Newtek Business Services (a BDC) Sells a Short Duration $25 Note Issue

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Newtek Business Services (ticker:NEWT) is selling a small 7.5% $25 note issue.  These notes mature in 2022.  Newtek, while a Business Development Company, only converted to a BDC this year after being in business for 12 years as a C-Corp. Newtek is the largest non bank generator of Small Business Administration (SBA) loans which they service, but do not carry on their balance sheet. Additionally they have a highly diversified loan portfolio of loans made to small and mid level businesses. Currently they have 854 loans in the portfolio with an average loan size of $173,000. These loans have been made in all 50 states and to companies in 68 different industries.

As a BDC Newtek is required to carry $2 in assets for every $1 in debt. This is a requirement of the SEC Act of 1940, Section 18 which covers all closed end investment funds (which includes BDC’s). This is an added level of safety for the BDC debt investor.

Newtek common stock has been one of the only BDC’s to gain in price year to date and currently has an estimated current yield on common shares of over 10%.

We will be purchasing some shares of this issue in both the 2014/2015 Short-Medium Duration Income Portfolio as well as the 2015 Blended Income Model Portfolio. It is anticipated these shares will trade in the next 2 weeks or so.

Details of the issue are here.

 

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