BDC Fact #10

After a short hiatus, our friends at Canada’s own Rogue Crown Corporation™ have given us some new material to share with y’all (see prior post “Next week is ‘BDC Facts & Figures’ Week” December 2-07).

For 2007, the BDC sub debt group now admits to having authorized a whopping $230.9 million of transactions, up an inexplicable $52 million (29%) as compared to the $178.7 million authorized in 2006. On the disbursed capital front, it appears that only $117.2 million of the $230.9 million approved by the BDC’s sub debt group has been actually drawn by the would-be borrower (an 8% increase vs. 2006). Curious.

With 49% of their authorized 2007 sub debt loans undrawn as at the end of the calendar year, let’s hope as taxpayers that bonuses are being paid on “drawn capital” and not “authorized loans” as they were in years gone by. A policy that’s a definite outlier in the marketplace.

The BDC’s 2007 deal sizes aren’t tiny, either. With 78 deals in excess of $1 million authorized – 34 of which were $2 million and larger – there’s enough there to warrant the attention of most private sector ventue and sub debt lenders across Canada.

If you are an existing private sector debt player thinking about swinging a syndication opportunity with this team, I don’t mean to dash your hopes but…. Of the $230 million authorized by the BDC, only $8.8 million of lead BDC sub debt transactions involved private sector lenders. A mere 3.8%.

Could it be that the pricing and terms are so off-market than no one in the private sector can stomach the deal structures – if in fact they are invited in at all? Doesn’t the Act of Parliament authorizing the BDC’s reason for being require them to be “complementary” to the private sector? (I’ll save you the suspense of punching through to the link: Yes, it does.)

Whatever the reason, the growing marketshare of BDC’s sub debt group certainly demonstrates their continued “crowding out” of the private sector. When will it end?

MRM