Q3商业开发企业预览.docxVIP

North America Equity Research29 October 2019J. P MorganBusiness Development Companies North America Equity Research 29 October 2019 3Q19 PreviewSpecialty Consumer Finance Richard Shane Specialty Consumer Finance Richard Shane AC (1-415)315-6701 richard.b.shane@jpmorgan Bloomberg JPMA SHANE GO J.P. Morgan Securities LLC Specialty Consumer Finance Richard Shane AC Specialty Consumer Finance Richard Shane AC (1-415)315-6701 richard.b.shane@jpmorgan Bloomberg JPMA SHANE GO J.P. Morgan Securities LLC Lower rate expectations continue to drive investor outflows in 3QX9. Continued investor outflows from leveraged loans pressured yields in 3Q19, particularly for lower-rated loans. Prime fund outflows in the September quarter totaled $8.8B, bringing YTD outflows through 9/30/19 to $29.9B. Spreads diverge based on credit quality. All-in institutional spreads on relatively higher quality BB/BB- loans compressed 63 bps during 3Q19 to L+261, while spreads on lower-rated B/B- loans widened 51bps to L+476 in September from L+424 in June. The divergence in spreads led to a 3Q19 loss of 0.4% for the JPM 1st Lien Leveraged Loan Index, compared to a 2.1% loss for the JPM 2nd Lien Leveraged Loan Index. Expect modest NAV compression, though accretive share repurchases may provide NAV support. We estimate NAVs will generally contract modestly in 3Q19. We expect that BDCs with elevated second lien and/or energy exposure will compress more than those with primarily first lien exposure. Additionally, those BDCs with active share repurchase plans in effect will likely experience modestly less NAV compression, as accretive share repurchases will provide some ballast to NAV (AINV, BKCC, CGBD, and FSK). Ratings PT changes: o Downgrade driven by elevated exposure to energy and 2nd lien: PNNT: Downgrade to UW (from N), PT to $6 (from $6.50) o PT changes: AINV: Remain N; PT to $15.50 (from $16)BKCC: Remain UW; PT to $5 (from $5.50) TSLX: Remain OW; PT to $22 (from $21)Equity Rati