Insider Bet on Business Debt Prospects

Chidem Kurdas
A former Fortress Group manager and current chief executive of Garrison Capital, Joseph Tansey, recently purchased Garrison shares. This has a wider implication beyond the future of the stock.

He added to an existing holding early this month, ending with almost 584,000 shares. He paid between $14.14 and $14.55 per share. In its initial public offering in April, the business development company was priced at $15 a share. The price right now is $14.3. So Mr. Tansey has a small paper loss.

He clearly believes the stock is under-valued and should rise, as a September post on Seeking Alpha argued.

But his willingness to up his Garrison bet – instead of, say, just buying an index to profit from the rising market – also indicates that he foresees investment opportunities.

Mr. Tansey is a loan specialist. At Fortress he managed loan restructuring and lending businesses and before that worked on special situations and mortgages at Goldman Sachs’ Asia desk.

Garrison can invest in equity as well as debt but most of the portfolio consists of small company senior first lien loans. The legal status of such loans keeps down the risk in bankruptcy. Nevertheless, the CEO’s stock buying suggests a forecast of lending opportunities in a relatively benign business environment.

Insider buying is typically considered a positive indicator for a stock. In this case it looks like a positive indicator for the credit market, unless Mr. Tansey has plans to use his distressed investing skills.

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