More Evidence of Corporate Credit Crunch Continuing (TLI)

LMP Corporate Loan Fund Inc., (NYSE:TLI) is a closed-end fund that makes money off corporate loans participation.  If you think the credit fallout isn’t weighing in on corporations, the news out of the closed-end fund today could be implies that companies are starting to feeling the crunch and that the trend isn’t a one-time event. 

LMP Corporate Loan Fund, Inc. announced a distribution from income of $0.089 per common share for the month of November 2007. This distribution is payable on November 30, 2007, to shareholders of record on November 23, 2007. The ex-dividend date is November 20, 2007.  Sounds harmless enough…. until you look at its history.

This has had a $0.092 dividend every month since January of this year.  The dividend had been rising for much of 2006 as the corporate climate was still incredible.  In June, 2006 the dividend was merely $0.0815 for the month and it was raised four different times before that $0.092 was reached.  Now that appears not to be stable.

Here is its statement:  The Fund determined that a reduction in the rate is appropriate to account for factors that negatively impact the Fund’s cash flow, including the decline in cash flow available from leveraged loans as the LIBOR rate declined in response to the recent FOMC interest rate reductions, along with an increase in borrowing costs associated with a widening of credit spreads in the Fund’s auction rate preferred stock issues. As a result, the Fund has decreased its distribution to more closely approximate the expected level of cash flow generated by the portfolio.

TLI shares closed down 1.1% at $11.75 today, and its 52-week trading range is $10.81 to $15.00.  This still has roughly a 9% dividend yield, although this has sold off about 8% since the highs of October.

Jon C. Ogg
November 15, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.