Market Overview

THL Credit Downgraded As Credit Related issues Continue


Deutsche Bank downgraded shares of THL Credit, Inc. (NASDAQ: TCRD), as the company works through ongoing credit-related issues.

Analyst George Bahamondes indicated that NAV has declined 9 percent since Dec. 31, 2015, despite first lien assets growing from 55 percent of the portfolio to 74 percent. The analyst noted that non-accruals now account for 4 percent of the portfolio, up from 0.1 percent at the end of the first quarter.

Positives And Negatives

Deutsche Bank believes the company will continue to cover the dividend after lowering its quarterly distribution run rate to 27 cents in the fourth quarter. With the shares trading at a discount, the firm sees limited downside.

At the same time, the firm feels the upside is also limited, as the company works through credit issues. The firm termed the decline in NAV, heightened competition, a favorable refinancing environment and limited debt capacity as the negatives.

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Challenging Environment In 2H

On the outlook, the firm said it expects the ongoing NAV volatility, leverage at the upper end of THL Credit's target range and heightened competition to impact the company's growth prospects in the second half of 2017, as it repositions the portfolio to improve credit performance and NAV stability.

"With leverage near the upper end of TCRD's target range and heightened competition from upstart private debt capital funds, we expect a challenging growth environment for the company in 2H17," the firm concluded.

As such, Deutsche Bank downgraded shares of THL Credit from Buy to Hold, but maintained its $10.50 price target, which is based on the shares trading at 90 percent of NAV.

At last check, shares of THL Credit were sliding 2.38 percent to $9.64.

Posted-In: Deutsche Bank George BahamondesAnalyst Color Downgrades Price Target Analyst Ratings


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