Out of the Gate: MCG Capital Downgraded

Jefferies analyst Daniel Furtado downgraded the stock to "Hold" from "Buy," following news that MCG was unable to renew a $200 million credit line. Instead, Furtado said, the lender has granted MCG a six-month extension to pay off the outstanding balance.

"We believe the loss of this line may reduce returns as the demands for liquidity from normal operating activities will have to compete with the $111 million in liquidity necessary to repay the outstanding balance," Furtado wrote in a client note.

Based on MCG's current portfolio, Furtado estimates an annual dividend of $1.32 per quarter, 25 percent lower from the current rate of $1.76.

"Considering the constraints on MCG capital levels ... we would not be surprised if the dividend was reduced below our $1.32 per share dividend calculation," Furtado wrote.

Furtado also cut his price target to $9 from $15.

Shares declined 44 cents, or 4.8 percent, to $8.63 in morning trading. The stock finished Monday at $9.09.