Financial Services


Jonathan C. Rich

Executive Vice President, Head of Investment Banking

A 20 year veteran of Wall Street, Mr. Rich is the Head of Investment Banking and an Executive Vice President at National Securities since 2009. Mr. Rich worked for First Colonial Securities Group, a 13 office, 150 employee regional firm based out of Florida and New Jersey, first as a Senior Vice President and then as Managing Director in its Corporate Finance Department. Since his tenure at National, the team at National has been responsible for successfully sourcing, structuring and completing capital markets transactions within the healthcare, technology, energy and financial services sectors for emerging growth issuers with total transaction volume in excess of $3 billion. Mr. Rich received his M.B.A. from Fordham University Gabelli School of Business and his B.A. from Tulane University. Mr. Rich holds his Series 4, 7, 24, 53, 63 and 79 licenses.

Financial Services Sector Expertise

The Financial Services sector is a key vertical for National, with a team of banking professionals highly regarded for their deep industry expertise and relationships. Our investment banking activity in this sector mainly includes privately held and publicly traded BDCs, specialty lenders, mortgage REIT’s, investment funds and SPVs focused on equity and debt investments providing competitive yields in a low interest rate environment.

In the past six years, National has led or participated in 100+ transactions including private placements, IPOs, Follow-Ons, CMPOs, RDOs, PIPEs, M&A, and financial advisory.

Completed Transactions


Christopher Testa

Managing Director, Head of Research

Christopher Testa joined National Securities in September 2014 as an equity research analyst covering Business Development Companies (BDC's). Prior to joining National, Chris worked in equity research at Sidoti & Company, LLC covering mortgage and specialty finance. His career began at Boston Provident, LP, a long/short hedge fund specializing in financial services companies where Chris focused primarily on banks, mortgage servicers, and REITs (both equity & mortgage). Chris holds an M.S. in Finance from Pace University, Lubin School of Business and a B.S. from Pace University.

    Financial Services Sector Coverage

    National has a robust and diverse coverage of financial institutions companies with a particular focus on Business Development Companies (BDCs) and Registered Investment Companies (RICs).

    BDCs in particular have grown in number, size, and popularity as US banks have come under increasing regulatory pressure that has curtailed their lending activities and permitted non-bank lenders to thrive in their place. We believe that through independent portfolio analysis, manager selection, assessment of accounting practices, and an examination of capital management policies, investors can continue to find attractive opportunities in the space.

    Apollo Investment Corp. (AINV: Neutral, $18 PT)

    February 11, 2019–  Please note all per share figures incorporate the 1 for 3 reverse split that occurred in November 2018. AINV posted NII/share of $0.45 for F3Q19, a penny ahead of our estimate and matching the quarterly dividend.

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    Ares Capital Corp. (ARCC: Buy, $20 PT)

    February 13, 2019–  Ares had another strong quarter, posting core NII/share of $0.45 versus our estimate of $0.42 and the consensus estimate of $0.41. The earnings beat came as a result of the company having $2.7 billion of commitments on the quarter with the economics of the origination fees recognized up-front, driving higher fee income and thus the earnings beat.

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    Barings BDC Inc. (BBDC: Neutral, $13 PT)

    November 13, 2018–  Barings wrapped up its first partial quarter as external manager to the formally internally managed TCAP vehicle. As a reminder, Barings officially took the helm on 8/3/18. NII/share came in at ($0.59) although this was largely from the compensation packages paid to the Triangle executives leaving. From 8/3/18-9/30/18, Barings earned NII/share of $0.06/share. The company declared a$0.10/share dividend for 4Q18.

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    Capital Southwest Corp. (CSWC: Buy, $24 PT)

    February 6, 2019–  For F3Q19, Capital Southwest earned $0.40/share of core NII, two cents above our estimate. The base dividend was increased to $0.36/share from $0.34/share Q/Q. We expect there is still a good runway for earnings growth ahead as the company posted core NII ROAE of 8.7% with D/E of 0.63x. We project that this number can get close to double-digits as the company nears 0.85x D/E in F3Q20, well under the Board limit of 1.50x (167% asset coverage).

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    Eagle Point Credit Company (ECC: Buy, $24 PT)

    August 16, 2018– For 2Q18 ECC earned NII+realized gains (earnings) per share of $0.34 versus our estimate of$0.35. The earnings were lower due to the $0.20/share impact of the issuance of the ECCX notes (with debt issuance costs being recognized up-front as opposed to amortized over the expected life) as well as the costs associated with the redemption of ECCZ notes.

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    FS Investment Corp. (FSIC: Buy, $10 PT)

    November 12, 2018– FSIC earned adjusted NII/share of $0.23 for 3Q18 compared with our estimate of $0.21 and the quarterly dividend of $0.19/share. The incentive fee was not earned on the quarter as non-accruals at cost increased to $210.4 million or 5.7% of the portfolio from $22.7 million or 0.6% of the portfolio Q/Q.

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    Garrison Capital Inc. (GARS: Buy, $11 PT)

    August 13, 2018– Garrison earned adjusted NII/share of $0.27, a penny shy of the quarterly dividend and 3 cents below our estimate. The company is expected to resume earning its incentive fee in 4Q18 which would likely induce a dividend cut.

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    Gladstone Capital Corp. (GLAD: Sell, $7 PT)

    February 11, 2019–  Gladstone’s NAV/share decreased by 4.1% on the quarter to $7.98 from $8.32 after falling by 6.1% Q/Q the quarter prior. Francis was marked at 27% of cost last quarter and during the 12/31/18 quarter GLAD recognized a $26.9mm realized loss on Francis. With the chapter 11 restructuring, Gladstone’s $27.0mm of debt in Francis was rolled into $1.35mm of equity and the company also purchased an additional $5.0mm of equity in the new entity, “FES Resources.”

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    Goldman Sachs, BDC, Inc. (GSBD: Buy, $23 PT)

    November 5, 2018–   For 3Q18, GSBD posted $0.54/share of NII, three cents above our estimate and comfortably above the $0.45/share quarterly dividend. Sales and repayments totaled $111.1 million on the quarter, up from $78.8 million Q/Q and we expect that this increased prepayment activity drove acceleration of unamortized OID and the earnings beat.

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    Golub Capital BDC. Inc. (GBDC: Buy, $22 PT)

    February 11, 2019–  GBDC earned core NII/share of $0.32 for F1Q19, matching our estimate and the quarterly dividend. The company didn’t recognize any dividend income from the SLF during the quarter although earnings were not impacted due to the incentive fee structure. Incentive fees declined to $2.0mm from $3.7mm Q/Q.

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    Horizon Technology Finance Corp. (HRZN: Neutral, $11 PT)

    November 2, 2018– Horizon posted NII/share of $0.30 for 3Q18, matching both our estimate as well as the quarterly dividend. The company had $24.2 million of originations versus sales and repayments of $11.9 million.

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    Main Street Capital Corp. (MAIN: Neutral, $38 PT)

    November 5, 2018– Main Street posted NII/share of $0.63 for 3Q18, matching our estimate and comfortably ahead of the$0.57/share regular quarterly dividend. The company guided towards DNII/share (NII + share-based compensation) of $0.63-$0.65 for 4Q18, which we think is a roughly $0.04/share difference from NII (NII/share likely $0.59-$0.61).

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    Monroe Capital Corp. (MRCC: Neutral, $13 PT)

    November 9, 2018–   Monroe earned adjusted NII/share of $0.38 for 3Q18, two cents above our estimate and three cents above the quarterly dividend. However, the earnings beat came from the incentive fee not being earned at all during the quarter, which we model to have positively impacted earnings by $0.07/share.

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    Oaktree Specialty Lending Corp. (OCSL: BUY, $7 PT)

    February 11, 2019–  OCSL earned NII/share of $0.12 for F1Q19, a penny ahead of our estimate and comfortably above the $0.095/share quarterly dividend. Much more significant than the earnings beat, in our opinion, was that NAV/share improved to $6.19 from $6.09 Q/Q. Non-accruals (including PIK) appreciated by $47.1mm Q/Q.

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    OFS Capital Corp. (OFS: Buy, $15 PT)

    November 5, 2018–  OFS earned $0.35 of NII/share for 3Q18, matching our estimate and exceeding the quarterly dividend by a penny. We think that earnings will be up a couple cents in 4Q18 as a result of OID acceleration before further portfolio growth and balance sheet leverage increasing through 2019 drive further earnings growth.

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    Oxford Square Capital Corp. (OXSQ: Sell, $5 PT)

    November 5, 2018–  For 3Q18, OXSQ posted estimated core NII/share of $0.20 versus our estimate of $0.19. Core numbers were not provided during the quarter in both the 8-K as well as the presentation and we are not sure why. However, we added back the $1.2 million in CLO equity reductions to cost in order to approximate estimated additional taxable income (EATI) and arrive at our core figures. This is unusual as OXSQ has reported this number consistently and dividend payout requirements for ’40 Act companies is based upon taxable income, not GAAP earnings or NII.

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    Prospect Capital Corp. (PSEC: Sell, $4 PT)

    February 11, 2019–  Prospect earned NII/share of $0.22 for F2Q19, a penny shy of our estimate as expenses were 8.4% above our forecast despite revenues being 1.9% higher. We had modeled $18.5mm of control investment dividend income which came in at $13.0mm but “other income” from control investments was $15.7mm versus our $2.8mm estimate as PSEC had a significant return of capital on its equity in NPRC and amended its loan terms for a $12.8mm structuring fee. We think that with cap rates rising future sales will generate less gains for PSEC from NPRC and that the most of the other income is also likely to be non-recurring, which points to pressure on earnings, in our opinion.

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    Saratoga Investment Corp. (SAR: Neutral, $24 PT)

    January 15,2019–  For fiscal 3Q19, SAR posted adjusted NII/share of $0.65 versus our estimate of $0.61 and consensus estimates of $0.62. The earnings beat was largely attributable to significant originations of $73.7mm of which half of the origination fees are recognized up-front.

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    Solar Capital Ltd. (SRLC: Buy, $25 PT)

    November 6, 2018–  Solar posted $0.44/share of NII for 3Q18, above the $0.41/share quarterly dividend but short of our $0.46/share estimate.  The portfolio at fair value was up modestly on the quarter to $1.41 billion from $1.40 billion Q/Q. The company has been and we expect will likely continue to be one of the most disciplined underwriters in the BDC sector.

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    StoneCastle Financial Corp. (BANX: Buy, $25)

    November 5, 2018–   BANX posted NII/share of $0.40 for 3Q18, 2 cents per share shy of our estimate but comfortably above the $0.40/share quarterly dividend. The earnings were below our expectations due to the portfolio being flat on the quarter.

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    TCP Capital Corp. (TCPC: Buy, $19 PT)

    August 13, 2018– For 2Q18, TCPC earned NII/share of $0.41, a penny above our estimate and well above the$0.36/share quarterly dividend. TCP has not earned less than $0.37/share since 2Q13. We regard the dividend policy as too conservative, but nonetheless respect TCP avoiding a situation where the dividend might have to potentially be cut. As a result, we don’t expect a base dividend increase unless credit spreads widen materially and for a sustained period of time.

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    THL Credit, Inc. (TCRD: Neutral, $9 PT)

    November 14, 2018–  TCRD’s NAV/share decreased to $10.10 from $10.23 Q/Q largely pertaining to write-downs from Charming Charlie’s and LAI. Although these are not currently on non-accrual, previous non-accrual Loadmaster Derrick’s revolver was also placed on non-accrual during the quarter, bringing the cost basis of this investment’s non-accruals up to $13.0 million from $8.4 million Q/Q.

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    TPG Specialty Lending, Inc. (TSLX: Buy, $23 PT)

    November 12, 2018–  TPG posted NII/share of $0.50 for 3Q18, matching our estimate but significantly above the regular dividend of $0.38/share. The company alluded to potentially raising the regular dividend and we think the increased balance sheet leverage and ROE would likely support an increase. However, we think TSLX has proven to be very conservative with distributions and thus for the time being we think the base dividend will be flat with more variable supplemental dividends paid so that the company meets its required payout ratios in accordance with the ’40 Act.

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    XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT: Buy, $13 PT)

    October 29, 2018–  We are initiating coverage on XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) with a BUY rating and $13 price target. The company is sub-advised by Octagon Credit, a leading CLO and credit investor in the US. Despite the small size of XFLT, it is worth noting that Octagon Credit has just over $20 billion of AUM and is thus able to leverage its extensive knowledge of credit markets for the benefit of XFLT shareholders. Octagon has been a top five CLO issuer since the financial crisis.

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