendements obligataires indiens pourraient baisser dans le sillage de leurs homologues américains

    April 27, 2025

    ETFs to Consider as Bitcoin Climbs to Record Levels

    July 14, 2025
    Our Picks

    Are mutual funds still the middle class’s best bet for wealth building? – Firstpost

    July 30, 2025

    Can specialised funds unlock India’s shorting potential—or will they just be long-only funds in disguise?

    July 30, 2025

    Pay contractors with bonds to curb inflation – Joe Jackson advises government

    July 30, 2025
    Most Popular

    ₹10,000 monthly SIP in this debt mutual fund has grown to over ₹70 lakh in 23 years

    June 13, 2025

    ₹1 lakh investment in these 2 ELSS mutual funds at launch would have grown to over ₹5 lakh. Check details

    April 25, 2025

    ZIG, BUZZ, NANC, and KRUZ

    October 11, 2024
    © 2025 Fund Focus News
    • Get In Touch
    • Privacy Policy
    • Terms and Conditions

    Type above and press Enter to search. Press Esc to cancel.