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FULL - Full Circle Capital


Guest MarkS
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Is anyone looking at Full Circle Capital (FULL)? FULL is a BDC with about 80% of their portfolio consisting of small senior secured loans. The stock trades at $3.34 with a book value of $4.43. Full just completed a rights offering that raised about $39M. The company pays a 3.5 cent distribution each month that should be amply covered by NII once a home is found for the money raised in the offering.  As a plus Bulldog just filed a 13D - so an activist with a history of helping to close discounts to book value is involved. I would love feedback - especially any major concerns – since FULL has a history of losses. Thanks.

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is it the same management team in place that made the cannabis loan?

 

I took a look a long time ago when a large portion of NAV was a marijuana penny stock and passed.

 

The CEO seems way overqualified for such a small BDC which is intriguing.

 

I recall the underlying credits seemed particularly dicey, even for a BDC. Just taking a quick look now, I see 3% of NAV is the marijuana thing and they own some PEAKs bonds (ITT tech student loans that have gotten hammerf*#@d), some energy related stuff already on non-accrual  lots of mid double digit coupon stuff to things no one has ever heard of.

 

25% discount and lots of cash from a recent rights offering may be enough to mitigate the generalized shitiness of the loan book, but tread carefully here.

 

The whole BDC space is at nice discounts, particularly the more sleazy ones. It's a game of pick your favorite scoundrel and pray. Bulldog + lots of cash makes this one more interesting i must admit.

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Thanks thepupil for the input and advice. I put my toe in the water establishing a small position. I'm treating it more like a trade than an  investment. If Bulldog can narrow the discount substantially  that will probably be my cue to leave.  Management appears  a bit more shareholder friendly. They reduced their fees and  are trying to be somewhat more open with analyst. Perhaps they found religion after realizing predators - like themselves - occasionally become the prey of better funded activist.  If you have more thoughts don't hesitate to share.

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  • 6 months later...

Good deal pupil.

In after hours trading the stock is taking a hit - presumably because of the dividend cut.  I'm hoping the sell off continues in the morning. I've pick up shares as it has fallen. But I sure would like more. Pupil, do you follow the M&A values on BDCs?

 

Thanks

Mark

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I think the m&a value will differ from company to company (because of big differences in asset quality).

 

my approach would be to have a look at the assets and liabilities, adjust for pending sales and see what kind of writedowns are implied by the current stock price. if i think that a draconian enough scenario is priced is, then the stock might be of interest. The last time I did that exercise, it wasn't, but now that the price is down and there is some clarity on large portions of the investments (either through sales or write-offs) and a harder catalyst is in place with the strategic alternatives announcement, it may be.

 

my initial reservations regarding the poor quality of the loan book still stand, and I'm still a little gun shy here, even at 50% of NAV.

 

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  • 4 months later...

They couldn't have picked a more volatile market in which to announce a merger.

Mark

http://finance.yahoo.com/news/full-circle-capital-corporation-merge-100000078.html

-Transaction More Than Doubles Assets Under Management-- Combined Company to be Named Great Elm Capital Corp.-- New Investment Management Agreement with Great Elm Capital Management-. GREENWICH, Conn., ...

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Did these dudes get new management?

 

If I remember correctly,this is the brain trust that invested in a "cannabis" company?

 

These are the same guys that MASSIVELY diluted shareholders when the stock was way down.

 

These are the guys that suspended the dividend.

 

If so, no thanks...

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they are getting new management (and a more reasonable fee structure) and are realizing the portfolio at 100% of NAV, seems like an optimal outcome. I got distracted by other opportunities and thought the portfolio was of too low quality to get involved, but congrats to Mark on this.

 

One thing that wasn't clear to me from the press release is if there would be adjustments to NAV before the merger and what that may entail. We also don't know what is in Masts's portfolio and how that is marked.

 

been pretty busy lately but this could be a decent opportunity. missed the big move.

 

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