WEDNESDAY July 20, 2016

Sports Authority Liquidation Almost Complete. BDC Losses May Be Lower Than Anticipated.

• Sports Authority liquidation drawing to a close, but final conflicts remain between lenders, landlords and suppliers.
• WSJ reports most senior lenders have been fully repaid. However, lenders are “still owed $240mn”.
• Hard to determine whether BDC lenders to bankrupt firm will book any Realized Loss at end of day. See Investment Ownership below.
• BDC Credit Reporter expects TSLX will be repaid in full, and Franklin Square funds loss-if any-will be lower than valuation at March 31, 2016.I
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• TSLX, FSIC, FSIC II, FSIC III

THURSDAY July 14, 2016

AVANTI COMMUNICATIONS FACES LIQUIDITY SHORTAGE. SEEKS NEW CAPITAL OR SALE

• UK-based publicly traded satellite services company Avanti Communications (LSE:AVN) may be facing liquidity crisis.
• According to trade news reports, Company needs to raise $50mn in cash by fall.
• Company liquidity said to be declining fast: cash on hand has dropped by 50% in last 3 months through end of June.
• Reportedly: Board and management seeking to major cost reductions over the next 3 years.
• Company has announced intention to raise additional equity capital if possible and has put business up for sale.
• Two BDCs with exposure to Company: Hercules Capital (HTGC) and TCP Capital (TCPC), both in senior debt due 2019.

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• BDC exposure already written down between 18-27%. Senior bond trading at 30% discount currently.
• BDC Credit Reporter says: ” Both Hercules and TCP Capital may face prospect of Realized Losses on Avanti Communications investment “
• BDC Credit Reporter published first Alert on Company back on May 25th, 2016 when stock hit record low.
• See Company File from BDC Credit Reporter’s database of under-performing companies.

WEDNESDAY July 13, 2016

WARREN RESOURCES AGREES RESTRUCTURING AGREEMENT WITH ALL CREDITOR GROUPS

• Bankrupt oil company Warren Resources moved one step closer to exiting Chapter 11 with an agreement amongst all creditors, in 8-K filing.
• The Amended Restructuring Support Agreement sets out debt to be restructured, forgiven and division of equity interests amongst creditors.
• The terms are in line with earlier versions of Restructuring Support Agreement and make possible a court approved bankruptcy exit in September.
• Included is a $20mn Debtor In Possession Facility (DIP), to be funded by existing senior lenders and eventually rolled into new senior debt of post-Chapter Company.
• BDC Credit Reporter reviewed weekly DIP budget, which shows operational cash flow break-even and $30mn in BK expenses funded by DIP and cash.
• No material change expected in impact on BDC lenders to Company-all in senior debt-as discussed in prior article on June 3, 2016.
• BDC lenders should book substantial fees for DIP financing even when writing off a portion of their debt exposure in the anticipated debt for equity swap.
• BDC Credit Reporter says: ” Worried that even after restructuring and huge debt forgiveness Company may not be cash flow positive if oil price stays down and new drilling stays low”
• FS Energy, FSIC II, FSIC III, FSIC

TUESDAY July 12, 2016

• Medley Capital (MCC) portfolio company Essex Crane Rental Corp. entered into 6th Forbearance Agreement with lenders on 6-23.
• As part of terms, Essex agreed to no longer draw on its Revolver and use incoming cash to pay expenses.
• Borrower also agreed with lender plan to liquidate all its assets at public auction, effectively ending the business.
• Proceeds to be received are unknown, but were considered preferable to sale of business and other options.
• Medley Capital arranged $30mn secured Term Loan to Essex Crane in mid-2014, retaining $20mn.
• Loan was carried at par till IVQ 2015 when placed on non-accrual, written down by over 80%. IQ 2016 value: $3.7mn.
• MCC likely to book Realized Loss in IIIQ. Unrealized value unlikely to be material in IIQ.
• Our View: Big-if not unexpected- setback for MCC given speed of write-down and likely 80%+ write-off of “senior secured” investment.

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• MCC

MONDAY July 11, 2016

• Caesar’s Entertainment Corporation (CZR) has tentatively agreed merger terms with Caesar’s Acquisition Company (CACQ).
• Merger of two non-bankrupt entities subject to satisfactory completion of Caesar’s Entertainment Operating Company (CEOC) Chapter 11 plan.
• CEOC re-organization may fail on dispute between its junior debt holders and Caesar’s Entertainment re: fraudulent conveyance.
• The formal CEOC reorganization plan to be adjudicated in early 2017.
• BDC Credit Reporter reviewed the Caesar companies press release and SEC filings of July 11.
• Conclusion: ” The tentative CZR-CACQ merger agreement increases likelihood of Chapter 11 plan being accepted by judge”.
• That’s good news for BDC lenders to all Caesar’s entities due to their senior position on the respective balance sheets.
• However, complexity of deals and no resolution till 2017 suggests huge legal bills will reduce cash availability for 6 months plus.
• See earlier article for BDC exposure to Caesar’s.
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