Industry Observations June 30, 2018 Business Development Company Industry

Transcription

1 . Industry Observations June 30, 2018 Business Development Company Industry Houlihan Capital 1

2 Select Business Development Company - Public Company Industry Data (USD in millions, except per share data) Company Name Business Development Companies Ticker Price at 06/30/18 % of 52 Week High Equity Value Enterprise Value Debt / Total Capital Total Assets LTM Revenue LTM Normalized EPS CY 2018 Revenue Estimate Apollo Investment Corporation AINV $ % $1, $1, % $2, $ $0.25 $ Ares Capital Corporation ARCC $ % $7, $11, % $12, $1, $0.86 $1, BlackRock Capital Investment Corporation BKCC $ % $ $ % $ $93.24 $0.45 $91.40 Capital Southwest Corporation CSWC $ % $ $ % $ $35.13 $0.66 $42.84 Capitala Finance Corp. CPTA $ % $ $ % $ $48.85 $0.55 $50.59 CM Finance Inc. CMFN $ % $ $ % $ $31.04 $0.63 $34.70 Equus Total Return, Inc. EQS $ % $31.90 $ % $62.66 $0.48 -$0.22 $0.00 Fidus Investment Corporation FDUS $ % $ $ % $ $70.62 $0.87 $74.04 Fifth Street Finance Corp. FSC $ $0.00 $ % $380, $16, $7.43 $17, Firsthand Technology Value Fund, Inc. SVVC $ % $ $ % $ $1.90 $0.38 $0.00 FS Investment Corporation FSIC $ % $1, $3, % $4, $ $0.51 $ Garrison Capital Inc. GARS $ % $ $ % $ $37.85 $0.70 $40.69 Gladstone Capital Corporation GLAD $ % $ $ % $ $42.41 $0.49 $46.92 Gladstone Investment Corporation GAIN $ % $ $ % $ $58.36 $0.42 $61.89 Golub Capital BDC, Inc. GBDC $ % $1, $1, % $1, $ $0.77 $ GSV Capital Corp. GSVC $ % $ $ % $ $0.76 -$0.46 $ Degree Capital Corp. TURN $ % $71.89 $ % $84.13 $1.23 -$0.05 $0.00 Hercules Capital, Inc. HTGC $ % $1, $1, % $1, $ $0.75 $ Horizon Technology Finance Corporation HRZN $ % $ $ % $ $25.99 $0.66 $29.35 KCAP Financial, Inc. KCAP $ % $ $ % $ $27.32 $0.17 $27.67 Main Street Capital Corporation MAIN $ % $2, $3, % $2, $ $1.53 $ PT Express Transindo Utama Tbk TAXI $ % $13.50 $ % $ $ $0.01 $0.00 Medley Capital Corporation MCC $ % $ $ % $ $83.51 $0.33 $70.39 Mill City Ventures III, Ltd. MCVT $ % $6.53 $ % $10.34 $0.17 -$0.03 $0.00 Monroe Capital Corporation MRCC $ % $ $ % $ $54.05 $0.89 $62.14 MVC Capital, Inc. MVC $ % $ $ % $ $23.50 $0.01 $25.37 New Mountain Finance Corporation NMFC $ % $1, $1, % $2, $ $0.87 $ OHA Investment Corporation OHAI $ % $30.76 $ % $ $10.10 $0.03 $0.00 OFS Capital Corporation OFS $ % $ $ % $ $34.40 $0.77 $40.92 PennantPark Floating Rate Capital Ltd. PFLT $ % $ $ % $ $60.43 $0.59 $74.38 PennantPark Investment Corporation PNNT $ % $ $ % $1, $ $0.51 $ Prospect Capital Corporation PSEC $ % $2, $4, % $5, $ $0.49 $ Saratoga Investment Corp. SAR $ % $ $ % $ $40.40 $1.34 $42.13 Solar Capital Ltd. SLRC $ % $ $1, % $1, $ $1.03 $ Solar Senior Capital Ltd. SUNS $ % $ $ % $ $34.01 $0.88 $42.55 Stellus Capital Investment Corporation SCM $ % $ $ % $ $40.70 $0.74 $48.49 TCP Capital Corp. TCPC $ % $ $1, % $1, $ $0.87 $ THL Credit, Inc. TCRD $ % $ $ % $ $75.66 $0.73 $68.49 Oxford Square Capital Corp. OXSQ $ % $ $ % $ $58.30 $0.38 $53.67 TPG Specialty Lending, Inc. TSLX $ % $1, $2, % $1, $ $1.18 $ Triangle Capital Corporation TCAP $ % $ $ % $1, $ $0.87 $80.39 WhiteHorse Finance, Inc. WHF $ % $ $ % $ $57.83 $0.88 $62.77 Notes: LTM (latest twelve months); Enterprise Value (market capitalization less total cash and short-term investments plus short-term borrowings and total long-term debt); EBITDA (earnings before interest, taxes, depreciation and amortization) Source: Capital IQ Market Data LTM Operating Data The material contained in this publication is meant to provide general information regarding valuation topics. This publication does not constitute investment advice with respect to the securities of any company discussed herein, is not intended to provide information upon which to base an investment decision, and should not be construed as such. Professional advice should be obtained before taking any action based on the information contained herein. Publicly available information utilized in this publication has been obtained from sources deemed to be reliable. Houlihan does not guarantee the accuracy or completeness of the information provided within this publication. The material presented reflects information known to the authors at the time this publication was written and this information is subject to change Houlihan Capital 2

3 Select Business Development Company Valuation Metrics (USD in millions, except per share data) Company Name Ticker Return On Assets LTM Operating Statistics Return Return On On Equity Capital Revenue Growth Price / TBV Trading Multiples Price / BV P/Normal EPS TEV / LTM Revenue Business Development Companies Apollo Investment Corporation AINV 4.9% 6.0% 5.1% -7.4% 0.85x 0.85x 12.9x 8.0x Ares Capital Corporation ARCC 4.2% 11.1% 4.4% 15.7% 0.98x 0.98x 17.1x 10.9x BlackRock Capital Investment Corporation BKCC 4.7% 1.0% 4.8% -17.1% 0.76x 0.76x 12.9x 7.9x Capital Southwest Corporation CSWC 3.7% 13.2% 3.8% 49.6% 0.95x 0.95x 40.0x 11.2x Capitala Finance Corp. CPTA 3.9% -5.0% 4.0% -25.6% 0.61x 0.61x 14.3x 7.5x CM Finance Inc. CMFN 4.2% 9.9% 4.4% -1.9% 0.71x 0.71x 13.3x 8.1x Equus Total Return, Inc. EQS -4.2% 2.4% -4.2% -39.6% 0.74x 0.74x NM 68.9x Fidus Investment Corporation FDUS 4.5% 13.1% 4.6% 14.3% 0.87x 0.87x 19.4x 9.5x Fifth Street Finance Corp. FSC 1.5% 13.2% 0.0% 7.1% 0.00x 0.00x 14.8x 7.2x Firsthand Technology Value Fund, Inc. SVVC -2.4% 19.4% -2.5% 94.4% 0.58x 0.58x NM 62.6x FS Investment Corporation FSIC 4.3% 5.8% 4.4% -2.7% 0.80x 0.80x 16.2x 9.4x Garrison Capital Inc. GARS 4.1% 6.5% 4.2% -7.4% 0.70x 0.70x 10.9x 7.7x Gladstone Capital Corporation GLAD 5.3% 12.6% 5.4% 10.6% 1.04x 1.04x 18.8x 9.4x Gladstone Investment Corporation GAIN 4.0% 18.5% 4.1% 12.5% 1.09x 1.09x 20.6x 10.0x Golub Capital BDC, Inc. GBDC 3.6% 9.3% 3.7% 7.2% 1.14x 1.14x 25.4x 15.0x GSV Capital Corp. GSVC -1.9% 10.2% -2.5% -21.4% 0.69x 0.69x NM 162.3x 180 Degree Capital Corp. TURN -2.2% 12.3% -2.2% -31.4% 0.89x 0.89x NM 19.3x Hercules Capital, Inc. HTGC 5.6% 11.1% 5.7% 5.9% 1.30x 1.30x 17.2x 9.4x Horizon Technology Finance Corporation HRZN 4.7% 6.2% 4.8% -15.2% 0.87x 0.87x 13.5x 5.8x KCAP Financial, Inc. KCAP 3.3% 3.0% 3.4% -20.7% 0.67x 0.67x 12.1x 8.7x Main Street Capital Corporation MAIN 5.0% 13.2% 5.1% 16.1% 1.61x 1.61x 27.4x 15.8x PT Express Transindo Utama Tbk TAXI -11.2% % -12.7% -40.7% 4.33x 1.40x NM 3.7x Medley Capital Corporation MCC 3.9% -16.1% 4.0% -21.2% 0.49x 0.49x 13.5x 7.5x Mill City Ventures III, Ltd. MCVT -3.4% 12.6% -3.4% -49.2% 0.64x 0.64x NM 14.9x Monroe Capital Corporation MRCC 4.9% 4.3% 5.0% 18.8% 1.00x 1.00x 15.9x 10.7x MVC Capital, Inc. MVC 1.8% 6.6% 1.8% 13.4% 0.73x 0.73x NM 16.3x New Mountain Finance Corporation NMFC 4.6% 10.4% 4.8% 21.7% 1.00x 1.00x 19.0x 11.1x OHA Investment Corporation OHAI 2.3% -18.7% 2.4% -33.5% 0.63x 0.63x 8.2x 6.2x OFS Capital Corporation OFS 4.1% 4.0% 4.2% 9.9% 0.84x 0.84x 16.0x 9.6x PennantPark Floating Rate Capital Ltd. PFLT 3.3% 7.6% 3.4% 24.0% 0.98x 0.98x 23.5x 14.8x PennantPark Investment Corporation PNNT 4.2% 6.9% 4.3% -13.8% 0.78x 0.78x 12.9x 8.1x Prospect Capital Corporation PSEC 4.6% 7.0% 4.7% -10.6% 0.73x 0.73x 14.3x 7.5x Saratoga Investment Corp. SAR 4.2% 15.1% 4.3% 19.0% 1.21x 1.21x 15.8x 10.3x Solar Capital Ltd. SLRC 3.4% 8.0% 4.2% -2.8% 0.93x 0.93x 21.0x 5.7x Solar Senior Capital Ltd. SUNS 3.2% 8.5% 4.4% 20.0% 0.97x 0.97x 19.8x 8.2x Stellus Capital Investment Corporation SCM 4.0% 12.1% 4.0% 2.0% 0.92x 0.92x 15.8x 9.9x TCP Capital Corp. TCPC 5.9% 11.2% 6.0% 18.2% 0.97x 0.97x 20.9x 10.1x THL Credit, Inc. TCRD 5.4% -1.9% 5.4% -7.5% 0.75x 0.75x 13.0x 7.9x Oxford Square Capital Corp. OXSQ 4.9% 11.2% 5.1% -17.3% 0.91x 0.91x 20.2x 6.2x TPG Specialty Lending, Inc. TSLX 5.5% 11.7% 5.6% 8.5% 1.10x 1.10x 18.0x 9.1x Triangle Capital Corporation TCAP 5.0% -3.1% 5.0% 1.4% 0.86x 0.86x 15.7x 10.6x Mean 2.3% 2.9% 2.2% -0.5% 0.96x 0.86x 17.8x 19.9x Median 4.0% 9.9% 4.1% -1.9% 0.85x 0.85x 16.0x 9.5x The material contained in this publication is meant to provide general information regarding valuation topics. This publication does not constitute investment advice with respect to the securities of any company discussed herein, is not intended to provide information upon which to base an investment decision, and should not be construed as such. Professional advice should be obtained before taking any action based on the information contained herein. Publicly available information utilized in this publication has been obtained from sources deemed to be reliable. Houlihan does not guarantee the accuracy or completeness of the information provided within this publication. The material presented reflects information known to the authors at the time this publication was written and this information is subject to change Houlihan Capital 3

4 Select Business Development Company M&A Transactions June 30, 2017 through June 30, 2018 (USD in millions) Close Date Target Acquirer Target Company Primary Industry Implied Equity Value 5/31/2018 Samsung Electronics Co., Ltd. 1/0/1900 Technology Hardware, Storage and $306, /7/2017 Daimler AG BlackRock, Inc. Automobile Manufacturers $90, /29/2018 Shore Premier Finance Division of Union Bank & Trust Centennial Bank (Conway, AR) Specialized Finance $ /18/2018 First Bank Lubbock Bancshares, Inc. Heartland Financial USA, Inc. Regional Banks $ /1/2017 Ares Capital Management LLC, Venture Lending Portfolio Assets Bearcub Acquisitions LLC Specialized Finance $ /12/2018 Ovation Credit Services, Inc. LendingTree, LLC Research and Consulting Services $ /1/2017 Siena Capital Finance LLC. 1/0/1900 Specialized Finance $4.03 4/12/2018 ASAP Expo Inc. (nka:greenbox Pos LLC) GreenBox POS, LLC Real Estate Services $0.28 5/31/2018 Air Transport Group Holdings, Inc. Pharmagreen Biotech Inc. Trading Companies and Distributors NA 6/29/2018 Louisville Metro Police Officers Credit Union, Inc. Commonwealth Credit Union, Inc. Specialized Finance NA 6/6/2018 Manufactured Housing Floorplan Loan Portfolio Triad Financial Services, Inc. Specialized Finance NA 6/1/2018 Renewable Energy Lending, LLC MMA Energy Capital, LLC Specialized Finance NA 6/4/2018 Far West Capital Inc Advantage Business Capital, Inc. Specialized Finance NA 5/8/2018 Phoenix Capital Group, LLC Gulf Coast Bank and Trust Company Specialized Finance NA 4/27/2018 Local 142 Federal Credit Union Air Force Federal Credit Union Specialized Finance NA 4/16/2018 Toccoa Branch of DOCO Credit Union Peach State Federal Credit Union Specialized Finance NA 6/4/2018 ipayment Holdings, Inc. Paysafe Group Limited Data Processing and Outsourced NA 4/2/2018 Woodfield Fund Administration LLC Ultimus Fund Solutions, LLC Research and Consulting Services NA 4/6/2018 Dugway Federal Credit Union Mountain America Federal Credit Union Specialized Finance NA 4/1/2018 Floodwood Area Credit Union Northwoods Credit Union Specialized Finance NA 5/1/2018 Carle Employees Federal Credit Union University of Illinois Community Credit Union Specialized Finance NA 3/1/2018 Monad Federal Credit Union Numerica Credit Union Specialized Finance NA 3/14/2018 Lakelands Federal Credit Union Peach State Federal Credit Union Specialized Finance NA 3/12/2018 Wechsler Marsico Simpson Wealth Management Services, LLC Diamond State Financial Group, LLC Specialized Finance NA 4/7/2018 Taconnet Federal Credit Union New Dimensions Federal Credit Union Specialized Finance NA 4/2/2018 Advantage Funding Management Co., Inc. Sterling National Bank Specialized Finance NA 3/5/2018 Gibraltar Business Capital, LLC Hercules Capital, Inc. Specialized Finance NA 4/16/2018 SoCore Energy LLC ENGIE North America Inc. Semiconductor Equipment NA 5/8/2018 Lansing Postal Community Credit Union LAFCU Specialized Finance NA 2/13/2018 TRAKAmerica, Inc. Stevens Financial Group, LLC Diversified Support Services NA 12/31/2017 Agility Financial Credit Union Memphis City Employees Credit Union Specialized Finance NA 6/4/2018 Niagara Falls Memorial Medical Center Federal Credit Union Niagara's Choice Credit Union Specialized Finance NA 2/7/2018 White Oak Business Capital, Inc. White Oak Global Advisors LLC Specialized Finance NA 4/4/2018 Allied Credit Union UNCLE Credit Union Specialized Finance NA 1/31/2018 Domestic Factoring Portfolio of BB&T Corporation Rosenthal & Rosenthal, Inc. Specialized Finance NA 4/1/2018 Piedmont Hospital Federal Credit Union (nka:piedmont Plus Members First Credit Union Specialized Finance NA 1/29/2018 ADI Energy, LLC Oaktree Capital Management, L.P. Construction and Engineering NA 1/24/2018 Oxygen Funding, Inc. Armada Group USA, Inc. Specialized Finance NA 12/31/2017 Vertex Financial Corporation BAM Worldwide LLC Specialized Finance NA 1/19/2018 Paragon Financial Group, Inc. ONE Bio Corp. Specialized Finance NA 1/11/2018 Assets Of Sienna Transportation Finance, LLC Accutrac Capital Solutions Inc. Specialized Finance NA 1/10/2018 Stockton Community Federal Credit Union UNCLE Credit Union Specialized Finance NA 2/1/2018 Navitas Credit Corp. United Community Bank Specialized Finance NA 12/29/2017 Reading Federal Credit Union Cinfed Federal Credit Union Specialized Finance NA 12/29/2017 AMC Financial Group PDX Partners, Inc. Specialized Finance NA 12/20/2017 Good Street Baptist Church Federal Credit Union Neighborhood Credit Union Specialized Finance NA 12/8/2017 American Business Lending, Inc. Gulf Coast SBA Lending Specialized Finance NA 11/30/2017 Hawaiian Airlines Federal Credit Union Hawaiian Tel Federal Credit Union Specialized Finance NA 12/5/2017 Swift Prepaid Solutions, Inc. Bain Capital Ventures; Silversmith Capital Partners Specialized Finance NA 12/1/2017 St. Jules Credit Union Pelican State Credit Union Specialized Finance NA 12/1/2017 Keg Credit, LLC Keg Logistics, LLC Specialized Finance NA 12/1/2017 Pacific Community Credit Union Credit Union of Southern California Specialized Finance NA 2/2/2018 Bent River Community Credit Union Marine Credit Union Specialized Finance NA 11/14/2017 Deutsche Bank Aktiengesellschaft Cerberus Capital Management, L.P.; Cerberus Diversified Capital Markets NA 11/14/2017 FactorTrust, Inc. TransUnion Research and Consulting Services NA 10/31/2017 Tri-Rivers Federal Credit Union of Montgomery Hope Credit Union Specialized Finance NA Source: Capital IQ Houlihan Capital 4

5 S&P Capital IQ - Sector Last 3 Month Equity Performance 20.0% Change in Market Cap by S&P Capital IQ Sector 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% 3/31/2018 4/30/2018 5/31/2018 6/30/2018 Energy Materials Industrials Consumer Discretionary Healthcare Financials Information Technology Telecommunication Services Utilities Consumer Staples Note: The indices are derived from the equity performance of the S&P Capital IQ Sectors. Source: Capital IQ Houlihan Capital 5

6 M&A Deal Flow Statistics by S&P Capital IQ Sector 16,000 M&A Deal Count - Number of Transactions 14,000 12,000 10,000 8,000 6,000 7,735 7,544 8,953 7,561 8,024 8,265 8,970 7,120 6,788 6,011 6,954 6,702 5,967 5,258 6,410 5,471 5,064 4,000 2,000 4,989 5,391 5,700 5,147 5,062 5,134 5,244 4,543 4,297 4,033 4,197 4,316 3,697 3,347 3,788 3,667 3,335 0 $1,000 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q M&A Deals - USA & Canada M&A Deals - Rest of the World M&A Deal Count - Total Transaction Value ($ Billions) $900 $800 $700 $600 $500 $400 $372.8 $381.4 $462.7 $430.2 $512.6 $406.6 $440.3 $419.0 $268.0 $295.1 $445.7 $364.7 $336.2 $292.0 $335.7 $272.3 $353.3 $300 $200 $100 $251.0 $289.7 $450.7 $402.3 $385.2 $499.4 $408.0 $403.0 $375.6 $293.7 $363.7 $363.7 $338.9 $414.0 $346.2 $292.1 $442.5 $0 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Transaction Value - USA & Canada Transaction Value - Rest of World Houlihan Capital 6

7 M&A Deal Flow Statistics by S&P Capital IQ Sector Percentage Dollars Invested by Sector 2Q18 10% 2% 13% 12% 5% 9% 13% 19% 4% 4% 4% 5% Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Real Estate Telecommunications Services Utilities Not Listed Houlihan Capital 7

8 About Us Houlihan Capital is a leading, solutions-driven valuation, financial advisory and boutique investment banking firm. We pride ourselves on being thought leaders in an ever-changing landscape. Houlihan Capital is SOC-compliant, a FINRA and SIPC member and committed to the highest levels of professional ethics and standards. Valuation & Financial Advisory We provide an array of services that include enterprise valuations, portfolio valuation, valuation of carried interest, transaction opinions, tax and financial reporting compliance, purchase price allocations, and a wide variety of consulting services through our Financial Advisory Group. Investment Banking Through our Investment Banking Group, we offer sell side/buy side advisory and capital raises. Through our Special Situations desk, we provide services that fit outside the archetypal verticals, including liquidity solutions, transactional advisory, and secondary market advisory and trading. Litigation Support Our team provides support for a wide variety of situations including commercial and shareholder disputes, derivatives and structured finance litigation, and fraudulent conveyance. For additional information about our industry expertise and services, visit: Andrew Smith asmith@houlihancapital.com Paul Clark pclark@houlihancapital.com Michael Norton mnorton@houlihancapital.com Monica Blocker mblocker@houlihancapital.com