FSCO - Trying To Catch The BDC Bottom With A Pair Trade (Part 2) - Carlyle Vs. FSCO
2025-04-25 13:06:06 ET
Summary
- Business development companies have recently fallen significantly, presenting a potential buying opportunity, but caution is advised, and hedging with FS Credit Opportunities Corp. is recommended.
- Carlyle Secured Lending Inc. has a 15.36% discount, a 44% asset coverage ratio cushion, and a Baa2 credit rating equivalent, making it a strong candidate for investment.
- FSCO, with a 9.68% discount and an equivalent to an A2 rating, offers a lower leverage and expense ratio, making it suitable for hedging.
- Given the recent market performance, a pair trade between CGBD and FSCO could capitalize on their price deviations and relative strengths.
As you know, until recently, many business development companies, or BDCs, were trading at overvalued levels. We discussed this in previous articles, mentioning names like MAIN, PBDC, CGBD, etc. However, the situation has changed - BDCs have fallen significantly, and now most of them have negative z-scores....
Trying To Catch The BDC Bottom With A Pair Trade (Part 2) - Carlyle Vs. FSCO