UPDATE: J.P. Morgan Initiates Coverage on Fifth Street Finance Corp. with Overweight Rating, $11 PT on Optimization Opportunity

In a report published Wednesday, J.P. Morgan analyst Richard Shane initiated coverage on Fifth Street Finance Corp.

with an Overweight rating and $11.00 price target. In the report, Shane noted, “We are initiating coverage of Fifth Street Finance Corp. with an Overweight rating and an $11 price target. FSC is one of five BDCs to have crossed the $1.5B asset threshold. We believe that as BDCs migrate from $1B to $2B in receivables, they begin to generate additional competitive advantages including: more consistent access to equity, lower borrowing costs, increased operating leverage, and greater transaction flexibility. In our view, FSC is at this inflection point, potentially creating a significant opportunity over the next 12 to 24 months. Through year-end, we expect the company to optimize leverage and that NII will fully cover the quarterly dividend. We view FSC's increasingly secure 10.6% dividend yield as attractive.” Fifth Street Finance Corp. closed on Tuesday at $10.87.