Earlier this week, Fitch Ratings announced the completion of its periodic review of Business Development Companies (BDCs) – publicly traded firms that mostly make loans to mid-sized companies.
The review, which was comprised of 10 publicly rated firms, resulted in one-half of the 10 companies being either downgraded or otherwise assigned a negative outlook.
As noted by Fitch in its announcement, “Fitch’s outlook for the BDC sector is negative and reflects competitive underwriting conditions, earnings pressure, underperforming energy investments, unsustainable asset quality metrics, increased activist pressure, and limited access to growth capital. While some firms are better positioned, given their more conservative financial profiles and portfolio characteristics, others are likely to see rating pressure over the outlook horizon.”
Among the actions that were taken as a result of this peer review were the following:
– American Capital, Ltd. (NASDAQ – ACAS): Its ratings were placed on Rating Watch Negative;
– Apollo Investment Corporation (NASDAQ – AINV): Its Long-term Issuer Default Rating (IDR) was downgraded to ‘BBB-‘ from ‘BBB’ with a Rating Outlook of Negative;
– BlackRock Capital Investment Corporation (NASDAQ – BKCC): Its Long-term Issuer Default Rating was affirmed at ‘BBB-‘ with a Rating Outlook of Negative;
– Fifth Street Finance Corp. (NASDAQ:FSC): Its Long-term Issuer Default Rating was downgraded to ‘BB’ from ‘BB+’ with a Rating Outlook of Negative; and
– PennantPark Investment Corporation (NASDAQ: PNNT): Its Rating Outlook was revised to Negative from Stable.
If you are an individual or institutional investor who has any concerns about your investment in any Business Development Company (BDC), please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).