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, $6 PT)

    August 15, 2018–  AINV posted NII/share of $0.15 for fiscal 1Q19, in-line with consensus but a penny shy of our estimate. We expect revenue to grow more robustly in fiscal 2Q19 as we suspect many of the$359 million of deployments during the quarter closed late in the quarter and thus the company likely did not realize a full quarter of investment income pertaining to additions during the quarter.

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    Ares Capital Corp. (ARCC: Buy, $19 PT)

    August 6, 2018–  For 2Q18 ARCC posted core NII/share of $0.42, a penny ahead of our estimate and two north of consensus. The company increased its quarterly dividend to $0.39/share from $0.38/share and we expect that the dividend will be bumped up by another penny in 3Q19.

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

    August 6, 2018– Barings officially took over TCAP with the ticker and name change now official. The company announced the date of the distribution to be paid for the management contract and also filed for redemption of notes outstanding. As previously stated, we think Barings has a significant advantage with getting a clean slate BDC to invest with from the start. The company will begin to invest in liquid credits initially in the ramp up phase before recycling those assets into direct originations, which is the point at which we think it is likely the BDC’s shares improve where they trade on a NAV-basis.

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    Capital Southwest Corp. (CSWC: Buy, $23 PT)

    August 13, 2018–  For fiscal 1Q19 CSWC earned core NII/share of $0.31, matching our estimate and exceeding the base dividend by $0.02/share. The company declared a $0.60/special dividend for the quarter pertaining to the sale of Titan Liner for which the company realized a gain of $18.6 million or $1.15 per diluted share.

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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, $11 PT)

    August 13, 2018– FSIC posted adjusted NII/share of $0.19 for 2Q18, two cents shy of our estimate and in-line with the quarterly dividend. The portfolio at cost shrank by $66.6 million Q/Q to $3.66 billion from $3.73 billion. Additionally, despite the portfolio shrinking, prepayment-related income (acceleration of unamortized OID and fees) was minimal during the quarter which also had a negative impact on earnings.

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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: Neutral, $8 PT)

    August 6, 2018– For fiscal 3Q18 Gladstone posted NII/share of $0.22, a penny above our estimate as well as the quarterly dividend. The portfolio at cost increased by $6.7 million Q/Q as the increase in repayments offset a generally flat origination volume on the quarter.

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

    August 6, 2018–  Goldman earned $0.50/share of NII in 2Q18, 3 cents ahead of our estimate. The company’s portfolio at cost shrunk to $1.26 billion from $1.28 billion Q/Q although investment income was up, leading us to expect that the increased revenue was likely attributable to some OID acceleration as well as prepayment fees.

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    Golub Capital BDC. Inc. (GBDC: Buy, $21 PT)

    August 13, 2018–  For fiscal 3Q18 Golub earned core NII/share of $0.32, matching both our estimate and the quarterly dividend. We expect that earnings will be generally flat through fiscal 2019 as the company remains very disciplined in its approach to credit and funding costs are not low enough for current and expected yields on investments to improve NII/share meaningfully, as we see it.

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

    August 6, 2018– HRZN earned $0.29/share of NII for 2Q19, ahead of consensus by a penny but just short of the$0.30/share quarterly dividend. We expect that Horizon will earn its dividend next quarter and that increased balance sheet leverage will serve to improve dividend coverage through 2019.

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

    August 8, 2018– MAIN earned NII/share of $0.66 versus our estimate of $0.61 and the quarterly regular dividend of$0.57 which was increased to $0.59/share for 4Q18. Management guided towards lower dividend income going forward and while we think earnings will be lower than 2Q18 levels they will likely be high enough on a recurring basis to permit two more base dividend increases during 2019, in our opinion.

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    Medley Capital Corp. (MCC: Neutral, $3 PT)

    August 15, 2018– MCC earned $0.02/share of NII, drastically below our estimate of $0.13 and the dividend of $0.10. The company still declared a $0.10/share dividend going forward, although we do not expect that earnings would be above $0.05/share if MCC were to remain a standalone entity.

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    Monroe Capital Corp. (MRCC: Buy, $16 PT)

    September 10, 2018–  Monroe offered $60.0 million of 5.75% five-year unsecured notes with the underwriters being granted a 15% overallotment which we expect to be taken up in full. With the overallotment exercise and fees paid to underwriters, we model net proceeds to Monroe to total $66.5 million.

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    Oaktree Specialty Lending Corp. (OCSL: Neutral, $5 PT)

    August 13, 2018–  Oaktree earned $0.10 for the 6/30/18 quarter versus our estimate of $0.11 and the quarterly dividend of $0.095/share which was held flat with the quarter prior. The company continues to rotate out of legacy Fifth street assets at a brisk pace with $536.0 million in non-core assets exited at par or above marks. Of this total $179.0 million was sold alone in fiscal 3Q18 with $42.0 million of the total being non-interest bearing, with $135.0 million of non-interest-bearing assets remaining.

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

    August 7, 2018–  OFS posted NII/share of $0.34 for 2Q18, matching the dividend and exceeding our estimate by a penny. Increases in fee income drove the increase with fee income totaling $406,000 compared with $46,00 the quarter prior. Fee income and acceleration of unamortized OID will likely contribute positively to earnings in 2019.

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

    August 6, 2018–  OXSQ posted core NII/share of $0.18 versus our estimate of $0.21 and the dividend of $0.20. We had modeled CLO equity estimated additional taxable income (EATI) of $2.3 million on the quarter versus the $1.4 million Oxford recorded. We expect core earnings to trend up in 2H18 from spread compression abating and lower refinance and reset costs and in 2019 from what we expect will be a significant loan market dislocation.

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

    August 31, 2018–  PSEC earned NII/share of $0.22 for fiscal 4Q18 versus our estimate of $0.19 and the dividend of$0.18. Interest income from control investments jumped to $56.1 million from $45.9 million sequentially Q/Q and CLO equity income increased to $34.7 million from $31.3 million Q/Q. While we can understand that resets and refinances in prior quarters drove increased GAAP effective yield on CLO equity and thus more income, we think a quarterly increase of 22% in interest income from controlled investments is worthy of significant skepticism.

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

    August 23, 2018– Saratoga issued $35.0 million of seven-year notes with a 6.25% coupon. The overallotment option for the underwriters is 15% of the base deal, which we expect to be taken down in full given the continued demand for yield by market participants combined with the general safety of RIC debt.

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

    August 9, 2018–  For 2Q18 SLRC had $0.45/share of NII versus our estimate of $0.46 and the dividend of $0.41. We expect that Solar will be able to maintain a stable overall effective yield and that combined with increased balance sheet leverage and ROE serve to boost earnings. Accordingly, we think the dividend can be increased again in 2019 with a comfortably low NII payout ratio of 87% by our estimates.

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

    August 13, 2018–  For 2Q18 StoneCastle earned NII/share of $0.40, two cents ahead of the dividend but a penny short of our estimate. We expect that NII will experience a material lift from the $1.7 million in deferred dividends owed to the company from Chicago Shore.

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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, $10 PT)

    August 14, 2018–  TCRD earned NII/share of $0.31 for 2Q18, above our estimate of $0.28 and the quarterly dividend of $0.27. The beat was primarily driven by prepayment-related income as accretion of discounts and other fees increased to $1.2 million from $700,000 Q/Q and prepayment premiums increased to $300,000 from $100,00.

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    TPG Specialty Lending, Inc. (TSLX: Buy, $21 PT)

    August 6, 2018–  TPG earned $0.56/share of NII versus our estimate of $0.46 as a result of the prepayment of the iHeart Communications ABL which we had previously modeled to prepay in 3Q18. The company will likely earn less prepayment-related income such as fees and accelerated unamortized OID in 2H18, in our opinion, as we expect prepayments to slow down.

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