Battle Ground Baby Bond: An 18.2% Yield From Medley Management

The performance of Medley Capital (MCC) has lagged BDC peers over the last 5 years. The stock has lost approximately 3/4 of its value as loan losses have led to a decline in net asset value and multiple dividend cuts. The decline in MCC has been exacerbated by negative investor sentiment. At a recent price of $3.22, MCC now trades at a substantial discount to its $5.63 net asset value. Medley Management Inc. (MDLY) has faced well-deserved investor scorn for its poor performance as MCC's asset manger.
Many investors view MDLY and MCC as bad companies. Two MCC Independent Directors recently resigned. This followed a Delaware court decision that the MCC Directors had violated their fiduciary duties by failing to properly disclose competing offers for MCC. Should high yield investors join the dark side and invest in the Medley LLC 7.25% Notes (MDLQ) of this much despised company?
Despite the setbacks at MCC, MDLY has achieved some success in other areas. Sierra Income Corporation is a non-traded BDC that is also managed by MDLY. Sierra has grown in size and is now almost twice as large as MCC. Altogether, MDLY now manages approximately $2 billion of high fee BDC assets. MCC accounts for $742 million of that total with the rest accounted for by the larger Sierra. MDLY has also successfully managed to grow the pool of private separately managed accounts it manages. MDLY now manages about $2.8 billion of private separately managed accounts. However, these SMAs have much lower... Read more

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