In the recent past, Fifth Street Asset Management Inc (NASDAQ:FSAM) has not been in good records in regards to its loan profile and management turnover. The situation has resulted in considering a sale, still under exploration. Apparently, the Greenwich, Connecticut-based firm had explored a sale last year but it did not materialize.
However, though the exploration is still at its early stages, it is expected that this time the sale will attract potential bidders. Sources familiar with the matter have revealed that the company has taken up the task with Morgan Stanley, who will help in fishing out would-be buyers.
The specialty lender has a complicated structure
Many reasons are cited for the exploration of a sale, among them the souring of loans, which have been performing below expectations. The company’s assets are mostly in custody of two publicly-traded investment vehicles commonly known as business-development companies (BDCs).
Surprisingly, the BDCs are ever indebted of small- to midsize companies. They have been avoiding corporate taxes and will only pay out income to shareholders. Apparently, a majority of the BDCs’ stock and other large stakes are iowned by Leonard Tannenbaum; the founder and Chief Executive of Fifth Street.
Fifth Street has had more challenges to deal with
Apart from the deterioration in their portfolios, Fifth Street, which manages $4.7 billion in corporate loans and other savings, has had enough challenges to deal with. The company’s Senior Floating Rate was at $240 million of market value, which was below the reported net asset value of $320 million.
The company has also suffered the exit of its Co-President Patrick Dalton who also declined to take up any roles leading Fifth Street’s BDCs. He was just three months into the job. However, he did mention that his exit had nothing to do with the company’s operational or financial status.
A day earlier into Dalton’s exit, Nathaniel August, an independent director who has been on the board since 2016, had also handed in his resignation. Meanwhile, FSAM’s stock closed at $4.85 witnessing an increase of $0.55 or 12.79%.