The video this transcript is based on appeared on Nov 11.
NEW YORK ( TheStreet) -- Markets remained flat Monday as traders await earnings from major retailers. Grier Eliasek, President of Prospect Capital, talks BDCs.
Welcome to after-hours action I'm Greg Greenberg from TheStreet. After last Friday's melt up stocks less ebullient Monday, before we wrap up the market one prominent name moving in extended hours trading is News Corp which missed on the top line with its third-quarter earnings and bottom line by 2 cents. News Corp (NWSA) is down 6 percent last check. Now let's wrap up the markets, stocks finished fairly flat Monday as investors await earnings reports from major retailers they may offer additional signals about the strength of the US economic recovery. S&P was up one measly point while the Dow added 21 the Nasdaq was up two points to $39.20. In corporate news Transocean (RIG) finished 4 percent higher is the world's largest drilling contractor, reached an agreement with call icon to pay a three dollar dividend and reduce the number of seats on its board. Meanwhile Macy's (M) shares were up 2 percent had a bit third-quarter results on Wednesday Macy's posted in an 8/10sof a percent drop in second-quarter same-store sales too tepid consumer demand. Finally Twitter shares rose three percent today to forty three bucks, after the stocky back to sum up its first-day gains on Friday. Now there are a lot of ways to measure the health of the economy from retail earnings like we just mentioned to government data any number of anecdotal indicators one at that I like is asking the head to BD Cesar, business development companies, about the lending environment. Are businesses forming, are they finding places to invest and if so where? Greer is the president of a prospect Capital Corporation and I'm hoping he can answer some of those questions for me I'm sure we can welcome Greer.
Before we get started and find out about the lending environment the default rate, tell me a bit more about Prospect.
Sure Prospect is one of the largest business development companies. We are one of the two largest in the industry, we have a market capitalization in excess of $3 billion, and what we do is we deliver an attractive yield we currently pay about twelve percent dividend yield to investors, which is a pretty attractive yield in the current yield starved environment that we've been in for a while. What we do is we focus on middle-market, private, medium-size companies and we lend the money, and we acquire companies as well and manage that for current cash flow in attractive yield that we then payout to our investors in a tax-efficient manner. By paying at least ninety percent of our income to up to our investors we avoid corporate taxation.And you have about 130 companies in your portfolio which ones are doing the best right now because you run the gamut from real estate energy retail truly crossed the border what's doing the best? Sure well but we're very pleased to report that we haven't had a deal going non-accrual in our book in in over six years so I could say that all are doing well as we certainly watch some more carefully than othersthere certain areas that are performing particularly well for example, real state is one area that's attracting attention we've been investing quite a bit in multifamily real state, garden-style apartment complexes predominately where you see it's difficult for individuals to obtain mortgage. Vacancies are at close to an all-time low rents are up it's an attractive time to invest in that sector. Of course our portfolio is very well diversified across a number different industries and that's one of things that allows us to sleep well at night now warning about how one particular sectors doing. What's the credit quality like right now in the market? Are companies defaulting? I know you just that real estate is doing well what about some other sectors and terms if you're investing our is there a demand, are people asking you for loans? There is a demand a significant demand and what's happened is more regulation has occurred with banks in our country, and we all a study the reasons why for several years now. That's worked to the benefit of nonbank companies like Prospect Capital and there are new regulations have come on line, impacting banks that limit the amount of money that they can provide to smaller private companies. That creates a vacuum allowing us to step into it to meet that unmet demand. Do you think this is a byproduct that the financial crisis when you had too many a problems with the too big to fail banks which we're still seeing when you think about what's happening at JP Morgan right now in all the fines that they're being, that the government is chasing down for? It's a byproduct of that, but to a certain extent, it's it's been there for a while in the grow the business development companies has been occurring for many years and in fact the last couple a decade since the rules were propagated 1980 impacting and creating our industry. Banks really are good at making collateralized loans to businesses and consumers not very good, allowed under the regulators to make cash flow loans that are where our business comes in and has a ready market.