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BDC CREDIT REPORTER-COMPANY ALERTS

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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
  • Screen Shot 2016-07-20 at 8.03.04 AM
  • TSLX, FSIC, FSIC II, FSIC III

Analysis


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.
  • Source: Advantage Data (www.advantagedata.com)
    Source: Advantage Data (www.advantagedata.com)
  • 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.

Avanti Communications logo


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

Oil price drop


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.
  • Ownership data from Advantage Data
    Ownership data from Advantage Data
  • 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.
  • Caesar's Entertainment

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