FSCO - CGBDL: It Is A Good Time For Us To Switch Gears

2025-04-24 07:50:50 ET

Summary

• We constantly monitor BDC-issued Baby Bonds due to the issuers' regulatory leverage limitations and attractive yields, using Moody's BDC credit rating methodology for better evaluation.
• Carlyle Secured Lending offers a tempting adjusted NII yield of 13.5% and adjusted expected ROE of 11.8%, but with inherent credit and interest rate risks, too.
• CGBDL, trading at $26.00, offers a 7.50% Yield to Maturity but a less impressive 3.51% Yield to Call, making it less attractive currently.
• Despite recent underperformance, CGBD shows strong long-term returns, suggesting investment potential. BIZD or FSCO used as a hedge/hedging reaction.

Co-authored by Relative Value.

Overview

As active investors/traders, we constantly seek opportunities to profit, and anyone following our articles might have noticed that BDC-issued Baby Bonds are among the fixed-income investment vehicles we constantly monitor in Trade With Beta. We are almost constantly exposed to debt issues we deem undervalued in the sector, so I think it is fair to say these are among our go-to investments. The reasons for this, in short, are the issuers' regulatory leverage limitations and the attractive yields their debt issues offer us. We recently adopted the Moody's BDC credit rating methodology, so this gives us (we hope) an even firmer grasp of what is a "good deal" in the sector. ...

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