News, Analysis, Views
The BDC Credit Report- a publication of the BDC Reporter- tracks hundreds of under-performing public and private companies in which Business Development Companies have invested debt and/or equity and updates readers on all news developments on a daily basis. In addition, the BDC Credit Reporter provides data on the amount and type of BDC exposure and the prospects for incurring realized losses in the future.
At July 31, 2018, we are tracking 220 different Watch List companies.
TOWN OF THOMPSON — Resorts World Catskills' entertainment village is on track to open in December. The village will be a 124,000-square-foot,
FSIC II: The heavily indebted BDC is changing its business strategy. The only BDC with exposure at June 2018 is FSIC II with $10mn in second lien debt, written down 74%.
Comsat, a satellite connectivity provider for the U.S. Department of Defense (DO)D), signed a seven year Master Distribution Agreement (MDA) with Avanti Communications. The agreement will allow Comsat
FSIC, FSIC II, FSIC IIi, FE Energy & Power:
PFLT: The company has negotiated a new $40mn ABL facility, which will be used to "refinance existing indebtedness" . Likely good news for PFLT - which has a $5.0mn First Lien loan marked down 35% with a CCR of 3. This might result in a $1.7mn Unrealized Appreciation mark -up in the IIIQ 2018 results.
CGBD: The only BDC with exposure - all in senior debt in two loans is Carlyle Group' s CGBD, with $36mn at cost. As of June 2018, one $33mn loan was on non accrual and written down (69%). A second - performing - loan for $4mn was carried at par. The news of the recall is likely to increase pressure on the borrower and reduce further the likelihood of much recovery, even at the first lien level.
Z Capital Group to take ownership of 78-unit Mexican restaurant company through asset sale
GECC,TCPC: GetSAT and Avanti Communications have successfully demonstrated the outstanding potential of Satellite on the Move (SOTM) capabilities.
FSIC, FSIC II, FSIC III,BDCA [$84.4mn First Lien + Subordinated Debt]: The Layoff.com posts report that lay-offs are going on at the company. No external confirmation. The BDC Reporter adds: The subordinated debt at the Company is carried at a 20% or so discount and the senior debt at a 5% discount, two quarters after being valued at par. This information - though not reliable - suggests reorganization still underway.
GSBD [$9.3mn At Cost Equity]: The public oil firm says drilling results in southern Alberta have "exceeded expectations". The BDC Reporter adds: This may be good news for GSBD's equity stake in the publicly traded company, which was carried at a (87%) discount at 3/31/2018.
ACSF,Cion, Crescent, BDCA: The CEO discusses the coal company's prospects and debt financing. The BDC Reporter adds:
FSIC, FSIC II, FSIC III [$62mn First and Second Lien Debt]: An article mentions two closed Phoenix restaurants for Logan's Roadhouse. The BDC Reporter adds: Presumably part of the restructured chain's new plans.
AINV, Cion: The U.S. Bankruptcy Court in the Elements Behavioral Health case has (i) approved the asset purchase agreement (“APA”) between the Debtors and Project Build Behavioral He
AINV,CION: The bankrupt company is close to being acquired, with senior lenders supposedly becoming owners.
PFLT,BDCA,CMFN: The news story reports that Empire Resorts, which owns Montreign and the Resorts World Catskills has been under-performing since opening. Moreover Moody's has downgraded the debt to Caa1.
ABDC, FDUS [$11mn Debt & Equity] : Specialty retailer Palmetto Moon LLC has named Adam Stone as CEO. Stone is succeeding Eric Holzer, who is leaving the position to" spend more time with his family". The BDC Credit Reporter adds: The BDCs relationship with the retailer began in late 2016 but the equity has been written down since the IIQ of 2017, suggesting some sort of under-performance. This might explain the advent of a new CEO and why we added Palmetto to the Watch List.
MVC: On July 17, 2018 Crius Energy Trust issued a press release following a sharp drop in the price of its publicly traded units saying they had no explanation for the drop. In subsequent days, the units have rallied, regaining most of their losses and closing at $4.73 at the close on 7/19. The BDC Credit Reporter adds: MVC owns 3,282,982 shares in Crius, with a cost of $25.9mn and an April 2018 value of $19.4mn. Just a glance at the chart for the past year shows the units have been in constant decline at this company, down over (40%). We reviewed the latest quarterly financials and slide deck dating back to the IQ 2018. There is no obvious smoking gun as sales and Adjusted EBITDA are on the upswing; debt is modest (most owed to MVC Capital in a subordinated loan on U.S. Gas & Electric - which the BDC sold to Crius last year and for which MVC took back the loan, which bears 9.5%. It's early days to worry but given that MVC has more than $60mn in exposure at cost to Crius (that's 15% of total assets at cost and a quarter of net assets) this bears watching. The units were already written down by ($6.5mn) as of April 2018. Given the subsequent price drop - if nothing changes - expect a further Unrealized Depreciation of ($4mn) or more. However, the debt to USGE should remain unchanged, valued at par, based on current information.
BKCC,CPTA,CMFN,PNNT,Sierra. [$100mn at cost]: The company provides fracking services and has just been "acquired by a publicly traded blank-check firm called Matlin & Partners Acquisition Corp. that's headed by Wall Street investor David Matlin, who has a reputation of targeting distressed companies" Total enterprise value - according to a press release - is $588mn. The BDC Credit Reporter adds: For the 5 BDCs which have provided debt and equity to the company, whose value dropped into Watch List territory in 2016 before recovering in more recent quarters, this is an excellent outcome. We expect the $79mn of first lien BDC term senior debt owed, with a maturity of 2022 and an A and B format to be repaid as part of the transaction. That's part of a $198mn tof Term and Revolver debt being paid off in full. Moreover, the BDCs - to varying degrees- have equity stakes. Although those were already written up at March 31, 2018, the value might still increase with this deal. We don't have enough data to hazard an estimate as to how much though. The biggest beneficiaries are BKCC and CPTA, who have a combined $49mn in FMV in Class A equity stakes alone. Those are material numbers for both BDCs. The press release, though, suggests "existing shareholders" will not be selling out but "rolling 100% of their equity" into a 34% stake in the new soon to be public entity which will keep the US Well Services name.
OCSI, WHF [Cost: $26mn]: Cetera Financial Group, owned by Aretec Group Inc., has been acquired by private equity firm Genstar Financial following an auction. According to another article, "the deal marks the completion of Cetera's review of its capital structure, which the company publicly acknowledged in February. LPL Financial and Lightyear Capital, the owner of Advisor Group, had also expressed interest in a potential deal that was speculated to value Cetera at about $1.5 billion". There are two BDCs with exposure to the parent. OCSI recently booked a senior loan at LIBOR + 425 bps, which is likely to be repaid. The biggest winner is likely to be WHF for whom Aretec used to be one of their worst investments following a Chapter 11 restructuring back in 2016. The BDC only owns equity in Aretec, with a cost of $20.7 and an FMV of $25.1mn at March 2018. We'd guess that the ultimate value received - which should result in a Realized Gain - might be even higher. That will be a boon to WHF and provide an opportunity for the BDC to redeploy this asset - which has been on income producing for 2 years - into yield bearing instruments.
FSIC,FSIC II, FSIC III, BDCA, GECC:
BKCC [$30mn of Debt & Equity]: The 150 store chain is adding a new location in Enderby, replacing its sister brand The Bargain! Shop. The BDC Credit Report adds: Red Apple has been under-performing since 2014 and its subordinated debt is valued at a (26%) discount as of March 2018 and its $7mn of equity stake at zilch. Still, that's better than a few quarters ago, suggesting Red Apple - if not on the mend has at least been stabilizing. BKCC has a "Control" position, and has been supporting the business. This store opening/change of format probably does not tell us much about Red Apple's fortunes. However, information on the privately held Canadian retailer is so infrequent, we clutched at this straw.
ADVANCED LIGHTING TECHNOLOGIES INC (EFOI) SEC Filing 10-K Annual report for the fiscal year ending Friday, June 30, 2006
Bluestem Group Inc. (
Bluestem Group Inc. (OTCPK:BGRP) Q1 2018 Earnings Conference Call June 20, 2018 10:00 A.M. ET Executives Christopher Tukua - Vice President, Investor Relations
GSBD TCPC: Article provides info about new $5mn plant expansion at Iracore International, which continues through September 2018. The BDC Reporter adds: This may be good news - if all goes well and more orders come in - for GSBD and TCPC which have both debt and equity in the company. In fact, the two BDCs have invested $11.2mn in the equity, which is carried at discount of (11%) and (24%) respectively. This could result in Unrealized Appreciation. The debt is carried at par.
FDUS: Integrated Behavioral Health, Inc. announced the acquisition of Inflexxion, Inc. "a healthcare data and and analytics company that specializes in the collection, surveillance, monitoring and analysis of critical public health issues including prescription drug abuse, substance use, behavioral health, and pain management". Terms were not given. The BDC Reporter adds: This is presumably very good news for FDUS, which has $7mn in debt and Preffered at cost advanced to Inflexxion. At March 31, 2018 the $4.8mn in debt was written down to $3.1mn and the Preferred had no value. This could result - on the debt alone - in a $1.6mn appreciation for the BDC. According to Advantage Data's records, this is a 2015 deal by FDUS that has been under-performing for several years.
TSLX: The only BDC with exposure - TPG Specialty - has a $21.6mn at cost First Lien Loan, valued at par at March 31 2018. Given the senior nature of the obligation, the proposed asset sale should ensure full repayment even in liquidation of Rex Energy over the next few months. TSLX will be losing a credit earning 11.06% (LIBOR + 875bps) in the second or third quarter 2018. If no loss incurred, this will validate TSLX's strategy of investing in asset based senior positions in "difficult" credits.
ABDC,TCAP: Total exposure by the two remaining BDC lenders - both invested in the non-performing Second Lien debt - aggregates $31.570mn at cost. That's been essentially written off at both firms. No recovery is expected from the investment. Expect Realized Losses in the IIQ 2018 results.
AINV,Cion: Elements Behavioral Health announced it is filing chapter 11 bankruptcy and will restructure the company. According to executives, all clinical programs will remain in place during the process. BDC Exposure: The two related BDCs have senior debt exposure of $18mn in second lien debt to the Company, as recorded by Advantage Data.The loans have been on non-accrual for 3 quarters. Both BDCs have written down the debt to zero. Nothing in the press release suggests any recovery will occur. Realized Losses are likely to be booked in the third or fourth quarter 2018.
TSLX: Rex Energy Corporation is filing for bankruptcy after missing a payment to lenders in April.
TCRD, Cion, Sierra: The troubled retailer emerged from bankruptcy with THL Credit as its major investor. A new CEO was appointed. No details were given as to the new financial structure.
ABDC: The expansion of this logistics company into new markets is good news. The BDC has $7.7mn at cost invested, mostly in Second Lien. A $5.2mn tranche is carried at a (33%) discount at 12-31-2017. We have an unchanged - but hopeful - CCR 4 rating on Xpress.
GECC,TCPC: The two BDCs have $84.2mn of investments in Avanti as of IVQ 2017, all carried at various discounts. This news only indicates the Company remains active as the value of the contract is not given.
ABDC: The BDC has $7.7mn of exposure to the Company in two Second Lien loans and equity. One tranche of the Second Lien is carried at a 32% discount to cost, with the other at par. The equity has no FMV. The trend is slightly up. This expansion suggests the Company may be growing, which could shrink the valuation discount.
AINV: Elements offers addiction treatment programs such as drug rehab, alcoholism treatment, eating disorder treatment, trauma, sex addiction in both residential and outpatient settings
FS energy & Power, FSIC,FSIC II, FFIC III, Carey Credit: James Bennett is out as CEO of SandRidge Energy Inc. Thursday, an apparent casualty of shareholder action. BDC EXPOSURE: All BDC investment in form of Equity, created by converting from debt in past restructuring. Carried at 9/30/2017 at (10%) discount to Cost. Unclear if management shuffles and disputes with activist investors will affect.
Sears said in January it was in talks with lenders about transactions to address its $1 billion of debt.
Corporate Capital Trust: Nine West Holdings and its creditors are nearing a deal to restructure approximately $1.5 billion in debt, according to a report from Bloomberg. As pa...
PhaseRx, Inc. (NASDAQ:PZRX) Files An 8-K Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet ArrangementItem 2.04. Triggering Events
iHeartCommunications, Inc. today announced that its Board of Directors has elected not to make a cash interest payment of $106 million, due February 1
TCW Direct Lending, PNNT, PFLT. Total Exposure $40mn.