Medley cuts dividend amid $0.53-a-share loss

The BDC posted net realised and unrealised losses of $32.36m, which included a $23.33m realised loss.

Medley Capital Corporation’s net asset value per share dropped almost 9 percent in the first quarter, falling to $7.02 from $7.71 at year-end, which sent its stock down more than 15 percent on Wednesday.

The business development company, which has offices in New York and San Francisco, posted a loss of 53 cents per share. That figure resulted from a net investment income of $3.58 million offset by a $23.33 million realised loss, the result of non-cash restructuring charges and net unrealised depreciation of $8.06 million.

The firm also cut its dividend from $0.16 a share to $0.10 a share.

“We are continuing to reposition the portfolio,” MCC chairman and chief executive Brook Taube said on the firm’s earnings call. “There is a priority focus on legacy assets, and this includes generating liquidity to fund these assets where it’s available and otherwise repositioning certain of the assets for long-term success.”

The legacy investments were about $90 million, $82.5 million of which was on non-accrual status. Of its total book, almost one-quarter, 23.93 percent, is on non-accrual status at cost, or $208.46 million. That figure was 11.05 percent at fair value, or $82.51 million, according to Thomson Reuters BDC Collateral.

The firm’s portfolio consists of 76.43 percent first lien and second lien senior secured loans and 23.57 percent equity, BDC Collateral showed. The three largest industries MCC has exposure to are business services (19.82 percent of its portfolio), construction (18.33 percent) and financial services (12.37 percent).

Shares for the company closed at $3.68, a 15.17 percent decrease from the $4.35-a-share price as of Tuesday’s close. MCC said it expects the repositioning of its portfolio to be completed by the end of the year.

Wells Fargo analyst Jonathan Bock asked on the earnings call about the firm’s leverage, which stood at a debt-to-equity ratio of 0.75x, in light of the declining stock price. Taube said the firm has not found any restrictions on the borrowing base of its debt facility.

Due to its leverage levels thought, Taube said he expects the firm to not renew its stock buyback programme.

“We are always evaluating the appropriate utilisation of our capital and I would include share repurchase in that,” he said. “Let’s say, at our current leverage levels while we are continuing to look at the completion of this repositioning, we do not expect to renew it.”

The firm’s investment portfolio shrank by $59.3 million, resulting from $20.2 million in new originations which were muted by $79.5 million in repayments, according to the firm’s earnings results.

MCC is indirectly advised by Medley Management, which also oversees a private BDC, Sierra Income Corporation, and private funds.