Dream Finders Homes LLC: IPO Completed

Pandemic or no, Florida home builder Dream Finders Homes LLC found a way to go public, selling 9.6mn shares at $13 a share to the public and taking the ticker DFH. Jacksonville Daily Record contributing writer Mark Basch wrote “not only is Dream Finders selling its stock in a strong market for its industry, but IPOs in general have been surging. Major stock market indexes have reached record highs recently, but stocks of home builders are doing even better than the overall market.”

This is good news for the only BDC with exposure to Dream Finders: PhenixFIN (PFX) – the former Medley Capital – which holds $4.5mn of Preferred Series B, which is accruing at 8.0% per annum in Pay In Kind (PIK). (The BDC previously was also a senior lender to the company but a remaining $1.5mn senior term loan was repaid in the IQ 2020).

Till this IPO Dream Finders was underperforming from IVQ 2019, when the PFX discounted its preferred by -21%. We downgraded the company from CCR 2 to CCR 4 on our 5 point scale, but moved the rating up to CCR 3 in the IIIQ 2020 as the discount shrunk to 13%. We’ve now returned Dream Finders to performing status (CCR 2) . Reading through the company’s public filings, we expect the preferred will get repaid by 2022 in full, including all accrued dividends.

This is good news – albeit on a small scale – for PFX which has been beset for years by multiple credit trouble spots. The good news coming out of the home builder will not affect the BDC’s investment income but should result in a write-up of the preferred value by over $0.5mn in the IVQ 2020 results when published.