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KBW Downgrades THL Credit To Market Perform, Says Dividend Cut 'Necessary'

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KBW Downgrades THL Credit To Market Perform, Says Dividend Cut 'Necessary'

KBW has downgraded THL Credit, Inc. (NASDAQ: TCRD) to Market Perform from Outperform citing weaker credit quality and the potential risk of dividend cut.

"Credit quality deteriorated which reduced book value and pressured earnings. The combination of weaker credit quality and lower portfolio yields as TCRD moves into more secure loans has pressured earnings to the point where we believe a dividend cut is warranted and will occur," analyst Ryan Lynch wrote in a note.

"We believe TCRD's ability to cover the dividend will become challenged once their portfolio value stabilizes and TCRD's incentive fee turns back on. We estimate TCRD's earnings will be $1.25 versus the $1.36 dividend, when incentive fees return. As such, we believe a dividend cut is in TCRD's future," Lynch continued.

Related Link: Keefe Bruyette & Woods Downgrades THL Credit to Market Perform, Lowers PT to $11.50

Lynch noted that two new portfolio companies (4 loans) were placed on non-accrual status, increasing THL's non-accruals to 7.6 percent in the second quarter, up from 2.8 percent in the prior quarter. Additionally, book value declined 2.9 percent to $11.88 due to portfolio depreciation.

Meanwhile, the analyst raised his 2016 EPS estimate to $1.49 from $1.40 on estimated reduction of incentive fee in the second half of 2016.

However, Lynch cut the price target by $1 to $11.50.

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Latest Ratings for TCRD

DateFirmActionFromTo
Mar 2019UpgradesUnderperformMarket Perform
Nov 2018DowngradesOutperformMarket Perform
Mar 2018MaintainsHoldHold

View More Analyst Ratings for TCRD
View the Latest Analyst Ratings

Posted-In: KBW Ryan LynchAnalyst Color Downgrades Price Target Analyst Ratings

 

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