Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (23742)	4/13/2006 2:30:14 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78729

Possible that defaults occur but possibly not because of the deal structure. I presume each deal is somewhat structured to account for rate rises. OTOH, the customers of a company might have to reduces their dealings with the company esp. if interest rates bite enough to cause a recession. This in turn could cause the company to default on its BDC loan due to lack of cash flow. Or the company could drop in value. (Thus hurting the BDC, e.g. if there were stock or warrants invoved in the particular loan.) Back otoh: Because bank rates to borrowers increase and become more difficult for smaller companies to obtain, I expect that more small companies will turn to these BDCs for the BDCs relatively more attractive financing, so demand for the deals that the BDCs do, might increase. ALD has a long history: It's survived interest rate swings. I hope it and other BDCs can do so again.

To: E_K_S who wrote (23742)	4/13/2006 8:31:47 PM
From: Carl Worth	Read Replies (1) \| Respond to of 78729

i don't think it's as likely that defaults would start to be a problem due to interest rates, since the loans are already in place, and are largely fixed rate debt...as such, the companies qualified for those loans at a known cost, to both the borrower and the lender, unlike an adjustable mortgage or the like i'd be more concerned about these companies if and when the economy slows down CSE in particular makes fairly short term loans, as you can see by the maturities in their recent collateralization biz.yahoo.com as such, they should be fairly well insulated from defaults, since it would seem unlikely that a significant number of their customers would have their respective businesses turn down substantially in that short a time