MCC posts dismal FY-end results ahead of merger with Sierra Income Corporation

The BDC has experienced steady losses for over four years, with a net asset value drop of 30% over the last fiscal year alone.

Medley Capital Corporation (MCC) revealed another quarter of losses on its fiscal year-end earnings call Tuesday, marking the business development company’s 18th quarter of decline in a row.

The business development company posted a loss of $23.5 million during the quarter ended 30 September – the firm’s fiscal Q4 – with a loss of $0.43 per share. The vehicle had a net investment income of $700,000, or $0.01 a share, and will pay a quarterly dividend of $0.10 a share.

The net asset value per share dipped to $5.90 at the end of the quarter, down from $6.43 at the end of the third quarter. The NAV has fallen approximately 30 percent since the same time last year, when it was valued at $8.45.

Rick Allorto, the BDC’s chief financial officer, said on the call that 75 percent of the drop in NAV was due to the dividend payments in excess of the NII and the decline of a legacy asset.

The vehicle made more than $64 million of investments during the quarter, with $46.4 million into new originations. The portfolio is made up of 63.2 percent senior-secured first lien loans, 16.9 percent equity, 11.9 percent in a senior loan joint venture strategy with Medley Management, 7.5 percent senior-secured second lien and 0.5 percent unsecured debt. The portfolio had an average yield of 9.9 percent.

The portfolio was valued at $655.4 million at the end of the quarter, down from $837 million at the same time last year.

It was announced in August that the BDC and its manager, Medley Management, would be purchased by Sierra Income Corporation in a deal expected to close in the first quarter of 2019.

The merger proposal passed unanimously across the board of directors of all three entities involved. MCC shareholders will receive 0.805 shares of the new Sierra stock for each MCC share.

If that deal goes through, Sierra will merge with MCC to create the second largest internally managed BDC. However, shareholders will vote, and the transaction has been met with opposition. Roumell Asset Management, which owns 2 percent of MCC, will vote against the deal, calling it a bailout for Medley Management in a press release on Monday.

Medley Capital Corporation is a BDC affiliated with Medley Management. Medley Management is a global alternative asset management firm that has over $4.8 billion in assets under management. The value of MCC stock was $3.22 a share at press time.