UPDATE: Gilford Securities Upgrades Fifth Street Finance to Neutral on Impressive Origination Scheme

In a report published Thursday, Gilford Securities analyst Casey Alexander upgraded the rating on Fifth Street Finance Corp. FSC from Sell to Neutral. In the report, Alexander noted, “Fifth Street Finance has a truly impressive origination model. They have a presence across the country, and have shown an ability to ratchet up their deal size. The concept of back-levering deals shows the power of their balance sheet and their ability to understand the current motivation of the commercial banking system as it exists today. To explain a back-levered deal, investors need to understand that it occurs in two stages. For purposes of simplifying the explanation, let's say that FSC originates a unitranche1 deal with a borrower for $100MM as a rate of LIBOR+675 basis points with a 1.25% floor. The loan will amortize at a rate of 5% per year and the lender also earns 2.5% in up front origination fees.” Fifth Street Finance Corp. closed on Wednesday at $10.39.