This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Fifth Street Finance Corp. Releases Its Newsletter For June 2013

Stocks in this article: FSC

WHITE PLAINS, N.Y., June 20, 2013 (GLOBE NEWSWIRE) -- Fifth Street Finance Corp. (Nasdaq:FSC) released its June 2013 newsletter today.

Positioning for Higher Interest Rates while Building the Platform

Stock and bond markets have had a mixed reaction to potentially lower levels of quantitative easing and improving economic data in the U.S. Bonds have sold off while the reaction of stocks has been more muted due to potential headwinds for economic growth from higher interest rates. This dynamic has caused Business Development Companies (BDCs) and other stocks with relatively high dividend yields to generally underperform the broader stock market indices in recent weeks.

Although BDC stocks may have sold off due to investor concern over higher interest rates, the impact should not be uniform across the sector. Several BDCs, including Fifth Street, have taken steps to prepare their balance sheets for higher interest rates by investing in floating rate assets and issuing fixed rate debt. As of March 31, 2013, 74% of our debt investments were floating rate and over 90% of our capital was not directly sensitive to interest rates, taking into account our equity and unsecured notes offerings in April and May.

We expect our portfolio to be incrementally more profitable as short-term interest rates rise because the interest rates on our floating rate loans should reset higher while a portion of our borrowing costs remain at fixed rates. Incremental interest income increases more as interest rates rise because some of our loans have minimum base rates or floors. As interest rates increase above the floors, the level of incremental interest income increases dramatically. For example, a 200 basis point increase in the base rate would generate an annualized $8.4 million increase in interest income offset by an annualized $7.5 million increase in interest expense for a net change of $0.9 million based on our balance sheet as of March 31, 2013. However, if interest rates increase 300 basis points, interest income would increase by an annualized $20.1 million offset by an annualized $11.2 million increase in interest expense for a net change of $8.9 million based on our balance sheet as of March 31, 2013.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs