MVC just posted its 15th straight profitable quarter and saw its net asset value (NAV) increase to $14.98 per share as of July 31. (The company reports that its NAV as of Aug. 31 was $15.05.)
With its $120 million sale in June of Baltic Motors, MVC had to find a bunch of companies in which to invest, lest its capital sit around in a bank account earning a meager return. And sure enough, it appears that the company is already taking advantage of the recent credit crunch: It invested $42 million, or 11% of its total NAV, during the quarter.
Unlike a private-equity firm, MVC invests its own money. And being structured as a BDC, it doesn't pay taxes as long as it pays out most of its income in dividends, similar to how a real estate investment trust operates. Also unlike most public companies, BDCs have to mark to market the value of their investments. That means that NAV is a good estimate of the value of such a company. And MVC, at a recent price of $16.70 per share, is trading at an 11% premium to its NAV. Most BDCs trade at a modest premium to NAV: MCG Capital
We hear news every day about continued tightening in lending standards and problems that some private-equity firms are having closing large deals. However, unlike such firms as Blackstone
MVC is clearly in the mood to spend. Add in the $18 million the company pledged to U.S. Gas & Electric and an announced deal of indeterminate size to buy a number of European Ford dealerships, and MVC Capital is well on its way to putting its cash to good use.
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