Main Street Capital (NYSE:MAIN) has become a successful BDC?

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Main Street Capital (NYSE:MAIN) recently ended one of its most happening quarters. The company not only successfully conducted its first ever bond offerings to institutions, but it also got a lot of capital for its new investments. Main Street has also become an investment development company.

Vince Foster, the chief executive officer of Main Street Capital (NYSE:MAIN), said that the company has learned a lot of new things in its bond offering session. According to him, the investors do not really like offering unless they are above the value of $0.25 billion dollar issuances. Vince said that the company has learned this the hard way, for it only offered $175 million offerings. Main Street Capital (NYSE:MAIN) do not plan to hold another $175 million offering.

Vince Foster also mentioned that the Wall Street does not like when a company offers bonds lower than the value of $0.25 billion. According to him, that is when the need for BDC arises; BDC takes care of the capital needs when the needs are too small for the public to handle and too big for the banks to sponsor.  He further announced that the new offering planned by Main Street Capital (NYSE:MAIN) will have a larger share of low priced bonds.

Main Street Capital (NYSE:MAIN) is not like other BDCs; the company has a portfolio firm whose main purpose to manager another BDC and bring in money. This arrangement made by the company has proved quite beneficial, as the company is now able to make dividends to its investors.

According to Vince, HMS, the portfolio company owned by Main Street, is growing day by day, with assets valued at $400 million.

The HMS Fund is around 1/4th of the total size of Main Street Capital (NYSE:MAIN), and the company expects it to report a net income of $0.02 to $0.03 per share for the current year.

The company has old firms in its portfolio, which are paying quite high dividend right now. Perhaps this is the reason why the dividends of Main Street Capital (NYSE:MAIN) are above the average of industry.

The company reported a dividend income of $5.9 million for the most recent of its quarters. These figures were 15 percent of the company’s total income.

The company is located in Houston and a lot of its investments are also in the region of Houston.  The oil prices in the local economy are plummeting, and the investors are waiting to see its impact on Main Street Capital’s (NYSE:MAIN) income.  The company does not expect the oil prices to affect its assets as the city has more gas exposure than oil.

Although there are a number of rumors going on in the market about a recent bill that Congress might legislate; the bill can increase the limit of BDC’s leverage from 1:1 to 2:1. This is just a rumor as of yet, and we will have to wait for a little while in order to see whether the bill becomes a legislation or not.

 

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