In short: New income add: the PFLT 7⅜% unsecured baby bond, debuted last month ~100 bp cheap on BDC headline panic. Issuer is 87% senior-secured first-lien, core middle-market, <1% avg position, ~1–1.5% non-accruals, ~11.5–12.3% portfolio yield — would need ~30% defaults to impair the bond. Likes the bond, not the common (headline risk). Only risk: aggressive rate cuts (100% floating) — which he doubts given the inflation shock.
A "baby bond" is just a bond sold in small ($25-ish) pieces so regular investors can buy it on the stock exchange. This one pays 7.375% and is issued by PennantPark, a lender (a "BDC") that makes senior, first-in-line loans to mid-sized companies. It came cheap because the whole BDC sector has scary headlines right now.
Singh's point: the bond sits ahead of the stock in line to get paid, and the loans behind it are conservative — first-lien, tiny individual positions, very low problem-loan rates. The portfolio would have to suffer ~30% defaults before the bond loses a cent. So he buys the bond for safe ~7.4% income, but avoids the company's stock, which carries all the sector's headline risk. The only real danger is if central banks slash rates fast (the loans float with rates) — which he doubts, given inflation.
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