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Ladenburg Thalmann downgrades Fidus Investment to 'neutral' from 'buy'

Ladenburg Thalmann analyst Mickey Schleien downgraded Fidus Investment Corp. to "neutral" from "buy" and removed its price target.

The business development company reported adjusted second-quarter net investment income per share of 34 cents, which missed the consensus estimate of 38 cents and the analyst's estimate of 37 cents. Oaktree Medical's placement on full non-accrual resulted in an 11% quarter-over-quarter decrease in investment income, according to Schleien.

Oaktree Medical is under probe for allegedly improperly billing Medicare and making excessive opioid prescriptions, according to the report.

Merits include relatively low balance sheet leverage, dividend coverage and acceptable net investment income yield, Schleien said. The analyst also pointed out concerns such as investment concentration, credit watch investment levels and payment-in-kind income, and the lack of an incentive fee cap mechanism.