Stonegate Capital Partners Updates Coverage on Alcentra Capital Corporation (NasdaqGS: ABDC)

DALLAS, TX / ACCESSWIRE / September 6, 2017 / Stonegate Capital Partners initiates coverage on Alcentra Capital Corporation (NASDAQ: ABDC):

COMPANY DESCRIPTION

Alcentra Capital Corporation is a Business Development Company (BDC) specializing in investments in lower middle-market growth companies. The Company invests in the form of senior secured debt, second lien debt, subordinated debt and, to a lesser extent, minority equity investments. The Company is externally managed and offers debt and equity funding solutions to North American lower middle-market growth companies. Its investment advisor, Alcentra NY, LLC is a credit-focused investment boutique with a primary focus in sub-investment grade credits. Alcentra Ltd., the parent company of Alcentra NY, LLC, is a subsidiary of BNY Mellon.

SUMMARY

Alcentra Capital is externally managed by Alcentra NY LLC, whose investment professionals possess collective experience of more than 60 years of investing and lending to middle-market companies across various economic cycles of the market.

Alcentra’s investment strategy focuses on lower middle-market growth company investments. Capitalizing on this often neglected market is a central strategic principle for the Company. Banks have been vacating the lower middle-market space for several years providing Alcentra ample opportunity to expand its portfolio.

Alcentra Capital Corporation offers debt and equity investments to companies with annual EBITDA of $5M to $25M and/or revenues in the $10M to $250M range. Alcentra’s usual investment size is typically in the $5M to $15M range.

Investments take the form of senior debt, unitranche, second lien, subordinated debt and, to a lesser extent, minority equity investments.

Alcentra’s point of differentiation is the fact that it focuses on growth companies, which Alcentra defines as companies that traditionally have revenues between $10M and $100M and the potential to grow at 2x or 3x the US GDP growth rate.

The Company’s portfolio is well diversified with 30 companies representing 20 industry sectors. Healthcare Services is the single largest industry sector exposure, representing ~17% of the portfolio. Exposure to the oil & gas industry was limited to approximately 3.8% as of June 30, 2017.

All portfolio companies are selected through a detailed screening process, comprised of a credit analysis, review of historical and projected financial performance, and an evaluation of business models.

Alcentra has an advantage over other BDC’s in terms of deal-flow because of the Company’s investment advisor and its connection to BNY Mellon’s Wealth Management group. Alcentra’s investment advisor has developed a strong and wide reaching relationship network that provides a consistent influx of deal-flow. Alcentra is able to benefit from BNY Mellon’s Wealth Management group, which upholds close associations with many owners of privately held businesses in the form of their high net-worth clientele.

Since Alcentra’s May 2014 IPO, the Company has not had any portfolio companies on non-accrual status until recently; as of 6/30/17, Alcentra reported two investments on non-accrual basis.

We employ a scenario analysis using relative valuation frameworks with details on page 7 of the report. Currently, Alcentra is trading at a P/NAV of 0.84x vs. comps trading at a median P/NAV of 0.89x. Alcentra is trading at essentially the same multiple, while its dividend yield is 12.7% vs. the median of its peers of 9.1%. Using a P/NAV range of .95x to 1.05x, we arrive at a valuation range of $12.09 to $13.36, with a midpoint at $12.73.

The full report can be accessed by clicking on the following link:

http://www.stonegateinc.com/reports/ABDC_Sept_2017_Final.pdf

About Stonegate Capital Partners

Stonegate Capital Partners is a Dallas-based corporate advisory firm dedicated to serving the specialized needs of small-cap public companies. Since our inception, our mission has been to find innovative, undervalued public companies for our network of leading institutional investors who seek high quality investment opportunities.

SOURCE: Stonegate Capital Partners

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